view remarks and slides

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Good afternoon, ladies and gentlemen. It’s a pleasure to be back for CS First Boston’s annual conference. Today we will provide our outlook for the balance of 2004 and next year. I shall begin by reviewing highlights of this year. Reid Ashe, our president and chief operating officer, will then discuss our three divisions. Marshall Morton, vice chairman and chief financial officer, will follow Reid and report on our financial condition. Let me now introduce Lou Anne Nabhan, vice president of Corporate Communications, and John Schauss, our Treasurer, both of whom are with us today. Our comments this afternoon, as you know, will include forward looking statements, which are subject to various risks and uncertainties. They should be understood in the context of our publicly available reports, filed with the SEC. Our future performance could differ materially from current expectations. Media General will report very good results for the full-year 2004, and we will do so in an economy that never gained the full momentum we all had hoped for. Our performance will reflect an outstanding contribution by the Broadcast Division and a very solid contribution by the Publishing Division. We expect consolidated revenue growth of more than 7% above 2003. After excluding an accounting change and operations that were sold in 2003, net income is expected to be approximately $75 million, or 25% above last year’s income from continuing 1

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Page 1: View remarks and slides

Good afternoon, ladies and gentlemen. It’s a pleasure to be back for CS First Boston’s annual conference. Today we will provide our outlook for the balance of 2004 and next year. I shall begin by reviewing highlights of this year. Reid Ashe, our president and chief operating officer, will then discuss our three divisions. Marshall Morton, vice chairman and chief financial officer, will follow Reid and report on our financial condition. Let me now introduce Lou Anne Nabhan, vice president of Corporate Communications, and John Schauss, our Treasurer, both of whom are with us today. Our comments this afternoon, as you know, will include forward looking statements, which are subject to various risks and uncertainties. They should be understood in the context of our publicly available reports, filed with the SEC. Our future performance could differ materially from current expectations.

Media General will report very good results for the full-year 2004, and we will do so in an economy that never gained the full momentum we all had hoped for. Our performance will reflect an outstanding contribution by the Broadcast Division and a very solid contribution by the Publishing Division. We expect consolidated revenue growth of more than 7% above 2003. After excluding an accounting change and operations that were sold in 2003, net income is expected to be approximately $75 million, or 25% above last year’s income from continuing operations. We will also benefit from lower interest expense and improved results from SP Newsprint.

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Page 2: View remarks and slides

The Broadcast Division expects profit growth for the year of 37-to-38%, primarily the result of unprecedented political advertising revenues that should total $38 million for the year. Presidential and issue spending far exceeded expectations, especially in key battleground states like Florida, where we operate our largest television station. Issues advertising, including that from the “527’s,” will account for approximately one-half of our total political revenues. We also saw strong U.S. Senate and House spending in Florida, the Carolinas and Alabama, as well as state and local election advertising in a number of our markets.

The Publishing Division expects profit growth for the year of 3-to-3.5%, which will largely reflect a hefty increase in Classified advertising. Through October, classified revenues were up $12 million, or 8.4%. Classified growth is due to robust employment advertising, aided by automotive and real estate linage. We are pleased that both the Publishing and Broadcast divisions continue to perform well above the growth averages for their respective industries. And, now, let me turn our presentation over to Reid, who will discuss all of our advertising categories in detail.

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Page 3: View remarks and slides

Let me start with the Publishing Division.

Total Publishing revenues through October, shown in blue, were 4.1% above last year. Newspaper advertising revenues, in green, were up 4.5%. For the year as a whole, the increases are likely to be a little lower than the year-to-date. We expect fourth-quarter comparisons to be difficult as we go up against robust advertising from two new mall openings in Richmond last year as well as strong results overall from last year’s final months.

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Page 4: View remarks and slides

As Stewart noted, Classified advertising has been the key driver of Publishing’s growth this year. We believe the growth will continue in 2005, with gains once again coming from employment and automotive. Specialty real estate publications should also help drive higher revenue. And, we will benefit from rate increases. We anticipate classified advertising growth next year in the range of 7-to-7.5%.

Retail advertising results have been mixed. Economic uncertainty and its impact on consumer spending and retail sales have caused many advertisers to pull back spending. Our strategy for offsetting declines, especially from department stores, has been to increase our business with small- and mid-size retailers, where we have achieved some success. Next year, we will have cycled through most of the cutbacks. Between higher rates and increased linage, we look for the retail category to grow 3-to-4% in ’05.

