FAIRPORT, N.Y., Nov 13, 2007  -- GateHouse Media, Inc. today reported financial results for the quarter ended September 30, 2007.
The Company reported As Adjusted Revenues of $171.8 million, operating income of $12.5 million, a net loss of $8.8 million and As Adjusted EBITDA of $40.1 million for the third quarter ended September 30, 2007. Total revenues for the Company decreased 1.7% on a same-store basis over the third quarter 2006. As Adjusted EBITDA decreased $0.5 million or 1.1% on a same-store basis. Excluding corporate costs, As Adjusted EBITDA was $43.3 million, an increase of 1.4% on a same-store basis over the third quarter 2006.
As a dividend-paying company, GateHouse Media's management utilizes As Adjusted Revenue and As Adjusted EBITDA to evaluate the Company's performance, cash flows and liquidity because these metrics exclude non-cash expenses such as depreciation and amortization, non-cash compensation expense and one-time costs associated with integrating acquisitions and realizing synergy cost savings. GateHouse Media also uses As Adjusted EBITDA, excluding corporate costs, to assess the performance of its local businesses.
Michael E. Reed, GateHouse Media's Chief Executive Officer, commented, "We are very pleased with GateHouse Media's performance in the third quarter. Our strategy of focusing on strong local media franchises in geographically diverse, small markets has allowed us to significantly outperform the newspaper industry and show resilience in a challenging advertising environment.
"We believe that most of the current advertising slow down in small markets is cyclical. When the real estate and automotive categories begin to recover we will be positioned to recapture revenues due to our strong local franchises, penetration rates and our ability to deliver results to advertisers through our print and online offerings.
"I am confident that we will maintain stability in our revenue base should the economic climate worsen. Our revenues and cash flows have proven to be exceptionally consistent throughout economic cycles and this provides a strong underpinning to our dividend policy. I am pleased to announce that our board of directors approved a $0.40 per share dividend (annualized to $1.60) for the fourth quarter that will be paid on January 15, 2008.
"We continue to execute on all phases of our strategy including accretive acquisitions, realization of synergies and strategic disposal of non-core assets. For example, we shuttered eight print plants in the third quarter, merging six into other GateHouse Media press plants and completely outsourcing the printing at the other two. We also closed on the sale of The Herald Dispatch in Huntington, West Virginia at a very attractive valuation. Finally, we announced entering into an acquisition agreement with Morris Publishing Group that will add meaningfully to our EBITDA and free cash flow per share.
"We also continue to execute on our online strategy. We recently added 10 full time company-wide online sales reps who have significantly strengthened our online marketing capabilities. We also launched Yahoo! HotJobs in our larger markets and initial results have been very strong. HotJobs is scheduled to be rolled out in all of our markets by the end of the year. Online revenues at those properties owned by GateHouse Media on January 1, 2007, excluding properties acquired during the year that we are currently transitioning to our platform, are up 42.3% over the same period in 2006."
September Quarter
Total As Adjusted Revenue for the quarter declined 1.7% on a same-store sales basis to $171.8 million. Local advertising revenues increased 0.2% on a same-store sales basis. Classified revenues declined 8.4% driven primarily by declines in real estate in our Massachusetts marketplace and automotive declines. Circulation revenues increased 3.8% driven by price increases and commercial printing revenues increased 2.0%.
As Adjusted EBITDA for the quarter was $40.1 million which was down $0.5 million or 1.1% on a same-store sales basis. Excluding corporate expenses, As Adjusted EBITDA was $43.3 million which was up $0.6 million or 1.4% on a same- store sales basis.
Total operating expenses, excluding depreciation, amortization, non-cash compensation expenses and other one-time restructuring charges, on a same- store sales basis for continuing operations decreased $2.1 million or 1.6%. Corporate expenses were up $1.0 million due to the establishment of a corporate office to handle the requirements of being a public company, as previously disclosed. The Company will cycle through these corporate expense increases by the end of the fourth quarter of 2007. The corporate expenses are scaleable for future growth through acquisitions. Expenses at the Company's business operations were down $3.1 million or 2.4%. This was driven primarily by realization of synergies from acquisitions and declines in newsprint costs.
Non-cash compensation expense for RSGs in the third quarter was $1.0 million. One-time expenses incurred or accrued in the quarter were $5.9 million. These were charges primarily incurred for the closing of eight press plants located in Illinois, New York and Massachusetts and for implementation of other synergy opportunities. Charges included severance, benefits, equipment transportation costs and legal fees.
Levered Free Cash Flow for the quarter was $17.2 million compared with $6.1 million for the same quarter in the prior year.
Business Strategy
GateHouse Media's business strategy is to focus on increasing its earnings and dividends to shareholders by growing As Adjusted EBITDA and Levered Free Cash Flow through:
- Organic growth at existing media properties through increases in print and online revenues, geographic clustering of publications to realize operating efficiencies, and
- Accretive acquisitions of locally focused media businesses.
Dividend
The Company's Board of Directors has declared a fourth quarter cash dividend of $0.40 per share on its common stock for the quarter ending December 31, 2007, payable on January 15, 2008 to stockholders of record on December 31, 2007. In addition, the Company paid a third quarter dividend of $0.40 per share on October 15, 2007.
Earnings Call
The Company has scheduled a conference call to discuss results on November 14, 2007 at 10:00 AM EST. The conference call can be accessed by dialing (888) 708-5690 (from within the U.S.) or (913) 312-0402 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the "GateHouse Media Third Quarter Earnings Call."
A webcast of the conference call will be available to the public on a listen-only basis at www.gatehousemedia.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for three months following the call.
For those who cannot listen to the live call, a replay will be available until 11:59 PM EST on Thursday, November 22, 2007 by dialing (888) 203-1112 (from within the U.S.) or (719) 457-0820 (from outside of the U.S.) please reference access code "905-5164." A copy of this earnings release and quarterly financial supplement is posted on the Investors section of the GateHouse Media website.
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 Revenue 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 Revenue 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 Revenue and Levered Free Cash Flow
The Company defines Adjusted EBITDA as net income (loss) 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 Revenue as total revenues plus revenues of discontinued operations while adjusting for the purchase accounting impact on revenues of the SureWest acquisition. 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 Revenue and Levered Free Cash Flow
Adjusted EBITDA, As Adjusted EBITDA, As Adjusted Revenue 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 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 and 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.