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 /-FirstCall/ -- 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.
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