<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 26, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
Commission File No. 1-6383
MEDIA GENERAL, INC.
(Exact name of registrant as specified in its charter)
Commonwealth of Virginia 54-0850433
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 East Franklin Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 649-6000
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock American Stock Exchange
(Title of class) (Name of exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [_]
The aggregate market value of voting stock held by nonaffiliates of the
registrant, based upon the closing price of the Company's Class A Common Stock
as reported on the American Stock Exchange, as of February 27, 2000, was
approximately $1,141,000,000.
The number of shares of Class A Common Stock outstanding on February
27, 2000, was 25,050,493. The number of shares of Class B Common Stock
outstanding on February 27, 2000, was 556,574.
Part I, Part II and Part IV incorporate information by reference from
the Annual Report to Stockholders for the year ended December 26, 1999. Part III
incorporates information by reference from the proxy statement for the Annual
Meeting of Stockholders to be held on May 19, 2000.
<PAGE>
Index to Media General, Inc.
Annual Report on Form 10-K for the Year Ended December 26, 1999
<TABLE>
<CAPTION>
Item No. Page
Part I
<S> <C>
1. Business
General 1
Publishing 2
Broadcast Television 3
Newsprint 6
2. Properties 7
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
Executive Officers of Registrant 9
Part II
5. Market for Registrant's Common Equity and Related Stockholder Matters 9
6. Selected Financial Data 9
7. Management's Discussion and Analysis of Financial Condition and Results
of Operation 9
7A. Quantitative and Qualitative Disclosures About Market Risk 9
8. Financial Statements and Supplementary Data 10
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 10
Part III
10. Directors and Executive Officers of the Registrant 10
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial Owners and Management 10
13. Certain Relationships and Related Transactions 10
Part IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11
Schedule II 12
Index to Exhibits 13
Signatures 17
</TABLE>
<PAGE>
Part I
Item 1. Business
General
Media General, Inc., is an independent, publicly owned communications
company situated primarily in the Southeast with interests in newspapers,
broadcast television, interactive media, recycled newsprint production, and
diversified information services. The Company employs approximately 8,200 people
on a full or part-time basis. The Company's businesses are somewhat seasonal;
the second and fourth quarters are typically stronger than the first and third
quarters.
As part of the Company's continuing commitment to strengthen its
presence in the Southeast, it has completed a series of strategic acquisitions,
exchanges, investments and divestitures over the past several years which has
significantly intensified its focus on southeastern newspapers and broadcast
television stations. In October 1999, the Company sold its cable operations to
Cox Communications, Inc., for approximately $1.4 billion in cash. The Company
recorded a gain of $799 million (net of income taxes of $510 million) which is
subject to resolution with the buyer of certain post-closing adjustments
relating to working capital and income tax matters. Immediately following the
sale, approximately $735 million of the proceeds were used to repay all amounts
outstanding under the Company's revolving credit agreements and to terminate the
associated interest rate swaps; the remaining proceeds were invested principally
in prime-rated commercial paper. In June 1999, the Company sold 20% of the
outstanding common stock of Denver Newspapers, Inc. (Denver), the parent company
of The Denver Post (a Colorado daily newspaper), for $39 million, resulting in a
$19 million after-tax gain. The Company still retains 20% ownership of the
common stock of Denver. Additionally, the Company's preferred stock investment
in Denver was redeemed in June 1999, for $34 million plus $19.2 million of
accrued but unpaid dividends. In May 1999, the Company sold its WHOA-TV station
in Montgomery, Alabama, for approximately $8 million.
The aforementioned transactions allow the Company the financial
flexibility to focus on increasing its southeastern presence through those media
segments, namely newspapers and broadcast television, where the Company believes
it has achieved critical mass. In December 1999, the Company announced an
agreement to acquire Spartan Communications, Inc. (Spartan) for approximately
$605 million. Spartan owns 12 network-affiliated stations and operates one UPN
affiliate under a local marketing agreement; eight of these stations are located
in the Southeast. This transaction is expected to close early in the second
quarter of 2000.
In December 1999, the Board of Directors authorized a program to
repurchase up to $250 million of the Company's Class A common stock. As of
February 27, 2000, 1.1 million shares had been repurchased at a cost of
approximately $57 million.
In January 1998 the Company acquired, for approximately $93 million,
the assets of the Bristol Herald Courier, a daily newspaper in southwestern
Virginia (circulation - 42,000 daily, 44,000 Sunday), and two affiliated weekly
newspapers (circulation - 5,000 weekly). In July 1998 the Company acquired, for
approximately $40 million, the assets of the Hickory Daily Record, a daily
newspaper in northwestern North Carolina (circulation - 19,000 daily, 21,000
Sunday). Additionally, in June 1998, the Company completed the sale of its
Kentucky newspaper properties for approximately $24 million.
1
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In January 1997, the Company acquired Park Acquisitions, Inc., parent
of Park Communications, Inc. (Park), which included ten network affiliated
television stations, 28 daily newspapers and 82 weekly newspapers. The total
consideration approximated $715 million. In conjunction with this acquisition,
and as intended, the Company sold certain of the former Park properties, most
all of which were located outside of the Southeast, for approximately $147
million and purchased new properties for approximately $53 million. These
purchases were the Potomac News (Woodbridge, Virginia; circulation - 20,000
daily, 24,000 Sunday) in February 1997, The Reidsville Review (Reidsville, North
Carolina) and The Messenger (Madison, North Carolina) in April 1997. In August
1997 the Company exchanged WTVR-TV (Richmond, Virginia), a station acquired from
Park, for three other stations, WSAV-TV (Savannah, Georgia), WJTV-TV (Jackson,
Mississippi) and WHLT-TV (Hattiesburg, Mississippi), in order to comply with the
Federal Communication Commission's requirement that WTVR-TV be divested within
one year of its January 1997 purchase date.
Industry Segments
The Company is engaged in three significant industry segments. For
financial information related to these segments see pages 27 through 29 of the
1999 Annual Report to Stockholders, which are incorporated herein by reference.
Additional information related to each of the Company's significant industry
segments is included below.
Publishing Business
At December 26, 1999, the Company's wholly owned publishing operations
included daily and Sunday newspapers in Virginia, Florida and North Carolina.
For a listing of the Company's daily and Sunday newspapers by location, see page
3 of the 1999 Annual Report to Stockholders, which is incorporated herein by
reference. Combined daily circulation for the Virginia, Florida and North
Carolina newspapers in 1999 was 377,000, 233,000 and 167,000, respectively;
combined Sunday circulation for these newspapers was 426,000, 314,000 and
179,000, respectively. The Company also owns weekly newspapers, shoppers and
other publications in Virginia, Florida and North Carolina, with weekly
circulation of 33,000, 2,000 and 19,000, respectively; and it holds 20% of the
common stock of the Denver Post Corporation, the parent company of The Denver
Post, a daily newspaper in Denver, Colorado. Additionally, the Company owns
Media General Financial Services, Inc., which compiles and makes available both
current and historical data on publicly traded companies to a broad spectrum of
users, including many online financial data services, and also offers other
specialized financial products. In August 1999, the Company invested in AdOne,
L.L.P., the leading online database of classified advertising.
The newspaper publishing industry in the United States is comprised of
hundreds of public and private companies ranging from large national and
regional companies, publishing multiple newspapers across many states, to small
privately held companies publishing one newspaper in one locality. The trend in
the publishing industry (as well as the Broadcast industry) has been towards
consolidation. Generally, larger companies, like Media General, have acquired
smaller family-owned entities based upon their availability; these properties do
not reappear on the market unless the larger companies make strategic decisions
to exit a particular market or to exit a segment of their business. Acquisitions
and growth achieved by the Company over the past several years have placed the
Company's newspaper circulation among the top twenty in the United States and
have situated the Company among the top fifteen publicly-held newspaper
publishers in the country based on revenue. Moreover,
2
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the Company has achieved the number three position in circulation in its chosen
southeastern area of focus, with its publications reaching nearly one million
households across the Southeast every week. Additionally, the Company's online
news, information and entertainment services have become increasingly important
as they reach additional viewers and readers without geographic restriction;
virtually all of the Company's daily newspapers have expanded their reach with
Web sites.
All of the Company's newspapers compete for circulation and advertising
with other newspapers published nationally and in nearby cities and towns and
for advertising with magazines, radio, broadcast and cable television, the
internet and other promotional media. All of the newspapers compete for
circulation principally on the basis of content, quality of service and price.
The primary raw material used by the Company in its publishing
operations is newsprint, which is purchased from various Canadian and United
States sources, including Garden State Paper Company, Inc., a wholly owned
subsidiary of the Company, and SP Newsprint Company, in which the Company owns a
one-third equity interest. The publishing operations of the Company consumed
approximately 137,000 tons of newsprint in 1999. Management of the Company
believes that sources of supply under existing arrangements will be adequate in
2000.
Broadcast Television Business
The ownership, operation and sale of broadcast television stations,
including those licensed to the Company, are subject to the jurisdiction of the
Federal Communications Commission (FCC), which engages in extensive and changing
regulation of the broadcasting industry under authority granted by the
Communications Act of 1934 (Communications Act), as most recently amended by the
Telecommunications Act of 1996 (1996 Telecom Act). The Communications Act
requires broadcasters to serve the public interest. Among other things, the FCC
assigns frequency bands; determines stations' locations and operating power;
issues, renews, revokes and modifies station licenses; assigns and controls
changes in ownership or control of station licenses; regulates equipment used by
stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of stations;
regulates certain program content; has the authority to impose penalties for
violations of its rules or the Communications Act; and imposes annual fees on
stations.
Pursuant to the Children's Television Act of 1990 (Children's
Television Act), the FCC has adopted rules limiting advertising in children's
television programming and requiring that broadcast television stations serve
the educational and informational needs of children. The Children's Television
Act specifically requires the FCC to consider compliance with these obligations
in deciding whether to renew a television broadcast license.
Reference should be made to the Communications Act, the 1996 Telecom
Act, the Children's Television Act and the FCC's rules, public notices and
rulings for further information concerning the nature and extent of federal
regulation of broadcast television stations.
The Broadcast Television Division operates thirteen network-affiliated
television stations in the southeastern United States. The following table sets
forth certain information on each of these stations:
3
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<TABLE>
<CAPTION>
Expiration Expiration
National Date of Date of
Station Location Market Station Audience FCC Network
and Affiliation Rank (a) Rank (a) * % Share (a) * License (b) Agreement
--------------- -------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
WFLA-TV NBC 13 2 13% 2/1/05 12/31/04
Tampa, FL
WIAT-TV CBS 39 4 9% 4/1/05 12/31/04
Birmingham, AL
WJWB-TV WB 52 3 7% 2/1/05 1/12/04
Jacksonville, FL
WTVQ-TV ABC 66 2 11% 8/1/05 1/1/06
Lexington, KY
WSLS-TV NBC 68 2 13% 10/1/04 10/1/05
Roanoke, VA
WDEF-TV CBS 84 3 14% 8/1/05 12/31/04
Chattanooga, TN
WJTV-TV CBS 89 1 19% 6/1/05 12/31/04
Jackson, MS
WJHL-TV CBS 92 2 16% 8/1/05 12/31/04
Johnson City, TN
WSAV-TV NBC 100 2 10% 4/1/05 9/30/04
Savannah, GA
WCBD-TV NBC 104 2 15% 12/1/04 12/31/04
Charleston, SC
WNCT-TV CBS 106 1 17% 12/1/04 12/31/04
Greenville, NC
WHLT-TV CBS 167 2 9% 6/1/05 8/31/05
Hattiesburg, MS
KALB-TV NBC 177 1 29% 6/1/05 10/1/05
Alexandria, LA
</TABLE>
(a) Source: November 1999 Nielsen Rating Books.
(b) Television broadcast licenses are granted for maximum terms of
eight years and are subject to renewal upon application to the
FCC.
* Sign-On to Sign-Off.
4
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Pending the close of the Spartan acquisition early in the second
quarter of 2000, the Company will also operate the following network-affiliated
stations as well as one UPN affiliate:
<TABLE>
<CAPTION>
Expiration Expiration
National Date of Date of
Station Location Market Station Audience FCC Network
and Affiliation Rank (a) Rank (a) * % Share (a) * License (b) Agreement
--------------- -------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
WSPA-TV CBS 35 1 17% 12/1/04 6/30/05
Greenville, SC
Spartanburg, SC
Satellite:
WNEG-TV,
Toccoa, GA
WASV-TV UPN, (c) 35 5 2% 12/1/04 10/31/07
Anderson, SC
Asheville, NC
WKRG-TV CBS 62 1 18% 4/1/05 4/2/05
Mobile, AL
Pensacola, FL
KWCH-TV CBS 65 1 19% 6/1/06 6/30/05
Wichita, KS
Satellites in Kansas:
KBSD-TV, Dodge City
KBSH-TV, Hays
KBSL-TV, Goodland
WJBF-TV ABC 115 2 19% 4/1/05 3/6/05
Augusta, GA
WBTW-TV CBS 116 1 24% 12/1/04 6/30/05
Florence, SC
Myrtle Beach, SC
WRBL-TV CBS 127 2 16% 4/1/05 3/31/05
Columbus, GA
KIMT-TV CBS 153 2 15% 2/1/06 6/30/05
Mason City, IA
WMBB-TV ABC 157 2 17% 2/1/05 3/6/05
Panama City, FL
</TABLE>
(a) Source: November 1999 Nielsen Rating Books.
(b) Television broadcast licenses are granted for maximum terms of
eight years and are subject to renewal upon application to the
FCC.
(c) This station is operated by the Company under a local marketing agreement.
* Sign-On to Sign-Off.
5
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The primary source of revenues for the Company's television stations is
the sale of time to national and local advertisers. Since each of the stations
is network-affiliated, additional revenue is derived from the network
programming carried by each. All of these stations have also established a
presence on the Web.
The Company's television stations are in competition for audience and
advertising revenues with other television and radio stations and cable
television systems as well as magazines, newspapers, the internet and other
promotional media. A number of cable television systems which operate generally
on a subscriber payment basis are in business in the Company's broadcasting
markets and compete for audience by importing out-of-market television signals
and by presenting cable network and other program services. The television
stations compete for audience on the basis of program content and quality of
reception, and for advertising revenues on the basis of price, share of market
and performance.
The television broadcast industry presently is implementing the
transition from analog to digital (DTV) technology in accordance with a mandated
conversion timetable established by the FCC. The Company's Tampa television
station has begun digital broadcasting; the Company's other television stations
must begin DTV service by May 1, 2002.
Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast television stations and affect the
ability of the Company to acquire additional stations. In addition to the
matters noted above, these include, for example, spectrum use fees, political
advertising rates, potential restrictions on the advertising of certain products
(such as alcoholic beverages) and ownership rule changes. Other matters that
could potentially affect the Company's broadcast properties include
technological innovations and developments generally affecting competition in
the mass communications industry, such as satellite radio and television
broadcast service, wireless cable systems, low-power television stations, radio
technologies, the advent of telephone company participation in the provision of
video programming services, and Internet delivered broadcast services.
