GateHouse Media Announces Second Quarter 2010 Results

FAIRPORT, N.Y., Aug. 3 /PRNewswire-FirstCall/ --

Second Quarter 2010 Highlights

  • Reported revenues for the second quarter were $144.2 million, down 4.7% from the prior year.  

  • Reported operating costs and SG&A expense was $117.9 million in the second quarter, a decrease of $10.3 million or 8.0% from the prior year.

  • Reported net loss for the second quarter was $5.3 million, compared to a net loss of $496.5 million in the prior year.  The net loss in the prior year includes an impairment charge of $481.4 million.  

  • As Adjusted EBITDA was $27.5 million for the second quarter, an increase of 9.6% from the prior year.

  • In the second quarter, Levered Free Cash Flow per share improved 31.3% to $0.21 versus $0.16 for the prior year.  

GateHouse Media, Inc. (the "Company" or "GateHouse Media") (OTC Pink Sheets: GHSE) today reported financial results for the second quarter ended June 30, 2010.

Second Quarter 2010

Total reported revenues were $144.2 million for the quarter, a decline of 4.7% as compared to the prior year.  As Adjusted Revenues for the quarter were $143.3 million, a decline of 4.9% on a same-store basis from the prior year.  Total advertising revenue for the quarter declined 4.4% on a same-store basis from the prior year.  The overall declines in same-store revenue were driven primarily by the local retail and commercial printing categories, which were down 5.6% and 18.1%, respectively, from the prior year.  Online revenues grew by 17.8% in the quarter from the prior year.  

Reported operating costs and SG&A expense were $117.9 million in the quarter, a decline of $10.3 million or 8.0% from the prior year.  The expense declines were driven primarily by lower compensation costs and newsprint usage.  The Company has been able to successfully reduce compensation expense as part of its overall cost savings initiatives implemented in 2009.  Compensation expense was down 7.2% in the quarter versus the prior year. Newsprint expense was down 14.6% versus prior year driven primarily by lower consumption.  However, with the increase in newsprint prices since the beginning of the year, the Company does not expect the favorable expense trend to continue in the second half of 2010.

Reported operating income for the quarter was $12.8 million, an increase of $6.2 million as compared to the prior year excluding the impairment charge.  As Adjusted EBITDA for the quarter was $27.5 million, an increase of $2.4 million or 9.8% on a same-store basis from the prior year.  

Levered Free Cash Flow for the quarter increased 32.2% to $11.9 million as compared to $9.0 million for the prior year.

Non-cash compensation expense for Restricted Stock Grants in the second quarter was $0.5 million.

One-time costs incurred and other non-cash expenses in the quarter were $2.6 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.  

Commenting on GateHouse Media's results, Michael E. Reed, GateHouse Media's Chief Executive Officer, said, "I was pleased with several aspects of our performance in the quarter.  Our costs controls were strong with expenses down 7.8% on a same-store basis despite the increases we saw in actual pricing for newsprint.  As Adjusted EBITDA was up nearly 10.0% and Levered Cash Flow was up 32.2%, both showing strong performance versus prior year.  In addition, our liquidity continues to improve.  We were able to pay off the remainder of our short term debt six months ahead of schedule, while also improving our cash position since the end of the first quarter.

"Despite some of the strong performance noted above, economic conditions remain challenging contributing to our 4.9% total revenue decline.  Our largest declining revenue category from a percent perspective was commercial printing, reflecting the trouble our customers are having in this difficult economy.  Our local and classified revenues continued to trend down, 5.6% and 4.7% respectively.

"In 2010 we have launched behavioral targeted selling online in our large markets, as well as our new RadarFrog deal site and those both helped contribute to our 17.8% growth in online revenues.

"Although our revenue remains down versus prior year, we are encouraged that the rates of decline have slowed incredibly when compared to 2009.  We continue to work on permanent cost reductions, some of which is being redeployed toward our growth initiatives.  We remain highly focused on and have several initiatives underway towards delivering our local news to our readers in the manner they want to get it, while at the same time preventing unauthorized commercial use of our content.  We also continue our efforts to transform our sales culture to reflect the multi media and multi platform business we are evolving into."

About GateHouse Media, Inc.

GateHouse Media, Inc., headquartered in Fairport, New York, is one of the largest publishers of locally based print and online media in the United States as measured by its 87 daily publications.  GateHouse Media currently serves local audiences of more than 10 million per week across 21 states through hundreds of community publications and local websites.  GateHouse Media is traded in the over-the-counter market under the symbol "GHSE."  

