1. Good afternoon ladies and gentlemen. I’m Marshall Morton, president and chief executive of Media
General. I’m glad to see you all. Presenting with me today are Reid Ashe, our chief operating officer,
and John Schauss, our chief financial officer. Our Investor Relations Vice President, Lou Anne Nabhan,
is also here in the audience. As a reminder, our presentation contains forward-looking statements, which
should be understood in the context of our SEC filings. Our future performance could differ from current
expectations. I’ll begin with some comments on current business conditions. Advertiser spending
patterns have firmed in the fourth quarter. We expect total revenues to be down 14-16% from last year,
which compares sequentially with an 18% decrease in the third quarter of this year. It’s important to note
that last year’s fourth quarter included $23 million of Political revenues and the third quarter of last year
included $7.5 million of Political revenues that we will not have this year. The improvement we’ve seen is
primarily in the automotive and retail categories. On the television side, higher automotive spending is
mostly coming from the manufacturers, although we’ve seen an uptick in local dealer advertising in some
markets. On the newspaper side, we’ve seen positive signs with local dealers in some markets,
including Tampa and Richmond. Within the Classified category, auto has been declining at a much
lower rate than employment or real estate. The preprints placed in our newspapers over the
Thanksgiving holiday met or exceeded last year’s levels in several markets, and this trend has continued.
Digital Media advertising revenues continue to increase, most notably in the Local and advertising
services categories. As we look to the new year, we believe we’ve reached equilibrium between
revenues and expenses. We’re in a strong position to benefit from a recovery. We look forward to next
year’s Political and Olympics revenues, and we expect a lift from an improving economy. However,
we’re not just going to ride those waves. The future that will sustain us is going to be one of our own
making in our own markets. Our presentation today will provide insights into how we are shaping our
future as we harness the power of digital communications on a 24-7 basis. We believe the way forward
is becoming increasingly clear and that the successes we’re achieving in the digital and mobile worlds
are more than incremental steps. We are using a host of new tools to attract new audiences with
targeted content and to connect advertisers with their desired customers more effectively than ever.
Before delving into those topics, I’d like to briefly recap how we’ve navigated the recession.
2. Because we have sizeable operations in Florida, we felt the recession’s impact earlier and more severely
than some. That was late 2006. Since then, we have responded aggressively to rapidly eroding
advertiser spending and have dramatically lowered our cost structure. Through the first nine months of
this year, our total operating costs were down 19% compared with last year. We expect to end the year
at that same level. Our 2008 total operating costs were 6% below 2007. The most significant factor in
our lower cost structure is a nearly 30% reduction in our workforce since the beginning of 2007.
This year, which has been the most challenging of the past three, we implemented several additional
steps to conserve cash. These included eliminating across-the-board salary increases, suspending the
company match for the 401(k) plan and implementing 15 furlough days for essentially all employees. We
froze retirement plan benefits and suspended the dividend.
Our workforce reductions have been accomplished through streamlining, consolidating, centralizing and
3. For example, 10 years ago we had 25 newspaper printing facilities. Today, we have ten, and unit costs
are down substantially. To further leverage our printing assets, early this year, we set up a new group to
run our printing and distribution operations and focus on outside sales. This approach has freed our
Publishers to focus on content and advertising sales, and we have generated more than $5.5 million in
annualized outside revenues. We are printing and distributing for many other publishers, including a
major new contract to print and deliver various Dow Jones products in Tampa. We just opened our first
copy editing and page design center serving four of our daily and six of our non-daily newspapers in
North Carolina. We will apply this approach to all of our newspapers by the end of next year.
Our television stations have also learned to operate more effectively with fewer people. We've
centralized our traffic, master control and graphics operations for all stations, and in the process reduced
costs and improved product quality. More recently, we’ve begun conversations in several of our
television markets for joint sales and operating agreements. Our first one starts in January, in Augusta,
Ga., where our ABC station will provide the local NBC and CW affiliates with sales, local news and other
4. During the difficult operating environment of the past three years, we’ve reduced our debt by nearly $200
million, or 22%, using free cash flow and proceeds from asset sales. At the end of the third quarter, our
debt was $706 million. We expect to reduce debt an additional $6-$10 million by the end of the year.
We’ve pared back capital spending to maintenance levels, while continuing to fund high-return projects.
Capital expenditures this year are expected to be $20 million. Next year, we expect capital spending to
be $28-29 million. We believe this level of investment is adequate to meet our needs given our strategic
5. Tough times also have inspired us to stretch in new directions and with great urgency. We’ve continued
to embrace all the new opportunities provided by advancing technologies and changing consumer
preferences. We’ve placed tremendous emphasis on strengthening our sales culture to drive new
revenues, especially for online and mobile platforms. We greatly heightened our focus on innovation
throughout the company. All properties have innovation teams in place to drive new ideas that meet
customer and local market needs. We quickly identify high-potential new products and services that can
be scaled across the enterprise.
