Media General Reports Third-Quarter 2014 Results

  • Net operating revenue increased 21% to $160.2 million compared to combined company (Media General and Young) net operating revenue of $132.6 million in the third quarter of 2013. Operating income more than doubled to $35.2 million compared to combined company operating income of $17.1 million in the third quarter of 2013.
  • Broadcast Cash Flow (BCF) increased 53% to $61.1 million compared to combined BCF of $40 million in the third quarter of 2013; BCF margin in the current quarter was 38% compared to 30% in the prior year.
  • EBITDA as adjusted increased 79% to $55.4 million compared to combined EBITDA as adjusted of $30.9 million in the third quarter of 2013.
  • Free Cash Flow of $30.3 million compared to a combined deficit of $3.4 million in the third quarter of 2013.

RICHMOND, Va.--()--Media General, Inc. (NYSE: MEG), a local broadcast television and digital media company, today reported third-quarter 2014 results.

“Comparing the results of the combined company, net operating revenue increased 21%. This growth reflected higher political, retransmission, digital and local advertising revenues along with our purchase of WHTM in Harrisburg on September 1.”

“Our strong year-over-year growth in the third quarter of all key financial metrics further demonstrates the value of our merger with Young Broadcasting last November,” said George L. Mahoney, president and chief executive officer of Media General. “Comparing the results of the combined company, net operating revenue increased 21%. This growth reflected higher political, retransmission, digital and local advertising revenues along with our purchase of WHTM in Harrisburg on September 1.

“Our $21.4 million of political revenue in the third quarter is attributable to our presence in many key markets where U.S. Senate and state gubernatorial races were very competitive. We additionally were pleased to see local advertising revenues grow 2% in the third quarter including WHTM, while, as expected, national advertising revenues decreased from last year. Weak automotive advertising was the primary driver of an approximate 10% decrease in national revenues.

“Our net revenue growth, combined with expense management, drove increases in Broadcast Cash Flow, which was up 53%; in adjusted EBITDA, which increased 79%; and in Free Cash Flow, which was $30 million this year compared to a $3.4 million deficit in last year’s third quarter,” said Mr. Mahoney.

GAAP Results for Third-Quarter 2014

On November 12, 2013, Media General, Inc. and New Young Broadcasting Holding Co., Inc. were combined in an all-stock merger transaction. The merger was accounted for as a reverse acquisition. For financial reporting purposes only, Young is the acquirer and the continuing reporting entity. Consequently, the consolidated financial statements of Media General, Inc., the legal acquirer and the continuing public corporation in the transaction, include the operating results for only Young for the three months ended September 30, 2013. This news release first discusses GAAP results for the third quarter of 2014 compared to 2013. The company has appended Supplemental Combined Company Information to this press release. A discussion of these “As Adjusted” third-quarter results follows the GAAP discussion.

In the third quarter of 2014, net income attributable to Media General was $13.4 million, or 15 cents per diluted share, based on weighted-average diluted common shares outstanding of 89 million. Net income attributable to Media General in the third quarter of 2013 was $4.5 million, or 7 cents per diluted share, based on weighted-average diluted common shares outstanding of 60.2 million. In accordance with GAAP, the presentation of “net income attributable to Media General” does not include the results of WXXA-TV or WLAJ-TV.

Also, net operating revenue in the third quarter of 2014 was $160.2 million compared to $54.1 million in the prior year. Total operating costs in the third quarter of 2014 were $125.0 million compared to $45.2 million in the prior year. Operating income in the third quarter of 2014 was $35.2 million compared to $8.9 million in the prior year.

Non-GAAP Results for the Third-Quarter (As Adjusted Combined Company)

The appended Supplemental Combined Company Information includes an “As Adjusted" column, which provides financial information for the combined company for the third quarter of 2013. The purpose of the "Adjustments" column is to include Legacy Media General revenues and expenses. No other adjustments have been made to the supplemental financial information, which is purely informational and does not purport to be indicative of what would have happened had the merger occurred as of the beginning of the period presented, nor is it indicative of results that may occur in the future, nor does it include any of the synergies of the combined company.

