<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 27, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-6383
MEDIA GENERAL, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0850433
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 E. Grace St., Richmond, VA 23219
(Address of principal executive offices) Zip Code
(804) 649-6000
Registrant's telephone number, including area code
N/A
---
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 29, 1994.
Class A Common shares: 25,682,925
Class B Common shares: 557,154
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
March 27, December 26,
1994 1993
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,551 $ 2,942
Accounts receivable - net 55,899 62,122
Inventories 10,348 10,290
Other 29,038 17,003
----------- -----------
Total current assets 97,836 92,357
----------- -----------
Investments in unconsolidated affiliates 45,151 46,675
Other assets 34,405 45,561
Property, plant and equipment - net 516,947 515,225
Excess of cost of businesses acquired over
equity in net assets - net 45,312 45,424
----------- -----------
$ 739,651 $ 745,242
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
March 27, December 26,
1994 1993
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,729 $ 20,994
Accrued expenses and other liabilities 66,314 61,066
Income taxes payable 1,936 746
----------- -----------
Total current liabilities 89,979 82,806
----------- -----------
Long-term debt 250,250 261,250
Deferred income taxes 88,914 88,679
Other liabilities and deferred credits 86,720 87,073
Stockholders' equity:
Preferred stock ($5 cumulative convertible),
par value $5 per share:
Authorized 5,000,000 shares; none outstanding
Common stock, par value $5 per share:
Class A, authorized 75,000,000 shares; issued
25,682,564 and 25,695,000 shares 128,413 128,475
Class B, authorized 600,000 shares; issued
557,154 shares 2,786 2,786
Additional paid-in capital 5,810 5,967
Unearned compensation (2,712) (3,108)
Retained earnings 89,491 91,314
----------- -----------
Total stockholders' equity 223,788 225,434
----------- -----------
$ 739,651 $ 745,242
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 4
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(000's except for per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 27, March 28,
1994 1993
----------- -----------
<S> <C> <C>
Revenues $ 149,390 $ 144,190
Operating costs:
Production costs 81,743 79,838
Selling, distribution and administrative 41,196 39,913
Depreciation and amortization 14,012 14,586
----------- -----------
Total operating costs 136,951 134,337
----------- -----------
Operating income 12,439 9,853
----------- -----------
Other income (expense):
Interest expense (4,882) (5,379)
Equity in net loss of
unconsolidated affiliate (1,524) (539)
Other, net (50) 1,087
----------- -----------
Total other income (expense) (6,456) (4,831)
----------- -----------
Income before income taxes 5,983 5,022
----------- -----------
Income taxes 2,034 1,613
----------- -----------
Net income $ 3,949 $ 3,409
=========== ===========
Earnings per common share and equivalent $ 0.15 $ 0.13
=========== ===========
Dividends per common share $ 0.11 $ 0.11
=========== ===========
Weighted average common shares
and equivalents 26,258 26,105
</TABLE>
See accompanying notes.
<PAGE> 5
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Three Months Ended
March 27, March 28,
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,949 $ 3,409
Adjustments to reconcile net income:
Depreciation and amortization 14,012 14,586
Deferred income taxes (6) (1,070)
Equity in undistributed net loss
of unconsolidated affiliate 1,524 539
Change in assets and liabilities 9,524 (1,477)
----------- -----------
Net cash provided by operating activities 29,003 15,987
----------- -----------
Cash flows from investing activities:
Capital expenditures (15,447) (6,837)
Other, net (139) 2,724
----------- -----------
Net cash used in investing activities (15,586) (4,113)
----------- -----------
Cash flows from financing activities:
Net decrease in long-term debt (11,000) (10,000)
Dividends paid (2,886) (2,882)
Other, net 78 655
----------- -----------
Net cash used in financing activities (13,808) (12,227)
----------- -----------
Net decrease in cash (391) (353)
Cash at beginning of year 2,942 2,791
----------- -----------
Cash at end of period $ 2,551 $ 2,438
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 5,020 $ 6,050
Income taxes (net of refunds) 830 655
</TABLE>
See accompanying notes.
<PAGE> 6
MEDIA GENERAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial reporting, and with applicable quarterly reporting
regulations of the Securities and Exchange Commission. They do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements and, accordingly, should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Company's Annual Report on Form 10-K for the year ended December
26, 1993.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of interim
financial information have been included. The results of operations for interim
periods are not necessarily indicative of the results that may be expected for
the full fiscal year.
