FOR IMMEDIATE RELEASE
Thursday, February 27, 2014
Media General Reports Fourth-Quarter and Full-Year 2013 Results
RICHMOND, Va. – Media General, Inc. (NYSE: MEG), a local broadcast television and digital media company, today reported fourth-quarter and full-year 2013 results.
“The merger of Media General and Young Broadcasting on November 12, 2013, was a renaissance event for both companies. This business combination created a new, diversified broadcast and digital company with a strong balance sheet, generating robust cash flows. Indeed, our year-end 2013 net leverage was 4.27x, based on our credit agreement, even better than we’d anticipated,” said George L. Mahoney, president and chief executive officer of Media General.
“We expect a particularly strong year in 2014, when we benefit from advertising associated with the Winter Olympics and this year’s elections as well as growing revenue from the rising market for retransmission revenues. Additionally, our digital and mobile platforms are providing new, accelerating opportunities to generate higher revenues,” said Mr. Mahoney.
In accordance with generally accepted accounting principles (GAAP), the merger was accounted for as a reverse acquisition. While Media General, Inc. is the legal acquirer and the name of the combined entity, for financial reporting purposes, the historical financial statements of the accounting acquirer, Young, are now the historical financial statements of the new Media General. Consequently, the official consolidated financial statements reported in this press release include only the operating results for Young for the periods prior to November 12, 2013.
This release first discusses GAAP results for the fourth quarter of 2013; these results do not include most of legacy Media General’s results in 2013 or any in 2012. Because legacy Media General results represent more than half of the combined company’s net operating revenue and broadcast cash flow, the company has appended Supplemental Combined Company Information to this press release. The as adjusted results do not include the operating and finance synergies of the combined company. A discussion of these as adjusted fourth-quarter results follows the GAAP discussion.
GAAP Results for Fourth Quarter 2013
In the fourth quarter of 2013, net loss attributable to Media General was $5.2 million, or 7 cents per share, based on weighted-average diluted common shares outstanding of 69.8 million. Net income attributable to Media General in the fourth quarter of 2012 was $19.1 million, or 30 cents per share, based on weighted-average diluted common shares outstanding of 64.2 million. Merger-related expenses of $5.5 million and debt modification and extinguishment costs of $4.5 million caused the loss in the 2013 fourth quarter. In accordance with GAAP, the presentation of “net income (loss) attributable to Media General” does not include the results of WXXA-TV or WLAJ-TV.
Net operating revenue in the fourth quarter of 2013 was $110 million, compared with $71.4 million in the prior year, with the increase reflecting merger and acquisition activity offset by the relative absence of 2012’s extremely strong fourth-quarter Political revenue.
Total operating costs in the fourth quarter of 2013 were $100.3 million, compared with $49.4 million in the fourth quarter of 2012, with the increase again attributable to merger and acquisition activity.
Operating income in the fourth quarter of 2013 was $9.7 million, compared with $22.1 million in the fourth quarter of 2012. Both the acquisition activity and the relative absence of Political revenues contributed to the decline.
Broadcast cash flow in the fourth quarter of 2013 was $41.7 million, compared with $36.3 million in the fourth quarter of 2012 for the same reasons noted above.
Non-GAAP Results for Fourth Quarter 2013 (Combined Company)
The appended Supplemental Combined Company Information was derived from the historical results of operations of legacy Media General and Young and contains pre- and post-merger transactions and accounting estimates. The "As Adjusted" column provides certain financial information for the combined company for the fourth quarter and full year 2013. The purpose of the "Adjustments" column in each section is to include legacy Media General revenues and expenses for the periods prior to November 12, 2013. No other adjustments have been made to the supplemental financial information, which is purely informational and does not purport to be indicative of what would have happened had the merger occurred as of the beginning of the period presented, nor is it indicative of results that may occur in the future, nor does it include the operating and finance synergies of the combined company.
As adjusted net operating revenue in the fourth quarter of 2013 was $149.1 million, with the decrease compared to 2012 primarily the result of lower Political revenues. As adjusted total operating costs in the fourth quarter of 2013 were $140.2 million, with the increase compared to 2012 primarily attributable to merger-related costs and higher stock-based compensation due to the company’s increased stock price. This resulted in as adjusted operating income and broadcast cash flow in the fourth quarter of 2013 of $8.9 million and $55.1 million, respectively. The quarter-over-quarter decline in Political spending, along with as adjusted merger-related expenses of $13.4 million, contributed to the overall decline.
