Edgar Filing: MEDIA GENERAL INC

meg20150331_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC. 20549

Form 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:

1-6383

MEDIA GENERAL, INC.

(Exact name of registrant as specified in its charter)

Commonwealth of Virginia	46-5188184
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

333 E. Franklin St., Richmond, VA	23219
(Address of principal executive offices)	(Zip Code)

(804) 887-5000

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year,

if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Larger accelerated filer X	Accelerated filer
Non-accelerated filer	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of May 8, 2015.

Voting Common shares (no par value): 130,399,285

MEDIA GENERAL, INC.

TABLE OF CONTENTS

FORM 10-Q REPORT

March 31, 2015

			Page
Part I.	Financial Information

Item 1.		Financial Statements

		Consolidated Condensed Balance Sheets – March 31, 2015 and December 31, 2014	1

		Consolidated Condensed Statements of Comprehensive Income – Three months ended March 31, 2015 and March 31, 2014	3

		Consolidated Condensed Statements of Cash Flows – Three months ended March 31, 2015 and March 31, 2014	4

		Notes to Consolidated Condensed Financial Statements	5

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.		Quantitative and Qualitative Disclosure About Market Risk	29

Item 4.		Controls and Procedures	29

Part II.	Other Information

Item 6.		Exhibits	30

		(a) Exhibits	31

Signatures

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Media General, Inc.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited, in thousands, except shares)

ASSETS
	March 31,		December 31,
	2015		2014
Current assets:
Cash and cash equivalents	$	58,311	$	43,920
Restricted cash at qualified intermediary		119,903		119,903
Trade accounts receivable (less allowance for doubtful accounts 2015 - $4,987; 2014 - $5,475)		234,577		265,169
Current deferred tax asset		52,169		55,754
Prepaid expenses and other current assets		39,157		39,798
Total current assets		504,117		524,544

Property and equipment, net		489,262		499,878
Other assets, net		75,403		79,000
Definite lived intangible assets, net		934,268		956,100
Broadcast licenses		1,097,100		1,097,100
Goodwill		1,595,726		1,595,726
Total assets (a)	$	4,695,876	$	4,752,348

See accompanying notes.

(a) Consolidated assets as of March 31, 2015 and December 31, 2014, include total assets of variable interest entities (VIEs) of $154 million and $155 million, respectively, which can only be used to settle the obligations of the VIEs. See Note 1.

Media General, Inc.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited, in thousands except shares)

LIABILITIES AND STOCKHOLDERS' EQUITY

	March 31,			December 31,
	2015			2014
Current liabilities:
Trade accounts payable	$	27,516		$	36,359
Accrued salaries and wages		20,997			36,634
Other accrued expenses and other current liabilities		122,471			102,692
Current installments of long-term debt		3,555			11,781
Current installments of obligation under capital leases		833			815
Total current liabilities		175,372			188,281

Long-term debt		2,372,800			2,400,162
Deferred tax liability and other long-term tax liabilities		357,905			364,844
Long-term capital lease obligations		14,650			14,869
Retirement and postretirement plans		206,530			211,264
Other liabilities		34,848			38,026
Total liabilities (b)		3,162,105			3,217,446

Commitments and contingencies

Noncontrolling interests		37,958			34,481

Stockholders' equity:
Preferred stock (no par value): authorized 50,000,000 shares; none outstanding		-			-
Common stock (no par value):
Voting common stock, authorized 400,000,000 shares; issued 2015 - 130,325,543 and 2014 - 129,931,812		1,325,695			1,322,284
Accumulated other comprehensive loss		(36,445	)		(36,445	)
Retained earnings		206,563			214,582
Total stockholders' equity		1,495,813			1,500,421
Total liabilities, noncontrolling interests and stockholders' equity	$	4,695,876		$	4,752,348

See accompanying notes.

(b) Consolidated liabilities as of March 31, 2015, and December 31, 2014, include total liabilities of VIEs of $38.3 million and $42.5 million, respectively, for which the creditors of the VIEs have no recourse to the Company. See Note 1.

