<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 June 26, 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 July 29, 1994.
Class A Common shares: 25,690,438
Class B Common shares: 556,574
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
June 26, December 26,
1994 1993
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,483 $ 2,942
Accounts receivable - net 61,837 62,122
Inventories 9,647 10,290
Other 27,578 17,003
----------- -----------
Total current assets 115,545 92,357
----------- -----------
Investments in unconsolidated affiliates 78,973 46,675
Other assets 31,616 45,561
Property, plant and equipment - net 518,203 515,225
Excess of cost of businesses acquired over
equity in net assets - net 44,182 45,424
----------- -----------
$ 788,519 $ 745,242
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
June 26, December 26,
1994 1993
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,714 $ 20,994
Accrued expenses and other liabilities 68,360 60,560
Income taxes payable 6,968 746
Current portion of long-term debt 13,989 506
----------- -----------
Total current liabilities 115,031 82,806
----------- -----------
Long-term debt 177,767 261,250
Deferred income taxes 92,660 88,679
Other liabilities and deferred credits 86,257 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
25,684,116 and 25,695,000 shares 128,420 128,475
Class B, authorized 600,000 shares; issued
556,954 and 557,154 shares 2,785 2,786
Additional paid-in capital 5,846 5,967
Unearned compensation (2,627) (3,108)
Retained earnings 182,380 91,314
----------- -----------
Total stockholders' equity 316,804 225,434
----------- -----------
$ 788,519 $ 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>
Second Quarter Ended Six Months Ended
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 154,608 $ 152,583 $ 303,998 $ 296,773
Operating costs:
Production costs 80,095 80,900 161,838 160,738
Selling, distribution and administrative 42,120 40,744 83,316 80,657
Depreciation and amortization 13,941 14,640 27,953 29,226
----------- ----------- ----------- -----------
Total operating costs 136,156 136,284 273,107 270,621
----------- ----------- ----------- -----------
Operating income 18,452 16,299 30,891 26,152
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (4,319) (5,588) (9,201) (10,967)
Equity in net income (loss) of
unconsolidated affiliate (117) 486 (1,641) (53)
Gain on sale of Garden State Newspapers
investment 91,520 --- 91,520 ---
Other, net 524 771 474 1,858
----------- ----------- ----------- -----------
Total other income (expense) 87,608 (4,331) 81,152 (9,162)
----------- ----------- ----------- -----------
Income before income taxes 106,060 11,968 112,043 16,990
----------- ----------- ----------- -----------
Income taxes 13,171 3,824 15,205 5,437
----------- ----------- ----------- -----------
Net income $ 92,889 $ 8,144 $ 96,838 $ 11,553
=========== =========== =========== ===========
Earnings per common share and equivalent $ 3.54 $ 0.31 $ 3.69 $ 0.44
=========== =========== =========== ===========
Dividends paid per common share $ 0.11 $ 0.11 $ 0.22 $ 0.22
=========== =========== =========== ===========
Weighted average common shares
and equivalents 26,229 26,097 26,244 26,101
</TABLE>
See accompanying notes.
<PAGE> 5
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Six Months Ended
June 26, June 27,
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 96,838 $ 11,553
Adjustments to reconcile net income:
Depreciation and amortization 27,953 29,226
Deferred income taxes 3,324 (1,361)
Equity in undistributed net loss
of unconsolidated affiliate 1,641 53
Gain on sale of Garden State Newspapers
investment (91,520) ---
Change in assets and liabilities 16,732 (5,377)
----------- -----------
Net cash provided by operating activities 54,968 34,094
----------- -----------
Cash flows from investing activities:
Net proceeds from sale of Garden State
Newspapers investment 57,520 ---
Capital expenditures (30,257) (14,099)
Other, net 6,972 3,745
----------- -----------
Net cash provided (used) by investing activities 34,235 (10,354)
----------- -----------
Cash flows from financing activities:
Net decrease in long-term debt (70,000) (19,000)
Dividends paid (5,773) (5,765)
Other, net 111 700
----------- -----------
Net cash used in financing activities (75,662) (24,065)
----------- -----------
Net increase (decrease) in cash and cash equivalents 13,541 (325)
Cash at beginning of year 2,942 2,791
----------- -----------
Cash at end of period $ 16,483 $ 2,466
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 10,220 $ 12,626
Income taxes (net of refunds) 5,572 6,075
</TABLE>
Information about Noncash Investing Activities:
In addition to the receipt of $63 million in cash ($57.5 million, net of
related transaction costs) from the sale of its investment in Garden State
Newspapers, Inc. (GSN), the Company also received 1,200 shares of 9% cumulative
preferred stock of Denver Newspapers, Inc., with a fair value of $34 million.