All 2013 results in the discussion below are adjusted for the combined company.

Net operating revenue increased 21% to $160.2 million compared to $132.6 million in the third quarter of 2013.

Local gross time sales increased 2% to $76.4 million compared to $74.9 million in the third quarter of 2013. Local automotive advertising was nominally below the third quarter of 2013. Major local advertising categories that increased included healthcare, home improvement and telecommunications, while categories showing declines included restaurant and grocery.

National gross time sales decreased 10% to $34.3 million compared to $38.1 million in the third quarter of 2013. National automotive advertising declined double digits compared to the third quarter of 2013. Other major national advertising categories that decreased included telecommunications, legal and entertainment, while categories showing increases included financial, healthcare and grocery.

Core advertising (local and national gross time sales combined) declined 2% year over year.

Political gross time sales were $21.4 million compared to $2.5 million in the third quarter of 2013. Media General stations benefited in particular from U.S. Senate races in North Carolina, Iowa, Louisiana, Georgia, and South Dakota and from gubernatorial races in Florida, Rhode Island and Wisconsin.

Retransmission revenues increased 51% to $35.3 million from $23.4 million in the third quarter of 2013.

Digital gross time sales increased 35% to nearly $7 million compared to $5.2 million in the third quarter of 2013.

Total operating costs of $125 million compared to $115.5 million in the third quarter of 2013. Total operating costs increased 4%, excluding the higher depreciation and amortization this year due to purchase accounting for the Young merger, and merger-related expense and corporate severance in both years along with our purchase of WHTM on September 1.

Station operating expenses were $54.7 million compared to $49.9 million in the third quarter of 2013. The increase was primarily attributable to higher programming fees paid to the networks and one month of station operating expense for WHTM.

Selling, general and administrative expenses were $39.4 million compared to $37.5 million in the third quarter of 2013. The increase was attributable to third party expense directly related to the increase in digital time sales along with one month of expense in 2014 for WHTM.

Corporate and other expenses decreased 24% to $5.5 million compared to $7.3 million in the third quarter of 2013 due to Young merger synergies, lower pension and postretirement costs and lower incentive compensation expense. The Directors’ Deferred Compensation Plan was amended in April 2014, which eliminated mark-to-market accounting for these awards as of that date. In the third quarter of 2013, an approximate $3 increase in Media General’s stock price caused a $2 million increase in incentive compensation expense. Additionally, the prior year amount included a reversal of an accrued liability of $1.8 million related to a former Young contract.

Depreciation and amortization was of $15.6 million was $5.2 million higher than last year’s $10.4 million predominantly due to the effects of purchase accounting resulting from the Young merger.

Merger-related expenses in the current year were $3.6 million compared to $4.5 million last year. Corporate severance expense was $275,000 compared to $630,000 in the prior period.

Operating income of $35.2 million compared to $17.1 million in the third quarter of 2013.

Interest expense was $9.8 million this year compared to $22.3 million in last year’s third quarter.

Income tax expense of $11.5 million compared to $5.4 million in the prior year and was mostly non-cash in both years.

Broadcast Cash Flow (BCF) increased 53% to $61.1 million compared to combined BCF of $40 million in the third quarter of 2013; BCF margin in the current quarter was 38% compared to 30% in the prior year.

EBITDA as adjusted increased 79% to $55.4 million compared to combined EBITDA as adjusted of $30.9 million in the third quarter of 2013.

Free Cash Flow of $30.3 million compared to a combined deficit of $3.4 million in the third quarter of 2013. Capital expenditures in the current period were $10.3 million compared to $6.7 million last year.

Total debt outstanding was $906.2 million at September 30, 2014. Net leverage at the end of the third quarter was 4.2x.

