Media General, Inc. (MEG)

MEG 
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Industry: Consumer Services
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Media General (MEG)

March 05, 2013 4:05 pm ET

Executives

George L. Mahoney - Chief Executive Officer and President

James F. Woodward - Chief Financial Officer and Vice President of Finance

Analysts

Matthew Chesler - Deutsche Bank AG, Research Division

Presentation

Matthew Chesler - Deutsche Bank AG, Research Division

Next up here is Media General, which I'm excited to introduce is a pure play broadcast and digital media company. The Media General sitting with me today is a vastly different company compared to what it was 1 ago. Last year, the company had a portfolio of newspapers, television stations and an advertising services business and they had debt refinancing needs. They've since divested the newspapers. And then you got some of these other businesses, refinanced your debt, extended the maturity and you have a significant stockholder that many people have heard of. So while other companies have talk about transforming, this company has actually done it. So I do want to introduce the management here, George Mahoney, President and CEO. You took over in January of this year but you have been with the company for since the...

George L. Mahoney

Almost 20 years now.

Matthew Chesler - Deutsche Bank AG, Research Division

Almost 20 years. So welcome. And then Jim Woodward, VP of Finance and CFO. CFO since last year but also a long-term member of the organization. So welcome, thank you both for being here.

George L. Mahoney

Thank you, Matt. It has been a big year for us and we're looking forward to talking about it this afternoon.

James F. Woodward

Appreciate being here.

Matthew Chesler - Deutsche Bank AG, Research Division

The topic to start on is clearly the transformation of the business. The divestiture of the newspapers is an obvious one, the way that sort of backward looking but we'd like to catch people up, who aren't familiar with the story on the steps that you've taken -- the key steps you've taken to reposition the company over the last year.

George L. Mahoney

Great, thanks. Well, you're right. Newspapers have been a part of Media General for the last 150 years and in -- at the end of June, we sold nearly all of our newspapers to Berkshire Hathaway with Warren Buffett. And then sold the remaining group, our Tampa group, to a private equity concern in October. So at that point, Media General was pure play broadcast and digital. And as we went through those transactions, we also refinanced some debt with Berkshire Hathaway and we also acquired, as you mentioned, a new stockholder, Warren Buffett, Berkshire Hathaway, who has had now about 17% of Media General. So it was indeed a transformational year on the structure and the business model for Media General and as the phrasing that we're using is that we now have a very clear path forward. That clear path though was really -- we lit it even better with our operational performance in 2012, which really was outstanding. And I won't go back and recap that but suffice it to say, in a year that broadcasters usually do very well, and even-numbered year, Media General had an outstanding political result and also, it did very well with the Summer Olympics on NBC. So it was a terrific year for us and we have started 2013 on a terrific note as well. We issued a press release this morning and provided a little bit of more guidance than we had in the past on what the quarter looks like. But for us right now, focusing on cash flow and focusing on margins is hugely important. And maybe Jim would be good enough to give you a little bit more on the results that we're seeing so far and that we think we'll have in the first quarter and also for the year.

James F. Woodward

Well, the core advertising and excluding Political and the Olympics, is in the press release, pacing up about 2%. And the net revenues for the quarter will be up 7% to 8%. And then, for the year, we are going to compare ourselves to even to even, odd to odd, we had $89 million of broadcast cash flow in '11, and we expect to be meaningfully better in '13 with that. So that positions us really well going forward. So we have this opportunity to refinance debt in February of next year or earlier. And that sets us in a great position to then continue to repay our debt to set the debt structure a little bit more differently so that we don't have to accumulate cash on our balance sheet we have so far and then to be in a better position to help deliver more value to the shareholders.

Matthew Chesler - Deutsche Bank AG, Research Division

Okay. Thanks for the color. Can I dig a little bit more to the current trends and then we'll talk about how soon you're focused. Any color, any particular categories that you wanted to highlight that are strong or weak in terms of pacing?

George L. Mahoney

Yes. We've -- obviously, for all broadcasters, the way autos -- is that auto segment is doing is really important. And it started, frankly, a little bit slow in January, which is not unusual coming out of a political year, but we've seen continuing building strength all the way through the quarter. So we like where auto is right now. We're seeing a lot of firmness in the back half of March and just as we had hoped, auto looks like it will be a very important builder for us in 2013. On top of that, restaurants and fast food look like they're also performing very well. So we're pleased with the way the quarter is going.

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