2. Inventories are principally raw materials.
3. At March 27, 1994, 1,092,824 shares of Class A common stock were
reserved for issuance upon exercise of unqualified stock options granted.
4. Effective December 27, 1993, the Company adopted Statement of
Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits". This standard requires that the cost of certain
benefits, such as workers' compensation, disability benefits and health care
continuation coverage provided to former or inactive employees be recognized on
the accrual basis of accounting. Prior to the date of adoption of SFAS 112, the
Company already accounted for the majority of these benefit costs on the accrual
method. Consequently, the effects on the Company of adopting the standard were
not material and have been charged to operating costs in the accompanying
Statement of Operations.
5. On April 7, 1994, the stock redemption agreement between the Company
and Mr. D. Tennant Bryan, Chairman of the Executive Committee of the Board of
Directors, was amended and restated. Under the terms of the former agreement,
the Company was obligated to purchase some of the Class A shares of the Company
owned by Mr. Bryan at his death. The number of shares required to be acquired
was determined by reference to certain taxes and other expenses which would be
incurred by Mr. Bryan's estate, and the price per share would be 90% of the
market price of the shares during a period immediately preceding his death. At
December 26, 1993, the Company's obligation for the purchase of Class A shares
under the former agreement would have approximated $37 million.
The amended agreement provides that upon Mr. Bryan's death, his estate has
the option to sell and the Company has a separate option to buy the lesser of
(a) 15% of the Company's Class A stock owned by Mr. Bryan at his death and (b) a
sufficient number of shares of Class A stock to fund estate taxes and certain
funeral and administrative expenses. The purchase price for each share redeemed
under the amended agreement will equal 90% of the average daily closing price
for a share of Class A stock during the 91 days preceding the date that is 30
days after the date of death. The agreement also provides that, if the estate
pays taxes in installments over a period of time, and if a redemption right has
been exercised, the Company in certain circumstances also may elect to pay the
redemption price in installments, plus interest at the rate paid by the estate.
Assuming the amended agreement had been in place on March 27, 1994, if the
<PAGE> 7
Company or the estate had exercised an option, respectively, to buy or sell, the
maximum cost to the Company of the redemption would have approximated $7
million.
6. As disclosed in Note 3 to the Company's 1993 Annual Report, Garden
State Newspapers (GSN) has failed to redeem the Series A and Series C Preferred
Stock that previously had been issued to the Company and which was mandatorily
redeemable on January 1, 1994. However, the Company has signed a Letter
Agreement (Agreement) with GSN and a GSN affiliate whereby it has agreed to a
process through which it would sell its 40% common equity interest in GSN, along
with its GSN Series A and Series C Preferred Stock, for approximately $62.7
million. Under the terms of the Agreement, the Company would simultaneously
exchange its GSN Series B Preferred Stock for the 9% Preferred Stock of Denver
Newspapers, Inc., currently owned by GSN. The Company would continue to hold a
warrant to purchase 40% of the common equity of Denver Newspapers, Inc. The
closing date under the Agreement, has been extended from April 29, 1994, to May
19, 1994. The Agreement remains subject to various conditions, including the
buyer's ability to arrange financing. Consequently, there is no assurance that
the transactions will be consummated and, in light of these contingencies, the
Company continues to evaluate its options.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
Media General, Inc., is a diversified communications company with wholly owned
subsidiaries operating within three principal business segments: newspaper
publishing, broadcast and cable television operations, and newsprint
manufacturing. In addition to the three principal business segments, the
Company has auxiliary operations in the financial and business publishing, and
commercial printing fields. The Company also participates in newspaper
publishing and newsprint manufacturing joint venture operations, the operating
results of which are recognized under the equity method of accounting.
The Company's businesses are somewhat cyclical; the second and fourth quarters
are typically stronger than the first and third quarters.
The Company's fiscal year ends on the last Sunday in December.