Media General provides the non-GAAP financial metrics of broadcast cash flow, EBITDA as adjusted, after-tax cash flow, free cash flow and the Supplemental Combined Company Information. The company believes these metrics are alternative measures used in peer comparison and by lenders, investors, financial analysts and rating agencies to evaluate a company’s ability to service its debt requirements and to estimate the value of the company. A reconciliation of these metrics to amounts on the GAAP statements is included in this news release.

Merger with LIN Media

On March 21, 2014, Media General announced plans to merge with LIN Media in a transaction that will more than double the size of Media General. Following an amendment to the agreement in August, on October 6, 2014, at separate meetings, the shareholders of the two companies approved the proposed merger. Media General and LIN Media entered into a proposed consent decree with the Department of Justice and received early termination of the Hart-Scott-Rodino waiting period for the proposed merger on October 31, 2014. The transaction remains subject to the approval of the Federal Communications Commission and certain third-party consents. Media General expects the transaction to close in the fourth quarter of 2014.

About Media General

Media General, Inc. is a leading local television broadcasting and digital media company, providing top-rated news, information and entertainment in strong markets across the U.S. The company owns or operates 32 network-affiliated broadcast television stations and their associated digital media and mobile platforms, in 29 markets. These stations reach 17.5 million or nearly 15% of U.S. TV homes. Seventeen of the 32 stations are located in the top 75 designated market areas. Media General first entered the local television business in 1955 when it launched WFLA in Tampa, Florida, as an NBC affiliate. The company subsequently expanded its station portfolio through acquisition. In November 2013, Media General and Young Broadcasting merged, combining Media General’s 18 stations and Young’s 13 stations. In September 2014, Media General acquired WHTM-TV in Harrisburg, PA.

 
Media General, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
       
Three Months Nine Months
Ending (1) Ending (1)
Sept 30, Sept 30, Sept 30, Sept 30,
(Unaudited, in thousands except per share amounts)   2014   2013   2014   2013
 
Net operating revenue $ 160,224 $ 54,097 $ 458,253 $ 159,924
 
Operating costs:
Operating expenses, excluding depreciation expense 54,679 20,612 156,112 59,399
Selling, general and administrative expenses 39,440 14,237 123,702 42,984
Amortization of program license rights 5,167 2,451 15,077 7,433
Corporate and other expenses 5,567 (484 ) 19,778 4,097
Depreciation and amortization 15,643 4,481 48,278 13,616
Loss (gain) related to property and equipment, net 676 11 897 (32 )
Merger-related expenses 3,596 3,236 13,173 7,623
Corporate severance expense     275       630       4,764       634  
Total operating costs     125,043       45,174       381,781       135,754  
Operating income     35,181       8,923       76,472       24,170  
 
Other expense:
Interest expense (9,826 ) (1,923 ) (29,432 ) (6,143 )
Debt modification and extinguishment costs --- --- (183 ) ---
Other, net     19       1       19       (79 )
Total other expense     (9,807 )     (1,922 )     (29,596 )     (6,222 )
 
Income before income taxes 25,374 7,001 46,876 17,948
Income tax expense     (11,525 )     (2,864 )     (20,696 )     (7,345 )
 
Net income 13,849 4,137 26,180 10,603
Net income (loss) attributable to noncontrolling interests (included above)     454       (340 )     614       (694 )
Net income attributable to Media General (2)   $ 13,395     $ 4,477     $ 25,566     $ 11,297  
 
Earnings per common share (basic and diluted):
Net earnings per common share (basic)   $ 0.15     $ 0.09     $ 0.29     $ 0.24  
Net earnings per common share (assuming dilution)   $ 0.15     $ 0.07     $ 0.29     $ 0.19  
                 
 
Weighted-average common shares outstanding:
Basic (3) 88,535 47,803 88,444 47,803
Diluted (3)     89,027       60,193       88,943       60,193  
 
(1) On November 12, 2013, Media General, Inc. and New Young Broadcasting Holding Co., Inc. (the Former Young Company) were combined in an all-stock merger transaction. The merger was accounted for as a reverse acquisition. For financial reporting purposes only, the Former Young Company is the acquirer and the continuing reporting entity, but has been renamed Media General, Inc. Consequently, the consolidated financial statements of Media General, Inc., the legal acquirer and the continuing public corporation in the transaction, include the operating results for only the Former Young Company for the three and nine months ended Sept 30, 2013.
 