Media General, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands, except per share amounts)

	Three Months Ended
	March 31,			March 31,
	2015			2014

Net operating revenue	$	296,734		$	143,918
Operating costs:
Operating expenses, excluding depreciation expense		125,876			50,615
Selling, general and administrative expenses		80,470			42,332
Amortization of program license rights		11,758			4,963
Corporate and other expenses		12,651			6,578
Depreciation and amortization		40,283			16,195
Gain related to property and equipment, net		(228	)		(771	)
Merger-related expenses and restructuring expenses		5,277			4,752
Total operating costs		276,087			124,664
Operating income		20,647			19,254
Other income (expense):
Interest expense		(31,023	)		(9,990	)
Debt modification and extinguishment costs		(613	)		(98	)
Other, net		3,290			(85	)
Total other expense		(28,346	)		(10,173	)

Income (loss) before income taxes		(7,699	)		9,081
Income tax benefit (expense)		3,157			(3,642	)
Net income (loss)		(4,542	)		5,439

Net income attributable to noncontrolling interests (included above)		2,891			54
Net income (loss) attributable to Media General	$	(7,433	)	$	5,385

Other comprehensive income		-			-
Total comprehensive income (loss)		(4,542	)		5,439

Other comprehensive income attributable to noncontrolling interest		-			-
Total comprehensive income (loss) attributable to Media General	$	(7,433	)	$	5,385

Earnings (loss) per common share (basic and diluted):

Net earnings (loss) per common share (basic)	$	(0.06	)	$	0.06
Net earnings (loss) per common share (assuming dilution)	$	(0.06	)	$	0.06

See accompanying notes.

Media General, Inc.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Three Months Ended
	March 31,			March 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	(4,542	)	$	5,439
Adjustments to reconcile net income (loss):
Deferred income tax (benefit) expense		(3,357	)		3,556
Depreciation and amortization		40,283			16,195
Amortization of program license rights		11,758			4,963
Non-cash interest expense		308			124
Gain on disposal of property and equipment, net		(228	)		(771	)
Gain on relocation of spectrum		(3,120	)		-
Stock-based compensation		3,010			(642	)
Debt modification and extinguishment costs		613			98
Change in assets and liabilities:
Program license rights, net of liabilities		(10,867	)		(5,106	)
Trade accounts receivable		31,080			1,716
Company owned life insurance (cash surrender value less policy loans including repayments)		(519	)		(1,821	)
Trade accounts payable, accrued expenses and other liabilities		(3,932	)		4,485
Contributions to retirement plans		(1,250	)		(46,422	)
Other, net		(2,818	)		(3,350	)
Net cash provided (used) by operating activities		56,419			(21,536	)
Cash flows from investing activities:
Capital expenditures		(7,209	)		(2,510	)
Collateral refunds related to letters of credit		-			980
Proceeds from the sale of PP&E		262			973
Proceeds from spectrum sale		620			-
Other, net		(5	)		-
Net cash used by investing activities		(6,332	)		(557	)
Cash flows from financing activities:
Repayment of borrowings under Media General Credit Agreement		(35,000	)		(35,000	)
Repayment of borrowings under Shield Media Credit Agreement		(600	)		(600	)
Repayment of other borrowings		(290	)		-
Other, net		194			330
Net cash used by financing activities		(35,696	)		(35,270	)
Net increase (decrease) in cash and cash equivalents		14,391			(57,363	)
Cash and cash equivalents at beginning of period		43,920			71,618
Cash and cash equivalents at end of period	$	58,311		$	14,255

Cash paid for interest	$	29,444		$	11,422

See accompanying notes.

MEDIA GENERAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with applicable quarterly reporting regulations of the Securities and Exchange Commission. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and, accordingly, should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim financial information have been included.

On December 19, 2014 (the "Closing Date"), Media General, Inc., now known as MGOC, Inc. (“Old Media General”), and LIN Media LLC, a Delaware limited liability company (“LIN Media” or “LIN”) were combined in a business combination transaction (the “LIN Merger”). As a result of this merger, Media General, Inc., formerly known as Mercury New Holdco, Inc. (“New Media General” or the “Company”) became the parent public reporting company of the combined company; LIN Television Corporation (“LIN Television”) became a direct, wholly owned subsidiary of New Media General; and Old Media General became a direct, wholly owned subsidiary of LIN Television and an indirect, wholly owned subsidiary of New Media General. The merger was accounted for in accordance with FASB Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), and New Media General was the acquirer.

References to Media General, we, us, or the Company in this Item 1 that include any period at and before the effectiveness of the LIN Merger shall be deemed to refer to Old Media General as the predecessor registrant to New Media General.

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries and certain variable interest entities (“VIE”) for which the Company is considered to be the primary beneficiary. Significant intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company is the primary beneficiary of a VIE for financial reporting purposes, the Company considers whether it has the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether it has the obligation to absorb losses or the right to receive returns that would be significant to the VIE. Assets of consolidated VIE’s can only be used to settle the obligations of that VIE. As discussed in Note 4, the Company consolidates the results of WXXA, WLAJ, WBDT, WYTV, KTKA, KWBQ, KRWB, and KASY pursuant to the VIE accounting guidance. All the liabilities are non-recourse to the Company, except for the debt, which the Company guarantees. The Company is also the primary beneficiary of the VIE that holds the Supplemental 401(k) Plan’s investments and consolidates the plan accordingly.

