November 15, 2006

GateHouse Media, Inc. Announces Third Quarter 2006 Results

Third Quarter 2006 Highlights

  • Revenues increased 88.6% to $97.5 million in the third quarter 2006 from the third quarter 2005. Revenues for the nine months ended September 30, 2006 were $216.9 million.
  • Operating income was $9.0 million for the third quarter 2006 and $23.0 million for the nine months ended September 30, 2006.
  • As Adjusted EBITDA increased 55.5% to $20.4 million in the third quarter 2006 from the third quarter 2005. As Adjusted EBITDA for the nine months ended September 30, 2006 was $46.0 million.
  • Levered Free Cash Flow in the third quarter 2006 was $9.1 million, excluding $2.7 million in interest expense on the second lien debt and $0.3 million in interest expensed on the revolving credit facility. The second lien debt was paid off completely and the outstanding balance of the revolving credit facility was repaid with proceeds from the initial public offering. Including the interest expensed on the second lien debt and revolving credit facility, levered free cash flow would have been $6.1 million.
  • Declared third quarter 2006 dividend of $0.32 per common share. The dividend was paid in October 2006. Subsequent Events to Third Quarter 2006
  • Initial public offering of 13,800,000 shares went effective and started trading on October 25, 2006 and over-allotment of 2,070,000 shares was exercised on November 3, 2006, raising $265.7 million before offering expenses, after deducting the underwriting discount.
  • Repaid in full and terminated its $152.0 million second lien term loan credit facility from a portion of its initial public offering net proceeds. Repaid the outstanding balance under the $40.0 million revolving credit facility from a portion of its initial public offering net proceeds.

FAIRPORT, N.Y., Nov 15, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- GateHouse Media, Inc. (the "Company" or "GateHouse Media") (NYSE: GHS) today reported financial results for the quarter ended September 30, 2006.

The Company recorded revenues of $97.5 million, operating income of $9.0 million, a net loss of $11.4 million and As Adjusted EBITDA of $20.4 million for the third quarter ended September 30, 2006. Additionally the Company recorded revenues of $216.9 million, operating income of $23.0 million, a net loss of $9.4 million and As Adjusted EBITDA of $46.0 for the nine months ended September 30, 2006. As Adjusted EBITDA included non-recurring costs of $1.1 million and $3.2 million for the third quarter and nine months ended September 30, 2006, respectively.

Michael E. Reed, GateHouse Media's CEO, commented, "We recently completed our successful initial public offering and at the same time executed on our plan to drive revenues and profits in the third quarter. In addition to our operational strength, we continue to see a strong supply of attractive acquisition opportunities. I am very proud of the dedicated efforts of our team and the accomplishments we have achieved and look forward to our future as a public company and to updating investors in February after our first full quarter as a public company."

The Company's revenues remained stable on a same publication basis in the third quarter during a very difficult revenue environment for the newspaper industry in general. This performance underscores the benefits of the Company's focus on local content and advertising. Advertising and circulation revenue were slightly higher in the third quarter 2006 from the third quarter 2005 on a same publication sales basis, excluding acquisitions since the third quarter 2005, increasing by $0.1 million on a consolidated basis over the previous year.

GateHouse Media also experienced significant growth in its online revenue and audience development. "The Company's online strategy and key initiatives are underway, and I am very happy with this progress," noted Michael Reed. "Third quarter online revenues were $1.2 million, an increase of 79.2% on a same store basis over the previous period."

The Company's balance sheet following the initial public offering has been significantly strengthened. Long-term debt has been reduced to $558.0 million as of October 30, 2006 from $732.9 million as of September 30, 2006 through the repayment of $174.9 million of indebtedness from cash from the offering. Cash from the offering, net of debt repayment, offering expenses and underwriters' discounts and after the exercise of the underwriters' over- allotment, was approximately $77.0 million. The Company's access to capital through its credit facility and revolver capacity, coupled with its cash on- hand, put it in a strong position to pursue strategic opportunities.

Dividend

GateHouse Media intends to pay a regular quarterly cash dividend to the holders of its common stock. For the third quarter of 2006, GateHouse Media paid a dividend of $0.32 per share of common stock, in October 2006, to holders of record of GateHouse Media's common stock on September 26, 2006.

About GateHouse Media, Inc.

