GateHouse Swings to 1Q Loss Despite Revenues Up 90%

By: Mark Fitzgerald GateHouse Media Inc., which closed on five deals for about $200 million in the first quarter, said the added newspapers nearly doubled its revenues for the period ended March 31 to $95 million.

Net income, however, fell to a loss of $5.3 million, or 14 cents a share, from a $405,000 profit, or 2 cents a share, in the year-ago period. In a conference call Tuesday morning, GateHouse CEO Mike Reed said the much higher corporate costs related to going public in October 2006 accounted for much of the loss. "Last year, the office consisted of four people and no public (company) costs," he said.

"Once we have cycled through four quarters as a public company, these costs will be embedded in future results," Reed said. With the integration of recently acquired papers, he added, "corporate expenses will be shared over a significantly larger revenue base than the numbers you are hearing here today."

Operationally, this was a "strong quarter," Reed said.

Revenues jumped 90.1% over the first quarter of 2006, the Fairport, N.Y.-based publisher of community newspapers said. Without some accounting issues that prevented the recording of some income, revenues would have been about $97 million, the company said.

On a same-property basis, "as adjusted" EBITDA (earnings before interest, taxes, deduction, and amortization) or roughly cash flow, was up 2% in the quarter on a same-property basis to $19.3 million.

Reed said there was weakness in the automotive and real estate advertising categories. GateHouse is doing better than many of its peers in the newspaper industry, company officials said.

"I will say our numbers in April are not 'horrendous,' and certainly are in line with our first quarter," Reed said in a response to a question from analyst Peter Appert, who noted that some April results released so far were "pretty horrendous."

GateHouse's strategy is to grow through acquisitions, generating free cash flow that is plowed into dividends higher than those paid out by most newspaper companies. Reed noted that in April, the company paid out a first-quarter dividend of 37 cents a share, or a 15.6% increase over the fourth-quarter 2006 dividend.