- The Washington Times - Monday, April 17, 2006

Stock of Media General, the Richmond owner of print, broadcast and online media in the Southeast, hit a 52-week low yesterday, joining other media companies reporting a decline in stock prices.

Gannett Co. Inc., Knight-Ridder Inc. and McClatchy Co., among others, reported dips in stock prices of at least 1 percent after poor earnings news. Knight-Ridder said yesterday that its net income fell by 50 percent. Gannett and McClatchy reported 12 percent and 14 percent drops, respectively.

Media General stock fell 81 cents to close at $41.16 on the New York Stock Exchange.

The media company last week reported that net income for its first quarter ended March 26 fell 28 percent to $6.7 million (28 cents per diluted share) from $9.3 million (39 cents) a year ago, before an accounting change that put the company’s net loss for the first quarter of 2005 at $316.2 million.

“The decrease from the prior year was primarily due to lower profit in the publishing division and non-cash stock option expenses,” Media General President and Chief Executive Officer Marshall N. Morton said in a conference call last week.

Media General’s first quarter showed improvement in its broadcast and interactive media divisions, but they were offset by declines in the publishing division. The company owns the Richmond Times-Dispatch, Tampa (Fla.) Tribune and Winston-Salem (N.C.) Journal.

Media General expects its publishing division’s advertising revenue to climb 5.5 percent to 6 percent next quarter compared with the year prior. The company also expects improvement from its partial ownership of SP Newsprint Co., a recycled newsprint manufacturer, which earned $172,000 in equity income in the first quarter.

“We were disappointed by the performance of our investment in SP Newsprint in the first quarter,” Mr. Morton said. “We do anticipate a significant improvement in the second quarter, when we expect our share in their results to be $3 million.”

“We expect accelerating growth in both newspaper and broadcast, although the lack of bottom-line leverage could hold back the stock on the near term,” Credit Suisse research analyst Debra Schwartz reported. “Given the growth outlook (spotty, but improving), we believe the stock is fairly valued.”

Media General announced earlier this month that it plans to buy four NBC stations for $600 million in cash, a move that drew a note of caution from crediting agencies.

Moody’s Investors Service placed the company’s ratings on review for a downgrade, and Standard & Poor’s Ratings Service changed its rating from stable to negative.

“They’re financing the transaction with 100 percent debt, and that’s more than doubling their debt balance,” said John Puchalla, an economist at Moody’s. “The stations they’re purchasing do have some revenue and earnings, but the amount of debt they’re taking on relative to the earnings is quite large. It was enough to question whether the ratings would hold.”

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