GateHouse Media, Inc. is one of the largest publishers of locally based print and online media in small and midsize markets in the United States. As of September 30, 2006, GateHouse Media's portfolio of products, which included 423 community publications and more than 230 related websites, served over 125,000 business advertisers and reached approximately 9 million people on a weekly basis.

As Adjusted EBITDA

GateHouse Media's management utilizes As Adjusted EBITDA to evaluate the Company's performance. This metric is based on Adjusted EBITDA, which excludes non-cash expenses such as interest expense, depreciation and amortization, income tax expense (benefit) and other non-recurring items. As Adjusted EBITDA also excludes other non-cash items such as non-cash compensation and non-recurring integration and reorganization costs.

Levered Free Cash Flow

GateHouse Media's management also utilizes Levered Free Cash Flow to evaluate the Company's performance because that metric will be used, along with other criteria, to determine the funds available for paying the regular quarterly dividend. This metric is based on As Adjusted EBITDA, as defined above, less capital expenditures, cash taxes and interest expense.



                    GATEHOUSE MEDIA, INC. AND SUBSIDIARIES
          Unaudited Condensed Consolidated Statements of Operations
               (In thousands, except share and per share data)

                    Three       Three       Nine        Period       Period
                   Months      Months      Months        from         from
                    Ended       Ended       Ended      January 1, June 6, 2005
                 September   September   September   2005 to June to September
                  30, 2006    30, 2005    30, 2006      5, 2005      30, 2005
                (Successor) (Successor) (Successor)  (Predecessor) (Successor)
    Revenues:
      Advertising  $74,265     $38,348    $163,449      $63,172      $49,749
      Circulation   16,700       8,442      36,056       14,184       10,836
      Commercial
       printing
       and other     6,543       4,905      17,417        8,134        6,361
         Total
          revenues  97,508      51,695     216,922       85,490       66,946
    Operating costs
     and expenses:
      Operating
       costs        50,316      25,403     109,861       40,007       34,748
      Selling,
       general and
       admini-
       strative     28,264      13,398      63,124       26,210       15,127
      Depreciation and
       amortization  7,763       3,421      16,207        5,776        4,550
      Transaction
       costs related
       to Merger         -           -           -        7,703        2,850
      Integration and
       reorganization
       costs and
       management
       fees paid to
       prior owner   1,121         654       3,217          768          654
      Impairment of
       long-lived
       assets          897           -         897            -            -
      Loss on sale
       of assets       170           -         611            -            -
        Operating
         income      8,977       8,819      23,005        5,026        9,017
    Interest
     expense - debt 13,300       5,204      25,665       13,232        6,494
    Interest expense
     - dividends on
     mandatorily
     redeemable
     preferred stock     -           -           -       13,484            -
    Amortization of
     deferred
     financing costs   226          28         341          643           38
    Loss on early
     extinguishment
     of debt             -           -         702        5,525            -
    Unrealized loss
     (gain) on
     derivative
     instrument      1,241      (7,957)     (1,364)           -       (7,957)
      (Loss) income
       from operations
       before income
       taxes        (5,790)     11,544      (2,339)     (27,858)      10,442
    Income tax
     expense
     (benefit)       5,570       4,487       7,028       (3,027)       4,189
      Net (loss)
       income     $(11,360)     $7,057     $(9,367)    $(24,831)      $6,253

    Basic (loss)
     earnings
     per share      $(0.51)      $0.32      $(0.42)      $(0.12)       $0.28
    Diluted (loss)
     earnings
     per share      $(0.51)      $0.32      $(0.42)      $(0.12)       $0.28
    Basic weighted
    average shares
    outstanding 22,221,652  22,197,500  22,219,876  215,883,300   22,197,500
    Diluted
     weighted
     average
     shares
    outstanding 22,221,652  22,215,563  22,219,876  215,883,300   22,433,200



                    GATEHOUSE MEDIA, INC. AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets
                      (In thousands, except share data)