For more information regarding GateHouse Media and to be added to our email distribution list, please visit www.gatehousemedia.com.

Non-GAAP Financial Measures

A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure.  GateHouse Media defines and uses Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues, and Levered Free Cash Flow, non-GAAP financial measures, as set forth below.  The Company strongly urges stockholders and other interested persons not to rely on any single financial measure to evaluate its business.  In addition, because Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow are not measures of financial performance under GAAP and are susceptible to varying calculations, these non-GAAP measures, as presented in this press release, may differ from and may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow

The Company defines Adjusted EBITDA as income (loss) from continuing operations before interest, income tax expense (benefit), depreciation and amortization and other non-recurring or non-cash items.  The Company defines As Adjusted EBITDA as Adjusted EBITDA before other non-cash items such as non-cash compensation and non-recurring integration and reorganization costs.  The Company defines As Adjusted Revenues as total revenues plus revenues of discontinued operations less revenues from non-wholly owned subsidiaries. The Company defines Levered Free Cash Flow as As Adjusted EBITDA less capital expenditures, cash taxes and interest expense.    

Management's Use of Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow

Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow are not measurements of financial performance under GAAP and should not be considered in isolation or as alternatives to income from operations, net income (loss), cash flow from continuing operating activities or any other measure of performance or liquidity derived in accordance with GAAP.  GateHouse Media's management believes these non-GAAP measures, as defined above, are useful to investors for the following reasons:

  • Evaluating performance and identifying trends in day-to-day performance because the items excluded have little or no significance on its day-to-day operations;

  • Providing assessments of controllable expenses that afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieving optimal financial performance; and

  • Indicators for management to determine if adjustments to current spending decisions are needed.

Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow provide GateHouse Media with measures of financial performance, independent of items that are beyond the control of management in the short-term, such as depreciation and amortization, taxation and interest expense associated with its capital structure.  These metrics measure GateHouse Media's financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization.  Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenues and Levered Free Cash Flow are some of the metrics used by senior management and the Board of Directors to review the financial performance of the business on a monthly basis.  In addition, GateHouse Media's management utilizes these metrics to evaluate the Company's performance, along with other criteria, to determine the funds available for paying the quarterly dividend.

Forward-Looking Statements

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to various risks and uncertainties, including without limitation, statements relating to progress made by the Company in its integration efforts, growth in revenues and cash flow, on-line revenues, expense reduction efforts and potential acquisition and sale opportunities.  Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "would," "project," "predict," "continue" or other similar words or expressions.  Forward-looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information.  The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements.  Factors which could have a material adverse effect on the Company's operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, the condition of the economy and the credit markets generally, the Company's ability to maintain adequate liquidity and financing sources and an appropriate level of debt, the Company's ability to close on a timely basis upon announced or contemplated transactions, unexpected liabilities arising from any transaction or that the Company will not receive the expected benefits from the transaction, the Company's limited operating history on a combined basis, the Company's ability to generate sufficient cash flow to cover required interest, long-term obligations and dividends, the effect of the Company's indebtedness and long-term obligations on its liquidity, the Company's ability to effectively manage its growth, unforeseen costs associated with the acquisition of new properties, the Company's ability to find suitably priced acquisitions, the Company's ability to integrate acquired assets and businesses, any increases in the price or reduction in the availability of newsprint, seasonal and other fluctuations affecting the Company's revenues and operating results, any declines in circulation, the Company's ability to obtain additional capital on terms acceptable to it, the Company's vulnerability to economic downturns, regulatory changes or acts of nature in certain geographic areas, increases in competition for skilled personnel, a portion of the Company's workforce being unionized, departure of key officers, increases in market interest rates, the cost and difficulty of complying with increasing and evolving regulation, and other risks detailed from time to time in the Company's SEC reports, including but not limited to its most recent Annual Report on Form 10-K filed with the SEC under Commission File Number 001-33091.  When considering forward-looking statements, readers should keep in mind the risk factors and other cautionary statements in such SEC filings.  Readers are also cautioned not to place undue reliance on any of these forward-looking statements, which reflect management's views as of the date of this press release.  The factors discussed above and the other factors noted in the Company's SEC filings could cause actual results to differ significantly from those contained in any forward-looking statement.  Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements and expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)






























Three months


Three months


Six months


Six months






ended


ended


ended


ended






June 30,


June 30,


June 30,


June 30,






2010


2009


2010


2009













Revenues:










Advertising


$          102,921


$          107,623


$    195,335


$    201,892


Circulation


34,459


35,364


68,548


70,996


Commercial printing and other


6,836


8,320


13,436


16,924



Total revenues


144,216


151,307


277,319


289,812

Operating costs and expenses:










Operating costs


80,037


85,538


159,661


173,815


Selling, general, and administrative


37,845


42,626


77,556


86,206


Depreciation and amortization


11,631


15,772


23,492


31,721


Integration and reorganization costs


641


765


1,538


1,232


Impairment of long-lived assets


-


206,089


-


206,089


Loss on sale of assets


1,270


22


1,536


186


Goodwill and mastheads impairment


-


275,310


-


275,310



Operating income (loss)


12,792


(474,815)


13,536


(484,747)

Interest expense


15,050


15,813


29,958


33,486

Amortization of deferred financing costs


340


340


680


680

Loss on derivative instrument


2,559


3,706


5,356


5,912

Other (income) expense


5


(122)


(4)


673



Loss from continuing operations












before income taxes


(5,162)


(494,552)


(22,454)


(525,498)

Income tax expense


34


14


191


315



Loss from continuing operations


(5,196)


(494,566)


(22,645)


(525,813)

Loss from discontinued operations, net










of income taxes


(134)

(a)

(1,901)


(158)

(a)

(2,574)



Net loss


$            (5,330)


$        (496,467)


$    (22,803)


$  (528,387)



Net loss attributable to noncontrolling interest


$                 105


$                   79


$           258


$           222




Net loss attributable to












    GateHouse Media


$            (5,225)


$        (496,388)


$    (22,545)


$  (528,165)













Loss per share:










Basic and diluted:










Loss from continuing operations











attributable to GateHouse Media


$              (0.09)


$              (8.61)


$        (0.39)


$        (9.17)


Loss from discontinued operations











attributable to GateHouse Media, net of











income taxes


$                   -


(0.03)


$              -


$        (0.05)


Net loss attributable to GateHouse Media


$              (0.09)


$              (8.64)


$        (0.39)


$        (9.22)

Dividends declared per share


$                   -


$                   -


$              -


$              -

Basic weighted average shares outstanding


57,728,624


57,426,416


57,677,799


57,330,827

Diluted weighted average shares outstanding


57,728,624


57,426,416


57,677,799


57,330,827













(a)  Included in income from discontinued operations, net of taxes are total revenues of $38 for the three months ended June 30, 2010 primarily related to a publication in New York and $92 for the six months ended June 30, 2010 primarily from publications in Minnesota and New York.  



GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)
















June 30,


December 31,







2010


2009


(unaudited)



Assets





Current assets:






Cash and cash equivalents


$         28,100


$             10,999


Accounts receivable, net of allowance for doubtful accounts of $3,508







and $4,569 at June 30, 2010 and December 31, 2009, respectively


59,803


67,669


Inventory


7,205


7,049


Prepaid expenses


5,256


5,128


Other current assets


7,277


6,873




Total current assets


107,641


97,718


Property, plant, and equipment, net of accumulated depreciation of $92,035







and $81,493 at June 30, 2010 and December 31, 2009, respectively


159,574


171,572


Goodwill


14,343


14,343


Intangible assets, net of accumulated amortization of $142,678 and $130,472







at June 30, 2010 and December 31, 2009, respectively


283,336


295,731


Deferred financing costs, net


5,015


5,695


Other assets


934


5,442


Long-term assets held for sale


1,429


1,428




Total assets


$       572,272


$           591,929










Liabilities and Stockholders' Deficit





Current liabilities:






Current portion of long-term liabilities


$         14,925


$             14,369


Short-term debt


-


8,000


Accounts payable


8,499


6,075


Accrued expenses


33,828


28,598


Accrued interest


2,924


3,235


Deferred revenue


28,423


27,826




Total current liabilities


88,599


88,103

Long-term liabilities:






Long-term debt


1,192,487


1,195,000


Long-term liabilities, less current portion


4,058


4,733


Derivative instruments


69,530


44,522


Pension and other postretirement benefit obligations


12,716


13,147




Total liabilities


1,367,390


1,345,505

Stockholders’ deficit:






Common stock, $0.01 par value, 150,000,000 shares authorized at







June 30, 2010; 58,313,868 and 58,313,868 shares issued, and







58,079,700 and 58,104,009 outstanding at June 30, 2010 and







December 31, 2009, respectively


568


568


Additional paid-in capital


829,926


829,009


Accumulated other comprehensive loss


(68,568)


(48,916)