INCREASE (DECREASE) IN OPERATING COMPONENTS
<TABLE>
<CAPTION>
Three Months Ended
March 27, 1994
Compared To Equivalent
Period Last Year
Increase (Decrease)
Amount Percent
----------------------
<S> <C> <C>
Revenues $ 5,200 3.6 %
Production costs 1,905 2.4
Selling, distribution and administrative 1,283 3.2
Depreciation and amortization (574) (3.9)
Operating income 2,586 26.2
Other income (expense) (1,625) 33.6
Income before income taxes 961 19.1
Income taxes 421 26.1
Net income 540 15.8
</TABLE>
<PAGE> 9
REVENUES
Consolidated revenues increased $5.2 million (3.6%) in the first quarter of 1994
compared to the equivalent quarter of 1993.
Newspaper segment revenues for the first quarter were $77.9 million, up 4.8%
from the comparable 1993 quarter. Within the three daily newspapers which
comprise the Company's metropolitan newspaper group, advertising revenues
increased 5.2%, reflecting a 2.8% average rate increase and a 2.3% rise in
advertising inches. Classified advertising revenues, particularly in the
automotive and employment categories, and general advertising revenues, driven
by airline and cruise line spending, improved meaningfully from the year-ago
period. Retail advertising remained soft overall, the result of severe winter
weather and ongoing retail store closings and consolidations. Circulation
revenues rose 2.2% from the first quarter of 1993, the result of average
circulation rate increases of 5.4% which more than offset a 3% decline in
combined circulation volume. The volume decline was primarily attributable to
the selective pull-back of circulation by The Tampa Tribune in the more distant
districts it serves, and to the effect of circulation rate increases implemented
since the year-ago quarter.
Television segment revenues increased $2.2 million (5.2%) compared to the first
quarter of 1993. The increase was primarily attributable to the Company's three
broadcast TV stations, where combined revenues rose $1.8 million (15.3%) in the
current quarter from the year-ago period. Local and national advertising
revenues increased 16.8% and 20%, respectively, in the quarter, led by strong
growth in advertising by domestic and foreign car manufacturers. Revenues of
the Company's Fairfax County, Virginia, cable system (Fairfax Cable) were
essentially level with the year-ago period. Growth in installation revenues,
the result of a 2.4% increase in the number of subscribers (to 207,700 at March
27, 1994), and an increase in pay-per-view revenues of 18.5% ($.3 million) was
essentially offset by the effect of a 4.5% decline in revenue per subscriber
(excluding pay-per-view), the result of a decrease in the percentage of total
subscribers taking expanded programming services. The decrease in the
percentage of subscribers taking expanded cable service is, to a significant
degree, attributable to the Cable Television Consumer Protection and Competition
Act of 1992 (Cable Act), which now allows subscribers who take basic cable
service to subscribe directly to premium pay channels. On September 1, 1993,
Fairfax Cable implemented new rates to comply with the rate regulation
provisions of the Cable Act. Those rates resulted in increased bills for some
subscribers, and decreased bills for others, but had an essentially revenue-
neutral effect when compared to the total average monthly rate charged all
subscribers as a group. On March 30, 1994, the Federal Communications
Commission (FCC) announced the adoption of further detailed rules intended to
govern rates which cable operators may charge subscribers. While the Company
continues to study the new rules, its preliminary evaluation indicates that
their overall effect is unlikely to be material to the Company's financial
position or results of operations. Cable rates are subject to local franchise
authority and FCC review, and further rate regulation by the FCC is possible.
As a result of the Cable Act, Fairfax Cable's near-term revenue growth will be
largely dependent upon its success in increasing its subscriber base and in
expanding subscriber use of its unregulated services, such as pay-per-view
programming.
Newsprint segment revenues decreased $.9 million (3.7%) in the first quarter of
1994 from the comparable period of 1993. The decrease was principally
attributable to the Company's Garden State Paper newsprint mill, where newsprint
tonnage sold increased slightly (.6%) from the year-ago quarter, but average
newsprint selling prices declined 7.2% (from approximately $417/ton to
<PAGE> 10
$387/ton), the result of pricing pressure attributable to a continued supply
and demand imbalance. Newsprint prices are expected to remain soft during most
of the first-half of 1994. Even though newsprint supply and demand may not come
back into balance in 1994, there are indications that the severity of the
oversupply situation is lessening.
