12.07.2011 12:30 PM
Cost Cuts and Digital Growth Helps Media General Meet Loan Payments
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
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,”
One of those changes involves charging for content on Media General-owned
“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
“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