The Company guarantees all of LIN Television's debt and the debt of its consolidated VIEs. LIN Television guarantees all of the debt of its restricted wholly owned subsidiaries and the debt of its consolidated VIEs. All of the consolidated wholly owned subsidiaries of LIN Television fully and unconditionally guarantee LIN Television's 5.875% Senior Notes due 2022 (the “2022 Notes”) and the 6.375% Senior Notes due 2021 (the "2021 Notes") on a joint-and-several basis, subject to customary release provisions.

Certain prior year balances in Notes 2, 3, 4 and 12 have been reclassified to conform to the presentation adopted in the current fiscal year.

Note 2: Mergers, Acquisitions and Dispositions

LIN Merger

As described in Note 1, Old Media General and LIN were combined under New Media General, a newly formed holding company, that was renamed Media General. This combination increased the scale of the combined entity enabling the company to continue to participate in industry consolidation. In connection with the LIN Merger the Company issued a total of approximately 41,239,715 shares of voting common stock and paid approximately $763 million in cash to the former LIN Media shareholders. The total purchase price of the LIN Merger was approximately $2.4 billion. The LIN Merger was financed using proceeds from the Company and LIN Television’s borrowings under the Credit Agreement, as more fully described in Note 5.

As part of the LIN Merger, the Company sold WJAR-TV in Providence, RI, WLUK-TV and WCWF-TV in Green Bay-Appleton, WI, WTGS-TV in Savannah, GA, WVTM-TV in Birmingham, AL, WJCL-TV in Savannah, GA and WALA-TV in Mobile, AL for approximately $360 million and purchased KXRM-TV and KXTU-LD in Colorado Springs, CO and WTTA-TV in Tampa, FL for approximately $93 million. At March 31, 2015, the Company had restricted cash in the amount of approximately $120 million in a qualified intermediary (a consolidated entity) relating to the sale of WJAR-TV. The assets included in the stations sold included goodwill of approximately $84 million.

Following the LIN Merger and the divestitures and acquisitions discussed above, the Company now owns or operates 71 stations across 48 markets. The Company also has a digital media portfolio comprised of six digital offerings: LIN Digital, LIN Mobile, Federated Media, Dedicated Media, HYFN, and BiteSize TV.

The LIN Merger closed during December 2014. The initial allocated fair value of the acquired assets and assumed liabilities of LIN (including the acquisitions of the stations in Colorado Springs and Tampa discussed above) was adjusted during the three-months ended March 31, 2015 based on information that became available to management subsequent to the acquisition date. Additionally, the fair value of the consideration paid related to the LIN merger increased by $1.2 million. The initial allocated fair value, including adjustments during the three-months ended March 31, 2015, is presented below:

	Initial Allocation of Fair Value
	March 31,						December 31,
(In thousands)	2015			Adjustments			2014
Current assets acquired	$	218,516		$	-		$	218,516
Property and equipment		284,623			4,499			280,124
Other assets acquired		12,812			-			12,812
FCC broadcast licenses		588,042			(26,900	)		614,942
Definite lived intangible assets		786,505			46,440			740,065
Goodwill		1,118,205			(14,333	)		1,132,538
Deferred income tax liabilities recorded in conjunction with the acquisition		(339,090	)		(8,443	)		(330,647	)
Current liabilities assumed		(111,517	)		-			(111,517	)
Other liabilities assumed		(79,267	)		(82	)		(79,185	)
Total	$	2,478,829					$	2,477,648

Current assets acquired included cash and cash equivalents of $26 million and trade accounts receivable of $166 million.

The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $497 million, advertiser and publisher relationships of $220 million, $37 million of Local Marketing Agreements (LMA), $16 million of technology and trade names and favorable lease assets of $17 million. These intangible assets will be amortized over their weighted-average estimated remaining useful lives of 15 years for network affiliations, 5-7 years for the advertiser relationships, 20 years for LMA agreements, 5 years for technology and trade names and 10 years for favorable lease assets. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.

None of the goodwill recognized in connection with the LIN Merger is expected to be tax deductible.

The initial allocation presented above is based upon management’s preliminary estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Network affiliations and advertiser relationships were valued primarily using an excess earnings income approach. The broadcast licenses represent the estimated fair value of the FCC license using a “Greenfield” income approach. Under this approach, the broadcast license is valued by analyzing the estimated after-tax discounted future cash flows of an average market participant. Property and equipment was primarily valued using a cost approach. Acquired program license rights will be amortized to operating expense over the estimated broadcast period in an amount equal to the relative benefit that is expected to be derived from the airing of the program, or on a straight line basis over the life of the program where the expected useful life is one year or less.