(2) In accordance with generally accepted accounting principles, the Company has presented the caption "Net income attributable to Media General" which excludes the Net income (loss) attributable to noncontrolling interests. Net income (loss) attributable to noncontrolling interests include the results of operation for WXXA-TV and WLAJ-TV. The Company does not own these stations but provides essential services to the stations under joint sales and shared services agreement and also guarantees the debt of both stations. Accordingly the Company consolidates the stations.
 
(3) For the three and nine months ended September 30, 2013, weighted-average common shares outstanding include the Former Young Company's common shares and share equivalents multiplied by the exchange ratio: 730.6171 shares of Media General for each share and share equivalent of the Former Young Company. For the three and nine months ended September 30, 2014, weighted-average common shares include the share and share equivalents of the combined company.
 

   
Media General, Inc.
CONSOLIDATED BALANCE SHEETS
 
September 30, December 31,
(Unaudited, in thousands)   2014   2013
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 26,875 $ 71,618
Trade accounts receivable, net 106,117 110,283
Current deferred tax asset 8,957 7,506
Prepaid expenses and other current assets   13,973       13,889  
Total current assets   155,922       203,296  
 
Property and equipment, net 276,668 285,467
Deferred tax asset, long-term 21,338 42,711
Other assets, net 38,366 35,477
Definite lived intangible assets, net 249,927 239,642
Broadcast licenses 604,500 573,300
Goodwill   561,832       541,475  
Total assets   $ 1,908,553     $ 1,921,368  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Trade accounts payable $ 11,529 $ 11,783
Accrued salaries and wages 14,652 14,183
Deferred proceeds related to sale of property (1) 24,535 ---
Other accrued expenses and other current liabilities 44,922 42,656
Current installments of long-term debt 2,400 11,217
Current installments of obligation under capital leases   146       153  
Total current liabilities   98,184       79,992  
 
Long-term debt 903,800 905,783
Obligations under capital leases, excluding current installments 1,068 1,156
Retirement and postretirement plans 103,101 155,309
Other liabilities   30,773       43,891  
Total liabilities   1,136,926       1,186,131  
 
Total stockholders' equity attributable to Media General 772,757 736,981
Noncontrolling interests   (1,130 )     (1,744 )
Total stockholders' equity   771,627       735,237  
Total liabilities and stockholders' equity   $ 1,908,553     $ 1,921,368  
 
(1) In May of 2014, the Company sold its KRON-TV building in San Francisco to a third party for $24.5 million of net cash proceeds. The Company leased the space back from the third party through December 31, 2014, with no rental payments required. The Company is required to defer the gain on the sale until the end of the lease term. The Company anticipates recording a gain in the range of $10 million in the fourth quarter.
 

       
SUPPLEMENTAL INFORMATION
Media General, Inc.
 
