2014

GateHouse Media Announces Third Quarter 2012 Results

FAIRPORT, N.Y., Nov. 1, 2012 /PRNewswire/ -- 

Third Quarter Highlights

  • Total digital revenue increased 27.9% versus the prior year.
  • Total revenues for the third quarter were $120.8 million, down 3.4% from the prior year.
  • As Adjusted EBITDA decreased 7.8% versus the prior year to $20.3 million. Excluding investments in new strategic growth initiatives, As Adjusted EBITDA decreased 1.7% versus the prior year.
  • Operating costs and SG&A expense declined $2.1 million from the prior year, or 2.1%, to $102.3 million. Adjusting for one-time and non-cash items, operating costs and SG&A expense declined 2.5% from the prior year.
  • Levered Free Cash Flow per share was $0.08 versus $0.11 for the prior year.

GateHouse Media, Inc. (the "Company" or "GateHouse Media") (OTC Pink Sheets: GHSE), a leading multi-media company providing news and information to local communities, today reported financial results for the third quarter ended September 30, 2012.  Total revenues were $120.8 million for the quarter, a decline of 3.4% from the prior year on a GAAP and same store basis.  As Adjusted EBITDA was $20.3 million, a decline of 7.8% compared to the prior year.

Commenting on GateHouse Media's results, Michael E. Reed, Chief Executive Officer of GateHouse Media, said, "We continue to make inroads on our transformational strategy.  While the anemic economic recovery creates a challenging operating environment, we continue to invest in our digital and other strategic growth initiatives, grow consumer revenues, reduce overall expenses and implement new initiatives to stabilize print advertising. 

"Digital revenues grew by 27.9% in the quarter versus prior year.  Our digital products extend across web, mobile and tablet products and led to 28% growth in average monthly page views during the quarter.  We invested $1.5 million in the quarter on new strategic growth initiatives, particularly on our local digital solutions service to small and medium sized businesses.  Our continued focus on consumer revenue growth resulted in a 3.1% increase in circulation revenue during the quarter.  Pricing initiatives more than offset volume declines and we saw improving volume trends throughout the quarter, particularly on Sunday circulation.  We currently have pay meters in place in all of our daily newspapers and early indications suggest they are not having a significant impact on traffic.

"After adjusting for one-time and non-cash items, our operating expenses declined 2.5% in the quarter, or 3.9% when the investment in new strategic growth initiatives is factored out.  As Adjusted EBITDA declined 7.8% in the quarter but remained positive year to date at 0.4%.  Additionally, when excluding our investments in strategic growth initiatives, As Adjusted EBITDA decreased only 1.7% for the quarter and is up 5.7% year to date.

"I believe we are developing the right strategies and making the right investments in people and resources to execute on our transformational strategy, making GateHouse a truly local multi-media company.  These investments along with a more efficient operating structure should position us to take full advantage of the growth opportunities we see as well as improvement we should start to see coinciding with a sustainable improvement in the economy."

Third Quarter 2012 

Total revenues were $120.8 million for the quarter, a decline of 3.4% compared to the prior year on a GAAP and same store basis.  The same store results were driven by strong digital revenue growth of 27.9% offset by declines in print advertising.  The improvement in digital revenue resulted primarily from increased banner and display advertising revenue from higher page views and strong growth in our SEO/SEM services.  Total advertising revenue declined 6.4% on a same store basis as growth in digital advertising was more than offset by a 9.2% decline in total print advertising.  Classified print revenue declined 6.6% compared to the prior year, however, trends improved slightly from the second quarter across all major categories, with auto showing the greatest improvement.  Circulation revenue increased 3.1% driven by price increases, partially offset by volume declines.

Total operating and SG&A expenses in the quarter were $102.3 million, down 2.1% compared to the prior year.  The expense declines were primarily from lower compensation. 

Operating income for the quarter was $6.7 million, a decrease of $2.1 million as compared to the prior year.  As Adjusted EBITDA for the quarter was $20.3 million, a decrease of $1.7 million or 7.8% from the prior year. 

Levered Free Cash Flow for the quarter declined $2.0 million, or 31.3%, to $4.4 million as compared to $6.4 million for the prior year. 

One-time costs incurred and other non-cash expenses in the quarter were $3.2 million, related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions. 

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 78 daily publications.  GateHouse Media currently serves local audiences of approximately 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, non-recurring integration and reorganization costs and Adjusted EBITDA from non-wholly owned subsidiaries.  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, excluding non-wholly owned subsidiaries.   