OPERATING COSTS
Production costs increased $1.9 million (2.4%) in the first quarter of 1994 from
the comparable 1993 period. The increase reflects the effects of a $1 million
(3.4%) rise in compensation and employee benefit costs, and increases of $.7
million in fuel and utility costs and $.3 million in waste news costs (due to
increased price and consumption in both cases), primarily in the Company's
newsprint operations. Together, these more than offset reduced maintenance and
repairs expenses, down $.5 million mainly as a result of a comparative decline
in newsprint manufacturing equipment repairs, a $.4 million reduction in the
cost of newsprint consumed, principally the result of a decline in the average
cost of newsprint consumed by the Company's metropolitan newspapers, and a $.3
million decrease in insurance, reflecting the effect on workers' compensation
costs of aggressive worker safety awareness programs within the Company's
newspaper operations.
Selling, distribution and administrative costs increased $1.3 million (3.2%)
from the year-ago quarter. Increases in compensation and employee benefit costs
(up 2.4%), agency commissions (up due to expanded advertising revenues), and in
other administrative expenses more than offset declines in bad debt expense
(down principally on improved collection results and receivables aging at the
Company's newspapers) and reduced newspaper circulation promotion incentives.
Depreciation and amortization expense declined $.6 million (3.9%) in the first
quarter of 1994 from the comparable period of 1993. The decline, which occurred
in all of the Company's significant business segments, was attributable to a
comparative reduction in assets placed in service, and to certain newspaper
press equipment becoming fully depreciated at the end of 1993.
OTHER INCOME (EXPENSE)
Interest expense declined $.5 million (9.2%) in the first quarter of 1994 from
the comparable quarter of 1993. The decrease was principally the result of the
significant ($66 million) decline in average debt outstanding from the year-ago
period, which more than offset the effect of a 73 basis point rise (to
approximately 7.7%) in the Company's average borrowing rate from the prior
comparable quarter.
The Company's share of the net loss of its unconsolidated affiliate, Southeast
Paper Manufacturing Company (SEPCO), increased to $1.5 million in the current
quarter from $.5 million in the first quarter of 1993. The increased loss was
primarily attributable to the reduced average newsprint selling price realized
by SEPCO during the quarter, down 8.1% from the year-ago period, which more than
offset the combined effects of a slight increase in tons sold and reduced
maintenance, chemical and fiber costs.
Other income (expense), net, decreased $1.1 million from the first quarter of
1993, to an expense of $50 thousand in the current period. The decrease was
primarily attributable to the quarter-to-quarter reduction in insurance proceeds
recognized in connection with a late-1992 fire ($.8 million) and to a decrease
in interest income ($.3 million), principally as a result of the repayment of a
note receivable in 1993.
<PAGE> 11
NET INCOME
Net income for the first quarter of 1994 was $3.9 million, up $.5 million
(15.8%) from the first three months of 1993.
The following discussion focuses on the pretax operating income of each of the
Company's principal business segments, and on income taxes.
Newspaper segment operating income rose to $5.5 million in the first quarter of
1994 from $1.5 million in the same period of 1993. While all three of the
Company's daily metropolitan newspapers contributed to the increased
profitability, the major share of the earnings growth was produced by The Tampa
Tribune, due mainly to significant growth in general and classified advertising
revenues (up 22.9% and 14.9%, respectively) combined with the effects of
meaningful operating cost reductions. Television segment operating income
increased $.5 million (7.8%) from the year-ago period, primarily the result of
strong revenue gains at the Company's three broadcast TV stations. Newsprint
segment operating income declined from a profit of $1.7 million in the first
quarter of 1993 to an operating loss of $.3 million in the current quarter,
chiefly the result of a 7.2% decline in average realized newsprint prices from
the year-earlier period.
Income taxes rose $.4 million (26.1%) in the first quarter of 1994 from the
comparable 1993 amount on a $1 million (19.1%) rise in income before income
taxes. The Company's effective tax rate increased to 34% from 32.1% in the
year-ago period, principally the result of the corporate tax rate increase
enacted in August 1993 as well as a decrease in the favorable tax effects of
certain insurance programs.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated by operating activities during the first three months of 1994
totaled $29 million, up $13 million from the comparable period of 1993. The
increase was due principally to improved profitability, to the increase in funds
generated by comparative reductions in accounts receivable, inventories and
other current assets, and to a reduction of funds applied to reduce accrued
expenses and other current liabilities.
The primary use of cash in the first quarter of 1994 was $15.4 million for
capital expenditures ($10.2 million of which related to the new Winston-Salem
Journal production facility which is expected to be completed during the third
quarter of 1994 at a cost of approximately $44 million), $11 million for the
curtailment of debt, and $2.9 million for the payment of dividends to
stockholders.
