-----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, HacIliXQNrXD38+a8hlh+3DXwmjeze7XIfhhmZApcDY2KS4JoMKubNjqR1Lc7FGi N9Xw01MYnRFp9ENCLZJxqA== 0001127264-01-500058.txt : 20010822 0001127264-01-500058.hdr.sgml : 20010822 ACCESSION NUMBER: 0001127264-01-500058 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010820 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010821 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06383 FILM NUMBER: 1719665 BUSINESS ADDRESS: STREET 1: 333 E GRACE ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8046496000 8-K 1 front.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: August 20, 2001 (Date of earliest event reported) Media General, Inc. (Exact name of registrant as specified in its charter) Virginia 001-6383 54-0850433 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation or organization) File Number) Identification No.) 333 East Franklin Street Richmond, Virginia 23219 (804) 649-6000 (Address including zip code, and telephone number, including area code, of registrant's principal executive offices) (Former name or former address, if changed since last report.) ITEM 5. OTHER EVENTS This Current Report on Form 8-K is being filed to provide audited and unaudited guarantor/non-guarantor financial statements in relation to the guarantees being provided by Media General Financial Services, Inc.; Media General Communications, Inc., MG Broadcasting of Birmingham Holdings, LLC; Media General Operations, Inc.; The Tribune Company Holdings, Inc.; Media General Broadcasting of South Carolina Holdings, Inc.; MG Broadcasting of Birmingham II, LLC; Professional Communications Systems, Inc.; NES II, Inc. and Virginia Paper Manufacturing Corp. of Media General, Inc.'s senior debt securities under its $1.2 billion registration statement on Form S-3 dated August 15, 2001 (file nos. 333-67612 and 333-65292). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibits 23 Consent of Independent Public Accountants 99.1 Report of Independent Public Accountants Consolidated Statements of Operations for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Consolidated Balance Sheets as of December 31, 2000 and December 26, 1999 Consolidated Statements of Cash Flows for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Notes to Consolidated Financial Statements 99.2 Consolidated Condensed Statements of Operations for the second quarter and six months ended July 1, 2001 and June 25, 2000 Consolidated Condensed Balance Sheets as of July 1, 2001 and December 31, 2000 Consolidated Condensed Statements of Cash Flows for the six months ended July 1, 2001 and June 25, 2000 Notes to Consolidated Condensed Financial Statements SIGNATURE 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. /s/ Marshall N. Morton _____________________________ Marshall N. Morton Vice Chairman and Chief Financial Officer Date: August 20, 2001 EXHIBIT LIST Exhibits 23 Consent of Independent Public Accountants 99.1 Report of Independent Public Accountants Consolidated Statements of Operations for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Consolidated Balance Sheets as of December 31, 2000 and December 26, 1999 Consolidated Statements of Cash Flows for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, December 26, 1999 and December 27, 1998 Notes to Consolidated Financial Statements 99.2 Consolidated Condensed Statements of Operations for the second quarter and six months ended July 1, 2001 and June 25, 2000 Consolidated Condensed Balance Sheets as of July 1, 2001 and December 31, 2000 Consolidated Condensed Statements of Cash Flows for the six months ended July 1, 2001 and June 25, 2000 Notes to Consolidated Condensed Financial Statements EX-23 3 ex_23.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23 Consent of Independent Auditors We consent to the use of our report dated January 26, 2001 (except Note 10, as to which the date is August 17, 2001), with respect to the consolidated financial statements of Media General, Inc. for the fiscal year ended December 31, 2000, included in this Current Report on Form 8-K. We also consent to the incorporation by reference in the Annual Report (Form 10- K) of Media General, Inc., of our report dated January 26, 2001 (except Note 10, as to which the date is August 17, 2001), with respect to the consolidated financial statements of Media General, Inc. for the fiscal year ended December 31, 2000, included in this Current Report on Form 8-K. We also consent to the incorporation by reference in the following Registration Statements of our report dated January 26, 2001 (except Note 10, as to which the date is August 17, 2001), with respect to the consolidated financial statements of Media General, Inc. for the fiscal year ended December 31, 2000, included in this Current Report on Form 8-K. Registration Statement Number Description ----------------------------- ----------- 2-56905 Form S-8 33-23698 Form S-8 33-26853 Form S-3 33-52472 Form S-8 333-16731 Form S-8 333-16737 Form S-8 333-69527 Form S-8 333-54624 Form S-8 333-57538 Form S-8 333-65292 Form S-3 333-67612 Form S-3 Richmond, Virginia /s/ Ernst & Young August 17, 2001 EX-99 4 ex_991.txt FINANCIAL STATEMENTS FOR THREE YEARS ENDED 12/31/00 EXHIBIT 99.1 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 31, 2000, and December 26, 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three fiscal years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on 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 31, 2000, and December 26, 1999, and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. January 26, 2001 except for Note 10, as to which the date is /s/ Ernst & Young LLP August 17, 2001 Richmond, Virginia Media General, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Fiscal Years Ended --------------------------------------------- December 31, December 26, December 27, 2000 1999 1998 (53 weeks) - -------------------------------------------------------------------------------------------------- Revenues $ 830,601 $ 692,902 $ 688,677 Operating costs: Production 343,949 288,677 299,807 Selling, distribution and administrative 261,272 209,209 205,523 Depreciation and amortization 101,547 72,440 69,055 - --------------------------------------------------------------------------------------------------- Total operating costs 706,768 570,326 574,385 - --------------------------------------------------------------------------------------------------- Operating income 123,833 122,576 114,292 - --------------------------------------------------------------------------------------------------- Other income (expense): Interest expense (42,558) (45,014) (61,027) Investment income - unconsolidated affiliates 5,131 9,067 22,193 Gain on sale of Denver Newspapers, Inc. stock --- 30,983 --- Other, net 16,520 12,637 (636) - --------------------------------------------------------------------------------------------------- Total other income (expense) (20,907) 7,673 (39,470) - --------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes and extraordinary item 102,926 130,249 74,822 Income taxes 39,369 51,431 26,967 - --------------------------------------------------------------------------------------------------- Income from continuing operations before extra- ordinary item 63,557 78,818 47,855 Discontinued operations: Income (loss) from discontinued operations (net of income tax benefit of $2,471 in 2000; income taxes of $2,576 in 1999 and $13,334 in 1998) (4,350) 5,107 23,019 Gain (loss) on sale of operations (net of income tax benefit of $2,604 in 2000 and income taxes of $509,760 in 1999) (5,488) 798,719 --- Extraordinary item from early redemption of debt (net of income tax benefit of $800) --- (1,328) --- - --------------------------------------------------------------------------------------------------- Net income $ 53,719 $ 881,316 $ 70,874 =================================================================================================== Earnings per common share: Income from continuing operations before extraordinary item $ 2.66 $ 2.97 $ 1.80 Income (loss) from discontinued operations (0.41) 30.33 0.87 Extraordinary item --- (0.05) --- --------------------------------------------- Net income $ 2.25 $ 33.25 $ 2.67 ============================================= Earnings per common share - assuming dilution: Income from continuing operations before extraordinary item $ 2.63 $ 2.93 $ 1.78 Income (loss) from discontinued operations (0.41) 29.90 0.85 Extraordinary item --- (0.05) --- --------------------------------------------- Net income $ 2.22 $ 32.78 $ 2.63 =============================================
Notes to Consolidated Financial Statements begin on page 6. Page 1 Media General, Inc. CONSOLIDATED BALANCE SHEETS (In thousands, except shares and per share amounts)
ASSETS December 31, December 26, 2000 1999 - --------------------------------------------------------------------------------------------------- Current assets: Cash, cash equivalents and short-term investments $ 10,404 $ 646,046 Accounts receivable (less allowance for doubtful accounts 2000 - $7,471; 1999 - $7,088) 117,254 102,834 Inventories 7,168 14,282 Other 38,054 33,572 --------------- -------------- Total current assets 172,880 796,734 - --------------------------------------------------------------------------------------------------- Investments in unconsolidated affiliates 90,739 87,871 - --------------------------------------------------------------------------------------------------- Other assets 59,565 58,945 - --------------------------------------------------------------------------------------------------- Property, plant and equipment, at cost: Land 30,465 28,432 Buildings 157,504 164,384 Machinery and equipment 459,012 534,514 Construction in progress 6,795 10,749 Accumulated depreciation (273,826) (356,603) --------------- -------------- Net property, plant and equipment 379,950 381,476 - --------------------------------------------------------------------------------------------------- Excess of cost over fair value of net identifiable assets of acquired businesses (less accumulated amortization 2000 - $80,817; 1999 - $58,553) 958,443 631,597 - --------------------------------------------------------------------------------------------------- FCC licenses and other intangibles (less accumulated amortization 2000 - $81,555; 1999 - $51,657) 899,705 383,751 - --------------------------------------------------------------------------------------------------- Total assets $ 2,561,282 $ 2,340,374 ===================================================================================================
Notes to Consolidated Financial Statements begin on page 6. Page 2 LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, December 26, 2000 1999 - --------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 27,203 $ 32,032 Accrued expenses and other liabilities 87,338 75,190 Income taxes payable --- 508,966 Current maturity of long-term debt --- 13,000 --------------- --------------- Total current liabilities 114,541 629,188 - ---------------------------------------------------------------------------------------------------- Long-term debt 822,077 46,838 - ---------------------------------------------------------------------------------------------------- Deferred income taxes 351,491 217,437 - ---------------------------------------------------------------------------------------------------- Other liabilities and deferred credits 101,251 116,009 - ---------------------------------------------------------------------------------------------------- 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 22,158,070 and 25,911,614 shares 110,790 129,558 Class B, authorized 600,000 shares; issued 556,574 shares 2,783 2,783 Additional paid-in capital --- 3,040 Accumulated other comprehensive income - unrealized gains (losses) on equity securities (3,481) 7,392 Unearned compensation (2,145) (2,973) Retained earnings 1,063,975 1,191,102 --------------- --------------- Total stockholders' equity 1,171,922 1,330,902 - ---------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,561,282 $ 2,340,374 ====================================================================================================
Notes to Consolidated Financial Statements begin on page 6. Page 3 Media General, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Fiscal Years Ended --------------------------------------------- December 31, December 26, December 27, 2000 1999 1998 (53 weeks) - --------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 53,719 $ 881,316 $ 70,874 Adjustments to reconcile net income: Extraordinary item --- 1,328 --- Depreciation and amortization 105,293 97,532 100,201 Deferred income taxes 3,327 (5,484) (5,945) Provision for doubtful accounts 4,751 4,676 6,269 Investment income - unconsolidated affiliates (5,131) (10,333) (22,193) Distribution from unconsolidated affiliates 3,400 30,372 7,700 Gain on sale of Denver Newspapers, Inc. common stock --- (30,983) --- Net loss on disposition of Garden State Paper 13,774 --- --- Net gain on disposition of Cable operations (8,286) (798,719) --- ------------- ------------ ------------- Net cash provided by operations 170,847 169,705 156,906 Change in assets and liabilities: Accounts receivable and inventories (13,457) (6,317) (6,810) Other current assets (829) (2,694) 15,986 Accounts payable, accrued expenses and other liabilities (9,513) (33,778) (5,631) Income taxes payable (516,812) 1,868 (10,016) Other, net (2,842) (5,765) (11,044) ------------- ------------ ------------- Net cash (used) provided by operating activities (372,606) 123,019 139,391 - ---------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (42,873) (60,829) (49,480) Purchase of businesses (857,570) --- (132,680) Proceeds from disposition of Garden State Paper 76,623 --- --- Proceeds from disposition of Cable operations 10,063 1,404,407 --- Proceeds from sale of other businesses 3,825 8,058 28,123 Denver Newspapers, Inc.: Proceeds from sale of common stock --- 39,000 --- Redemption of preferred stock --- 34,000 --- Proceeds (purchases) of short-term investments - net 390,748 (390,748) --- Other investments (12,283) (6,780) --- Other, net 255 1,198 2,924 ------------- ------------ ------------- Net cash (used) provided by investing activities (431,212) 1,028,306 (151,113) - ---------------------------------------------------------------------------------------------------- Cash flows from financing activities: Increase in debt 1,095,000 268,000 463,000 Repayment of debt (333,333) (1,136,509) (436,383) Stock repurchase (192,692) (22,743) --- Cash dividends paid (15,299) (16,062) (14,974) Other, net 5,248 3,650 4,212 ------------- ------------ ------------- Net cash provided (used) by financing activities 558,924 (903,664) 15,855 - ---------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (244,894) 247,661 4,133 Cash, cash equivalents and short-term investments: Cash and cash equivalents at beginning of year 255,298 7,637 3,504 ------------- ------------ ------------- Cash and cash equivalents at end of year 10,404 255,298 7,637 Short-term investments at end of year --- 390,748 --- ------------- ------------ ------------- Cash, cash equivalents and short-term investments at end of year $ 10,404 $ 646,046 $ 7,637 ====================================================================================================