Accumulated deficit


(1,555,966)


(1,533,421)


Treasury stock, at cost, 234,168 and 209,859 shares at June 30, 2010







and December 31, 2009, respectively


(310)


(306)




Total GateHouse Media stockholders' deficit


(794,350)


(753,066)




Noncontrolling Interest


(768)


(510)




Total stockholders' deficit


(795,118)


(753,576)





Total liabilities and stockholders' deficit


$       572,272


$           591,929



GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)































Six months


Six months









ended


ended









June 30, 2010


June 30, 2009












Cash flows from operating activities:






Net loss




$        (22,803)


$      (528,387)


Adjustments to reconcile net loss to net cash







provided by operating activities:








Depreciation and amortization


23,496


31,790




Amortization of deferred financing costs


680


680




Loss on derivative instrument


5,356


5,912




Non-cash compensation expense


917


2,026




Loss on sale of assets


1,536


186




Pension and other postretirement benefit obligations


(348)


(153)




Impairment of long-lived assets


124


208,423




Goodwill and masthead impairment


-


275,310




Changes in assets and liabilities, net of sales:










Accounts receivable, net


7,866


12,032






Inventory


(156)


2,450






Prepaid expenses


(128)


(1,175)






Other assets


532


(3,834)






Accounts payable


2,424


(5,487)






Accrued expenses


5,146


6,804






Accrued interest


(311)


(4,628)






Deferred revenue


597


1,271






Other long-term liabilities


(101)


(145)







Net cash provided by operating activities


24,827


3,075

Cash flows from investing activities:






Purchases of property, plant, and equipment


(1,285)


(1,564)


Proceeds from sale of publications and other assets


4,076


4,741


Acquisitions, net of cash acquired


-


(254)







Net cash provided by investing activities


2,791


2,923

Cash flows from financing activities:






Repayments under long-term debt


(2,513)


-


Repayments under short-term debt


(8,000)


(1,500)


Purchase of treasury stock


(4)


(1)







Net cash used in financing activities


(10,517)


(1,501)







Net increase in cash and cash equivalents


17,101


4,497

Cash and cash equivalents at beginning of period


10,999


11,744

Cash and cash equivalents at end of period


$         28,100


$         16,241



GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

As Adjusted EBITDA

(In thousands)



























Three months


Three months


Six months


Six months





ended


ended


ended


ended





June 30, 2010


June 30, 2009


June 30, 2010


June 30, 2009












Loss from continuing operations


$            (5,196)


$        (494,566)


$        (22,645)


$      (525,813)

Income tax expense


34


14


191


315

Loss on derivative










instrument (1)


2,559


3,706


5,356


5,912

Amortization of deferred










financing costs


340


340


680


680

Write-off of financing costs


-


(2)


-


743

Interest expense


15,050


15,813


29,958


33,486

Impairment of long-lived assets


-


206,089


-


206,089

Depreciation and amortization


11,631


15,772


23,492


31,721

Goodwill and masthead impairment


-


275,310


-


275,310


Adjusted EBITDA from











continuing operations


24,418


22,476


37,032


28,443

Non-cash compensation and










other expense


1,344


2,186


1,917


4,820

Non-cash portion of










postretirement benefits










expense


(206)


(293)


(348)


(153)

Integration and reorganization










costs


641


765


1,538


1,232

Loss on sale of assets


1,270


22


1,536


186

Loss from discontinued operations


(8)


(105)


(23)


(163)


As Adjusted EBITDA


27,459


25,051


41,652


34,365

Net capital expenditures


(649)


(232)


(1,285)


(1,564)

Cash taxes


(40)


(4)


(80)


(137)

Interest paid


(14,892)


(15,798)


(29,633)


(37,445)


Levered Free Cash Flow


$            11,878


$              9,017


$         10,654


$          (4,781)












(1)  Non-cash loss on derivative instruments is related to interest rate swap agreements which are financing related and are excluded from Adjusted EBITDA.  



GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

As Adjusted Revenues

(In thousands)



























Three months


Three months


Six months


Six months





ended


ended


ended


ended





June 30, 2010


June 30, 2009


June 30, 2010


June 30, 2009























Total revenues from continuing


$          144,216


$          151,307


$       277,319


$       289,812


operations









Revenues from discontinued










operations


38


218


92


1,044

Revenues from non-wholly owned










subsidiary


(990)


(759)


(1,513)


(1,513)


As Adjusted Revenues


$          143,264


$          150,766


$       275,898


$       289,343



SOURCE GateHouse Media, Inc.



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