Media General provides the non-GAAP financial metrics of broadcast cash flow, EBITDA as adjusted, after-tax cash flow, free cash flow and the Supplemental Combined Company Information. The company believes these metrics are alternative measures used in peer comparison and by lenders, investors, financial analysts and rating agencies to evaluate a company’s ability to service its debt requirements and to estimate the value of the company. A reconciliation of these metrics to amounts on the GAAP statements is included in this news release.
Outlook for 2014
For the full-year 2014, Media General currently anticipates the following:
Political revenues are expected to be robust. Media General operates in the battleground states of Iowa, Florida, Michigan, North Carolina, Ohio, Virginia and Wisconsin. The company expects to benefit from contested Senate races in eight states, from contested gubernatorial races in seven states and from a number of contested races for seats in the U.S. House of Representatives. As adjusted Political revenues in 2012 were a record $113.4 million, and as adjusted political revenues in 2010 were $69 million.
Retransmission revenues are expected to increase by more than 40% in 2014, depending on subscriber counts, compared with as adjusted retransmission revenues of $94 million in 2013.
As adjusted Olympics revenues from the 2010 Winter Olympics totaled $7.8 million, and revenues from the 2014 Winter Olympics were $11.6 million.
Digital revenues are expected to increase by more than 20% from as adjusted digital revenues in 2013 of $19.6 million.
Expenses will increase in 2014, in particular for employee salary and benefits and for fees paid to networks. The major component of fees paid to networks is commonly referred to as “reverse compensation;” reverse compensation in 2014 is expected to be approximately $50 million, compared with as adjusted $34 million in 2013.
Corporate and other expenses in 2014 are expected to be in the range of $37 million to $38 million, with core corporate expense accounting for approximately one-half of the total; the remainder is primarily for incentive compensation (including station management bonuses) and non-cash stock-based compensation.
Based on current LIBOR rates, cash interest expense in 2014 is expected to be approximately $39 million.
At December 31, 2013, the company has $681 million of net operating loss (NOL) carryforwards. These NOLs are available to offset future income.
Capital expenditures are expected to be approximately $41-42 million in 2014, and they then should reduce to maintenance levels of $15-20 million for at least the next several years.
This news release contains forward-looking statements that are subject to various risks and uncertainties and should be understood in the context of the company’s publicly available reports filed with the Securities and Exchange Commission. Media General’s future performance could differ materially from its current expectations.
Conference Call and Webcast
The company will hold a conference call with investors today at 11:00 a.m. ET. To dial in to the call, investors may call (800) 708-4539 about 10 minutes prior to the 11:00 a.m. start. The participant passcode is 36685360.
All others may access a live webcast by visiting www.mediageneral.com and clicking on the “Live Webcast” link on the homepage about 10 minutes in advance. A replay of the webcast will be available online at www.mediageneral.com beginning at 1:30 p.m. today. A telephone replay will also be available, beginning at 1:30 p.m. on February 27, 2014, and ending at 11:59 p.m. on March 6, 2014, by dialing (888) 843-7419 or (630) 652-3042 and using the passcode 36685360.
About Media General
Media General, Inc. is a leading local television broadcasting and digital media company, providing top-rated news, information and entertainment in strong markets across the U.S. The company owns or operates 31 network-affiliated broadcast television stations and their associated digital media and mobile platforms, in 28 markets. These stations reach 16.5 million, or 14%, of U.S. TV households. Their network affiliations include CBS (12), NBC (9), ABC (7), Fox (1), MyNetwork TV (1) and CW (1). Sixteen of the 31 stations are located in the top 75 designated market areas. Media General first entered the local television business in 1955 when it launched WFLA in Tampa, Florida as an NBC affiliate. The company subsequently expanded its station portfolio through acquisition. In November of 2013, Media General and Young Broadcasting merged, combining Media General’s 18 stations and Young’s 13 stations into the 31-member group that exists today. Five of the stations have been on the air since 1949: WCMH in Columbus, Ohio; WVTM in Birmingham, Alabama; WJAR in Providence, Rhode, Island; KWQC in Davenport, Iowa; and KRON in San Francisco.
Contact Media General
Media General maintains extensive company information on its website www.mediageneral.com. The company’s media and investor contact is Lou Anne J. Nabhan, Vice President-Corporate Communications, firstname.lastname@example.org or 804-887-5120.