See Note 7 for a further discussion of the GSN sale.
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. Cash and cash equivalents include highly liquid investments with
original maturities of three months or less.
4. At June 26, 1994, 1,092,734 shares of Class A common stock were
reserved for issuance upon exercise of unqualified stock options granted.
5. 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.
6. 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
<PAGE> 7
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.
If the 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
$8 million at June 26, 1994.
7. On May 20, 1994, the Company sold its 40% common equity interest in
Garden State Newspapers, Inc. (GSN), along with its GSN Series A and Series C
Preferred Stock, for $63 million in cash. Additionally, the Company received
1,200 shares of $25,000 par, 9% cumulative preferred stock of Denver Newspapers,
Inc. (previously owned by GSN), including accumulated and unpaid dividends of
approximately $17.4 million thereon. The stock is valued at $34 million, net of
an unamortized discount of $27.3 million, based on an imputed discount rate of
12% and a redemption date of June 30, 1999. The sale resulted in a gain of
$91.5 million ($83.3 million after-tax; $3.17 per share). The cash proceeds
from the sale were used immediately to pay down debt ($53 million) and for
investment in short-term fixed income instruments ($5 million). The balance was
applied to transaction costs and utilized for other corporate purposes. The
Company continues to hold a warrant to purchase 40% of the common equity of
Denver Newspapers, Inc.
As more fully explained in Note 3 to its 1993 consolidated financial statements
(incorporated by reference in the Company's 1993 Annual Report on Form 10-K),
the Company's investment in GSN was reduced to zero in 1991 as a result of a GSN
loss in that year, and the Company has not recognized any equity in GSN's
operating results since then.
<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 newsprint
manufacturing joint venture operations and, until the recent sale of its
investment in Garden State Newspapers, Inc., in newspaper publishing joint
venture operations. Operating results of joint venture operations are
recognized under the equity method of accounting.
As more fully described in the "Other income (expense)" section of this
Discussion and in Note 7 to the accompanying financial statements, the Company
sold its investment in Garden State Newspapers, Inc., in May 1994, realizing a
gain of $91.5 million ($83.3 million after-tax).
The Company's businesses are somewhat cyclical; the second and fourth quarters
are typically stronger than the first and third quarters.
The Company's financial reporting year is a fiscal year which ends on the last
Sunday in December. Interim quarterly reporting periods consist of four 13-week
periods. Results for the current year are compared to those of the equivalent
quarterly and year-to-date periods of the prior year in the accompanying
consolidated financial statements.
<PAGE> 9
INCREASE (DECREASE) IN OPERATING COMPONENTS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 26, 1994, June 26, 1994,
Compared to Compared to
Equivalent Equivalent
Period Last Year Period Last Year
------------------- --------------------
Increase (Decrease) Increase (Decrease)
(000's) Amount Percent Amount Percent
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues $ 2,025 1.3 % $ 7,225 2.4 %
Production costs (805) (1.0) 1,100 0.7
Selling, distribution
and administrative 1,376 3.4 2,659 3.3
Depreciation and amortization (699) (4.8) (1,273) (4.4)
Operating income 2,153 13.2 4,739 18.1
Other income (expense) 91,939 (2,122.8) 90,314 (985.7)
Income before income taxes 94,092 786.2 95,053 559.5
Income taxes 9,347 244.4 9,768 179.7
Net income 84,745 1,040.6 85,285 738.2
</TABLE>
<PAGE> 10
REVENUES
Consolidated revenues increased $2 million (1.3%) and $7.2 million (2.4%) in the
second quarter and first half of 1994, respectively, compared to the equivalent
periods of 1993.
Newspaper segment revenues for the quarter and six-month periods ended June 26,
1994, rose 5.3% and 5%, respectively, from the comparable 1993 periods. Within
the three daily newspapers which comprise the Company's metropolitan daily
newspaper group, advertising revenues increased in both the second quarter and
first half of 1994 (by 6% and 5.6%, respectively), reflecting average rate
increases of 3.6% and 3.2% above the comparable year-ago periods, combined with
an approximate 2.4% rise in advertising inches in both periods. Although
increases in classified advertising (primarily in the employment and automotive
categories) produced most of the revenue gains in both periods, retail
advertising also contributed to the improvement in the second quarter,
rebounding from the effects of severe winter weather and the retail store
closings and consolidations experienced earlier in the year. Circulation
revenues rose 3.3% and 2.7% in the second quarter and first half of 1994, the
result of circulation rate increases of 4.3% and 4.9% which more than offset
combined circulation volume declines of 1% and 2% in those same periods. The
decline in circulation volume was primarily attributable to the selective pull-
back of circulation by The Tampa Tribune in the more distant districts it
serves, and to the effects of home delivery circulation rate increases
implemented in the second quarter of 1993.
