<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 26, 1995
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 28, 1995.
Class A Common shares: 25,883,835
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>
March 26, December 25,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,673 $ 11,663
Accounts receivable - net 65,770 68,901
Inventories 13,309 11,360
Other 21,153 22,738
----------- -----------
Total current assets 130,905 114,662
----------- -----------
Investments in unconsolidated affiliates 86,073 83,249
Other assets 28,297 28,105
Property, plant and equipment - net 508,649 517,044
Excess of cost of businesses acquired over
equity in net assets - net 43,683 44,105
----------- -----------
$ 797,607 $ 787,165
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
March 26, December 25,
1995 1994
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,166 $ 26,981
Accrued expenses and other liabilities 60,719 61,973
Income taxes payable 5,606 1,875
Current portion of long-term debt 28,000 9,000
----------- -----------
Total current liabilities 119,491 99,829
----------- -----------
Long-term debt 144,500 163,500
Deferred income taxes 97,534 97,012
Other liabilities and deferred credits 94,997 93,461
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
25,883,409 and 25,739,732 shares 129,417 128,699
Class B, authorized 600,000 shares; issued
556,574 shares 2,783 2,783
Additional paid-in capital 9,532 6,787
Unearned compensation (3,748) (1,676)
Retained earnings 203,101 196,770
----------- -----------
Total stockholders' equity 341,085 333,363
----------- -----------
$ 797,607 $ 787,165
=========== ===========
</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 26, March 27,
1995 1994
----------- -----------
<S> <C> <C>
Revenues $ 165,154 $ 149,390
Operating costs:
Production costs 91,215 81,743
Selling, distribution and administrative 42,959 41,196
Depreciation and amortization 15,078 14,012
----------- -----------
Total operating costs 149,252 136,951
----------- -----------
Operating income 15,902 12,439
----------- -----------
Other income (expense):
Interest expense (3,585) (4,882)
Investment income (loss) --
unconsolidated affiliates:
Southeast Paper Manufacturing Co. 1,115 (1,524)
Denver Newspapers, Inc.:
Equity in net income 621 ---
Preferred stock income 1,088 ---
Other, net (note 4) 3,985 (50)
----------- -----------
Total other income (expense) 3,224 (6,456)
----------- -----------
Income before income taxes 19,126 5,983
----------- -----------
Income taxes 6,451 2,034
----------- -----------
Net income $ 12,675 $ 3,949
=========== ===========
Earnings per common share and equivalent $ 0.48 $ 0.15
=========== ===========
Dividends paid per common share $ 0.12 $ 0.11
=========== ===========
Weighted average common shares
and equivalents 26,424 26,258
</TABLE>
See accompanying notes.
<PAGE> 5
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Three Months Ended
March 26, March 27,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,675 $ 3,949
Adjustments to reconcile net income:
Depreciation and amortization 15,078 14,012
Deferred income taxes 582 (6)
Investment (income) loss --
unconsolidated affiliates (2,824) 1,524
Change in assets and liabilities (1,879) 9,524
----------- -----------
Net cash provided by operating activities 23,632 29,003
----------- -----------
Cash flows from investing activities:
Capital expenditures (7,054) (15,447)
Other, net 4,956 (139)
----------- -----------
Net cash used by investing activities (2,098) (15,586)
----------- -----------
Cash flows from financing activities:
Net decrease in long-term debt --- (11,000)
Dividends paid (3,172) (2,886)
Other, net 648 78
----------- -----------
Net cash used by financing activities (2,524) (13,808)
----------- -----------
Net increase (decrease) in cash and
cash equivalents 19,010 (391)
Cash and cash equivalents at beginning of year 11,663 2,942
----------- -----------
Cash and cash equivalents at end of period $ 30,673 $ 2,551
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 3,468 $ 5,020
Income taxes (net of refunds) 1,743 830
</TABLE>
See accompanying notes.
<PAGE> 6
MEDIA GENERAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated condensed 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
25, 1994.
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 26, 1995, 1,082,665 shares of Class A common stock were
reserved for issuance upon exercise of unqualified stock options granted.
4. First quarter 1995 results include a $3.6 million gain ($2.5 million
after-tax; $0.09 per share) from the sale of the Company's interest in a Mexican
newsprint operation.
5. Pursuant to the provisions of the Cable Television Consumer and
Competition Act of 1992 (the "1992 Cable Act"), the rates charged to subscribers
by the Company's Fairfax Cable subsidiary are subject to regulation and review
by local franchising authorities and the Federal Communications Commission
(FCC). The FCC is currently reviewing certain of the rates charged to
subscribers. The Company believes that it has complied with all provisions of
the 1992 Cable Act, including its rate setting provisions. However, since the
Company's rates for regulated services are subject to review, the Company may be
subject to a refund liability if its rates are successfully challenged.
