UPDATE 3-Media General loss narrows, shares extend rally

Wed Apr 21, 2010 2:22pm EDT

* Q1 loss $0.75 vs $0.96 year earlier

* Expenses down 12 percent in quarter

* Expects business outlook to improve in Q2

* Media General shares up 1.8 pct, hits fresh 52-week high (Adds analyst comment, updates stock movement)

By Jennifer Saba

NEW YORK, April 21 (Reuters) - Media General Inc (MEG.N) posted a narrower first-quarter loss as the severe slide in advertising spending slowed and the media company cut costs by 12 percent, largely by eliminating jobs.

Media General, which operates 23 newspapers and 18 broadcast TV stations, said on Wednesday that the recovery in advertising should continue in the second quarter, providing some relief after one of the worst spending downturns in decades.

Shares of Media General on Wednesday reached a new 52-week high on optimism about a rebound in advertising. In afternoon trading the stock was up 1.8 percent to $12.54 on the New York Stock Exchange.

In an industry where dramatic revenue declines have become common, Media General's quarterly revenue was essentially flat, falling less than 1 percent to about $159 million.

Few analysts offered estimates on the company, making an average expectation difficult to project. But it marked a drastic improvement from the fourth quarter, when revenue was down 14 percent year-on-year.

Advertising revenue at the broadcasting division was the bright spot, rising 12.1 percent thanks to sales of commercial time during the Winter Olympics. Even so, at least one analyst said he had hoped to see an even stronger performance from the broadcast unit.

"Other broadcasters had better performances," said Benchmark Co analyst Edward Atorino, adding others showed revenue increases in the high teens and 20s.

The company said second-quarter advertising revenue at its TV stations should advance in the low double-digit percentage range as political dollars hit the airwaves.

Meanwhile, advertising sales at its newspapers continued to decline, dropping 9.4 percent year-over-year to $81.2 million. The rate of decline, however, has slowed, as some key advertisers have begun to open their wallets.

Media General, like many of its newspaper peers, also increased its circulation revenue and benefited from a decrease in newsprint costs in the quarter.

And digital revenue -- up 9.8 percent in the first quarter -- is expected to strengthen as retail and classified advertisers begin to spend and the company takes advantage of its partnerships with Yahoo Inc (YHOO.O) and real estate site Zillow, Media General said.

Overall, Media General reported a quarterly loss of $16.8 million, or 75 cents per share, compared to a loss of $21.3 million, or 96 cents a share, in the same quarter a year earlier. The company attributed the loss to higher interest expenses when it refinanced its debt in February.

One key reason for the stronger performance was cost cutting efforts, including measures that resulted in 600 job losses in the past year. Building on those initiatives, the company announced plans earlier this month to combine copy and page design at three of its largest dailies, the Richmond Times-Dispatch, The Tampa Tribune and the Winston-Salem Journal. (Reporting by Jennifer Saba; Editing by Derek Caney and Tim Dobbyn)

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