Broadcast Cash Flow
Three Months Ending Nine Months Ending
Sept 30, Sept 30, Sept 30, Sept 30,
(Unaudited, in thousands)   2014   2013   2014   2013
 
Net income $ 13,849 $ 4,137 $ 26,180 $ 10,603
Add:
Interest expense 9,826 1,923 29,432 6,143
Debt modification and extinguishment costs --- --- 183 ---
Corporate and other expenses 5,567 (484 ) 19,778 4,097
Depreciation and amortization 15,643 4,481 48,278 13,616
Income tax expense 11,525 2,864 20,696 7,345
Loss (gain) related to property and equipment, net 676 11 897 (32 )
Program license rights, net 162 --- (127 ) ---
Merger-related expenses 3,596 3,236 13,173 7,623
Corporate severance expense 275 630 4,764 634
Other, net     (19 )     (1 )     (19 )     79  
 
Broadcast cash flow   $ 61,100     $ 16,797     $ 163,235     $ 50,108  
 
Net operating revenue $ 160,224 $ 54,097 $ 458,253 $ 159,924
 
Broadcast cash flow margin 38 % 31 % 36 % 31 %
                 
 
EBITDA as adjusted
Three Months Ending Nine Months Ending
Sept 30, Sept 30, Sept 30, Sept 30,
(Unaudited, in thousands)   2014   2013   2014   2013
 
Net income $ 13,849 $ 4,137 $ 26,180 $ 10,603
Interest expense 9,826 1,923 29,432 6,143
Debt modification and extinguishment costs --- --- 183 ---
Depreciation and amortization 15,643 4,481 48,278 13,616
Income tax expense 11,525 2,864 20,696 7,345
Loss (gain) related to property and equipment, net 676 11 897 (32 )
Merger-related expenses 3,596 3,236 13,173 7,623
Corporate severance expense 275 630 4,764 634
Reversal of Gray liabilities (1)     ---       (1,769 )     ---       (1,769 )
 
EBITDA as adjusted   $ 55,390     $ 15,513     $ 143,603     $ 44,163  
 
After-tax Cash Flow
 
Net income $ 13,849 $ 4,137 $ 26,180 $ 10,603
Debt modification and extinguishment costs --- --- 183 ---
Depreciation and amortization 15,643 4,481 48,278 13,616
Deferred tax expense 11,033 2,648 19,923 6,757
Reversal of Gray liabilities (1)     ---       (1,769 )     ---       (1,769 )
After-tax cash flow   $ 40,525     $ 9,497     $ 94,564     $ 29,207  
 
Free Cash Flow
 
After-tax cash flow $ 40,525 $ 9,497 $ 94,564 $ 29,207
Capital expenditures 10,249 2,323 18,621 8,251
                 
Free cash flow   $ 30,276     $ 7,174     $ 75,943     $ 20,956  
 
(1) The Former Young Company had a management agreement with Gray Television, Inc. (Gray), the term of which expired on December 31, 2012. In addition to certain management fees, as part of the management agreement, if the Former Young Company had been sold prior to December 31, 2012, then Gray would have received a portion of the aggregate sales price above a specified threshold. The Former Young Company was not sold. In August 2013, the Former Young Company made a payment of $7.1 million to Gray in accordance with the terms of the management agreement. This was a final payment and satisfied any remaining obligations the Former Young Company had in relation to that agreement. The Company reversed its remaining accrued liability of $1.8 million as a reduction of corporate and other expenses on the consolidated statements of operations in the third quarter of 2013.
 

       
SUPPLEMENTAL INFORMATION
Media General, Inc.
 
Selected Revenue Categories
Three Months Ending Nine Months Ending
Sept 30, Sept 30, Sept 30, Sept 30,
(Unaudited, in thousands)   2014   2013   2014   2013
Local (gross) $ 76,370 $ 31,184 $ 233,888 $ 95,290
National (gross) 34,344 15,245 103,500 43,699
Political (gross) 21,418 1,449 35,192 2,267
Retransmission (gross) 35,316 10,240 104,281 29,724
Digital (gross) 6,956 1,965 18,877 5,627
                 
 
Corporate and other expenses
 
Three Months Ending Nine Months Ending
Sept 30, Sept 30, Sept 30, Sept 30,
(Unaudited, in thousands)   2014   2013   2014   2013
Corporate (excluding depreciation and amortization) $ 4,586 $ 913 $ 17,027 $ 4,751
Legacy benefit costs (1) (863 ) --- (2,310 ) ---
Incentive compensation 1,588 372 3,757 1,115
Reversal of Gray liabilities (2) --- (1,769 ) --- (1,769 )
Other operating expenses     256       ---       1,304      