Notes to Consolidated Financial Statements begin on page 6. Page 4 Media General, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except shares and per share amounts)
Accu- mulated Addi- Other tional Compre- Unearned Common Stock Paid-in hensive Compen- Retained ------------------ Total Class A Class B Capital Income sation Earnings - ----------------------------------------------------------------------------------------------------------------------------------- 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 shares 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 gain 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 shares 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 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 53,719 -- -- -- -- -- 53,719 Unrealized loss on equity securities (net of deferred tax benefit of $6,346) (10,873) -- -- -- (10,873) -- -- ----------- Comprehensive income 42,846 Cash dividends ($0.64 per share) (15,299) -- -- -- -- -- (15,299) Purchase and retirement of 3,890,136 Class A shares (192,817) (19,451) -- (7,819) -- -- (165,547) Exercise of options on 136,969 Class A shares 4,023 685 -- 3,338 -- -- -- Income tax benefits relating to restricted shares and exercised options 1,478 -- -- 1,478 -- -- -- Issuance of 5,723 Class A shares under dividend reinvestment plan 254 29 -- 225 -- -- -- Amortization and forfeitures of unearned compensation 535 (31) -- (262) -- 828 -- ----------- ---------- --------- -------- -------- ----------- ----------- Balance at December 31, 2000 $ 1,171,922 $ 110,790 $ 2,783 $ -- $ (3,481) $ (2,145) $ 1,063,975 ===================================================================================================================================
Notes to Consolidated Financial Statements begin on page 6. Page 5 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). 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. The Company's fiscal year ends on the last Sunday in December. Results for 2000 are for the 53-week period ended December 31, 2000, while results for 1999 and 1998 are for the 52-week periods ended December 26, 1999, and December 27, 1998, respectively. Note 2: Acquisitions, Dispositions and Discontinued Operations Over the past few years, the Company has completed several acquisitions. All of these 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 appraisals of estimated fair values. Such estimated values are preliminary for those acquisitions completed in 2000 and may change as more facts become known. The excess of the purchase price over the fair market value of the tangible net assets acquired was allocated to FCC licenses, other identifiable intangibles, and excess cost over net assets acquired and is being amortized on a straight-line basis over periods ranging from 3 to 40 years. In March 2000 the Company acquired the common stock of Spartan Communications, Inc. (Spartan); the transaction included 12 network-affiliated television stations and one UPN affiliate which is operated under a local marketing agreement. The total consideration approximated $610 million (including approximately $9 million of transaction costs and net of $5 million cash received). Approximately $500 million of the purchase price was funded with borrowings under an existing $1.2 billion revolving credit facility; concurrent with this acquisition, the Company entered into several new interest rate swap agreements as part of an overall risk management strategy (see Note 4). Approximately $540 million of the purchase price was allocated to FCC licenses and other identifiable intangibles and $129 million to excess cost over the net assets acquired. The following summary presents the Company's unaudited pro forma consolidated results of operations for the year ended December 31, 2000, and December 26, 1999, as if the Spartan acquisition had been completed at the beginning of each period. Certain Spartan items have been reclassified to conform with Media General's presentation. The pro forma information is presented for comparative purposes only and does not purport to be indicative of what would have occurred had the acquisition actually been made at such date, nor is it necessarily indicative of future operating results: Page 6
Pro Forma Pro Forma Year Ended Year Ended (In thousands, except per share amounts) December 31, 2000 December 26, 1999 - ------------------------------------------------------------------------------------------------------ Revenues $ 853,135 $ 804,834 ========== =========== Income from continuing operations before extraordinary item $ 57,966 $ 50,005 Discontinued operations (9,838) 803,826 Extraordinary item --- (1,328) ---------- ----------- Net income $ 48,128 $ 852,503 ========== =========== Income per common share: Income from continuing operations before extraordinary item $ 2.42 $ 1.88 Income (loss) from discontinued operations (0.41) 30.33 Extraordinary item --- (0.05) ---------- ----------- Net income $ 2.01 $ 32.16 ========== =========== Income per common share - assuming dilution: Income from continuing operations before extraordinary item $ 2.40 $ 1.86 Income (loss) from discontinued operations (0.41) 29.90 Extraordinary item --- (0.05) ---------- ----------- Net income $ 1.99 $ 31.71 ========== ===========
In August 2000 the Company acquired, for approximately $238 million, the assets of certain newspaper groups located in South Carolina and Alabama from Thomson Newspapers. This transaction was also funded with borrowings under the Company's existing $1.2 billion revolving credit facility. Additionally, in June 2000, the Company acquired a group of weekly newspapers in southwestern Virginia from Family Community Newspapers of Southwest Virginia, Inc., for approximately $9 million. The portion of the purchase price for these acquisitions allocated to identifiable intangibles (principally subscriber lists) was $6 million and to excess cost over the net assets acquired was $223 million. Pro forma information for these acquisitions has not been provided because such information would not differ significantly from the results provided above. In September 2000 the Company sold Garden State Paper (GSP) to an affiliate of Enron North America Corporation for approximately $76.6 million, including working capital. The Company recorded a loss of $13.8 million (net of income tax benefit of $6.2 million) which is subject to resolution with the buyer of certain income tax matters and other items. The transaction also included a seven-year, financial fixed-price newsprint agreement which the Company does not intend to retain. Concurrent with the sale, the Company retired $20 million of 7.125% municipal revenue bonds (see Note 4). In October 1999 the Company sold its cable operations to Cox Communications, Inc., for approximately $1.4 billion in cash, at which time the Company recorded a gain of $799 million (net of income taxes of $510 million). In the second quarter of 2000, certain final post-closing adjustments related to this sale resulted in an additional gain of $8.3 million (net of income taxes of $3.6 million). Immediately following the sale in 1999, approximately $735 million of the proceeds were used to pay off 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. Page 7 The following results of GSP and the Cable Segment have been presented as income (loss) from discontinued operations in the accompanying consolidated statements of operations:
Fiscal Years Ended --------------------------------------------- December 31, December 26, December 27, 2000 1999 1998 --------------------------------------------- Revenues $ 55,656 $ 225,670 $ 284,352 Costs and expenses 62,477 217,987 247,999 --------------------------------------------- Income (loss) before income taxes (6,821) 7,683 36,353 Income taxes (benefit) (2,471) 2,576 13,334 --------------------------------------------- Income (loss) from discontinued operations $ (4,350) $ 5,107 $ 23,019 =============================================
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. The portion of the purchase price for these acquisitions 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, coupled with proceeds from the disposition of the Kentucky newspaper properties. 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 original 20% ownership if that stock is sold to a third party or publicly offered. Additionally, the Company's preferred stock investment in DNI was redeemed in June 1999, for $34 million plus $19.2 million of accrued but unpaid dividends. Using the equity method, the Company recognized, on a one-month lag, 20% of Denver's net income applicable to common stockholders in 2000 and 1999 (after the sale), and 40% of net income applicable to common stockholders in 1999 (before the sale) and 1998. The Denver Post and the Denver Rocky Mountain News have entered into a joint-operating agreement, effective in January 2001, under which the competing newspapers combined their advertising, circulation and production operations, while maintaining separate newsrooms. The Company also has a one-third partnership interest in SP Newsprint Company (SPNC), a domestic newsprint manufacturer which also pays licensing fees to the Company. In November 1999, SPNC acquired Smurfit Newsprint Corporation's Newberg, Oregon mill. The Company has purchased, at market prices, approximately 40 thousand tons of newsprint from SPNC in each of the past three years. Retained earnings of the Company at December 31, 2000, included $22.6 million related to undistributed earnings of unconsolidated affiliates. Additionally, the Company owns approximately 7.4% of AdOne, L.L.P., a national online database of classified advertising and e-commerce, which is being accounted for under the equity method. Page 8 Note 4: Long-Term Debt and Other Financial Instruments Long-term debt at December 31, 2000, and December 26, 1999, was as follows: (In thousands) 2000 1999 - ------------------------------------------------------------------------------- Revolving credit facility $ 790,000 $ --- 8.62% senior notes due annually from 2001 to 2002 26,000 39,000 7.125% revenue bonds --- 20,000 Bank lines 5,000 --- Capitalized leases 1,077 838 Less: current maturity of long-term debt --- (13,000) ----------- ------------ Long-term debt $ 822,077 $ 46,838 =============================================================================== 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% each year by 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% (.375% at December 31, 2000), 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 31, 2000) on the unused portion of the facility at a rate based on its leverage ratio. The Company's debt covenants contain a minimum net worth requirement ($435.1 million at December 31, 2000), 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 31, 2000, aggregating $822.0 million are as follows: 2001 - $18.0 million; 2002 - $203.3 million; 2003 - $600.3 million; 2004 - $.2 million; 2005 - $.2 million. At December 31, 2000, 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 7% at December 31, 2000. In October 1999 the Company used proceeds from the sale of its cable operations (see Note 2) to pay off all amounts outstanding under its revolving credit agreements. The associated interest rate swap agreements covering $725 million of that debt 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 March 2000 the Company borrowed funds under the aforementioned credit facility to purchase Spartan Communications, Inc. (see Note 2); concurrent with this acquisition, the Company entered into several new interest rate swap agreements to manage interest cost and risk associated with increasing variable interest rates, primarily short-term changes in LIBOR. These interest rate swaps totaled $300 million in notional amount with maturities that range from less than one year to three years; they effectively convert a portion of the Company's variable rate debt to fixed rate debt with a weighted average interest rate approximating 7.4%. Prior to the adoption on January 1, 2001, of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, the Company used the accrual method to account for all interest rate swap agreements. Amounts which were due to or from interest rate swap counterparties were recorded as an adjustment to interest expense in the periods in which they accrued. The Company's exposure to credit loss on its interest rate swap agreements in the event of nonperformance by the counterparties is believed to be remote due to the Company's requirement that counterparties have a strong credit rating. In September 2000, concurrent with the sale