Newsprint Business
Media General's newsprint operations consist of the Garden State Paper
Company (GSP), a wholly owned newsprint mill in Garfield, New Jersey, with an
annual capacity of 242,000 short tons, and a one-third interest in SP Newsprint
Company (SPNC) which operates mills in Dublin, Georgia, and Newberg, Oregon,
with an annual capacity of 960,000 short tons. Both the GSP facility and the
Dublin mill use Media General's proprietary de-inking technology to produce 100
percent recycled, high quality newsprint from recovered old newspapers (ONP).
Media General's share of the combined total capacity of all three facilities is
approximately 560,000 short tons. Media General is the nation's leading producer
of 100 percent recycled newsprint. The Company also earns licensing fees
pursuant to a contract with SPNC, in addition to its share of operating results.
Garden State competes with approximately twenty Canadian and American
companies in selling newsprint, its sole product, to newspaper publishers.
Consolidation within the newsprint industry has resulted in the three largest
North American manufacturers (Bowater, Abitibi, Donohue) controlling more than
50% of the production capacity. This is expected to provide for more price
6
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stability and should benefit smaller producers like Garden State. Competition is
based principally on price, quality of product and service, although the
percentage of recovered fiber contained in manufactured newsprint is important
to newspaper publishers to meet various existing and proposed state and federal
standards.
In the past decade, environmentally driven legislation, as well as both
the publishing and newsprint industries, have encouraged the use of recycled
paper. Consequently, newspaper recycling rates rose steadily and increased
supply led to a gradual decline in ONP prices throughout all of 1996 and into
1997, with prices beginning to stabilize towards the close of 1997. However,
1998 and 1999 showed moderate increases in ONP prices due to increased export
demand to the Far East as well as greater local competition within the industry.
Media General's strategically located and cost-effective newsprint recycling
facilities have helped assure the Company of adequate supplies of ONP.
The newsprint business has historically been a cyclical industry and as
newsprint has become more of a global commodity, the delicate balance between
supply and demand has been constantly challenged. In 1994, newsprint demand was
on the rise, producing higher selling prices as most mills reached 96-97 percent
of operating capacity. The trend upward continued through 1995, enabling Media
General's newsprint operations to implement four price increases during that
year. Prices peaked in early 1996 and then declined throughout the remainder of
the year. However, prices began a gradual and steady ascent in 1997 and leveled
out during 1998. Newsprint prices fell sharply throughout the first half of 1999
as production capacity increased in foreign countries resulting in an excess
supply; only modest improvement was seen during the latter portion of the year.
These dramatic year-over-year pricing swings have a significant effect on the
performance of the Company's Newsprint Segment.
Item 2. Properties
The recently completed headquarter buildings of Media General, Inc.
(occupied in 1998), and the Richmond Times-Dispatch (occupied in early 2000) are
adjacent to one another in downtown Richmond, Virginia. The Company currently
leases both of these headquarter buildings and has an option to buy them. The
Richmond newspaper is printed at a production and distribution facility located
on an 86 acre site in Hanover County, Virginia, near Richmond; the acreage
beyond the foreseeable needs of the Company is being actively marketed. The
Company owns nine other daily newspapers in Virginia, all of which are printed
in or around their respective cities at production and distribution facilities
situated on parcels of land ranging from one-half acre to six acres. The Tampa,
Florida, newspaper is located in a single unit production plant and office
building located on a six acre tract in that city. The headquarters of the
Company's Brooksville and Sebring, Florida, daily newspapers are located on
leased property in their respective cities; however, these newspapers are
printed at the Tampa production facility. The Winston-Salem newspaper is
headquartered in one building in downtown Winston-Salem. Its newspapers are
printed at a production and distribution facility located on a nearby 12 acre
site. The remaining seven daily newspapers in North Carolina are printed at
production and distribution facilities on sites which range from one-half acre
to seven acres, all located in or around their respective cities. The Company
owns substantially all of its newspaper production equipment, production
buildings and the land where these production facilities reside.
The Company's station, WFLA-TV in Tampa, Florida, now occupies its
recently completed headquarters and studio building, which is leased by the
Company with an option to buy. This building, which adjoins The Tampa Tribune,
provides the television station with the ability to broadcast digital signal as
well as a new and expanded newsroom for the Tampa newspaper. This
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structure also serves as a multimedia center where efforts are combined and
information is shared among The Tampa Tribune, WFLA-TV, and the Company's area
online presence, TBO.com.
The Company's thirteen currently-owned television stations are located
in ten southeastern states. Two stations are located in each of the following
states: Florida, Mississippi and Tennessee. The seven remaining stations are
located in the following states: Alabama, Georgia, Kentucky, Louisiana, North
Carolina, South Carolina and Virginia. Substantially all of the television
stations are located on land owned by the Company. Nine station tower sites are
owned by the Company; four are leased.
Pending the acquisition of Spartan, the Company will own an additional
12 television stations and operate one station under a local marketing agreement
in the following states: Alabama, Florida, Georgia, Iowa, Kansas, North Carolina
and South Carolina. Eleven of the towers will be owned by the Company; two will
be leased.
Newsprint production facilities at Garden State consist of a
Company-owned mill in Garfield, New Jersey, housing two paper-making machines
adjacent to a Company-owned power plant which supplies it with steam and
electric power. Garden State leases adequate storage facilities for waste paper
in the general vicinity of the newsprint mill. The Company also leases three
properties in New Jersey and one in New York for its recycling operations.
The Company considers all of its properties, together with the related
machinery and equipment contained therein, to be well-maintained, in good
operating condition, and adequate for its present and foreseeable future needs.
Item 3. Legal Proceedings
None.
Items 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1999.
8
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Executive Officers of the Registrant
<TABLE>
<CAPTION>
Name Age Position and Office Year First Took Office*
<S> <C> <C> <C>
J. Stewart Bryan III 61 Chairman, President, Chief Executive Officer 1990
Marshall N. Morton 54 Senior Vice President, Chief Financial Officer 1989
H. Graham Woodlief, Jr. 55 Vice President, President of Publishing Division 1989
Stephen Y. Dickinson 54 Controller 1989
George L. Mahoney 47 General Counsel, Secretary 1993
Stephen R. Zacharias 50 Treasurer 1989
</TABLE>
_____________________
* The year indicated is the year in which the officer first assumed an
office with the Company.
Officers of the Company are elected at the Annual Meeting of the Board
of Directors to serve, unless sooner removed, until the next Annual Meeting of
the Board of Directors and/or until their successors are duly elected and
qualified.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to page 43 of the 1999 Annual Report to Stockholders,
which is incorporated herein by reference, for information required by this
item.
Item 6. Selected Financial Data
Reference is made to pages 44 and 45 of the 1999 Annual Report to
Stockholders, which are incorporated herein by reference, for information
required by this item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to pages 38 through 42 of the 1999 Annual Report to
Stockholders, which are incorporated herein by reference, for information
required by this item.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Reference is made to the fourth paragraph of Item 1 "Newsprint
Business" and to page 41 of the 1999 Annual Report to Stockholders, which is in
corporated herein by reference, for information required by this item.
9
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Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company as of December 26,
1999, and December 27, 1998, and for each of the three fiscal years in the
period ended December 26, 1999, and the report of independent auditors thereon,
as well as the Company's unaudited quarterly financial data for the fiscal years
ended December 26, 1999, and December 27, 1998, are incorporated herein by
reference from the 1999 Annual Report to Stockholders pages 19 through 37 and
page 43.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 19, 2000, except as to
certain information regarding executive officers included in Part I.
Item 11. Executive Compensation
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 19, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 19, 2000.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders on May 19, 2000.
10
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. and 2. The financial statements and schedule listed in the
accompanying index to financial statements and financial statement
schedules are filed as part of this annual report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed as
part of this annual report.
(b) Reports on Form 8-K
None
Index to Financial Statements and Financial Statement Schedules - Item 14(a)
<TABLE>
<CAPTION>
Annual Report to
Form 10-K Stockholders
--------- ------------
Media General, Inc.
(Registrant)
<S> <C> <C>
Report of independent auditors 37
Consolidated statements of operations for the fiscal years ended December 26,
1999, December 27, 1998, and December 28, 1997 19
Consolidated balance sheets at December 26, 1999, and December 27, 1998 20-21
Consolidated statements of stockholders' equity for the fiscal years ended
December 26, 1999, December 27, 1998, and December 28, 1997 22
Consolidated statements of cash flows for the fiscal years ended
December 26, 1999, December 27, 1998, and December 28, 1997 23
Notes to consolidated financial statements 24-36
Schedule:
II - Valuation and qualifying accounts and reserves for the fiscal
years ended December 26, 1999, December 27, 1998, and
December 28, 1997 12
</TABLE>
Schedules other than Schedule II, listed above, are omitted since they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
The consolidated financial statements of Media General, Inc., listed in the
above index which are included in the Annual Report to Stockholders of Media
General, Inc., for the fiscal year ended December 26, 1999, are incorporated
herein by reference. With the exception of the pages listed in the above index
and the information incorporated by reference included in Parts I, II and IV,
the 1999 Annual Report to Stockholders is not deemed filed as part of this
report.
11
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Media General, Inc.
Schedule II - Valuation and Qualifying Accounts and Reserves
Fiscal Years Ended December 26, 1999, December 27, 1998, and December 28, 1997
<TABLE>
<CAPTION>
Balance at Additions Balance
beginning charged to Deductions at end
of period expense-net net Transfers of period
-------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1999
Allowance for doubtful accounts $ 8,433,300 $ 5,278,081 $ 5,863,762 $ (759,608) (a) $ 7,088,011
Reserve for warranties 3,139,934 --- 439,934 --- 2,700,000
--------------- ------------- -------------- ------------- ------------
Totals $ 11,573,234 $ 5,278,081 $ 6,303,696 $ (759,608) $ 9,788,011
=============== ============= ============== ============= ============
1998
Allowance for doubtful accounts $ 6,653,367 $ 6,727,114 $ 5,059,996 $ 112,815 (a) $ 8,433,300
Reserve for warranties 3,523,324 --- 383,390 --- 3,139,934
--------------- ------------- -------------- ------------- ------------
Totals $ 10,176,691 $ 6,727,114 $ 5,443,386 $ 112,815 $ 11,573,234
=============== ============= ============== ============= ============
1997
Allowance for doubtful accounts $ 5,270,765 $ 5,716,864 $ 6,122,261 $ 1,787,999 (a) $ 6,653,367
Reserve for warranties 4,146,005 --- 622,681 --- 3,523,324
--------------- ------------- -------------- ------------- ------------
Totals $ 9,416,770 $ 5,716,864 $ 6,744,942 $ 1,787,999 $ 10,176,691
=============== ============= ============== ============= ============
</TABLE>
(a) Amount associated with net acquisitions and dispositions of businesses.
12
<PAGE>
Index to Exhibits
Exhibit
Number Description
2.1 Agreement and Plan of Merger dated July 19, 1996, by and among
Media General, Inc., MG Acquisitions, Inc., and Park
Acquisitions, Inc., incorporated by reference to Exhibit 2.1
of Form 8-K dated January 7, 1997.
2.2 First Amendment to Agreement and Plan of Merger dated as of
January 7, 1997, by and among Media General, Inc., MG
Acquisitions, Inc., and Park Acquisitions, Inc., incorporated
by reference to Exhibit 2.2 of Form 8-K dated January 7, 1997.
3 (i) The Amended and Restated Articles of Incorporation of Media
General, Inc., incorporated by reference to Exhibit 3.1 of
Form 10-K for the fiscal year ended December 31, 1989.
3 (ii) Bylaws of Media General, Inc., amended and restated as of July
31, 1997, incorporated by reference to Exhibit 3 (ii) of Form
10-Q for the period ended September 28, 1997.
10.1 Form of Option granted under the 1976 Non-Qualified Stock
Option Plan, incorporated by reference to Exhibit 2.2 of
Registration Statement 2-56905.
10.2 Additional Form of Option to be granted under the 1976 Non-
Qualified Stock Option Plan, incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 3 Registration
Statement 2-56905.
10.3 Addendum dated January 1984, to Form of Option granted under
the 1976 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.13 of Form 10-K for the fiscal year
ended December 31, 1983.
10.4 Addendum dated June 19, 1992, to Form of Option granted under
the 1976 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.15 of Form 10-K for the fiscal year
ended December 27, 1992.
10.5 The Media General, Inc., Amended and Restated Restricted Stock
Plan, dated January 31, 1996, incorporated by reference to
Exhibit 10.10 of Form 10-K for the fiscal year ended December
31, 1995.
10.6 Addendum dated June 19, 1992, to Form of Option granted under
the 1987 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 10.20 of Form 10-K for the fiscal year
ended December 27, 1992.
10.7 Media General, Inc., Executive Death Benefit Plan effective
January 1, 1991, incorporated by reference to Exhibit 10.17 of
Form 10-K for the fiscal year ended December 29, 1991.
10.8 Amendment to the Media General, Inc., Executive Death Benefit
Plan dated July 24, 1991, incorporated by reference to Exhibit
10.18 of Form 10-K for the fiscal year ended December 29,
1991.
10.9 Shareholders Agreement, dated May 28, 1987, between Mary
Tennant Bryan, Florence Bryan Wisner, J. Stewart Bryan III,
and D. Tennant Bryan and J. Stewart Bryan III as
13
<PAGE>
trustees under D. Tennant Bryan Media Trust, and Media
General, Inc., incorporated by reference to Exhibit 10.50 of
Form 10-K for the fiscal year ended December 31, 1987.
10.10 Media General, Inc., Supplemental Thrift Plan, amended and
restated as of November 17, 1994, incorporated by reference to
Exhibit 10.27 of Form 10-K for the fiscal year ended December
25, 1994.
10.11 Media General, Inc., Executive Supplemental Retirement Plan,
amended, and restated as of April 23, 1999, incorporated by
reference to Exhibit 10 of Form 10-Q for the period ended June
27, 1999.
10.12 Deferred Income Plan for Selected Key Executives of Media
General, Inc., and form of Deferred Compensation Agreement
thereunder dated as of December 1, 1984, incorporated by
reference to Exhibit 10.29 of Form 10-K for the fiscal year
ended December 31, 1989.
10.13 Media General, Inc., Management Performance Award Program,
adopted November 16, 1990, and effective January 1, 1991,
incorporated by reference to Exhibit 10.35 of Form 10-K for
the fiscal year ended December 29, 1991.
10.14 Media General, Inc., Deferred Compensation Plan, amended and
restated as of January 1, 1999, incorporated by reference to
Exhibit 4.3 of Registration Statement 333-69527.
10.15 Media General, Inc., ERISA Excess Benefits Plan, amended and
restated as of November 17, 1994, incorporated by reference to
Exhibit 10.33 of Form 10-K for the fiscal year ended December
25, 1994.
10.16 Media General, Inc., 1995 Long-Term Incentive Plan, adopted as
of May 19, 1995, incorporated by reference to Exhibit 10.33 of
Form 10-K for the fiscal year ended December 31, 1995.
10.17 Media General, Inc., 1996 Employee Non-Qualified Stock Option
Plan, adopted as of January 30, 1996, incorporated by
reference to Exhibit 10.20 of Form 10-K for the fiscal year
ended December 29, 1996.
10.18 Media General, Inc., 1997 Employee Restricted Stock Plan,
adopted as of May 16, 1997, incorporated by reference to
Exhibit 10.21 of Form 10-K for the fiscal year ended December
29, 1996.