The Preprint category, which was very strong last year, slowed this year, mostly the result of reductions by Kmart. We expect to finish this year up just over 2%. We believe that migration to preprint from ROP will be minimal next year and that, with rate and volume increases, the category should grow 2-to-3% in ‘05.

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Page 5: View remarks and slides

National revenue has been affected by telecommunications advertising, which has not been as strong this year as it was last year. We expect national revenue to decline about 2% for the year. For ’05, we hope to see some gains in telecommunications advertising, as well as from the travel, entertainment and electronics categories. We believe National advertising could grow as much as 7-to-8% next year.

We report an “Other” advertising category, which is where we record most ROP color revenues and comics advertising. We have seen significantly increased demand for both, and we have been successful in driving higher rates. Through October, this category was up $3.5 million, or 20%. We expect more moderate growth next year, 4-to-5%, the result of comparisons to the increase we saw this year.

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Page 6: View remarks and slides

Circulation revenue growth this year is primarily due to rate increases and is up 2.4% year to date. Twelve of our newspapers implemented rate increases in late 2003, and six increased rates in ’04. Circulation revenue is expected to increase slightly in ’05, the result of price increases taken in ’04 and some volume increases.

Most major newspapers have experienced Circulation declines this year, due in part to the new telemarketing rules. As of the September 30 Audit Bureau of Circulation report, Media General, shown in orange, was down 0.8% Daily, and we held our Sunday circulation steady. While these results are not what we would like for them to be, we were pleased to outperform the industry averages, shown in blue.

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Page 7: View remarks and slides

The Tampa Tribune, shown in green, has reported strong growth for four consecutive Publisher’s statements. For the Sept. 30 report, The Tribune was up 1.9% Daily and 2.7% Sunday. The St. Petersburg Times, our primary competitor, shown in purple, was down 0.9% Daily and down 0.4% Sunday.

Our Publishing Division believes the new telemarketing rules may be a blessing in disguise. We are seizing the opportunity to develop new and better sales techniques. All of our newspapers have been challenged to grow circulation in 2005, and our overall goal is 1% Daily and 0.8% Sunday. We will target prospects better and focus on subscriber retention, as well as revitalize single copy sales and develop non-traditional outlets. Other tactics include kiosks, crews, direct marketing, carrier sales, partnerships and product sampling.

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Page 8: View remarks and slides

In addition to sales initiatives, we are pursuing a “total newspaper approach” to growing readership and circulation. Our content is becoming better aligned with reader interests and focuses on our core competency of providing excellent LOCAL journalism. One-half of our 25 daily newspapers have been redesigned in the last couple of years, including the two pictured here that were completed this year. Two more papers are scheduled for redesigns next year.

This year, our two largest newspapers launched new branding programs. The Tampa Tribune’s is built around the theme “Life. Printed Daily.”

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Page 9: View remarks and slides

The Richmond Times-Dispatch developed a campaign around the theme “You Need to Know Stuff,” which includes traditional marketing, as well as tie-ins with news content.

All of our newspapers are developing new products for special demographics, such as NASCAR fans, high school and college sports fans, youth, and for our Spanish language readers. We also produce pure advertising-based new products such as employment and real estate publications, and others.

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Page 10: View remarks and slides

The Publishing Division has an aggressive plan to drive advertising revenue growth in the range of 5-to-6% next year. New business development is the cornerstone of their plan. Sales Managers and Account executives have been trained in consultative selling techniques. We will continue to expand classified advertising products in print and online, and develop New Products to satisfy unmet market needs. Cross-selling among our newspapers is becoming a larger component of generating incremental revenues. So far this year, our newspapers have cross-sold nearly $7 million in advertising.

Now let’s turn to the Broadcast Division, where we’ll long remember 2004 as a benchmark year for political revenues and profit. Through October, total broadcast revenues, shown in orange, were up 13.4%. Total time sales, in blue, were up 15.9%. As we’ve seen previously, we benefit far more than our competitors from political spending. That is because we operate leading stations that emphasize local news. That’s the environment in which political campaigns prefer to advertise. In addition, our proprietary Central Traffic Operation gives us a superior ability to manage and price our spot inventory. Our time sales growth this year includes Super Bowl advertising on our 16 CBS affiliates and Olympics advertising on our 5 NBC stations.

