Wait and see
GateHouse suspends stock payout, hopes for improved economy
GateHouse Media Inc., which owns the State Journal-Register and other Illinois newspapers, last week announced a second-quarter income loss of $429.6 million on revenues of $184 million in the same three-month period.
The huge loss reflected a $443.1 million "impairment charge" — a reduction of the value of the company's assets, reflecting the weakened state of the newspaper industry.
Without the one-time charge, the company would have reported operating income of $13.4 million for the three-month period ended June 30, compared with operating income of $18.5 million in the same period a year earlier.
Mike Reed, GateHouse's chief executive officer, said in a conference call Friday that the company is struggling with weak classified advertising sales, a reduction in demand for commercial printing services, and higher costs for transportation and employee health care.
GateHouse also announced that it was suspending quarterly dividend payments, which Reed said would enable the Fairport, N.Y.-based company to address its debts and increase liquidity.
"We believe this is a prudent strategy given the challenging and uncertain times we are in today," Reed said.
Failure to meet expectations has become the hallmark of GateHouse's brief existence, at least as a publicly traded security. After hitting a low of 40 cents per share last week, GateHouse stock had rebounded to around 75 cents as of press time on Wednesday.
Reed addressed GateHouse's poor stock performance, which he attributed largely to a widespread belief that newspapers are "out of favor" and the perception that GateHouse, which reports liabilities of $1.4 billion, is "overleveraged and possibly in danger of default." He dismissed the latter contention by pointing out that GateHouse's long-term debt is not due until 2014.
GateHouse's properties, meanwhile, seem reluctant to report on the woes of their parent company.
Just two of the company's Illinois papers, the Galesburg Register-Mail and Peoria Journal Star, carried
any news from last week's earnings call.
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