-----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, OuLJT+EnzFLmhEQ5DQkpHteE4faSPFu+wjgI4StPxVFsOX0qAIv3skZYWkU/4qh7 XCcLW5uzApCt00wu/RXLVg== 0000916641-99-000405.txt : 19990512 0000916641-99-000405.hdr.sgml : 19990512 ACCESSION NUMBER: 0000916641-99-000405 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990328 FILED AS OF DATE: 19990511 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: 1227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06383 FILM NUMBER: 99616949 BUSINESS ADDRESS: STREET 1: 333 E GRACE ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8046496000 10-Q 1 MEDIA GENERAL, INC. 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 28, 1999 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. Franklin 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 2, 1999. Class A Common shares: 26,351,205 Class B Common shares: 556,574 MEDIA GENERAL, INC. TABLE OF CONTENTS FORM 10-Q REPORT MARCH 28, 1999
Page ---- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets - March 28, 1999, and December 27, 1998 1 Consolidated Condensed Statements of Operations - Three months ended March 28, 1999, and March 29, 1998 3 Consolidated Condensed Statements of Cash Flows - Three months ended March 28, 1999, and March 29, 1998 4 Notes to Consolidated Condensed Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 14 (a) Exhibits (b) Reports on Form 8-K Signatures 15
PART I - FINANCIAL INFORMATION Item 1. Financial Statements
MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (000's except shares) (Unaudited) March 28, December 27, 1999 1998 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 5,757 $ 7,637 Accounts receivable - net 100,244 110,067 Inventories 21,713 20,341 Other 28,304 38,181 -------------- -------------- Total current assets 156,018 176,226 -------------- -------------- Investments in unconsolidated affiliates 149,658 146,702 Other assets 53,370 45,818 Property, plant and equipment - net 494,566 496,797 Excess of cost over fair value of net identifiable assets of acquired businesses - net 647,007 651,391 FCC licenses and other intangibles - net 396,248 400,412 -------------- -------------- $ 1,896,867 $ 1,917,346 ============== ==============
See accompanying notes. 1
MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (000's except shares) (Unaudited) March 28, December 27, 1999 1998 -------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 31,586 $ 41,050 Accrued expenses and other liabilities 105,503 106,047 Income taxes payable 3,363 --- -------------- -------------- Total current liabilities 140,452 147,097 -------------- -------------- Long-term debt 911,023 928,101 Deferred income taxes 243,424 244,968 Other liabilities and deferred credits 119,875 119,831 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 26,318,493 and 26,214,721 shares 131,592 131,074 Class B, authorized 600,000 shares; issued 556,574 shares 2,783 2,783 Additional paid-in capital 22,748 18,694 Unearned compensation (4,123) (1,050) Retained earnings 329,093 325,848 -------------- -------------- Total stockholders' equity 482,093 477,349 -------------- -------------- $ 1,896,867 $ 1,917,346 ============== ==============
See accompanying notes. 2
MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (000's except for per share data) Three Months Ended March 28, March 29, 1999 1998 -------------- -------------- Revenues $ 191,811 $ 196,034 -------------- -------------- Operating costs: Production costs 96,416 98,239 Selling, distribution and administrative 53,419 52,789 Depreciation and amortization 20,090 19,560 -------------- -------------- Total operating costs 169,925 170,588 -------------- -------------- Operating income 21,886 25,446 -------------- -------------- Other income (expense): Interest expense (15,355) (16,232) Investment income - unconsolidated affiliates 5,022 5,918 Other, net 305 (517) -------------- -------------- Total other income expense (10,028) (10,831) -------------- -------------- Income from continuing operations before income taxes 11,858 14,615 Income taxes 4,950 5,692 -------------- -------------- Income from continuing operations 6,908 8,923 Income from discontinued Cable operations, net of income taxes -- Note 2 4,398 3,822 -------------- -------------- Net income $ 11,306 $ 12,745 ============== ============== Earnings per common share: Income from continuing operations $ 0.26 $ 0.34 Income from discontinued Cable operations 0.16 0.14 -------------- -------------- Net income $ 0.42 $ 0.48 ============== ============== Earnings per common share and equivalent - assuming dilution: Income from continuing operations $ 0.26 $ 0.33 Income from discontinued Cable operations 0.16 0.14 -------------- -------------- Net income $ 0.42 $ 0.47 ============== ============== Dividends paid per common share $ 0.15 $ 0.14 ============== ==============
See accompanying notes. 3
MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (000's) Three Months Ended ------------------------------------ March 28, March 29, 1999 1998 ------------------------------------ Operating activities: Net income $ 11,306 $ 12,745 Adjustments to reconcile net income: Depreciation and amortization 26,226 26,283 Deferred income taxes (819) (1,668) Investment income -- unconsolidated affiliates, net of distributions (1,989) 1,782 Change in assets and liabilities: Accounts receivable and inventories 7,681 15,217 Other (5,651) (4,832) -------------- -------------- Net cash provided by operating activities 36,754 49,527 -------------- -------------- Investing activities: Capital expenditures (15,477) (10,619) Purchase of businesses --- (92,613) Other, net (2,723) 1,153 -------------- -------------- Net cash used by investing activities (18,200) (102,079) -------------- -------------- Financing activities: Increase in debt 91,000 184,000 Payment of debt (108,231) (127,071) Dividends paid (4,030) (3,736) Other, net 827 1,549 -------------- -------------- Net cash (used) provided by financing activities (20,434) 54,742 -------------- -------------- Net (decrease) increase in cash and cash equivalents (1,880) 2,190 Cash and cash equivalents at beginning of year 7,637 3,504 -------------- -------------- Cash and cash equivalents at end of period $ 5,757 $ 5,694 ============== ============== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 14,989 $ 16,344 Income taxes $ 334 $ 6,096
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 27, 1998. 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 1998 have been reclassified to conform with the current year's presentation. The reclassifications have no effect on net income as previously reported. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. 2. On April 22, 1999, the Company agreed to sell all of its cable operations to Cox Communications, Inc., for approximately $1.4 billion in cash. The transaction, which is subject to various municipal and regulatory approvals, is expected to close later in 1999 and will result in a substantial gain for the Company. The results of the Cable Segment have been presented as discontinued operations in the accompanying consolidated condensed statements of operations as follows:
(in thousands) March 28, 1999 March 29, 1998 -------------- -------------- Revenues $40,388 $38,647 Costs and expenses 33,325 32,538 ------- ------- Income before income taxes 7,063 6,109 Income taxes 2,665 2,287 ------- ------- Income from discontinued Cable operations $ 4,398 $ 3,822 ======= =======
At March 28, 1999, the accompanying consolidated condensed balance sheet included the following approximate amounts related to the Cable operations: current assets of $15 million, noncurrent assets of $105 million, current liabilities of $25 million, and noncurrent liabilities of $25 million. The Company is considering its options for the use of the proceeds from the sale. However, income from continuing operations reflected in the accompanying consolidated condensed statements of operations does not include any proforma adjustments or other allocations to reflect the potential use of the proceeds to repay debt, repurchase shares, or acquire new broadcast television or publishing properties and, as such, are not fully indicative of the ongoing operations of the Company. 3. On July 1, 1998, the Company acquired, for approximately $40 million, the assets of the Hickory Daily Record, a daily newspaper in northwestern North Carolina. The transaction was accounted for as a purchase and the Company's results of operations include the results of Hickory since the date of acquisition. Purchase price has been allocated to the assets acquired based on preliminary appraisal of estimated fair values. Such estimated values may change as the appraisal is finalized and more facts become known. On June 2, 1998, the Company completed the sale of its Kentucky newspaper properties for approximately $24 million. Additionally, the Company sold certain commercial printing assets in October 1998. 5 4. Inventories are principally raw materials. 5. The following table sets forth the Company's financial performance by segment:
Broadcast (in thousands) Publishing Television Newsprint Total - --------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 28, 1999 Consolidated revenues * $ 127,903 $ 37,061 $ 26,847 $ 191,811 ============================================================= Segment operating cash flow $ 39,447 $ 8,715 $ 769 $ 48,931 Allocated amounts: Equity in net income (loss) of unconsolidated affiliates (514) 3,950 3,436 License fees from unconsolidated affiliate 254 254 Depreciation and amortization (6,329) (2,704) (1,876) (10,909) ------------------------------------------------------------- Segment profit $ 32,604 $ 6,011 $ 3,097 41,712 ================================================= Unallocated amounts: Interest expense (15,355) Acquisition intangible amortization (8,484) Corporate