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 maintain debt covenants, the Company's ability to successfully grow digital revenues and audience and consumer revenues, the Company's ability to successfully stabilize print revenues, the ability of the Company to successfully identify and develop new business ventures, 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 ability to generate sufficient cash flow to cover required interest and long-term obligations, the effect of the Company's indebtedness and long-term obligations on its liquidity, 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 ability to compete effectively in the local media industry, the Company's success or failure in pursuing its digital business and related initiatives and strategic realignments and undertakings, increases in health costs, 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

 and Comprehensive Income (Loss)

(In thousands, except share and per share data)






























Three months
ended


Three months
ended


Nine months
ended


Nine months
ended






September 30,
2012


September 25,
2011


September 30,
2012


September 25,
2011













Revenues:










Advertising


$            80,262


$            85,901


$          246,365


$          258,808


Circulation


33,837


32,750


100,076


97,390


Commercial printing and other


6,698


6,373


18,955


18,761



Total revenues


120,797


125,024


365,396


374,959

Operating costs and expenses:










Operating costs


67,098


69,045


204,968


211,314


Selling, general, and administrative


35,223


35,421


107,812


110,977


Depreciation and amortization


9,836


10,285


30,116


31,694


Integration and reorganization costs


1,597


1,274


3,467


3,317


Impairment of long-lived assets


-


37


-


1,733


Loss on sale of assets


379


157


534


556



Operating income


6,664


8,805


18,499


15,368

Interest expense


14,500


14,441


43,497


42,690

Amortization of deferred financing costs


314


340


994


1,020

(Gain) loss on derivative instruments


5


(694)


(1,639)


(274)

Other expense


7


94


4


94



Loss from continuing operations












before income taxes


(8,162)


(5,376)


(24,357)


(28,162)

Income tax expense (benefit) 


(250)


22


(207)


90



Loss from continuing operations


(7,912)


(5,398)


(24,150)


(28,252)

Income (loss) from discontinued operations, net










of income taxes


(1,506)


236


(1,504)


(169)



Net loss


(9,418)


(5,162)


(25,654)


(28,421)



Net loss attributable to noncontrolling interest


105


185


410


600




Net loss attributable to GateHouse Media


$            (9,313)


$            (4,977)


$          (25,244)


$          (27,821)













Loss per share:










Basic and diluted:










Loss from continuing operations 











attributable to GateHouse Media


$              (0.13)


$              (0.09)


$              (0.41)


$              (0.48)


Loss from discontinued operations 











attributable to GateHouse Media, net of 











income taxes


(0.03)


-


(0.03)


-


Net loss attributable to GateHouse Media


$              (0.16)


$              (0.09)


$              (0.44)


$              (0.48)













Basic weighted average shares outstanding


58,051,607


57,976,184


58,038,673


57,935,943

Diluted weighted average shares outstanding


58,051,607


57,976,184


58,038,673


57,935,943













Comprehensive income (loss)


$            (6,036)


$              1,416


$          (23,545)


$          (19,590)


Comprehensive loss attributable to noncontrolling











 interest


(105)


(185)


(410)


(600)


Comprehensive income (loss) attributable to GateHouse Media

$            (5,931)


$              1,601


$          (23,135)


$          (18,990)













 

 

GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)
















September 30,
2012


January 1, 2012







 (unaudited) 



Assets





Current assets:






Cash and cash equivalents


$             36,820


$             19,212


Restricted cash


6,167


6,167


Accounts receivable, net of allowance for doubtful accounts of $2,789







and $2,976 at September 30, 2012 and January 1, 2012, respectively


51,023


59,236


Inventory


6,104


6,017


Prepaid expenses


5,798


15,483


Other current assets


8,280


7,347


Current assets held for sale


1,433


-



Total current assets



115,625


113,462


Property, plant, and equipment, net of accumulated depreciation of $124,625







and $116,780 at September 30, 2012 and January 1, 2012, respectively


119,785


130,937


Goodwill


13,742


13,958


Intangible assets, net of accumulated amortization of $190,981 and $179,327







at September 30, 2012 and January 1, 2012, respectively


224,873


246,661


Deferred financing costs, net


1,980


2,974


Other assets


2,118


1,876


Long-term assets held for sale


2,315


934



Total assets



$           480,438


$           510,802










Liabilities and Stockholders' Deficit





Current liabilities:






Current portion of long-term liabilities


$                  889


$               1,039


Current portion of long-term debt


-


4,600


Accounts payable


9,933


8,216


Accrued expenses


29,531


27,625


Accrued interest


2,479


2,876


Deferred revenue


25,865


27,171


Current liabilities held for sale


597


-



Total current liabilities



69,294


71,527

Long-term liabilities:






