<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 25, 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 July 31, 1995.
Class A Common shares: 25,892,332
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 25, December 25,
1995 1994
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,267 $ 11,663
Accounts receivable - net 69,582 68,901
Inventories 16,361 11,360
Other 19,613 22,738
----------- -----------
Total current assets 144,823 114,662
----------- -----------
Investments in unconsolidated affiliates 88,804 83,249
Other assets 26,211 28,105
Property, plant and equipment - net 501,563 517,044
Excess of cost of businesses acquired over
equity in net assets - net 43,586 44,105
----------- -----------
$ 804,987 $ 787,165
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(000's except shares)
<TABLE>
<CAPTION>
June 25, December 25,
1995 1994
----------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,290 $ 26,981
Accrued expenses and other liabilities 58,273 61,973
Income taxes payable 286 1,875
Current portion of long-term debt 36,500 9,000
----------- -----------
Total current liabilities 120,349 99,829
----------- -----------
Long-term debt 136,000 163,500
Deferred income taxes 98,420 97,012
Other liabilities and deferred credits 95,361 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
25,887,832 and 25,739,732 shares 129,439 128,699
Class B, authorized 600,000 shares;
issued 556,574 shares 2,783 2,783
Additional paid-in capital 9,634 6,787
Unearned compensation (3,287) (1,676)
Retained earnings 216,288 196,770
----------- -----------
Total stockholders' equity 354,857 333,363
----------- -----------
$ 804,987 $ 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>
Second Quarter Ended Six Months Ended
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 173,479 $ 154,608 $ 338,633 $ 303,998
----------- ----------- ----------- -----------
Operating costs:
Production costs 94,449 80,095 185,664 161,838
Selling, distribution and administrative 44,006 42,120 86,965 83,316
Depreciation and amortization 14,714 13,941 29,792 27,953
----------- ----------- ----------- -----------
Total operating costs 153,169 136,156 302,421 273,107
----------- ----------- ----------- -----------
Operating income 20,310 18,452 36,212 30,891
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (3,598) (4,319) (7,183) (9,201)
Investment income (loss) --
unconsolidated affiliates:
Southeast Paper Manufacturing Co. 1,180 (117) 2,295 (1,641)
Denver Newspapers, Inc.:
Equity in net income 462 --- 1,083 ---
Preferred stock income 1,089 339 2,177 339
Gain on sale of Garden State Newspapers
investment --- 91,520 --- 91,520
Other, net (note 4) 667 185 4,652 135
----------- ----------- ----------- -----------
Total other income (expense) (200) 87,608 3,024 81,152
----------- ----------- ----------- -----------
Income before income taxes 20,110 106,060 39,236 112,043
----------- ----------- ----------- -----------
Income taxes 6,921 13,171 13,372 15,205
----------- ----------- ----------- -----------
Net income $ 13,189 $ 92,889 $ 25,864 $ 96,838
=========== =========== =========== ===========
Earnings per common share and equivalent $ 0.50 $ 3.54 $ 0.98 $ 3.69
=========== =========== =========== ===========
Dividends paid per common share $ 0.12 $ 0.11 $ 0.24 $ 0.22
=========== =========== =========== ===========
Weighted average common shares
and equivalents 26,482 26,229 26,453 26,244
</TABLE>
See accompanying notes.
