Media General, Inc. (MEG)
Q3 2008 Earnings Call
October 16, 2008 11:00 am ET
Marshall N. Morton – Chief Executive Officer, President
John A. Schauss – Chief Financial Officer
O. Reid Ashe Jr. – Chief Operating Officer
Lou Anne Nabhan
Edward Atorino – The Benchmark Company
Barry Lucas - Gabellie & Company
[Jay Greer] – Miramar Capital
Ken Silver – Royal Bank of Scotland
[Jeff Begen] – [Milwaukie Private Wealth]
Michael Cash - Three Sigma Value
[Carlos Riason] – LCG
Dan [Bicarri] – O’Connor.
Previous Statements by MEG
» Media General Inc. Q2 2009 Earnings Call Transcript
» Media General Inc. Q4 2008 Earnings Call Transcript
» Media General, Inc. Q2 2008 Earnings Call Transcript
Lou Anne Nabhan
Good morning everyone. Welcome to our conference, which is also being webcast. Earlier today as I hope you’ve seen, we announced our third quarter 2008 results and out September revenues. Both press releases have been posted on our website and the comments from today 's call will also be posted after we finish.
Today’s presentation does contain forward-looking statements which are subject to various risks and uncertainties. It should be understood in the context of the company's publically available reports filed with SEC. Our future performance could differ materially from current expectations.
Our speakers today are Marshall N. Morton, President and Chief Executive Officer, Reid Ashe, Executive Vice President and Chief Operating Office, and John Schauss, Vice President Finance and Chief Financial Officer. Let me now turn the presentation over to Marshall.
Marshall N. Morton
Thank you, Lou Ann. Good morning everyone. For the third quarter, we reported earnings from continuing operations of $5.8 million or $0.26 per diluted share a $4.1 million increase from the prior year. The increase came mainly from improved broadcast and interactive media profitability, lower interest expense and the absence this year of SP Newsprint related operating losses. Broadcast division results reflected the benefit of strong Olympics and political advertising.
Interactive media division results reflected an excellent performance by our new online coupon and shopping business, DealTaker.com as well as the absence of last year’s investment write down. Significantly lower publishing process constrained the overall increase.
Included in our third quarter results was the reversal of profit sharing expense that had been accrued earlier in the course of 2008. The reversal totaled approximately $5 million prêt-ax and was spread across all three operating segments and corporate expense. Based on forecasted results, we do not anticipate paying performance-related incentive compensation for 2008 either.
Total operating costs for the third quarter decreased 9.5% compared with the prior year, reflecting the benefit of the aggressive actions we have taken to reduce our work force and cut other costs. We also had $2 million more of fixed asset gains this year than we did last year.
Since the beginning of 2007, we have reduced FTEs by approximately 750, removing approximately $40 million of annualized costs. We saw some savings in 2007 and expect to net about 40% of that of that amount for the full year 2008. We’ll benefit fully from these actions in 2009.
Total company revenues for the third quarter of $194 million were down 11% from the same period last year, mostly the result of decreased revenues in our publishing segment. In our broadcast segment, strong summer Olympics and political advertising revenues in the third quarter mostly offset the impact of weak transactional business especially on the national side.
Total broadcast revenues were down 1.5%. Summer Olympics advertising on our eight NBC stations generated revenues of just under $13 million. Some anticipated advertising packages were not played and our stations aggressively sold Olympics packages to local advertisers.
Political advertising revenues in the third quarter totaled $7.5 million. These revenues mostly came from robust Presidential campaign and issue spending in Florida, Ohio, North Carolina, Virginia, and Mississippi. On the state level, our markets have eight active Senate races. The most intense battle should be for Elizabeth Dole's seat in North Carolina, Trent Lott’s recently opened seat in Mississippi, and the seat being vacated by John Warner in Virginia. I will now ask Reid to provide more details on the performance of our three operating divisions in the quarter.
O. Reid Ashe Jr.
Thanks, Marshall. For the third quarter, publishing division profit was $10.3 million compared with $22 million a year ago. The decrease was chiefly due to an 18% decline in total revenues partially offset by an 11% decline in expenses. Essentially all newspapers experienced revenue declines in the quarter. The largest shortfall as expected was in our Florida markets where revenues were down 28% from last year. Revenue declines in other markets included Richmond down 18%, Winston Salem down 10% and the community newspaper group as a whole down 12%. Classified advertising revenue decreased 33% in the quarter.
The largest shortfall occurred in Florida followed by Richmond. Of the three Metro markets combined, employment revenues were down 47%, real estate revenues declined 46% and automotive revenues decreased 43%. Retail revenue decreased 13% reflecting weakness in several categories especially department stores and home furnishings. National revenue declined 20% mainly reflecting lower spending by telecommunications advertisers.
Circulation revenue in the quarter reversed the downward trend and was even with last year owing to increases in home delivery and single copy prices and a decrease in discount programs.
Publishing expenses in the quarter excluding severance in both years decreased 10%. Salaries expense was down 11% from last year excluding severance. FTEs for the quarter relative to last year decreased by more than 500 were 12.5%. Other large expense savings were in benefits including profit sharing and other departmental expenses.