The Company incurred $2.7 million of legal, accounting and other professional fees and expenses in the three months ended March 31, 2015, related to the merger with LIN.

Note 3: Segment Information

During the first quarter of 2015, as a result of the LIN Merger discussed in Note 2, the Company began assessing and internally reporting financial information for the broadcast business and the digital business separately. As a result, we now have two reportable operating segments, “Broadcast” and “Digital” that are disclosed separately from our corporate activities. The Broadcast segment includes 71 television stations that are either owned, operated or serviced by the Company in 48 U.S. markets, all of which are engaged principally in the sale of television advertising. The Digital segment includes the operating results of the digital companies (LIN Digital, LIN Mobile, HYFN, Dedicated Media, BiteSize TV, and Federated Media) as well as the business operations related to the television station companion websites. Unallocated corporate expenses primarily include costs to operate as a public company and to operate corporate locations.

The Company identifies operating segments based on how the chief operating decision maker (“CODM”) allocates resources, assesses performance and makes decisions. The CODM is the President, and Chief Executive Officer. The CODM evaluates performance and allocates resources based on operating income or loss for the Broadcast and Digital segments, excluding non-segment expenses.

	Three months
	Ended March 31,
(in thousands)	2015		2014
Revenues
Broadcast	$	266,484	$	138,994
Digital		30,250		4,924
Revenues	$	296,734	$	143,918

	Three months
	Ended March 31,
(in thousands)	2015			2014
Operating income
Broadcast	$	80,821		$	45,970
Digital		(2,191	)		38
Segment operating income		78,630			46,008
Corporate and other expenses		(12,651	)		(6,578	)
Depreciation and amortization		(40,283	)		(16,195	)
Gain related to property and equipment, net		228			771
Merger-related expenses and restructuring expenses		(5,277	)		(4,752	)
Operating income	$	20,647		$	19,254

(in thousands)	March 31, 2015		December 31, 2014
Assets
Broadcast	$	4,007,010	$	4,063,997
Digital		354,402		370,603
Segment assets		4,361,412		4,434,600
Corporate		334,464		317,748
Total assets	$	4,695,876	$	4,752,348

Note 4: Variable Interest Entities

Shield Media Entities

Shield Media LLC and Shield Media Lansing LLC, through their respective subsidiaries, WXXA-TV LLC (“WXXA”) and WLAJ-TV LLC (“WLAJ”), have Joint Sales Agreements (“JSA”) and Shared Service Agreements (“SSA”) in place with the Company. Under these agreements the Company provides a variety of operational and administrative services for WXXA and WLAJ (the “Shield Stations”). In return, the Company is paid a JSA fee from the ad sales collected and is also paid an SSA fee for providing the operational services. If, in a given period, expenses incurred by WXXA and/or WLAJ exceed their revenue share and the Shield Stations are not in a position to pay the Company the JSA and/or SSA fees, the Company would be at a loss for the services provided. Under the JSA/SSA agreements, if at any time the Shield Stations default of its loan, the Company, as the guarantor of the Shield Station loans, would be the responsible party. Additionally, the Company has options to acquire the Shield Stations at any time, subject to FCC consent, until the expiration of the applicable JSA. The company determined that the Shield stations are VIEs and as a result of the JSAs and/or SSAs, it has a variable interest in these entities.

Other JSA and SSA Entities

Beginning in December 2014, the Company has a JSA and an SSA with WBDT Television, LLC (“WBDT”), a third party licensee for WBDT-TV in the Dayton, OH market. It also has JSAs and SSAs with affiliates of Vaughan Acquisition LLC (“Vaughan”), a third party licensee for WYTV-TV in the Youngstown, OH market and KTKA-TV in the Topeka, KS market and SSAs with KASY-TV Licensee, LLC (“KASY”), a third-party licensee, for KWBQ-TV in the Santa Fe, NM market, KRWB-TV in the Roswell, NM market and KASY-TV in the Albuquerque, NM market. Under these agreements, the Company provides administrative services to these stations, has an obligation to reimburse certain of the stations' expenses, and is compensated through a performance-based fee structure that provides the Company the benefit of certain returns from the operation of these stations. The company determined that WBDT, Vaughan and KASY are VIEs and as a result of the JSAs and/or SSAs, it has a variable interest in these entities.

The Company is the primary beneficiary of the Shield Stations and other JSA and SSA entities described above and therefore, the financial results and financial position of these entities have been consolidated by the Company in accordance with the VIE accounting guidance.

