Media General Expects Rapid Retrans Growth

Fresh off its merger with Young Broadcasting, Media General is expecting strong growth in retransmission consent revenue this year and next, CEO George Mahoney said at the UBS Global Media & Communications Conference in New York today.

In 2012, Media General took in $69.9 million in retrans on a pro forma basis. “This year, we expect retrans to increase 35% to 40% from that base,” he say. “In 2014, we expect to increase [it] again by a similar percentage.”

And much of the additional revenue will drop to the bottom line, he noted.

Mahoney said: “Our merger with Young was an all-stock transaction. To say it was transformational for both companies dramatically understates the case. First, we promised $30 million of synergies when we announced this transaction. We said they’d be realized in 12-15 months from the closing. Today, our expected synergies already stand at $44 million, and we believe they could go higher.

“We also said the merger would be immediately accretive to free cash flow. The new credit facility we put in place has allowed us to refinance Media General’s and Young’s debt at a significantly lower cost than we’d anticipated. Our new, combined balance sheet will be even stronger going forward than we’d hoped.

“We’re working hard on integration issues, melding two companies and assimilating the best of each into our new organization. This too is going well. We’ve found that our two companies approach the world — and their responsibilities to, and their roles in their communities — all in virtually the same ways. Culture is not only not a problem, rather, it’s an accelerant.

“We’re excited at our prospects as we look ahead to 2014. Political once again will be a hot category. Our digital and mobile platforms will continue to drive meaningful, industry-leading audience and revenue growth,” Mahoney added.

James F. Woodward, SVP-CFO, said: “In addition to our strong balance sheet, improved credit profile, synergies and accretion to free cash flow, we have combined NOLs of more than $500 million and do not expect to pay any significant cash income taxes for the next 5-7 years.

“After the merger closed, we drew our new credit facilities and repaid the existing term loans for Media General and Young, including call premiums, transaction fees and expenses. Our credit facilities are also funding a $50 million contribution to Media General’s pension plan. Tomorrow, we are redeeming our 11-3/4% senior notes, which will complete our refinancing process. After tomorrow’s redemption of the senior notes, we will have $885 million of debt, an interest rate of 4.25% and annual cash interest expense of $37 million,” he said.

 Woodward also reported that for the first nine months of 2013, pro forma combined revenues were $394 million, pro forma combined operating income was $43 million, and pro forma combined EBITDA was $87 million.