<PAGE> 5
MEDIA GENERAL, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
(000's)
<TABLE>
<CAPTION>
Six Months Ended
June 25, June 26,
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 25,864 $ 96,838
Adjustments to reconcile net income:
Depreciation and amortization 29,792 27,953
Deferred income taxes 1,547 3,324
Investment (income) loss --
unconsolidated affiliates (5,555) 1,302
Gain on sale of Garden State Newspapers
investment --- (91,520)
Change in assets and liabilities (9,763) 17,071
----------- -----------
Net cash provided by operating activities 41,885 54,968
----------- -----------
Cash flows from investing activities:
Net proceeds from sale of Garden State
Newspapers investment --- 57,520
Capital expenditures (14,063) (30,257)
Other, net 5,285 6,972
----------- -----------
Net cash provided (used) by investing activities (8,778) 34,235
----------- -----------
Cash flows from financing activities:
Net decrease in long-term debt --- (70,000)
Dividends paid (6,346) (5,773)
Other, net 843 111
----------- -----------
Net cash used by financing activities (5,503) (75,662)
----------- -----------
Net increase in cash and cash equivalents 27,604 13,541
Cash and cash equivalents at beginning of year 11,663 2,942
----------- -----------
Cash and cash equivalents at end of period $ 39,267 $ 16,483
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 7,531 $ 10,220
Income taxes (net of refunds) 12,928 5,572
</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 6 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 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. Certain items in 1994 have been
reclassified to conform with the current year's presentation. The
reclassifications have no effect on net income as previously reported. 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 June 25, 1995, 1,067,498 shares of Class A common stock were
reserved for issuance upon exercise of unqualified stock options granted.
4. Other, net for the six months ended June 25, 1995, includes 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 (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. 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. (DNI), previously owned by GSN, including accumulated and unpaid dividends
of approximately $17.4 million thereon. The preferred stock was 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. 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
As more fully explained in Note 3 to its 1994 consolidated financial statements
(incorporated by reference in the Company's 1994 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 had not recognized any equity in GSN's
operating results since then.
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 four principal business segments: newspaper
publishing, broadcast television, cable television and newsprint manufacturing.
Effective with this report, broadcast and cable operations are reported as
separate segments to provide a clearer understanding of the importance of each
to the Company's overall operations. Previously, these operations were combined
into the television segment. In addition to the four principal business
segments, the Company has auxiliary operations in the financial and business
publishing, and commercial printing fields. The Company also has investments in
newspaper publishing and newsprint manufacturing operations, the operating
results of which are recognized under the equity method of accounting.
As more fully described in the "Other income (expense)" section of this
Discussion and in Notes 4 and 6 to the accompanying consolidated condensed
financial statements, in the first quarter of 1995 the Company sold its interest
in a Mexican newsprint operation realizing a gain of $3.6 million ($2.5 million
after-tax; $0.09 per share) and, in the second quarter of 1994, the Company sold
its investment in Garden State Newspapers, Inc., realizing a gain of $91.5
million ($83.3 million after-tax; $3.17 per share).
The Company's businesses are somewhat seasonal; 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.
<PAGE> 8
INCREASE (DECREASE) IN OPERATING COMPONENTS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 25, 1995, June 25, 1995,
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 $ 18,871 12.2% $ 34,635 11.4%
Production costs 14,354 17.9 23,826 14.7
Selling, distribution
and administrative 1,886 4.5 3,649 4.4
Depreciation and amortization 773 5.5 1,839 6.6
Operating income 1,858 10.1 5,321 17.2
Other income (expense) (87,808) --- (78,128) (96.3)
Income before income taxes (85,950) (81.0) (72,807) (65.0)
Income taxes (6,250) (47.5) (1,833) (12.1)
Net income (79,700) (85.8) (70,974) (73.3)
</TABLE>
<PAGE> 9
REVENUES
Consolidated revenues increased $18.9 million (12.2%) and $34.6 million (11.4%)
in the second quarter and first half of 1995, respectively, compared to the same
periods of 1994.
Newspaper segment revenues for the quarter and six-month periods ended June 25,
1995, rose 4.6% and 5.9%, respectively, from the comparable 1994 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 1995 (by 3.8% and 5.7%, respectively), reflecting average rate
increases of 7.4% and 8.8% which more than offset declines of 3.4% and 2.9% in
advertising inches. Increases in classified (led by employment) and retail
(paced by the furniture category) more than offset declines in general
advertising, down on reduced grocery and travel ad spending. Circulation
revenues rose 3.4% in both the second quarter and first half of 1995 from the
comparable periods of 1994, principally the result of circulation rate increases
approximating 3.3%. Other revenues in the quarter and first six months ended
June 25, 1995, rose 29.3% and 26.4%, principally the result of increased waste
newsprint sales, up due to prices.