6. As more fully described in note 3 to the Company's 1994 Annual Report
to Stockholders, on May 20, 1994, the Company acquired 1,200 shares of $25,000
par, 9% cumulative preferred stock of Denver Newspapers, Inc. (DNI), the parent
company of The Denver Post. On September 28, 1994, the Company exercised an
option, for $40,000, to purchase 40% of the common stock of DNI. Effective with
the fourth quarter of 1994, Media General began recognizing in its earnings 40%
of DNI's net income applicable to common stockholders under the equity method of
accounting.
<PAGE> 7
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 26, 1995
Compared To Equivalent
Period Last Year
Increase (Decrease)
Amount Percent
----------------------
(000's)
<S> <C> <C>
Revenues $15,764 10.6 %
Production costs 9,472 11.6
Selling, distribution and administrative 1,763 4.3
Depreciation and amortization 1,066 7.6
Operating income 3,463 27.8
Other income (expense) 9,680 ---
Income before income taxes 13,143 219.7
Income taxes 4,417 217.2
Net income 8,726 221.0
</TABLE>
<PAGE> 8
REVENUES
Consolidated revenues increased $15.8 million (10.6%) in the first quarter of
1995 compared to the equivalent quarter of 1994.
Newspaper segment revenues for the first quarter were $83.5 million, up 7.2%
from the comparable 1994 quarter. Within the three daily newspapers which
comprise the Company's metropolitan newspaper group, advertising revenues
increased 7.7%, reflecting a 10.2% average rate increase which more than offset
a 2.3% decline in advertising inches. Classified advertising revenues,
particularly automotive and employment, and retail advertising revenues, led by
the furniture and appliance categories, improved meaningfully from the year-ago
period. Circulation revenues rose 3.5% from the first quarter of 1994, the
result of average circulation rate increases of 3.1% and a .4% increase in
combined circulation volume.
Television segment revenues increased $3.7 million (8.3%) from the comparable
quarter of 1994. The increase was primarily attributable to the Company's
broadcast TV stations, where combined revenues rose $2.2 million (16.5%) in the
current quarter from the year-ago period. Local and national advertising
revenues increased 11% and 21%, respectively, in the quarter, led by strong
growth in the automotive, food products and furniture categories. Strong
revenue growth at the Company's Tampa and Jacksonville, Florida, TV stations
more than offset a small decline in revenues at the Company's Charleston, S.C.,
station, the result of a soft local economy which was magnified by uncertainties
surrounding the pending navy base and shipyard closings. Revenues of the
Company's Fairfax County, Virginia, cable system (Fairfax Cable) increased $1.1
million (3.7%) from the year-ago quarter. The revenue growth was primarily
attributable to a January 1, 1995, subscriber rate increase (of 2.1% on basic
cable service and 4.5% on expanded cable service), the first cable rate increase
implemented in 23 months due primarily to the restrictive rate regulation
provisions of the Cable Act, and to an increase in the number of Fairfax Cable
subscribers from the year-ago period (to 215,800 at March 26, 1995).
Newsprint segment revenues rose $6.8 million (29.1%) in the first quarter of
1995 from the comparable period of 1994. The increase was attributable to the
Company's Garden State Paper newsprint mill where average realized newsprint
prices increased to $476 per ton in the current quarter from $387 per ton in the
first quarter of 1994. The rise in the average realized selling price from the
year-ago quarter was attributable to the cumulative effects of three selling
price discount reductions implemented since June 1994, the most recent being a 7
percentage point discount reduction which became effective in March 1995. While
approximately 75% of the first quarter revenue increase was attributable to the
rise in average realized selling price, the balance of the increase was
attributable to a 6.1% rise, from the first quarter of 1994, in newsprint
tonnage sold. The effect of newsprint price and sales volume improvements
during the current quarter more than offset the absence, in the first three
months of 1995, of $.9 million of option fees earned in the first quarter of
1994 from the Company's Mexican newsprint affiliate. Those option fees were
discontinued, as planned, in October 1994, and the Company sold its minority
interest in that affiliate in early 1995 (see Note 4 to the accompanying
consolidated condensed financial statements for further information regarding
the sale). The rise in newsprint selling prices in recent months should be put
in historical perspective. In March 1995, Garden State's average realized
newsprint selling price rose to $503 per ton, just topping the $500 per ton mark
(not adjusted for inflation) last achieved in July 1989, but still more than $30
per ton below the all-time peak of $536 per ton achieved in May 1988.