---

 
Corporate and other expenses   $ 5,567     $ (484 )   $ 19,778     $ 4,097  
 
(1) Includes the impact of the frozen pension and postretirement obligations to former employees. Due to the benefit of the supplemental pension contribution of $50 million, expected return on plan assets exceeds interest cost on the Company's main retirement plans. As such, the Company is recognizing pension "income" in 2014.
 
(2) The Former Young Company had a management agreement with Gray Television, Inc. (Gray), the term of which expired on December 31, 2012. In addition to certain management fees, as part of the management agreement, if the Former Young Company had been sold prior to December 31, 2012, then Gray would have received a portion of the aggregate sales price above a specified threshold. The Former Young Company was not sold. In August 2013, the Former Young Company made a payment of $7.1 million to Gray in accordance with the terms of the management agreement. This was a final payment and satisfied any remaining obligations the Former Young Company had in relation to that agreement. The Company reversed its remaining accrued liability of $1.8 million as a reduction of corporate and other expenses on the consolidated statements of operations in the third quarter of 2013.
 

 
SUPPLEMENTAL COMBINED COMPANY INFORMATION
Media General, Inc.
 
The supplemental financial information presented below was derived from the historical results of operations of Media General, Inc. and Young. The "As Adjusted" column in each section provides certain financial information for the combined company for the three and nine months ended September 30, 2013. The purpose of the "Adjustments" column in each section is to include legacy Media General revenues and expenses for the three and nine months ended September 30, 2013. No other adjustments have been made to the supplemental financial information. The supplemental information provided does not purport to be indicative of what would have happened had the merger actually occurred as of the beginning of the period presented, nor is it indicative of results which may occur in the future.
 
 
Supplemental Summary of Combined Company Income (Loss) from Continuing Operations
         
Three Months Ending Sept 30, 2013 Nine Months Ending Sept 30, 2013
(Unaudited, in thousands)   As Reported   Adjustments   As Adjusted As Reported   Adjustments   As Adjusted
 
Net operating revenue $ 54,097 $ 78,489 $ 132,586 $ 159,924 $ 234,448 $ 394,372
 
Operating costs:
Operating expenses, excluding depreciation expense 20,612 29,271 49,883 59,399 87,220 146,619
Selling, general and administrative expenses 14,237 23,300 37,537 42,984 69,055 112,039
Amortization of program license rights 2,451 2,702 5,153 7,433 8,168 15,601
Corporate and other expenses (484 ) 7,833 7,349 4,097 24,650 28,747
Depreciation and amortization 4,481 5,957 10,438 13,616 17,996 31,612
Loss (gain) related to property and equipment, net 11 10 21 (32 ) 78 46
Merger-related expenses 3,236 1,218 4,454 7,623 8,389 16,012
Corporate severance expense     630      

---

      630     634       (29 )     605  
Total operating costs     45,174       70,291       115,465     135,754       215,527       351,281  
Operating income     8,923       8,198       17,121     24,170       18,921       43,091  
 
Other income (expense):
Interest expense (1,923 ) (20,339 ) (22,262 ) (6,143 ) (59,078 ) (65,221 )
Debt modification and extinguishment costs --- --- --- --- --- ---
Other, net     1       42       43     (79 )     (132 )     (211 )
Total other expense     (1,922 )     (20,297 )     (22,219 )   (6,222 )     (59,210 )     (65,432 )
 
Income (loss) before income taxes 7,001 (12,099 ) (5,098 ) 17,948 (40,289 ) (22,341 )
 
Income tax expense (2,864 ) (2,517 ) (5,381 ) (7,345 ) (7,725 ) (15,070 )
                       