Long-term debt


1,176,638


1,176,638


Long-term liabilities, less current portion


2,422


2,935


Derivative instruments


48,317


51,576


Pension and other postretirement benefit obligations


12,873


13,758



Total liabilities



1,309,544


1,316,434

Stockholders' deficit:






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







September 30, 2012 and January 1, 2012; 58,313,868  issued, and 







58,077,031 outstanding at September 30, 2012 and January 1, 2012


568


568


Additional paid-in capital


831,320


831,249


Accumulated other comprehensive loss


(52,250)


(54,359)


Accumulated deficit


(1,606,358)


(1,581,114)


Treasury stock, at cost, 236,837 shares at September 30, 2012 and







January 1, 2012


(310)


(310)



     Total GateHouse Media stockholders' deficit



(827,030)


(803,966)



     Noncontrolling Interest



(2,076)


(1,666)



     Total stockholders' deficit




(829,106)


(805,632)



          Total liabilities and stockholders' deficit




480,438


510,802










 

 

GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


































Nine months ended


Nine months ended










September 30, 2012


September 25, 2011













Cash flows from operating activities:






Net loss





$           (25,654)


$           (28,421)


Adjustments to reconcile net loss to net cash







provided by operating activities:








Depreciation and amortization


30,710


32,315




Amortization of deferred financing costs


994


1,020




Gain on derivative instrument


(1,639)


(274)




Non-cash compensation expense


71


422




Loss on sale of assets


566


905




Pension and other postretirement benefit obligations


(432)


(680)




Impairment of long-lived assets


2,344


2,051




Changes in assets and liabilities:










Accounts receivable, net


6,889


6,801






Inventory


(87)


1,133






Prepaid expenses


9,622


6,156






Other assets


(1,181)


(557)






Accounts payable


1,859


3,272






Accrued expenses


2,019


2,457






Accrued interest


(397)


1,328






Deferred revenue


(949)


(659)






Other long-term liabilities


(513)


(577)






Net cash provided by operating activities



24,222


26,692

Cash flows from investing activities:






Purchases of property, plant, and equipment


(2,854)


(2,431)


Proceeds from sale of assets and insurance


840


2,389






Net cash used in investing activities



(2,014)


(42)

Cash flows from financing activities:






Repayments under current portion of long-term debt


(4,600)


(11,249)






Net cash used in financing activities



(4,600)


(11,249)






Net increase in cash and cash equivalents



17,608


15,401

Cash and cash equivalents at beginning of period


19,212


8,753

Cash and cash equivalents at end of period


$             36,820


$             24,154














 

GATEHOUSE MEDIA, INC. AND SUBSIDIARIES

As Adjusted EBITDA

(In thousands)



























Three months
ended


Three months
ended


Nine months
ended


Nine months
ended





September 30,
2012


September 25,
2011


September 30,
2012


September 25,
2011












Loss from continuing operations


$            (7,912)


$            (5,398)


$          (24,150)


$          (28,252)

Income tax expense (benefit) 


(250)


22


(207)


90

(Gain) loss on derivative









     instruments (1)



5


(694)


(1,639)


(274)

Amortization of deferred









     financing costs



314


340


994


1,020

Interest expense


14,500


14,441


43,497


42,690

Impairment of long-lived assets


-


37


-


1,733

Depreciation and amortization


9,836


10,285


30,116


31,694

     Adjusted EBITDA from










          continuing operations




16,493


19,033


48,611


48,701

Non-cash compensation and









     other expense



1,417


1,215


4,125


4,018

Non-cash portion of









     postretirement benefits










     expense



(188)


(107)


(432)


(229)

Integration and reorganization









     costs



1,597


1,274


3,467


3,317

Loss on sale of assets


379


157


534


556

As adjusted EBITDA from discontinued operations




612


467


1,472


1,184

     As Adjusted EBITDA



20,310


22,039


57,777


57,547

Net capital expenditures 


(1,117)


(757)


(2,853)


(2,366)

Cash taxes


-


-


-


-

Interest paid


(14,772)


(14,847)


(43,778)


(41,384)

     Levered Free Cash Flow



$              4,421


$              6,435


$            11,146


$            13,797













(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 ended


Three months ended


Nine months ended


Nine months ended





September 30,
2012


September 25,
2011


September 30,
2012


September 25,
2011























Total revenues from continuing


$          120,797


$          125,024


$          365,396


$          374,959

   operations









Revenues from discontinued









   operations


2,145


2,119


6,326


6,396

Revenues from non-wholly owned









   subsidiary


(818)


(729)


(2,235)


(1,741)

Same reporting period basis adjustment


-


-


(2,256)


-

   As Adjusted Revenues


$          122,124


$          126,414


$          367,231


$          379,614












 

 

SOURCE GateHouse Media, Inc.



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