10.19 Media General, Inc., Directors' Deferred Compensation Plan,
adopted as of May 16, 1997, incorporated by reference to
Exhibit 10.22 of Form 10-K for the fiscal year ended December
29, 1996.
10.20 Amended and Restated Partnership Agreement, dated November 1,
1987, by and among Virginia Paper Manufacturing Corp., KR
Newsprint Company, Inc., and CEI Newsprint, Inc., incorporated
by reference to Exhibit 10.31 of Form 10-K for the fiscal year
ended December 31, 1987.
10.21 Amended and Restated License Agreement, dated November 1,
1987, by and among Media General, Inc., Garden State Paper
Company, Inc., and Southeast Paper Manufacturing Co.,
incorporated by reference to Exhibit 10.34 of Form 10-K for
the fiscal year ended December 31, 1987.
14
<PAGE>
10.22 Amended and Restated Umbrella Agreement, dated November 1,
1987, by and among Media General, Inc., Knight - Ridder, Inc.,
and Cox Enterprises, Inc., incorporated by reference to
Exhibit 10.32 of Form 10-K for the fiscal year ended December
31, 1987.
10.23 Amended Newsprint Purchase Contract, dated November 1, 1987,
by and among Southeast Paper Manufacturing Co., Media General,
Inc., Knight-Ridder, Inc., and Cox Enterprises, Inc.,
incorporated by reference to Exhibit 10.35 of Form 10-K for
the fiscal year ended December 31, 1987.
10.24 Television affiliation agreement, dated February 10, 1995,
between WFLA-TV and the NBC Television Network incorporated by
reference to Exhibit 10.38 of Form 10-K for the fiscal year
ended December 25, 1994.
10.25 Amendments, dated May 17, 1993, to television affiliations
agreement, between WFLA-TV and National Broadcasting Company,
Inc., dated March 22, 1989, incorporated by reference to
Exhibit 10.47 of Form 10-K for the fiscal year ended December
26, 1993.
10.26 Second Amended and Restated Stock and Warrant Purchase and
Shareholders' Agreement dated May 20, 1994, by and among Media
General, Inc., Affiliated Newspapers Investments, Inc., and
Denver Newspapers, Inc., incorporated by reference to Exhibit
2 of Form 8-K dated September 28, 1994.
10.27 Asset Purchase Agreement dated February 13, 1997, by and among
Media General Newspapers, Inc., and Newspaper Holdings, Inc.,
incorporated by reference to Exhibit 10.36 of Form 10-K dated
March 27, 1997.
10.28 Credit Agreement, dated December 4, 1996, among Media General,
Inc., and various lenders, incorporated by reference to
Exhibit 10.30 of Form 10-K dated December 27, 1998.
13 Media General, Inc., Annual Report to Stockholders for the
fiscal year ended December 26, 1999.
21 List of subsidiaries of the registrant.
23 Consent of Ernst & Young LLP, independent auditors.
27.1 1999 Financial Data Schedule.
15
<PAGE>
27.2 1998 Restated Financial Data Schedule.
27.3 1997 Restated Financial Data Schedule.
Note: Exhibits 10.1 - 10.19 are management contracts or
compensatory plans, contracts or arrangements.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 23, 2000
/s/ J. Stewart Bryan III
-----------------------------------------------
J. Stewart Bryan III, Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Marshall N. Morton Senior Vice President and March 23, 2000
- ------------------------------------ Chief Financial Officer and Director
Marshall N. Morton
/s/ Stephen Y. Dickinson Controller March 23, 2000
- ------------------------------------
Stephen Y. Dickinson
/s/ Robert P. Black Director March 23, 2000
- ------------------------------------
Robert P. Black
/s/ Charles A. Davis Director March 23, 2000
- ------------------------------------
Charles A. Davis
/s/ Robert V. Hatcher, Jr. Director March 23, 2000
- ------------------------------------
Robert V. Hatcher, Jr.
/s/ John G. Medlin, Jr. Director March 23, 2000
- ------------------------------------
John G. Medlin, Jr.
/s/ Roger H. Mudd Director March 23, 2000
- ------------------------------------
Roger H. Mudd
/s/ Wyndham Robertson Director March 23, 2000
- ------------------------------------
Wyndham Robertson
/s/ Henry L. Valentine, II Director March 23, 2000
- ------------------------------------
Henry L. Valentine, II
</TABLE>
17
<PAGE>
Exhibit 13
Media General, Inc.
Operating Locations
. PUBLISHING
Virginia
Richmond Times-Dispatch
Bristol Herald Courier
The (Lynchburg) News & Advance
The (Charlottesville) Daily Progress
Potomac (Woodbridge) News
Danville Register & Bee
The (Waynesboro) News Virginian
Manassas Journal Messenger
Culpeper Star-Exponent
Suffolk News-Herald
Virginia Business Magazine, Richmond
Media General Financial Services, Richmond
North Carolina
Winston-Salem Journal
(Concord & Kannapolis) Independent Tribune
Hickory Daily Record
Statesville Record & Landmark
The (Morganton) News Herald
The Reidsville Review
The (Eden) Daily News
The (Marion) McDowell News
Florida
The Tampa Tribune
(Sebring) Highlands Today
(Brooksville) Hernando Today
Colorado
The Denver Post (20% ownership)
District of Columbia
Media General News Service
Media General also owns nearly
100 weeklies and other periodicals
. BROADCAST TELEVISION
WIAT-CBS, Birmingham, Ala.
WKRG-CBS, Mobile, Ala.,
Pensacola, Fla.*
WJWB-WB, Jacksonville, Fla.
WMBB-ABC, Panama City, Fla.*
WFLA-NBC, Tampa, Fla.
WJBF-ABC, Augusta, Ga.*
WRBL-CBS, Columbus, Ga.*
WSAV-NBC, Savannah, Ga.
WNEG-CBS, Toccoa, Ga.*
KIMT-CBS, Mason City, Iowa*
KBSD-CBS, Dodge City, Kan.*
KBSL-CBS, Goodland, Kan.*
KBSH-CBS, Hays, Kan.*
KWCH-CBS, Wichita, Kan.*
WTVQ-ABC, Lexington, Ky.
KALB-NBC, Alexandria, La.
WHLT-CBS, Hattiesburg, Miss.
WJTV-CBS, Jackson, Miss.
WNCT-CBS, Greenville, N.C.
WASV-UPN, Anderson, S.C.,
Asheville, N.C.*
WCBD-NBC, Charleston, S.C.
WBTW-CBS, Florence, S.C.,
Myrtle Beach, S.C.*
WSPA-CBS, Greenville, S.C.,
Spartanburg, S.C.*
WDEF-CBS, Chattanooga, Tenn.
WJHL-CBS, Johnson City, Tenn.
WSLS-NBC, Roanoke, Va.
Professional Communications
Systems, Tampa, Fla.
. NEWSPRINT
Garden State Paper Company, Inc.,
Garfield, N.J.
SP Newsprint Company,
(33% ownership), Dublin, Ga.,
Newberg, Ore.
* Acquisition pending
Page 3
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended
-------------------------------------------------------
December 26, December 27, December 28,
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 795,408 $ 816,936 $ 756,685
Operating costs:
Production 386,987 399,396 381,815
Selling, distribution and administrative 218,535 216,461 205,347
Depreciation and amortization 79,520 75,789 72,184
- -------------------------------------------------------------------------------------------------------------------------
Total operating costs 685,042 691,646 659,346
- -------------------------------------------------------------------------------------------------------------------------
Operating income 110,366 125,290 97,339
- -------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (46,554) (62,584) (60,691)
Investment income - unconsolidated affiliates 9,067 22,193 21,037
Gain on sale of Denver Newspapers, Inc. common stock 30,983 -- --
Other, net 11,548 (980) 1,270
- -------------------------------------------------------------------------------------------------------------------------
Total other income (expense) 5,044 (41,371) (38,384)
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income
taxes and extraordinary item 115,410 83,919 58,955
Income taxes 45,463 30,482 23,370
- -------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before extra-
ordinary item 69,947 53,437 35,585
Discontinued operations:
Income from operations of Cable Segment (net of
income taxes of $8,544 in 1999; $9,819 in 1998;
and $10,427 in 1997) 13,978 17,437 16,925
Gain on disposition of Cable operations (net of
income taxes of $509,760) 798,719 -- --
Extraordinary item from early redemption of debt (net of
income tax benefit of $800 in 1999; $38,613 in 1997) (1,328) -- (63,000)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 881,316 $ 70,874 $ (10,490)
=========================================================================================================================
Earnings (loss) per common share:
Income from continuing operations before
extraordinary item $ 2.64 $ 2.01 $ 1.35
Income from discontinued Cable operations 30.66 0.66 0.64
Extraordinary item (0.05) -- (2.39)
-------------------------------------------------------
Net income (loss) $ 33.25 $ 2.67 $ (0.40)
=======================================================
Earnings (loss) per common share - assuming dilution:
Income from continuing operations before
extraordinary item $ 2.60 $ 1.98 $ 1.33
Income from discontinued Cable operations 30.23 0.65 0.64
Extraordinary item (0.05) -- (2.37)
-------------------------------------------------------
Net income (loss) $ 32.78 $ 2.63 $ (0.40)
=======================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 24.
Page 19
<PAGE>
Media General, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
ASSETS
December 26, December 27,
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash, cash equivalents and short-term investments $ 646,046 $ 7,637
Accounts receivable (less allowance for doubtful
accounts 1999 - $7,088; 1998 - $8,433) 102,834 110,067
Inventories 14,282 20,341
Other 33,572 38,181
----------------- -----------------
Total current assets 796,734 176,226
- -------------------------------------------------------------------------------------------------------------------------
Investments in unconsolidated affiliates 87,871 146,702
- -------------------------------------------------------------------------------------------------------------------------
Other assets 58,945 45,818
- -------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land 28,432 29,932
Buildings 164,384 167,332
Machinery and equipment 534,514 900,328
Construction in progress 10,749 13,659
Accumulated depreciation (356,603) (614,454)
----------------- -----------------
Net property, plant and equipment 381,476 496,797
- -------------------------------------------------------------------------------------------------------------------------
Excess of cost over fair value of net identifiable assets of acquired businesses
(less accumulated amortization
1999 - $58,553; 1998 - $41,490) 631,597 651,391
- -------------------------------------------------------------------------------------------------------------------------
FCC licenses and other intangibles (less accumulated
amortization 1999 - $51,657; 1998 - $34,829) 383,751 400,412
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,340,374 $ 1,917,346
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 24.
Page 20
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 32,032 $ 41,050
Accrued expenses and other liabilities 75,190 106,047
Income taxes payable 508,966 ---
Current maturity of long-term debt 13,000 ---
------------ ------------
Total current liabilities 629,188 147,097
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt 46,838 928,101
- -------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 217,437 244,968
- -------------------------------------------------------------------------------------------------------------------------
Other liabilities and deferred credits 116,009 119,831
- -------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 9)
- -------------------------------------------------------------------------------------------------------------------------
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
25,911,614 and 26,214,721 shares 129,558 131,074
Class B, authorized 600,000 shares; issued
556,574 shares 2,783 2,783
Additional paid-in capital 3,040 18,694
Accumulated other comprehensive income -
unrealized gains on equity securities 7,392 ---
Unearned compensation (2,973) (1,050)
Retained earnings 1,191,102 325,848
------------ ------------
Total stockholders' equity 1,330,902 477,349
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,340,374 $ 1,917,346
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 24.
Page 21
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except shares and per share amounts)
<TABLE>
<CAPTION>
Accu-
mulated
Addi- Other
tional Compre- Unearned
Common Stock Paid-in hensive Compen- Retained
--------------------
Total Class A Class B Capital Income sation Earnings
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 $ 437,240 $ 129,751 $ 2,783 $ 11,393 $ --- $ (1,254) $ 294,567
Net loss (10,490) --- --- --- --- --- (10,490)
Cash dividends ($0.53 per share) (14,129) --- --- --- --- --- (14,129)
Exercise of options on 131,024
Class A shares 2,646 655 --- 1,991 --- --- ---
Issuance of 91,000 Class A shares
under restricted stock plan --- 455 --- 2,406 --- (2,861) ---
Income tax benefits relating to
restricted share dividends and
exercised options 918 --- --- 918 --- --- ---
Issuance of 5,373 Class A shares
under dividend reinvestment plan 184 27 --- 157 --- --- ---
Amortization and forfeitures of
unearned compensation 1,857 (26) --- (132) --- 2,015 ---
----------- --------- ---------- ---------- ---------- ---------- -----------
Balance at December 28, 1997 418,226 130,862 2,783 16,733 --- (2,100) 269,948
- ---------------------------------------------------------------------------------------------------------------------------------
Net income 70,874 --- --- --- --- --- 70,874
Cash dividends ($0.56 per share) (14,974) --- --- --- --- --- (14,974)
Purchase and retirement of 77,011
Class A shares (3,571) (385) --- (3,186) --- --- ---
Exercise of options on 112,560
Class A shares 3,049 563 --- 2,486 --- --- ---
Income tax benefits relating to
restricted share dividends and
exercised options 2,406 --- --- 2,406 --- --- ---
Issuance of 6,748 Class A shares
under dividend reinvestment plan 289 34 --- 255 --- --- ---
Amortization of unearned
compensation 1,050 --- --- --- --- 1,050 ---
----------- --------- ---------- ---------- ---------- ---------- -----------
Balance at December 27, 1998 477,349 131,074 2,783 18,694 --- (1,050) 325,848
- ---------------------------------------------------------------------------------------------------------------------------------
Net income 881,316 --- --- --- --- --- 881,316
Unrealized gains on equity securities
(net of deferred taxes of $4,454) 7,392 --- --- --- 7,392 --- ---
-----------
Comprehensive income 888,708
Cash dividends ($0.60 per share) (16,062) --- --- --- --- --- (16,062)
Purchase and retirement of 580,456
Class A shares (26,448) (2,902) --- (23,546) --- --- ---
Exercise of options on 197,726
Class A shares 4,234 988 --- 3,246 --- --- ---
Issuance of 72,200 Class A shares
under restricted stock plan --- 361 --- 3,098 --- (3,459) ---
Income tax benefits relating to
restricted share dividends and
exercised options 1,227 --- --- 1,227 --- --- ---
Issuance of 7,423 Class A shares
under dividend reinvestment plan 358 37 --- 321 --- --- ---
Amortization of unearned compensation 1,536 --- --- --- --- 1,536 ---
----------- --------- ---------- ---------- ---------- ---------- -----------
Balance at December 26, 1999 $ 1,330,902 $ 129,558 $ 2,783 $ 3,040 $ 7,392 $ (2,973) $ 1,191,102
=================================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 24.