                                                    September 30, December 31,
                                                         2006          2005
    Assets                                           (unaudited)
    Current assets:
      Cash and cash equivalents                         $2,777         $3,063
      Accounts receivable, net of allowance for doubtful
       accounts of $3,128 and $1,509 at September 30,
       2006 and December 31, 2005, respectively         43,183         22,587
      Inventory                                          4,734          3,421
      Prepaid expenses                                   4,194          1,392
      Deferred income taxes                              2,960          2,121
      Other current assets                                 587            366
      Assets held for sale                               1,072              -
        Total current assets                            59,507         32,950
      Property, plant, and equipment, net of
       accumulated depreciation of $8,497 and $2,878
       at September 30, 2006 and December 31, 2005,
       respectively                                    100,838         60,017
      Goodwill                                         512,826        316,691
      Intangible assets, net of accumulated
       amortization of $15,266 and $5,111 at September
       30, 2006 and December 31, 2005, respectively    396,077        217,104
      Deferred financing costs, net                      6,534            753
      Other assets                                      11,154         11,211
      Long-term assets held for sale                     3,889              -
        Total assets                                $1,090,825       $638,726

    Liabilities and Stockholders' Equity
    Current liabilities:
      Current portion of long-term debt                     $-         $3,071
      Current portion of long-term liabilities             229            224
      Accounts payable                                   5,296          1,616
      Accrued expenses                                  23,037         10,505
      Deferred revenue                                  14,652          8,851
      Dividend payable                                   7,361              -
      Liabilities held for sale                            243              -
        Total current liabilities                       50,818         24,267
    Long-term liabilities:
      Borrowings under revolving credit facility        10,905          8,500
      Long-term debt, less current portion             722,000        301,355
      Long-term liabilities, less current portion          895            505
      Deferred income taxes                             78,316         72,043
      Pension and other post-retirement
       benefit obligations                              13,746              -
        Total liabilities                              876,680        406,670
    Stockholders' equity:
      Preferred stock, $0.01 par value, 50,000,000
       shares authorized, none issued and outstanding
       at September 30, 2006 and December 31, 2005          $-             $-
      Common stock, $0.01 par value, 150,000,000
       shares authorized, 23,009,000 shares and
       22,640,000 shares issued at September 30, 2006
       and December 31, 2005, respectively, and
       23,003,000 and 22,640,000 shares outstanding at
       September 30, 2006 and December 31, 2005,
       respectively                                        222            222
      Additional paid-in capital                       223,767        226,178
      Accumulated other comprehensive income            (2,621)             -
      Deferred compensation                                  -         (3,909)
      (Accumulated deficit) retained earnings           (7,163)         9,565
      Treasury stock, at cost, 6,000 shares                (60)             -
        Total stockholders' equity                     214,145        232,056
        Total liabilities and stockholders' equity  $1,090,825       $638,726



                    GATEHOUSE MEDIA, INC. AND SUBSIDIARIES
          Unaudited Condensed Consolidated Statements of Cash Flows
                                (In thousands)

                                      Nine Months    Period from   Period from
                                         Ended       January 1,   June 6, 2005
                                       September    2005 to June  to September
                                        30, 2006        5, 2005      30, 2005
                                      (Successor)   (Predecessor)  (Successor)
    Cash flows from operating activities:
      Net (loss) income                 $(9,367)       $(24,831)       $6,253
      Adjustments to reconcile net
       (loss) income to net cash
       provided by (used in)
       operating activities:
        Depreciation and amortization    16,207           5,776         4,550
        Amortization of deferred
         financing costs                    341             643            38
        Unrealized gain on
         derivative instrument           (1,364)              -        (7,957)
        Issuance of senior debentures in
         lieu of paying cash interest on
         senior discount debentures and
         senior debentures held
         by affiliates                        -           4,765             -
        Change in accrued interest on
         senior discount debentures and
         senior debentures held
         by affiliates                        -            (389)      (21,129)
        Non-cash compensation expense     1,048               -           294
        Deferred taxes                    6,906          (3,520)        4,155
        Loss on sale of assets              611               -             -
        Loss on early
         extinguishment of debt             702           5,525             -
        Interest expense - dividends
         on mandatorily redeemable
         preferred stock                      -          13,484             -
        Non-cash transaction costs
         related to Merger                    -             953             -
        Impairment of long-lived assets     897               -             -
        Changes in assets and liabilities,
         net of acquisitions:

          Accounts receivable, net       (2,871)           (656)        1,410
          Inventory                         (16)             74          (364)
          Prepaid expenses and other assets 460            (226)          194
          Accounts payable                1,255             223           (50)
          Accrued expenses                1,738          (2,227)       (7,686)
          Deferred revenue                 (926)            (71)         (233)
          Other long-term liabilities       568             (95)         (171)
            Net cash provided by (used
             in) operating activities    16,189            (572)      (20,696)
    Cash flows from investing activities:
      Purchases of property, plant,
       and equipment                     (6,384)         (1,015)       (1,213)
      Proceeds from sale of publications
       and other assets                   2,859               -             -
      Acquisition of GateHouse Media,
       Inc., net of cash acquired             -               -       (21,588)
      Acquisition of CP Media, net
       of cash acquired                (231,672)              -             -
      Acquisition of Enterprise
       NewsMedia, LLC, net of cash
       acquired                        (181,337)              -             -
      Other acquisitions, net
       of cash acquired                 (11,828)            (80)       (3,850)
        Net cash used in investing
         activities                    (428,362)         (1,095)      (26,651)
    Cash flows from financing activities:
      Extinguishment of senior
       subordinated notes, net of fees        -        (182,813)            -
      Extinguishment of senior
       discount notes, held by third
       parties                                -         (20,184)            -
      Extinguishment of senior
       preferred stock, held by third

       parties                                -         (11,361)            -
      Payment of debt issuance costs     (6,310)         (2,350)         (771)
      Net borrowings (repayments)
       under term loans                 722,000         216,448        (1,382)
      Net borrowings under revolving
       credit facility                    2,405               -        33,500
      Extinguishment of
       senior debentures                      -               -       (69,200)
      Contributed capital                     -               -       221,975
      Extinguishment of senior
       preferred stock, related to Merger     -               -      (134,321)
      Extinguishment of credit
       facility, net of fees           (304,426)              -             -
      Payment of deferred offering costs (1,972)              -             -
      Issuance of common stock              250               -             -
      Purchase of treasury stock            (60)              -             -
          Net cash provided by (used
           in) financing activities     411,887            (260)       49,801
          Net (decrease) increase in
           cash and cash equivalents       (286)         (1,927)        2,454
    Cash and cash equivalents at
     beginning of period                  3,063           3,276         1,349
    Cash and cash equivalents
     at end of period                    $2,777          $1,349        $3,803


    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 and Levered Free Cash Flow, non-GAAP financial measures, as set forth below.

Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow

We define Adjusted EBITDA as net income (loss) before income tax expense (benefit), depreciation and amortization and other non-recurring items. We define As Adjusted EBITDA as Adjusted EBITDA before other non-cash items such as non-cash compensation and non-recurring integration and reorganization costs. We define Levered Free Cash Flow as As Adjusted EBITDA less capital expenditures, cash taxes and interest expense.

Management's Use of Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow

Adjusted EBITDA, As Adjusted EBITDA 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 believes these non-GAAP measures, as defined above, are helpful in identifying trends in its day-to-day performance because the items excluded have little or no significance on its day-to-day operations. These measures provide assessments of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieving optimal financial performance. They provide indicators for management to determine if adjustments to current spending decisions are needed.

Adjusted EBITDA, As Adjusted EBITDA 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 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.

Limitations of Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow

Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow have limitations as analytical tools. They should not be viewed in isolation or as substitutes for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to GateHouse Media's earnings to calculate Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow and using these non-GAAP financial measures as compared to GAAP net income (loss), include: the cash portion of interest expense, income tax (benefit) provision and non-recurring charges related to gain (loss) on sale of facilities and extinguishment of debt activities generally represent charges (gains), which may significantly affect GateHouse Media's financial results.

An investor or potential investor may find these items important in evaluating GateHouse Media's performance, results of operations and financial position. GateHouse Media uses non-GAAP financial measures to supplement its GAAP measures in order to provide a more complete understanding of the factors and trends affecting its business.

Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow are not alternatives to net income, income from operations or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. You should not rely on Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow as substitutes for any such GAAP financial measures. GateHouse Media strongly urges you to review the reconciliation of net (loss) income to Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow, along with its consolidated financial statements included elsewhere in this release. GateHouse Media also strongly urges you to not rely on any single financial measure to evaluate its business. In addition, because Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow are not measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA, As Adjusted EBITDA and Levered Free Cash Flow measures, as presented in this release, may differ from and may not be comparable to similarly titled measures used by other companies.


