* Company renegotiating debt terms with lenders
* EPS of 26 cents misses estimates of 30 cents
* Media General newspaper advertising rev. fell 21.5 pct
* Shares down over four percent (Adds executive comments on debt, byline, share movement)
NEW YORK, Oct 16 (Reuters) - Media General Inc (MEG.N) posted a lower-than-expected quarterly profit, hurt by a prolonged drop in advertising revenue and setting the pace for another gloomy quarter of U.S. newspaper financial results.
The publisher of the Richmond Times-Dispatch said on Thursday it is talking with lenders about modifying its debt agreements, similar to a move by publisher McClatchy Co (MNI.N) that helps it avoid violating lending terms.
"In light of recent economic events, we have considered it prudent to engage in a dialogue with them to ensure that the borrowing agreements we have in place provide us adequate flexibility in the foreseeable future," Chief Financial Officer John Schauss said on a conference call with analysts to discuss the company's third-quarter financial results.
Media General is experiencing problems common to U.S. newspaper publishers. They already were losing ad revenue, particularly in classified ads, as the Internet siphoned away that money. The problem only worsened as home prices have plummeted and jobs dried up, and the current world financial crisis is poised to do more damage in the near future.
Shares of Media General are down 72 percent over the last 12 months, and were 4.1 percent lower to $7.99 in Thursday afternoon trading on the New York Stock Exchange.
In the third quarter, Media General posted net income of $6.15 million, or 28 cents a share, compared with $2.48 million, or 11 cents a share, in the same quarter a year ago.
Excluding discontinued operations the company earned 26 cents a share, below analysts' expectations of 30 cents a share, according to Reuters Estimates.
Revenue fell to $193.7 million from $217.3 million, mainly because of an 18.2 percent fall in publishing revenue.
Media General's higher profit reflected a nearly 25 percent increase in broadcast earnings and lower interest expense. They also reflected the absence of losses from its interest in SP Newsprint, which it sold earlier this year.
Ad spending for the U.S. presidential and congressional races as well as the Olympics contributed about $20 million.
Online revenue rose 9 percent, and an online employment ads partnership with Yahoo Inc (YHOO.O) brought in $1.7 million.
Media General also reported a 13.9 percent drop in revenue in September, mainly because publishing revenue fell 19.1 percent. Classified ad revenue plunged 35 percent.
The company continued to pay its lenders, with debt at the end of the quarter at $750 million, down from $898 million at the beginning of the year. It also is using the proceeds of several television sales and money left over from cutting its dividend to lower its outstanding debt.
Richmond, Virginia-based Media General also has cut jobs, like many other newspaper publishers, to reduce costs.
Media General's results are the first in a line of U.S. newspaper publishers. McClatchy Co, New York Times Co (NYT.N) and Gannett Co Inc (GCI.N) report next week. (Additional reporting by Franklin Paul; Editing by Derek Caney and Tim Dobbyn)