Page 22
<PAGE>
Media General, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------------
December 26, December 27, December 28,
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 881,316 $ 70,874 $ (10,490)
Adjustments to reconcile net income (loss):
Extraordinary item 1,328 -- 63,000
Depreciation and amortization 97,532 100,201 98,316
Deferred income taxes (5,484) (5,945) (4,227)
Provision for doubtful accounts 4,676 6,269 5,228
Investment income - unconsolidated affiliates (10,333) (22,193) (21,037)
Distribution from unconsolidated affiliates 30,372 7,700 2,700
Gain on sale of Denver Newspapers, Inc.
common stock (30,983) -- --
Gain on disposition of Cable operations (798,719) -- --
---------------- --------------- ---------------
Net cash provided by operations 169,705 156,906 133,490
Change in assets and liabilities:
Accounts receivable and inventories (6,317) (6,810) (13,074)
Other current assets (2,694) 15,986 14,392
Accounts payable, accrued expenses
and other liabilities (30,725) (14,774) (13,495)
Other, net (5,765) (11,044) (1,965)
---------------- --------------- ---------------
Net cash provided by operating activities 124,204 140,264 119,348
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (60,829) (49,480) (41,599)
Purchase of businesses (1997 - net of $476 million
of debt assumed) -- (132,680) (276,823)
Proceeds from disposition of Cable operations 1,404,407 -- --
Proceeds from sale of other businesses 8,058 28,123 147,267
Denver Newspapers, Inc.:
Proceeds from sale of common stock 39,000 -- --
Redemption of preferred stock 34,000 -- --
Purchase of short-term investments - net (390,748) -- --
Other, net (5,582) 2,924 (1,146)
---------------- --------------- ---------------
Net cash provided (used) by investing activities 1,028,306 (151,113) (172,301)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in debt 268,000 463,000 1,022,000
Payment of debt (1,136,509) (436,383) (874,000)
Stock repurchase (22,743) -- --
Premiums and costs related to early redemption of debt (2,128) -- (84,703)
Cash dividends paid (16,062) (14,974) (14,129)
Other, net 4,593 3,339 2,818
---------------- --------------- ---------------
Net cash (used) provided by financing activities (904,849) 14,982 51,986
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 247,661 4,133 (967)
Cash, cash equivalents and short-term investments:
Cash and cash equivalents at beginning of year 7,637 3,504 4,471
---------------- --------------- ---------------
Cash and cash equivalents at end of year 255,298 7,637 3,504
Short-term investments at end of year 390,748 -- --
---------------- --------------- ---------------
Cash, cash equivalents and short-term investments
at end of year $ 646,046 $ 7,637 $ 3,504
=========================================================================================================================
</TABLE>
Notes to Consolidated Financial Statements begin on page 24.
Page 23
<PAGE>
Media General, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Principles of Consolidation
The accompanying financial statements include the accounts of Media
General, Inc., and subsidiaries more than 50% owned (the Company). The Company's
fiscal year ends on the last Sunday in December. All significant intercompany
balances and transactions have been eliminated. See Note 9 for a summary of the
Company's accounting policies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. Certain
prior year financial information has been reclassified to conform with the
current year's presentation.
Note 2: Acquisitions, Dispositions and Discontinued Operations
In October 1999, the Company sold its cable operations to Cox
Communications, Inc., for approximately $1.4 billion in cash. The Company
recorded a gain of $799 million (net of income taxes of $510 million) which is
subject to resolution with the buyer of certain post-closing adjustments
relating to working capital and income tax matters. The following results of the
Cable Segment have been presented as income from discontinued operations in the
accompanying consolidated statements of operations:
<TABLE>
<CAPTION>
Nine Months
Ended Fiscal Year Ended
--------------------------------------------------------
September 30, December 27, December 28,
(In thousands) 1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 123,693 $ 157,042 $ 153,302
Costs and expenses 101,171 129,786 125,950
--------------------------------------------------------
Income before income taxes 22,522 27,256 27,352
Income taxes 8,544 9,819 10,427
--------------------------------------------------------
Income from discontinued Cable operations $ 13,978 $ 17,437 $ 16,925
========================================================
</TABLE>
Immediately following the sale, approximately $735 million of the proceeds
were used to repay all amounts then outstanding under the Company's revolving
credit agreements and to terminate the associated interest rate swaps (see Note
4) and the remaining proceeds of approximately $665 million were invested,
primarily in prime-rated commercial paper.
In January 1998, the Company acquired, for approximately $93 million, the
assets of the Bristol Herald Courier (Bristol), a daily newspaper in
southwestern Virginia, and two affiliated weekly newspapers. In July 1998, the
Company acquired, for approximately $40 million, the assets of the Hickory Daily
Record (Hickory), a daily newspaper in northwestern North Carolina. Both
transactions were accounted for as purchases and have been included in the
Company's consolidated results of operations since their respective dates of
acquisition. Purchase price has been allocated to the assets acquired based on
estimated fair values. The amount allocated to identifiable intangibles
(principally subscriber lists) was $8 million, to other assets, net (principally
property, plant and equipment) was $17 million, and to excess cost over the net
assets acquired was $108 million. Also, in June 1998, the Company completed the
sale of its Kentucky newspaper properties for approximately $24 million. The
Bristol and Hickory acquisitions were funded with borrowings under an existing
revolving credit facility (see Note 4), coupled with proceeds from the
disposition of the Kentucky newspaper properties. Assuming the acquisitions had
occurred at the beginning of the year, there would be no significant difference
between actual and pro forma results of operations.
In January 1997, the Company acquired Park Acquisitions, Inc., parent of
Park Communications, Inc. (Park). The acquisition included ten network
affiliated television stations, 28 daily newspapers and 82 weekly newspapers.
The total consideration approximated $715 million, representing the purchase of
all the issued and outstanding common stock of Park, the assumption of
liabilities (primarily $476 million of Park's high coupon long-term debt) and
transaction costs. In early February 1997, the Company redeemed Park's high
coupon debt and recorded an extraordinary charge of $63 million ($2.39 per
share, or $2.37 per share - assuming dilution), representing the debt prepayment
premium and the write-off of associated debt issuance costs, net of a $38.6
million tax benefit.
Page 24
<PAGE>
The acquisition and redemption were financed with borrowings under an
existing revolving credit facility (see Note 4). As intended, after the
acquisition the Company completed sales of certain of the former Park properties
for approximately $147 million and purchased new properties for approximately
$53 million. These purchases included the Potomac News (Woodbridge, Virginia) in
February 1997, and the Reidsville Review (Reidsville, North Carolina) and The
Messenger (Madison, North Carolina) in April 1997.
In order to comply with the Federal Communications Commission's requirement
that WTVR-TV be divested within one year of its January 1997 purchase date, in
August 1997, the Company completed the exchange of WTVR-TV (Richmond, Virginia)
for three other stations, WSAV-TV (Savannah, Georgia), WJTV-TV (Jackson,
Mississippi) and WHLT-TV (Hattiesburg, Mississippi). The new stations' results
of operations have been included in the Company's operations beginning with the
exchange date.
These acquisitions were also accounted for as purchases and the purchase
price was allocated to the assets acquired and liabilities assumed based upon
their estimated fair values. The amount allocated to FCC licenses and other
identifiable intangibles and to excess cost over the net assets acquired
relating to Park and the related sale, purchase, and exchange activities was
$415 million and $313 million, respectively. These amounts are being amortized
on a straight-line basis over periods ranging from 3 to 40 years. The results of
operations of these businesses, since their respective dates of acquisition,
have been included in the Company's consolidated results of operations.
In December 1999, the Company announced an agreement to acquire Spartan
Communications for approximately $605 million. Spartan owns and operates 12
network-affiliated stations and one UPN affiliate under a local marketing
agreement. This transaction is expected to close early in the second quarter of
2000. The acquisition will be included in the Company's results of operations
from the date of acquisition.
Note 3: Investments in Unconsolidated Affiliates
In June 1999, the Company sold 20% of the outstanding common stock of
Denver Newspapers, Inc. (DNI), the parent company of the Denver Post (a Colorado
daily newspaper), to MediaNews, Inc., for $39 million, resulting in a $19
million after-tax gain. Subsequently, DNI's name was changed to The Denver Post
Corporation (Denver). The Company still retains 20% ownership of the common
stock of Denver and, for the three year period ending June 2002, will share in
any realized appreciation in value of its previously owned 20% interest if that
stock is sold to a third party or publicly offered. Additionally, the Company's
preferred stock investment in Denver was redeemed in June 1999 for $34 million
plus $19.2 million of accrued but unpaid dividends. The Company recognizes its
share of Denver's net income applicable to common stockholders on a one month
lag. In 1997, Denver's net sales totaled $224.8 million while gross profit was
$111.3 million; net income was $19.4 million, of which $16.7 million was net
income applicable to common stock. The Company's equity in Denver's 1997 net
income amounted to $6.7 million.
The Company also has a one-third partnership interest in SP Newsprint
Company (SPNC), formerly Southeast Paper Manufacturing Company, a domestic
newsprint manufacturer which also pays licensing fees to the Company. In
November 1999, SPNC acquired Smurfit Newsprint Corporation's Newberg, Oregon
mill. Summarized financial information for the Company's investment in SPNC
accounted for by the equity method follows:
SP Newsprint Company:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 97,823 $ 79,434
Noncurrent assets 487,859 294,628
Current liabilities 52,336 66,946
Noncurrent liabilities 301,393 74,765
- ---------------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
Net sales $ 258,225 $ 255,248 $ 246,468
Gross profit 45,092 66,945 56,183
Net income 19,701 38,493 25,002
Company's equity in net income 6,567 12,831 8,334
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Page 25
<PAGE>
Other:
Retained earnings of the Company at December 26, 1999, included $23.9
million related to undistributed earnings of unconsolidated affiliates. During
1999, the Company invested approximately $2.5 million for a 7.14% ownership
interest in AdOne, L.L.P., a national online database of classified advertising,
which is being accounted for under the equity method.
Note 4: Long-Term Debt and Other Financial Instruments
Long-term debt at December 26, 1999, and December 27, 1998, was as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit facility $ -- $ 850,000
8.62% senior notes due annually from 2000 to 2002 39,000 52,000
7.125% revenue bonds due 2022 20,000 20,000
Bank lines -- 5,000
Capitalized leases 838 1,101
Less: current maturity of long-term debt (13,000) --
------------- ---------------
Long-term debt $ 46,838 $ 928,101
==============================================================================================================
</TABLE>
In December 1996, the Company entered into a seven-year revolving credit
facility committing a syndicate of banks to lend the Company up to $1.2 billion.
This facility has mandatory commitment reductions of 25% at the end of 2001 and
2002. Interest rates under the facility are typically based on the London
Interbank Offered Rate (LIBOR) plus a margin ranging from .225% to .75%, based
on the Company's debt to cash flow ratio (leverage ratio), as defined. Under
this facility, the Company pays commitment fees (.10% at December 26, 1999) on
the unused portion of the facility at a rate based on its leverage ratio. In
October 1999, the Company used proceeds from the sale of its cable operations
(see Note 2) to repay all amounts outstanding under its revolving credit
agreements. The associated interest rate swap agreements covering $725 million
of that debt, representing all of the Company's swap agreements, were terminated
as well, resulting in an extraordinary charge of $1.3 million ($0.05 per share,
both basic and assuming dilution), net of a $.8 million tax benefit.
In 1992, the Company issued $20 million of New Jersey Economic Development
Authority tax-exempt revenue bonds. The bonds are secured by a letter of credit,
under which the Company pays an annual fee equal to .125% plus a margin (.30% at
December 26, 1999) based on the Company's leverage ratio. The bonds contain
certain optional and mandatory redemption provisions, and the bond proceeds were
restricted for capital expenditures related to the Company's Garden State Paper
newsprint operations in New Jersey.
The Company's debt covenants contain a minimum net worth requirement
($405.5 million at December 26, 1999), and require the maintenance of an
interest coverage ratio and a leverage ratio, as defined. Long-term debt
maturities during the five years subsequent to December 26, 1999, aggregating
$39.8 million, are as follows: 2000 - $13 million; 2001 - $13.3 million; 2002 -
$13.2 million; 2003 - $.2 million; 2004 - $.1 million.
At December 27, 1998, the Company had borrowings of $5 million from bank
lines and $13 million of senior notes due within one year classified as
long-term debt in accordance with the Company's intention and ability to
refinance these obligations on a long-term basis under existing facilities. The
interest rate on the bank lines was 5.04% at December 27, 1998.
In June 1998 Statement of Financial Accounting Standard (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, was issued; it is
effective for fiscal years beginning after June 15, 2000, under the provisions
of its amendment, SFAS No. 137, Deferral of the Effective Date of FASB Statement
No. 133. When adopted by the Company, any derivatives that the Company then had
would be recognized on the balance sheet at fair value. Derivatives that were
not hedges would be adjusted to fair value through income. If a derivative was a
hedge, depending upon the nature of the hedge, a change in its fair value would
either be offset against the change in the fair value of the hedged assets,
liabilities, or firm commitments through earnings, or be recognized in other
comprehensive income until the hedged item was recognized in earnings.
Page 26
<PAGE>
The table below includes information about the carrying values and
estimated fair values of the Company's financial instruments:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in Denver Preferred Stock (Note 3) $ --- $ --- $ 52,702 $ 53,953
Investment in Hoover's, Inc. 19,378 19,378 4,567 7,120
Investment in ReacTV 1,270 1,270 --- ---
Liabilities:
Long-term debt:
Revolving credit facility --- --- 850,000 850,000
8.62% senior notes 39,000 39,696 52,000 54,057
7.125% revenue bonds 20,000 21,023 20,000 22,287
Bank lines --- --- 5,000 5,000
Interest rate swap agreements --- --- --- 26,784
- ------------------------------------------------------------------------------------------------------
</TABLE>
In 1998, the fair value of the Company's investment in Denver Preferred
Stock, which was not publicly traded, was estimated by discounting expected
future cash flows using a current market rate applicable to the yield, credit
quality and maturity of the investment. In July 1999, Hoover's sold stock to the
public and began trading on the NASDAQ stock exchange resulting in a readily
determinable value of its stock. Under the provisions of SFAS No. 115,
Accounting For Certain Investments in Debt and Equity Securities, the Company's
investment in Hoover's was classified as available-for-sale and carried at fair
value, with unrealized gains, net of tax, reported as a separate component of
stockholders' equity. In 1998, the fair value of the Company's investment in
Hoover's, which was not publicly traded at that time, was based on prices
recently paid for shares of the company. The Company's investment in ReacTV
approximates its fair value. In 1998, the fair values of the interest rate swaps
were based on the estimated amounts the Company would have received or paid to
terminate the swaps. Fair values of the Company's long-term debt were estimated,
in both years, using discounted cash flow analyses based on the Company's
incremental borrowing rates for similar types of borrowings. In 1998, the
borrowings under the Company's revolving credit facility and bank lines
approximated their fair value.
Note 5: Business Segments
The Company, located primarily in the southeastern United States, is a
diversified communications company which has three business segments:
Publishing, Broadcast Television and Newsprint. The Publishing Segment, the
Company's largest based on revenue and segment profit, includes 21 daily
newspapers and nearly 100 weekly newspapers and other publications, its online
financial data service, the Company's 20% interest in Denver, as well as the
Company's 7% interest in AdOne. The Broadcast Television Segment consists of 13
network-affiliated broadcast television stations and a provider of equipment and
studio design services. A wholly owned mill, as well as the Company's 33%
interest in SP Newsprint Company, comprise the Newsprint Segment which produces
recycled newsprint for sale primarily to publishers. In October 1999 the Company
sold its Cable Television Segment (see Note 2).