At March 27, 1994, total debt was $250.8 million compared to $261.8 million at
December 26, 1993, and $310.5 million at March 28, 1993. Although the Company's
debt level may rise temporarily in the second and third quarters of 1994 as
construction of the Winston-Salem project enters it final phases, the Company
anticipates that, barring unexpected funds requirements, internally generated
funds provided by operations during 1994 will be more than adequate to finance
projected capital expenditures, dividends to shareholders, and working capital
needs, and that excess funds will be utilized to further reduce debt from the
current level. However, to ensure continued flexibility should unexpected needs
or opportunities arise, at March 27, 1994, the Company had available to it
unused credit lines of $101 million under revolving credit agreements with five
banks, and an uncommitted credit facility with an insurance company which
<PAGE> 12
provides for additional borrowings of up to $85 million at prevailing interest
rates.
OUTLOOK
While prospects remain favorable for the Company's newspaper and broadcast TV
operations in the second quarter, newsprint profitability will remain under
pressure in all likelihood, and the Company's cable TV performance will continue
to be limited by restrictive reregulation provisions. Overall, however, the
Company continues to expect solid year-over-year operating gains, with much of
the improvement coming in the latter half of the year.
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2 Amendment dated May 3, 1994, to Letter Agreement dated March
16, 1994, by and among Media General, Inc., Affiliated Newspaper Investment
Company, and Garden State Newspapers, Inc.
Exhibit 10.1 Amended and Restated Redemption Agreement between Media
General, Inc., and D. Tennant Bryan, dated April 7, 1994.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
March 27, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDIA GENERAL, INC.
DATE: May 9, 1994 /s/ J. Stewart Bryan III
---------------------------------
J. Stewart Bryan III, Chairman,
President and Chief Executive Officer
DATE: May 9, 1994 /s/ Marshall N. Morton
---------------------------------
Marshall N. Morton,
Senior Vice-President and Chief
Financial Officer
<PAGE> 1
Exhibit 2
Garden State Newspapers, Inc.
Loop Central One
4888 Loop Central Drive, Suite 425
Houston, Texas 77081
May 3, 1994
Mr. Stewart Bryan, III
Chairman of the Board of
Directors and President
Media General, Inc.
333 East Grace Street
Richmond, VA 23219
Dear Stewart:
This letter will serve as an amendment to the March 16, 1994 Letter
Agreement (the "Letter Agreement") pursuant to which Affiliated Newspapers
Investment Company will acquire all of the common and preferred stock of Garden
State held by Media General.
Except as expressly provided herein, all of the existing terms of the
Letter Agreement will remain unchanged and will continue in full force and
effect.
1. Paragraph 6 of the Letter Agreement is amended in its entirety to read
as follows:
"ANI shall have (i) until May 12, 1994 to enter into a firm commitment
underwriting agreement and price an offering of not less than $85,000,000 of ANI
Securities and (ii) until May 19, 1994 to close the transactions contemplated by
paragraphs 1 and 2. If (a) the offering has not been priced on or before May
12, 1994, or (b) the closing of the transactions contemplated by paragraphs 1
and 2 have not occurred on or before May 19, 1994 (unless the parties have
mutually agreed in writing to extend such deadline), in each case, as of such
respective deadline, this agreement, as amended, shall terminate, with all
expenses related to the transactions described herein to be paid by ANI, GSN and
Media General as set forth in this agreement, and all provisions of the GSN
Shareholders' Agreement shall remain in full force and effect."
Please confirm your acceptance of the terms of this amendment to the Letter
Agreement by signing the attached facsimile of this letter and returning a
signed copy of this letter by facsimile to me by May 3, 1994. If we do not
receive your response by 5:00 p.m. on such date, we will assume that the Letter
Agreement shall no longer be of any force or effect.
<PAGE> 2
Yours very truly,
AFFILIATED NEWSPAPERS INVESTMENT
COMPANY
By: /s/ Joseph J. Lodovic
Joseph J. Lodovic, IV
Executive Vice President
Chief Financial Officer and Treasurer
GARDEN STATE NEWSPAPERS, INC.
