-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EcyXw7mjxORbNWyQIAtr6q0ENht5GtUkKm6hS5txgI05N7ki/lU0HUxvHYSmp7SP 6kDfyWL+Si/SbN+dLWkcUw== 0000916641-97-000491.txt : 19970514 0000916641-97-000491.hdr.sgml : 19970514 ACCESSION NUMBER: 0000916641-97-000491 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDIA GENERAL INC CENTRAL INDEX KEY: 0000216539 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 540850433 STATE OF INCORPORATION: VA FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06383 FILM NUMBER: 97601675 BUSINESS ADDRESS: STREET 1: 333 E GRACE ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8046496000 10-Q 1 1ST QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 1-6383 MEDIA GENERAL, INC. (Exact name of registrant as specified in its charter) Commonwealth of Virginia 54-0850433 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 E. Grace St., Richmond, VA 23219 (Address of principal executive offices) (Zip Code) (804) 649-6000 (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of May 4, 1997. Class A Common shares: 26,060,360 Class B Common shares: 556,574 PART I - FINANCIAL INFORMATION Item 1. Financial Statements MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (000's except shares)
March 30, December 29, 1997 1996 ----------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 5,565 $ 4,471 Accounts receivable - net 90,334 81,513 Inventories 19,241 16,329 Other 33,342 25,905 ----------------- ------------------ Total current assets 148,482 128,218 ----------------- ------------------ Investments in unconsolidated affiliates 115,376 113,872 Other assets 127,023 23,564 Property, plant and equipment - net 525,009 469,978 Intangibles - net 932,545 289,852 ----------------- ------------------ $ 1,848,435 $ 1,025,484 ================= ==================
See accompanying notes. 1 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (000's except shares)
March 30, December 29, 1997 1996 ----------------- ------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 26,447 $ 30,154 Accrued expenses and other liabilities 102,003 72,310 Income taxes payable 2,200 1,381 Short-term borrowings --- 11,000 ----------------- ------------------ Total current liabilities 130,650 114,845 ----------------- ------------------ Long-term debt 1,048,000 265,000 Deferred income taxes 175,976 102,055 Other liabilities and deferred credits 117,348 106,344 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 26,060,124 and 25,950,287 shares 130,301 129,751 Class B, authorized 600,000 shares; issued 556,574 shares 2,783 2,783 Additional paid-in capital 14,196 11,393 Unearned compensation (3,699) (1,254) Retained earnings 232,880 294,567 ----------------- ------------------ Total stockholders' equity 376,461 437,240 ----------------- ------------------ $ 1,848,435 $ 1,025,484 ================= ==================
See accompanying notes. 2 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (000's except for per share data)
Three Months Ended ------------------------------------------- March 30, March 31, 1997 1996 ----------------- ----------------- Revenues $ 216,145 $ 184,800 ----------------- ------------------ Operating costs: Production costs 111,995 103,241 Selling, distribution and administrative 56,027 44,978 Depreciation and amortization 23,321 16,566 ----------------- ------------------ Total operating costs 191,343 164,785 ----------------- ------------------ Operating income 24,802 20,015 ----------------- ------------------ Other income (expense): Interest expense (15,614) (5,661) Investment income - unconsolidated affiliates: Southeast Paper Manufacturing Co. 1,138 8,123 Denver Newspapers, Inc.: Equity in net income 1,564 128 Preferred stock income 1,502 1,244 Other, net 681 (264) ----------------- ------------------ Total other income (expense) (10,729) 3,570 ----------------- ------------------ Income before income taxes and extraordinary item 14,073 23,585 Income taxes 5,840 8,529 ----------------- ------------------ Income before extraordinary item 8,233 15,056 Extraordinary item from early redemption of debt (net of income tax of $38,613) (63,000) --- ----------------- ------------------ Net income (loss) $ (54,767) $ 15,056 ================= ================== Earnings (loss) per common share and equivalent: Income before extraordinary item $ 0.31 $ 0.57 Extraordinary item (2.37) --- ----------------- ------------------ Net income (loss) $ (2.06) $ 0.57 ================= ================== Dividends paid per common share $ 0.13 $ 0.12 ================= ================== Weighted average common shares and equivalents 26,606 26,546
See accompanying notes. 3 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (000's)
