Media General hopes for better second half


Media General met its guidance to Wall Street for Q2, but that was nothing to get excited about. Newspaper revenues were down 14.7% and television revenues dropped 5.7%. The company reported a loss from continuing operations of $1.4 million for the quarter, or eight cents per share. That included 14 cents per share for severance costs for the 750 positions eliminated across the company, mostly in newspapers, but at TV stations as well. So, excluding the severance costs the company had EPS of eight cents per share for the quarter – in line with guidance and two cents better than the Thompson/First Call analysts’ consensus. However, Media General hung a “preliminary” indication on its Q2 results, saying it was in the process of completing a review of impairment for goodwill and other intangible assets, which is expected to result in a non-cash charge of $500-550 million against the Q2 results.

"We determined that, in view of the continued economic slowdown and the market’s perception of media industry equity valuations, this was the appropriate time to undertake the impairment testing. The charge is non-cash and will not impact our ability to operate, reduce debt or move forward with our ongoing transition to the digital world," said CEO Marshall Morton. After two difficult quarters to kick off they year, Morton is hoping for better days in the second half, mostly on the TV side.

“As difficult as current business conditions are, Media General has several significant bright spots to look forward to in the second half of this year,” Marshall told analysts and investors. He said the company expects approximately $13 million in ad revenues related to the Beijing Summer Olympics on the company’s eight NBC stations, including the four stations it bought from NBC. He said the economic downturn, and the softness in the automotive sector in particular, have had “a dampening effect on Olympics advertising.” But Media General has adapted to target “new-to-the Olympics” advertisers at the local level. “Many of these clients could not obtain access to the Olympics before and we’re now succeeding in bringing them to the table,” he said. Media General is also expecting at least $45 million in political advertising for all of 2008. Obviously, most of that will be coming in the second half. In addition to the presidential race, Morton noted that there are eight active Senate races in states where Media General has TV stations.

For Q2, Media General reported that Broadcast Division profits were $14.9 million, down from $18 million a year ago. Weak local and national sales were partially offset by $2.8 million in political sales. Broadcast revenues were down 5.7%.

Publishing revenues dropped 14.7%, mainly due to a 24.7% drop in Florida. Publishing profits were $6.8 million, down from $22.6 million a year ago.

The company also reported its June figures. Broadcast time sales were down 5.4% to $25.4 million. Local was off 3.5% to $16.1 million and national dropped 14.4% to $8.5 million. Political was $813,000, up from $242,000 a year ago.

Newspaper advertising was down 17.7% in June to $27.6 million. Retail dropped 7.5%, national 19.6% and classified 29.4%.