Income (loss) from continuing operations   $ 4,137     $ (14,616 )   $ (10,479 ) $ 10,603     $ (48,014 )   $ (37,411 )
                       
 
Supplemental Combined Company EBITDA as adjusted, After-tax Cash Flow, and Free Cash Flow
 
Three Months Ending Sept 30, 2013 Nine Months Ending Sept 30, 2013
(Unaudited, in thousands)   As Reported   Adjustments   As Adjusted As Reported   Adjustments   As Adjusted
Income (loss) from continuing operations $ 4,137 $ (14,616 ) $ (10,479 ) $ 10,603 $ (48,014 ) $ (37,411 )
Interest expense 1,923 20,339 22,262 6,143 59,078 65,221
Depreciation and amortization 4,481 5,957 10,438 13,616 17,996 31,612
Income tax expense 2,864 2,517 5,381 7,345 7,725 15,070
Loss (gain) related to property and equipment, net 11 10 21 (32 ) 78 46
Merger-related expenses 3,236 1,218 4,454 7,623 8,389 16,012
Corporate severance expense 630 --- 630 634 (29 ) 605
Reversal of Gray liabilities (1)     (1,769 )     ---       (1,769 )   (1,769 )     ---       (1,769 )
EBITDA as adjusted   $ 15,513     $ 15,425     $ 30,938   $ 44,163     $ 45,223     $ 89,386  
                       
 
Income (loss) from continuing operations $ 4,137 $ (14,616 ) $ (10,479 ) $ 10,603 $ (48,014 ) $ (37,411 )
Depreciation and amortization 4,481 5,957 10,438 13,616 17,996 31,612
Deferred tax expense 2,648 2,517 5,165 6,757 7,725 14,482
Reversal of Gray liabilities (1)     (1,769 )     ---       (1,769 )   (1,769 )     ---       (1,769 )
After-tax cash flow   $ 9,497     $ (6,142 )   $ 3,355   $ 29,207     $ (22,293 )   $ 6,914  
 
After-tax cash flow $ 9,497 $ (6,142 ) $ 3,355 $ 29,207 $ (22,293 ) $ 6,914
Capital expenditures 2,323 4,411 6,734 8,251 11,788 20,039
                       
Free cash flow   $ 7,174     $ (10,553 )   $ (3,379 ) $ 20,956     $ (34,081 )   $ (13,125 )
 
(1) The Former Young Company had a management agreement with Gray Television, Inc. (Gray), the term of which expired on December 31, 2012. In addition to certain management fees, as part of the management agreement, if the Former Young Company had been sold prior to December 31, 2012, then Gray would have received a portion of the aggregate sales price above a specified threshold. The Former Young Company was not sold. In August 2013, the Former Young Company made a payment of $7.1 million to Gray in accordance with the terms of the management agreement. This was a final payment and satisfied any remaining obligations the Former Young Company had in relation to that agreement. The Company reversed its remaining accrued liability of $1.8 million as a reduction of corporate and other expenses on the consolidated statements of operations in the third quarter of 2013.
 

 
SUPPLEMENTAL COMBINED COMPANY INFORMATION
Media General, Inc.
 
The supplemental financial information presented below was derived from the historical results of operations of Media General, Inc. and Young. The "As Adjusted" column in each section provides certain financial information for the combined company for the three and nine months ended September 30, 2013. The purpose of the "Adjustments" column in each section is to include legacy Media General revenues and expenses for the three and nine months ended September 30, 2013. No other adjustments have been made to the supplemental financial information. The supplemental information provided does not purport to be indicative of what would have happened had the merger actually occurred as of the beginning of the period presented, nor is it indicative of results which may occur in the future.
 
