Media General, Inc. (MEG)

MEG 
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Media General (MEG)

Q1 2013 Earnings Call

April 24, 2013 11:00 am ET

Executives

Lou Anne J. Nabhan - Vice President of Corporate Communications

George L. Mahoney - Chief Executive Officer and President

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

Analysts

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Dennis Howard Leibowitz - Act II Capital, LLC

Presentation

Operator

Welcome to the Q1 2013 Media General Earnings Conference Call. My name is Leslie, and I will be your operator for to day. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Ms. Lou Anne Nabhan. Ms. Nabhan, you may begin.

Lou Anne J. Nabhan

Thank you, Leslie, and good morning, everyone. Welcome to Media General's First Quarter Conference Call and Webcast. Earlier today, we announced our first quarter 2013 results. Our press release is posted to our website. A transcript from the comments from today's call will be available immediately after the call, and a replay will be available early this afternoon. 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 which are 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, President and Chief Executive Officer; and Jim Woodward, Vice President, Finance and Chief Financial Officer. Let me now turn the presentation over to George.

George L. Mahoney

Thank you, Lou Anne, and good morning, everyone. I'll start with the summary of our first quarter results. Operating income in the first quarter was $5.8 million, a 28% increase compared with $4.5 million in the first quarter of 2012. This reflects a 35% reduction in corporate expense, and also a disciplined expense management by our stations. After becoming a pure-play broadcaster last year, one of the significant first steps we took was to reduce the size of a corporate structure that had been scaled to serve newspapers and television stations. We're pleased to reflect the full benefit of this reduction in today's first quarter results.

Total revenues in the first quarter this year were $74 million, nearly even with last year. Excluding Political advertising, revenues in the first quarter increased 6% compared with last year. Political revenues last year were $6.2 million compared to $0.5 million this year. Comparatively, that was a lot of first quarter Political last year and it left us with a pretty big hill to climb for this year. This quarter's Political revenues were generated mainly from the lively congressional race in South Carolina's First Congressional District. Last year at this time, we were benefiting from presidential primary races in Florida, Ohio, South Carolina, Alabama and Mississippi. Later this year, we expect to also benefit from the Virginia gubernatorial race and from issues advertising across a number of our markets. We continue to expect the Political revenues for the full year 2013 will be approximately $5 million.

Additionally, Super Bowl revenues on our CBS station this year of $1.2 million compared to $2.8 million last year when the game was aired on our larger NBC stations. It's noteworthy that our CBS stations did an outstanding job increasing Super Bowl revenues by 33% compared to the last time the game aired on CBS which was 2010. Nevertheless the switch from NBC to CBS this year, combined with our lower Political revenues, left us with nearly $7.3 million of revenues to make up in this year's first quarter.

Our Retransmission revenues increased by $4.8 million this year or 55%, making a significant contribution to offsetting our lower Political and Super Bowl revenues.

Local gross time sales in the first quarter were $41.6 million compared with $42.3 million in the prior year, down 1.7%. National gross time sales were $20.6 million compared with $21 million in the prior year, down 2%. Core Local and National revenues in the first quarter, excluding the impact of Super Bowl revenues in both years, increased approximately 1%.

Our largest advertising category, automotive, increased 2.4% over last year. We like the prospects for automotive advertising. The projected growth for the auto industry in '13 and into '14 is well-documented and derives from pent-up demand, supported by the continuing increases in housing prices and low interest rates. On top of that, automakers are introducing new products. GM alone has 13 new cars slated for this fall. And automakers and retailers know that television remains the undisputed prime driver for awareness, and it's also the key trigger for consumers' actual purchases. Furthermore, as the bulk of auto industry advertising spending has always been tied directly to unit sales, we believe the category will continue to be strong.

Other major core advertising categories that increased in the current year were restaurants, furniture, home improvement, financial institutions and grocery. We saw first quarter declines in professional services, retail, telecommunications and entertainment. Additionally, Tampa showed more softness than our other markets in the quarter. It's simply harder to find signs of economic recovery in Tampa than in many other major metros around the country.

Our Digital revenues increased 18% in the first quarter. While the dollar volume was small, we made a lot of progress with our digital operations in the first quarter. Of our top 5 online advertising categories, 4 were up strongly and only 1, medical, was down slightly. Digital automotive advertising increased 20%.

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