Management measures segment performance based on operating cash flow
(operating income plus depreciation and amortization) as well as profit or loss
from operations before interest, income taxes, and acquisition related
amortization. Amortization of the excess of cost over fair value of net
identifiable assets, as well as FCC licenses and other intangibles, is not
allocated to individual segments although the intangible assets themselves are
included in identifiable assets for each segment. Investments in the Denver Post
Corporation, AdOne and SP Newsprint Company are included in corporate assets
although the equity income is included in the applicable Publishing or Newsprint
Segment. Intercompany sales are accounted for at current market prices and are
eliminated in the consolidated financial statements. The Company's reportable
segments, which are managed separately, are strategic business enterprises that
provide distinct products and services using diverse technology and production
processes.
Page 27
<PAGE>
Information by segment is as follows:
<TABLE>
<CAPTION>
Broadcast
(In thousands) Publishing Television Newsprint Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Consolidated revenues * $ 524,017 $ 168,885 $ 102,506 $ 795,408
=========================================================
Segment operating cash flow $ 174,929 $ 47,854 $ (6,223) $ 216,560
Allocated amounts:
Equity in net income of
unconsolidated affiliates (673) 6,567 5,894
License fees from unconsolidated affiliate 529 529
Depreciation and amortization (24,617) (10,542) (7,079) (42,238)
---------------------------------------------------------
Segment profit $ 149,639 $ 37,312 $ (6,206) 180,745
==========================================
Unallocated amounts:
Interest expense (46,554)
Acquisition intangible amortization (33,934)
Corporate expenses (29,932)
Gain on sale of Denver Newspapers, Inc.
common stock 30,983
Other 14,102
----------
Consolidated income from continuing operations
before taxes and extraordinary item $ 115,410
==========
Segment assets $ 788,625 $ 670,612 $ 91,272 $1,550,509
Corporate assets 789,865
----------
Consolidated assets $2,340,374
==========
Segment capital expenditures $ 12,570 $ 14,389 $ 10,779 $ 37,738
Discontinued Cable capital expenditures 20,123
Corporate capital expenditures 2,968
----------
Consolidated capital expenditures $ 60,829
==========
- ----------------------------------------------------------------------------------------------------------------
1998
Consolidated revenues * $ 517,880 $ 170,797 $ 128,259 $ 816,936
=========================================================
Segment operating cash flow $ 155,452 $ 51,318 $ 18,825 $ 225,595
Allocated amounts:
Equity in net income of
unconsolidated affiliates 3,226 12,831 16,057
License fees from unconsolidated affiliate 944 944
Depreciation and amortization (23,627) (9,311) (6,734) (39,672)
---------------------------------------------------------
Segment profit $ 135,051 $ 42,007 $ 25,866 202,924
=========================================
Unallocated amounts:
Interest expense (62,584)
Acquisition intangible amortization (34,111)
Corporate expenses (24,462)
Other 2,152
---------
Consolidated income from continuing
operations before taxes $ 83,919
==========
Segment assets $ 809,803 $ 691,787 $ 86,717 $1,588,307
Discontinued Cable assets 129,820
Corporate assets 199,219
----------
Consolidated assets $1,917,346
==========
Segment capital expenditures $ 11,534 $ 10,061 $ 10,043 $ 31,638
Discontinued Cable capital expenditures 16,022
Corporate capital expenditures 1,820
----------
Consolidated capital expenditures $ 49,480
==========
</TABLE>
Page 28
<PAGE>
<TABLE>
<CAPTION>
Broadcast
(In thousands) Publishing Television Newsprint Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Consolidated revenues * $ 485,594 $ 156,315 $ 114,776 $ 756,685
=========================================================
Segment operating cash flow $ 139,357 $ 49,099 $ 2,734 $ 191,190
Allocated amounts:
Equity in net income of
unconsolidated affiliates 6,695 8,334 15,029
License fees from unconsolidated affiliate 720 720
Depreciation and amortization (24,187) (9,066) (6,249) (39,502)
---------------------------------------------------------
Segment profit $ 121,865 $ 40,033 $ 5,539 167,437
=========================================
Unallocated amounts:
Interest expense (60,691)
Acquisition intangible amortization (30,965)
Corporate expenses (19,701)
Other 2,875
----------
Consolidated income from continuing operations
before taxes and extraordinary item $ 58,955
==========
Segment assets $ 713,375 $ 700,767 $ 85,671 $1,499,813
Discontinued Cable assets 137,706
Corporate assets 176,682
----------
Consolidated assets $1,814,201
==========
Segment capital expenditures $ 10,417 $ 9,203 $ 7,920 $ 27,540
Discontinued Cable capital expenditures 13,067
Corporate capital expenditures 992
----------
Consolidated capital expenditures $ 41,599
==========
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Intercompany revenues are less than 1% of consolidated revenues and have been
eliminated.
The substantial increase in assets attributable to Corporate during 1999 is
primarily due to short-term investments which are a direct result of the
disposition of the Company's Cable operations.
Note 6: Taxes on Income
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this "liability" method, deferred tax
liabilities and assets are determined based on the temporary differences between
the financial statement and tax bases of assets and liabilities by applying
enacted statutory tax rates applicable to future years in which the differences
are expected to reverse.
The Company's federal income tax returns through fiscal year 1996 have been
examined by the Internal Revenue Service; tax returns for years prior to 1994
have been examined and closed. The Company has reached an agreement with respect
to all adjustments proposed by the Internal Revenue Service in connection with
its examination of the Company's returns for fiscal years 1994-96 and awaits a
final determination. Various state tax returns are currently under examination
by state tax authorities. The results of these examinations are not expected to
be material to the Company's results of operations, financial position or cash
flows.
Page 29
<PAGE>
Significant components of income taxes from continuing operations are as
follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 41,897 $ 27,488 $ 21,093
State 5,931 6,209 3,962
--------- --------- ---------
47,828 33,697 25,055
--------- --------- ---------
Deferred:
Federal (2,150) (2,836) (1,450)
State (215) (379) (235)
--------- --------- ---------
(2,365) (3,215) (1,685)
--------- --------- ---------
$ 45,463 $ 30,482 $ 23,370
==========================================================================
</TABLE>
Temporary differences which give rise to significant components of the
Company's deferred tax liabilities and assets at December 26, 1999, and December
27, 1998, are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Difference between book and tax bases of intangible assets $ 155,770 $ 155,386
Tax over book depreciation 88,508 117,505
Other 17,414 17,743
---------- ----------
Total deferred tax liabilities 261,692 290,634
---------- ----------
Deferred tax assets:
Employee benefits (36,918) (39,469)
Other (15,542) (17,377)
---------- ----------
Total deferred tax assets (52,460) (56,846)
---------- ----------
Deferred tax liabilities, net 209,232 233,788
Deferred tax assets included in other current assets 8,205 11,180
---------- ----------
Deferred tax liabilities $ 217,437 $ 244,968
====================================================================================================
</TABLE>
Reconciliation of income taxes computed at the federal statutory tax rate
to actual income tax expense from continuing operations is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at federal statutory tax rate $ 40,393 $ 29,371 $ 20,635
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal income tax benefit 3,714 3,747 2,327
Investment income - unconsolidated affiliates (397) (2,622) (3,557)
Amortization of excess cost (goodwill) 2,815 2,960 2,873
Life insurance plans (1,139) (1,905) (1,625)
Other 77 (1,069) 2,717
---------- ---------- ----------
$ 45,463 $ 30,482 $ 23,370
======================================================================================================
</TABLE>
Net of refunds, in 1999, 1998 and 1997, the Company paid income taxes of
$52.1 million, $56.5 million and $29.4 million, respectively.
Page 30
<PAGE>
Note 7: Common Stock and Stock Options
Holders of the Class A common stock are entitled to elect 30% of the Board
of Directors and, with the holders of Class B common stock, also are entitled to
vote on the reservation of shares for stock awards and on certain specified
types of major corporate reorganizations or acquisitions. Class B common stock
can be converted into Class A common stock on a share-for-share basis at the
option of the holder. Both classes of common stock receive the same dividends
per share.
Each non-employee member of the Board of Directors of the Company
participates in the Directors' Deferred Compensation Plan. The plan provides
that each non-employee Director shall receive half of his or her annual
compensation for services to the Board in the form of Deferred Stock Units
(DSU); each Director additionally may elect to receive the balance of his or her
compensation in cash or DSU. Other than dividend credits, deferred stock units
do not entitle Directors to any rights due to a holder of common stock. DSU
account balances may be settled as of the Director's retirement date by a cash
lump-sum payment, a single distribution of common stock, or annual installments
of either cash or common stock over a period of up to ten years. Expense
recognized in 1999, 1998 and 1997 under the plan was $456,000, $550,000 and
$550,000.
Stock-based awards are granted to key employees in the form of nonqualified
stock options and restricted stock under the 1995 Long-Term Incentive Plan
(LTIP). The plan is administered by the Compensation Committee of the Board of
Directors. Grant prices of stock options are determined by the Committee and
shall not be less than the fair market value on the date of grant. Options are
exercisable during the continued employment of the optionee but not for a period
greater than ten years and not for a period greater than one year after
termination of employment, and they become exercisable at the rate of one-third
each year from the date of grant. Restricted stock is awarded in the name of
each of the participants; these shares have all the rights of other Class A
shares, subject to certain restriction and forfeiture provisions. In 1999,
72,200 shares were granted under terms of the plan. Restrictions on the shares
expire no more than ten years after the date of award, or earlier if
pre-established performance targets are met. The pre-established performance
targets were met for the 1997 award and the 89,000 shares outstanding under that
award will have the restrictions lifted in the first quarter of 2000. The plan
will continue until terminated by the Company.
Options to purchase Class A common stock were granted to key employees
under the 1976 and 1987 nonqualified stock option plans prior to the 1995 LTIP.
The Company will not make any future awards under these plans and past awards
are not affected. Options outstanding under the plans are exercisable during the
continued employment of the optionee, but not for a period greater than ten
years after the date of grant for options granted subsequent to the 1991
amendment to the 1987 plan and for a period of not greater than three years
after termination of employment.
Restricted shares of the Company's Class A common stock were granted to
certain key employees under the 1991 restricted stock plan. The Company will not
make any future awards under the plan and past awards are not affected. At
December 26, 1999, 25,644 shares granted in 1995 remain restricted under the
terms of the plan. Shares were awarded in the name of each of the participants;
these shares have all the rights of other Class A shares, subject to certain
restrictions and forfeiture provisions. Restrictions on the shares expire no
more than ten years after the date of the award, or earlier if certain
performance targets are met.
Unearned compensation was recorded at the date of the restricted stock
awards based on the market value of the shares. Unearned compensation, which is
shown as a separate component of stockholders' equity, is being amortized to
expense over a vesting period (not exceeding ten years) based upon expectations
of meeting certain performance targets. The amount amortized to expense in 1999,
1998 and 1997 was $1.5 million, $1.0 million and $1.8 million, respectively.
The Company entered into a stock redemption agreement in 1985, which was
amended in 1988 and 1994, with the late D. Tennant Bryan, former Chairman
Emeritus of the Company. In June 1999, the estate of D. Tennant Bryan exercised
its option under the 1994 stock redemption agreement to sell to the Company 15%
of Mr. Bryan's ownership in Media General Class A Stock at the time of his
death. This exercise resulted in the Company's purchase of 326,897 shares from
the estate, at a 10% discount from average stock price, for $13.6 million.
Additionally, in December 1999, the Board of Directors authorized a program to
repurchase up to $250 million of the Company's Class A common stock. As of
December 26, 1999, 253,200 shares had been repurchased at a cost of $12.8
million; the program will continue in 2000.
The following information is provided solely in connection with the
disclosure requirements of SFAS No. 123, Accounting for Stock-Based
Compensation. If the Company had elected to recognize compensation cost related
to its stock options granted in 1999, 1998 and 1997 in accordance with the
provisions of SFAS No. 123, earnings per share would have declined $0.05 ($0.07
assuming dilution), $0.05 ($0.04 assuming dilution) and $0.03 in 1999, 1998 and
1997, and pro forma net income (loss) and earnings (loss) per share would have
been $880,052,000, $69,730,000 and ($11,452,000); and $33.20 ($32.73 assuming
dilution), $2.62 ($2.59 assuming dilution) and ($0.43), respectively (per share
amounts assuming dilution are identical unless otherwise indicated). The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1999,
1998 and 1997, respectively: risk-free interest rates of 4.72%, 5.61% and 6.54%;
dividend yields of 1.31%, 1.45% and 1.57%; volatility factors of .293, .287 and
.287; and an expected life of 8 years.
Page 31
<PAGE>
A summary of the Company's stock option activity, and related information
for the years ended December 26, 1999, December 27, 1998 and December 28, 1997
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ------------------------ -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 1,056,203 $ 28.96 1,049,097 $ 26.68 1,066,722 $ 25.59
Granted 136,000 47.91 122,000 46.38 144,500 31.44
Exercised (197,726) 21.42 (112,560) 27.08 (131,024) 20.20
Forfeited (7,704) 43.90 (2,334) 6.64 (31,101) 38.60
------------- ------------- -------------
Outstanding-end of year 986,773 32.96 1,056,203 28.96 1,049,097 26.68
------------- ------------- -------------
Price range at end of year $ 2 to $48 $ 2 to $46 $ 2 to $46
Price range for exercised shares $ 2 to $48 $ 2 to $46 $ 2 to $32
Available for grant at end of year 467,100 603,100 725,100
Exercisable at end of year 749,558 799,388 789,300
Weighted-average fair value of
options granted during the year $ 17.82 $ 17.68 $ 12.47
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding
at December 26, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------------- ---------------------------------
Range of Weighted-Average
Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.50 13,100 * $ 2.50 13,100 $ 2.50
15.75 10,000 ** 15.75 10,000 15.75
18.81-20.19 171,600 2 years 19.35 171,600 19.35
27.63-31.81 422,805 6 years 29.93 380,719 29.77
32.50-47.91 369,268 *** 44.31 174,139 40.92
--------- ---------
2.50-47.91 986,773 32.96 749,558 29.31
========= =========
</TABLE>
(*) Exercisable during lifetime of optionee
(**) Exercisable during the continued employment of the optionee and for a
three-year period thereafter
(***) Exercisable during the continued employment of the optionee and for a
three-year period thereafter with the exception of 122,000 options which
were issued on 1/28/98 for $46.38 with a remaining contractual life of
eight years and 136,000 options which were issued on 1/28/99 for $47.91
with a remaining contractual life of nine years
Page 32
<PAGE>
Note 8: Retirement Plans
The Company has non-contributory defined benefit retirement plans which
cover substantially all employees, and non-contributory unfunded supplemental
executive retirement and ERISA excess plans which supplement the coverage
available to certain executives. The Company also provides certain health and
life insurance benefits for retired employees. The union employees at the
Company's wholly owned newsprint mill participate in multi-employer defined
benefit and defined contribution pension plans. The previously mentioned plans
are collectively referred to as the "Plans."
The assumptions used in the measurement of the Company's benefit obligation
are shown as follows:
<TABLE>
<CAPTION>
Weighted-average assumptions Pension Benefits Other Benefits
-------------------------- ----------------------
at end of year 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 10.50 10.50 -- --
Rate of compensation increase 4.75 3.75 4.75 3.75
</TABLE>
For measurement purposes, an 8.25% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually each year to a rate of 4.25% for 2007 and remain
at that level thereafter.
