Media General continues to struggle with print revenue losses, debt restructuring

Media General reported first quarter results today with big continuing problems outweighing a strong performance by its broadcast unit.

CEO Marshall Morton said in a conference call with investors that plans to sell all or most of its newspapers are progressing.  "Strategically it makes sense for us," he said. "Our future is as a broadcast and digital company."

On an operating basis, the company earned $3.2 million on $149.5 in revenues for the quarter, a margin of 2 percent.

However an assortment of additional costs resulted in a net loss of $34.4 million for the quarter -- a negative margin of 23 percent.

Media General results were dragged down by $15 million in interest payments, $10 million in costs for restructuring its debt to meet terms of loans and a $10 million non-cash write-off of its DealTaker subsidiary.

Efforts to turn around DealTaker's business, crippled by low search rankings after changes in Google's algorithm, have failed, Morton said.

Like Gannett, reporting earlier this week, Media General had a decline in print revenues of 8.3 percent compared to the same period in 2011. Cutting 165 jobs and other expenses at the Tampa Tribune, executives said, did improve publishing earnings (which Media General does not report paper by paper).

Asked how the proposed sale of the newspapers, announced in February, was progressing, Media General executives said they had received many inquiries -- some for the whole division of 23 titles, some for regional groups, some for individual papers.

The next step is to get confidentiality agreements and deposits from serious bidders in return for a full prospectus. Morton declined to speculate, even roughly, what the papers will fetch.

He agreed with an analyst, however, that even if all of them sell at prices comparable to recent transactions, the company's debt challenges will continue.

Last month Media General negotiated an extension on the due date of one set of loans from March 2013 to March 2015. But that will involve higher interest rates -- roughly 10 percent -- for those loans as well, as the one-time costs of refinancing.

Also the company agreed to try to sell $225 million in bonds by May 25, applying at least $190 million of the proceeds to paying down the loans.

Like Gannett, Media General's broadcast unit had a strong first quarter with revenues up 12 percent, buoyed by political advertising relating to Republican presidential primaries. Political will now slow over the next several months until general election advertising picks up in the fall.

However, Media General said that auto advertising, by far the most important category for local stations, will do well over the next two quarters. In the same period last year, shipment of Japanese cars and ads for them slowed after the earthquake and tsunami -- so companies like Honda and Toyota are now trying to make up for that lost business.

Also echoing Gannett, Media General said January was a terrible month for print advertising, but February (down 4.6 percent) and March (down 2.5 percent) were much better.

The company had issued press releases and made regulatory filings that telegraphed the results announced today. Shares, which had declined by about a third since the plan to sell newspapers was announced, rallied with a 7.5 percent gain, since the results were no worse than expected.

Questions linger whether the company, especially during the off year for political in 2013, will be able to deliver the revenue growth it is promising lenders and investors. It seems more and more probable, though, that by the end of this year Media General will have exited the thinning ranks of publicly traded newspaper companies.

(Poynter's Tampa Bay Times competes directly against the Tampa Tribune).


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