Journal Register Company (NYSE:JRC) today reported adjusted net
income of $6.5 million, or $0.17 per diluted share, for the quarter
ended July 1, 2007, as compared to adjusted net income of $11.2
million, or $0.28 per diluted share, for the quarter ended June 25,
2006. The Company�s GAAP 2007 second quarter net income was $5.5
million, or $0.14 per diluted share, as compared to $9.8 million,
or $0.25 per diluted share, for the prior year period. Included in
these second quarter GAAP results is an adverse net tax adjustment
of approximately $1.0 million, or $0.03 per share, from a New York
State tax law change that was enacted in April 2007, while the 2006
second quarter included a special item related to a one-time charge
for a non-compete/separation arrangement of $2.5 million after tax.
Results presented in the accompanying financial summary are for
continuing operations only and exclude the performance of the
Company�s Massachusetts and Rhode Island properties which were sold
in February 2007. The Massachusetts and Rhode Island properties are
shown as discontinued operations and their results are excluded
from revenues, operating expenses and operating income, but are
included in 2006 and 2007 net income and earnings per share. Net
income from discontinued operations totaled $1.1 million, or $0.03
per diluted share, for the 2006 second quarter. Acting Chief
Executive Officer James W. Hall stated, �Our second quarter
results, although not satisfactory, are consistent with the adverse
advertising market that continues to affect the newspaper
publishing industry in almost all sectors. As we work at various
revenue producing initiatives and programs to improve our future
results, we will continue to enhance our operating efficiency.
Total operating expenses were down 4.8 percent in the second
quarter from the prior year, and $11.5 million in annual cost
savings has been identified. �All of us at Journal Register Company
have a lot of work to do as we transform our business model from
one that is largely focused on traditional print media to one that
is also consistent with our new, online media platforms. As
customer expectations continue to evolve, we expect advertising
revenues to continue to shift from print to online until some level
of balance is reached. We are confident our talented employees will
carry us through this interesting transition period of integrating
our print and online offerings over the next several quarters.�
Commenting on the Company�s revenue trends, Julie A. Beck, Senior
Vice President and Chief Financial Officer said, �We are obviously
disappointed by the contraction of our revenues this past quarter;
however, we are very pleased with the results of our Hyper-Local
online operations, which continued to perform well. During the
first half of this year, we made a significant investment in our
online operations of $7.6 million, and we look forward to
accelerating growth in this business.� Overall Revenue Total
revenues for the quarter ended July 1, 2007 were $120.7 million, as
compared to total revenues of $131.8 million for the second quarter
of 2006, a decrease of 8.5 percent. Advertising Revenue Total
advertising revenues from continuing operations for the second
quarter of 2007 decreased 10.6 percent to $92.7 million, as
compared to $103.6 million for the second quarter of 2006.
Excluding the results of the Company�s Michigan cluster, total
advertising revenues were down 8.8 percent for the second quarter
of 2007. Online Revenue The Company continued to post increases in
online revenues in the second quarter of 2007. Online revenues were
$4.7 million for the quarter, reflecting an increase of 19.7
percent as compared to the second quarter of 2006. The Company�s
Web sites generated 96.3 million page views during the second
quarter, an increase of approximately 10.2 percent as compared to
the prior year quarter. In June, the Company reported 3.6 million
unique visitors to its Web sites. Revenue Performance by Category:
Retail Retail advertising revenues for the second quarter of 2007
decreased 10.8 percent as compared to the prior year quarter with
particular softness in the Company�s Michigan cluster. Retail
advertising revenues for the same period decreased 8.9 percent
excluding the Company�s Michigan cluster. While there were trend
improvements in the home furnishings and dining/entertainment
advertising revenue categories, the financial/insurance and
grocery/food/drugstore categories remained weak. Classified Total
classified advertising revenues decreased 9.2 percent in the second
quarter of 2007 as compared to the prior year quarter. Excluding
the Michigan cluster, total classified advertising revenues were
down 6.7 percent. Classified other revenues, which consists of
private party, legal and obituaries were down 2.5 percent.