With the passage of time, actual experience differs from the assumptions
used in determining the Company's pension and postretirement benefit
obligations. These differences, coupled with external economic factors, cause
periodic revision of the assumptions. The effects of actual versus assumed
experience, as well as changes in assumptions, give rise to actuarial gains and
losses in the table that follows. These actuarial gains and losses represent
both better than expected return on plan assets and other changes in assumptions
and are recognized over the expected service period of active participants.
The following table provides a reconciliation of the changes in the
non-union Plans' benefit obligations and fair value of assets over the periods
ended December 26, 1999, and December 27, 1998, and a statement of the funded
status at December 26, 1999, and December 27, 1998:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------- -----------------------------
(In thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 220,157 $ 198,792 $ 32,648 $ 32,705
Service cost 7,618 6,469 462 469
Interest cost 15,053 14,906 2,215 2,214
Participant contributions --- --- 279 290
Actuarial (gain)/loss (22,576) 11,042 (1,618) (365)
Curtailment (2,099) --- --- ---
Benefit payments (11,242) (11,052) (1,901) (2,665)
---------- --------- ----------- -----------
Benefit obligation at end of year 206,911 220,157 32,085 32,648
---------- --------- ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 240,162 216,205 --- ---
Actual return on plan assets 9,365 33,792 --- ---
Employer contributions 1,286 1,217 --- ---
Benefit payments (11,242) (11,052) --- ---
---------- --------- ----------- -----------
Fair value of plan assets at end of year 239,571 240,162 --- ---
---------- --------- ----------- -----------
Funded status:
Plan assets greater than/(less than) benefit
obligation 32,660 20,005 (32,085) (32,648)
Unrecognized transition asset (1,012) (1,718) --- ---
Unrecognized prior-service cost 2,786 5,509 --- ---
Unrecognized actuarial (gain)/loss (60,614) (51,744) 3,201 4,228
---------- --------- ----------- -----------
Accrued benefit cost $ (26,180) $ (27,948) $ (28,884) $ (28,420)
===============================================================================================================================
</TABLE>
Page 33
<PAGE>
The following table provides the components of net periodic benefit cost for the
Plans for fiscal years 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------------ -------------------------------
(In thousands) 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 7,618 $ 6,469 $ 5,767 $ 462 $ 469 $ 569
Interest cost 15,053 14,906 14,323 2,215 2,214 2,438
Expected return on plan assets (21,221) (19,285) (17,679) --- --- ---
Amortization of transition asset (706) (499) (499) --- --- ---
Amortization of prior-service cost 588 829 884 --- --- ---
Amortization of net (gain)/loss (53) 2 (261) 114 --- 124
Multi-employer plans expense 621 589 678 --- --- ---
-------- --------- --------- --------- --------- --------
Net periodic benefit cost $ 1,900 $ 3,011 $ 3,213 $ 2,791 $ 2,683 $ 3,131
===========================================================================================================================
</TABLE>
The Company recorded a $1.8 million curtailment gain in 1999 as a result of
the sale of its Cable operations, which was included in the gain on disposal of
that segment.
The Company's policy is to fund benefits under the supplemental executive
retirement, excess, and postretirement benefits plans as claims and premiums are
paid. As of December 26, 1999, and December 27, 1998, the benefit obligation
related to the supplemental executive retirement and ERISA excess plans included
in the preceding tables was $24.7 million and $21.1 million, respectively.
Assumed health care cost rates have an effect on the amounts reported for
the health care plans. A one percent change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
(In thousands) 1% Increase 1% Decrease
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost $ 95 $ (88)
Effect on the health care component of the accumulated
postretirement benefit obligation 1,325 (1,226)
</TABLE>
The Company also sponsors a thrift plan covering substantially all
employees. Company contributions represent a partial matching of participant
contributions up to a maximum of 3.3% of the employee's salary. Contributions
charged to expense under the plan were $5.5 million, $5.0 million and $4.5
million in 1999, 1998 and 1997, respectively.
Note 9: Other
Revenue recognition
Advertising revenue is recognized when advertisements are published or
aired, or when related advertising services are rendered. Subscription revenue
is recognized on a pro-rata basis over the term of the subscription. Newsprint
revenue is recognized upon shipment of newsprint.
Depreciation and amortization
Plant and equipment are depreciated, primarily on a straight-line basis,
over their estimated useful lives which are generally 40 years for buildings and
range from 3 to 20 years for machinery and equipment. Depreciation deductions
are computed by accelerated methods for income tax purposes. Internal use
software is amortized on a straight-line basis over its estimated useful life,
not to exceed 5 years.
Excess of cost over fair value of net identifiable assets of acquired
businesses through 1970 (approximately $32 million) is not amortized unless
there is evidence of diminution in value; such excess cost incurred after 1970
is being amortized by the straight-line method over periods not exceeding 40
years. FCC licenses and other intangibles are being amortized by the
straight-line method over periods ranging from 3 to 40 years. Amortization of
the excess of cost over fair value of net identifiable assets of acquired
businesses and FCC licenses and other intangibles was $34.1 million, $34.3
million and $31.1 million in 1999, 1998 and 1997, respectively.
The Company periodically evaluates the carrying value of long-lived assets,
including intangible assets, to determine whether there are any impairment
losses. If indicators of impairment are present in long-lived assets used in
operations, and future cash flows are not expected to be sufficient to recover
the assets' carrying amount, an impairment loss would be charged to expense in
the period identified.
Interest
In 1999, 1998 and 1997, the Company's interest expense from continuing
operations was $46.6 million, $62.6 million and $60.7 million, respectively,
which is net of $1.5 million of interest costs capitalized for 1997. Interest
payments made during 1999, 1998 and 1997, net of amounts capitalized, were $50.9
million, $65.3 million and $62.2 million, respectively. In 1999, the Company
earned interest income of $9.4 million on investments primarily in prime-rated
commercial paper. This amount is included in Other, net on the Consolidated
Statements of Operations.
Page 34
<PAGE>
Cash, cash equivalents and short-term investments
Cash in excess of current operating needs is invested in various short-term
instruments carried at cost that approximates fair value. Those short-term
investments having an original maturity of three months or less are classified
in the balance sheet as cash equivalents.
Derivatives
From time to time the Company enters into interest rate swap agreements,
which are not held for trading purposes, to manage interest cost and risk
associated with variable interest rates. The Company uses the accrual method to
account for all interest rate swap agreements. Realized gains or losses on
termination of interest rate swaps, where the underlying debt has not been
terminated, are deferred and amortized over their remaining original terms as an
adjustment to interest expense. Amounts which are due to or from interest rate
swap counterparties are recorded as an adjustment to interest expense in the
periods in which they accrue.
Inventories
Inventories, principally raw materials, are valued at the lower of cost or
market. The cost of raw material used in the production of newsprint is
determined on the basis of average cost. The cost of newsprint inventories is
determined on the first-in, first-out method.
Other current assets
Other current assets included program rights of $13.6 million and $12.6
million at December 26, 1999, and December 27, 1998, respectively.
Accrued expenses and other liabilities
Accrued expenses and other liabilities consisted of the following:
(In thousands) 1999 1998
- --------------------------------------------------------------------
Payroll $ 15,355 $ 21,577
Program rights 12,839 20,317
Unearned revenue 14,566 19,691
Other 32,430 44,462
------------- ---------
Total $ 75,190 $ 106,047
====================================================================
Lease obligations
The Company rents certain facilities and equipment under operating leases.
These leases extend for varying periods of time ranging from one year to more
than twenty years and in many cases contain renewal options. Total rental
expense amounted to $15.6 million in 1999, $14.2 million in 1998 and $12.3
million in 1997. Minimum rental commitments under operating leases with
noncancelable terms in excess of one year are as follows: 2000 - $10.5 million;
2001 - $9.1 million; 2002 - $8.5 million; 2003 - $4.9 million; 2004 - $3.8
million; subsequent years - $11.4 million.
Concentrations of credit risk
Media General is a diversified communications company which sells products
and services to a wide variety of customers located principally in the eastern
United States. The Company's trade receivables result primarily from its
publishing, broadcast television and newsprint operations. The Company routinely
assesses the financial strength of significant customers, and this assessment,
combined with the large number and geographic diversity of its customer base,
limits its concentration of risk with respect to trade receivables.
Comprehensive Income
In 1999, the Company adopted SFAS No. 130, Reporting Comprehensive Income.
This statement requires presentation of comprehensive income and its components
in the financial statements (see Consolidated Statements of Stockholders'
Equity). The Company's comprehensive income consists of net income and
unrealized gains and losses on certain investments in equity securities.
Page 35
<PAGE>
Earnings per share
The following chart is a reconciliation of the numerators and the
denominators of the basic and diluted per-share computations for income from
continuing operations before extraordinary item, as presented in the
Consolidated Statements of Operations.
<TABLE>
<CAPTION>
(In thousands, except 1999 1998 1997
------------------------------------- ----------------------------------- ---------------------------------
per share amounts) Income Shares Per-Share Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ----------- ------ --------- ----------- ------ --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
Income from continuing
operations available
to common stock-
holders before
extraordinary item $ 69,947 26,506 $ 2.64 $ 53,437 26,579 $ 2.01 $ 35,585 26,353 $ 1.35
======= ====== ========
Effect of Dilutive
Securities
Stock options 253 245 169
Restricted stock
and other (34) 126 (17) 90 (37) 172
---------- ---------- ---------- ---------- --------- --------
Diluted EPS
Income from continuing
operations available
to common stock-
holders plus assumed
conversions before
extraordinary item $ 69,913 26,885 $ 2.60 $ 53,420 26,914 $ 1.98 $ 35,548 26,694 $ 1.33
================================== ================================== ================================
</TABLE>
Commitments and contingencies
Over the next six years the Company is committed to purchase approximately
$31.1 million of program rights which currently are not available for broadcast,
including programs not yet produced. If such programs are not produced the
Company's commitment would expire without obligation. Additionally, the Company
had commitments outstanding, at December 26, 1999, for capital expenditures
under purchase orders and contracts of approximately $8.9 million.
During 1997 and 1998, the Company entered into lease agreements whereby the
owner would construct and own real estate facilities at a cost of up to $100
million and lease the facilities to the Company for a term of up to 5 years. The
Company occupied a portion of the facilities in the second quarter of 1998, and
will occupy the remaining portion by the second quarter of 2000. The Company may
cancel the leases by purchasing or arranging for the sale of the facilities. The
Company has guaranteed recovery of a portion (88%) of the owner's cost. Such
cost approximated $86.9 million at December 26, 1999.
Page 36
<PAGE>
MEDIA GENERAL, INC., MANAGEMENT STATEMENT
Primary responsibility for the integrity and objectivity of the Company's
financial statements rests with Management. The financial statements report on
Management's stewardship of Company assets. They are prepared in conformity with
generally accepted accounting principles and accordingly include amounts that
are based on Management's informed estimates and judgments. Nonfinancial
information included in the annual report has also been prepared by Management
and is consistent with the financial statements.
Media General, Inc., maintains an accounting system and related controls
designed to provide reasonable assurance that there is proper authorization and
accounting for all transactions, that financial records are reliable for
preparing financial statements, and that assets are safeguarded against loss or
unauthorized use. The system is supported by written policies and guidelines, a
program of internal audit and the selection and training of qualified personnel.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, meets periodically with Management, internal auditors and the
independent auditors to review their respective activities and the discharge of
their responsibilities.
Media General operates under a strict Code of Ethics that all employees are
required to follow without exception. The Code requires ethical standards in all
of the Company's relationships, including those with customers, suppliers and
government agencies.
January 25, 2000
J. Stewart Bryan III Marshall N. Morton
Chairman, President and Chief Senior Vice President and Chief
Executive Officer Financial Officer
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders,
Media General, Inc.
We have audited the accompanying consolidated balance sheets of Media
General, Inc., as of December 26, 1999, and December 27, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three fiscal years in the period ended December 26, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Media General, Inc., at December 26, 1999, and December 27, 1998, and the
consolidated results of its operations and its cash flows for each of the three
fiscal years in the period ended December 26, 1999, in conformity with
accounting principles generally accepted in the United States.
January 25, 2000
Richmond, Virginia Ernst & Young LLP
Page 37
<PAGE>
MEDIA GENERAL, INC., FINANCIAL REVIEW AND MANAGEMENT ANALYSIS
This discussion addresses the principal factors affecting the Company's
operations during the past three years and should be read in conjunction with
the financial statements and the Ten-Year Financial Summary found in this
report.
OVERVIEW
The past three years have been marked by transition as the Company
advanced its mission of becoming a leading provider of high-quality news,
information and entertainment services in the Southeast. This initiative was
accomplished in part through strategic acquisitions and dispositions; however,
the Company continues to strengthen its regional presence through growth and
expansion of its existing businesses in their current markets, as well as by
entering into beneficial strategic alliances.
Since 1997, the Company has engaged in a series of acquisitions,
exchanges, investments and dispositions which have significantly increased its
penetration of southeastern households through the Company's chosen media of
newspapers, broadcast television and, more recently, the Internet. The growth of
the Company's southeastern presence was punctuated with the following events:
. January 1997, purchase of Park Communications, Inc. (Park), which was
followed by the subsequent sale of several non-southeastern Park properties
acquired in the transaction.
. February 1997, purchase of the Potomac News (Woodbridge, VA).
. April 1997, purchase of The Reidsville Review (Reidsville, NC) and The
Messenger (Madison, NC).
. August 1997, exchange of WTVR-TV (Richmond, VA), due to a Federal
Communications Commission regulation, for WSAV-TV (Savannah, GA), WJTV-TV
(Jackson, MS) and WHLT-TV (Hattiesburg, MS).
. September 1997, initial investment in Hoover's, Inc., a leading provider of
online financial information.
. January 1998, purchase of the Bristol Herald Courier (Bristol, VA).
. June 1998, sale of the Company's Kentucky newspaper properties.
. July 1998, purchase of the Hickory Daily Record (Hickory, NC).
. March 1999, additional investment in Hoover's, Inc.
. May 1999, sale of WHOA-TV (Montgomery, AL).
. June 1999, sale of 20% of the common stock of Denver Newspapers, Inc.
(Denver), resulting in a $19 million after-tax gain.
. August 1999, investment in AdOne, L.L.P., the leading online database of
classified advertising.
. October 1999, investment in ReacTV, an online service which features daily
postings of television newscasts linked to additional related news content.
. October 1999, disposition of the Cable Segment, resulting in a $799 million
after-tax gain.
. December 1999, announced a program to repurchase up to $250 million of the
Company's Class A common stock.
. December 1999, announced agreement to acquire Spartan Communications, Inc.
(Spartan) which is expected to close early in the second quarter of 2000.
The aforementioned transactions culminated in the Company's ownership
of 21 daily and nearly 100 weeklies and other periodicals, as well as, upon the
completion of the Spartan acquisition, ultimate ownership or operation of 26 (21
southeastern) television stations.
The Company's decision to sell its Cable Segment was influenced by the
rapidly moving trend toward consolidation within this specialized industry. The
sale of the Cable Segment, for approximately $1.4 billion in cash, resulted in a
gain of $799 million (net of income taxes of $510) which is subject to
resolution with the buyer of certain post-closing adjustments relating to
working capital and income tax matters. It is expected these post-closing items
will be resolved during the second quarter and could result in a small
additional gain for the Company.