expenses (6,800) Other 785 --------- Consolidated income from continuing operations before income taxes $ 11,858 ========= - --------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 29, 1998 Consolidated revenues * $ 125,792 $ 37,527 $ 32,715 $ 196,034 ============================================================= Segment operating cash flow $ 36,072 $ 9,564 $ 5,460 $ 51,096 Allocated amounts: Equity in net income of unconsolidated affiliates 616 3,768 4,384 License fees from unconsolidated affiliate 268 268 Depreciation and amortization (6,156) (2,619) (1,704) (10,479) ------------------------------------------------------------- Segment profit $ 30,532 $ 6,945 $ 7,792 45,269 ================================================= Unallocated amounts: Interest expense (16,232) Acquisition intangible amortization (8,757) Corporate expenses (5,380) Other (285) --------- Consolidated income from continuing operations before income taxes $ 14,615 ===================================================================================================
* Intercompany revenues are less than 1% of consolidated revenues and have been eliminated. Cable Segment results have not been presented in the tables above as they are reflected as income from discontinued operations in the consolidated condensed statements of operations. 6 6. The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
Quarter Ended March 28, 1999 Quarter Ended March 29, 1998 ---------------------------------------- ------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------------------------------------- ------------------------------------------- (in thousands, except per share amounts) BASIC EPS Income from continuing operations available to common stockholders $ 6,908 26,646 $ 0.26 $ 8,923 26,503 $ 0.34 ========= ========= EFFECT OF DILUTIVE SECURITIES Stock options 265 262 Restricted stock and other (10) 111 (5) 79 ------------------------ ------------------------ DILUTED EPS Income from continuing operations available to common stockholders + assumed conversions $ 6,898 27,022 $ 0.26 $ 8,918 26,844 $ 0.33 ====================================== ===========================================
7 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. ACQUISITIONS AND DISPOSITIONS In April 1999, the Company announced an agreement to sell its Cable operations, located primarily in Fairfax County and Fredericksburg, Virginia, to Cox Communications, Inc. The transaction is valued at approximately $1.4 billion and is expected to close later this year. See Note 2 of this Form 10-Q for further details about the Cable disposition. See Note 3 of this Form 10-Q for information about 1998 acquisitions and dispositions which affect Segment comparability. CONSOLIDATED OPERATING RESULTS (IN THOUSANDS, EXCEPT PER SHARE DATA)
First Quarter Ended --------------------------------------------------- March 28, March 29, 1999 1998 Change ----------- ----------- ----------- Revenues $ 191,811 $ 196,034 (2) % Operating Income 21,886 25,446 (14) Income from Continuing Operations 6,908 8,923 (23) Income from Discontinued Cable Operations 4,398 3,822 15 Net Income 11,306 12,745 (11) Earnings Per Share 0.42 0.48 (13) Earnings Per Share - Assuming Dilution 0.42 0.47 (11)
The results of the Cable Segment have been presented as discontinued operations in the accompanying consolidated condensed statements of operations. However, these statements do not include any proforma adjustments or other allocations to reflect the potential use of the proceeds to repay debt, repurchase shares, or acquire new broadcast television or publishing properties and, as such, are not fully indicative of the ongoing operations of the Company. SEGMENT OPERATING RESULTS Each segment's operating results include segment operating cash flow information in addition to revenues, operating expense and operating income. The segment operating cash flow amounts presented represent operating income plus depreciation and amortization. The Company believes the presentation of operating cash flow amounts is important for several reasons. First, fluctuations in depreciation and amortization from year to year are not necessarily indicative of the underlying performance of a company. Second, the year-over-year change in operating cash flow can be a useful measure of performance and presents a meaningful indicator of results that may occur in future periods. Finally, acquisition values of communications and media businesses are often based on multiples of operating cash flow. 8 Operating income, in the tables that follow, differs from segment profit, as presented in Note 5 of this Form 10-Q, because segment profit includes investment income from unconsolidated affiliates. PUBLISHING (IN THOUSANDS)
First Quarter Ended --------------------------------------------------- March 28, March 29, 1999 1998 Change ----------- ----------- ----------- Revenues $ 127,903 $ 125,792 2 % Operating Expense 94,785 95,876 (1) Operating Income 33,118 29,916 11 Depreciation & Amortization 6,329 6,156 3 Segment Operating Cash Flow 39,447 36,072 9