Excluding the Michigan cluster, classified other revenues decreased
0.7 percent. Classified employment advertising revenues were down
5.7 percent for the quarter. Excluding the Michigan cluster,
classified employment advertising revenues decreased by 5.6
percent. �We are beginning to see some improvement in classified
employment advertising revenues, particularly in our Greater
Cleveland, Mid-Hudson and Capital-Saratoga clusters,� Ms. Beck
said. Classified auto advertising revenues fell 11.9 percent.
Excluding the Michigan cluster, classified auto advertising
revenues decreased 6.2 percent. Classified real estate advertising
revenues decreased 17.5 percent in the quarter as compared to the
second quarter of last year. Excluding the Michigan cluster,
classified real estate advertising revenues were down 13.8 percent.
National National advertising revenues, which represent
approximately four percent of the Company�s advertising revenues,
fell 19.7 percent for the quarter ended July 1, 2007, as compared
to the prior year quarter. Circulation Circulation revenue trends
continue to improve. Second quarter 2007 results were relatively
flat as compared to the same period last year. Expenses The
Company�s non-newsprint operating expenses were down 4.1 percent,
excluding the second quarter 2006 special charge described above.
Newsprint expense declined 11.7 percent for the quarter, reflecting
a decrease in unit cost of approximately 4.5 percent, and a
decrease in consumption of approximately 7.5 percent. Excluding
online investment, the Company�s non-newsprint operating expenses
decreased 5.5 percent. Taxes The company�s tax expenses for the
second quarter were negatively impacted by the New York State tax
law change described above and non-cash expense accruals required
under FIN-48, �Accounting for Uncertainty in Income Taxes.� Debt
and Interest The Company had $646.4 million of debt, net of cash
balances, outstanding as of July 1, 2007, reflecting a decline of
$79.9 million since December 31, 2006. The Company�s capital
expenditures in the second quarter were $6.6 million, including
$1.5 million in online and $2.0 million for costs in connection
with the new Michigan press and mailroom facility which we
anticipate will be operational in August 2007. In July, the Company
prepaid an additional $10.0 million on the Term A portion on the
Company�s credit agreement, making the next payment due in the
fourth quarter of 2008. The Company�s overall effective interest
rate was 6.3 percent, an increase from last year�s second quarter
rate of 5.7 percent. The Company�s after-tax cost of capital
remains attractive at 3.7 percent. The Company�s second quarter
2007 earnings conference call is scheduled for 10:00 a.m. Eastern
Time today and will be accessible via a live Internet Webcast and a
limited number of listen-only, dial-in conference lines. The live
Webcast can be accessed through Journal Register Company's Web
site, www.JournalRegister.com, and through CCBN's Individual
Investor Center and CCBN's StreetEvents for institutional investors
at www.streetevents.com. Please access the Webcast at least ten
minutes prior to the start of the call to ensure adequate
connection time. An archive of the Webcast will be available at
www.JournalRegister.com for seven days following the call. About
Journal Register Company Journal Register Company is a leading U.S.
media company. Journal Register Company owns 22 daily newspapers
and 346 non-daily publications. Journal Register Company currently
operates 226 individual Web sites that are affiliated with the
Company's daily newspapers, non-daily publications and its network
of employment Web sites. These Web sites can be accessed at
www.JournalRegister.com. All of the Company�s operations are
strategically clustered in six geographic areas: Greater
Philadelphia; Michigan; Connecticut; Greater Cleveland; and the
Capital-Saratoga and Mid-Hudson regions of New York. The Company
owns JobsInTheUS, a network of 19 premier employment Web sites.