Television segment revenues increased $.9 million (1.8%) and $3.1 million (3.4%)
in the second quarter and first-half of 1994, from the comparable periods of
1993. The increase was principally attributable to the Company's broadcast TV
stations, where combined revenues rose $1.2 million (7.9%) and $3 million
(11.2%) in the second quarter and first half on strong national and local
advertising, particularly in the automotive segment. During the second quarter
three of the Tampa market's four major broadcast TV stations announced they will
change their network affiliations. In that market, only the Company's flagship
station, WFLA-TV, will retain its historical network affiliation. Revenues of
the Company's Fairfax County, Virginia, cable system (Fairfax Cable) decreased
slightly in the second quarter and first-half of 1994, down 1.5% and .6%,
respectively, from the year-ago periods. The 2.8% year-over-year growth in the
number of subscribers, to 208,165 at June 26, 1994, combined with an
accompanying increase in installation revenues, was more than offset by declines
of 3.1% and 2.4% in average revenue per subscriber in the three and six-month
periods ended June 26, 1994. Pay-per-view revenues declined 7.3% in the quarter
as a result of weak special program offerings, but increased 5.5% in the year to
date. The decrease in average revenue per subscriber reflects the decline in
the percentage of subscribers taking expanded cable service which, to a
significant degree, is 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 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 a number of
issues associated with cable reregulation remain unresolved, and while the
overall effect of the rules to-date has not been material to the Company's
financial position or results of operations, they have had the effect of
limiting the revenue growth of those cable services which are now regulated.
<PAGE> 11
Consequently, 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. Cable rates
are subject to local franchise authority and FCC review.
Newsprint segment revenues decreased $3 million (11.6%) and $3.9 million (7.8 %)
in the second quarter and first six months of 1994 from the year-ago periods.
The decreases were principally attributable to the Company's Garden State Paper
newsprint mill, located in Garfield, New Jersey, where newsprint tonnage sold
during the second quarter and first six months decreased 4.8% and 2.2% from the
comparable year-ago periods, and average newsprint selling prices for both
periods declined approximately 7% (to slightly over $390/ton in the first-half
of 1994 from approximately $420/ton in the comparable 1993 period). The decline
in selling prices resulted from pricing pressure attributable to a supply and
demand imbalance which began during the latter half of 1993, and continued until
late in the first-half of 1994. On June 1, 1994, the Company reduced its
selling price discount by 3%, enabling it to realize an average June selling
price of approximately $407/ton. The Company was recently notified by the
majority owner of its Mexican newsprint affiliate that it presently is unable to
fund the scheduled quarterly payments (approximately $2.9 million) due the
Company for the remainder of 1994, and the scheduled October 15, 1994, purchase
of the Company's capital stock investment in that affiliate (for $3.6 million).
Accordingly, the Company has not recognized any income from this investment
since the first quarter of 1994, and no further recognition of income is
anticipated until the payment of amounts owed is probable.
OPERATING COSTS
Production costs decreased $.8 million (1%) in the second quarter, but rose $1.1
million (.7%) in the first half of 1994 compared to the equivalent 1993 periods.
The second quarter reflects a $1.3 million decrease in the cost of newsprint
(the result of a 10.1% decline in price, offset somewhat by the effect of a 3%
increase in tons consumed), and a $1.2 million decline in insurance expense,
largely the result of reduced workers compensation costs attributable to
aggressive worker safety awareness programs. Together, these more than offset
the effects of a $1.1 million (3.7%) increase in employee compensation and
benefit costs, and increased cable TV programming expense, the result of
contract rate increases. In the year to date, a $2.1 million (3.6%) rise in
employee compensation and benefit costs, increased cable TV programming expense
and energy costs at the Company's Garfield newsprint mill, along with other
production cost increases, more than offset the effects of a $1.7 million
decline in the cost of newsprint at the Company's newspaper operations,
principally the result of an 8% price decrease, and a $1.5 million decline in
insurance expense.