of Garden State Paper (GSP), the Company retired $20 million of 7.125% municipal revenue bonds. In conjunction with the sale, the Company entered into a financial newsprint swap agreement that it does not intend to retain. The agreement, under which the Company receives a floating price per metric ton and pays a fixed price of $596 per metric ton, is being accounted for as a derivative under the accrual method. Predominantly, the agreement hedges the Company's exposure to changes in the cost of newsprint; however, a portion of the agreement currently exceeds the Company's newsprint usage. For the year ended December 31, 2000, the Company recognized an unrealized gain of approximately $1.2 million in "Other, net" on the accompanying Statement of Operations related to the change in fair value of the portion of the swap not designated as a hedge by the Company for the time period between the GSP sale and December 31, 2000. The Company's exposure to credit loss on its newsprint swap agreement in the event of nonperformance by the counterparty is believed to be remote due to the financial strength of that party. Page 9 Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities. These statements require that all derivatives be recognized as either assets or liabilities on the balance sheet at fair value. If a derivative is a hedge, depending upon the nature of the hedge, a change in its fair value will either be offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income (OCI) until the hedged item is recognized in earnings. Any difference between fair value of the hedge and the item being hedged, known as the ineffective portion, will be immediately recognized in earnings. The Company has several interest rate swap agreements and a newsprint swap agreement that are derivatives; the interest rate swaps and a designated portion of the newsprint swap qualify as cash flow hedges under the new standard. The interest rate swaps are not expected to have an impact on the Company's Statement of Operations but will affect the Company's Balance Sheet and Statement of Stockholders' Equity; the magnitude of the impact will vary over time dependent on market LIBOR rates. Changes in value of the effective portion of the newsprint swap will impact the Company's Balance Sheet and Statement of Stockholders' Equity, and changes in the ineffective portion will be recorded directly in the Statement of Operations. The magnitude of the impact will vary over time dependent principally on changes in future newsprint prices; currently, a $1 increase or decrease in the average newsprint price over the term of the contract would result in income or expense, respectively, to the Company of approximately $70 thousand. The table below includes information about the carrying values and estimated fair values of the Company's financial instruments at December 31, 2000 and December 26, 1999:
(In thousands) 2000 1999 - ----------------------------------------------------------------------------------------- Carrying Fair Carrying Fair Amounts Value Amounts Value - ----------------------------------------------------------------------------------------- Assets: Investments $ 13,318 $ 13,318 $ 20,648 $ 20,648 Newsprint swap agreement --- 11,991 --- --- Liabilities: Long-term debt: Revolving credit facility 790,000 790,000 --- --- 8.62% senior notes 26,000 26,478 39,000 39,696 7.125% revenue bonds --- --- 20,000 21,023 Bank lines 5,000 5,000 --- --- Interest rate swap agreements --- 5,324 --- --- - -----------------------------------------------------------------------------------------
The Company's investments which have a readily determinable value and are classified as available-for-sale are carried at fair value, with unrealized gains or losses, net of deferred taxes, reported as a separate component of stockholders' equity. The Company's other investments which do not have readily determinable fair values are carried at cost which approximates fair value. The fair values of the interest rate swaps and the newsprint swap were based on a discounted cash flow analysis of 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. The borrowings under the Company's revolving credit facility and bank lines approximated their fair value. Page 10 Note 5: Business Segments The Company, located primarily in the southeastern United States, is a diversified communications company which has two business segments: Publishing and Broadcasting. The Publishing Segment, the Company's largest based on revenue and segment profit, includes 25 daily newspapers and nearly 100 weekly newspapers and other publications, the Company's 20% interest in Denver, the Company's 7% interest in AdOne, LLP, as well as its online financial data service. The Broadcasting Segment consists of 26 network-affiliated broadcast television stations and a provider of equipment and studio design services. See Note 2 for a discussion of the disposition of the Company's Newsprint and Cable operations. 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 Denver and AdOne are not allocated to segment assets although the equity income is included in the Publishing Segment. Intercompany sales are accounted for as if the sales were 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. Information by segment is as follows:
(In thousands) Publishing Broadcasting Total - --------------------------------------------------------------------------------------------------- 2000 Consolidated revenues * $ 567,673 $ 262,928 $ 830,601 ======================================= Segment operating cash flow $ 177,653 $ 84,501 $ 262,154 Allocated amounts: Equity in net loss of unconsolidated affiliates (2,546) (2,546) Depreciation and amortization (26,303) (18,617) (44,920) --------------------------------------- Segment profit $ 148,804 $ 65,884 214,688 ========================= Unallocated amounts: Interest expense (42,558) Investment income - SP Newsprint 7,677 Acquisition intangibles amortization (52,501) Corporate expenses (35,535) Other 11,155 ---------- Consolidated income from continuing operations before income taxes $ 102,926 ========== Segment assets $ 1,024,068 $ 1,383,414 $2,407,482 Corporate 153,800 ---------- Consolidated assets $2,561,282 ========== Segment capital expenditures $ 18,577 $ 13,008 $ 31,585 Discontinued Newsprint capital expenditures 6,015 Corporate 5,273 ---------- Consolidated capital expenditures $ 42,873 ========== - ---------------------------------------------------------------------------------------------------
* Intercompany revenues are less than 1% of consolidated revenues and have been eliminated. Page 11
(In thousands) Publishing Broadcasting Total - --------------------------------------------------------------------------------------------------- 1999 Consolidated revenues * $ 524,017 $ 168,885 $ 692,902 ======================================= Segment operating cash flow $ 174,929 $ 47,854 $ 222,783 Allocated amounts: Equity in net loss of unconsolidated affiliates (673) (673) Depreciation and amortization (24,617) (10,542) (35,159) --------------------------------------- Segment profit $ 149,639 $ 37,312 186,951 ========================= Unallocated amounts: Interest expense (45,014) Investment income - SP Newsprint 6,567 Acquisition intangibles amortization (33,934) Corporate expenses (29,932) Gain on sale of Denver Newspapers, Inc. common stock 30,983 Other 14,628 ---------- Consolidated income from continuing operations before income taxes and extraordinary item $ 130,249 ========== Segment assets $ 788,625 $ 670,612 $1,459,237 Discontinued Newsprint assets 91,272 Corporate 789,865 ---------- Consolidated assets $2,340,374 ========== Segment capital expenditures $ 12,570 $ 14,389 $ 26,959 Discontinued Cable and Newsprint capital expenditures 30,902 Corporate 2,968 ---------- Consolidated capital expenditures $ 60,829 ========== - --------------------------------------------------------------------------------------------------- 1998 Consolidated revenues * $ 517,880 $ 170,797 $ 688,677 ======================================= Segment operating cash flow $ 155,452 $ 51,318 $ 206,770 Allocated amounts: Equity in net income of unconsolidated affiliate 3,226 3,226 Depreciation and amortization (23,627) (9,311) (32,938) --------------------------------------- Segment profit $ 135,051 $ 42,007 177,058 ========================= Unallocated amounts: Interest expense (61,027) Investment income - SP Newsprint 12,831 Acquisition intangibles amortization (34,111) Corporate expenses (23,011) Other 3,082 ---------- Consolidated income from continuing operations before income taxes $ 74,822 ========== Segment assets $ 809,803 $ 691,787 $1,501,590 Discontinued Cable and Newsprint assets 216,537 Corporate 199,219 ---------- Consolidated assets $1,917,346 ========== Segment capital expenditures $ 11,534 $ 10,061 $ 21,595 Discontinued Cable and Newsprint capital expenditures 26,065 Corporate 1,820 ---------- Consolidated capital expenditures $ 49,480 ========== ===================================================================================================
* Intercompany revenues are less than 1% of consolidated revenues and have been eliminated. Page 12 The substantial decrease and increase in assets attributable to Corporate during 2000 and 1999, respectively, was primarily due to short-term investments which were generated as a direct result of the sale of the Company's Cable operations in 1999. These investments were sold in 2000 to pay the income taxes related to that transaction, as well as to fund a portion of the Spartan acquisition. Note 6: Taxes on Income The Company accounts for income taxes in accordance with SFAS 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 for fiscal years 1997 and 1998 are currently under examination by the Internal Revenue Service. The Company's federal income tax returns have been examined by the Internal Revenue Service through fiscal year 1996 and settled through 1993. Various state 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 flow. Significant components of income taxes from continuing operations are as follows:
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------ Current: Federal $ 21,234 $ 45,895 $ 24,643 State 2,551 7,620 5,367 ---------- ----------- ----------- 23,785 53,515 30,010 ---------- ----------- ----------- Deferred: Federal 18,339 (1,927) (2,670) State (2,755) (157) (373) ---------- ----------- ----------- 15,584 (2,084) (3,043) ---------- ----------- ----------- $ 39,369 $ 51,431 $ 26,967 ======================================================================================================
The Company's provision for state income taxes for the fiscal year 2000 reflects a $3 million deferred state income tax benefit due to a reduction in the Company's effective state tax rate. Temporary differences which gave rise to significant components of the Company's deferred tax liabilities and assets at December 31, 2000, and December 26, 1999, are as follows:
(In thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------ Deferred tax liabilities: Difference between book and tax bases of intangible assets $ 306,730 $ 155,770 Tax over book depreciation 87,583 88,508 Other 15,645 17,414 ----------- ----------- Total deferred tax liabilities 409,958 261,692 ----------- ----------- Deferred tax assets: Employee benefits (34,535) (36,918) Acquired net operating losses (19,445) --- Other (12,820) (15,542) ----------- ----------- Total deferred tax assets (66,800) (52,460) ----------- ----------- Deferred tax liabilities, net 343,158 209,232 Deferred tax assets included in other current assets 8,333 8,205 ----------- ----------- Deferred tax liabilities $ 351,491 $ 217,437 ======================================================================================================
Page 13 Reconciliation of income taxes computed at the federal statutory tax rate to actual income tax expense from continuing operations is as follows:
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------ Income taxes computed at federal statutory tax rate $ 36,024 $ 45,587 $ 26,187 Increase (reduction) in income taxes resulting from: State income taxes, net of federal income tax benefit (133) 4,850 3,204 Investment income - unconsolidated affiliates 261 (397) (2,622) Amortization of excess cost (goodwill) 3,697 2,815 2,960 Life insurance plans 125 (1,139) (1,905) Other (605) (285) (857) ---------- ----------- ----------- $ 39,369 $ 51,431 $ 26,967 ======================================================================================================
Net of refunds, in 2000, 1999 and 1998, the Company paid income taxes of $531.9 million, $52.1 million and $56.5 million, respectively. The significant increase in taxes paid in 2000 was attributable to the gain on the sale of the Company's Cable operations in 1999. As a result of an acquisition in 2000, the Company has a federal net operating loss of approximately $45.8 million that will expire in the year 2014. The Company also has state net operating losses as a result of this acquisition. 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. The Company records expense annually based on the amount of compensation paid to each director as well as an adjustment for changes in the Company's stock price. Expense recognized in 1999 and 1998 under the plan was $456,000 and $550,000; a benefit of $169,000 was recognized in 2000. 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 of the 91,000 shares granted, 31,600 shares remained outstanding under that award at December 31, 2000. The plan will continue until terminated by the Company. Page 14 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 31, 2000, 18,000 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 2000, 1999 and 1998 was $.4 million, $1.5 million and $1.0 million, respectively. In December 1999, the Board of Directors authorized a program to repurchase up to $250 million of the Company's Class A common stock. The Company repurchased stock, at market prices, throughout 2000 and, at December 31, 2000, 4.1 million shares had been repurchased at a cost of $204 million since the program's inception, including $7.5 million from the Company's thrift plan. Additionally, 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 purchasing 326,897 shares from the estate, at a 10% discount from average stock price, for $13.6 million. 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 2000, 1999 and 1998 in accordance with the provisions of SFAS No. 123, earnings per share would have declined $0.08 ($0.07 assuming dilution), $0.05 ($0.07 assuming dilution) and $0.05 ($0.04 assuming dilution) in 2000, 1999 and 1998, and pro forma net income and earnings per share would have been $52.0 million, $880.1 million and $69.7 million; and $2.17 ($2.15 assuming dilution), $33.20 ($32.73 assuming dilution) and $2.62 ($2.59 assuming dilution), respectively. 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 2000, 1999 and 1998, respectively: risk-free interest rates of 6.71%, 4.72% and 5.61%; dividend yields of 1.26%, 1.31% and 1.45%; volatility factors of .331, .293 and .287; and an expected life of 8 years. Page 15 A summary of the Company's stock option activity, and related information for the years ended December 31, 2000, December 26, 1999 and December 27, 1998, follows:
2000 1999 1998 -------------------------- ----------------------- ------------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Shares Price Shares Price Shares Price - ----------------------------------------------------------------------------------------------------------------------- Outstanding-beginning of year 986,773 $ 32.96 1,056,203 $ 28.96 1,049,097 $ 26.68 Granted 176,500 52.06 136,000 47.91 122,000 46.38 Exercised (136,969) 29.37 (197,726) 21.42 (112,560) 27.08 Forfeited (19,569) 42.97 (7,704) 43.90 (2,334) 6.64 ------------ ----------- ------------ Outstanding-end of year 1,006,735 36.61 986,773 32.96 1,056,203 28.96 ------------ ----------- ------------ Price range at end of year $ 2 to $52 $ 2 to $48 $ 2 to $46 Price range for exercised shares $ 2 to $48 $ 2 to $48 $ 2 to $46 Available for grant at end of year 319,408 467,100 603,100 Exercisable at end of year 751,887 749,558 799,388 Weighted-average fair value of options granted during the year $ 23.35 $ 17.82 $ 17.68
The following table summarizes information about stock options outstanding at December 31, 2000:
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 - ------------------------------------------------------------------------------------------------------ $ 2.50 12,700 * $ 2.50 12,700 $ 2.50 18.81-20.19 134,500 1 year 19.36 134,500 19.36 27.63-31.81 360,868 5 years 29.94 360,868 29.94 32.50-46.50 209,867 ** 42.14 180,111 41.44 47.91-52.06 288,800 9 years 50.45 63,708 49.00 --------- ------- 2.50-52.06 1,006,735 36.61 751,887 31.95 ========= =======
(*) Exercisable during lifetime of optionee (**) Exercisable during the continued employment of the optionee and for a three-year period thereafter with the exception of 99,367 options which were issued on 1/28/98 for $46.38 with a remaining contractual life of seven years 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 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:
Weighted-average Assumptions Pension Benefits Other Benefits ----------------------- ---------------------- at End of Year 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------ Discount rate 7.50% 7.75% 7.50% 7.75% Expected return on plan assets 10.50 10.50 --- --- Rate of compensation increase 4.50 4.75 4.50 4.75
Page 16 For measurement purposes, an 8.75% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000. The rate was assumed to decrease gradually each year to a rate of 5.25% 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 differences in actual versus 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 Plans' benefit obligations and fair value of assets for the years ended December 31, 2000, and December 26, 1999, and a statement of the funded status at December 31, 2000, and December 26, 1999:
Pension Benefits Other Benefits ---------------------- ------------------------ (In thousands) 2000 1999 2000 1999 - ---------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 206,911 $ 220,157 $ 32,085 $ 32,648 Service cost 8,012 7,618 356 462 Interest cost 17,558 15,053 2,575 2,215 Participant contributions --- --- 506 279 Actuarial (gain) loss 19,922 (22,576) 2,409 (1,618) Acquisitions 4,677 --- 439 --- Curtailment --- (2,099) --- --- Benefit payments (13,219) (11,242) (2,828) (1,901) --------- --------- --------- --------- Benefit obligation at end of year 243,861 206,911 35,542 32,085 --------- --------- --------- --------- Change in plan assets: Fair value of plan assets at beginning of year 239,571 240,162 --- --- Actual return on plan assets (972) 9,365 --- --- Acquisitions 5,562 --- --- --- Employer contributions 1,695 1,286 2,828 1,901 Benefit payments (13,219) (11,242) (2,828) (1,901) --------- --------- --------- --------- Fair value of plan assets at end of year 232,637 239,571 --- --- --------- --------- --------- --------- Funded status: Plan assets greater than (less than) benefit obligation (11,224) 32,660 (35,542) (32,085) Unrecognized transition asset --- (1,012) --- --- Unrecognized prior-service cost 2,178 2,786 --- --- Unrecognized actuarial (gain) loss (14,668) (60,614) 5,993 3,201 --------- --------- --------- --------- Accrued benefit cost $ (23,714) $ (26,180) $ (29,549) $ (28,884) ==========================================================================================================
Page 17 The following table provides the components of net periodic benefit cost for the Plans for fiscal years 2000, 1999 and 1998:
Pension Benefits Other Benefits --------------------------- ----------------------------- (In thousands) 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------- Service cost $ 8,013 $ 7,618 $ 6,469 $ 356 $ 462 $ 469 Interest cost 17,558 15,053 14,906 2,575 2,215 2,214 Expected return on plan assets (23,853) (21,221) (19,285) --- --- --- Amortization of transition asset (1,012) (706) (499) --- --- --- Amortization of prior-service cost 608 588 829 --- --- --- Amortization of net (gain) loss (1,200) (53) 2 123 114 --- Multi-employer plans expense 467 621 589 --- --- --- -------- -------- -------- -------- -------- ------ Net periodic benefit cost $ 581 $ 1,900 $ 3,011 $ 3,054 $ 2,791 $2,683 =======================================================================================================
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 31, 2000, and December 26, 1999, the benefit obligation related to the supplemental executive retirement and ERISA excess plans included in the preceding tables was $28.9 million and $24.7 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:
(In thousands) 1% Increase 1% Decrease - ------------------------------------------------------------------------------------------------ Effect on total of service and interest cost components of net periodic postretirement health care benefit cost $ 110 $ (101) Effect on the health care component of the accumulated postretirement benefit obligation 1,580 $ (1,440)
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 $5.3 million, $5.5 million and $5.0 million in 2000, 1999 and 1998, respectively. Beginning in 2001, the Company will increase its match to 100% of participant contributions up to a maximum of 4% of the employee's salary. Note 9: Other Revenue recognition The principal sources of revenue are the sale of advertising in newspapers, the sale of newspapers to individual subscribers and distributors and the sale of airtime on television stations. In addition, the sale of advertising on its newspaper and television websites and portals, as well as revenues derived from the online sale of financial data by a specialized financial services company, are becoming increasingly important. Advertising revenue is recognized when advertisements are published, aired or displayed, or when related advertising services are rendered. Subscription revenue is recognized on a pro-rata basis over the term of the subscription. Revenue from the sale of online financial data is recognized pro-rata over the term of the contract, subject to adjustment in certain circumstances, for usage volume. 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. Page 18 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 $52.6 million, $34.1 million and $34.3 million in 2000, 1999 and 1998, respectively. Management periodically evaluates the recoverability of long-lived assets, where indicators of impairment are present, by reviewing current and projected profitability or undiscounted cash flows of such assets. Interest In 2000, 1999 and 1998, the Company's interest expense from continuing operations was $42.6 million, $45 million and $61 million, respectively. Interest paid during 2000, 1999 and 1998, net of amounts capitalized, was $42.8 million, $50.9 million and $65.3 million, respectively. In 2000 and 1999, the Company earned interest income of $8.3 million and $9.4 million on investments in highly-rated commercial paper and United States Government securities. These amounts are included in Other, net on the Consolidated Statements of Operations. 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 The Company utilizes derivative financial instruments from time to time to manage interest cost and risk associated with variable interest rates, primarily short-term changes in LIBOR. 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 consist principally of raw materials (primarily newsprint) and broadcast equipment, and are valued at the lower of cost or market. The cost of newsprint inventories and broadcast equipment is determined by the first-in, first-out, and specific identification methods, respectively. Other current assets Other current assets included program rights of $15.3 million and $13.6 million at December 31, 2000, and December 26, 1999, respectively. Accrued expenses and other liabilities Accrued expenses and other liabilities consisted of the following:
(In thousands) 2000 1999 - ------------------------------------------------------------------------------------------------------ Payroll and employee benefits $ 18,767 $ 20,806 Program rights 15,240 12,839 Advances from unconsolidated newsprint affiliate 6,667 6,667 Unearned revenue 17,007 14,566 Other 29,657 20,312 ----------- ----------- Total $ 87,338 $ 75,190 ======================================================================================================
Page 19 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 $16.9 million in 2000, $15.6 million in 1999 and $14.2 million in 1998. Minimum rental commitments under operating leases with noncancelable terms in excess of one year are as follows: 2001 - $5.3 million; 2002 -$4.3 million; 2003 - $2.5 million; 2004 - $1.8 million; 2005 - $1.3 million; subsequent years - $2.8 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 southeastern United States. The Company's trade receivables result primarily from its publishing and broadcast 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 The Company's comprehensive income consists of net income and unrealized gains and losses on certain investments in equity securities. 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.
(In thousands, except 2000 1999 1998 ----------------------------------- ----------------------------------- ----------------------------------- per share amounts) Income Shares Per Share Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount --------- ----------- ------ --------- ----------- ------ --------- ----------- ------ Basic EPS Income from continuing operations available to common stock- holders before extraordinary item $ 63,557 23,920 $ 2.66 $ 78,818 26,506 $ 2.97 $ 47,855 26,579 $ 1.80 ======= ======= ======= Effect of Dilutive Securities Stock options 172 253 245 Restricted stock and other (25) 97 (34) 126 (17) 90 -------- ------- --------- ------- --------- ------- Diluted EPS Income from continuing operations available to common stock- holders plus assumed conversions before extraordinary item $ 63,532 24,189 $ 2.63 $ 78,784 26,885 $ 2.93 $ 47,838 26,914 $ 1.78 ================================= ================================== =================================
Commitments and contingencies Over the next five years the Company is committed to purchase approximately $28.6 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. During 1997 and 1998, the Company entered into lease agreements whereby the owner constructed real estate facilities costing approximately $96 million; the facilities are leased to the Company for a term of up to 5 years. 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. Note 10: Guarantor Financial Information In the third quarter of 2001, the Company has filed a shelf registration with the Securities and Exchange Commission under which its subsidiaries, Media General Financial Services, Inc., Media General Communications, Inc., MG Broadcasting of Birmingham Holdings, LLC, Media General Operations, Inc., The Tribune Company Holdings, Inc., Media General Broadcasting of South Carolina Holdings, Inc., MG Broadcasting of Birmingham II, LLC, Professional Communications Systems, Inc., NES II, Inc., and Virginia Paper Manufacturing Corp. (collectively "Guarantor Subsidiaries"), may guarantee debt securities issued from the shelf under certain circumstances. These guarantees would be full and unconditional and on a joint and several basis. The following financial information presents condensed consolidating balance sheets, statements of operations, and statements of cash flows for the parent company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, together with certain eliminations. The Non-Guarantor Subsidiaries consist of Garden State Paper Company, sold in the third quarter of 2000, and the Company's cable operations, sold in the fourth quarter of 1999, during their respective periods of ownership.