The carrying amounts and classification of the assets and liabilities of the Shield Stations and the other JSA and SSA entities described above, which have been included in the consolidated balance sheets as of March 31, 2015, and December 31, 2014, were as follows:

	March 31,		December 31,
(In thousands)	2015		2014
Assets
Current assets
Cash and cash equivalents	$	6,175	$	3,846
Trade accounts receivable (less allowance for doubtful accounts 2015 - $149; 2014 - $99)		7,983		10,336
Prepaid expenses and other current assets		1,347		1,156
Total current assets		15,505		15,338
Property and equipment, net		5,245		5,402
Other assets, net		1,622		2,011
Definite lived intangible assets, net		34,201		34,885
Broadcast licenses		71,300		71,300
Goodwill		26,097		26,097
Total assets	$	153,970	$	155,033
Liabilities
Current liabilities
Trade accounts payable	$	181	$	56
Other accrued expenses and other current liabilities		3,379		6,839
Current installments of long-term debt		3,562		3,562
Total current liabilities		7,122		10,457
Long-term debt		27,259		28,150
Other liabilities		3,924		3,914
Total liabilities	$	38,305	$	42,521

The assets of the Company’s consolidated VIEs can only be used to settle the obligations of the VIEs and may not be sold, or otherwise disposed of, except for assets sold or replaced with others of like kind or value. At March 31, 2015, the Company has an option that it may exercise if the FCC attribution rules change. The option would allow the Company to acquire the assets or member’s interest of the VIE entities for a nominal exercise price, which is significantly less than the carrying value of their tangible and intangible net assets. The options are carried at zero on the Company’s consolidated balance sheet, as any value attributable to the options is eliminated in the consolidation of the VIEs. In an order adopted in March 2014, the FCC concluded that JSAs should be “attributable” for purposes of the media ownership rules if they permit a television licensee to sell more than 15% of the commercial inventory of a television station owned by a third party in the same market. Stations with JSAs that would put them in violation of the new rules will have until June 19, 2016 (subsequently extended to December 19, 2016) to amend or terminate those arrangements, unless they are able to obtain a waiver of such rules. Accordingly, absent further developments, or the grant of waivers, the Company will be required to modify or terminate its existing JSAs no later than December 19, 2016.

Note 5: Debt and Other Financial Instruments

Long-term debt at March 31, 2015, and December 31, 2014, was as follows:

(In thousands)	2015			2014

Media General Credit Agreement	$	1,666,000		$	1,701,000
2022 Notes		400,000			400,000
2021 Notes		290,000			290,000
Shield Media Credit Agreement		29,000			29,600
Other borrowings		1,815			2,111
Total debt		2,386,815			2,422,711

Less: net unamortized discount		(10,460	)		(10,768	)
Less: scheduled current maturities		(3,555	)		(11,781	)

Long-term debt excluding current maturities	$	2,372,800		$	2,400,162

Media General Credit Agreement

In July 2013, the Company entered into a credit agreement with a syndicate of lenders to provide the Company an $885 million term loan and a $60 million revolving credit facility (the “Original Credit Agreement”, as supplemented and amended to date, the “Credit Agreement”). In 2014, the Company obtained additional incremental term loans (i) of $75 million under Incremental Facility Amendment No. 1 to the Original Credit Agreement to facilitate the acquisition of the WHTM station in Harrisburg, Pennsylvania and (ii) of $825 million (a portion of which was borrowed by LIN Television as co-borrower) under Incremental Facility Amendment No. 2 to the Credit Agreement to repay certain debt, and pay merger costs related to the LIN Merger. The term loan under the Credit Agreement matures in July 2020 and bears interest at LIBOR (with a LIBOR floor of 1%) plus a margin of 3.25%.

The Company repaid $35 million of principal on the term loan in the first quarters of both 2015 and 2014. The early repayments of debt resulted in debt modification and extinguishment costs of $0.6 million and $0.1 million during the quarter ended March 31, 2015 and 2014, respectively, due to the accelerated recognition of deferred debt-related items. As of March 31, 2015, there was $1,666 million outstanding under the Credit Agreement.

The Original Credit Agreement also included a $60 million revolving credit facility, and during 2014 the Company obtained additional revolving credit commitments of $90 million under Incremental Facility Amendment No. 2 to the Credit Agreement (the resulting $150 million revolving credit facility, the “Revolving Credit Facility”). The Revolving Credit Facility matures in October 2019, bears an interest rate of LIBOR plus a margin of 2.75% and is subject to a 0.5% commitment fee per annum with respect to the undrawn portion of the facility.