Broadcast television segment revenues increased $2.8 million (17.9%) and $5.1
million (17.2%) in the second quarter and first half of 1995, from the
comparable periods of 1994. The increases were principally the result of local
and national advertising growth, led by strong automotive ad spending, at the
Company's Tampa and Jacksonville, Florida, TV stations. In December 1994, three
of the Tampa market's four major broadcast TV stations changed their network
affiliations. In that market, only the Company's flagship station, WFLA-TV,
retained its historical television network affiliation. In part, this
undisrupted network affiliation has enabled WFLA-TV to achieve a number one
station ranking in that market (sign-on to sign-off), contributing to strong
demand for advertising time and increased advertising rates. Revenues of the
Company's Charleston, S.C., station declined slightly (1% and 1.9% in the
quarter and six months), the result of a decline in national advertising
revenues which more than offset a small improvement in local ad spending. The
Charleston market continued to experience a soft local economy as a result of
uncertainties surrounding the pending Navy Base and Shipyard closings.
Cable television segment revenues rose $1.2 million (3.8%) and $2.7 million
(4.3%) in the second quarter and first six months of 1995 from the comparable
1994 periods. The increases were principally attributable to the Company's
Fairfax County, Virginia, cable system (Fairfax Cable), where revenues grew
nearly $1.2 million (4%) and $2.2 million (3.9%) in the quarterly and year-to-
date periods ended June 25, 1995, from the prior comparable periods. The
revenue growth resulted from a January 1, 1995, subscriber rate increase (2.1%
on basic cable service and 4.5% on expanded cable service), and from a 4.3%
increase in the number of Fairfax Cable subscribers from the year-ago period (to
217,136 at June 25, 1995). Revenues of the Company's Fredericksburg, Virginia,
cable system (Fredericksburg Cable) rose 2.5% and 2.8% in the second quarter and
first half of 1995 from the same periods of 1994. The increased revenues were
principally the result of a 3.5% growth in subscribers since June 1994 (to
14,993 at June 25, 1995) and a 2.1% average rate increase implemented on April
1, 1995, the effects of which more than offset reduced revenues for installation
and pay-per-view and leased access channel fees.
<PAGE> 10
Newsprint segment revenues increased $11.5 million (50.2%) and $18.3 million
(39.5%) in the second quarter and first half of 1995 from the year-ago periods.
The increases were 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 of 1995 increased 2.1% and 4.1% from the
comparable year-ago periods and, more significantly, where average realized
newsprint selling prices rose 39% and 30.9% above those of the comparable year-
ago periods (to an average of $547 per ton in the second quarter of 1995 from an
average of $393 per ton in the same period of 1994). The rise in the average
realized selling price, which accounted for approximately 90% of the revenue
increase in both the quarter and year-to-date periods, was attributable to the
cumulative effects of three selling price discount reductions implemented since
the beginning of 1995, the most recent being a 5% discount reduction combined
with a 6.3% list price increase which only became effective in June 1995.
OPERATING COSTS
Production costs increased $14.4 million (17.9%) and $23.8 million (14.7%) in
the second quarter and first six months of 1995 compared to the equivalent 1994
periods. The second quarter reflects a $5.2 million (163%) increase from the
comparable year-ago quarter in the cost of recovered newspapers (ONP) consumed
in the production of recycled newsprint by Garden State Paper's Garfield, N.J.,
newsprint mill, the result of significant ONP price increases since the year-ago
quarter; a $3.4 million (27.9%) rise in the cost of newsprint consumed by the
Company's newspaper and printing operations (the result of a 39.1% increase in
price, offset somewhat by the effect of a 6.7% decrease in tons consumed,
largely the result of aggressive newsprint conservation measures); a $1.4
million (4.5%) increase in employee compensation and benefit costs; and a $1.1
million (15.2%) increase in programming costs, the result of increased program
rates and subscriber growth at the Company's cable TV operations. In the year
to date, a $7.9 million (121%) rise in the cost of ONP consumed in newsprint
production, a $6.6 million (27.3%) increase in the cost of newsprint consumed by
the Company's newspaper and printing operations (a 33.1% price increase offset
by a 4.1% decline in tons consumed), a $2.6 million (4.2%) increase in employee
compensation and benefit expenses, and a $1.7 million (11.9%) increase in
programming costs (at Cable TV), together with other production cost increases,
more than offset waste treatment cost and insurance expense reductions of $1.1
million and $1 million, respectively. As a result of significant price
increases during the past year, the cost of newsprint consumed by the Company's
metropolitan newspapers grew to 36.4% of their combined production costs in the
first half of 1995 compared to 31.7% in the comparable period of 1994.