By: /s/ Joseph J. Lodovic
Joseph J. Lodovic, IV
Executive Vice President
Chief Financial Officer and Treasurer
AGREED AND ACCEPTED:
MEDIA GENERAL, INC.
By: /s/ J. Stewart Bryan, III
J. Stewart Bryan, III
Chairman and President
<PAGE> 1
Exhibit 10.1
AMENDED AND RESTATED REDEMPTION AGREEMENT
April 7, 1994
The REDEMPTION AGREEMENT dated November 19, 1985, between MEDIA
GENERAL, INC., a Virginia corporation (the "Company"), and D. TENNANT BRYAN (the
"Shareholder"), and amended and restated as of January 29, 1988, is hereby
amended and restated as of April 7, 1994, as follows:
RECITALS:
A. The Shareholder owns 2,179,491 shares of the Company's Class A
common stock (the "Shares") as of the date of this Agreement.
B. The Shareholder wishes to ensure that his estate will be able to
sell a sufficient number of the Shares to pay a portion of the federal and state
transfer taxes and expenses incurred as a result of the Shareholder's death.
C. The Company believes it is in its best interests and the best
interests of its remaining shareholders to be in a position to redeem a portion
of the Shares from the Shareholder's estate for a number of reasons, including
among others, an ability to purchase a portion of the Shares at a discount from
prevailing market prices.
D. The parties intend that payments in redemption of any of the
Shares pursuant to this Agreement qualify as distributions in payment for the
Shares pursuant to section 303(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
Therefore in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
<PAGE> 2
1. Purchase of Shares. Following the death of the Shareholder, the
Company shall have the right to purchase from the Shareholder's Personal
Representative, and the Personal Representative shall have the right to sell to
the Company, upon proper notice to the other party pursuant to Section 3 and on
the terms and conditions set forth in this Agreement, the number of the Shares
designated by the Company or the Personal Representative, as the case may be,
pursuant to Section 3.
2. Purchase Price. The purchase price for each of the Shares
purchased will equal 90 percent of the average daily closing price for a share
of the Company's Class A common stock in the principal market in which the
Shares are traded on trading days falling within the 91 calendar day period
preceding the date that is 30 days after the date of the Shareholder's death
(the "Purchase Price").
3. Number of Shares to be Purchased. The number of the Shares that
the Company shall purchase from the Personal Representative, if any, shall be
within the discretion of the party, i.e., the Company or the Personal
Representative, as the case may be, that elects by appropriate notice pursuant
to this Section 3, to have some of the Shares so purchased (the "Electing
Party"). Notwithstanding the foregoing, however, the largest number of Shares
that the Electing Parties collectively may elect to have the Company purchase
shall be the lesser of: (a) 15 percent of the Shares owned by the Shareholder
at his death; and (b) the number of the Shares (to the nearest Share) obtained
by dividing (i) the sum of the estate, inheritance, legacy, and succession taxes
(including any interest collected as a part of such taxes) imposed because of
the Shareholder's death, and the amount of the funeral and administrative
expenses allowable as deductions to the Shareholder's estate under section 2053
of the Code, by (ii) the Purchase Price per share. The Electing Party shall
notify the other party of the number of the Shares it elects to have the Company
<PAGE> 3
purchase as soon as possible after the Shareholder's death, but in no event
later than seven months after the Shareholder's death. If either party elects
to have the Company purchase some of the Shares, then the Personal
Representative shall notify the Company whether the Personal Representative has
elected, anticipates electing or has obtained permission to extend the period of
time for paying Federal and Virginia estate taxes owed by the Shareholder's
estate. Any election hereunder shall be without prejudice to the right of the
other party to elect, by appropriate notice pursuant to this Section 3, to have
the Company purchase such additional number of the Shares as shall cause the
total number purchased by the Company not to exceed the maximum number permitted
by this Section 3.
4. Closing and Payment
(a) Closing. The closing for any purchase of the Shares
pursuant to this Agreement shall take place at the principal office of the
Company, 333 East Grace Street, Richmond, Virginia, on or before the forty-fifth
(45th) day following the date the Electing Party notifies the other party of its
election to have some of the Shares purchased pursuant to Section 3 of this
Agreement. Except as otherwise provided in Section 4(b) hereof, the payment of
the purchase price shall be made by the Company by "same day funds" against
delivery by the Personal Representative of a certificate or certificates for the
Shares to be purchased free and clear of any liens or encumbrances, other than
unpaid Federal and Virginia estate taxes, and in proper form and duly endorsed
for transfer to the Company.