Three Months Ended -------------------------------------------- March 30, March 31, 1997 1996 ----------------- ------------------ Operating activities: Net income (loss) $ (54,767) $ 15,056 Adjustments to reconcile net income (loss): Extraordinary item 63,000 --- Depreciation and amortization 23,321 16,566 Deferred income taxes (1,188) 738 Investment income -- unconsolidated affiliates (4,204) (9,495) Distribution from unconsolidated newsprint affiliate --- 4,600 Change in assets and liabilities 1,185 7,365 ----------------- ------------------ Net cash provided by operating activities 27,347 34,830 ----------------- ------------------ Investing activities: Capital expenditures (9,994) (4,363) Purchase of businesses (273,247) --- Sale of businesses, net of $90,944 held in trust 48,620 --- Other, net 120 204 ----------------- ------------------ Net cash used by investing activities (234,501) (4,159) ----------------- ------------------ Financing activities: Increase in debt 963,000 --- Payment of debt (667,000) (27,000) Premiums and costs related to early redemption of debt (84,703) --- Dividends paid (3,460) (3,173) Other, net 411 (313) ----------------- ------------------ Net cash provided (used) by financing activities 208,248 (30,486) ----------------- ------------------- Net increase in cash and cash equivalents 1,094 185 Cash and cash equivalents at beginning of year 4,471 3,367 ----------------- ------------------ Cash and cash equivalents at end of period $ 5,565 $ 3,552 ================= ================== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 7,532 $ 6,037 Income taxes $ 5,392 $ 4,360
See accompanying notes. 4 MEDIA GENERAL, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting, and with applicable quarterly reporting regulations of the Securities and Exchange Commission. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and, accordingly, should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended December 29, 1996. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim financial information have been included. Certain items in 1996 have been reclassified to conform with the current year's presentation. The reclassifications have no effect on net income as previously reported. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is effective for both interim and annual financial statements ending after December 15, 1997. At that time, the Company will change the method currently used to compute earnings per share and to restate all prior periods. Under the new standard basic earnings per share will replace the present primary earnings per share, with the dilutive effect of stock options excluded. The impact on earnings per share of the Company is not expected to be material. 2. On January 7, 1997, Media General, Inc. (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 estimated transaction costs. In early February, the Company redeemed Park's high coupon debt and recorded an extraordinary charge of $63 million, or $2.37 per share, representing the debt prepayment premium and the write-off of associated debt issuance costs. The acquisition and redemption were financed with borrowings under an existing revolving credit facility. In connection with the additional borrowings, the Company entered into additional interest rate swap agreements totaling $600 million (bringing total debt covered by swap agreements to $800 million with eight counterparties) which effectively converted variable rate debt to fixed rate debt at weighted average interest rates approximating 7% with maturities of four to seven years. Since the acquisition, the Company completed sales of certain of the former Park properties for approximately $140 million, purchased new properties for approximately $49 million and has $91 million (included in other assets), remaining with which it expects to acquire additional properties in the Southeast to consolidate its holdings in that region. Additionally, the Company has entered into agreements for sales and exchanges of certain other former Park properties which are expected to close by the end of the third quarter. 5 The acquisition has been accounted for as a purchase and, accordingly, the accompanying financial statements for the three-month period ended March 30, 1997, include the results of the former Park properties. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values according to preliminary appraisals. Such estimated values may change as the appraisals are finalized and more facts become known. Approximately $645 million of intangible assets relating to Park and the related sale, purchase, and exchange activities are included in the balance sheet at March 30, 1997, and are being amortized on a straight-line basis over periods of 10-35 years. The following summary presents the actual consolidated results of operations for 1997 and pro forma consolidated results of operations for 1996 as if the acquisition had been completed at the beginning of the period and the pro forma does not purport to be indicative of what would have occurred had the acquisition actually been made as of such date, nor is it indicative of results which may occur in the future.