           
Supplemental Combined Company Broadcast Cash Flow
 
Three Months Ending Sept 30, 2013 Nine Months Ending Sept 30, 2013
(Unaudited, in thousands)   As Reported   Adjustments   As Adjusted As Reported   Adjustments   As Adjusted
 
Income (loss) from continuing operations $ 4,137 $ (14,616 ) $ (10,479 ) $ 10,603 $ (48,014 ) $ (37,411 )
Add:
Interest expense 1,923 20,339 22,262 6,143 59,078 65,221
Corporate and other expenses (484 ) 7,833 7,349 4,097 24,650 28,747
Depreciation and amortization 4,481 5,957 10,438 13,616 17,996 31,612
Income tax expense 2,864 2,517 5,381 7,345 7,725 15,070
Loss (gain) related to property and equipment, net 11 10 21 (32 ) 78 46
Program license rights, net --- 12 12 --- 160 160
Merger-related expenses 3,236 1,218 4,454 7,623 8,389 16,012
Corporate severance expense 630 --- 630 634 (29 ) 605
Other, net     (1 )     (42 )     (43 )   79       132       211  
Broadcast cash flow   $ 16,797     $ 23,228     $ 40,025   $ 50,108     $ 70,165     $ 120,273  
 
Net operating revenue $ 54,097 $ 132,586 $ 159,924 $ 394,372
 
Broadcast cash flow margin 31 % 30 % 31 % 30 %
                       

 

Supplemental Combined Company Selected Revenue Categories
 
Three Months Ending Sept 30, 2013 Nine Months Ending Sept 30, 2013
(Unaudited, in thousands)   As Reported   Adjustments   As Adjusted As Reported   Adjustments   As Adjusted
Local (gross) $ 31,184 $ 43,737 $ 74,921 $ 95,290 $ 131,456 $ 226,746
National (gross) 15,245 22,886 38,131 43,699 68,200 111,899
Political (gross) 1,449 1,049 2,498 2,267 2,595 4,862
Retransmission (gross) 10,240 13,196 23,436 29,724 40,026 69,750
Digital (gross) 1,965 3,192 5,157 5,627 8,513 14,140
                       
 
Supplemental Combined Company Corporate and Other Expenses
 
Three Months Ending Sept 30, 2013   Nine Months Ending Sept 30, 2013
(Unaudited, in thousands)   As Reported   Adjustments   As Adjusted   As Reported   Adjustments   As Adjusted
 
Corporate and other expenses
Corporate (excluding depreciation and amortization) $ 913 $ 4,010 $ 4,923 $ 4,751 $ 12,562 $ 17,313
Legacy benefit costs --- 666 666 --- 1,986 1,986
Incentive compensation (including stations) 372 2,688 3,060 1,115 9,415 10,530
Reversal of Gray liabilities (1) (1,769 ) --- (1,769 ) (1,769 ) --- (1,769 )
Gain on legal settlement --- (70 ) (70 ) --- (845 ) (845 )
Other operating expenses     ---       539       539     ---       1,532       1,532  
Total corporate and other expenses   $ (484 )   $ 7,833     $ 7,349   $ 4,097     $ 24,650     $ 28,747  
 
(1) The Former Young Company had a management agreement with Gray Television, Inc. (Gray), the term of which expired on December 31, 2012. In addition to certain management fees, as part of the management agreement, if the Former Young Company had been sold prior to December 31, 2012, then Gray would have received a portion of the aggregate sales price above a specified threshold. The Former Young Company was not sold. In August 2013, the Former Young Company made a payment of $7.1 million to Gray in accordance with the terms of the management agreement. This was a final payment and satisfied any remaining obligations the Former Young Company had in relation to that agreement. The Company reversed its remaining accrued liability of $1.8 million as a reduction of corporate and other expenses on the consolidated statements of operations in the third quarter of 2013.
 

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Media General, Inc.
Lou Anne J. Nabhan
Vice President-Corporate Communications
804-887-5120
lnabhan@mediageneral.com

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Media General Reports Third-Quarter 2014 Results

Media General, Inc.