(b) Installment Payments. Notwithstanding the provisions of Section
4(a) hereof, if the Personal Representative shall elect or shall provide notice
to the Company of its intention to elect to extend the time for payment of
Federal estate taxes owed by the Shareholder's estate pursuant to section 6166
of the Code, or shall obtain permission from the Internal Revenue Service to
<PAGE> 4
extend the time for such payment pursuant to section 6161 of the Code, then, at
the option of the Company, the Company's payment of the purchase price at the
closing may be made partly in "same day funds" and partly by a nontransferable
term installment note.
(1) Section 6166 Election. If, prior to the closing of any
purchase of Shares, the Personal Representative shall have made an election
or shall have provided notice of its intention to make an election pursuant
to section 6166 of the Code, then the portion of the purchase price paid in
"same day funds" shall be an amount determined by multiplying (i) the
product of the Purchase Price and the number of Shares to be purchased at
the closing (the "closing purchase price"), by (ii) a fraction, the
numerator of which shall be the amount of the federal and Virginia estate
taxes not paid in installments under section 6166 of the Code, and the
denominator of which shall be the total federal and Virginia estate taxes
owed by the Shareholder's estate. For example, if the closing purchase
price is $10X, the total federal and Virginia estate taxes are $50X, and
the amount of federal and Virginia estate taxes not paid in installments
under section 6166 of the Code is $5X, then the portion of the purchase
price paid in same day funds shall be not less than $10X multiplied by
$5X/$50X, or $1X. The installment note shall provide for payments of
principal and interest to be made five days before any day on which
payments of estate taxes and interest will be made and for which the
Personal Representative shall have provided at least fifteen days' notice.
Until the total closing purchase price shall have been paid, the principal
amount of each such installment payment shall be determined by multiplying
the closing purchase price by a fraction, the numerator of which shall be
the principal amount of the federal and Virginia estate taxes then being
paid, and the denominator of which shall be the total federal and Virginia
<PAGE> 5
estate taxes owed by the Shareholder's estate without reduction for any
such taxes previously paid. The installment note shall bear interest on
the unpaid balance of the closing purchase price, from the closing date,
payable at such times as installments of principal are payable, at such
rate or rates as shall equal the rate or rates of interest payable by the
Shareholder's estate with respect to the unpaid portion of the estate tax.
(2) Section 6161 Extension. If, prior to the closing of any
purchase of Shares, the Personal Representative shall have obtained
permission from the Internal Revenue Service to extend the time for payment
of Federal estate taxes pursuant to section 6161 of the Code, then the
portion of the closing purchase price paid in same day funds shall be the
greater of (i) the portion of the closing purchase price that would be
required to be paid in same day funds pursuant to Section 4(b)(1) above if
an election had been made pursuant to section 6166, and (ii) the sum of the
Shareholder's debts at the time of his death, specific cash bequests in the
Shareholder's will or any trust agreement, and the reasonably anticipated
costs of administering the Shareholder's estate for the first year of such
administration. The installment note shall provide for payments of
principal and interest to be made five days before any day on which
payments of estate taxes and interest will be made and for which the
Personal Representative shall have provided at least fifteen days' notice,
but not less often than annually. Until the total closing purchase price
shall have been paid, the principal amount of each such installment payment
shall be not less than the sum of (i) an amount which shall be determined
by multiplying the closing purchase price by a fraction, the numerator of
which shall be the principal amount of the federal and Virginia estate
taxes then being paid, and the denominator of which shall be the total
federal and Virginia estate taxes owed by the Shareholder's estate without
reduction for any such taxes previously paid, and (ii) the administrative
<PAGE> 6
expenses of the estate reasonably anticipated to be payable within the next
twelve months. The installment note shall bear interest on the unpaid
balance of the closing purchase price, from the closing date, payable at
such times as installments of principal are payable, at such rate or rates
as shall equal the rate or rates of interest payable by the Shareholder's
estate with respect to the unpaid portion of the estate tax.
5. Effect of Stock Splits. If the number of outstanding shares of
the Company increases between the Shareholder's death and the date of the
closing as set forth in Section 4 of this Agreement as a result of a stock split
or stock dividend, the Purchase Price and the number of the Shares to be
purchased under Section 3 of this Agreement shall be adjusted accordingly.
