GateHouse Media swings to Q3 earnings of US$2.0M compared with loss of US$18.5M last year, cites cost reduction initiatives to improve results
FAIRPORT, New York
November 6, 2009
– Third Quarter 2009 Highlights
* Total reported revenues were $144.9 million, a 15.0% decline compared to the prior year.
* Total As Adjusted Revenues were $143.5 million, a decline of 14.9% on a same-store basis.
* Reported operating costs and SG&A expense decreased $23.2 million or 16.3% from the prior year.
* Reported net income was $2.0 million as compared to an $18.5 million net loss in the prior year.
* As Adjusted EBITDA was $27.3 million, a 13.6% decline on a same-store basis.
* Levered Free Cash Flow per share was $0.19, an increase of 11.8% versus $0.17 for the prior year.
GateHouse Media, Inc. (the "Company" or "GateHouse Media") (OTC Pink Sheets: GHSE) today reported financial results for the quarter ended September 30, 2009.
The Company reported total revenues of $144.9 million, a decline of 15.0% versus prior year. As Adjusted Revenues were $143.5 million for the quarter, down 14.9% on a same-store basis versus the prior year quarter. The decline in same-store revenue was driven primarily by the print classified and local advertising categories, which were down 28.5% and 13.7%, respectively. Both categories continue to be impacted by the recession. Circulation revenue declined 3.6% in the quarter on a same-store basis.
In the quarter, reported operating and SG&A costs declined by $23.2 million or 16.3%. Same-store expenses declined by 15.2%, driven by compensation expense which declined 14.3%. Expense declines in the quarter reflect permanent cost reduction initiatives implemented primarily in the first half of the year. In addition, declines in newsprint pricing and consumption resulted in a 37.8% reduction in newsprint expense. Although newsprint prices have begun to increase, the Company anticipates it will continue to benefit from moderate newsprint prices and consumption declines during the remainder of the year.
Reported operating income for the third quarter was $14.0 million, a 44.2% increase from $9.7 million in the prior year. As Adjusted EBITDA for the quarter was $27.3 million, which was down 13.6% on a same-store basis from the prior year. As Adjusted EBITDA performance is improving as the Company realizes the full benefit of permanent cost reduction initiatives.
Levered Free Cash Flow for the third quarter was $11.1 million or $0.19 per share. This represents an 11.8% increase from $0.17 in the prior year, driven by lower interest expense and capital expenditures. Interest expense for the quarter was $15.7 million, down $5.9 million or 27.1% as compared to the prior year. The decline in interest expense was due primarily to lower LIBOR rates.
Non-cash compensation expense for Restricted Stock Grants in the third quarter was $0.7 million.
One-time costs and other non-cash expenses in the quarter were $0.9 million, and related primarily to reorganization and expense control initiatives introduced to realize permanent expense savings.
Commenting on GateHouse Media’s results, Mike Reed, Chief Executive Officer, said, "While current economic conditions continue to present a challenging revenue environment, the permanent cost reduction initiatives we implemented this year resulted in higher EBITDA margins and increased levered free cash flow in the quarter.
"Revenue trends are showing signs of potential stabilization in terms of nominal dollars. Our total same-store revenue declined 14.9% in the third quarter, a slight improvement over 15.2% and 16.3% in the first and second quarters, respectively. September was our strongest month based on year-over-year revenue performance and we are encouraged that this trend may continue as we enter what has historically been our seasonally best quarter.
"Due to the cost initiatives put in place in the first half of the year, our As Adjusted EBITDA margin has improved each quarter, reaching 19.0% in the third quarter, compared to 16.6% and 6.7% in the first and second quarters, respectively. Solid As Adjusted EBITDA results, combined with lower interest expense and capital spending resulted in levered free cash flow of $0.19 per share in the third quarter compared to $0.16 per share in the second quarter and $0.17 last year.
"In addition to ongoing cost reduction initiatives, we continue to focus on strengthening our balance sheet, in particular, working capital and liquidity. During the third quarter, we were able to improve our short term liquidity position by retiring $16.0 million of short term debt at a discount."
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 88 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.