Media General, Inc. Condensed Consolidating Statements of Operations Fiscal year ended December 31, 2000 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------- ------------- Revenues $ 154,060 $ 944,866 $ - $ (268,325) $ 830,601 Operating costs: Production - 343,949 - - 343,949 Selling, general and administrative 151,240 378,357 - (268,325) 261,272 Depreciation and amortization 4,128 97,419 - 101,547 --------------------------------------------------------- ------------- Total operating costs 155,368 819,725 - (268,325) 706,768 --------------------------------------------------------- ------------- Operating income (loss) (1,308) 125,141 - - 123,833 Other income (expense): Interest expense (42,434) (124) - - (42,558) Investment income (loss) - unconsolidated affiliates (2,546) 7,677 - - 5,131 Investment income - consolidated affiliates 79,374 - - (79,374) - Other, net 13,520 3,000 - - 16,520 --------------------------------------------------------- ------------- Total other income (expense) 47,914 10,553 - (79,374) (20,907) --------------------------------------------------------- ------------- Income (loss) from continuing operations before income taxes 46,606 135,694 - (79,374) 102,926 Income tax expense (benefit) (12,601) 51,970 - - 39,369 --------------------------------------------------------- ------------- Income (loss) from continuing operations 59,207 83,724 - (79,374) 63,557 Discontinued operations: Loss from discontinued operations (net of tax) - - (4,350) - (4,350) Loss on disposition of discontinued operations (net of tax) (5,488) - - - (5,488) --------------------------------------------------------- ------------- Net income (loss) 53,719 83,724 (4,350) (79,374) 53,719 Other comprehensive loss (net of tax) (10,873) - - - (10,873) --------------------------------------------------------- ------------- Comprehensive income (loss) $ 42,846 $ 83,724 $ (4,350) $ (79,374) $ 42,846 ========================================================= =============
Media General, Inc. Condensed Consolidating Statements of Operations Fiscal year ended December 26, 1999 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------- ------------ Revenues $ 28,951 $ 692,902 $ - $ (28,951) $ 692,902 Operating costs: Production - 288,677 - - 288,677 Selling, general and administrative 30,987 207,173 - (28,951) 209,209 Depreciation and amortization 3,348 69,092 - - 72,440 ---------------------------------------------------------- ------------ Total operating costs 34,335 564,942 - (28,951) 570,326 ---------------------------------------------------------- ------------ Operating income (loss) (5,384) 127,960 - - 122,576 Other income (expense): Interest expense (44,917) (97) - - (45,014) Investment income - unconsolidated affiliates 2,500 6,567 - - 9,067 Investment income - consolidated affiliates 83,744 - - (83,744) - Gain on sale of Denver Newspapers, Inc. stock 30,983 - - - 30,983 Other, net 11,902 735 - - 12,637 --------------------------------------------------------- ------------ Total other income (expense) 84,212 7,205 - (83,744) 7,673 --------------------------------------------------------- ------------ Income (loss) from continuing operations before income taxes and extraordinary item 78,828 135,165 - (83,744) 130,249 Income tax expense (benefit) (5,097) 56,528 - - 51,431 --------------------------------------------------------- ------------ Income from continuing operations before extraordinary item 83,925 78,637 - (83,744) 78,818 Discontinued operations: Income from discontinued operations (net of tax) - - 5,107 - 5,107 Gain on sale of discontinued operations (net of tax) 798,719 - - 798,719 Extraordinary item from early redemption of debt (net of tax) (1,328) - - (1,328) --------------------------------------------------------- ------------ Net income 881,316 78,637 5,107 (83,744) 881,316 Other comprehensive income (net of tax) 7,392 - - - 7,392 --------------------------------------------------------- ------------ Comprehensive income $ 888,708 $ 78,637 $ 5,107 $ (83,744) $ 888,708 ========================================================= ============
Media General, Inc. Condensed Consolidating Statements of Operations Fiscal year ended December 27, 1998 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------- ------------- Revenues $ 30,362 $ 688,677 $ - $ (30,362) $ 688,677 Operating costs: Production - 299,807 - - 299,807 Selling, general and administrative 30,582 205,303 - (30,362) 205,523 Depreciation and amortization 2,004 67,051 - - 69,055 --------------------------------------------------------- ------------- Total operating costs 32,586 572,161 - (30,362) 574,385 --------------------------------------------------------- ------------- Operating income (2,224) 116,516 - - 114,292 Other income (expense): Interest expense (60,913) (114) - - (61,027) Investment income - unconsolidated affiliates 9,362 12,831 - - 22,193 Investment income - consolidated affiliates 99,004 - (99,004) - Other, net 745 (1,381) - - (636) --------------------------------------------------------- ------------- Total other income (expense) 48,198 11,336 - (99,004) (39,470) --------------------------------------------------------- ------------- Income (loss) from continuing operations before income taxes 45,974 127,852 - (99,004) 74,822 Income tax expense (benefit) (24,900) 51,867 - - 26,967 --------------------------------------------------------- ------------- Income (loss) from continuing operations 70,874 75,985 - (99,004) 47,855 Discontinued operations: Income from discontinued operations (net of tax) - - 23,019 - 23,019 --------------------------------------------------------- ------------- Net income (loss) 70,874 75,985 23,019 (99,004) 70,874 --------------------------------------------------------- ------------- Comprehensive income (loss) $ 70,874 $ 75,985 $ 23,019 $ (99,004) $ 70,874 ========================================================= =============
Media General, Inc. Condensed Consolidating Balance Sheets As of December 31, 2000 (In thousands) Media General Guarantor Media General Corporate Subsidiaries Eliminations Consolidated ------------------------------------------ ------------- ASSETS Current Assets: Cash and cash equivalents $ (5,418) $ 6,313 $ 9,509 $ 10,404 Accounts receivable, net - 117,254 - 117,254 Inventories 6 7,162 - 7,168 Other 45,753 58,246 (65,945) 38,054 ------------------------------------------- ------------- Total current assets 40,341 188,975 (56,436) 172,880 ------------------------------------------- ------------- Investments in unconsolidated affiliates 9,113 81,626 - 90,739 Investments in and advances to subsidiaries 2,021,691 519,783 (2,541,474) - Other assets 39,412 20,153 - 59,565 Property, plant and equipment, net 12,845 367,105 - 379,950 Excess of cost over fair value of net identifiable assets of acquired businesses, net - 958,443 - 958,443 FCC licenses and other intangibles, net - 899,705 - 899,705 ------------------------------------------- ------------- Total assets $ 2,123,402 $ 3,035,790 $ (2,597,910) $ 2,561,282 =========================================== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,978 $ 14,723 $ 9,502 $ 27,203 Accrued expenses and other liabilities 66,121 87,162 (65,945) 87,338 ------------------------------------------- ------------- Total current liabilities 69,099 101,885 (56,443) 114,541 ------------------------------------------- ------------- Long-term debt 821,000 1,077 - 822,077 Deferred income taxes (27,910) 379,401 - 351,491 Other liabilities and deferred credits 89,291 11,960 - 101,251 Stockholders' equity Common stock 113,573 4,872 (4,872) 113,573 Additional paid-in capital - 2,024,743 (2,024,743) - Accumulated other comprehensive income (loss) (3,481) - - (3,481) Unearned compensation (2,145) - - (2,145) Retained earnings 1,063,975 511,852 (511,852) 1,063,975 ------------------------------------------- ------------- Total stockholders' equity 1,171,922 2,541,467 (2,541,467) 1,171,922 ------------------------------------------- ------------- ------------------------------------------- ------------- Total liabilities and stockholders' equity $ 2,123,402 $ 3,035,790 $ (2,597,910) $ 2,561,282 =========================================== =============
Media General, Inc. Condensed Consolidating Balance Sheets As of December 26, 1999 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------- ------------ ASSETS Current Assets: Cash, cash equivalents and short-term investments $ 632,116 $ 5,122 $ 11 $ 8,797 $ 646,046 Accounts receivable, net - 89,820 13,014 - 102,834 Inventories 6 6,322 8,104 (150) 14,282 Other 6,958 25,600 1,014 - 33,572 --------------------------------------------------------- ------------- Total current assets 639,080 126,864 22,143 8,647 796,734 --------------------------------------------------------- ------------- Investment in unconsolidated affiliates 10,522 77,349 - - 87,871 Investments in and advances to subsidiaries 1,277,008 344,768 14,663 (1,636,439) - Other assets 47,539 11,350 56 - 58,945 Property, plant and equipment, net 9,636 305,259 66,581 - 381,476 Excess of cost over fair value of net identifiable assets of acquired businesses, net - 631,597 - - 631,597 FCC licenses and other intangibles, net - 383,751 - - 383,751 -------------------------------------------------------- ------------- Total assets $ 1,983,785 $ 1,880,938 $ 103,443 $ (1,627,792) $ 2,340,374 ======================================================== ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,058 $ 11,524 $ 6,659 $ 8,791 $ 32,032 Accrued expenses and other liabilities 28,215 43,148 3,827 - 75,190 Income taxes payable 508,821 145 - - 508,966 Current maturity of long-term debt 13,000 - - - 13,000 -------------------------------------------------------- -------------- Total current liabilities 555,094 54,817 10,486 8,791 629,188 -------------------------------------------------------- -------------- Long-term debt 26,000 838 20,000 - 46,838 Deferred income taxes (24,649) 230,694 11,392 - 217,437 Current maturity of long-term debt 96,438 18,301 1,270 - 116,009 Shareholders' equity Common stock 132,341 9,558 5,000 (14,558) 132,341 Additional paid-in capital 3,040 1,138,602 339 (1,138,941) 3,040 Accumulated other comprehensive income 7,392 - - - 7,392 Unearned compensation (2,973) - - - (2,973) Retained earnings 1,191,102 428,128 54,956 (483,084) 1,191,102 -------------------------------------------------------- ------------- Total stockholders' equity 1,330,902 1,576,288 60,295 (1,636,583) 1,330,902 -------------------------------------------------------- ------------- -------------------------------------------------------- ------------- Total liabilities and stockholders' equity $ 1,983,785 $ 1,880,938 $ 103,443 $ (1,627,792) $ 2,340,374 ======================================================== =============
Media General, Inc. Condensed Consolidating Statements of Cash Flows Fiscal year ended December 31, 2000 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------- ------------ Cash flows from operating activities: Net cash (used) provided by operating activities* $ (432,407) $ 33,085 $ 26,004 $ 712 $ (372,606) Cash flows from investing activities: Capital expenditures (5,041) (31,817) (6,015) - (42,873) Purchase of businesses (857,570) - - - (857,570) Proceeds from dispositions and sales 90,511 - - - 90,511 Proceeds from maturity of short-term investments 390,748 - - - 390,748 Other, net (12,284) 256 - - (12,028) -------------------------------------------------------- ------------ Net cash used by investing activities (393,636) (31,561) (6,015) - (431,212) Cash flows from financing activities: Increase in debt 1,095,000 - - - 1,095,000 Repayment of debt (313,000) (333) (20,000) - (333,333) Stock repurchase (192,692) - - - (192,692) Cash dividends paid (15,299) - - - (15,299) Other, net 5,248 - - - 5,248 -------------------------------------------------------- ------------ Net cash provided (used) by financing activities 579,257 (333) (20,000) - 558,924 -------------------------------------------------------- ------------ Net (decrease) increase in cash and cash equivalents (246,786) 1,191 (11) 712 (244,894) Cash and cash equivalents at beginning of year 241,368 5,122 11 8,797 255,298 -------------------------------------------------------- ------------ Cash and cash equivalents at end of period $ (5,418) $ 6,313 $ - $ 9,509 $ 10,404 ======================================================== ============
* Cash is managed on a centralized basis by Media General Corporate; cash transferred from the subsidiaries are included in the caption "Net cash (used) provided by operating activities".
