By: Mark Fitzgerald
GateHouse Media Inc., publisher of 87 mostly smaller dailies, late Tuesday reported a sharply reduced net loss in the second-quarter from a year-ago period that included a big impairment charge. Q2 revenue calculated on a same-store basis fell 4.9% from a year ago, a higher year-over-year percentage decline than the 3.9% reported in the first quarter of 2010.
GateHouse’s net loss for the quarter was $5.3 million, compared to a net loss a year ago of $496.5 million that included a non-cash impairment charge on goodwill, long-lived assets and other intangibles of $481.5 million.
Total advertising revenue for the quarter declined 4.4% on a same-store basis, with the declines driven primarily by local retail category, which was down 5.6%, and commercial printing, which fell 18.1%.
Online revenue jumped 17.8% from the year-ago period, GateHouse said. In a statement released with the results, CEO Michael Reed suggested GateHouse would remain aggressive in guarding its content. Last year, GateHouse settled a lawsuit with The New York Times Co. that alleged boston.com was infringing on its copyright by using material from its local Websites.
“Although our revenue remains down versus prior year, we are encouraged that the rates of decline have slowed incredibly when compared to 2009,” Reed said. “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.”
GateHouse’s bottom line continued to benefit from deep cost-cutting, with expenses down 8% from Q2 2009, primarily because of compensation costs that dropped 7.2% and newsprint costs that were down 14.6% mostly on 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,” GateHouse said.
GateHouse is a highly leveraged publisher that took on significant debt to grow rapidly earlier in the decade. In its Form 10Q filed with the Securities and Exchange Commission Tuesday, GateHouse listed long-term debt of $1.192 billion, down from 1.195 billion at the end of 2009.
Total interest expense in the quarter fell 4.8% to $15.1 million, GateHouse said.
Reed said the Fairport, N.Y.-based company’s liquidity “continues to improve” noting GateHouse paid off the remainder of its short-term debt six months ahead of schedule.
In its SEC filing, GateHouse said it is in compliance with all covenants and terms of its credit facility, but that because of restrictive covenants, “we currently do not have the ability to draw upon the revolving credit facility portion of the 2007 Credit Facility for any immediate short-term funding needs or to incur additional long-term debt.”
GateHouse said it believes it has adequate capital resources and liquidity to meet its working capital needs, borrowing obligations and all required capital expenditures for at least the next 12 months.
GateHouse newspapers incluide the Peoria (Ill.) Journal Star and The Patriot Ledger in Quincy, Mass.