Media General finds silver lining in down quarter


Media GeneralProfits at television group Media General were way down, but the reasons for much of the loss were either beyond the company’s control or due to its plans to get bigger. The first will be fixed by the return of elections in 2014, and the second by closing on MG’s merger with Young Broadcasting.

Operating income for the quarter was $5M, down substantially from Q2 2012 when the company reported $17M. However, $7.2M was attributed to expenses related to the merger, $3.7M was a result of higher stock compensation payments due to a higher stock price, and then there was a $6.5M drop in political income from $7.5M to $1M to factor in.

Core revenue was on the up side of flat, picking up 1% to M. Local was down 1.9% to $46M, but national was up 5.6% to $25M.

The company’s biggest category, automotive, picked up 5.5%. MG said other positive categories included furniture, home improvement, medical, entertainment and telecommunications; categories going the other way included professional services, restaurants, retail and corporate.

Retransmission consent and digital were bright spots, picking up 38% and 17% respectively.

President/CEO George L. Mahoney stated, “Our stations are doing a good job this year replacing last year’s robust Political revenues with new revenue initiatives and business development programs. Additionally, our largest category, automotive advertising, grew 5.5% in the second quarter. Station revenues also reflected higher retransmission revenue this year and growth in Digital revenues. Station expenses increased 4.6%, due to additional network affiliation fees and expenses for revenue initiatives.  We were especially pleased to see our stations increase Broadcast cash flow to 34%, compared to the last odd-numbered year 2011, a key initiative for us. Core corporate expense in the second quarter decreased 41% from last year, reflecting our major corporate restructuring following the sale of our newspapers.”

Mahoney added, “Our merger with Young Broadcasting is progressing smoothly, and we expect to complete the transaction in the late third or early fourth quarter of this year. We are very happy with the terms of a new credit agreement, announced on August 5, which will be in place following the completion of the merger. We refinanced the combined debt of Media General and Young at a significantly lower cost of capital. Cash interest will be approximately $39 million annually as a result of the new credit agreement, based on current LIBOR rates, a savings of $36 million over the two companies’ current standalone annual cash interest expense of approximately $75 million. The new Media General will be on even stronger footing than anticipated, and we’re delighted with our gathering momentum.”

Looking ahead, MG is expecting continued good news on the retransmission front, and it has further increased guidance for political to $6M by year’s end, up from $5M.

However, the company is facing extremely difficult Q3 comps – in 2012 it earned $19.6M from the Olympics and $15.5M in political cash – sources of income that will be difficult to replace this year.