Actual Pro forma Three months ended Three months ended (In thousands, except per share amounts) March 30, 1997 March 31, 1996 -------------- -------------- Revenues $ 216,145 $ 217,703 ============= ============= Income before extraordinary item $ 8,233 $ 7,052 Extraordinary item (63,000) (63,000) -------------- -------------- Net loss $ (54,767) $ (55,948) ============== ============== Income (loss) per common share and equivalent: Income before extraordinary item $ 0.31 $ 0.27 Extraordinary item (2.37) (2.37) -------------- -------------- Net loss $ (2.06) $ (2.11) ============== ==============
3. Inventories are principally raw materials. 4. Pursuant to the provisions of the Cable Television Consumer and Competition Act of 1992 (the "1992 Cable Act"), the rates charged to subscribers by the Company's Fairfax Cable subsidiary are subject to regulation and review by local franchising authorities and the Federal Communications Commission (FCC). The FCC is currently reviewing certain of the rates charged to subscribers. The Company believes that it has complied with all provisions of the 1992 Cable Act, including its rate setting provisions. However, since the Company's rates for regulated services are subject to review, the Company may be subject to a refund liability if its rates are successfully challenged. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Media General is an independent, publicly owned communications company situated primarily in the Southeast with interests in newspapers, broadcast and cable television, recycled newsprint production, and diversified information services. The Company's fiscal year ends on the last Sunday in December. Media General, Inc. Business Segment Information (Unaudited)
Three Months Ended -------------------------------------------- March 30, March 31, 1997 1996 ----------------- ------------------ Revenues: Publishing $ 115,757 $ 97,922 Broadcast Television 35,939 16,104 Cable Television 38,102 35,032 Newsprint 26,347 $ 35,742 ----------------- ------------------ Total revenues $ 216,145 $ 184,800 ================= ================== Operating income: Publishing $ 18,751 $ 6,589 Broadcast Television 3,147 4,313 Cable Television 7,235 4,080 Newsprint (4,331) 5,033 ----------------- ------------------ Total operating income $ 24,802 $ 20,015 ================= ================== Operating cash flows: Publishing $ 27,910 $ 13,901 Broadcast Television 9,154 5,037 Cable Television 13,753 10,909 Newsprint (2,694) 6,734 ----------------- ------------------ Total operating cash flows $ 48,123 $ 36,581 ================= ==================
The magnitude of our recent acquisitions has heightened the relevance of operating cash flow information for purposes of developing a full understanding of the Company's operating results. The effects of non-cash expenses are integral to this understanding. Accordingly, for each business segment we have presented operating cash flow information. Operating cash flow amounts, as presented represent operating income plus depreciation and amortization of intangible assets. Such cash flow amounts vary from net cash provided by operating activities as presented in the Consolidated Statements of Cash Flows, because cash payments for interest and taxes are not reflected, nor are the cash flow effects of non-operating items or changes in certain operations-related balance sheet accounts. 7 ACQUISITIONS AND DISPOSITIONS On January 7, 1997, the Company acquired Park Acquisitions, Inc., parent of Park Communications, Inc. (Park). See Note 2 of this Form 10-Q for details. Subsequent to the end of the first quarter, the Reidsville Review (Reidsville, North Carolina; daily circulation - 7,000) and The Messenger, a weekly newspaper in Madison, North Carolina, were purchased. In addition, due to the Federal Communication Commission's requirement that the WTVR-TV (Richmond, Virginia) station, also acquired from Park, be divested within one year from its January 1997 purchase date, the Company has entered into an exchange agreement to trade WTVR-TV for three other stations: WSAV-TV (Savannah, Georgia), WJTV-TV (Jackson, Mississippi), and WHLT-TV (Hattiesburg, Mississippi). The Company also has entered into an agreement to sell WUTR-TV in Utica, New York. These transactions are expected to close by the end of the third quarter of 1997. CONSOLIDATED OPERATING RESULTS (In thousands, except per share data) 1997 Change 1996 ---- ------ ---- Revenues $ 216,145 17% $184,800 Net Income (54,767) * -- 15,056 Earnings Per Share (2.06) * -- 0.57 * Includes extraordinary charge from early redemption of debt ($63 million net of income tax benefits of $38.6 million; $2.37 per share) SEGMENT OPERATING RESULTS The following discussion of segment operating results is primarily focused on the comparative performance of the Company, excluding the operating results of Professional Communications Systems, the Danville Register & Bee and Park Communications, Inc. (acquired in May 1996, August 1996 and January 1997, respectively). PUBLISHING (In thousands) 1997 Change 1996 ---- ------ ---- Revenues $115,757 18% $ 97,922 Operating Expenses 97,006 6 91,333 Operating Income 18,751 185 6,589 Depreciation & Amortization 9,159 25 7,312 Operating Cash Flow 27,910 101 13,901 The preceding chart contains the first quarter results of the Publishing segment, including recent acquisitions. As a direct result of these acquisitions, Publishing revenues increased $11.8 million and operating income increased $1.5 million in the first quarter of 1997. 