<PAGE> 9
OPERATING COSTS
Production costs increased $9.5 million (11.6%) in the first quarter of 1995
from the comparable 1994 period. The increase includes the effects of: a $3.2
million (26.6%) rise in the cost of newsprint consumed by the Company's
newspapers, the result of a $102 per ton (27.4%) average increase in the cost of
newsprint consumed which more than offset a 1.6% decline in tons consumed (a
decline due, in-part, to newsprint conservation measures implemented to counter
the impact of sharp newsprint price increases); a $2.7 million (80.3%) increase
in the cost of recovered newspapers (ONP) consumed in the manufacture of
recycled newsprint by Garden State Paper's Garfield, N.J., newsprint mill, the
result of rising ONP market prices which elevated the average cost per ton of
ONP consumed to $72 in the current quarter from $37 in the comparable year-ago
period; and a $1.2 million (3.9%) increase in compensation and employee benefit
costs. Together, these and other production cost increases more than offset
declines of $.6 million (each) in insurance expense and waste treatment costs at
the Company's newsprint manufacturing operations, the result of increased fiber
fuel burning efficiencies and lower disposal rates.
Selling, distribution and administrative costs increased $1.8 million (4.3%)
from the year-ago quarter. The majority of the increase was attributable to
rises in compensation and employee benefit costs of $1.1 million (up 4.5%) and
in advertising and promotion, up $.6 million principally on expanded newspaper
circulation incentives.
Depreciation and amortization expense increased $1.1 million (7.6%) in the first
quarter of 1995 from the comparable period of 1994. The rise was principally
the result of increased depreciation expense at the Company's cable operations
and newspapers (the latter, principally the result of higher depreciation
expense on the new Winston-Salem Journal production facility that was placed in
service in the third quarter of 1994), which more than offset depreciation
declines at the Company's broadcast TV and newsprint operations, the result of
comparative reductions in assets placed in service and certain equipment
becoming fully depreciated.
OTHER INCOME (EXPENSE)
Interest expense declined $1.3 million (26.6%) in the first quarter of 1995 from
the comparable quarter of 1994. The decrease was principally the result of the
significant ($72.5 million) decline in average debt outstanding from the year-
ago period, which more than offset the effect of a 115 basis point rise (to
approximately 8.9%) in the Company's average borrowing rate from the prior
comparable quarter.
The Company's share of the operating results of its unconsolidated affiliate,
Southeast Paper Manufacturing Company (SEPCO), increased to a profit of $1.1
million in the current quarter from a $1.5 million loss in the first quarter of
1994. The increase was directly attributable to improved newsprint selling
prices, which rose to an average of $493 per ton in the first quarter of 1995
from an average of $374 per ton in the comparable year-ago quarter. The
increase in SEPCO's realized selling price more than offset the effects of a
small decline (.5%) in tons sold and a significant increase in the cost of its
principal raw material, recovered newspapers (ONP), which rose 57% from the
first quarter of 1994. Income earned from the Company's Denver Newspapers,
Inc.(DNI), affiliate totaled $1.7 million in the first quarter of 1995; $1.1
million from the Company's DNI preferred stock investment and the balance from
the Company's share of DNI's net income applicable to common stockholders. The
<PAGE> 10
Company held no ownership position in DNI during the first quarter of 1994.
DNI's revenues for the quarter ended March 31, 1995, rose $3.5 million (10.3%)
from the year-ago quarter aided by strong classified and retail advertising
gains which more than offset a decline in circulation revenues, the result of
selective, competitive circulation rate reductions. Net income declined $1.3
million from the prior comparable quarter, however, as the revenue gain was more
than offset by increased operating expenses (primarily the result of a 34.3%
rise in the cost of newsprint which resulted from an 18.6% increase in the
average cost per ton and a 13.2% rise in tons consumed) and income taxes.
Other income (expense), net, rose to $4 million of income in the first quarter
of 1995 from an expense of $50 thousand in the year-ago quarter. The increase
in 1995 was primarily attributable to the $3.6 million pretax gain on the sale
of the Company's interest in a Mexican newsprint affiliate (see Note 4) and to
interest income earned on short-term cash equivalent securities.
NET INCOME
Net income for the first quarter of 1995 was $12.7 million compared to $3.9
million in the year-ago period. Excluding the $2.5 million after-tax gain ($.09
per share) from the previously mentioned sale of the Company's interest in a
Mexican newsprint affiliate, first quarter 1995 net income rose by 162% to $10.2
million.