Media General, Inc. Condensed Consolidating Statements of Cash Flows Fiscal year ended December 26, 1999 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------- ------------- Cash flows from operating activities: Net cash provided (used) by operating activities* $ 75,300 $ 25,331 $ 30,897 $ (8,509) $ 123,019 Cash flows from investing activities: Capital expenditures (2,968) (26,959) (30,902) - (60,829) Proceeds from dispositions and sales 1,412,465 - - - 1,412,465 Proceeds from Denver Newspapers, Inc. investment transactions 73,000 - - - 73,000 Purchases of short-term investments, net (390,748) - - - (390,748) Other, net (6,815) 1,201 32 - (5,582) ------------------------------------------------------- ------------ Net cash provided (used) by investing activities 1,084,934 (25,758) (30,870) - 1,028,306 Cash flows from financing activities: Increase in debt 268,000 - - - 268,000 Repayment of debt (1,136,000) (369) (140) - (1,136,509) Stock repurchase (22,743) - - - (22,743) Cash dividends paid (16,062) - - - (16,062) Other, net 3,650 - - - 3,650 ------------------------------------------------------- ------------- Net cash used by financing activities (903,155) (369) (140) - (903,664) ------------------------------------------------------- ------------- Net increase (decrease) in cash and cash equivalents 257,079 (796) (113) (8,509) 247,661 Cash, cash equivalents and short-term investments: Cash and cash equivalents at beginning of year (15,711) 5,918 124 17,306 7,637 ------------------------------------------------------- ------------- Cash and cash equivalents at end of year 241,368 5,122 11 8,797 255,298 Short-term investments at end of year 390,748 - - - 390,748 ------------------------------------------------------- ------------- Cash, cash equivalents and short-term investments at end of year $ 632,116 $ 5,122 $ 11 $ 8,797 $ 646,046 ======================================================= =============
* Cash is managed on a centralized basis by Media General Corporate; cash transferred from the subsidiaries are included in the caption "Net cash provided (used) by operating activities".
Media General, Inc. Condensed Consolidating Statements of Cash Flows Fiscal year ended December 27, 1998 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------- ------------ Cash flows from operating activities: Net cash provided by operating activities* $ 74,123 $ 22,502 $ 25,460 $ 17,306 $ 139,391 Cash flows from investing activities: Capital expenditures (1,771) (21,644) (26,065) - (49,480) Purchase of businesses (132,680) - - - (132,680) Proceeds from sales of businesses 28,123 - - - 28,123 Other, net - 2,552 372 - 2,924 --------------------------------------------------------- ------------ Net cash used by investing activities (106,328) (19,092) (25,693) - (151,113) Cash flows from financing activities: Increase in debt 463,000 - - - 463,000 Repayment of debt (436,000) (243) (140) - (436,383) Cash dividends paid (14,974) - - - (14,974) Other, net 4,212 - - - 4,212 --------------------------------------------------------- ------------ Net cash provided (used) by financing activities 16,238 (243) (140) - 15,855 --------------------------------------------------------- ------------ Net (decreased) increased in cash and cash equivalents (15,967) 3,167 (373) 17,306 4,133 Cash and cash equivalents at beginning of year 256 2,751 497 - 3,504 --------------------------------------------------------- ------------ Cash and cash equivalents at end of year $ (15,711) $ 5,918 $ 124 $ 17,306 $ 7,637 ========================================================= ============
* Cash is managed on a centralized basis by Media General Corporate; cash transferred from the subsidiaries are included in the caption "Net cash provided by operating activities". Page 20 EX-99 5 ex_992.txt FINANCIAL STATEMENTS FOR SIX MONTHS ENDED 7/1/01 EXHIBIT 99.2 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (000's except shares)
(Unaudited) July 1, December 31, 2001 2000 ---------- ----------- ASSETS Current assets: Cash and cash equivalents $ 8,277 $ 10,404 Accounts receivable - net 104,717 117,254 Inventories 7,680 7,168 Other 28,789 38,054 ---------- ---------- Total current assets 149,463 172,880 ---------- ---------- Investments in unconsolidated affiliates 111,869 90,739 Other assets 70,139 59,565 Property, plant and equipment - net 376,463 379,950 Excess of cost over fair value of net identifiable assets of acquired businesses - net 946,166 958,443 FCC licenses and other intangibles - net 882,452 899,705 ---------- ---------- $2,536,552 $2,561,282 ========== ==========
See accompanying notes. 1 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (000's except shares)
(Unaudited) July 1, December 31, 2001 2000 ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 18,776 $ 27,203 Accrued expenses and other liabilities 72,164 87,338 ---------- ----------- Total current liabilities 90,940 114,541 ---------- ----------- Long-term debt 796,964 822,077 Deferred income taxes 351,636 351,491 Other liabilities and deferred credits 127,215 101,251 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 22,397,513 and 22,158,070 shares 111,988 110,790 Class B, authorized 600,000 shares; issued 556,574 shares 2,783 2,783 Additional paid-in capital 9,167 --- Accumulated other comprehensive income (loss) (13,950) (3,481) Unearned compensation (7,414) (2,145) Retained earnings 1,067,223 1,063,975 ---------- ----------- Total stockholders' equity 1,169,797 1,171,922 ---------- ----------- $2,536,552 $ 2,561,282 ========== ===========
See accompanying notes. 2 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (000's except for per share data)
Second Quarter Ended Six Months Ended --------------------- --------------------- July 1, June 25, July 1, June 25, 2001 2000 2001 2000 --------- --------- --------- --------- Revenues $ 205,747 $ 211,299 $ 404,628 $ 383,757 --------- --------- --------- --------- Operating costs: Production 88,499 85,886 179,074 159,886 Selling, general and administrative 67,655 63,431 137,313 119,965 Depreciation and amortization 28,569 26,312 57,899 44,684 --------- --------- --------- --------- Total operating costs 184,723 175,629 374,286 324,535 --------- --------- --------- --------- Operating income 21,024 35,670 30,342 59,222 --------- --------- --------- --------- Other income (expense): Interest expense (12,437) (10,655) (26,424) (12,013) Investment income (loss) - unconsolidated affiliates 7,307 253 17,205 (1,312) Other, net (3,463) 3,390 (3,014) 11,720 --------- --------- --------- --------- Total other expense (8,593) (7,012) (12,233) (1,605) --------- --------- --------- --------- Income from continuing operations before income taxes 12,431 28,658 18,109 57,617 Income taxes 4,735 11,605 7,063 23,297 --------- --------- --------- --------- Income from continuing operations 7,696 17,053 11,046 34,320 Discontinued operations: Loss from discontinued operations --- (1,445) --- (4,350) Loss on disposition of discontinued operations --- (5,970) --- (5,970) --------- --------- --------- --------- Net income $ 7,696 $ 9,638 $ 11,046 $ 24,000 ========= ========= ========= ========= Earnings per common share: Income from continuing operations $ 0.34 $ 0.71 $ 0.49 $ 1.38 Loss from discontinued operations --- (0.31) --- (0.42) --------- --------- --------- --------- Net income $ 0.34 $ 0.40 $ 0.49 $ 0.96 ========= ========= ========= ========= Earnings per common share - assuming dilution: Income from continuing operations $ 0.33 $ 0.70 $ 0.48 $ 1.36 Loss from discontinued operations --- (0.31) --- (0.41) --------- --------- --------- --------- Net income $ 0.33 $ 0.39 $ 0.48 $ 0.95 ========= ========= ========= ========= Dividends paid per common share $ 0.17 $ 0.16 $ 0.34 $ 0.32 ========= ========= ========= =========
See accompanying notes. 3 MEDIA GENERAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (000's)
Six Months Ended --------------------- July 1, June 25, 2001 2000 --------- --------- Operating activities: Net income $ 11,046 $ 24,000 Adjustments to reconcile net income: Depreciation and amortization 57,899 48,430 Deferred income taxes (227) (126) Investment (income) loss -- unconsolidated affiliates, net of distributions (17,205) 4,712 Gain on disposition of Cable operations --- (8,286) Loss on disposition of Garden State Paper --- 14,256 Change in assets and liabilities: Accounts receivable and inventory 12,085 (5,593) Accounts payable (6,310) (5,289) Taxes payable 28 (518,855) Other 3,045 8,877 --------- --------- Net cash provided (used) by operating activities 60,361 (437,874) --------- --------- Investing activities: Capital expenditures (21,210) (23,215) Proceeds from maturity of short-term investments --- 390,748 Purchases of businesses (943) (620,463) Proceeds from disposition of Cable operations --- 10,063 Other investments (4,614) (3,455) Other, net 4,117 77 --------- --------- Net cash used by investing activities (22,650) (246,245) --------- --------- Financing activities: Increase in debt 908,000 638,000 Payment of debt (933,174) (54,164) Debt issuance costs (9,177) --- Stock repurchase (2,120) (136,520) Dividends paid (7,798) (7,947) Other, net 4,431 1,709 --------- --------- Net cash (used) provided by financing activities (39,838) 441,078 --------- --------- Net decrease in cash and cash equivalents (2,127) (243,041) Cash and cash equivalents at beginning of year 10,404 255,298 --------- --------- Cash and cash equivalents at end of period $ 8,277 $ 12,257 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 25,801 $ 12,359 Income taxes $ 261 $ 526,907
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 31, 2000. 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 2000 have been reclassified to conform with the current year's presentation. The reclassifications have no effect on net income as previously reported. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. 2. Inventories are principally raw materials (primarily newsprint). 3. In January 2001, The Denver Post and the Denver Rocky Mountain News finalized a Joint Operating Agreement (JOA) that was signed in 2000. The Company has a 20% interest in The Denver Post Corporation (Denver). A one-time gain of $6.1 million was recorded in the first quarter of 2001 related to a cash payment received by Denver in conjunction with the formation of the JOA; it is included in the line item "Investment income (loss) - unconsolidated affiliates" on the accompanying Consolidated Condensed Statement of Operations. That line item also includes start-up costs incurred by Denver related to the initial formation of the JOA. 4. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138. These statements require that all derivatives be recognized as either assets or liabilities on the balance sheet at fair value. If a derivative is a hedge, depending upon the nature of the hedge, a change in its fair value will either be offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income (OCI) until the hedged item is recognized in earnings. Any difference between the fair value of the hedge and the item being hedged, known as the ineffective portion, will be immediately recognized in earnings. The adoption of the standard resulted in the cumulative effect of an accounting change that had no impact on net income and an after-tax net increase to OCI of $3.6 million. For derivative instruments that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of the Company's OCI and reclassified into earnings (interest expense for the interest rate swaps and newsprint expense for the newsprint swap) in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument (i.e., the ineffective portion) in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in the Company's current earnings during the period of change. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the Company's current earnings during the period of change. 