8 Excluding acquisitions, Publishing revenues increased $6 million (6%) in the first quarter of 1997 from the comparable 1996 period. At the Company's metropolitan newspaper group, which includes its three largest daily newspapers, advertising revenues increased $5.9 million, reflecting the effect of a 3.8% average rate increase combined with a 5.3% rise in advertising inches. The first quarter advertising increase was principally attributable to strong performance in retail advertising, (led by the telecommunication and grocery categories), classified advertising (largely due to employment), and general advertising (again, led by the telecommunication category). A small decrease in circulation revenues of 1.9% in the first quarter, resulting from a 3.4% drop in circulation volume partially offset by a 1.5% average rate increase, was more than offset by the above mentioned increases in advertising revenues. Publishing operating expenses, excluding acquisitions, decreased $4.6 million in the first quarter of 1997. This drop was primarily attributable to a $6.9 reduction in newsprint expense from the comparable quarter a year ago, down due to decreased cost per ton. Partially offsetting the decrease in newsprint expense for the quarter was a $1.2 million increase in other expenses, the most significant of which related to the initial costs associated with a re-engineering program which began in late 1996 at the Company's Tampa, Florida, daily newspaper. Operating income for Publishing, excluding acquisitions, rose $10.6 million (161%) in the first quarter of 1997 from the prior-year period. A large portion of this increase was due to increased revenues at the metropolitan newspaper group, particularly at the Company's Richmond, Virginia, daily newspaper. The balance of the growth was primarily attributable to the substantial drop in newsprint prices for the quarter. BROADCAST TELEVISION (In thousands) 1997 Change 1996 ---- ------ ---- Revenues $ 35,939 123% $ 16,104 Operating Expenses 32,792 178 11,791 Operating Income 3,147 (27) 4,313 Depreciation & Amortization 6,007 -- 724 Operating Cash Flow 9,154 82 5,037 The preceding chart includes the operating results of the Broadcast Television segment, including recent acquisitions. As a direct result of these acquisitions, Broadcast revenues increased $19.7 million and operating income decreased $.9 million, largely attributable to a $5.2 million increase in depreciation and intangible amortization expenses. Broadcast revenues, excluding acquisitions, remained relatively flat in the first quarter of 1997. A solid performance at the Company's flagship station, WFLA-TV in Tampa, offset the effects of the poor results produced by the Company's Jacksonville station due to its network affiliation change from ABC to Warner Brothers in February 1997. While local revenues for the quarter (driven by the automotive category) were up, political revenues were down due to the absence of several 1996 political issues and the presidential election ads. The operating expenses of Broadcast, excluding acquisitions, increased slightly from the comparable period of 1996. 9 Excluding acquisitions, Broadcast operating income remained relatively flat in the first quarter of 1997 as well. The solid performance by the Company's WFLA station, combined with a modest contribution from the Company's Charleston station, helped mitigate the poor results posted at the Jacksonville station. CABLE TELEVISION (In thousands) 1997 Change 1996 ---- ------ ---- Revenues $ 38,102 9% $ 35,032 Operating Expenses 30,867 -- 30,952 Operating Income 7,235 77 4,080 Depreciation & Amortization 6,518 (5) 6,829 Operating Cash Flow 13,753 26 10,909 Revenues at the Company's Cable Television segment rose $3.1 million in the first quarter of 1997, up 8.8% from the year-ago period. The increase was primarily attributable to the Company's Fairfax County, Virginia, cable system (Fairfax Cable), as a result of a 2.7% increase in the number of subscribers (to 228,991 at March 30, 1997), together with average increases of 8.7% and 9.3% in basic and expanded subscriber rates, respectively. MEGA Advertising also contributed $.5 million to the revenue improvement in the first quarter of 1997, largely attributable to stronger national and regional advertising time sales. Operating expenses of Cable in the