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 $6 million in the first quarter of
1995 from $5.5 million in the same period of 1994. The rise was produced by the
Company's Richmond and Tampa metropolitan newspapers, where the effects of a
strong increase in classified and to a lesser degree in retail advertising
revenues more than offset a significant increase in newsprint costs. Television
segment operating income increased $.2 million (2.4%) from the year-ago period,
primarily the result of strong revenue gains at the Company's Tampa and
Jacksonville, Florida, broadcast TV stations, which more than countered a profit
decline at the Company's cable TV operations, primarily a consequence of higher
depreciation and other operating expenses which could not be fully recouped
through allowable rate increases. Newsprint segment operating income increased
to a profit of $2.4 million in the first quarter of 1995 from an operating loss
of $.3 million in the year-ago quarter. The increase was chiefly the result of
a 23% rise in the average realized newsprint selling price and a 6.1% increase
in tonnage sold, which more than offset the effect of increased ONP prices and
the absence, in the current quarter, of the previously mentioned option fees.
Income taxes increased $4.4 million (217%) in the first quarter of 1995 from the
prior comparable period on a $13.1 million rise in income before income taxes.
The Company's effective tax rate approximated 34% in both the current and year-
ago quarters.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated by operating activities during the first three months of 1995
totaled $23.6 million, down $5.4 million from the comparable period of 1994.
The reduction was due principally to an increase in inventory levels (primarily
newsprint at the Company's newspapers), to a lesser decrease in accounts
receivable, and to an increase in funds applied to reduce current liabilities.
Together, these more than offset increased funds generated by improved
<PAGE> 11
profitability. Funds generated by investing activities during the first quarter
include $3.6 million from the sale of the Company's interest in a Mexican
newsprint affiliate.
The primary use of cash in the first quarter of 1995 was $7.1 million for
capital expenditures and $3.2 million for the payment of dividends to
stockholders. First quarter 1995 funds generated in excess of current needs
($19 million) were invested in short-term cash equivalent securities, which
totaled $28 million at March 26, 1995.
At March 26, 1995, total debt was $172.5 million, unchanged from December 25,
1994, but down $78.3 million from the year-ago level of $250.8 million. Barring
unexpected funds requirements, the Company anticipates that internally generated
funds provided by operations during 1995 will be more than adequate to finance
projected capital expenditures, dividends to shareholders, and working capital
needs. Excess funds generated during the second quarter of 1995, together with
existing short-term cash equivalents and, to the extent necessary, long-term
borrowings under an existing credit facility, will be used to curtail $43.8
million of 9.27% notes due in July 1995. At March 26, 1995, the Company had
available unused credit lines of $180 million under a five-year revolving credit
facility with six banks. Additionally, to ensure continued flexibility should
unexpected needs arise, including growth opportunities through internal
expansion or by acquisition, in the first quarter of 1995 the Company entered
into a three-year agreement with an insurance company which makes available to
the Company, on an uncommitted basis, the opportunity to borrow up to $150
million under senior notes at prevailing interest rates.
OUTLOOK
Prospects for the remainder of 1995 remain positive for the Company's newspaper
and broadcast TV operations, although the rising cost of newsprint is expected
to have an unfavorable impact on newspaper profit margins. Improved
profitability at the Company's newsprint operations should continue as a result
of increased newsprint selling prices, the effects of which should more than
offset the impact of increased newsprint costs on the Company's newspaper
operations. Cable TV profitability will, in all likelihood, remain under
pressure as a result of restrictive reregulation provisions. Overall, however,
all indications are that 1995 should be another very good year for Media
General.
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended March
26, 1995.
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, 1995 /s/ J. Stewart Bryan, III
---------------------------------
J. Stewart Bryan III, Chairman,
President and Chief Executive Officer
DATE: May 9, 1995 /s/ Marshall N. Morton
---------------------------------
Marshall N. Morton,
Senior Vice-President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDIA
GENERAL, INC.'S CONSOLIDATED CONDENSED BALANCE SHEETS AND CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-26-1995
<CASH> 30,673
<SECURITIES> 0
<RECEIVABLES> 65,770
<ALLOWANCES> 0
<INVENTORY> 13,309
<CURRENT-ASSETS> 130,905
<PP&E> 508,649
<DEPRECIATION> 0
<TOTAL-ASSETS> 797,607
<CURRENT-LIABILITIES> 119,491
<BONDS> 144,500
<COMMON> 132,200
0
0
<OTHER-SE> 208,885
<TOTAL-LIABILITY-AND-EQUITY> 797,607
<SALES> 165,154
<TOTAL-REVENUES> 165,154
<CGS> 91,215
<TOTAL-COSTS> 91,215
<OTHER-EXPENSES> 15,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,585
<INCOME-PRETAX> 19,126
<INCOME-TAX> 6,451
<INCOME-CONTINUING> 12,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,675
<EPS-PRIMARY> .48
<EPS-DILUTED> 0
</TABLE>
