Media General Inc. is an independent publicly owned communicationscompany with interests in newspapers broadcast television interactive media recycled newsprint production and diversified information services. Media General Inc. has a market cap of $205.5 million; its shares were traded at around $9.02 with and P/S ratio of 0.2.
Highlight of Business Operations:The Company recorded a net loss of $62.5 million ($2.80 per share) and $63.1 million ($2.84 per share) in the third quarter of 2009 and the first nine months of the year, as compared to net income of $6 million ($.27 per share) in the equivalent prior-year quarter and a net loss of $546.3 million ($24.75 per share) in the first nine months of 2008. Embedded within these results are two areas which merit separate discussion: discontinued operations and impairment charges. The Company sold four TV stations and their associated Web sites in 2008: WTVQ in Lexington, Kentucky, WMBB in Panama City, Florida, KALB/NALB in Alexandria, Louisiana, and WNEG in Toccoa, Georgia. The Company completed the sale of its final held-for-sale station, WCWJ in Jacksonville, Florida, in the second quarter of 2009. Additionally, in the third quarter of 2009, the Company
sold a small business magazine. The Company recognized an after-tax gain of $5.1 million in the first nine months of 2009 and an after-tax loss of $11.3 million in 2008 related to these divestitures. See Note 5 of this Form 10-Q for a further discussion of discontinued operations. Additionally, the Company recorded after-tax non-cash impairment charges of $64.8 million in the third quarter of 2009 and $532 million in the second quarter of 2008. For a complete discussion of these impairment charges, see the Impairment section in this MD&A and Note 3 of this Form 10-Q. The remainder of this discussion focuses only on results from continuing operations.
In the third quarter of 2009, the Company had a loss from continuing operations of $60.4 million as compared to income from continuing operations of $5.7 million in the equivalent quarter of 2008; excluding the impairment charge in 2009 and applying a 39% effective tax rate, income from continuing operations was $4.4 million in the third quarter. An 18% decrease in quarter-over-quarter revenues was the primary reason for the decline in income from continuing operations. Successful cost containment efforts resulted in a 19% reduction in operating costs, which softened the impact of lower revenues as the advertising environment remained challenging. Savings were achieved through a combination of actions, including a mandatory employee furlough program, the suspension of the company match on the 401(k) plan, and lower employee counts, all of which all led to reduced compensation costs, and through a 41% decline in intangibles amortization expense (due to the 2008 impairment write-downs of network affiliation agreement intangibles) and decreased newsprint expense. The quarterly results were aided by gains from the following: $2 million from implementing a final freeze on a retirement plan, $1.9 million from an insurance recovery, and $.9 million from a favorable tax ruling related to a retained liability from the sale of SP Newsprint. In order to facilitate meaningful quarter-over-quarter comparisons, it is appropriate to note that the third quarter of 2008 also included a $1 million reduction in the previously reported loss on the sale of SP Newsprint and a $.5 million gain associated with a separate insurance recovery.
The Company recorded a loss from continuing operations of $68.4 million in the first nine months of 2009 as compared to a loss of $537.5 million in 2008; excluding the after-tax impairment charges in both periods, the losses from continuing operations were $3.6 million and $5.5 million, respectively. As with the quarter, significantly lower operating costs were instrumental in offsetting a large portion of a 19% decrease in revenues; cost savings were achieved for reasons similar to those in the third quarter including, the furlough program, the absence of the company match on the 401(k) plan, workforce reductions, lower intangibles expense, and lower newsprint costs. Additionally, various gains played a role in year-over-year comparisons such as: a $2 million gain in 2009 associated with a final freeze on a retirement plan; a $.7 million net gain in the first nine months of 2009 due primarily to a favorable tax ruling in connection with a retained liability from the 2008 sale of SP Newsprint as compared to a $1.6 million loss in 2008; and a $1.9 million gain in the first nine months of 2009 associated with an insurance recovery, as compared to a $3.3 million gain for a separate event in the equivalent period of 2008.
In 2009, the Company generated net cash of $9.4 million from operating activities in the first nine months of the year. Additionally, the Company completed the sale of WCWJ, which yielded proceeds of approximately $17 million. During the year, the Company collected a $5 million note receivable related to its sale of SP Newsprint in 2008, incurred capital expenditures of $11.6 million, contributed $15 million to its retirement plan, and repaid $24.4 million of debt. Based on the general economic environment and outlook, the Company has reduced its capital spending plans by postponing various projects.
At September 27, 2009, the Company had in place a $577 million revolving credit facility and a $287 million variable-rate bank term loan facility (together the Facilities). The term loan is with essentially the same syndicate of banks that provides the Companys revolving credit facility. At the end of the third quarter, there were borrowings of $418 million outstanding under the revolving credit facility and $287 million under the bank term loan. The Facilities have both interest coverage and leverage ratio covenants. Under the terms of the Facilities, the maximum leverage ratio covenant was reduced slightly for the remainder of 2009 beginning with
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