Safe-Harbor This release contains forward-looking information about
Journal Register Company that is intended to be covered by the safe
harbor for forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are statements that are not historical facts. These
statements can be identified by the use of forward-looking
terminology such as �believe,� �expect,� �may,� �will,� �should,�
�project,� �plan,� �seek,� �intend,� or �anticipate� or the
negative thereof or comparable terminology, and include discussions
of strategy, financial projections and estimates and their
underlying assumptions, the extent or timing of cost savings,
charges, the extent of employees impacted, and statements about the
future performance, operations, products and services of the
Company. These forward-looking statements involve a number of risks
and uncertainties, which could cause actual results to differ
materially. These risks and uncertainties include, but are not
limited to, the success of the Company's acquisition strategy,
dispositions, the ability of the Company to achieve cost reductions
and integrate acquisitions, competitive pressures including
competition from non-newspaper forms of media , general or regional
economic conditions and advertising trends, the unavailability or a
material increase in the price of newsprint and increases in
interest rates, changes in performance that affect financial
covenant compliance or funds available for borrowing, technological
changes, the adoption of new accounting standards or changes in
accounting standards. These and additional risk factors are
outlined in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The Company
undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events,
or otherwise. In this release, financial measures are presented
both in accordance with United States generally accepted accounting
principles (�GAAP�) and also on a non-GAAP basis. All EBITDA, Free
Cash Flow, Adjusted Net Income and Net Income excluding special
items figures in this release are non-GAAP financial measures.
EBITDA is defined as net income plus provision for income taxes,
net interest expense, depreciation, amortization, and other
non-cash, special or non-recurring charges. Free cash flow is
defined as EBITDA minus capital expenditures, interest and cash
income taxes. Adjusted Net Income excludes the special item that is
described elsewhere in this release. EBITDA Margin is defined as
EBITDA divided by total revenues. The Company believes that the use
of certain non-GAAP financial measures enables the Company and its
investors to evaluate and compare the Company�s results from
operations and cash resources generated from its business in a more
meaningful and consistent manner and provides an analysis of
operating results using the same measures used by the Company�s
chief operating decision makers to measure the performance of the
Company. The emphasis on measures of cash flow is appropriate given
the generally predictable cash flow generated by the Company�s
operations and the short period of time it takes to convert new
orders to cash. Please see the financial summary below for
information reconciling non-GAAP financial measures to comparable
GAAP financial measures. Financial Summary follows. Journal
Register Company Condensed Consolidated Statements of Income
(Unaudited) In thousands, except per share data � Thirteen weeks
Ended Twenty-six weeks Ended July 1, 2007 June 25,2006(1) July
1,2007 June 25,2006(1) � Revenue Advertising $ 92,659 $ 103,617 $
179,012 $ 196,332 Circulation � 22,999 � � 23,104 � � 45,911 � �
46,185 � Newspaper revenues 115,658 126,721 224,923 242,517
Commercial printing and other � 5,028 � � 5,115 � � 9,888 � � 9,611
� Total revenue � 120,686 � � 131,836 � � 234,811 � � 252,128 �
Operating Expenses Salaries and employee benefits 46,910 54,021
94,783 104,947 Newsprint, ink and printing charges 11,441 12,355
23,019 23,813 Selling, general and administrative 18,848 19,066
38,228 37,841 Depreciation and amortization 4,784 4,482 9,371 8,825
