(News release from GateHouse Media)
GateHouse Media, Inc. (the “Company” or “GateHouse Media”) (GHSE) today reported financial results for the second quarter ended June 26, 2011.
Total revenues were $134.4 million for the quarter, a decline of 6.4% from the prior year on a same store basis. This was an improvement from the first quarter which declined 10.0% versus prior year. Excluding the loss of four business days in the first quarter due to a reporting change in 2011 from a calendar year to a 52 week operating year, first quarter revenues were down 8.5% versus prior year (same store basis). Online revenue grew 17.4% in the second quarter while total advertising revenue declined 7.5%, classified revenue declined 6.4% and local advertising declined 9.8% versus the prior year. The decline in classified revenue was much improved from the first quarter same store decline of 13.1%. This was driven by improvement in real estate trends, foreclosure revenues and an 8.6% gain over prior year in print employment advertising. These three classified categories were partially offset by softer auto trends in the second quarter which we believe to be more temporary in nature. Local advertising trends improved slightly in the second quarter from the first quarter same store decline of 11.1%. Circulation revenue declined 2.9% in the second quarter improving from a same store decline of 5.0% in the first quarter.
Total operating and SG&A expenses in the quarter were $110.8 million, down 6.0% versus prior year. The expense declines were driven by lower compensation, distribution and newsprint costs. As Adjusted
EBITDA was $25.2 million for the quarter, declining 8.3% from the prior year. This is a significant improvement from the 27.2% decline in the first quarter.
Commenting on GateHouse’s results, Michael E. Reed, Chief Executive Officer of GateHouse Media, said “While overall the revenue environment and small market economic conditions remain soft, we were encouraged by the relative improvement in nearly every category versus the first quarter. Obviously, we are not satisfied with our current revenue performance, but there are pockets of optimism resulting from progress we are making within our sales processes, our product improvements and extensions, and our subscriber retention, marketing and pricing efforts. We are particularly excited about additional initiatives, focused on each of these important areas of our business, that we have underway for the remainder of 2011.
“We continue to do an excellent job in permanently removing legacy costs from our business. Expenses were down 6.0% or $7.1 million in the second quarter. We feel confident that we can continue to accomplish more on this front. The expense reductions have come from, and will continue to come from, efficiencies garnered from process improvements, regionalization and centralization of processes as well as outsourcing of non-revenue producing functions.
“Our online advertising revenues in the quarter were $7.7 million. This represented 8.1% of total advertising revenues. Online revenue was up from $6.8 million in the first quarter and up 17.4% over prior year. We expect to continue to rapidly grow digital revenues through improvements to our sales processes, including compensation, new product roll outs, better company-wide penetration of existing best practices and a rapidly growing presence in our markets in the mobile space.
“Our cash position continues to improve and with no short term debt obligations, we feel good about the resources we have available to us to continue with our plans to transform our business from one that was print advertising dominated to one that enjoys strong consumer revenues and digital advertising revenues as well as print advertising revenue, and a much lower cost structure.
“On another note, I want to give credit to the tremendous job our GateHouse employees in Missouri did covering the devastating tornado that passed through the area last month. The storms ravaged much of the City of Joplin and completely destroyed our building there. Despite the tragedy and the personal situations they all had to deal with, our staff provided extensive coverage and assistance to the community without missing a beat. We are very proud of what they accomplished given the obstacles they faced.”
Operating income for the quarter was $9.8 million, a decrease of $3.0 million as compared to the prior year. As Adjusted EBITDA for the quarter was $25.2 million, a decrease of $2.3 million or 8.3% from the prior year.
Levered Free Cash Flow for the quarter decreased 18.6% to $9.7 million as compared to $11.9 million for the prior year.
Non-cash compensation expense for Restricted Stock Grants in the fourth quarter was $0.2 million. One-time costs incurred and other non-cash expenses in the quarter were $2.4 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.