The Cable sale allows the Company to focus its resources specifically
on those media segments, namely newspapers and broadcast television, where the
Company has achieved critical mass in the Southeast, as well as on the Internet,
where geographical distinctions are not as critical.
Page 38
<PAGE>
The purchase of Spartan, with its concentration of stations in the Southeast,
will be the first step. While the non-cash amortization associated with the
acquisition will initially lower net income, all of Spartan's 13 television
stations are ranked either number one or two in their markets and because of
their rankings, reputations and strong management, should immediately produce
strong cash flow for the Company. Additionally, the Company believes its stock
is trading at a discount to its true value and has initiated a program to
repurchase up to $250 million of the Company's Class A common stock. This
program will result in several million shares being repurchased and will temper
the effect of acquisitions on earnings per share. The Company continues to
evaluate opportunities to further its southeastern strategy.
RESULTS OF OPERATIONS
1999's results were heavily impacted by the one-time $799 million
after-tax gain resulting from the sale of the Company's Cable Segment, as well
as the $19 million after-tax gain generated from the sale of 20% of the common
stock of Denver. Additionally, the Company incurred a $1.3 million after-tax
extraordinary charge representing costs associated with the early redemption of
debt. Inclusive of these unique and nonrecurring items, net income for 1999 was
$881.3 ($33.25 per share, or $32.78 per share - assuming dilution). For the
year, income from continuing operations was $69.9 million ($2.64 per share, or
$2.60 per share - assuming dilution) compared with $53.4 million ($2.01 per
share, or $1.98 per share - assuming dilution) in 1998. This 31% increase was
fully attributable to the Denver gain. Absent this gain, a profit reversal (from
a profit of $26 million to a loss of $6 million) in the Newsprint Segment and,
to a much lesser degree, an 11% decrease in Broadcast Segment profits were only
partially offset by the combination of a solid year-over-year performance within
the Publishing Segment (up 11%), a 26% decline in interest expense due to
decreased debt, and $9.4 million of interest income attributable to the
investment of proceeds from the Cable Segment sale.
Excluding an extraordinary item in 1997, net income increased from
$52.5 million ($1.99 per share, or $1.97 per share - assuming dilution) in 1997
to $70.9 million ($2.67 per share, or $2.63 per share - assuming dilution) in
1998. The $63 million extraordinary charge, net of an income tax benefit of
$38.6 million, related to the redemption of Park's high coupon debt. The $18.4
million (35%) increase in net income was primarily due to robust Newsprint
Segment profits which rose to more than four times their 1997 level, combined
with solid contributions from the Publishing Segment which posted an 11% year-
over-year profit improvement. Partially offsetting the segment operating income
growth was a moderate increase in intangible amortization expense, a result of
the Bristol and Hickory acquisitions mentioned in the foregoing list, and in
Corporate expense, due to personnel and other costs related to the
implementation of new company-wide financial, benefit plan and human resource
information systems. The significant growth of the Company over the past several
years and the need for better information has occasioned these infrastructure
investments.
Publishing
Excluding investment income from unconsolidated affiliates, operating
income for the Publishing Segment increased $18.5 million (14%) in 1999 over the
comparable 1998 amount; $3.5 million of this increase was directly attributable
to acquisitions and dispositions occurring in those years. Excluding
acquisitions and dispositions, this robust performance was driven by an $11.8
million increase in revenues combined with a $3.2 million decrease in operating
expenses. The following three-year chart illustrates a strong increase in
general advertising and classified advertising revenues (both led by the
automotive category), which more than offset lackluster retail advertising
revenues (down in the grocery and department store categories in 1999).
Advertising Revenues by Category
<TABLE>
<CAPTION>
(in millions)
-------------------------------------------------
Retail Classified General
- --------------------------------------------------------
<S> <C> <C> <C>
1999 196 174 32
- --------------------------------------------------------
1998 201 166 25
- --------------------------------------------------------
1997 184 152 23
- --------------------------------------------------------
</TABLE>
Newsprint expense decreased 14% in 1999 from the prior year as a result
of lower cost per ton, but was partially offset by a 2% increase in employee
compensation and benefits expense due to enhanced employee benefit offerings.
In June 1999, the Company completed the sale of 20% of the outstanding
common stock of Denver Newspapers, Inc.; the Company retained a 20% ownership in
the common stock of Denver. Investment income earned from that affiliate
decreased $3.6 million (from income of $3.2 million in 1998 to a loss of $.4
million in 1999). These comparisons reflect the Company's 40% ownership in 1998,
versus its 20% ownership beginning June 30, 1999. The reduced income was
primarily attributable to increased circulation, production and newsprint
expense, which were only partially mitigated by a rise in both circulation and
advertising revenues, all the result of circulation gains in the intensely
competitive Colorado market.
Page 39
<PAGE>
Excluding investment income from unconsolidated affiliates, operating
income for the Publishing Segment increased $16.6 million (14%) in 1998 over the
comparable 1997 amount; $4.6 million of this increase was directly attributable
to acquisitions and dispositions occurring in those years. Excluding
acquisitions and dispositions, this good performance increase resulted from a
$22 million rise in revenues, partially offset by a $10 million increase in
operating expenses. This year-over-year revenue gain was the result of a strong
performance in classified advertising (led by the employment category) and
retail advertising (driven by preprints), as illustrated in the preceding chart.
Approximately half of the higher expense level was attributable to a 6.2% rise
in newsprint expense due to higher newsprint prices; other contributing factors
included a rise in marketing and promotion cost, an increase in facilities
expense, and increased cost associated with new niche products.
Income earned from Denver decreased $3.5 million in 1998 from 1997.
This reduced income was primarily attributable to increased newsprint costs,
principally due to higher prices. Additionally, increased advertising and
circulation revenues only partially offset the associated rise in promotion and
circulation expense in the extremely competitive Colorado market.
Broadcast Television
Broadcast operating income decreased $4.7 million in 1999, down 11%
from 1998. This decline was driven by a $1.9 million drop in revenues combined
with a $2.8 million increase in operating expenses. Throughout the industry,
advertising spending was severely hindered in 1999 by the lack of political
activity and the absence of advertising associated with an Olympic year. The
Company's largest station, WFLA in Tampa, bore the brunt of the impact from this
lack of political spending, while simultaneously suffering from a
<PAGE>
generally weak national advertising market. WFLA's 23% decline in operating
profits in 1999 more than accounted for the entire Segment's shortfall from the
prior year's level. An overall increase in operating expense at the Company's
remaining stations was more than offset by a corresponding rise in revenues
produced by these stations. Higher 1999 expense levels ensued as a result of
improved programming and higher employee compensation and benefits expense, as
the Company continued to invest in its smaller stations in an effort to improve
their audience shares. The Segment has begun to reap the benefits of its
endeavors as average annual demographic ratings reflected increased audience
share at seven of those stations. Excluding WFLA, the Company's remaining
stations posted a combined 1% increase in operating profits despite the
challenges posed by the combination of 1999 being an off-election and non-
Olympic year.
The following chart illustrates the revenues related to advertising
time sales at the Company's only large-market station, WFLA in Tampa, and the
smaller stations over the past three years. Local advertising steadily produced
higher year-over-year revenues at all stations, as did national advertising at
the smaller stations; however, WFLA continued to experience a depressed national
market. Additionally, political advertising revenues clearly suffered in off-
election years.
<PAGE>
Broadcast Segment Advertising Time Sales
<TABLE>
<CAPTION>
(in millions)
Local National Political
1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
WFLA 35 32 31 20 25 30 --- 3 1
- ------------------------------------------------------------------------------------------
Smaller Stations 63 58 53 41 36 35 2 7 1
- ------------------------------------------------------------------------------------------
</TABLE>
Broadcast operating income rose $2 million in 1998, up 5% from 1997.
This improved performance resulted from a $14.5 million revenue increase,
partially offset by a $12.5 million increase in operating expenses. This
year-over-year revenue gain was due to strong political advertising (resulting
from election primaries and 1998 general elections, combined with local and
national issue-oriented advertising), as well as to solid local advertising
revenues (led by the automotive and fast food categories). These strong results
more than offset weak national advertising revenues at WFLA in Tampa. The higher
1998 expense levels were anticipated as the Company initiated steps in 1997 to
invigorate the performance of the stations acquired in that year. These steps
included upgrading programming and equipment, increasing staff levels and
competitively compensating personnel in conjunction with the repositioning and
relaunching of all of these stations. As a result of these initiatives,
programming costs increased 24%, reflecting higher costs of existing programming
and purchases of additional syndicated programming, and employee compensation
and benefits expense rose 9%.
Page 40
<PAGE>
Newsprint
Excluding investment income from its unconsolidated affiliate, the
Newsprint Segment produced an operating loss of $13.3 million in 1999, a sharp
contrast to the $12.1 million operating profit posted in 1998. Virtually all of
this negative profit swing was attributable to weak newsprint selling price
which plagued the entire newsprint industry throughout 1999. Although the
average realized selling price began to gradually rise in the second half of the
current year, it still remained well below the 1998 level, as the following
chart illustrates:
Garden State Paper Company
Average Newsprint Selling Price
(Per ton)
Selling Selling Selling
Month Price 99 Price 98 Price 97
- ---------------------------------------------------------------
January 510 520 456
February 496 525 450
March 470 522 457
April 446 522 473
May 433 521 486
June 422 519 496
July 408 518 506
August 411 518 496
September 417 517 499
October 420 526 507
November 434 527 510
December 444 528 510
Depressed newsprint revenues in 1999 resulted from a 15% drop in the
average realized selling price per ton, combined with a 5% decrease in tons
sold. Early year production difficulties at the Company's Garden State mill
exacerbated the effect of weak selling prices. As newsprint has become more of a
global commodity, the delicate balance between supply and demand is constantly
challenged. Prior-year newsprint strikes in Canada, the financial crisis in Asia
and increased production capacity in foreign countries all contributed to an
excess supply of newsprint in 1999.
The Company's income from its share of SP Newsprint Company (SPNC),
formerly Southeast Paper Manufacturing Company, decreased $6.2 million in 1999
from $12.8 million to $6.6 million in the current year. Despite a 7% increase in
tons sold, revenues declined 7% as a result of a $71 per ton decrease in SPNC's
average realized selling price. In November 1999, SPNC acquired Smurfit
Newsprint Corporation's Newberg, Oregon mill, which posted a $3.4 million loss
during that portion of 1999 in which it was owned by SPNC. Despite reduced
revenues at SPNC's Dublin mill and the loss incurred at the newly acquired
Newberg mill, SP Newsprint remained profitable in 1999 as a result of increased
production and sales volume together with an overall efficient production
performance.
Excluding investment income from its unconsolidated affiliate,
Newsprint operating income rose $15.6 million in 1998, rebounding from a loss of
$3.5 million in 1997 to income of $12.1 million in 1998. This profit turnaround
was driven by a $13.5 million increase in revenues, coupled with a $2.1 million
reduction in operating expenses. Improved revenues resulted from a 7% rise in
the average realized selling price per ton, combined with a 4% increase in tons
sold. While newsprint selling prices gradually rose over the course of 1997,
they maintained a higher level throughout 1998 as depicted on the preceding
graph. Production efficiencies facilitated reduced expense levels in 1998,
including a 13% decline in energy expense (due to both a shift to purchasing
natural gas in the competitively-priced open market as well as to a mild 1998
winter) and an 18% decrease in chemical expense.
The Company's share of the operating results of SP Newsprint increased
$4.5 million (54%) in 1998 from the comparable 1997 amount. SPNC's revenues rose
4.3% as a result of a 6.4% rise in the average realized selling price, which
more than offset the effect of a 2.3% decrease in tons sold.
Interest Income and Expense
Interest expense in 1999 decreased $16 million from 1998 due to a $230
million reduction in average debt outstanding. Immediately following the sale of
the Cable Segment in October 1999, a portion of the proceeds was used to repay
all amounts then outstanding under the Company's revolving credit agreements and
to terminate the associated interest rate swaps. As has been the case in the
past, from time to time the Company may employ such swaps and other derivative
financial instruments as part of an overall risk management strategy. If used,
the objective would be to manage specific risks and exposures, not to trade such
instruments for profit or loss. Interest expense increased 3% in 1998 over 1997.
The effective interest rate during each year was approximately 7%.
In October 1999, the Company invested the remaining proceeds from the
Cable sale of approximately $665 million in prime-rated commercial paper and
earned interest income of $9.4 million on these investments.
Income Taxes
The Company's effective tax rate on income from continuing operations
was approximately 39%, 36%, and 40% in 1999, 1998, and 1997. The lower 1998
effective tax rate was principally due to a favorable settlement of a state tax
examination.
LIQUIDITY
Several unique and non-recurring events transpired during 1999 which
afforded the Company unprecedented financial flexibility. Proceeds from the
Cable Segment sale, the Denver
Page 41
<PAGE>
common stock sale and the Denver preferred stock redemption, provided $1.5
billion in funds in 1999. In addition, operating activities generated $124.2
million. These combined cash inflows supplied the funds to repay all outstanding
bank debt and terminate the associated interest rate swaps, to fund $60.8
million of capital expenditures, $22.7 million of stock repurchases, and $16
million of dividends. The remaining funds were more than adequate for the cash
needs of the Company in 1999, resulting in cash equivalent investments of
approximately $640 million at year end.
The Company anticipates several significant cash outflows in 2000. Tax
payments related to the Cable Segment sale of approximately $510 million will be
made in March and April. Additionally, the pending acquisition of Spartan
Communications for approximately $605 million is expected to close early in the
second quarter. Finally, the stock repurchase program initiated in December will
continue in 2000. At December 26, 1999, the Company had available $1.2 billion
from its committed revolving credit facility which has commitment reductions
totaling 25% by the end of 2001 and 2002, and expires in 2003. The Company
anticipates that current investments, together with internally generated funds
provided by operations and existing credit facilities, will be more than
adequate to finance the aforementioned transactions, projected capital
expenditures, dividends to stockholders, and working capital needs in 2000.
YEAR 2000
The Company successfully prepared for the transition to the year 2000;
no significant problems were encountered and total Year 2000 costs were not
material.
OUTLOOK FOR 2000
The new millennium is ripe with possibilities for the Company to
intensify its southeastern focus as well as expand and grow its existing
properties. The completion of the pending Spartan acquisition early in the
second quarter of 2000 will add 13 television stations to the Broadcast Segment
and significantly increase the Company's presence in southeastern households.
The Broadcast Segment is positioned for a strong year; the hotly contested
political races and upcoming Olympics should bolster WFLA's results and enhance
the improved performance at the small to mid-market stations. The Publishing
Segment should experience continued growth despite slightly higher newsprint
prices. Although the Newsprint Segment is not expected to achieve the
performance level of 1998, the combination of production efficiencies and the
announcement of modest price increases should produce moderate improvement over
1999. To some degree, all of the Company's Segments either have been, or will
be, affected by the Internet. While it is not yet clear exactly how e-commerce
will ultimately shape our business, the Company continues to position itself to
participate in this rapidly expanding online world.