At the beginning of the third quarter, we introduced a new operating structure that puts focus on our
markets rather than on our platforms and makes us more nimble in responding to rapid changes and
opportunities in our marketplaces. Our new structure is based on five geographic markets plus a sixth
segment for our advertising services businesses. All of our properties within a given market are now
managed by a single, accountable leader. Before, different properties in the same market reported to
different platform-based divisions. Today, we can be quicker to market with new sales ideas and with
new products, especially as we engage more deeply in the digital and mobile worlds. We pioneered our
market approach in Tampa many years ago. We found that the synergies and benefits of cross-platform
collaboration results in higher audience penetration. In Tampa, our TV, print and online platforms reach
more than 80% of the total audience there. Our market structure makes it easier for business units in
6. close proximity to one another to work together to make inroads into new territories between our
traditional market boundaries. We’re succeeding with new digital products, inventive sales packages,
and new print products such as magazines and directories – all representing new revenue streams.
We know that in the digital world we can realize meaningful growth without acquisitions and without the
capital that used to be required to build traditional media businesses. Now, I’ll ask Reid to provide more
details about how we’re expanding our role as a provider of valuable local content, using an integrated
platform approach, and attracting the audiences that advertisers want to reach.
Thank you, Marshall. I’ll start with an overview of the many ways we’re using new technology to reach
more people more frequently and to diversify our revenue streams.
The Internet is no longer confined to the desktop. It travels with us on our cell phones and pocket
devices. We’re building new services customized for mobility and tailored to the specific devices people
carry. Strategic partnerships, notably with Yahoo!, are also an important part of our digital strategy. We
combine our deep customer relationships and local credibility with other’s global scale and best-of-class
technology. Our Blockdot business taps new and growing advertiser budgets for advergames and
branded entertainment. Our DealTaker.com business reaches beyond advertising altogether and
operates on a pay-for-performance, or commission model, while still putting retailers in touch with their
7. Our digital strategies continue to drive double-digit audience growth. This year, our unique visitors are
on track to increase more than 30%.
Visitor Sessions and Page Views for our local web sites have also grown nicely.
8. Our total digital revenues this year are expected to reach $42 million, up 8% from last year. This will
account for 6% of our total revenues, up from 4.7% last year. According to Borrell’s, we’re among the
top performers in our industry for this metric.
Here we see our diversified mix of digital revenues. A significant change that has occurred over the past
few years is that online Classifieds no longer dominate as they once did when we were almost
exclusively reliant on upsells to the web from ads placed in our newspapers. Today, our direct-to-the-
internet Help Wanted sales outpace newspaper upsells. Thanks to our Yahoo! HotJobs partnership, we
provide more job listings in most of our markets than either Monster or Careerbuilder.
9. Local direct-billed revenue is our largest and fastest growing category. This year it’s up nearly 30%.
Many of our online customers are brand new to us. Our opportunity to drive and control this category is
a key factor in its strong growth even during the recession. We attribute the growth to sales training and
sales focus, to strong local client relationships, and to the local control of all platforms that our new
market structure provides.
Our Internet partnerships are also driving significant online revenue growth. This year, we expect our
share of the revenue our agreement with Yahoo! provides from selling its various online products in our
local markets will be $7 million. Two-thirds of that amount will be derived from HotJobs ads, and nearly
all the rest will be from behaviorally targeted ads. The partnership also enables us to display our local
news headlines on Yahoo pages. So far, this arrangement has drawn more than 8 million visitors to our
web sites, which is up from 5 million last year. We monetize this traffic with the ad impressions on the
pages viewed. Increasingly, we’re also seeing these visitors sample content beyond what they originally
came to see, which expands our opportunity to monetize the traffic.
10. Zillow.com is a new partner this year. We’ve co-branded our online real-estate sections with Zillow since
April. As a result, we expect to sell $500,000 in new display revenue this year.
The mobile versions of our local web sites – 64 in all - draw about 2 million page views a month from
more than 400,000 unique visitors. Our mobile websites are designed for display on any mobile device,
and they all provide mobile video.
11. We use social media to expand our reach, extend our brands and interact with our customers in new
Blockdot has made groundbreaking inroads in mobile and social apps for major brand name clients and
agencies. You can find Blockdot products in iPhone and Android app stores, under customers’ brands,
as well as our own. Our word game, Chicktionary, a $1.99 download and considered by many to be
“addictive,” was named best in its class this year by MacWorld. Blockdot also continues to provide
sophisticated advergames for blue-chip advertisers. Microsoft recently chose us as one of its preferred
12. Our newest interactive service, DealTaker.com, finds the best prices on the Web for a wide variety of
consumer items. It also provides coupons, product information, comparisons and discussion forums.
DealTaker is one of the top ten sites of its kind, and it averages more than 60,000 unique visitors a day.
When a customer clicks through to a retailer’s site and completes a purchase, Dealtaker collects a
commission. It’s highly profitable and growing fast. DealTaker’s Black Friday revenues were ahead of
last year by 50%, and Cyber Monday was 75% ahead of last year.
We’re part of a broadcast industry partnership to define standards and explore business models for
digital mobile television. We foresee expanded viewership through mobile and hand-held devices, and
we believe the revenue model has potential to include both advertising and subscriptions. We also
expect new local programming opportunities that we will be able to monetize.
