Annual Report Index

Revenues for the year increased 19 percent to $910 million from $765 million in 1996. Operating cash flow for 1997 rose 36 percent to $228 million from $167 million in 1996.

During the first quarter of 1997 we incurred a one-time charge to earnings of $63 million, or $2.37 per share. This charge resulted from the redemption of high coupon debt we assumed January 7 when we acquired the former Park Communications broadcast television and newspaper properties. As a result of the one-time charge, we reported a loss of $10.5 million, or $0.40 per share for the year. Excluding this charge, income was $52.5 million, or $1.97 per share.

With the completion of the Park acquisition, we immediately began the integration of those of its southeastern properties which fit our model. Simultaneously, we divested, through sale or trade, those properties which did not. Our goal was to increase our revenue base and decrease our cost of operation through efficiencies at each location.

The Publishing Group achieved solid growth during 1997. During the year, we streamlined the division, integrated acquisitions and laid the foundation for stronger sales, lower costs and higher profit margins. One highly successful program has been our “rightsizing” initiative which we plan to develop further in 1998. Also, we are creating synergies in production by implementing clustering at several of our newspaper properties to allow for more efficient utilization of production equipment and personnel.

The year was even more dramatic for the Broadcast Group. The Park acquisition has given us 11 additional stations throughout the Southeast, increasing our reach to more than 22 percent of southeastern television homes. We spent the year integrating and strengthening these stations. More than half of them have been relaunched in their markets, with new graphics, sets and systems. We have developed research-based strategic plans for each station to increase its market share and make it the leading provider in its area of news, information and entertainment through the medium of video.

Our Cable Division had a very strong year. We achieved a notable increase in our customer base as well as moderate rate increases, and ended the year with more than 250,000 subscribers. Cable provides Media General with access to dynamic consumer and business markets in northern Virginia. Our strategy is to maximize opportunities in this core business while adding complementary businesses and services.

Results at our Newsprint Division in 1997 reflected the low price of newsprint during most of the year. Newsprint selling prices began to rise in late 1997, and we expect that 1998 results will show a marked improvement. We continue implementing cost reduction measures to increase efficiency and mitigate the cyclicality in newsprint pricing. Improved efficiency is the heart of our plan for future growth. At Garden State we underwent a major reorganization during 1997. We opened a new modern sorting and bailing recycling center in Paterson, New Jersey, and closed two older, less efficient plants in Hackensack. Looking ahead, we believe there are still areas with potential for improvement in production and sales. We plan to achieve growth and expansion by improving product and process.

Another highlight of the year was the substantial success of Media General Financial Services. MGFS, which provides current and historical financial data on publicly traded U.S. companies, entered into agreements to provide data to the public through three well-known on-line investment resources: Microsoft Investor, Wall Street Research Net, and Fidelity Brokerage’s MAXXESS system. In addition, MGFS joined forces with Hoover’s, Inc., and Data Downlink Corporation to provide a new stock screening Internet service.

In furthering our Southeast strategy, we acquired the Bristol Herald Courier and two affiliated weekly newspapers in January 1998. The Herald Courier is the major daily newspaper serving far-southwestern Virginia. It reaches 57 percent of all households in its market area daily and 63 percent on Sundays and has a circulation of 43,800 daily and 47,000 on Sundays. These three newspapers fit strategically with our existing newspapers in the region.

We also announced in January that we will acquire The Hickory Daily Record in North Carolina. The Daily Record, with circulation of approximately 20,000 daily and Sunday, augments Media General’s presence in northwestern North Carolina where we already own daily and weekly newspapers with 160,000 daily and 22,000 weekly paid circulation.

This past year, my father, D. Tennant Bryan, retired from Media General. He served our Company and its predecessors for nearly 70 years, including 25 as chairman. His contributions have been many and varied, and his dedication to the full and fair presentation of the news will serve as an example for years to come.

A company is only as good as the people who work with and for it. I would like to take this additional opportunity to thank our colleagues for their tireless work and commitment over the past year. It was a year full of challenges and accomplishments, and our people met them all.

Media General is healthy and vigorous. Our cash flow is strong. Our plant and equipment are in good shape, and our debt is manageable. Our operations have undergone scrutiny and reorganization. Our management team is strong and capable, and our employees are ready for the challenges ahead.

We are, therefore, in good shape to perform well for our customers, our stockholders and our employees in the years to come.

Yours sincerely,

J. Stewart Bryan III
Chairman, President and Chief Executive Officer

February 25, 1998