The preceding chart contains the operating results of the Publishing Segment, including acquisitions and dispositions. In the first quarter of 1999, Publishing Segment revenues decreased $1.7 million while operating income increased $.6 million from the prior-year quarter as a result of net acquisitions and dispositions completed after the first quarter of 1998. Excluding acquisitions and dispositions, Publishing revenues increased $3.8 million in the first quarter of 1999 from the comparable 1998 period. At the Company's three largest metropolitan newspapers, revenues rose $2.5 million due to increases in average advertising rates and in linage, up 2.6% and 1%, respectively. This first quarter advertising increase was principally the result of a $1.3 million rise in general advertising (led by the telecommunications category), along with solid contributions from retail and classified advertising. Additionally, the Company's daily and weekly community newspaper revenues increased $1.2 million over last year's first quarter, primarily on the strength of classified revenues (driven by the automotive and employment categories). Publishing operating expense, excluding acquisitions and dispositions, increased $1.2 million in the first quarter of 1999. This increase was more than fully accounted for by a $2.1 million increase in employee compensation and benefit expense over the comparable prior-year quarter, which was partially offset by a $.9 million decrease in newsprint expense, down due to lower cost per ton. Excluding acquisitions and dispositions, operating income for the Publishing Segment rose $2.6 million in the first quarter of 1999 from the prior-year period. The improved operating results were due to robust advertising revenues and a decline in newsprint expense, which were more than sufficient to offset increased employee compensation and benefit expense. Investment income earned from the Company's Denver Newspapers, Inc. (DNI), affiliate decreased from income of $616 thousand to a loss of $514 thousand in the first quarter of 1999 from the prior-year equivalent quarter. This reduced income was primarily attributable to increased circulation and newsprint expense, which was only partially offset by the rise in circulation revenues, all the result of circulation gains in the intensely competitive Colorado market. 9 BROADCAST TELEVISION (IN THOUSANDS)
First Quarter Ended --------------------------------------------------- March 28, March 29, 1999 1998 Change ----------- ----------- ----------- Revenues $ 37,061 $ 37,527 (1) % Operating Expense 31,050 30,582 2 Operating Income 6,011 6,945 (13) Depreciation & Amortization 2,704 2,619 3 Segment Operating Cash Flow 8,715 9,564 (9)
Broadcast revenues declined $.4 million in the first quarter of 1999. This modest decrease was attributable to weak national advertising revenues, most pronounced at the Company's largest station, WFLA-TV (NBC) in Tampa, Florida, combined to a lesser degree with decreased political advertising revenues due to the absence of congressional and presidential elections this year. Together, these weak results more than offset a solid contribution from local advertising revenues, led by the telecommunications and department store categories. The Segment's falling national and political advertising revenues reflect the decreased time sales which have resonated throughout the broadcast industry; however, the Segment's overall time sales are well ahead of those posted by the industry as a whole. Operating expense in the Broadcast Segment increased $.5 million in the first three months of 1999. Programming costs and employee compensation and benefit expense increased 16% and 5%, respectively. These increases were reflective of improved program offerings and enhanced benefits provided by the Company's new benefits program. They were only partially offset by the absence of certain 1998 expenses related to the repositioning and relaunching efforts at several stations. Broadcast operating income decreased $.9 million in the first quarter of 1998. The drop was attributable to weak national advertising revenues and higher programming expense (as the Company enhances its program offerings), as well as increased employee compensation and benefit expense. NEWSPRINT (IN THOUSANDS)
First Quarter Ended --------------------------------------------------- March 28, March 29, 1999 1998 Change ----------- ----------- ----------- Revenues $ 26,847 $ 32,715 (18) % Operating Expense 27,954 28,959 (3) Operating Income (Loss) (1,107) 3,756 --- Depreciation & Amortization 1,876 1,704 10 Segment Operating Cash Flow 769 5,460 (86)
