Media General Inc. (MEG)
Q4 2008 Earnings Call
January 29, 2009; 2:30 pm ET
Marshall Morton - President & Chief Executive Officer
John Schauss - Vice President of Finance & Chief Financial Officer
Reid Ashe - Executive Vice President & Chief Operating Officer
Lou Anne Nabhan - Vice President of Corporate Communications
Ed Atorino - Benchmark
Barry Lucas - Gabellie & Company
Drake Johnstone - Davenport & Company
Ken Silver - Royal Bank of Scotland
Mike Traynor - Milwaukee Private Wealth Management
Sean Greer - Lynn Capital
Previous Statements by MEG
» Media General Inc. Q2 2009 Earnings Call Transcript
» Media General, Inc. Q3 2008 Earnings Call Transcript
» Media General, Inc. Q2 2008 Earnings Call Transcript
I would now like to turn the presentation over to your host today’s conference Ms. Lou Anne Nabhan, Vice President. Please proceed.
Lou Anne Nabhan
Thank you Heather, and good morning everyone. Welcome to our conference call and webcast. Earlier today we announced fourth quarter 2008 results and revenues for the month of December. Both of those press releases are on our website and the comments from today’s call will be posted on our site immediately following the call.
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 publically available reports filed with SEC. Media General’s future performance could differ materially from its current expectations.
Our speakers today are Marshall Morton, President and Chief Executive Officer; Reid Ashe, Executive Vice President and Chief Operating Office; and John Schauss, Vice President of Finance and Chief Financial Officer.
Let me start with turning the presentation over to Marshall.
Thank you, Lou Anne and good afternoon everyone. As you’ve seen in our earnings release, our fourth quarter results included a non-cash intangible asset impairment charge and a tax valuation allowance. John will discuss those items later in our presentation.
Excluding those items and $6.1 million of pretax severance expense in the fourth quarter of ’08, income from continuing operations was $8.6 million or $0.39 per diluted share, compared $10.2 million or $0.46 per share in the fourth quarter of ’07. Total operating costs in the fourth quarter excluding the impairment charge in ’08 and an amount for an insurance recovery in ’07, decreased 7.1% from the prior year and reflected the benefit of the aggressive actions we’ve taken to improve the efficiency and effectiveness of our operations.
We began scaling back our work force, outsourcing certain functions and centralizing others in early 2007, when our business began to feel the impact of the housing downturn in Florida. Our number of FTEs has decreased from approximately 6,900 at the beginning of 2007 to approximately 5750 at the end of 2008. The 17% reduction provides more than $55 million of annualized savings. Approximately 20% of that amount benefited us in ’08 and the full amount will be realized in ’09.
For the year 2008 we’ll pay no profit sharing or executive bonuses. In addition, we recently announced the suspension of our 401(k) match starting April 1, 2009 through the end of this year. These steps will conserve additional cash that we will use for debt reduction. When our performance improves we’ll reinstate the 401(k) match.
A short while ago, we announced the Board of Directors had its meeting today to determine that it was prudent to suspend the dividend on Media General Class A and Class B shares. While we regret having to take this action, it will allow the company to direct additional cash flow to debt reduction.
While a portion of the revenue falloff we’ve experienced is certainly cyclical, we have no doubt that a meaningful portion is secular and will never return in its old forms. That being the case we are adapting our expense structure to conform to the realities of these changed revenue streams. For the fourth quarter of ’08 total revenues decreased 12% from the prior year.
Looking at our individual business segments, publishing division revenues declined 17% from the prior year. Publishing profits were down 57%, excluding severance expense from both years. Much of this reduced level of performance is driven by the recession in Florida, which is now entering its third year. The broadcast division enjoyed the benefit of more than $23 million of political revenues from the quarter, which largely offset a decline in local and national advertising revenues. Broadcast profits excluding severance expense were 2.6% ahead of the prior year.
The interactive media division benefited from new revenues from DealTaker.com, the online coupon of shopping business we acquired earlier this year. DealTaker is generating strong growth on its own and produced a doubling of its unique visitors in the fourth quarter, compared to its standalone performance in the prior year. Our local media sites generated a 3% increase in local online advertising revenues.
Now I'll ask Reid to provide more details on the performance of our three operating divisions in the fourth quarter.
Thank you Marshall. It was another tough quarter for our publishing division. With all the major advertising categories in retreat, overall publishing revenues were down 16.8%. Classified advertising revenue decreased 37.6% in the quarter. The largest shortfall was in Florida, followed by Richmond.
The three metro markets combined, employment revenues were down 60%, real estate revenues declined 50% and automotive revenues decreased 46.2%. Compared with the metros, the shortfalls in classified adverting were not as pronounced at our community newspapers. Legal category grew due to foreclosure notices.