Saturday, April 11, 2009

GateHouse Media: Cuts are coming

In a letter to shareholders, GateHouse Media CEO Michael Reed says things will get better, but more cutting is in store for the company this year. Following is the text of Reed's letter:

Dear Fellow Shareholders:

In my 21 years in the local media sector, 2008 was by far the most challenging year for the industry. At GateHouse Media, our strategy of focusing on small markets where we are the primary source of local news and information has allowed us a competitive advantage and resulted in industry leading performance. What distinguishes GateHouse Media’s markets from metro markets is the unique content we provide to the communities we serve; content in most cases our readers cannot obtain from other sources.

The greatest testament to our local strategy is the strength in our circulation numbers. On a comparative basis, circulation was up 1.7% compared to 2007, confirming our content is unique and valuable to the communities we serve. Our reported revenue for 2008 increased approximately 18% as we benefited from the full year impact of acquisitions completed in 2007. On a same store basis, our total revenue declined 5.7%, significantly better than our industry peers. Our print audience remains relatively stable as evidenced by our circulation results and our overall audience continues to grow through the development of our interactive strategy. Our best performing category was online, which grew 21% in 2008.

The print classified business, our category that is most sensitive to the economy, declined nearly 20% on a same store basis in 2008 and represented over 75% of our total advertising revenue decline. Advertising spending in the three primary classified categories, help wanted, automobile and real estate, has declined dramatically. Despite the decline we have not seen a significant shift to other mediums in our markets, an indication that the declines are primarily cyclical and not secular. We are finding our advertisers are not moving their ad dollars to other mediums or competitors; rather they are just spending less in the current environment. This is what gives us confidence in our belief that when the economy does turn, our customers will increase their spending with us. Lastly, our As Adjusted EBITDA margins continued to remain industry leading at 18.8%.
As we move into 2009 we expect to benefit from a few positive trends; fuel costs have declined significantly from the approximately $4 per gallon we experienced in 2008, newsprint costs are currently down more than 10% from their peak in December of 2008 and we expect our interest costs to be down more than 20% based on the current LIBOR rate. In addition, we have taken measures to reduce operating expenses to offset anticipated revenue declines.

We continue to believe that the majority of our overall revenue declines are cyclical and that when the economy turns, advertising revenue will improve. As we look ahead over the next year, we think the economy will remain weak. As we cannot influence the timing or the extent of the recovery, we are focusing on the things we can influence such as 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.

Finally, I would like to thank our employees. I am proud of the efforts and dedication all GateHouse Media employees have shown this year and am confident we will emerge a stronger company when the economy improves.

GateHouse Media publications n this area include The Carthage Press, Neosho Daily News, Pittsburg Morning Sun, Big Nickel, Neosho Post, Greenfield Vedette, and Aurora Advertiser.


Anonymous said...

I sure hope Mike Reed is seeking advice from Gloria, she really knows how to make things run more efficiently. She also knows how to destroy careers and families. She's very talented and giving and understanding.

Anonymous said...

You got that right... ask Chip Watson's family.

Anonymous said...

I wonder if GateHouse is only choosing certain papers at which they are breaking federal law by failing to put employees' own 401K contributions into their own 401K accounts, or if that's a company-wide policy.