5 At adoption the Company had interest rate swap agreements, with notional amounts totaling $300 million and having maturities ranging from less than three months to slightly more than two years, that were designated as cash flow hedges under the new standard. During the first quarter, the Company entered into interest rate swap (pay fixed, receive floating) agreements, with notional amounts totaling an additional $150 million and having maturities of two years, that also were designated as cash flow hedges; one swap agreement with a notional amount of $75 million matured. The Company entered into these interest rate swap agreements to manage interest cost and cash flows associated with variable interest rates, primarily short-term changes in LIBOR; changes in cash flows of the interest rate swaps offset changes in the interest payments on the covered portion of the Company's revolving credit agreement. In connection with these interest rate swap agreements, the Company recorded after-tax income of $.2 million in OCI during the second quarter and an after-tax charge of $2.6 million in the year to date; there was no impact on net income. Concurrent with the completion of the third quarter 2000 sale of Garden State Paper Company (GSP), the Company entered into a seven-year financial newsprint swap agreement. A portion (approximately 90%) of the agreement, under which the Company receives a floating price per metric ton and pays a fixed price of $596 per metric ton, has been designated as a cash flow hedge under the new standard. The objective of this hedge is to offset the variability of cash flows for purchases of newsprint due to changes in market prices; changes in cash flows of the newsprint swap are expected to be highly effective at offsetting changes in the cash flows related to the Company's purchases of newsprint. The Company recorded an after-tax charge to OCI of $15 million in the year to date, including $11.8 million during the second quarter, representing the decline in fair value of the derivative based on forecasted newsprint prices. There was no impact on net income due to ineffectiveness. Additionally, the Company recorded a pre-tax loss of approximately $2.3 million in the year to date ($1.7 million in the second quarter) in the line item "Other, net" related to the decrease in fair value of that portion of the contract not designated as a hedge. 5. In January 2001 the Company launched its Interactive Media Division. Historically, the Company's online activities were reported and managed as a part of the Publishing and Broadcast Segments, but as a result of this transition they are now reported and managed as a separate segment. This new segment is comprised of all online enterprises as well as Media General Financial Services, the Company's provider of financial information. Additionally, the Interactive Media Segment includes investments, accounted for under the equity method, in AdOne, L.L.P. (a online database of classified advertising), and in iPipe, Inc. (a provider and distributor of content and advertising services for Web sites), as well as investments, accounted for under the cost method, in several other dot-com companies. The prior period has been restated to reflect the change in the Company's reportable segments. The following table sets forth the Company's current and prior-year financial performance by segment, as well as total assets by segment as of July 1, 2001: 6
Interactive (In thousands) Publishing Broadcast Media Eliminations Total - --------------------------------------------------------------------------------------------------------------------- Three Months Ended July 1, 2001 Consolidated revenues $137,225 $ 66,630 $ 2,297 $(405) $ 205,747 ====================================================================== Segment operating cash flow $ 37,604 $ 20,323 $ (717) $ 57,210 Allocated amounts: Equity in net loss of unconsolidated affiliates (770) (862) (1,632) Write-off of investment (2,323) (2,323) Depreciation and amortization (7,045) (5,095) (217) (12,357) ---------------------------------------------------------------------- Segment profit (loss) $ 29,789 $ 15,228 $(4,119) 40,898 ====================================== Unallocated amounts: Interest expense (12,437) Investment income - SP Newsprint 8,939 Acquisition intangibles amortization (15,130) Corporate expenses (8,453) Other (1,386) ---------- Consolidated income from continuing operations before income taxes $ 12,431 ========== Segment assets $991,220 $1,355,170 $23,140 $2,369,530 Corporate 167,022 ---------- Consolidated assets $2,536,552 ========== - ---------------------------------------------------------------------------------------------------------------------- Three Months Ended June 25, 2000 Consolidated revenues $135,906 $ 73,437 $ 2,042 $ (86) $ 211,299 ====================================================================== Segment operating cash flow $ 45,031 $ 26,147 $ 18 $ 71,196 Allocated amounts: Equity in net income (loss) of unconsolidated affiliates 258 (523) (265) Depreciation and amortization (6,360) (5,377) (82) (11,819) ---------------------------------------------------------------------- Segment profit (loss) $ 38,929 $ 20,770 $ (587) 59,112 ====================================== Unallocated amounts: Interest expense (10,655) Investment income - SP Newsprint 518 Acquisition intangibles amortization (13,590) Corporate expenses (8,331) Other 1,604 --------- Consolidated income from continuing operations before income taxes $ 28,658 ========= - ---------------------------------------------------------------------------------------------------------------------- Six Months Ended July 1, 2001 Consolidated revenues $274,231 $ 126,767 $ 4,492 $(862) $ 404,628 ====================================================================== Segment operating cash flow $ 72,828 $ 33,737 $(1,213) $ 105,352 Allocated amounts: Equity in net income (loss) of unconsolidated affiliates 3,964 (1,858) 2,106 Write-off of investment (2,323) (2,323) Depreciation and amortization (14,381) (10,679) (406) (25,466) ---------------------------------------------------------------------- Segment profit (loss) $ 62,411 $ 23,058 $(5,800) 79,669 ====================================== Unallocated amounts: Interest expense (26,424) Investment income - SP Newsprint 15,099 Acquisition intangibles amortization (30,258) Corporate expenses (17,627) Other (2,350) --------- Consolidated income from continuing operations before income taxes $ 18,109 ========= - ----------------------------------------------------------------------------------------------------------------------
7
Interactive (In thousands) Publishing Broadcast Media Eliminations Total - -------------------------------------------------------------------------------------------------------------------- Six Months Ended July 25, 2000 Consolidated revenues $266,234 $113,793 $ 3,861 $(131) $383,757 =================================================================== Segment operating cash flow $ 86,688 $ 35,284 $ 205 $122,177 Allocated amounts: Equity in net income (loss) of unconsolidated affiliates 41 (980) (939) Depreciation and amortization (12,705) (8,341) (165) (21,211) ------------------------------------------------------------------- Segment profit (loss) $ 74,024 $ 26,943 $ (940) 100,027 ==================================== Unallocated amounts: Interest expense (12,013) Investment loss - SP Newsprint (373) Acquisition intangibles amortization (21,685) Corporate expenses (16,619) Other 8,280 -------- Consolidated income from continuing operations before income taxes $ 57,617 ======== - --------------------------------------------------------------------------------------------------------------------
6. The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
Quarter Ended July 1, 2001 Quarter Ended June 25, 2000 ------------------------------------- --------------------------------------------- Income Shares Per Share Income Shares Per Share (In thousands, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ------------- ----------------- ----------- Basic EPS Income from continuing operations available to common stockholders $ 7,696 22,716 $ 0.34 $17,053 24,184 $ 0.71 ========= =========== Effect of dilutive securities Stock options 135 191 Restricted stock and other (17) 115 (6) 98 ---------------------- -------------------------- Diluted EPS Income from continuing operations available to common stockholders plus assumed conversions $ 7,679 22,966 $ 0.33 $17,047 24,473 $ 0.70 ================================== ======================================== Six Months Ended July 1, 2001 Six Months Ended June 25, 2000 ------------------------------------- --------------------------------------------- Income Shares Per Share Income Shares Per Share (In thousands, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ---------- ------------ --------- ------------ ---------------- ----------- Basic EPS Income from continuing operations available to common stockholders $11,046 22,691 $ 0.49 $34,320 24,920 $ 1.38 ========= =========== Effect of dilutive securities Stock options 130 201 Restricted stock and other (36) 109 (12) 95 ---------------------- -------------------------- Diluted EPS Income from continuing operations available to common stockholders plus assumed conversions $11,010 22,930 $ 0.48 $34,308 25,216 $ 1.36 ================================== ========================================
8 7. The Company's comprehensive income consisted of the following:
Quarter Ended Six Months Ended -------------------- -------------------- (In thousands) July 1, June 25, July 1, June 25, 2001 2000 2001 2000 -------- ------- -------- ------- Net income $ 7,696 $ 9,638 $ 11,046 $24,000 Cumulative effect of adoption of SFAS No. 133 (net of deferred taxes) --- --- 3,570 --- Unrealized loss on derivative contracts (net of deferred taxes) (11,601) --- (17,621) --- Unrealized gain (loss) on equity securities (net of deferred taxes) 3,918 (4,992) 3,582 (2,543) -------- ------- -------- ------- Comprehensive income $ 13 $ 4,646 $ 577 $21,457 ======== ======= ======== =======
8. The Financial Accounting Standards Board has approved Statement No. 142, Goodwill and Other Intangible Assets. This Statement establishes a new accounting standard for goodwill and certain other intangible assets acquired in a business combination as well as a new method of testing those assets for impairment. It will continue to require recognition of these items as assets but amortization as currently required by APB Opinion No. 17, Intangible Assets will cease. It will also require that these assets be separately tested for impairment annually at the reporting unit level when certain indicators of impairment are present using a fair-value-based approach. Initial adoption of the provisions of this statement is required for fiscal years beginning after December 15, 2001; the Company will adopt SFAS No. 142 as of the beginning of its fiscal year 2002. The provisions of this statement will apply not only to balances arising from acquisitions completed after the issuance date of the final Statement, but also to the unamortized balances at the date of adoption. While the Company is still reviewing the new standard, it anticipates that application of the standard's provisions will reduce its amortization expense by approximately 70% in 2002 compared to that of the prior year. 9. On June 29, 2001, the Company replaced its $1.2 billion revolving credit facility with a five-year revolving credit facility committing a syndicate of banks to lend the Company up to $1 billion. Interest rates under the facility are based on the London Interbank Offered Rate (LIBOR) plus a margin ranging from .75% to 1.75%, determined by the Company's debt to cash flow ratio (leverage ratio), as defined. Under this new facility, the Company pays facility fees on the entire commitment of the facility at a rate based on its leverage ratio. The Company's debt covenants require the maintenance of an interest coverage ratio and a leverage ratio, as defined. In July 2001, subsequent to the close of the second quarter, the Company filed a shelf registration for up to $600 million of public debt; no debt has been issued under this facility to date. 9 10. In the third quarter of 2001, the Company has filed a shelf registration with the Securities Exchange Commission under which its subsidiaries, Media General Financial Services, Inc., Media General Communications, Inc., MG Broadcasting of Birmingham Holdings, LLC, Media General Operations, Inc., The Tribune Company Holdings, Inc., Media General Broadcasting of South Carolina Holdings, Inc., MG Broadcasting of Birmingham II, LLC, Professional Communications Systems, Inc., NES II, Inc., and Virginia Paper Manufacturing Corp. (collectively "Guarantor Subsidiaries"), may guarantee debt securities issued from the shelf under certain circumstances. These guarantees would be full and unconditional and on a joint and several basis. The following financial information presents condensed consolidating balance sheets, statements of operations, and statements of cash flows for the parent company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, together with certain eliminations. The Non-Guarantor Subsidiaries consist of Garden State Paper Company, sold in the third quarter of 2000 during its respective period of ownership.
