FAIRPORT, N.Y. April 28, 2011 - GateHouse Media, Inc. (the “Company” or “GateHouse Media”) (OTC Pink Sheets: GHSE) today reported financial results for the first quarter ended March 27, 2011.
First Quarter 2011
Total revenues were $119.8 million for the quarter, a decline of 10.0% as compared to the prior year. Several timing factors and severe weather accounted for approximately 3.2% of the decline. Excluding these special factors, the Company estimates its revenues were down approximately 6.8% versus the prior year. The Company experienced the impact of a change in its reporting period in 2011 from a calendar year to a 52 week operating year (see note below) and the shift of the positive impact of the Easter holiday on advertising revenue to the second quarter of 2011 compared to the first quarter in 2010. The impact of these two timing factors on revenue is estimated to be approximately $3.1 million, or 2.2%. Severe winter storms also impacted the Company’s New England and Illinois regions, which account for 52.0% of total revenue. The Company believes this had a significant impact on its single copy circulation sales and advertising revenue.
Commenting on GateHouse Media’s results, Michael E. Reed, GateHouse Media’s Chief Executive Officer, said, “Our reported revenue decline of 10% in the quarter does not portray a clear picture of our revenue trends. Revenue was negatively impacted by several timing-related items in the first quarter including a planned change in reporting periods and a late Easter this year, which collectively made up approximately 2.2% of our total revenue decline. We expect to benefit from both of these timing factors later in the year. We also experienced severe winter storms in each of our largest markets in the first quarter. We believe this negatively impacted circulation revenue and caused retailers to hold back advertising dollars in anticipation of lighter consumer traffic.
“On a positive note, we continue to see very good results from our digital initiatives and the investments we are making in this area. Our online advertising revenues grew 23.3% during the quarter. New products launched in 2010, primarily RadarFrog.com and our behavioral targeted advertising platform with Yahoo!, combined with our traditional banner advertising, drove the improvement. We continue to roll out mobile apps across our top properties as we expand our digital offerings. We also continue to execute the roll out of metered pay systems on our websites to drive subscription revenues.
“I am also encouraged by the growth in both our print and online employment classified category. The new Monster platform provides us with additional functionality and we anticipate further improvement in this category throughout the year. The real estate category, both listings and legal revenue from foreclosures, was the primary drag on our overall classified revenue. The pace of legal revenues coming from foreclosures remains slower than we had anticipated, particularly when compared to the very strong volumes we saw in the first quarter of 2010. However, the outlook for our real estate category is a little brighter as we are starting to see legal revenue related to foreclosures pick up again and we are rolling out a new real estate vertical platform with a soon to be announced national partner.
“We are concerned about the slow trends experienced so far in 2011 and are taking extra steps to ensure we remain focused on initiatives and best practices to drive both print and advertising sales. In addition, we continue to look at permanent cost reduction opportunities and have accelerated some of these initiatives in order to more positively impact 2011. We remain committed long term to removing legacy infrastructure costs and positioning GateHouse to be a nimble, multi-media platform business.”
Total advertising revenue declined 11.7% on a same store basis in the quarter. Adjusting for the timing factors and impact of weather noted above, the Company estimates advertising revenue would have declined approximately 8.0%. Online revenue, which now accounts for 8.3% of total advertising revenue, increased 23.3%. Continued strength in the employment and auto categories were not enough to offset weakness in real estate and legal revenue and the category as a whole was down 15.1% for the quarter. Circulation revenue declined 6.4% in the first quarter, 5.0% after adjusting for the calendar days, and was impacted by the severe weather in our New England and Illinois markets. Commercial printing and other revenues declined 8.8%.
Operating costs and SG&A expenses were $110.6 million in the quarter, a decline of $8.7 million or 7.3% from the prior year. The expense declines were driven primarily by lower compensation expense and hauling and delivery costs. Newsprint expense was up slightly for the quarter due to higher average pricing.
Operating loss for the quarter was $3.7 million, a decrease of $4.4 million as compared to the prior year. As Adjusted EBITDA for the quarter was $10.3 million, a decrease of $3.9 million or 27.2% from the prior year.
Levered Free Cash Flow for the quarter decreased 88.6% to ($2.3) million as compared to ($1.2) million for the prior year. The timing of interest payments was impacted by the calendar change, with the March 31st payment of $2.4 million falling into the second quarter.
Non-cash compensation expense for Restricted Stock Grants in the fourth quarter was $0.3 million. One-time costs incurred and other non-cash expenses in the quarter were $2.7 million, and related primarily to reorganization efforts and initiatives introduced to realize permanent expense reductions.
GateHouse Media owns The Carthage Press, Neosho Daily News, Pittsburg Morning Sun and more than 300 newspapers across the nation.