    The table below shows the reconciliation of net (loss) income to Adjusted
EBITDA, As Adjusted EBITDA and Levered Free Cash Flow for the periods
presented (in thousands):



                   Three       Three        Nine       Period       Period
                  Months      Months      Months        from          from
                   Ended       Ended       Ended     January 1,  June 6, 2005
                September   September   September   2005 to June  to September
                 30, 2006    30, 2005    30, 2006      5, 2005      30, 2005
               (Successor) (Successor) (Successor) (Predecessor) (Predecessor)

    Net (loss)
     income     $(11,360)     $7,057     $(9,367)    $(24,831)       $6,253
    Income tax
     expense
     (benefit)     5,570       4,487       7,028       (3,027)        4,189
    Unrealized loss
     (gain) on
     derivative
     instrument    1,241      (7,957)     (1,364)           -        (7,957)
    Loss on early
     extinguishment
     of debt           -           -         702        5,525             -
    Amortization of
     deferred
     financing costs 226          28         341          643            38
    Interest expense
     - dividends on
     mandatorily
     redeemable
     preferred stock   -           -           -       13,484             -
    Interest expense
     - debt       13,300       5,204      25,665       13,232         6,494
    Impairment of
     long-lived
     assets          897           -         897            -             -
    Transaction costs
     related to the
     Acquisitions
     and Merger        -           -           -        7,703         2,850
    Depreciation and
     amortization  7,763       3,421      16,207        5,776         4,550
    Adjusted
     EBITDA       17,637      12,240      40,109       18,505        16,417
    Non-cash
     compensation
     and other
     expense       1,134         210       1,664          809           250
    Non-cash portion
     of post
     -retirement
     benefits
     expense         317           -         422            -             -
    Management fees
     paid to prior
     owners            -           -           -          768             -
    Integration and
     reorganization
     costs         1,121         654       3,217            -           654
    Loss on sale
     of assets       170           -         611            -             -
    As Adjusted
     EBITDA       20,379      13,104      46,023       20,082        17,321
    Capital
     expenditures   (939)       (870)     (6,384)      (1,015)       (1,213)
    Interest
     expense -
     dividends on
     mandatorily
     redeemable
     preferred stock   -           -           -      (13,484)            -
    Interest
     expense -
     debt        (10,322)(a)  (5,204)    (22,687)(a)  (13,232)       (6,494)
    Levered Free
     Cash Flow    $9,118      $7,030     $16,952      $(7,649)       $9,614

    (a) Interest Expense-debt excludes $2.7 million in interest expense on the
        second lien debt and $0.3 million in interest expense on the revolving
        credit facility for the third quarter 2006.  The second lien debt was
        paid off completely and the outstanding balance of the revolving
        credit facility was repaid with proceeds from the initial public
        offering.

    Safe Harbor

Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to various risks and uncertainties, including without limitation, statements relating to progress made by the Company in its integration efforts, growth in revenues and cash flow and potential acquisition opportunities. Forward-looking statements are generally identifiable by use of forward-looking terminology such as "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "would," "project," "predict," "continue" or other similar words or expressions. Forward looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to, our limited operating history on a combined basis, our ability to generate sufficient cash flow to cover required interest, long-term obligations and dividends, the effect of our indebtedness and long-term obligations on our liquidity, our ability to effectively manage our growth, unforeseen costs associated with the acquisition of new properties, our ability to find suitably priced acquisitions, our ability to integrate acquired assets and businesses, any increases in the price or reduction in the availability of newsprint, seasonal and other fluctuations affecting our revenues and operating results, any declines in circulation, our ability to obtain additional capital on terms acceptable to us, our vulnerability to economic downturns, regulatory changes or acts of nature in certain geographic areas, increases in competition for skilled personnel, departure of our key officers, increases in market interest rates, the cost and difficulty of complying with increasing and evolving regulation, and other risks detailed from time to time in GateHouse's SEC reports, including its final Prospectus filed with the SEC pursuant to Rule 424(b) dated as of October 24, 2006. When considering forward- looking statements, you should keep in mind the risk factors and other cautionary statements in such SEC filings. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our management's views as of the date of this press release and/or the associated earnings conference call. The factors discussed above and the other factors noted in our SEC filings could cause our actual results to differ significantly from those contained in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

For more information regarding GateHouse Media and to be added to our email distribution list, please visit http://www.gatehousemedia.com.

SOURCE GateHouse Media, Inc.

Francie Nagy, Investor Relations for GateHouse Media, Inc., +1- 212-515-4625
http://www.gatehousemedia.com

Copyright (C) 2006 PR Newswire. All rights reserved

News Provided by COMTEX


Close window | Back to top

Copyright 2014 GateHouse Media