first quarter of 1997 remained relatively level with the comparable prior-year period. A $.7 million increase in programming costs, due to higher programming rates and the increased subscriber base at Fairfax Cable, was effectively offset by a $.4 million decrease in employee compensation and benefit costs, reflecting the results of a re-engineering process implemented at Fairfax Cable, and by a $.3 million decline in depreciation expense. Cable operating income increased $3.2 million in the first quarter of 1997 from the year-earlier period. The increase reflects revenue growth at Fairfax Cable as a result of both rate and subscriber count increases, combined with a $.7 million operating profit increase from MEGA Advertising, due to stronger advertising time sales and lower operating expense levels. NEWSPRINT (In thousands) 1997 Change 1996 ---- ------ ---- Revenues $ 26,347 (26)% $ 35,742 Operating Expenses 30,678 -- 30,709 Operating Income (4,331) (186) 5,033 Depreciation & Amortization 1,637 (4) 1,701 Operating Cash Flow (2,694) (140) 6,734 Newsprint segment revenues declined $9.4 million in the first quarter of 1997, reflecting the results of the Company's Garden State Paper (Garden State) newsprint mill, located in Garfield, New Jersey. The decline resulted from a 32% decrease in the average realized selling price per ton, partially offset by an 8% increase in tons sold. Average realized newsprint selling prices fell from a 10 record high of $672 per ton in the first quarter of 1996 to $456 in the comparable period of 1997. An announced March 1997 price increase, which is expected to be fully implemented at Garden State in June, should raise the average selling price to approximately $500 per ton. The first quarter of 1997 Newsprint operating expenses remained even with those of the year-earlier period. The cost of Garden State's principal raw material, recovered newspapers (ONP), dropped $1.1 million (16%) due principally to lower market demand, and energy cost declined by $.5 million, mainly attributable to a mild 1997 winter. These declines were offset by a $1.7 million increase in production costs, including a $.7 million increase in additive and bleaching chemical costs to enhance the quality of paper produced. Newsprint operating income fell $9.4 million in the first quarter of 1997 from the comparable period of 1996. The decrease resulted from a $216 decline in average realized selling price per ton, reflecting an industry-wide cycle of declining selling prices and weak demand. However, Newsprint results are expected to improve somewhat when the announced price increase is implemented. UNCONSOLIDATED AFFILIATES The Company's investment income from unconsolidated affiliates fell $5.3 million in the first quarter of 1997 from the comparable period of 1996. The most significant portion of the decrease came from the Company's share of the operating results of its Southeast Paper Manufacturing Company (SEPCO) newsprint affiliate, which decreased $7 million from the previous year. Despite a 8.2% increase in tons sold, revenues declined 28% in the first quarter of 1997 as a result of SEPCO's average realized selling price falling to $457 per ton from $676 per ton in the comparable prior-year period. Newsprint selling prices at SEPCO also should increase by June of 1997. Income earned from the Company's Denver Newspapers, Inc. (DNI), affiliate increased $1.7 million in the first quarter of 1997 over the comparable period of 1996 due to a $1.4 million increase in the Company's share of net income applicable to common stockholders and a $.3 million increase in income from the Company's DNI preferred stock investment. DNI's improved operating results were attributable to strong advertising revenue growth which more than offset the effect of a decrease in circulation revenues and a slight increase in operating expenses. INTEREST EXPENSE Interest expense of $15.6 million represented a $10 million increase in the first quarter of 1997 over the comparable year-earlier period. The increase was due primarily to a $618 million rise in average debt outstanding, the result of the recent acquisitions, slightly offset by a reduction in the Company's average effective borrowing rate to 6.7%. NON-OPERATING ITEMS Other income, net, increased $.9 million in the first quarter of 1997 from the comparable period in 1996. The majority of this increase was attributable to a rise in interest income. 