The Olympics and political advertising return and the NBC stations it just acquired will be fully incorporated, the company tells Wall Street. The cash flow margin will rise and the debt will fall, it says.
Without the $52 million in political advertising it captured this year, Media General expects revenue and profits to fall at its TV station division next year.
But then comes 2008.
“We look to 2008 as a banner year,” Media General CEO Marshall Morton said in discussing the TV division at the Credit Suisse Media conference in New York today.
“By then, we will have had the new stations under our ownership for one full year,” he said. “We expect to realize at least $3 million annually in operating synergies, from revenues and cost reductions. In addition, 2008 will be a Presidential election year, and we will see the return of the Summer Olympics to NBC,” he said.
Media General just completed a major station upgrade, buying four NBC affiliates in strong markets from NBC and selling four CBS affiliates in smaller markets.
“The new stations will significantly improve our broadcast cash flow margin,” Morton said.
For the full-year 2006, Media General expects cash flow margin to be approximately 33.5%, reflecting the fact that the new stations were owned for only part of the year as well as the facts that political revenues were less than anticipated at some existing stations and that local and national spot revenues were soft.
However, the company said, cash flow margin should rebound to 36% in 2008.
Strong cash flow from the new stations will enable the company to quickly reduce the debt incurred to finance the acquisition, the company said.
Media General expects total debt to be approximately $920 million at the end of 2006, or just under four times cash flow and expects to reduce that to $745 million or 2.75 times by the end of 2008.
In 2007, the company says it plans $30 million in capital spending, including investments for improved news gathering and production capabilities and the completion of a new facility for its Myrtle Beach, S.C., station.