Gatehouse Media Reaches New 52-Week Low

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By: Shares of Gatehouse Media Inc. hit a fresh 52-week low Tuesday, as a Goldman Sachs analyst pinned investors' fears to dividend viability and the sector's softening advertising environment.

The newspaper publisher said late Monday it fell to a second-quarter loss of $2 million, or 5 cents per share, versus a profit of $1.1 million, or 5 cents per share, in the year-ago period.

Gatehouse, which went public in October, had a loss from continuing operations of $2.6 million, or 7 cents per share, compared with income from continuing operations of $1.1 million, or 5 cents per share.

Analysts surveyed by Thomson Financial predicted a profit of 11 cents per share.

Total operating costs ballooned to $82.1 million from $34.3 million.

Quarterly revenue more than doubled to $158.6 million versus $69.5 million in the prior year. Ad sales jumped to $118.1 million from $52.7 million, while circulation revenue increased to $32 million from $10.9 million.

Consensus estimates put revenue at $161.5 million.

The current period's revenue results did not include $4.7 million from its SureWest directories business, due to purchase accounting requirements, the company said.

Goldman Sachs analyst Peter Appert said the stock's 18 percent decline for the year to date reflects worries about continued softness in newspaper advertising as well as the likelihood that Gatehouse continues its dividend.

However, Gatehouse's free cash flow results bolstered Appert's view somewhat. The company said its adjusted levered free cash flow grew to $17.4 million from $6 million. It is Gatehouse's policy to pay a dividend from adjusted levered free cash flow.

"Gatehouse's mixed second-quarter results can't alleviate all concerns surrounding the credit markets or newspaper industry, but free cash flow ahead of our expectations does alleviate some concern over the company's ability to continue to pay its dividend, which, in our view, is the most important piece of the story," he wrote in a client note.

Shares of Gatehouse Media fell $1.31, or 8.6 percent, to $13.90 in morning trading, rising from its new low of $13.78 earlier in the session. The stock previously traded in a 52-week range of $14.41 to $22.17.

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