Selling, distribution and administrative costs increased $1.9 million (4.5%) and
$3.6 million (4.4%) in the second quarter and first half of 1995 from the same
periods of 1994. A second quarter increase of $.9 million (3.9%) in employee
compensation and benefits expense, together with increases in advertising and
promotion (principally on expanded newspaper circulation incentives), bad debts
expense (on increased sales volume) and other administrative expenses, more than
offset declines in insurance and delivery expenses. In the year to date,
employee compensation and benefit cost increases of $2 million (4.2%), combined
with increases in advertising and promotion and in bad debts expense, more than
offset declines in delivery expense.
<PAGE> 11
Depreciation and amortization expense rose $.8 million (5.5%) and $1.8 million
(6.6%) in the second quarter and first half of 1995, from the comparable year-
ago periods. The rise was principally attributable to increased depreciation
expense at the Company's cable operations and at its Winston-Salem newspaper,
the latter resulting from the completion of its new production facility which
was placed in service in the third quarter of 1994. Together, these more than
offset depreciation declines at the Company's broadcast TV, newsprint and other
operations, the result of certain equipment becoming fully depreciated and a
reduced level of new assets placed in service.
OTHER INCOME (EXPENSE)
Interest expense declined $.7 million and $2 million in the quarter and year-to-
date periods ended June 25, 1995, from the comparable prior year periods. The
decreases were principally the result of the significant decline in average debt
outstanding (down $64 million from the first six months of 1994) which more than
offset the effect of a rise in the Company's average borrowing rate (to
approximately 8.8% for the first half of 1995) from the year-ago period.
The Company's share of the operating results of its Southeast Paper (SEPCO)
newsprint affiliate increased to profits of $1.2 million and $2.3 million in the
second quarter and first half of 1995, from losses of $.1 million and $1.6
million in the comparable year-ago periods. The increases were directly
attributable to improved newsprint selling prices, which rose to an average of
$548 per ton during the second quarter of 1995 from $390 per ton in the same
period of 1994, and to an average of $521 per ton in the first half of 1995 from
$382 per ton in the first six months of 1994. The increase in SEPCO's realized
selling price more than offset the effects of small declines in tons sold (down
2% and 1.3% in the second quarter and first half of 1995) and significant
increases in the cost of its principal raw material, recovered newspapers (ONP),
which rose 96% and 74% from the comparable prior periods.
Income earned from the Company's Denver Newspapers, Inc. (DNI), affiliate
totaled $1.6 million and $3.3 million in the second quarter and first six months
of 1995; of the foregoing, $1.1 million and $2.2 million was derived from the
Company's DNI preferred stock investment; the balance came from the Company's
share of DNI's net income applicable to common stockholders. The Company held
no ownership position in DNI until the acquisition of DNI's preferred stock in
May 1994 (see below), from which it earned $.3 million in the second quarter of
1994, and the acquisition of 40% of DNI's common stock in the fourth quarter of
1994, at which time the Company began recognizing 40% of DNI's net income
applicable to common stockholders. The share of DNI's net income recognized by
the Company in the second quarter and first half of 1995 reflects DNI's strong
revenue growth (paced by retail and classified advertising) from the comparable
year-ago periods, restrained by a decline from prior periods in DNI's operating
margins, principally the result of the significant and continuing increases in
the price of newsprint.
In May 1994, the Company sold its investment in Garden State Newspapers, Inc.