Newsprint Segment revenues decreased $5.9 million in the first quarter of 1999, reflecting the results of the Company's Garden State Paper (Garden State) newsprint mill, located in Garfield, New Jersey. This decline resulted from a 6% decrease in the average realized selling price per ton, combined with a 14% decline in tons sold. Newsprint selling prices decreased steadily over the first quarter of 1999, with average realized newsprint selling prices falling from $528 per ton in December of 1998 to $470 per ton in March of 1999, due primarily to an excess supply from overseas. 10 Despite the large decline in tons sold, Newsprint Segment operating expense only dropped $1 million in 1999 from the comparable 1998 amount. A decrease in tons produced, due in part to early year production difficulties, and a 13% rise in the cost of Garden State's principal raw material, recovered newspapers, resulted in a $42 cost per ton increase. Newsprint operating income declined $4.9 million, from a profit of $3.8 million in 1998 to a loss of $1.1 million in 1999's first quarter. The decrease resulted primarily from a $30 erosion in average realized selling price per ton as compared to the year-ago quarter. The Company's investment income from its Southeast Paper Manufacturing Company (SEPCO) newsprint affiliate increased modestly to $4 million in the first three months of 1999 over the comparable year-ago period. SEPCO's revenues remained essentially flat as a 5.3% rise in tons sold was basically offset by a 4.5% decrease in the average realized selling price while operating expenses remained level. INTEREST EXPENSE Interest expense of $15.4 million represented a $.9 million decrease in the first quarter of 1999 from the comparable year-earlier period. The decrease was due to a $52 million decline in average debt outstanding, as the Company used funds generated from operations to reduce its outstanding debt. The Company's average effective borrowing rate remained just under 7% in both the first quarter of 1999 and 1998. The Company has interest rate swaps totaling $725 million with maturities ranging from less than one year to five years. These swap agreements effectively convert most of the Company's variable rate debt to fixed rate debt at interest rates approximating 6.8%. INCOME TAXES The Company's effective tax rate was 41.7% in the first quarter of 1999, up from 39% in the previous year's comparable period due to a reduction in tax benefits related to the Company's investment in unconsolidated affiliates and an adverse change in tax law limiting the deductibility of company-owned life insurance. Despite this increase in effective tax rate, income tax expense dropped $.7 million from the first quarter of 1998 due to a pretax earnings decrease of $2.8 million. INCOME FROM CONTINUING OPERATIONS Income from continuing operations for 1999's first quarter was $6.9 million ($0.26 per share, both basic and assuming dilution) compared to $8.9 million ($0.34 per share, or $0.33 per share - assuming dilution) in the first three months of 1998. This $2 million decrease was more than fully accounted for by the Company's Newsprint Segment which posted a 60% quarter-over-quarter profit decrease, as newsprint prices continued to be subject to disadvantageous supply and demand factors. Partially offsetting the poor results posted by the Newsprint Segment was a 7% rise in the Publishing Segment's performance. Additionally, a 5% decrease in interest expense resulting from lower average debt levels more than offset increased Corporate expense due to personnel and other costs related to the implementation of new company-wide financial and human resource systems. 11 INCOME FROM DISCONTINUED CABLE OPERATIONS As mentioned earlier, in April 1999, the Company announced an agreement for the sale of its Cable operations to Cox Communications, Inc.; the sale is expected to close later this year. Income from discontinued Cable operations increased $.6 million to $4.4 million in the first quarter of 1999. The increase was primarily attributable to the Company's Fairfax County, Virginia, cable system, as a result of a 2.5% increase in the number of subscribers (to 242,600 at March 28, 1999), together with a $.7 million rise in pay-per-view revenues due to additional special events during this year's first quarter. Partially offsetting these revenue gains was a $1.2 million rise in franchise fees precipitated by increased revenues and a higher fee structure in the new franchise agreements signed in mid-1998 and early 1999. Cable Segment results in the first quarter of 1999 also included income from the Company's Greater Washington Interconnect (GWI) affiliate. GWI is a cable advertising interconnect formed with several other cable providers in the metro Washington, D.C., area for the sole purpose of collectively selling national and regional spot advertising throughout the region. GWI provided $.4 million in income in the first three months of this year. LIQUIDITY AND CAPITAL RESOURCES Funds generated by operating activities during the first quarter of 