Shield Media Credit Agreement

Shield Media LLC (and its subsidiary WXXA) and Shield Media Lansing LLC (and its subsidiary WLAJ) (collectively, “Shield Media”), companies that control subsidiaries with which the Company has joint sales and shared services arrangements for two stations as described in Note 4, entered into a new credit agreement with a syndicate of lenders, dated July 31, 2013. The term loans outstanding under this agreement mature in July 2018 and bear interest at LIBOR plus a margin of 3.25%. The Shield Media term loans are guaranteed by the Company and are secured by liens on substantially all of the assets of the Company, on a pari passu basis with the Credit Agreement. The Company repaid $0.6 million of principal on the term loan in the first quarters of both 2015 and 2014.

2022 Notes

On November 5, 2014, a wholly owned subsidiary of Old Media General completed the issuance of $400 million in aggregate principal amount of 5.875% Senior Unsecured Notes due in 2022 (the “2022 Notes”) in connection with the financing of the LIN Merger. The net proceeds from offering of the 2022 Notes were used to repay certain indebtedness of LIN Media in connection with the LIN Merger, including to satisfy and discharge LIN Television’s $200 million aggregate principal amount of 8.375% Senior Notes due 2018 and to pay related fees and expenses. The 2022 Notes were issued under an indenture, dated as of November 5, 2014 (the “2022 Notes Indenture”). New Media General, as the new direct parent of LIN Television, and certain of the wholly owned subsidiaries of LIN Television provide full and unconditional guarantees to the 2022 Notes, on a senior basis.

2021 Notes

LIN Television’s previously issued 6.375% Senior Notes due 2021 with an aggregate principal amount outstanding of $290 million were assumed as of the Closing Date (the “2021 Notes”). Following the consummation of the LIN Merger, New Media General, as the new direct parent of LIN Television, and certain of the wholly owned subsidiaries of LIN Television provide full and unconditional guarantees to the 2021 Notes, on a senior basis.

Fair Value

The following table includes information about the carrying values and estimated fair values of the Company’s financial instruments at March 31, 2015, and December 31, 2014:

	March 31, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
(In thousands)	Amount		Value		Amount		Value
Assets:
Investments
Trading securities	$	484	$	484	$	449	$	449
Liabilities:
Long-term debt:
Media General Credit Agreement		1,656,059		1,674,330		1,690,753		1,686,000
2022 Notes		398,080		409,000		398,038		397,000
2021 Notes		291,401		300,388		291,442		289,000
Shield Media Credit Agreement		29,000		29,000		29,600		29,600
Other borrowings		1,815		1,815		2,111		2,111

Trading securities held by the Supplemental 401(k) Plan are carried at fair value and are determined by reference to quoted market prices.

The fair value of the Media General Credit Agreement and the 2022 Notes was determined by reference to the most recent trading prices as of December 31, 2014. At March 31, 2015 the fair value was determined using a discounted cash flow analysis and an estimate of the current borrowing rate as recent trade data was not available.

The fair value of the 2021 Notes was determined by reference to the most recent trading prices.

The fair value of the Shield Media Credit Agreement and Other borrowings were determined using a discounted cash flow analysis and an estimate of the current borrowing rate.

Under the fair value hierarchy, the Company’s trading securities fall under Level 1 (quoted prices in active markets), the 2021 Notes fall under Level 2 (other observable inputs) and the Media General Credit Agreement, 2022 Notes, Shield Media Credit Agreement and the Other Borrowings fall under Level 3 (unobservable inputs).

Note 6: Taxes on Income

The effective tax rate was 41% in the first quarter of 2015 compared to 40.1% in the same quarter of 2014. The relatively high rate in both periods was due primarily to merger-related expenses, a portion of which will not be deductible for tax purposes. The tax benefit in 2015 and expense in 2014 were largely non-cash due to the Company’s significant net operating loss carryover for tax purposes. Current tax expense was approximately $0.2 million and $0.1 million for the three months ended March 31, 2015, and 2014, respectively, and was attributable to state income taxes.

Note 7: Earnings Per Share

The following table sets forth the computation of basic and diluted income per share for the three months ended March 31, 2015, and 2014

	Three Months Ended March 31, 2015								Three Months Ended March 31, 2014
(In thousands, except	Income			Shares		Per Share			Income			Shares		Per Share
per share amounts)	(Numerator)			(Denominator)		Amount			(Numerator)			(Denominator)		Amount

Net income (loss) attributable to Media General	$	(7,433	)						$	5,385

Undistributed earnings attributable to participating securities		-								(41	)

Basic EPS
Income (loss) attributable to common stockholders	$	(7,433	)		129,384	$	(0.06	)	$	5,344			88,324	$	0.06


Effect of dilutive securities:
stock options and warrants					-								407

Diluted EPS
Income (loss) attributable to common stockholders	$	(7,433	)		129,384	$	(0.06	)	$	5,344			88,731	$	0.06

We have excluded 1.1 million common shares issuable for share options and restricted shares from the calculation of diluted earnings per share for the three months ended March 31, 2015 because the net loss causes these outstanding shares to be anti-dilutive.

