American Community Newspapers Takes Q1 Loss On Weak Twin Cities Cluster

By: Mark Fitzgerald American Community Newspapers (ACN) reported a first-quarter net loss of $4.5 million on revenue that fell 11.7%, chiefly on weak performances by the 44 papers in its Minneapolis/St. Paul cluster.

The loss was $0.31 per diluted share for the Addison, Texas-based publisher of three dailies and about 100 mostly free non-dailies, shoppers and other publications. That compares to a net loss of $0.29 per diluted share a year ago.

There were no trades of ACN stock (AMEX: ANE) recorded Wednesday, which opened and closed at 60 cents. ACN released results after the markets closed.

Total revenue for the publisher of three dailies and more than 80 mostly free weeklies fell to $15.9 million from pro forma total revenue of $18.0 million in the year-ago period. (ACN, which was acquired last July by Courtside Acquisition Corp., used pro forma comparisons to the first quarter of 2007 in its Securities and Exchange filings because it ha no operating results in the period. Courtside changed its name to ACN after the acquisition.)

Excluding the cluster, total revenue was down 7.9%, ACN said.

Advertising revenue plunged 12.1% to $14.5 million, mostly on results from the Twin Cities, ACN said.

ACN also warned that "for the second quarter of fiscal 2008 ACN does not expect to be in compliance with financial ratio covenants contained in its credit agreements."

The chain said it had begun discussions with its banking group to "explore the possibility of obtaining waivers and modifying the terms of its financial covenants."

Courtside ultimately paid $204 milion for ACN and a cluster of Columbus, Ohio, publications.

ACN's Q1 pro forma adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $2.8 million, down 14.9%. Without Minneapolis-St. Paul cluster, pro forma adjusted EBITDA was up 9.7%, the company said.

ACN said newspaper cash flow, which it defined as pro forma adjusted EBITDA before corporate expenses, was $3.3 million, down 10.9% year-over-year. Excluding the troubled cluster, newspaper cash flow was up 11.7%.

Internet advertising revenues increased 10.9% in the quarter, and represented 2.6% of total revenue.

"The challenging economic climate combined with the on-going transformation of the newspaper and advertising industries has resulted in a very difficult business environment," Chairman and CEO Gene Carr said in a statement. "Our revenue decline in the quarter was also exacerbated by tough year-over-year comparisons as we posted organic advertising revenue growth of nearly 5% in the first quarter of 2007, well ahead of the industry's performance. We remain confident in the power of the community newspaper business model with its unique ability to provide truly local news and information that is not available anyplace else."