6. Limitations on the Company's Obligation to Repurchase
(a) No Impairment of the Company's Capital. Notwithstanding any
other provision of this Agreement, no redemption of Shares shall be made by the
Company if the capital of the Company is then impaired or if the redemption of
the Shares would cause any impairment of the capital of the Company within the
meaning of Sec. 13.1-653(C)(2) of the Virginia Stock Corporation Act or any
similar applicable statute or regulation, or if the Company is then insolvent or
unable to pay its debts as they become due in the usual course of business or
the redemption of the Shares would render the Company insolvent or unable so to
pay its debts within the meaning of Sec. 13.1-653(C)(1) of the Virginia Stock
Corporation Act or any similar applicable statute or regulation.
(b) Compliance with Securities Laws. Notwithstanding any other
provision of this Agreement, the Company shall not be obligated to redeem the
Shares if, in the opinion of the Company or its counsel, to do so would cause
the Company to violate applicable federal or state securities laws, rules or
regulations, or to violate any obligation imposed on the Company by such laws,
<PAGE> 7
rules or regulations or administrative or court decision thereunder.
(c) Suspension of Obligation to Redeem the Shares. If, pursuant to
Section 6(a) or 6(b) hereof, the Company does not redeem the Shares at the
initial date for such redemption set forth in Section 4(a) above, then the
Company shall notify the Personal Representative as soon as the condition
precluding the redemption no longer applies, and then will redeem the Shares
within forty-five (45) days following the delivery of a new notification to or
receipt of a new notification from the Personal Representative pursuant to
Section 3 hereof; provided, however, that the Personal Representative shall not
be obligated to sell the Shares if, in the opinion of its counsel, to do so
would cause it to violate applicable federal or state securities laws, rules or
regulations, or to violate any obligation imposed on the Personal Representative
by such laws, rules or regulations or administrative or court decision
thereunder or incur a liability under Section 16(b) of the Securities Exchange
Act of 1934 or the corresponding provision of any subsequent law. The
Shareholder's estate shall continue to be the owner of the Shares for all
purposes, until the closing of any purchase of the Shares. In the event that
the condition precluding the redemption continues for a period of twelve (12)
consecutive months following the delivery of the initial notice to or receipt of
the initial notice from the Personal Representative pursuant to Section 3
hereof, then the Company shall so notify the Personal Representative and any
further obligation or right of the Company to redeem the Shares under this
Agreement shall cease and be of no further force or effect. The Company shall
not be liable to any person for any failure to redeem the Shares by reason of
the prohibitions set forth in this Section 6.
7. Notices. All notices under this Agreement must be in writing,
and shall be duly given if delivered by hand or by certified mail to the
following address or such other address as either party may hereafter designate
by written notice to the other: to the Company at 333 East Grace Street,
<PAGE> 8
Richmond, Virginia 23219, Attention: Chief Financial Officer; to the
Shareholder at 211 Ampthill Road, Richmond, Virginia 23226; and to any Personal
Representative of the Shareholder at such address as the Personal Representative
shall give in writing to the Company. If mailed, notice shall be deemed given
on the date of delivery shown on any post office receipt or, if none, on the
fifth (5th) day after deposit of such notice in the United States mail with
first class postage prepaid.
8. Personal Representative Defined. For purposes of this Agreement,
the term "Personal Representative" shall include the following acting together
as a group: (a) the executors or administrators of the Shareholder's estate;
(b) the trustees of any trust created by the Shareholder (either at the
Shareholder's death or during the Shareholder's lifetime); and (c) any other
fiduciary acting in any similar capacity.
9. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Company and its successor or assigns and upon
the Shareholder, his heirs, and his Personal Representative, and each member of
the group constituting his Personal Representative.
10. Applicable Law. This Agreement shall be governed by and
construed according to the laws of the Commonwealth of Virginia.
11. Modification. No change or modification to this Agreement shall
be effective unless it is in writing and signed by each of the parties.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first above written.
/s/D. Tennant Bryan
---------------------------
D. Tennant Bryan
Date: 13 April '94
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MEDIA GENERAL, INC.
By:/s/ Marshall N. Morton
---------------------------
Senior Vice President and
Chief Financial Officer
Date: 4/13/94
----------------------