Note 8: Retirement and Postretirement Plans

The Company has a funded, qualified non-contributory defined benefit retirement plan which covers substantially all Legacy Media General employees hired before 2007 and IBEW Local 45 employees of KRON-TV with benefits which vested prior to 2006, as well as a non-contributory unfunded supplemental executive retirement and ERISA excess plans which supplement the coverage available to certain executives. These retirement plans are frozen.

In conjunction with the LIN Merger, the Company assumed liability for an additional defined benefit retirement plan as well as a supplemental retirement plan. Both plans are frozen. The Company is required to make contributions to the supplemental retirement plan for the then eligible employees and certain other employees based on 5% of each participant’s eligible compensation.

The Company also has a retiree medical savings account plan which reimburses eligible employees who retire for certain medical expenses. In addition, the Company has an unfunded plan that provides certain health and life insurance benefits to retired employees who were hired prior to 1992.

The following table provides the components of net periodic benefit cost (income) for the Company’s benefit plans for the first three months of 2015 and 2014:

	Three Months Ended
	Pension Benefits						Other Benefits
	March 31,			March 31,			March 31,		March 31,
(In thousands)	2015			2014			2015		2014
Service cost	$	-		$	42		$	10	$	22
Interest cost		7,400			5,506			110		261
Expected return on plan assets		(9,981	)		(6,671	)		-		-
Amortization of net loss		258			-			-		-
Net periodic benefit cost (income)	$	(2,323	)	$	(1,123	)	$	120	$	283

Note 9: Stockholders’ Equity

The following table shows the components of the Company’s stockholders’ equity as of and for the three months ended March 31, 2015:

						Accumulated
						Other						Total
	Common Stock					Comprehensive			Retained			Stockholders'
(In thousands)	Voting			Non-Voting		Income			Earnings			Equity
Balance at December 31, 2014	$	1,322,284		$	-	$	(36,445	)	$	214,582		$	1,500,421
Net loss attributable to Media General		-			-		-			(7,433	)		(7,433	)
Exercise of stock options		1,035			-		-			-			1,035
Stock-based compensation		3,009			-		-			-			3,009
Revaluation of redeemable noncontrolling interest		-			-		-			(586	)		(586	)
Other		(633	)		-					-			(633	)
Balance at March 31, 2015	$	1,325,695		$	-	$	(36,445	)	$	206,563		$	1,495,813

The following table shows the components of the Company’s stockholders’ equity as of and for the three months ended March 31, 2014:

						Accumulated
						Other				Total
	Common Stock					Comprehensive		Retained		Stockholders'
(In thousands)	Voting			Non-Voting		Loss		Earnings		Equity
Balance at December 31, 2013	$	557,754		$	12,483	$	5,668	$	161,076	$	736,981
Net income attributable to Media General		-			-		-		5,385		5,385
Exercise of stock options		394			-		-		-		394
Stock-based compensation		584			-		-		-		584
Other		(19	)		-		-		-		(19	)
Balance at March 31, 2014	$	558,713		$	12,483	$	5,668	$	166,461	$	743,325

Note 10: Other

In March 2015, the Company received approximately $2.5 million in settlement proceeds as a party to an industry-wide lawsuit alleging overcharges by an intellectual property licensing agency. The settlement proceeds were recorded as a reduction to Operating expenses, excluding depreciation expense in the Company’s Consolidated Condensed Statements of Comprehensive income. The Company also recorded $3.1 million of non-operating income related to the relocation of broadcast channels in our Lansing, Michigan and Austin, Texas markets to a telecommunications company.

Note 11: Subsequent Events

In April 2015, the Company acquired the remaining shares of Dedicated Media, Inc. for a purchase price of approximately $11 million. Prior to the transaction, the Company held 60% of the outstanding shares of Dedicated Media, Inc. For the three months ended March 31, 2015, Dedicated Media, Inc. was consolidated in the Company’s financial results and financial position. Dedicated Media, Inc. is a California-based company whose primary business is providing direct response marketing services to its customers.

On or about May 8, 2015, the Company expects to enter into an Amendment No. 5 to the Credit Agreement (“Amendment No. 5”), with Royal Bank of Canada, as administrative agent, and the other lenders and parties thereto. The Company’s existing senior secured credit facility will be amended to permit usage of the $100 million ‘Available Amount’ starter basket for restricted payments (including share repurchases) without regard to any leverage test, and the 5.00x total net leverage test for usage of other ‘Available Amount’ baskets will be changed to a 3.50x senior secured net leverage test.