Selling, distribution and administrative costs increased $1.4 million (3.4%) and
$2.7 million (3.3%) in the second quarter and first half of 1994 from the same
periods of 1993. A second quarter increase of $1 million (4.6%) in employee
compensation and benefits expense, together with increases in agency commissions
(up due to expanded revenues), advertising costs and other administrative
expenses, more than offset a decline in bad debt expense, due principally to
improved collection results and receivables aging at the Company's broadcast and
newsprint manufacturing operations. Similarly, in the year to date, employee
compensation and benefit cost increases of $1.6 million (3.5%), combined with
increases in agency commissions, advertising and other expenses, more than
offset reduced bad debt expense.
<PAGE> 12
Depreciation and amortization expense decreased $.7 million (4.8%) and $1.3
million (4.4%) in the second quarter and first half of 1994, from the comparable
year-ago periods. The declines, which occurred in all of the Company's
principal business segments, were attributable to comparative reductions in
assets placed in service, and to certain newspaper press equipment becoming
fully depreciated at the end of 1993. Depreciation expense for the second half
of 1994 is expected to rise approximately $.6 million above that for the first
half, principally as a result of the completion and placement in service of the
Winston-Salem Journal's new production facility.
OTHER INCOME (EXPENSE)
Interest expense decreased $1.3 million and $1.8 million in the quarterly and
year-to-date periods ended June 26, 1994, from the comparable prior year
periods. The decreases were principally the result of the significant decline
in average debt outstanding (down $75 million from the first six months of 1993)
which more than offset the effect of a 113 basis point rise in the Company's
average borrowing rate (to approximately 8.2% for the first-half of 1994) from
the year-ago period. Cash proceeds from the sale of the Company's investment in
Garden State Newspapers, Inc. (GSN), and increased cash flows from operations
were the principal factors which enabled the Company to effect the significant
debt reductions.
The Company's share of the operating results of its Southeast Paper (SEPCO)
newsprint affiliate declined, to losses of $.1 million and $1.6 million in the
second quarter and first-half of 1994, compared to earnings of $.5 million and a
loss of $.1 million in the comparable year-ago periods. The declines were
attributable to weak selling prices, the effects of which more than offset
increases in newsprint tonnage sold, which rose 4.2% and 2.1% above the second
quarter and first six months of 1993. As was the case with Media General's
wholly owned newsprint operations, SEPCO experienced some selling price
improvement late in the second quarter (to $403/ton in June).
On May 20, 1994, the Company sold its investment in GSN for cash ($63 million)
and preferred stock of Denver Newspapers, Inc. (fair value of $34 million). The
sale resulted in a gain of $91.5 million ($83.3 million after-tax; $3.17 per
share), and concluded the Company's relationship with that venture which began
in 1985. In 1991, the Company's investment in GSN was reduced to zero, and the
Company had not recognized any equity in GSN's operating results since then.
See Note 7 for a further discussion of the GSN sale.
Other income, net, declined $.2 million and $1.4 million in the quarter and
year-to-date periods ended June 26, 1994, from the comparable periods of 1993.
The year-to-date decline was primarily the result of the absence in the current
year of insurance proceeds recognized in connection with a late-1992 fire ($.8
million), and of income attributable to the termination of obligations
established upon the disposition of certain operations ($.6 million).
NET INCOME
Net income for the second quarter and first six months of 1994 was $92.9 million
and $96.8 million, respectively, including a second quarter after-tax gain of
$83.3 million ($3.17 per share) from the sale of the Company's investment in
GSN. Excluding the GSN gain, net income was $9.6 million and $13.6 million in
the second quarter and first-half of 1994, compared to $8.1 million and $11.6
million for the same periods of 1993, an increase of 18.3% and 17.5%,
respectively.
<PAGE> 13
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 $4.6 million (102%) and $8.6 million
(144%) in the second quarter and first six months of 1994, respectively, from
the comparable 1993 periods. The increase was primarily attributable to
combined revenue growth of 5.3% and 5% in the quarter and first-half, together
with reduced operating costs, particularly at the Company's Tampa Tribune.
Television segment operating income declined $.2 million in the quarter, but
rose $.3 million in the year to date. Within that segment, improved broadcast
TV results on strong national and local advertising revenue growth were
essentially offset by a decline in cable TV profits, principally the result of
reregulation. Newsprint segment operating income declined from profits of $1.2
million and $2.9 million in the second quarter and first half of 1993,
respectively, to operating losses of $1.2 million and $1.5 million in the
comparable periods of 1994. The decline was chiefly the result of a decrease in
the average newsprint price realized, down approximately 7% in both the second
quarter and first-half of 1994 from the comparable year-earlier periods.