(GSN), for cash ($63 million) and preferred stock of Denver Newspapers, Inc.
(which had a fair value at that date 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. (See Note 6
to the accompanying consolidated condensed financial statements for a further
discussion of the GSN sale).
<PAGE> 12
Other income, net, rose to $.7 million in the second quarter from $.2 million in
the comparable year-ago period, principally as a result of increased interest
earned on short-term cash equivalent securities. In the year to date, other
income, net, rose to $4.7 million from $.1 million in the comparable period of
1994, principally the result of a $3.6 million pretax gain from the sale of the
Company's interest in a Mexican newsprint affiliate (Note 4) together with
increased interest income.
NET INCOME
Net income for the second quarter and first six months of 1995 was $13.2 million
and $25.9 million, respectively, compared to net income of $92.9 million and
$96.8 million in the comparable periods of 1994. Excluding the impact of the
$0.09 per share after-tax gain from this year's first quarter sale of the
previously mentioned interest in the Mexican newsprint operation and the $3.17
per share after-tax gain from the second quarter 1994 sale of the Company's
investment in GSN, net income was $13.2 million and $23.4 million in the second
quarter and first half of 1995, compared to $9.6 million and $13.6 million for
the same periods of 1994, an increase of 37% and 72%, respectively.
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 declined $1.2 million (12.8%) and $.6 million
(4.2%) in the second quarter and first six months of 1995, respectively, from
the comparable 1994 periods. The decline was primarily attributable to
increased newsprint costs incurred by the Company's newspapers which in the
second quarter and first half of 1995 rose $3.5 million and $6.5 million from
the comparable year-ago periods. The rise in newsprint costs, together with
other operating cost increases, more than offset combined newspaper revenue
growth of 4.6% and 5.9% in the second quarter and first half of 1995. Year-
over-year broadcast television segment operating income rose $2.5 million
(46.6%) and $4.5 million (50.3%) in the quarterly and year-to-date periods ended
June 25, 1995. The increases resulted from strong local and national
advertising revenue growth at the Company's Tampa and Jacksonville, Florida, TV
stations. This revenue growth, paced by automotive advertising, more than
offset the effect of combined operating cost increases of less than 3% in both
periods. Cable television segment profits declined $2.7 million (54%) and $4.5
million (50.8%) in the second quarter and first half of 1995 from the comparable
year-earlier periods. The declines were principally attributable to
significantly higher programming costs and depreciation expense which, along
with other operating cost increases, could not be fully recouped through
allowable rate increases. Newsprint segment operating income rose $3.5 million
and $6.2 million in the second quarter and first half of 1995, respectively,
from last year's comparable periods. The rise was chiefly the result of
increases in 1995 average second quarter and first half realized newsprint
prices, up 39% and 30.9%, respectively, from the comparable year-earlier
periods, which more than offset the effect of significantly increased ONP costs.
Income taxes declined $6.3 million and $1.8 million in the second quarter and
first half of 1995 from the comparable 1994 periods. Excluding the gains and
related income taxes applicable to the Company's 1995 sale of its interest in a
Mexican newsprint operation and the 1994 sale of its investment in GSN, income
tax expense rose $2 million (41%) and $5.3 million (76.6%) from the comparable
1994 quarterly and year-to-date periods, on pretax earnings increases of 38.3%
and 73.6%. The Company's effective tax rate remained relatively constant,
increasing to approximately 34.4% in both the second quarter and first half of
1995, from approximately 33.8% in the same periods of 1994.
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Funds generated by operating activities during the first six months of 1995
totaled $41.9 million, down $13.1 million from the comparable period of 1994.
The decline was due principally to increases in inventories (on increased prices
for recovered newspapers [ONP] at the Company's newsprint operations and
newsprint at the Company's newspapers) and in funds applied to reduce current
liabilities. Together, these more than offset increased funds generated by
improved profitability. Funds generated by investing activities during the
first half of 1995 and 1994 include $3.6 million from the sale of the Company's
interest in a Mexican newsprint operation and $57.5 million of net cash proceeds
from the sale of GSN, respectively.
