12.07.2011 01:05 PM
Cost Cuts and Digital Growth Helps Media General Meet Loan Payments

NEW YORK: Shares of Media General shot up today after company executives told Wall Street that 2012 looked promising, digital revenue growth was strong, and the company has enough cash to meet its debt interest payments for the year. The company’s stock (NYSE: MEG) rose more than 7 percent during the course of the day to nearly $3.90.

“Event-driven revenue growth in 2012 from the elections, Super Bowl and Summer Olympics provide much optimism,” Media General President and CEO Marshall N. Morton told investors at today’s UBS Global Media & Communications Conference in New York.

MEG’s local websites are expected to bring in $33 million this year, up 15 percent from 2010.

“Our local media websites are profitable, and we expect the full-year profit to exceed $2 million. Our local media websites have an 11-year record of annualized double-digit audience and revenue growth,” Morton said.

Media General’s digital platforms include websites as well as mobile applications. Its TV station group is among those on the forefront of activating mobile DTV, but that platform is not yet generating revenue. Its presence on smartphones, tablets and social media helped it drive an overall 12 percent increase in digital traffic.

“As our business continues its shift to digital, we will continue to respond to the ongoing changes in the packaging and delivery of news and information by creating new revenue streams from multiple sources, including increased content revenues,” Morton said.

One of those changes involves charging for content on Media General-owned newspaper websites.

“We are finding that users are willing to pay a reasonable fee for premium local content,” he said.

Charging online for content will not be sufficient to rescue The Tampa Tribune, however, which will see more layoffs before the end of the year, Media General’s vice president of market operations John A. Schauss said.

Employees across the company have bore the brunt of its financial troubles, absorbing three furloughed weeks in 2009 and again this year, with a suspension of 401(k) contributions and pay raises. The sacrifices helped Media General cut total operating costs by $20 million, or three percent for 2011, including impairment.

“This year, we reinstated modest merit increases and restored a partial 2 percent 401(k) match,” Schauss said. “Despite these increased costs, employee compensation was down 11 percent in the third quarter, due to lower employee counts, furlough savings and other decreased compensation expense.”

Jim Woodward, vice president-finance and chief financial officer, said Media General expects cash from year-end accounts receivable and ongoing operations will enable it to make interest payments of $64 million, and to cover capital expenditures of $20 million to $22 million, and to make a retirement plan contribution of $11 million. Capex, held for the last few years at “maintenance level,” is expected to be $23 million to $25 million next year.

“Media General was in compliance with all covenants as of Sept. 25, 2011. We fully expect to remain in compliance in both the near and long-term, even though covenants will tighten,” Woodward said. “We will do so by taking the steps necessary to maintain EBITDA, constrain capital spending and minimize outstanding debt, including selling assets if necessary. We are currently evaluating options for refinancing, including amending and extending $363 million of bank term debt due March 2013.”

~ Deborah D. McAdams, Television Broadcast



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