Note 12: Guarantor Financial Information

LIN Television, a 100% owned subsidiary of New Media General, is the primary obligor of the 2021 Notes. New Media General fully and unconditionally guarantees all of LIN Television’s obligations under the 2021 Notes on a joint and several basis. Additionally, all of the consolidated 100% owned subsidiaries of LIN Television fully and unconditionally guarantee LIN Television’s obligations under the 2021 Senior Notes on a joint and several basis. There are certain limitations in the ability of the subsidiaries to pay dividends to New Media General. The following financial information presents condensed consolidating balance sheets, statements of operations, and statements of cash flows for New Media General, LIN Television (as the issuer), the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries, together with certain eliminations.

Media General, Inc.

Condensed Consolidating Balance Sheet

March 31, 2015

(in thousands)

	New Media General			LIN Television Corporation			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated


ASSETS
Current assets:
Cash and cash equivalents	$	-		$	27,816		$	24,042		$	6,453		$	-		$	58,311
Trade accounts receivable, net		-			65,866			156,547			12,164			-			234,577
Restricted cash at qualified intermediary		-			-			119,903			-			-			119,903
Current deferred tax asset		-			-			52,129			40			-			52,169
Prepaid expenses and other current assets		-			15,258			17,416			6,483			-			39,157
Total current assets		-			108,940			370,037			25,140			-			504,117
Property and equipment, net		-			175,402			308,177			5,683			-			489,262
Other assets, net		-			7,610			65,674			2,119			-			75,403
Definite lived intangible assets, net		-			393,299			495,913			45,056			-			934,268
Broadcast licenses		-			-			1,025,800			71,300			-			1,097,100
Goodwill		-			509,964			990,484			95,278			-			1,595,726
Advances to consolidated subsidiaries		-			(36,010	)		36,965			(955	)		-			-
Investment in consolidated subsidiaries		1,495,813			1,306,335			-			-			(2,802,148	)		-
Total assets	$	1,495,813		$	2,465,540		$	3,293,050		$	243,621		$	(2,802,148	)	$	4,695,876

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Trade accounts payable	$	-		$	3,369		$	22,872		$	1,275		$	-		$	27,516
Accrued salaries and wages		-			4,246			16,227			524			-			20,997
Other accrued expenses and other current liabilities		-			27,491			90,701			4,279			-			122,471
Current installments of long-term debt		-			-			-			3,555			-			3,555
Current installments of obligation under capital leases		-			480			294			59			-			833
Total current liabilities		-			35,586			130,094			9,692			-			175,372
Long-term debt		-			689,482			1,656,059			27,259			-			2,372,800
Deferred tax liability and other long-term tax liabilities		-			190,355			164,765			2,785			-			357,905
Long-term capital lease obligations		-			13,387			1,243			20			-			14,650
Retirement and postretirement plans		-			30,983			175,547			-			-			206,530
Other liabilities		-			9,934			22,820			2,094			-			34,848
Total liabilities		-			969,727			2,150,528			41,850			-			3,162,105

Noncontrolling interests		-			-			10,488			27,470			-			37,958

Stockholders' equity:
Voting common stock		1,325,695			-			-			-			-			1,325,695
Additional paid-in capital		-			1,451,173			945,728			175,834			(2,572,735	)		-
Accumulated other comprehensive income (loss)		(36,445	)		(1,434	)		(34,847	)		-			36,281			(36,445	)
Retained earnings		206,563			46,074			221,153			(1,533	)		(265,694	)		206,563
Total stockholders (deficit) equity		1,495,813			1,495,813			1,132,034			174,301			(2,802,148	)		1,495,813
Total liabilities, noncontrolling interest and stockholders' equity (deficit)	$	1,495,813		$	2,465,540		$	3,293,050		$	243,621		$	(2,802,148	)	$	4,695,876

Media General, Inc.

Condensed Consolidating Balance Sheet

December 31, 2014

(in thousands)

	New Media General		LIN Television Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	2,388	$	9,658	$	27,371	$	4,503	$	-	$	43,920
Trade accounts receivable, net		-		82,909		168,862		13,398		-		265,169
Restricted cash at qualified intermediary		-		-		119,903		-		-		119,903
Current deferred tax asset		-		3,492		52,222		40		-		55,754
Prepaid expenses and other current assets		-		19,424		11,396		8,978		-		39,798
Total current assets		2,388		115,483		379,754		26,919		-		524,544
Property and equipment, net		-		179,044		315,041		5,793		-		499,878
Other assets, net		-		8,565		67,962		2,473		-		79,000
Definite lived intangible assets, net		-		403,866		506,419		45,815		-		956,100
Broadcast licenses		-		-		1,025,800