Our tremendous success on the political front is both contributing to and offsetting a weaker-than-expected transactional segment. Since the second quarter, time sales have trailed expectations as uncertainty about the economy and our involvement in the Iraq war have dampened consumer spending and advertisers’ commitment to spot television. In addition, political advertising crowded out some local and national advertisers. Through October, Local time sales were up 5%.

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Page 11: View remarks and slides

National time sales were just slightly above last year.

As we look to next year, the principal challenge of the Broadcast Division will be to replace revenues that we enjoyed this year but will not see again until 2006. For example, Political revenues next year are expected to be only about $1.5 million. The shortfall from no Olympics advertising will be $2 million. The Super Bowl will air on Fox next year, so we won’t realize any advertising benefit until ’06 when the game is on ABC. In addition, we expect a reduction in network compensation of approximately $6.5 million, as we renew our CBS affiliate agreements next year. With such a challenge looming, Broadcast Division task forces have operated all year long to identify opportunities to grow revenues in 2005. The anticipated drop in television industry ad sales next year ranges from 1-to-3%. Our Broadcast Division has developed a very aggressive, but, we think, achievable plan, that strives to limit their ad sales decline to 1%. Our plan is based on realizing one-half of the new revenues from an improved TV advertising marketplace and the other half from new sales initiatives, many of which are exclusive to our stations in the markets where we operate.

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Page 12: View remarks and slides

The plan is based on specific and proven programs. Among them are: A new program tested successfully this year to generate revenue from first-time TV advertisers.Another new program to capture co-op funds available to retailers from manufacturers. We’ll continue to benefit from the sales initiatives we launched in 2003, and which have helped us to increase our revenue shares this year. In addition to these division-wide programs, stations will implement a variety of local initiatives and promotions. Finally, incentive trips have been excellent tools in off-political years for generating both incremental and new business revenue. The lion’s share of new revenues are expected to come from local advertisers, where we have the most opportunity to influence buying decisions.

Having top-rated stations will help us as we embark on our program to capture new revenues.21 of our 26 stations are rated #1 or #2 from sign-on to sign-off.

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Page 13: View remarks and slides

Another major Broadcast Division accomplishment this year was centralizing Master Control for 11 of our CBS stations. Now we can monitor and switch the on-air signal and manage all CBS programming, local news and commercials from WSPA in Spartanburg, South Carolina.

Next, let’s discuss the Interactive Media Division. Revenues in 2004 are expected to exceed $13.5 million, a 40% increase over 2003, mostly the result of online classified advertising growth. Classifieds should account for approximately 60% of Interactive Media revenues this year. Banners and sponsorships will account for 19%. Display advertising upsells will represent 10% of the total. Boxerjam, our premium interactive game business, will make up 4%. Our goal for next year is to grow online revenues to nearly $19 million, or 39%. Growth is targeted for all categories, including the continued success of classified upsells.

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Page 14: View remarks and slides

Site traffic is up by all measures. Page views have grown 41%, including the record traffic during the hurricane season. Unique visitors have grown from a monthly average of 2.8 million to 3.4 million, or 21%.Visitor sessions have grown from 77 million to 90 million, up 17%.

New Interactive Media initiatives for 2005 include embedded video in Web pages, expansion of specialty classified advertising programs, behavioral targeting, and a search function across all advertising categories. In conclusion, our three divisions have all developed aggressive, but solid, plans for next year. I am confident that, with a continuing improvement in the economy, our prospects for achieving those plans are excellent. And now I’d like to turn it over to Marshall.

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Page 15: View remarks and slides

Let me begin my remarks with our outlook for 2004.

The First Call Current Mean for the fourth-quarter is $1.28 per share, and for the full year it is $3.10 per share.For both periods, we expect earnings per share to be somewhat above the Current Mean. Next, let me provide our outlook for 2005.

The Publishing Division plans for total revenue growth of 4-to-4.5% and advertising revenue growth of 5-to-6%.

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Page 16: View remarks and slides

Publishing expenses are expected to increase approximately 5%, due mainly to higher newsprint and benefits expenses. The division plans to keep a tight rein on salary and departmental expenses. At present, we expect Publishing segment profit growth over this year in the low single digits.

Newsprint expense for the Division is expected to increase nearly 15%. In 2004, the Publishing Division budgeted for one $50 newsprint price increase in April. The increase occurred in March, but settled in at only $30 per short ton. A $50 price increase on September 1 of this year is still uncertain, but we believe it will settle in at about $30 per short ton. For 2005, the division has two $30 per-short-ton increases in its budget, effective April 1 and October 1.

