GateHouse Media still bleeding, but not as bad as before

It is a sad condition my former industry is in when the good news is that they're still losing money, but it's not as bad as it was.

GateHouse Media, which owns The Carthage Press, Neosho Daily News, and Pittsburg Morning Sun in this area, as well as 300 other newspapers, issued its quarterly report Tuesday. The news release follows:

GateHouse Media, Inc. (the “Company” or “GateHouse Media”) (OTC Pink Sheets: GHSE) today reported financial results for the second quarter ended June 30, 2010.


Second Quarter 2010

Total reported revenues were $144.2 million for the quarter, a decline of 4.7% as compared to the prior year. As Adjusted Revenues for the quarter were $143.3 million, a decline of 4.9% on a same-store basis from the prior year. Total advertising revenue for the quarter declined 4.4% on a same-store basis from the prior year. The overall declines in same-store revenue were driven primarily by the local retail and commercial printing categories, which were down 5.6% and 18.1%, respectively, from the prior year. Online revenues grew by 17.8% in the quarter from the prior year.

Reported operating costs and SG&A expense were $117.9 million in the quarter, a decline of $10.3 million or 8.0% from the prior year. The expense declines were driven primarily by lower compensation costs and newsprint usage. The Company has been able to successfully reduce compensation expense as part of its overall cost savings initiatives implemented in 2009. Compensation expense was down 7.2% in the quarter versus the prior year. Newsprint expense was down 14.6% versus prior year driven primarily by lower consumption. However, with the increase in newsprint prices since the beginning of the year, the Company does not expect the favorable expense trend to continue in the second half of 2010.
Reported operating income for the quarter was $12.8 million, an increase of $6.2 million as compared to the prior year excluding the impairment charge. As Adjusted EBITDA for the quarter was $27.5 million, an increase of $2.4 million or 9.8% on a same-store basis from the prior year.

Levered Free Cash Flow for the quarter increased 32.2% to $11.9 million as compared to $9.0 million for the prior year.

Non-cash compensation expense for Restricted Stock Grants in the second quarter was $0.5 million.

One-time costs incurred and other non-cash expenses in the quarter were $2.6 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.

Commenting on GateHouse Media’s results, Michael E. Reed, GateHouse Media’s Chief Executive Officer, said, “I was pleased with several aspects of our performance in the quarter. Our costs controls were strong with expenses down 7.8% on a same-store basis despite the increases we saw in actual pricing for newsprint. As Adjusted EBITDA was up nearly 10.0% and Levered Cash Flow was up 32.2%, both showing strong performance versus prior year. In addition, our liquidity continues to improve. We were able to pay off the remainder of our short term debt six months ahead of schedule, while also improving our cash position since the end of the first quarter.

“Despite some of the strong performance noted above, economic conditions remain challenging contributing to our 4.9% total revenue decline. Our largest declining revenue category from a percent perspective was commercial printing, reflecting the trouble our customers are having in this difficult economy. Our local and classified revenues continued to trend down, 5.6% and 4.7% respectively.

“In 2010 we have launched behavioral targeted selling online in our large markets, as well as our new RadarFrog deal site and those both helped contribute to our 17.8% growth in online revenues.

“Although our revenue remains down versus prior year, we are encouraged that the rates of decline have slowed incredibly when compared to 2009. We continue to work on permanent cost reductions, some of which is being redeployed toward our growth initiatives. We remain highly focused on and have several initiatives underway towards delivering our local news to our readers in the manner they want to get it, while at the same time preventing unauthorized commercial use of our content. We also continue our efforts to transform our sales culture to reflect the multi media and multi platform business we are evolving into.”