During the first six months of 1995, the primary use of cash was $14.1 for
capital expenditures and $6.3 million for the payment of dividends to
stockholders. Substantially all of the funds generated in excess of current
needs during the first six months of 1995 were invested in short-term cash
equivalent securities, which totaled $36.5 million at June 25, 1995.
Total long-term debt at June 25, 1995, was $172.5 million, unchanged from
December 25, 1995, but down $19.3 million from the year-ago level of $191.8 at
June 26, 1994. As a result of the decline in borrowings since that date, the
Company's ratio of debt to total capital decreased to 32.7% at June 25, 1995,
from 37.7% at mid-year 1994. On July 31, 1995, the Company made a scheduled
reduction of $43.75 million of 9.27% notes outstanding utilizing the proceeds
from accumulated short-term cash equivalent securities, reducing its total
borrowings to $128.75 million at that date. At June 25, 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 early 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. 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 stockholders, and working capital needs.
OUTLOOK
Prospects for the balance of 1995 remain quite positive for Media General.
Improved profitability at the Company's newsprint operations should continue.
The Company's broadcast television operations are expected to record a year-
over-year profit improvement, although results in the last quarter may soften on
the absence of the strong political ad revenues recognized in late 1994. These,
together with increased earnings from its affiliated newspaper and newsprint
companies and a continued decline in interest expense as a result of reduced
debt levels, should more than offset the effect of rising newsprint prices on
the Company's newspaper operations and the continuing impact of restrictive
reregulation provisions on cable television profitability.
<PAGE> 14
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
19, 1995, for the purpose of electing a board of directors, and approving the
Media General, Inc., Restricted Stock Plan for Non-Employee Directors and the
Media General, Inc., 1995 Long-Term Incentive Plan.
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 17,291,959 7,203,740
Robert V. Hatcher, Jr. 16,861,683 7,633,921
John G. Medlin, Jr. 16,869,035 7,626,574
Class B Class B
Shares Voted Shares Voted
"FOR" "WITHHELD"
----------- ------------
Class B Directors
-----------------
Robert P. Black 553,452 ---
D. Tennant Bryan 553,452 ---
J. Stewart Bryan III 553,452 ---
Alan S. Donnahoe 497,872 55,580
James S. Evans 553,452 ---
Henry L. Valentine, II 553,452 ---
The Media General, Inc., Restricted Stock Plan for Non-Employee Directors was
approved by Class A and Class B stockholders with the following vote:
Shares Voted Shares Voted Shares Voted
"FOR" "AGAINST" "ABSTAINING"
----------- ----------- ------------
14,971,984 779,667 7,300,711
The Media General, Inc., 1995 Long-Term Incentive Plan was approved by Class A
and Class B stockholders with the following vote:
Shares Voted Shares Voted Shares Voted
"FOR" "AGAINST" "ABSTAINING"
----------- ----------- ------------
13,141,380 2,569,702 7,341,280
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 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
June 25, 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: August 7, 1995 /s/ J. Stewart Bryan III
-----------------------------------
J. Stewart Bryan III, Chairman,
President and Chief Executive Officer
DATE: August 7, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-25-1995
<CASH> 39,267
<SECURITIES> 0
<RECEIVABLES> 69,582
<ALLOWANCES> 0
<INVENTORY> 16,361
<CURRENT-ASSETS> 144,823
<PP&E> 501,563
<DEPRECIATION> 0
<TOTAL-ASSETS> 804,987
<CURRENT-LIABILITIES> 120,349
<BONDS> 136,000
<COMMON> 132,222
0
0
<OTHER-SE> 222,635
<TOTAL-LIABILITY-AND-EQUITY> 804,987
<SALES> 338,633
<TOTAL-REVENUES> 338,633
<CGS> 185,664
<TOTAL-COSTS> 185,664
<OTHER-EXPENSES> 29,792
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,183
<INCOME-PRETAX> 39,236
<INCOME-TAX> 13,372
<INCOME-CONTINUING> 25,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,864
<EPS-PRIMARY> .98
<EPS-DILUTED> 0
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