The Broadcast Division, as noted, expects to hold a year-over-year revenue decline to just 1%.Expense growth is expected to be approximately 6%. With the exception of merit increases averaging 3.5% and higher employee benefits expense, all of the increase will be tied directly to new business development -- filling open sales positions, commissions on new business, and the cost of new sales programs. Discretionary spending will be restricted to 2004 levels. Broadcast operating profit next year is expected to be down year-over-year.

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Page 17: View remarks and slides

The Interactive Media Division’s revenue growth plan of 39% will be pursued through developing new products and expanding audience reach. Visitors are expected to grow 10%. Segment results should improve next year to a loss of $4.5 million, compared to an expected loss this year of about $6 million.

Interest expense is expected to increase 4%, due mainly to a higher all-in interest rate. Corporate expense is projected to increase 2%, due to higher rent expense based on increased interest rates, higher health and retirement costs, and Information Technology expense increases for expanding systems and Internet traffic.SP Newsprint is projecting two price increases in 2005. If the high end of their expected price realization occurs, our equity income could increase by as much as $10-12 million year-over-year. As a reminder, Media General is a net beneficiary of higher newsprint pricing. A $1 change in the price of newsprint has an after-tax impact to us of approximately $125,000. Income tax rates will decrease to 36.5%, compared with 37% this year, due mainly to the impact of the American Jobs Creation Act.

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Page 18: View remarks and slides

Capital expenditures for 2004 are expected to be approximately $54 million, down from our original plan of $85 million and from our mid-year downward revision of $70 million. Much of the unspent amount will be deferred into 2005. Our 2005 capital spending budget is $120 million.

The Publishing Division’s capital spending budget for next year is $66 million, mostly for three new press projects and a new system that will allow our metro markets to use one database for all advertisers. The Broadcast Division’s budget is $49 million and will be evenly split between replacing obsolete equipment and completing the transition to a full-power high definition standard. Many of our stations also need to replace production and editing equipment, as they move toward tape- less newsrooms, and we are building a new facility for our Florence/Myrtle Beach station. The Interactive Media Division has budgeted $2 million for infrastructure that will enable the division to improve content, delivery, behavior tracking, and archiving.Corporate expenditures of $3 million will be mostly for IT needs.

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Page 19: View remarks and slides

Any way you look at 2005, it is going to be a challenging year, for many of the reasons we have described . . . the absence of political revenue in our Broadcast Division, higher newsprint expense for the Publishing Division, and necessary capital investments. On the other hand, we expect to receive support from a continuing improving economy. We believe our divisions have done an outstanding job creating aggressive, but attainable, new revenue development plans. Our strong positions in the markets we serve will reinforce our efforts. For the full year 2005, we do not expect to achieve earnings growth over 2004’s very strong level. However, even with a much higher capital spending budget than usual, we expect to generate sufficient cash flow to cover our needs. It’s too early to provide specific full-year guidance for 2005, so we will update you as next year unfolds.

Let me conclude by describing our ample financial flexibility to pursue growth. Total debt at the end of the third quarter was $581 million and represented 34% of total capital. Debt outstanding included $286 million in bank debt, $200 million in public debt, and $95 million in consolidated variable interest entity debt. Since the beginning of this year, we have reduced debt by $89 million, and it currently stands at $539 million. Our existing revolving credit facility provides for borrowing up to $1 billion from our banks. We also have a universal shelf registration that allows us to issue additional debt and equity totaling $1.2 billion. And now let me turn it back to Stewart.

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Page 20: View remarks and slides

Let me conclude our presentation today with several summary points. Media General is well positioned to continue to grow market share, to drive innovation, and to increase profitability over the long term. Our Southeast Focus will continue to provide revenue growth opportunities and operating synergies as we cluster our newspapers and centralize our broadcast operations. We have demonstrated that Convergence is a competitive advantage. Multimedia partnerships serving a common market provide higher quality news and information than any single medium can provide on its own. When quality improves, circulation and audience share grow, which, in turn, creates revenue growth. On cross-ownership, we hope the Supreme Court will accept a petition to review the Third Circuit’s decision on that question. If they do, we hope the Court will uphold the FCC rulemaking allowing us to execute our Convergence strategy in more Southeastern markets.

I’d like to close today with a short video that demonstrates the value of our core strategies. Let’s now view, “The 2004 Hurricane Season and the Power of Media General’s Southeast Focus.”

And, now, we will be pleased to try to answer your questions.

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