GateHouse Media released its fourth quarter and 2011 annual reports today. The news release is printed below. GateHouse Media owns The Carthage Press, Neosho Daily News, Pittsburg Morning Sun, and more than 300 U. S. newspapers.
Fourth Quarter and 2011 Annual Highlights
- Digital revenue increased 26.1% for the quarter and 24.9% for the full year, and 17.2% and 23.5%, respectively, taking into account a change in the Company's reporting period.
- As Adjusted EBITDA was $32.9 million and $90.4 million for the fourth quarter and full year, respectively; an increase of 4.3% for the quarter and a decrease of 7.9% for the full year.
- Revenues for the fourth quarter were $144.4 million, up 0.8% from the prior year quarter and down 4.8% after taking into account a change in the Company's reporting period. Full year revenues were $525.8 million, a decrease of 5.9% from the prior year and 6.7% after taking into account a change in the Company's reporting period.
- Operating costs and SG&A expense decreased $2.0 million or 1.7% for the fourth quarter and $25.5 million or 5.5% for the full year.
- Levered Free Cash Flow per share for the fourth quarter was flat with prior year at $0.26 and for the full year decreased 16.4% to $0.50 as compared to $0.60 for the prior year.
GateHouse Media, Inc. (the "Company" or "GateHouse Media") (OTC Pink Sheets: GHSE) today reported financial results for the fourth quarter and full year ended January 1, 2012.
Change in Reporting Period
Comparisons to the prior year were influenced by two factors impacting the number of days in the reporting period. In fiscal 2011, there was a 53rd week, falling in Q4, for approximately 60% of the business which was already on a 52 week (5-4-4 quarterly) reporting cycle. Also in 2011, the remaining 40% of the business changed its reporting period from a calendar year to a 52 week reporting period to be consistent with the rest of the Company, which resulted in one additional net day in 2011, but an additional 6 days in Q4. The Company estimated the impact of these two factors for better comparability year over year in reporting same store results ("same reporting period basis"). Please see the exhibits to this press release for a reconciliation from GAAP revenue to same reporting period basis revenue.
Michael E. Reed, GateHouse Media's Chief Executive Officer, said, "We are starting to see some positive changes in our trends resulting from the strategic initiatives we embarked on in 2011. I am pleased with the implementation of a more structured approach to many of the functional areas of our business and the impact it is having on our results. We also adopted a new company-wide organizational structure in January 2012 and we are excited about how this should positively impact results in 2012 and beyond.
"I was pleased that we were able to generate $32.9 million of As Adjusted EBITDA in the fourth quarter, with a margin of 22.9%. This represented growth over the prior year of 4.3% and was also our largest quarter in terms of As Adjusted EBITDA since the third quarter of 2008. We saw a broad-based improvement in revenue trends in the fourth quarter that resulted in revenue declines of 4.8% in the quarter, our best comparison of the year. Further, we have seen continued improvement in this trend during January and February of 2012.
"We were encouraged by the improving trends we saw across many of our revenue categories as the year came to a close. I am pleased with our continued progress on cost reductions and resource realignment toward growth opportunities, and I am also pleased that our audiences continue to grow through all of our digital product offerings.
"In 2012 we will continue to focus on all facets of our transformational strategy, including targeting further cost reduction and resource realignment, improved digital audience and revenue growth, consumer revenue growth through volume improvements and strategic pricing actions, stabilization of print through product and process improvements, and new business development. Our new organizational structure was designed to give us leaner, more vertical management across most functional areas, which we believe positions the Company to successfully execute on our strategy.
Fourth Quarter 2011
Total revenues were $144.4 million for the quarter, an increase of 0.8% as compared to the prior year and a decrease of 4.8% on a same reporting period basis. Digital revenue grew 17.2% in the fourth quarter on a same reporting period basis driven by growth in online advertising, daily deals and digital subscription programs. Total advertising revenue declined 7.5% on the same reporting period basis as growth in digital advertising was more than offset by declines in local and classified print advertising revenues, which were down 9.9% and 6.7%, respectively, versus the prior year. While these trends were an improvement from the third quarter, local print advertising remained soft due to weak economic conditions and were further impacted by a decline in political spending as compared to the prior year. The improvement in our classified trends was driven by increased levels of legal foreclosure advertising in certain markets along with improved trends in the auto and real estate categories. Circulation revenue increased slightly on a same reporting period basis due to pricing actions taken in 2011.
Operating costs and SG&A expenses were $111.8 million in the quarter, a decline of $2.0 million or 1.7% from the prior year and a decrease of approximately $9.3 million or 7.7% on the same reporting period basis. The expense declines were driven primarily by lower compensation and newsprint expense. Compensation expense was down 10.7% on a same reporting period basis as the Company has been able to successfully reduce compensation expense as part of its overall permanent cost savings initiatives. For the quarter, newsprint expense was down 17.4% on a same reporting period basis, driven by the Company's decision to outsource printing and lower consumption levels. Partially offsetting these declines was an increase in outside services as a result of outsourcing printing and distribution in certain markets.
Operating income for the quarter was $18.7 million, an increase of $1.1 million as compared to the prior year. As Adjusted EBITDA for the quarter was $32.9 million, an increase of 4.3% versus 2010.
Levered Free Cash Flow for the quarter of $15.1 million was flat with the prior year.
One-time costs incurred and other non-cash expenses in the quarter were $1.8 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.
Total revenues were $525.8 million for the full year 2011, a decrease of 5.9% over the prior year and 6.7% on a same reporting period basis. Total advertising revenue declined 8.6% on a same reporting period basis. The decline in total advertising revenue was driven by local retail and classified revenue, which were down 9.2% and 12.3%, respectively, partially offset by 17.8% growth in online advertising revenues. Commercial print and other revenues declined 2.5% on a same reporting period basis.
Full year 2011 operating costs and SG&A expense declined $25.5 million or 5.5% compared to the prior year, and 6.4% on a same reporting period basis. The expense declines were driven primarily by lower compensation expense and newsprint costs. On a same reporting period basis, compensation expense was down 8.9% from the prior year and newsprint expense was down 7.7%.
Operating income for the full year 2011 was $33.9 million, compared to $43.2 million in 2010. As Adjusted EBITDA for the year was $90.4 million, a decrease of $8.6 million or 8.7% on a same reporting period basis, primarily due to revenue declines that outpaced expense reduction initiatives.
Levered Free Cash Flow for the full year 2011 was $28.9 million compared to $34.5 million in 2010.
Non-cash compensation expense for Restricted Stock Grants in 2011 was $0.5 million. One-time costs incurred and other non-cash expenses in 2010 were $9.4 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.
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 79 daily publications. GateHouse Media currently serves local audiences of approximately 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 visitwww.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, non-recurring integration and reorganization costs and Adjusted EBITDA from non-wholly owned subsidiaries. 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, excluding non-wholly owned subsidiaries.
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.