Business News

GateHouse Media Announces Full Year & Fourth Quarter Results

Monday 16. March 2009 - Full Year and Fourth Quarter 2008 Highlights

– Full year reported revenues were $683.1 million, an increase of 17.9% over the prior year. Reported revenues for the fourth quarter 2008 were $168.5 million, down 0.3% from the prior year quarter.

– On a same-store basis, As Adjusted Revenues decreased 5.7% to $698.5 million for the full year 2008 and were down 8.7% to $168.6 million for the fourth quarter 2008.

– Online revenue and circulation revenue grew 21.4% and 1.7%, respectively, for the full year 2008 on a same-store basis.

– Reported net loss for the full year and fourth quarter of 2008 was $673.3 million and $182.8 million, respectively. The net loss includes non-cash impairment charges recorded to goodwill and mastheads and other long-lived assets of $615.5 million and $176.8 million, respectively.

– As Adjusted EBITDA was $131.4 million and $30.6 million for the full year and fourth quarter 2008, respectively; down 6.7% and 30.5% from the comparable periods of 2007. On a same-store basis, As Adjusted EBITDA declined 20.3% for the full year 2008 and 32.7% for the fourth quarter.

– Levered Free Cash Flow per share for the full year 2008 was $0.59, down from $1.19 for 2007. In the fourth quarter of 2008, Levered Free Cash Flow per share was $0.16 versus $0.34 for the prior year quarter.

GateHouse Media, Inc. (the “Company” or “GateHouse Media”) today reported financial results for the full year and fourth quarter ended December 31, 2008.

The Company reported full year 2008 total revenue of $683.1 million, an increase of 17.9% over full year 2007. As Adjusted Revenues were $698.5 million, an increase of 14.1% over full year 2007. The increase in revenues was driven by the Company’s acquisitions and implementation of its online strategy, partially offset by declines in print classified advertising revenues, in particular, help wanted, real estate and automotive.

Reported operating loss for the full year 2008 was $582.9 million. Excluding the impairment charge associated with goodwill and mastheads and other long-lived assets, operating income in 2008 was $32.6 million, as compared with $45.2 million in 2007. As Adjusted EBITDA was $131.4 million for the year ended December 31, 2008, down 20.3% on a same-store basis.

Michael E. Reed, GateHouse Media’s Chief Executive Officer, said, “In my 21 years in the local media sector, 2008 was by far the most challenging year. Our print classified business, our category that is most sensitive to the economy, declined nearly 20% on a same store basis in 2008 and accounted for over 75% of our total advertising revenue decline. In the fourth quarter, the big three classified categories — help wanted, real estate and automotive — each experienced the largest decline in the last six quarters.

“Advertising spend in the three primary classified categories has declined dramatically, but we have not seen a significant shift to other mediums in our markets. We continue to believe that the majority of our overall revenue declines are cyclical and that when the economy turns, advertising revenue will improve.

“Our local businesses have held up well during this treacherous environment. Local print advertising, excluding classified, was down only 3.8% in 2008 on a same-store basis. In addition, online revenue increased 21% and circulation revenue increased approximately 2%. Our print audience remains relatively stable as evidenced by our circulation results. In addition our overall audience continues to grow through the development of our interactive strategy.

“As we look ahead over the next 12 to 24 months, we think the economy will remain very weak. Our focus is on improving our products and operations, aggressively pursuing reductions in controllable expenses, finding ways to become more efficient and continuing to invest in our fastest growing category, online. I am proud of the efforts and dedication all GateHouse employees have shown this year and am confident we will emerge a stronger company when the economy improves.”

Full Year 2008

Total reported revenues were $683.1 million for the full year 2008, an increase of 17.9% over the prior year reported revenue. As Adjusted Revenues for the full year were $698.5 million, a decline of 5.7% on a same-store basis. Local print advertising revenues decreased 3.8% on a same-store basis. Print classified revenues declined 18.8% on a same-store basis as the help wanted, real estate and automotive categories experienced double-digit declines. Print classified accounted for 75.4% of full year 2008 advertising declines. Online advertising increased 21.4% on a same-store basis and accounted for 5.1% of total advertising revenues. Circulation revenues increased 1.7% on a same-store basis benefiting from increased pricing. Commercial printing and other revenues were down 8.0% on a same-store basis.

Reported operating loss for the full year 2008 was $582.9 million. Excluding the impairment charge associated with goodwill and mastheads and other long-lived assets, operating income in 2008 was $32.6 million, as compared with $45.2 million in 2007. As Adjusted EBITDA for the year was $131.4 million, a decline of $33.5 million or 20.3% on a same-store basis, primarily due to the loss of revenue and increased production and delivery expenses. On average, newsprint pricing per metric ton increased 20.9% in 2008 compared to the prior year and higher fuel prices negatively impacted delivery costs.

Non-cash compensation expense for Restricted Stock Grants was $3.6 million for the year. One-time costs incurred and other non-cash expenses in 2008 were $22.3 million. These charges were primarily incurred to realize permanent savings from reduced staffing, plant consolidation related to acquisitions and cost reduction initiatives taken in light of the current revenue environment.

Levered Free Cash Flow for the full year 2008 was $33.7 million compared to $55.4 million in 2007.

Fourth Quarter 2008

Total reported revenues were $168.5 million for the quarter, a decline of 0.3% over the prior year reported revenue. As Adjusted Revenues for the quarter were $168.6 million, a decline of 8.7% on a same-store basis. Local print advertising revenues, excluding classified, decreased 6.6% on a same-store basis. Print classified revenues, which accounted for 15.7% of total revenues, were down 25.6% on a same-store basis. The classified advertising weakness was seen across all three major categories; help wanted, real estate and automotive. Circulation revenues remained relatively constant in the quarter, increasing 1.0% on a same-store basis. Commercial printing and other revenues declined 7.4% in the quarter on a same-store basis.

Reported operating loss for the fourth quarter was $166.5 million. Excluding the impairment charge associated with goodwill and mastheads and other long-lived assets, operating income for the fourth quarter of 2008 was $10.4 million, a decrease of 17.7% over the fourth quarter of 2007. As Adjusted EBITDA for the quarter was $30.6 million, a decline of $14.9 million on a same-store basis. The decline in As Adjusted EBITDA was primarily due to the loss of revenue and increased production and delivery expenses. Newsprint pricing per metric ton increased 42.6% in the quarter versus the prior year.

Non-cash compensation expense for Restricted Stock Grants in the fourth quarter was $0.6 million. One-time costs incurred and other non-cash expenses in the quarter were $5.3 million. These charges related primarily to reorganization and expense control initiatives introduced to realize permanent expense savings, particularly a reduction in staff levels in light of the current revenue environment.

Levered Free Cash Flow for the quarter was $9.4 million compared with $19.4 million for the same quarter in 2007.

During the fourth quarter of 2008, the Company recorded a non-cash impairment charge related to goodwill and mastheads and other long-lived assets of $176.8 million. This charge resulted from impairment testing, in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.