Income taxes rose $9.3 million and $9.8 million in the second quarter and first
half of 1994 from the comparable 1993 periods. Excluding the 1994 GSN gain and
income taxes thereon of approximately $8.3 million, income tax expense rose $1.1
million (28.4%) and $1.5 million (27.7%) from the comparable 1993 quarterly and
year-to-date periods, on pretax earnings increases of 21.5% and 20.8%. The
Company's effective tax rate increased to approximately 34% in both the second
quarter and first half of 1994, from approximately 32% in the same periods of
1993, principally the result of the retroactive corporate tax rate increase
enacted in August 1993, and of a decrease in the favorable tax effects of
certain insurance programs.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated by operating activities during the first six months of 1994
totaled $55 million, up $20.9 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 and inventories, and
to a reduction of funds used to reduce current liabilities. Funds generated by
investing activities during the first-half of 1994 include $57.5 million of net
cash proceeds from the sale of GSN.
During the first six months of 1994, the primary use of cash was $70 million for
the curtailment of long-term debt, $30.3 million for capital expenditures ($18
million of which related to the new Winston-Salem Journal production facility,
expected to be completed during the third quarter at a total cost of $44
million), and $5.8 million for the payment of dividends to shareholders. The
Company's ability to decrease its total debt by $70 million during the first
half of this year was the combined result of the GSN sale, and management's
decision to utilize the majority ($53 million) of the net cash proceeds from
that sale to immediately curtail debt, and of increased cash flows from
operating activities.
Although the Company's debt level may rise temporarily in the third and fourth
quarters of 1994 as a result of planned capital spending (including
approximately $14 million for the completion of the Winston-Salem facility), the
Company anticipates that funds generated by operating activities during the
remainder of 1994 will be adequate to finance projected capital expenditures,
dividends to shareholders, and working capital needs.
<PAGE> 14
Total long-term debt at June 26, 1994, was $191.8 million, down significantly
from $261.8 million at December 26, 1993, and $301.5 million at June 27, 1993.
As a result of the decline in borrowings, the Company's ratio of debt to total
capitalization decreased to 37.7% at June 26, 1994, from 53.7% at the beginning
of the year and 58.2% at mid-year 1993. Barring unexpected funds requirements,
the Company presently intends to utilize any excess funds generated during the
remainder of the year to further reduce its debt. However, to ensure continued
flexibility should unexpected needs or opportunities arise, the Company has
available bank credit lines of $160 million under revolving credit agreements
with five banks, and an uncommitted credit facility with an insurance company
which provides for additional long-term borrowings of up to $85 million at
prevailing interest rates.
OUTLOOK
The continued solid performance of the Company's newspaper and broadcast TV
operations, combined with improved newsprint selling prices, should more than
overcome the consequences of cable reregulation. The Company looks forward to
the remaining months of 1994.
<PAGE> 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of Media General, Inc., was held on May
20, 1994, for the purpose of electing a board of directors and ratifying the
appointment of independent auditors.
Each nominee for director was elected by the following vote:
Class A Class A
Shares Voted Shares Voted
"FOR" "WITHHELD"
----------- -----------
Class A Directors
Charles A. Davis 22,326,493 891,334
Robert V. Hatcher, Jr. 22,330,655 887,172
John G. Medlin, Jr. 22,337,753 880,074
Class B Class B
Shares Voted Shares Voted
"FOR" "WITHHELD"
----------- ------------
Class B Directors
Robert P. Black 541,242 0
D. Tennant Bryan 541,242 0
J. Stewart Bryan III 541,242 0
Alan S. Donnahoe 485,662 55,580
James S. Evans 541,242 0
Henry L. Valentine, II 541,242 0
The appointment of Ernst & Young as independent auditors for the fiscal
year ending December 25, 1994, was ratified by the Class B shareholders by the
following vote:
Shares Voted Shares Voted Shares Voted
"FOR" "AGAINST" "ABSTAINING"
----------- ----------- ------------
541,242 --- ---
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2.2 Amendment dated May 3, 1994, to Letter Agreement dated March
16, 1994, regarding the sale of the Company's investment in Garden State
Newspapers, Inc., incorporated by reference to Exhibit 2 of Form 10-Q for the
period ending March 27, 1994.
(b) Reports on Form 8-K
On June 3, 1994, the Company filed a Form 8-K to report the sale, on May
20, 1994, of its investment in Garden State Newspapers, Inc., for $63 million in
cash plus preferred stock valued at $34 million.
<PAGE> 16
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: August 9, 1994 /s/ J. Stewart Bryan III
---------------------------------
J. Stewart Bryan III, Chairman,
President and Chief Executive Officer
DATE: August 9, 1994 /s/ Marshall N. Morton
---------------------------------
Marshall N. Morton,
Senior Vice-President and Chief
Financial Officer