Media General, Inc. Condensed Consolidating Statements of Operations Six months ended July 1, 2001 (In thousands) Media General Guarantor Media General Corporate Subsidiaries Eliminations Consolidated ---------------------------------------------------- --------------------- Revenues $ 77,481 $ 464,448 $ (137,301) $ 404,628 Operating cost: Production $ - $ 179,074 $ - $ 179,074 Selling, general and administrative 76,982 197,632 (137,301) 137,313 Depreciation and amortization 2,175 55,724 - 57,899 -------------------------------------------------- ------------------ Total operating costs 79,157 432,430 (137,301) 374,286 --------------------------------------------------- ------------------ Operating income (loss) (1,676) 32,018 - 30,342 Other income (expense): Interest expense (26,377) (47) - (26,424) Investment income - unconsolidated affiliates 3,964 13,241 - 17,205 Investment income - consolidated affiliates 24,189 - (24,189) - Other, net (363) (2,651) - (3,014) -------------------------------------------------- ----------------- Total other income (expense) 1,413 10,543 (24,189) (12,233) -------------------------------------------------- ----------------- Income (loss) before income taxes (263) 42,561 (24,189) 18,109 Income tax expense (benefit) (11,309) 18,372 - 7,063 -------------------------------------------------- ----------------- Net income (loss) 11,046 24,189 (24,189) 11,046 Other comprehensive (loss) income (net of tax) (14,051) 3,582 - (10,469) -------------------------------------------------- ----------------- Comprehensive income (loss) $ (3,005) $ 27,771 $ (24,189) $ 577 ================================================== =================
Media General, Inc. Condensed Consolidating Statements of Operations Six months ended June 25, 2000 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated --------------------------------------------------------------- --------------- Revenues $ 53,510 $ 424,257 $ - $ (94,010) $ 383,757 Operating costs: Production - 159,886 - - 159,886 Selling, general and administrative 59,285 154,690 - (94,010) 119,965 Depreciation and amortization 1,787 42,897 - - 44,684 ------------------------------------------------------------ ------------- Total operating costs 61,072 357,473 - (94,010) 324,535 ------------------------------------------------------------ ------------- Operating income (loss) (7,562) 66,784 - - 59,222 Other income (expense): Interest expense (11,944) (69) - - (12,013) Investment income (loss) - unconsolidated affiliates (939) (373) - - (1,312) Investment income - consolidated affiliates 37,775 - - (37,775) - Other, net 8,628 3,092 - - 11,720 ------------------------------------------------------------ ------------- Total other income (expense) 33,520 2,650 - (37,775) (1,605) ------------------------------------------------------------ ------------- Income (loss) before income taxes 25,958 69,434 - (37,775) 57,617 Income tax expense (benefit) (4,012) 27,309 - - 23,297 ------------------------------------------------------------ ------------- Income (loss) from continuing operations 29,970 42,125 - (37,775) 34,320 Discontinued operations: Loss from discontinued operations (net of tax) - - (4,350) - (4,350) Loss on disposition of discontinued operations (net of tax) (5,970) - - - (5,970) ------------------------------------------------------------ ------------- Net income (loss) 24,000 42,125 (4,350) (37,775) 24,000 Other comprehensive income loss (net of tax) (2,543) - - - (2,543) ------------------------------------------------------------ ------------- Comprehensive income (loss) $ 21,457 $ 42,125 $ (4,350) $ (37,775) $ 21,457 ============================================================ =============
Media General, Inc. Condensed Consolidating Balance Sheets As of July 1, 2001 (In thousands) Media General Guarantor Media General Corporate Subsidiaries Eliminations Consolidated ---------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ (2,247) $ 3,607 $ 6,917 $ 8,277 Accounts receivable, net - 104,717 - 104,717 Inventories 5 7,675 - 7,680 Other 39,509 51,127 (61,847) 28,789 --------------------------------------------------------------------------- Total current assets 37,267 167,126 (54,930) 149,463 --------------------------------------------------------------------------- Investments in unconsolidated affiliates 11,271 100,598 - 111,869 Investments in and advances to subsidiaries 2,004,142 560,593 (2,564,735) - Other assets 34,557 35,582 - 70,139 Property, plant and equipment, net 16,379 360,084 - 376,463 Excess of cost over fair value of net identifiable assets of acquired businesses, net - 946,166 - 946,166 FCC licenses and other intangibles, net - 882,452 - 882,452 --------------------------------------------------------------------------- Total assets $ 2,103,616 $ 3,052,601 $ (2,619,665) $ 2,536,552 =========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 194 $ 13,569 $ 5,013 $ 18,776 Accrued expenses and other liabilities 58,865 73,249 (59,950) 72,164 --------------------------------------------------------------------------- Total current liabilities 59,059 86,818 (54,937) 90,940 --------------------------------------------------------------------------- Long-term debt 796,038 926 - 796,964 Deferred income taxes (37,049) 388,685 - 351,636 Other liabilities and deferred credits 115,872 11,343 - 127,215 Stockholders' equity Common stock 114,771 4,872 (4,872) 114,771 Additional paid-in capital 9,167 2,023,815 (2,023,815) 9,167 Accumulated other comprehensive income (loss) (14,051) 101 - (13,950) Unearned compensation (7,414) - - (7,414) Retained earnings 1,067,223 536,041 (536,041) 1,067,223 --------------------------------------------------------------------------- Total stockholders' equity 1,169,696 2,564,829 (2,564,728) 1,169,797 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,103,616 $ 3,052,601 $ (2,619,665) $ 2,536,552 ===========================================================================
Media General, Inc. Condensed Consolidating Balance Sheets As of June 25, 2000 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ (4,202) $ 6,108 $ 9 $ 10,342 $ 12,257 Accounts receivable, net - 109,346 15,805 (141) 125,010 Inventories 3 5,739 7,751 (150) 13,343 Other 28,859 55,072 1,554 (51,518) 33,967 ------------------------------------------------------------------------ Total current assets 24,660 176,265 25,119 (41,467) 184,577 ------------------------------------------------------------------------ Investments in unconsolidated affiliates 10,142 73,576 - - 83,718 Investments in and advances to subsidiaries 1,886,107 407,192 5,869 (2,299,168) - Other assets 45,815 11,584 52 - 57,451 Property, plant and equipment, net 11,458 366,370 67,173 - 445,001 Excess of cost over fair value of net identifiable assets of acquired businesses, net - 761,216 - - 761,216 FCC licenses and other intangibles, net - 912,453 - - 912,453 ------------------------------------------------------------------------ TOTAL ASSETS $ 1,978,182 $ 2,708,656 $ 98,213 $ (2,340,635) $ 2,444,416 ======================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 713 $ 13,199 $ 6,067 $ 10,196 $ 30,175 Accrued expenses and other liabilities 78,619 63,057 3,570 (51,518) 93,728 ------------------------------------------------------------------------ Total current liabilities 79,332 76,256 9,637 (41,322) 123,903 ------------------------------------------------------------------------ Long-term debt 623,000 1,224 20,000 - 644,224 Deferred income taxes (24,593) 373,931 11,407 - 360,745 Other liabilities and deferred credits 91,718 13,878 1,223 - 106,819 Stockholders' equity Common stock 119,093 9,323 5,000 (14,323) 119,093 Additional paid-in capital - 1,763,791 340 (1,764,131) - Accumulated other comprehensive income 4,848 - - - 4,848 Unearned compensation (2,567) - - - (2,567) Retained earnings 1,087,351 470,253 50,606 (520,859) 1,087,351 ------------------------------------------------------------------------ Total stockholders' equity 1,208,725 2,243,367 55,946 (2,299,313) 1,208,725 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 1,978,182 $ 2,708,656 $ 98,213 $ (2,340,635) $ 2,444,416 ========================================================================
Media General, Inc. Condensed Consolidating Statements of Cash Flows Six months ended July 1, 2001 (In thousands) Media General Guarantor Media General Corporate Subsidiaries Eliminations Consolidated ---------------------------------------------------- ------------------- Cash flows from operating activities: Net cash provided (used) by operating activities* $ 44,064 $ 18,889 $ (2,592) $ 60,361 Cash flows from investing activities: Capital expenditures (4,335) (16,875) - (21,210) Purchase of business (943) - - (943) Other, net 4,049 (4,546) - (497) ------------------------------------------------ ------------------- Net cash used by investing activities (1,229) (21,421) - (22,650) Cash flows from financing activities: Increase in debt 908,000 - - 908,000 Repayment of debt (933,000) (174) - (933,174) Debt issuance costs (9,177) - - (9,177) Stock repurchase (2,120) - - (2,120) Cash dividends paid (7,798) - - (7,798) Other, net 4,431 - - 4,431 ------------------------------------------------ ------------------- Net cash used by financing activities (39,664) (174) - (39,838) ------------------------------------------------ ------------------- Net increase (decrease) in cash and cash equivalents 3,171 (2,706) (2,592) (2,127) Cash and cash equivalents at beginning of year (5,418) 6,313 9,509 10,404 ------------------------------------------------ ------------------- Cash and cash equivalents at end of period $ (2,247) $ 3,607 $ 6,917 $ 8,277 ================================================ ===================
* Cash is managed on a centralized basis by Media General Corporate; cash transferred from the subsidiaries are included in the caption "Net cash provided (used) by operating activities".
Media General, Inc. Condensed Consolidating Statements of Cash Flows Six months ended June 25, 2000 (In thousands) Media General Guarantor Non-Guarantor Media General Corporate Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------------------------- Cash flows from operating activities: Net cash (used) provided by operating activities* $ (461,236) $ 17,523 $ 4,294 $ 1,545 $ (437,874) Cash flows from investing activities: Capital expenditures (2,469) (16,450) (4,296) - (23,215) Proceeds from maturity of short-term investments 390,748 - - - 390,748 Purchases of businesses (620,463) - - - (620,463) Proceeds from disposition of Cable operations 10,063 - - - 10,063 Other, net (3,455) 77 - - (3,378) -------------------------------------------------------- ------------- Net cash used by investing activities (225,576) (16,373) (4,296) - (246,245) Cash flows from financing activities: Increase in debt 638,000 - - - 638,000 Repayment of debt (54,000) (164) - - (54,164) Stock repurchase (136,520) - - - (136,520) Cash dividends paid (7,947) - - - (7,947) Other, net 1,709 - - - 1,709 -------------------------------------------------------- ------------- Net cash provided (used) by financing activities 441,242 (164) - - 441,078 -------------------------------------------------------- ------------- Net (decrease) increase in cash and cash equivalents (245,570) 986 (2) 1,545 (243,041) Cash and cash equivalents at beginning of year 241,368 5,122 11 8,797 255,298 -------------------------------------------------------- ------------- Cash and cash equivalents at end of period $ (4,202) $ 6,108 $ 9 $10,342 $ 12,257 ======================================================== =============
* Cash is managed on a centralized basis by Media General Corporate; cash transferred from the subsidiaries are included in the caption "Net cash (used) provided by operating activities". 10 -----END PRIVACY-ENHANCED MESSAGE-----