13. Newspaper circulation revenue is up 8.5% this year because we’ve aggressively raised prices. We’re
finding a stable base of loyal readers who value the content and service we provide. After slowing our
subscription sales pressure earlier in the year for cost reasons, we’ve now picked up the pace and
circulation is growing again. Nine of our newspapers offer e-editions, which are exact online replicas of
the print versions. You can search them, print out or e-mail stories, or even listen to a read-aloud version.
E-editions count as paid circulation and include all our ROP ads. We can price them attractively because
they require no manufacturing or materials cost.
As part of our strategy to provide our products on all the platforms people want to use, we are beginning
to offer our newspapers on e-readers such as Amazon’s Kindle. Today, we launched our second one.
Overall, our combined newspaper print and online audience is growing. The Tampa Tribune’s combined
audience is the third fastest growing in the country.
14. Throughout Media General, we’re building a culture of innovation. Every business unit has a mandate to
invent new services and reach new customers. We’re focused on high-potential opportunities – mobile
services, strategic partnerships, video, search, social media and e-mail direct marketing. Most of our
new products and services are electronic, but some take the form of printed publications serving specific
communities of interest. Broadcast innovations include local morning variety shows and themed
promotions. As our underlying business firms, we won’t relent in our initiatives to serve more people
more ways and to diversify our revenue. And now I will turn our presentation over to John.
Thank you, Reid. As we near the close of the fourth quarter, we are encouraged by the firming of
advertiser spending we’ve seen, although we do not expect to fully replace the $23 million of Political
revenues that we garnered in last year’s fourth quarter. Nonetheless, our lower cost structure will more
than offset the impact of lower revenues. In the fourth quarter, we will recognize a tax benefit of $25-30
million, for which we will also receive a cash refund next year. We will use the tax refund for debt
reduction. This came about as a result of Congressional carry-back legislation.
15. We’re still finalizing our 2010 budget, but we’re able to share some directional thoughts with you today.
While visibility is limited, our view at this point is that total revenues will be flat to slightly up. We expect a
low-to-mid single digit increase in broadcast revenues. Key drivers will be Political and Olympics
revenues, stronger transactional business, and growth in cable retransmission fees.
We’re projecting Political revenues next year of $32-34 million. These revenues will mostly be generated
by hotly contested races, including gubernatorial elections in Alabama, Florida, Georgia, Rhode Island,
and South Carolina; and Congressional races in Florida, Georgia, Ohio and Virginia. The wild card for
Political revenues is always issues advertising. It’s nearly impossible to project what those revenues
might be, but it is our experience that this category typically represents upside to our initial forecasts.
16. Revenues from the Winter Olympics are projected to be $7 million for our eight NBC stations. This
amount is less than the two previous Olympic games for two reasons. The more significant reason is the
slower economy. A second reason is that the four NBC stations we purchased in 2006 will no longer
receive an automatic allocation from network packages. Of course, the Winter Olympics typically are not
as strong as the Summer Olympics.
Cable retransmission fees next year will be $18-19 million, compared to $16 million this year.
17. Newspaper revenues are expected to be flat to down slightly compared with this year. Our newspaper
business will benefit from the incremental revenues Marshall discussed from new outside printing and
distribution customers, and also from growing circulation revenues.
On the expense side, until market conditions allow, we will hold in place our programs for controlling
employee compensation expense, except that we plan to enter 2010 with the expectation that furlough
days are behind us. We expect the Board will revisit the dividend at the appropriate time. Currently,
we’re benefiting from significantly lower newsprint expense. While newsprint prices are expected to
increase next year, our overall newsprint expense is expected to be down as a result of lower
consumption. We expect a low-to-mid single digit increase in total operating costs next year, before
interest expense, which I’ll discuss next.
18. While our bank facilities do not mature until mid-2011, we're encouraged by the recently completed and
pending refinancing activity in our space. We’re evaluating refinancing opportunities in the bank, public,
and institutional markets, and we are optimistic about the options that will be available to us. Our
refinance package will carry higher interest expense over the current one but will provide us with greater
flexibility. We expect the increase will be $25-30 million over this year’s projected $42 million in interest
expense. And, now I’ll hand it back to Marshall.
Thank you, John. With our market focus, our sales culture transformation, and our success with new
products and services, Media General is executing on a strategy that is designed to control our own
destiny for the long run. We also will continue to draw profitable growth from all the positives that drive
us. We’re deeply embedded as a leading media company in the Southeastern United States, which,
despite the recession, remains one of the nation’s strongest regions. We own outstanding assets in
highly attractive markets. Our lower cost base greatly increases our flexibility to do new things. In the
digital world, the new things that we can do don’t cost a lot on an incremental basis. With all the
opportunities available for growth via digital and electronic means, we no longer have to buy into new
markets, or make significant acquisitions, to realize meaningful growth over the long term. Our
customer- and market-focused company is ahead of the game in transforming itself in a rapidly changing
industry. We believe our financial results will improve over time, based on the clear and consistent
initiatives we’re executing and on the fundamental strengths of our assets and our region. We are
committed to increasing long-term shareholder value. And, now we’ll be pleased to answer your