* * * * * * *
Certain statements in this annual report that are not historical facts
are "forward-looking" statements, as that term is defined by the federal
securities laws. Forward-looking statements include statements related to
pending transactions, the Company's share repurchase program, the impact of the
Internet and expectations regarding newsprint prices, advertising levels and
broadcast ratings. Forward-looking statements, including those which use words
such as the Company "believes," "anticipates," "expects," "estimates" and
similar statements, are made as of the date of this report and are subject to
risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by such statements.
Some significant factors that could affect actual results include:
changes in advertising demand, the availability and pricing of newsprint,
changes in interest rates, regulatory rulings and the effects of acquisitions,
investments and dispositions on the Company's results of operations and its
financial condition.
Page 42
<PAGE>
<PAGE>
Media General, Inc.
Quarterly Review
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Revenues $ 191,811 $ 199,554 $ 191,879 $ 212,164
Operating income 21,886 30,194 25,577 32,709
Income from continuing operations
before extraordinary item 6,908 11,964 25,628 25,447
Discontinued Cable operations 4,398 4,492 4,818 798,989
Extraordinary item --- --- --- (1,328)
Net income 11,306 16,456 30,446 823,108
Income per share from continuing
operations before extraordinary item 0.26 0.45 0.97 0.96
Income per share from continuing
operations before extraordinary
item - assuming dilution 0.26 0.44 0.96 0.95
Net income per share before extra-
ordinary item 0.42 0.62 1.15 31.20
Net income per share before extra-
ordinary item - assuming dilution 0.42 0.61 1.14 30.77
- ------------------------------------------------------------------------------------------------------------------------------
Shares traded 1,840 4,382 4,676 3,787
Stock price range $ 44.50-53.50 $ 44.31-59.50 $ 46.13-53.94 $ 46.75-55.75
Quarterly dividend paid $ 0.15 $ 0.15 $ 0.15 $ 0.15
- ------------------------------------------------------------------------------------------------------------------------------
1998
Revenues $ 196,034 $ 211,519 $ 197,172 $ 212,211
Operating income 25,446 36,446 26,243 37,155
Income from continuing operations 8,923 17,265 10,103 17,146
Discontinued Cable operations 3,822 4,276 4,352 4,987
Net income 12,745 21,541 14,455 22,133
Income per share from continuing
operations 0.34 0.65 0.38 0.64
Income per share from continuing
operations - assuming dilution 0.33 0.64 0.37 0.63
Net income per share 0.48 0.81 0.54 0.83
Net income per share -
assuming dilution 0.47 0.80 0.54 0.82
- ------------------------------------------------------------------------------------------------------------------------------
Shares traded 3,030 2,087 2,127 1,947
Stock price range $ 40.94-50.50 $ 43.75-52.50 $ 40.50-52.00 $ 33.88-50.63
Quarterly dividend paid $ 0.14 $ 0.14 $ 0.14 $ 0.14
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
. Media General, Inc., Class A common stock is listed on the American Stock
Exchange under the symbol MEG.A. The approximate number of equity security
holders of record at February 29, 2000, was: Class A common - 2,134, Class
B common - 12.
. The Company sold its Cable Television operations in the fourth quarter 1999
and reported an after-tax gain of $799 million. The prior year has been
restated to reflect the Cable operations as discontinued.
. Third quarter 1999 results include a $19 million after-tax gain on the sale
of half the Company's common stock of Denver Newspapers, Inc.
. Fourth quarter 1999 results include an extraordinary item of $1.3 million
($0.05 per share), net of a tax benefit of $800 thousand, representing the
cost associated with the termination of interest rate swaps.
Page 43
<PAGE>
Ten-Year Financial Summary
(In thousands, except per share amounts)
Certain of the following data were compiled from the consolidated financial
statements of Media General, Inc., and should be read in conjunction with those
statements and the financial review and management analysis which appear
elsewhere in this report.
<TABLE>
<CAPTION>
1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Summary of Operations
Operating revenues $ 795,408 $ 816,936 $ 756,685 $ 618,945
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 881,316 $ 70,874 $ (10,490) $ 70,498
Adjustments to reconcile to operating
cash flow:
(Income) loss from discontinued Cable
operations (a) (13,978) (17,437) (16,925) (12,454)
Gain on sale of Cable operations (a) (798,719) -- -- --
Extraordinary item (b) 1,328 -- 63,000 --
Cumulative effect of changes in
accounting principles (c) -- -- -- --
Gain on sale of Denver Newspapers,
Inc. common stock (30,983) -- -- --
Gain on sale of Garden State
Newspapers investment -- -- -- --
Investment (income) loss-
unconsolidated affiliates (9,067) (22,193) (21,037) (27,188)
Other, net (11,548) 980 (1,270) (1,381)
Interest expense 46,554 62,584 60,691 14,308
Income taxes 45,463 30,482 23,370 31,645
------------- ------------- ------------- -------------
Operating income (d) 110,366 125,290 97,339 75,428
Depreciation and amortization 79,520 75,789 72,184 38,744
------------- ------------- ------------- -------------
Operating cash flow $ 189,886 $ 201,079 $ 169,523 $ 114,172
===========================================================================================================================
Per Share Data: (a) (b) (c)
Income (loss) from continuing operations $ 2.64 $ 2.01 $ 1.35 $ 2.21
Discontinued Cable operations 30.66 0.66 0.64 0.47
Extraordinary item (0.05) -- (2.39) --
Cumulative effect of changes in
accounting principles -- -- -- --
------------- ------------- ------------- -------------
Net income (loss) $ 33.25 $ 2.67 $ (0.40) $ 2.68
- ---------------------------------------------------------------------------------------------------------------------------
Per Share Data--assuming dilution: (a) (b) (c)
Income (loss) from continuing operations $ 2.60 $ 1.98 $ 1.33 $ 2.18
Discontinued Cable operations 30.23 0.65 0.64 0.47
Extraordinary item (0.05) -- (2.37) --
Cumulative effect of changes in
accounting principles -- -- -- --
------------- ------------- ------------- -------------
Net income (loss) $ 32.78 $ 2.63 $ (0.40) $ 2.65
- ----------------------------------------------------------------------------------------------------------------------------
Other Financial Data:
Total assets $ 2,340,374 $ 1,917,346 $ 1,814,201 $ 1,025,484
Working capital 167,546 29,129 34,716 13,373
Capital expenditures 60,829 49,480 41,599 28,510
Total debt 59,838 928,101 900,140 276,318
Cash dividend per share 0.60 0.56 0.53 0.50
============================================================================================================================
</TABLE>
(a) The Company sold its Cable Television operations in October 1999 and
reported a gain of $798.7 million (net of income taxes of $509.8 million).
All prior periods have been restated to show income from discontinued Cable
operations (net of tax).
(b) In 1999 the Company incurred a charge of $1.3 million (net of a tax benefit
of $800 thousand), representing the cost associated with the termination of
interest rate swaps, while in 1997 the Company incurred a charge of $63
million (net of a tax benefit of $38.6 million), representing the debt
repayment premium and write-off of associated debt issuance costs related
to the redemption of debt assumed in the January 1997 Park acquisition.
Page 44
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 567,583 $ 496,942 $ 474,468 $ 460,292 $ 478,599 $ 517,742
- ----------------------------------------------------------------------------------------------------------------------------
$ 53,232 $ 117,009 $ 25,708 $ 19,000 $ (62,091) $ 25,480
(7,395) (8,389) (9,154) (4,935) (637) 3,196
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- (687) -- --
-- -- -- -- -- --
-- (91,520) -- -- -- --
(19,034) (2,935) 990 4,926 75,640 1,303
(5,204) 857 (835) (6,131) (2,659) (814)
5,502 5,774 10,030 5,649 1,782 3,499
23,782 20,758 7,578 5,034 9,072 20,230
- ------------ ------------ ------------- ------------- ------------- ------------
50,883 41,554 34,317 22,856 21,107 52,894
34,070 33,048 34,145 31,373 26,217 25,469
- ------------ ------------ ------------- ------------- ------------- ------------
$ 84,953 $ 74,602 $ 68,462 $ 54,229 $ 47,324 $ 78,363
============================================================================================================================
$ 1.76 $ 4.18 $ 0.64 $ 0.51 $ (2.42) $ 1.11
0.28 0.32 0.35 0.19 0.02 (0.12)
-- -- -- -- -- --
-- -- -- 0.03 -- --
- ------------ ------------ ------------- ------------- ------------- ------------
$ 2.04 $ 4.50 $ 0.99 $ 0.73 $ (2.40) $ 0.99
- ----------------------------------------------------------------------------------------------------------------------------
$ 1.73 $ 4.13 $ 0.63 $ 0.51 $ (2.42) $ 1.12
0.28 0.32 0.35 0.19 0.02 (0.14)
-- -- -- -- -- --
-- -- -- 0.03 -- --
- ------------ ------------ ------------- ------------- ------------- ------------
$ 2.01 $ 4.45 $ 0.98 $ 0.73 $ (2.40) $ 0.98
- ----------------------------------------------------------------------------------------------------------------------------
$ 1,016,743 $ 787,165 $ 745,242 $ 787,425 $ 762,311 $ 775,944
22,938 14,833 9,551 9,657 3,668 21,333
29,076 56,919 32,837 92,319 115,383 73,686
327,235 173,144 262,550 321,487 277,428 235,266
0.48 0.44 0.44 0.44 0.44 0.44
============================================================================================================================
</TABLE>
(c) Includes the recognition, at the beginning of fiscal 1992, of the
accumulated postretirement benefit obligation related to prior service
costs of $22.8 million ($14.4 million after-tax; $0.55 per share, basic and
assuming dilution) as the cumulative effect of a change in accounting
principle for the adoption of Statement of Financial Accounting Standards
No. 106, Employer's Accounting for Postretirement Benefits Other Than
Pensions and the adoption of Financial Accounting Standards No. 109,
Accounting for Income Taxes which increased 1992 net income by $15.1
million ($0.58 per share, basic and assuming dilution), which represented
the net decrease in the Company's deferred tax liability at that date.
(d) Operating income in 1991 included pretax special charges of $11.3 million
for early retirement program and newspaper merger costs.
Page 45
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Listed below are the major subsidiaries of the Company, including equity
investees, each of which is in the consolidated financial statements of the
Company and its Subsidiaries, and the percentage of ownership by the Company (or
if indented, by the subsidiary under which it is listed). Subsidiaries omitted
from the list would not, if aggregated, constitute a significant subsidiary:
<TABLE>
<CAPTION>
Jurisdiction of Securities
Name of Subsidiary Incorporation Ownership
- ------------------ ------------- ---------
<S> <C> <C>
Garden State Paper Company, Inc. Virginia 100%
Media General Communications, Inc. Delaware 100%
MG Broadcasting of Birmingham, Inc. Alabama 100%
Media General Broadcasting of Montgomery, Inc. Alabama 100%
Media General Broadcasting of South Carolina, Inc. South Carolina 100%
Media General Operations, Inc. Delaware 100%
Professional Communications, Inc. Florida 100%
The Tribune Company Holdings, Inc. Delaware 100%
Media General Financial Services, Inc. Virginia 100%
NES II, Inc. Virginia 100%
Virginia Paper Manufacturing Corp. Virginia 100%
SP Newsprint Company (Partnership) Georgia 33.33%
Denver Post Corporation Delaware 20%
AdOne, L.L.P. New York 7%
</TABLE>
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Media General, Inc., of our report dated January 25, 2000, included in the
1999 Annual Report to Stockholders of Media General, Inc.
Our audits also included the financial statement schedule of Media General,
Inc., listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the following Registration
Statements of our report dated January 25, 2000, with respect to the
consolidated financial statements of Media General, Inc., incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule of Media General, Inc., included in this Annual
Report (Form 10-K) of Media General, Inc., for the fiscal year ended December
26, 1999.
Registration Statement Number Description
----------------------------- -----------
2-56905 Form S-8
33-29478 Form S-8
33-23698 Form S-8
33-26853 Form S-8
33-52472 Form S-8
333-16731 Form S-8
333-16737 Form S-8
333-69527 Form S-8
Ernst & Young LLP
Richmond, Virginia
March 23, 2000
<TABLE> <S> <C>
<PAGE>
<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> YEAR
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-END> DEC-26-1999
<CASH> 255,298
<SECURITIES> 390,748
<RECEIVABLES> 109,922
<ALLOWANCES> 7,088
<INVENTORY> 14,282
<CURRENT-ASSETS> 796,734
<PP&E> 738,079
<DEPRECIATION> 356,603
<TOTAL-ASSETS> 2,340,374
<CURRENT-LIABILITIES> 629,188
<BONDS> 46,839
0
0
<COMMON> 132,341
<OTHER-SE> 1,198,561
<TOTAL-LIABILITY-AND-EQUITY> 2,340,374
<SALES> 795,408
<TOTAL-REVENUES> 795,408
<CGS> 386,987
<TOTAL-COSTS> 386,987
<OTHER-EXPENSES> 79,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,554
<INCOME-PRETAX> 115,510
<INCOME-TAX> 45,463
<INCOME-CONTINUING> 69,947
<DISCONTINUED> 812,697
<EXTRAORDINARY> (1,328)
<CHANGES> 0
<NET-INCOME> 881,316
<EPS-BASIC> 33.25
<EPS-DILUTED> 32.78
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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> YEAR
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> DEC-27-1998
<CASH> 7,637
<SECURITIES> 0
<RECEIVABLES> 118,500
<ALLOWANCES> 8,433
<INVENTORY> 20,341
<CURRENT-ASSETS> 176,226
<PP&E> 1,111,251
<DEPRECIATION> 614,454
<TOTAL-ASSETS> 1,917,346
<CURRENT-LIABILITIES> 147,097
<BONDS> 928,101
0
0
<COMMON> 133,857
<OTHER-SE> 343,492
<TOTAL-LIABILITY-AND-EQUITY> 1,917,346
<SALES> 816,936
<TOTAL-REVENUES> 816,936
<CGS> 399,396
<TOTAL-COSTS> 399,396
<OTHER-EXPENSES> 75,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,584
<INCOME-PRETAX> 83,919
<INCOME-TAX> 30,482
<INCOME-CONTINUING> 53,437
<DISCONTINUED> 17,437
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,874
<EPS-BASIC> 2.67
<EPS-DILUTED> 2.63
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 3,504
<SECURITIES> 0
<RECEIVABLES> 115,940
<ALLOWANCES> 6,653
<INVENTORY> 20,868
<CURRENT-ASSETS> 165,927
<PP&E> 1,079,928
<DEPRECIATION> 578,296
<TOTAL-ASSETS> 1,814,201
<CURRENT-LIABILITIES> 131,211
<BONDS> 900,140
0
0
<COMMON> 133,645
<OTHER-SE> 284,581
<TOTAL-LIABILITY-AND-EQUITY> 1,814,201
<SALES> 756,685
<TOTAL-REVENUES> 756,685
<CGS> 381,815
<TOTAL-COSTS> 381,815
<OTHER-EXPENSES> 72,184
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,691
<INCOME-PRETAX> 58,955
<INCOME-TAX> 23,370
<INCOME-CONTINUING> 35,585
<DISCONTINUED> 16,925
<EXTRAORDINARY> (63,000)
<CHANGES> 0
<NET-INCOME> (10,490)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