1999 totaled $36.8 million, down $12.8 million from the comparable period of 1998. The decrease was due to a combination of factors, including: a $7.5 million reduction of funds generated in the current year from accounts receivable and inventory changes, the absence of a $5 million distribution from SEPCO and a $1.4 million decrease in net income. Funds generated from operating activities supplied $15 million for capital expenditures, $4 million for the payment of dividends to stockholders and $17 million to reduce long-term debt. Total debt outstanding at March 28, 1999, was $911 million, down $46 million from the year-ago level of $957.5 million, and down $17 million during the first quarter of 1999. The Company's unused credit lines available from its committed revolving credit facility were $350 million at March 28, 1999. The Company anticipates a large influx of cash late in 1999 from the sale of its Cable Segment. See Note 2 of this Form 10-Q for details. These funds, together with internally generated funds provided by operations during 1999 and existing credit facilities, will be more than adequate for the cash needs of the Company. YEAR 2000 The Company continues to address issues regarding the transition to the Year 2000 through a specially created task force comprised of corporate, divisional and operating unit personnel. The project has been divided into five phases: 1) identification/analysis, 2) plan development/scheduling, 3) remediation, 4) testing/integration, and 5) monitoring/continuous improvement. The Company continues to make progress in all phases for both information systems and operating systems with embedded technology. The Company believes its significant systems are ready for the Year 2000 and remains on schedule to complete the project by the third quarter of 1999. Inherent in all phases of the above is the assessment of the Year 2000 compliance by key suppliers and customers. The Company has initiated formal communications with these parties and most have indicated that there should be no disruption in their relationships with us. However, the Company cannot assure timely compliance of third parties and therefore could be adversely affected by failure of a significant third party to become Year 2000 compliant. 12 Amounts expended exclusively to ensure Year 2000 compliance continue to be funded by cash flow from operations and have not had, nor are they expected to have, a material impact on the Company's financial position, results of operations or cash flows. While the Company believes its significant systems are ready for the Year 2000, its financial condition still could be adversely impacted by disruptions related to the Year 2000. The Company does not consider the possibility of such an occurrence to be reasonably likely. If Year 2000 disruptions occur, the Company believes its existing business recovery plans are adequate to address reasonably likely Year 2000 issues. However, the Company has a separate initiative underway to revise its business recovery plans; the initiative is much broader than the Year 2000 project but will certainly consider Year 2000 issues. OUTLOOK The sale of the Company's Cable operations will facilitate growth opportunities while providing tremendous financial flexibility. The Company is reviewing and evaluating its options as to the most advantageous use of the proceeds to further enhance shareholder value, which may include paying down debt, initiating a share repurchase program and acquiring additional television and newspaper properties. The sale of our Cable operations will also allow for increased focus on newspapers and broadcast television in our chosen southeastern market. 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule for the period ended March 28, 1999. 27.2 Restated Financial Data Schedule for the period ended March 29, 1998. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended March 28,1999. 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 11, 1999 /s/ J. Stewart Bryan III ------------------------------------ J. Stewart Bryan III, Chairman, President and Chief Executive Officer DATE: May 11, 1999 /s/ Marshall N. Morton ------------------------------------ Marshall N. Morton Senior Vice President and Chief Financial Officer 15 EX-27 2 EXHIBIT 27.1 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-26-1999 MAR-28-1999 5,757 0 107,756 7,512 21,713 156,018 1,121,854 627,288 1,896,867 140,452 911,023 0 0 134,375 347,718 1,896,867 191,811 191,811 96,416 96,416 20,090 0 15,355 11,858 4,950 6,908 4,398 0 0 11,306 0.42 0.42
EX-27 3 EXHIBIT 27.2 1998 RESTATED 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-27-1998 MAR-29-1998 5,694 0 104,150 6,389 15,949 145,952 1,093,927 591,815 1,885,848 136,821 957,515 0 0 133,537 290,105 1,885,848 196,034 196,034 98,239 98,239 19,560 0 16,232 14,615 5,692 8,923 3,822 0 0 12,745 0.48 0.47
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