Business News

GateHouse Media Announces First Quarter 2008 Results

Friday 09. May 2008 - - Total reported revenues reached $168.9 million, an increase of 78.4% over the prior year.

First Quarter 2008 Highlights

– Total reported revenues reached $168.9 million, an increase of 78.4% over the prior year.

– As Adjusted Revenues increased to $170.9 million, or 77.0% over the prior year.

– Same store As Adjusted Revenues continued to outperform the industry, declining 4.2%.

– As Adjusted EBITDA increased 93.9% over the prior year to $30.1 million.

– Same store As Adjusted EBITDA also continued to outperform the industry, increasing 1.4%.

– Sold non-strategic properties for $9.4 million.

Recent Developments

– Paid first quarter dividend of $0.20 per share on April 15, 2008.

– Identified non-strategic properties, including real estate, for potential sale of approximately $35 million.

GateHouse Media, Inc. (the “Company” or “GateHouse Media”) (NYSE:GHS) today reported financial results for the quarter ended March 31, 2008.

The Company reported total revenues of $168.9 million in the quarter, an increase of 78.4% over the prior year. As Adjusted Revenues increased to $170.9 million, or 77.0% over the prior year. On a same store basis, As Adjusted Revenues declined 4.2% in the quarter, outpacing newspaper peers which averaged a double-digit decline.

Operating income declined less than $1.0 million for the first quarter to $1.2 million. As Adjusted EBITDA nearly doubled over the prior year to $30.1 million and on a same store basis increased 1.4%, significantly outperforming industry peers. Excluding corporate costs, As Adjusted EBITDA increased 2.9% on a same store basis.

GateHouse Media’s management utilizes As Adjusted Revenues and As Adjusted EBITDA to evaluate the Company’s performance, cash flows and liquidity because these metrics exclude non-cash items 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 core local businesses.

Michael E. Reed, GateHouse Media’s Chief Executive Officer, commented, “While the first quarter operating environment remained very challenging, our business strategy remains sound and continues to yield performance significantly better than the newspaper industry at large and positions us very well for growth with an economic recovery. Our solid, steady performance against the current economic headwinds is a result of our focus on operating strong local media franchises in smaller markets combined with our acquisition strategy of identifying attractively valued assets.

“First quarter As Adjusted Revenues on a same store basis were down 4.2%, considerably better than our peers which in most cases had double-digit declines. Our 2007 acquisitions continue to perform very well and we are realizing the full amounts of the synergy and cost saving opportunities we targeted at the time of acquisition. This has been a major contributor to our first quarter same store As Adjusted EBITDA growth of 1.4%. It is important to point out that our business is seasonal and our first quarter is historically the lowest of the year given the post holiday lull.

“Revenue declines were primarily driven by classifieds, particularly help wanted, real estate and auto, which are tied more to the economy. The volume of transactions that occur in those categories is a major factor in driving their classified ad spend; as transaction levels recover, ad spend will increase. We are very pleased with our online business with revenues increasing 28.4% on a same store basis as we continue to benefit from our strong local positions and our online product offerings. Circulation revenues also remained strong in the first quarter, increasing 1.5% on a same store basis.

“Longer term, I am confident we will see a turnaround in advertising spend. Conversations with advertisers support our belief that the majority of the slowdown in ad spend is cyclical in nature and that it will return when economic conditions improve. In the meantime, we will continue to execute on our small local market strategy and position the company for future growth.”

First Quarter 2008

As Adjusted Revenues for the quarter were $170.9 million, a decline of 4.2% on a same store basis. Local advertising revenues continued to perform well given the current economic environment declining only 2.6% on a same store basis. Classified revenues continue to be the primary driver of revenue declines with a 12.8% decline on a same store basis. The classified advertising weakness was seen in the categories of help wanted, real estate and auto. Online revenues were strong with same store growth in this category up 28.4%. Circulation revenues in the quarter increased by 1.5%, driven by price increases offset by small volume declines. Commercial printing and other revenues decreased 10.5% in the quarter.

Although same store revenues were down, As Adjusted EBITDA of $30.1 million represented an increase of 1.4% compared to the prior year on a same store basis. The increase was driven by the realization of synergies from prior year acquisitions and careful expense management.

Non-cash compensation expense for Restricted Stock Grants (RSGs) in the first quarter was $1.1 million. One-time costs incurred or accrued in the quarter were $8.7 million. These were charges related primarily to integration of the Company’s acquisitions in order to realize permanent expense reductions, and to reduce future capital expenditure needs, as well as staff reductions taken in order to reduce the cost basis in light of the current revenue environment. Charges included severance, benefits, equipment transportation costs and legal fees.

Levered Free Cash Flow for the quarter was $3.0 million compared with $3.1 million for the same quarter in 2007. Cash flow has historically been lightest in the first quarter due to the seasonality of the business.

Dividend

The Company’s Board of Directors declared a first quarter cash dividend of $0.20 per share on its common stock for the quarter ending March 31, 2008, which was paid on April 15, 2008.