Media General, Inc. (MEG)

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Media General, Inc. (MEG)

Q4 2012 Earnings Call

January 31, 2013, 02:30 pm ET

Executives

Lou Anne Nabhan - VP, Corporate Communications

George Mahoney - President & CEO

Jim Woodward - VP, Finance & CFO

Analysts

Barry Lucas - Gabelli & Company

Mario Gabelli - Gabelli & Company

David Cohen - Midwood Capital

Lance Vitanza - CRT Capital Group

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Fourth Quarter 2012 Media General Earnings Conference Call. My name is Charissa, and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating the question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to your host for today's conference, Ms. Lou Anne Nabhan, Vice President of Corporate Communications. Please proceed.

Lou Anne Nabhan

Thank you, Charissa, and good afternoon everyone. Welcome to Media General’s fourth quarter conference call and webcast. Earlier today, we announced fourth quarter and full-year 2012 results. The press release is on our website. A transcript of the comments from today's call will be posted immediately after the call and a replay will also be available.

Today’s presentation contains forward-looking statements, which are subject to various risks and uncertainties. They should be understood in the context of the company’s publicly available reports filed with the SEC, including the section on Risk Factors. Media General’s future performance could differ materially from its current expectations.

Our speakers today are George Mahoney, who became Media General’s President and Chief Executive Officer on January 1st and Jim Woodward, Vice President, Finance and Chief Financial Officer.

Let me now turn the presentation over to George.

George Mahoney

Thank you, Lou Anne, and good afternoon everyone. I am delighted to speak to you for the first time as Media General’s President and Chief Executive Officer. I met with a number of our shareholders, other investors and industry analysts in November and December. These meetings will continue; they’re a priority for me. I also look forward to working with the reporters and editors who cover our company and the broadcast industry, some of whom may be listening to this call.

Media General begins 2013 as a vastly different company compared to where we were a year ago. Last year, we had a portfolio of newspapers, television stations and advertising services businesses, and we had debt refinancing needs. We enter 2013 having divested our newspapers and advertising services businesses and having refinanced our bank debt with maturity in 2020. We also have a significant new stockholder, Berkshire Hathaway. These are truly transformational changes for our company and they were accomplished fast.

We’re delighted with our new business model as a pure-play broadcast television and digital media company. The expanded opportunities provided by our new model give us a bright future. We’re now moving forward with excellent performance, serving our customers in new ways across multiple platforms, adapting quickly and living our core values of integrity, quality and innovation.

Operationally, 2012 was an outstanding year for Media General, marked by strong performance in our core broadcast advertising revenue. So we benefited not only from Political spending, the Super Bowl and the Olympics, but also from growth in key local and national advertising categories, particularly automotive.

Broadcast cash flow for the full year was $146 million. EBITDA was $112 million. Our full year performance included an outstanding fourth quarter for Media General’s television stations. I’ll summarize our fourth-quarter results.

Broadcast cash flow in the fourth quarter was $50.4 million, with a 46% margin. Total revenues increased 40% to $109 million, compared with $78 million in the prior year. Political revenues in the fourth quarter were a record $30 million, and for the full year they were a record $64 million. We benefited from operating top-ranked stations, and from our top-rated newscasts, where political advertisers prefer to place their ads. Our Political revenues also reflected the presence of six of our stations in four of the key Presidential battleground states; Florida, North Carolina, Virginia and Ohio. We obviously are very pleased to own this particular group of strategically located stations.

Core local time sales in the fourth quarter increased 5.3%, and national time sales grew 1.4%. These amounts exclude Political advertising. Our stations were very aggressive about working back in displaced ads from the Political season is illustrated by this strong core growth. They were creative and aggressive with holiday content that advertisers wanted to be a part of. They truly did an outstanding job managing our inventory during the Political season and after.

Automotive continued to be our largest advertising category. Even with all the Political advertising in the fourth quarter, Automotive still accounted for nearly 20% of our revenues. Total Automotive advertising increased 21% from the prior year. Local Automotive advertising was up 25% and National Automotive advertising rose 16% in the fourth quarter. Of our remaining top 10 advertising categories, several grew by strong double digits in the fourth quarter. These were furniture, entertainment and home improvement. We additionally saw healthy single digit growth in Professional Services, Restaurants and Financial Institutions.

Cable and Satellite Retransmission fees increased by 84% in the fourth quarter to $9.9 million, from the same prior year period. This increase reflects the renewal in late 2011 of contracts reaching about 25% of the subscribers in our footprint and the attainment of new market based rates. At the end of 2012, we completed negotiating a new multiyear agreement with Time Warner. The rates we’re being paid are starting to reflect the value of our unique local programming and the demand in our communities for the quality content we provide.

Read the rest of this transcript for free on seekingalpha.com