Media General loses $3.3 million in 4th quarter

Lower revenue from broadcast and print divisions led to a $3.3 million loss for Media General Inc. in the fourth quarter, the company reported Thursday.

The company, which owns the Winston-Salem Journal, had net income of $9 million a year ago.

Media General posted an earnings loss of 15 cents a share compared with diluted earnings of 39 cents a share a year ago. Investors reacted to the quarterly earnings loss by sending the share price down 9.1 percent, or by 50 cents, to close at $4.98.

Also affecting earnings were $3.5 million in severance expenses primarily related to a staff reduction of 165 employees at its Tampa, Fla., print division in December and a $6 million noncash pre-tax impairment charge for its DealTaker.com property.

"Similar to many other e-commerce businesses, DealTaker.com has suffered the adverse effects of a significant change in the way Internet search results are delivered by Google," the company said.

Excluding the severance payments and impairment charges, Media General said it had net income of $4.5 million compared with net income of $9.3 million a year ago.

The company's North Carolina market had a profit of $3.9 million in the fourth quarter, up 35 percent compared with a year ago. The market had an 8.2 percent decline in expenses, primarily related to employee furloughs, while revenue was down 2.4 percent.

For the full year, Media General has a loss of $74.3 million, or $3.31 a share, compared with a loss of $22.6 million, or $1.01 a share, in fiscal 2010.

The full year loss reflects in part a decision in the third quarter to take a goodwill impairment charge of $26.6 million. Goodwill is defined as the difference between the purchase cost of a financial transaction and the fair-market value of the assets and liabilities of the company that is bought. A business also may build goodwill over time as loyalty builds among its customer base for its brands.

The quarterly and fiscal year earnings gaps reflect the larger role that broadcast revenue has taken on for the company, since it benefits from extra political and Olympics advertising in even-numbered years.

Revenue was down 12 percent in the fourth quarter at $167.7 million. Revenue from print decreased 7 percent to $80.8 million, while revenue from broadcast fell 16 percent to $77.8 million and revenue from digital media and other sources was down 19 percent to $9.1 million.

Marshall Morton, the company's president and chief executive, said there were several positive revenue trends during the fourth quarter, such as automotive broadcast advertising being up 14 percent.

"The decline in print revenues moderated to 6.6 percent compared with a 9.1 percent decrease in the third quarter," Morton said. "Fourth-quarter print revenues included strong preprint advertising volume in several markets and solid retail advertising related to the holidays."

Morton said revenue from media websites was $8.3 million in the quarter — the second highest ever for the company. "With the acceleration of smartphone penetration, our mobile revenues were up more than threefold in the quarter and are the fastest-growing advertising category," Morton said.

Morton said Media General already is gaining strong revenue from political advertisements in core markets such as Florida and South Carolina. Its eight NBC stations are expected to benefit from advance advertising sales for the Super Bowl and the 2012 Summer Olympics.

Morton said the company expects more decline in overall print revenues during 2012.

Media General's debt at the end of the fourth quarter was $658 million, down $5 million in the past year.

Media General said it continues to evaluate options for refinancing, amending or extending $363 million of bank debt due March 29, 2013. Under its credit agreement, the two main financial covenants tighten in 2012 with each succeeding quarter.

The company said that because of continued economic weakness and the uncertainty of its print business, it "is uncomfortable with its ability to remain in compliance with the covenants as they tighten."

"Media General intends to present a proposal to its lender group over the next few weeks seeking covenant modifications that would provide more flexibility to operate in the current uncertain economic environment. Media General also will seek an extension of its existing maturity date."