11 INCOME TAXES Excluding the extraordinary item, the Company's effective tax rate was 41.5% in the first quarter of 1997, up from 36.2% in the previous year's comparable period. Income tax expense declined $2.7 million (32%) from the first quarter of 1996 on a pretax earnings decrease of $9.5 million. The Company's effective tax rate rose in 1997 due to an increase in nondeductible intangible asset amortization related to the Park acquisition. The Company has net refundable income taxes of $4.8 million, including current taxes on operations, tax benefits relating to the extraordinary item and taxes associated with the disposition of various of the former Park properties. NET INCOME (LOSS) The Company incurred a net loss of $54.8 million ($2.06 per share) in the first quarter of 1997 as the result of a $63 million charge, net of tax benefits of $38.6 million, ($2.37 per share) related to the redemption of Park's high coupon debt in February 1997. Excluding this extraordinary item, net income fell $6.8 million from $15.1 million ($.57 per share) in the year-ago period to $8.2 million ($.31 per share) in the first quarter of 1997, principally the result of decreased newsprint profits related to weak industry-wide selling prices. Interest and intangible amortization expense associated with the recent acquisitions increased significantly, but was entirely covered by the operating profits of those acquired operations combined with strong growth in operating income from pre-existing Publishing and Cable operations. LIQUIDITY AND CAPITAL RESOURCES Funds generated by operating activities during the first quarter of 1997 totaled $27.3 million, down $7.5 million from the comparable period of 1996. The decrease was due principally to the absence of a $4.6 million distribution from SEPCO and a decline in net income (excluding the extraordinary item), principally due to poor performance in Newsprint. Funds generated from operating activities, coupled with funds provided by financing and investing activities, supplied the $273 million used for acquisitions (excluding the liabilities assumed), the $10 million for capital expenditures and the $3.5 million used for the payment of dividends to stockholders. Additionally $91 million, from the sale of businesses, which is currently held in trust, is expected to be used to purchase additional properties. Total debt outstanding at March 30, 1997, was $1,048 million, up $748 million from the year-ago level of $300 million (principally the result of the recent Park acquisition). The Company's unused credit lines available from its committed seven-year $1.2 billion revolving credit facility were $255 million at March 30, 1997. Augmenting this credit facility's borrowing capacity, the Company continues to have an arrangement with an insurance company which makes available an uncommitted credit facility allowing the Company to borrow up to an additional $150 million under senior notes at prevailing interest rates. In early 1997, in connection with the borrowings related to the Park acquisition, the Company entered into an additional $600 million of interest rate swap agreements which effectively converted variable rate debt to fixed rate debt at interest rates approximating 7% over four to seven year periods. 12 The Company anticipates that internally generated funds provided by operations during 1997, together with existing credit facilities and funds held in trust, will be more than adequate to finance other possible acquisitions, projected capital expenditures, dividends to stockholders, and working capital needs. OUTLOOK With the exception of Newsprint, all of the Company's segments are expected to show year-over-year operating improvement, with Publishing showing particularly strong results. Results for the Newsprint segment are directly affected by the newsprint market's price levels, which are expected to increase only moderately in 1997. With the Park acquisition and the related debt redemption fully completed in early 1997, we are optimistic and excited about the positive changes in store for Media General both immediately and in the future. 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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 21, 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 21, 1997. 10.1 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. 27 Financial Data Schedule (b) Reports on Form 8-K On January 21, 1997, the Company filed a Form 8-K to report the January 7, 1997, acquisition of Park Acquisitions, Inc., parent of Park Communications, Inc. (Park). On January 29, 1997, the Company filed a Form 8-K to amend and restate the title of its Thrift Plan Plus for Employees of Media General, Inc., and Register Publishing Company, Inc. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDIA GENERAL, INC. DATE: May 13, 1997 /s/ J. Stewart Bryan III -------------------------------------- J. Stewart Bryan III, Chairman, President and Chief Executive Officer DATE: May 13, 1997 /s/ Marshall N. Morton -------------------------------------- Marshall N. Morton Senior Vice President and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS DEC-28-1997 MAR-30-1997 5,565 0 96,696 6,362 19,241 148,482 1,067,701 542,692 1,848,435 130,650 1,048,000 0 0 133,084 243,377 1,848,435 216,145 216,145 111,995 111,995 23,321 0 15,614 14,073 5,840 8,233 0 (63,000) 0 (54,767) (2.06) 0
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