Other � 16,609 � � 17,184 � � 32,908 � � 33,479 � Total operating
expenses � 98,592 � � 107,108 � � 198,309 � � 208,905 � Operating
income 22,094 24,728 36,502 43,223 Net interest expense and other
(9,937 ) (10,397 ) (20,993 ) (21,321 ) Write-off of debt issuance
costs � - � � - � � - � � (5,662 ) Income from continuing
operations before income taxes 12,157 14,331 15,509 16,240
Provision for income taxes � 6,637 � � 5,641 � � 8,477 � � 6,391 �
Net income from continuing operations 5,520 8,690 7,032 9,849
Income (Loss) from discontinued operations, net of taxes - 1,088
(86 ) 1,694 Gain on sale of New England properties, net of taxes �
- � � - � � 27,660 � � - � Net income $ 5,520 � $ 9,778 � $ 34,606
� $ 11,543 � � Income per common share (basic) Income from
continuing operations $ 0.14 $ 0.22 $ 0.18 $ 0.25 Income (Loss)
from discontinued operations, net of taxes - 0.03 - 0.04 Gain on
sale of New England properties, net of taxes � - � � - � � 0.70 � �
- � Net income per common share (basic) $ 0.14 � $ 0.25 � $ 0.88 �
$ 0.29 � � Income per common share (diluted) Income from continuing
operations $ 0.14 $ 0.22 $ 0.18 $ 0.25 Income (Loss) from
discontinued operations, net of taxes - 0.03 - 0.04 Gain on sale of
New England properties, net of taxes � - � � - � � 0.70 � � - � Net
income per common share (diluted) $ 0.14 � $ 0.25 � $ 0.88 � $ 0.29
� � Dividends per common share $ 0.02 $ 0.02 $ 0.04 $ 0.04 �
Weighted Average shares outstanding Basic 39,140 39,497 39,134
39,837 Diluted 39,291 39,530 39,231 39,860 Journal Register Company
Condensed Consolidated Statements of Income (Unaudited) In
thousands, except per share data � Thirteen weeks Ended Twenty-six
weeks Ended July 1, 2007 June 25,2006(1) July 1,2007 June
25,2006(1) � Other Data: Net income from continuing operations $
5,520 $ 8,690 $ 7,032 $ 9,849 Add: Provision for income taxes 6,637
5,641 8,477 6,391 Add: Loss on write-off of debt issuance costs - -
- 5,662 Add: Net interest expense and other � 9,937 � 10,397 20,993
� 21,321 � Operating income 22,094 24,728 36,502 43,223 Add:
Depreciation and amortization 4,784 4,482 9,371 8,825 Add: Special
Items � - � 4,078 - � 4,078 � EBITDA 26,878 33,288 45,873 56,126
EBITDA Margin 22.3 % 25.2% 19.5% 22.3 % Less: Capital expenditures
(6,630 ) (6,860) (16,301) (9,968 ) Less: Cash interest expense and
other (9,700 ) (10,159) (20,518) (20,802 ) Less: Cash income taxes
(2) � (591 ) (1,650) (775) � (1,908 ) Free Cash Flow from
continuing operations $ 9,957 $ 14,619 $ 8,279 $ 23,448 Net cash
proceeds from sale of New England cluster operations � - � - 55,532
� - � Adjusted Free Cash Flow $ 9,957 � $ 14,619 $ 63,811 $ 23,448
� � Free Cash Flow per diluted share $ 0.25 $ 0.37 $ 0.21 $ 0.59
Adjusted Free Cash Flow per diluted share $ 0.25 $ 0.37 $ 1.63 $
0.59 � Net income, as reported $ 5,520 $ 9,778 $ 34,606 $ 11,543
Plus: Special items (net of taxes) 979 2,477 979 5,917 Less:
Discontinued operations (net of taxes) � - � (1,088) (27,574) �
(1,694 ) Adjusted net income (3) $ 6,499 � $ 11,167 $ 8,011 $
15,766 � � Notes: (1) 2006 has been revised to show discontinued
operations. Revenues and operating income are from continuing
operations. (2) Cash income taxes represent the application of the
Company's expected current year income tax liability rate to the
income before provision for income taxes for each period presented,
without regard to the actual timing of such payment, reduced by the
benefit of the anticipated utilization of available net operating
loss carry forwards. (3) Adjusted net income excludes the net
effects of the following special items: A $1.0 million charge for a
New York State tax law change in the second quarter of 2007; a $5.7
million charge ($3.4 million net of tax effect) in the first
quarter of 2006 related to the repricing of the Company�s
refinanced credit facility; and a $4.1 million charge ($2.5 million
net of tax effect) in the second quarter of 2006 related to a
non-compete/separation agreement.
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