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Executives

Michael Reed – Chief Executive Officer

Mark Thompson – Chief Financial Officer

Mark Merring – Investor Relations

Analysts

Jaime Neuman – Wachovia Capital Markets

Peter Appert – Goldman Sachs

Sylvia [Jusrask] – Bear Stearns

Leland Westerfield – BMO Capital Markets

GateHouse Media, Inc. (GHS) Q4 2007 Earnings Call March 14, 2008 10:00 AM ET

Operator

Please stand by. We are about to begin.

Good day and welcome to this conference call with GateHouse Media regarding the company’s fourth quarter financial results. This call is being recorded. I will now turn the call over to Mark [Merring]. Please go ahead sir.

Mark [Merring]

Thank you Stacey. Good morning everyone. I would like to welcome all of you to the further quarter 2007 earnings call for GateHouse Media. My name is Mark [Merring]. I will be heading up the Investor Relations function at the company and look forward to meeting and working with all of you.

Joining us today are Mike Reed, our Chief Executive Officer and Mark Thompson, our Chief Financial Officer.

Before I turn this call over to Mike, as Stacey mentioned this call is being recorded. The phone numbers and access code to listen to a replay of this call can be found in our earnings release. This call will also be available via webcast on our website www.GateHouseMedia.com.

I would also like to point out that statements today which are not historical facts may be deemed forward-looking statements. Actual results may differ materially from the estimates or the expectations expressed in those statements. Certain other factors that could cause actual results to differ materially from GateHouse’s expectations are detailed in our SEC reports. I direct you to GateHouse’s earnings release for the full forward-looking statement legend.

During this call we will also do certain non-GAAP financial measures included as adjusted revenue, adjusted EBITDA, as adjusted EBITDA and free cash flow. These measures should not be considered an alternative to any other measure of performance or liquidity derived in accordance with GAAP. A table reconciling net loss income to these measures as well as a description of how GateHouse uses and calculates these measures immediately follows the financial statements included with the press release GateHouse filed this morning.

Now I’d like to turn the call over to Mike Reed. Mike?

Michael Reed

Thanks Mark. Welcome everyone and thanks for joining us on our 2007 full year and fourth quarter earnings call. Before I get started let me take a second to welcome Mark [Merring] who you just heard to GateHouse as our new Vice President of investor relations. Mark has a very strong background in both finance and investor relations. We are delighted to have him on board here at GateHouse.

I am pleased to be able to talk to you this morning about a very good 2007, a strong fourth quarter and a look ahead to 2008. First and foremost, GateHouse has continued to deliver the type of results that validate our strategy of focusing on the hyper local markets and its advertisers. Our top line continues to perform significantly better than the industry.

Full year revenue, for example, on a same store sales basis was down only 2.5%. However, if you exclude our Massachusetts properties, our revenues were essentially flat down on 0.2% significantly better than the near double-digit decline seen in the industry.

Our 2007 acquisitions continue to perform as expected. Synergies are being realized as we expected and were a large contributor to our strong fourth quarter cash flow growth.

Now let me turn to 2007, a year filled with many accomplishments at GateHouse. We completed just over $1 billion in acquisitions, adding $375 million in revenue and $103 million in EBITDA. These are assets that greatly enhance the company’s overall strength and stability through further geographic and advertiser diversity, as well as providing the company with significant operating improvement opportunities.

Un-leveraged cash flow yields on these acquisitions at the time of acquisition were 9.4% and we expect that yield to increase to 10.6% in 2008 despite current economic conditions as we further rationalize these operations.

Our online business was a real bright spot for us last year. For the full year we generated a total of $15.1 million in revenue on a same store sales basis and that represents growth of 48.2% for the year and in fact in Q4 we grew 60.1% with regard to online revenues. While we accomplished a lot in this area in 2007 the good news is we are still in the early innings with regard to execution of our strategy. We fully expect this category to be a very large contributor to growth over the next several years and believe it could contribute up to 7% of total revenues by the end of 2009. That’s up from 2.5% at the end of 2007 and up from 1% at the end of 2006.

Successful execution of our online strategy could transform this business substantially and create a material amount of growth for our company in the future. Two key components to our 2008 online revenue growth will be key partnerships such as ours with Yahoo Hot Jobs and the expansion of our online only sales staff.

We also remain highly focused on growing our local print revenues. During 2007 we were able to launch many successful niche products, as well as conduct several promotions and contests for our sales forces. These initiatives helped contribute to our industry leading revenue performance. We are also excited about the local print revenue prospects for 2008 and have several great initiatives on the table for the upcoming year that we believe will lead to more than $15 million in new revenues.

We also completed a very strong year from a circulation standpoint with revenues increasing 1.9% for the full year of 2007 on the same store sales basis. Circulation revenue also held up very well in the fourth quarter on a same store sales basis with a 2.3% gain.

As adjusted EBITDA for the full year of 2007 was $141 million, which was essentially flat with 2006 on a same store sales basis, no small feat in this current environment we are operating in.

On a pro forma basis, assuming all of the assets we acquired in 2007 were under our management as of January 1, 2007, our as adjusted EBITDA would have been approximately $170 million for the year before synergies and operating improvements yet to be realized.

Our 2007 full year GateHouse revenues were $611.6 million, down 2.5% versus 2006. On a pro forma basis, assuming all of those assets we acquired during 2007 were under our management for the entire year, our revenues would have been approximately $750 million.

Now lets go a drill a little deeper into the fourth quarter results. As adjusted EBITDA in the fourth quarter was $44.2 million, up $1.9 million or a strong 4.4% versus the same period in 2006 on a same store sales basis.

Revenues for the quarter were $77.1 million which were down 3.4% on same store sales basis. Our fourth quarter performance has been significantly better than that of the newspaper industry at large which saw revenues fall on average 8-9% in the fourth quarter.

Preliminary results for January show further deterioration across the industry, down approximately 11% versus January 2007. However, at GateHouse January revenue trends actually improved from the fourth quarter.

Looking forward into 2008 we note that advertising trends in general and in the newspaper industry in particular, especially in the classified category, worsened in the second half of the year, worsened in the fourth quarter and appear to have worsened further in 2008 indicating that we are most likely in an advertising recession. In fact, 84% of GateHouse’s total revenue declines in 2007 were attributable to the classified category.

Having said that we believe that GateHouse will continue to outperform the industry in 2008 for several reasons. One, GateHouse has less exposure to the most volatile revenue categories; that being classifieds and national advertising. Two, our portfolio serves hundreds of small markets and hundreds of thousands of local advertisers across the country. Our business is diverse. We do not have significant exposure to any one market or advertiser. Third, our specific ongoing small market revenue initiatives help. Aggressively pursuing every revenue opportunity is critical for both the short and long-term health of our business. As long as we are not earning 100% of every advertising dollar in the market there is always more we could be doing. That is part of driving a revenue culture.

Lets switch gears a bit and talk about some of the announcements we made this morning. The company recognized a non-cash impairment charge of $231.6 million in the fourth quarter of 2007 due to impairment testing completed at year end triggered by the decline in our share price during the fourth quarter.

This impairment did not result from declining cash flows, nor does it reflect a change in our outlook for cash flows or a change in our view about the quality of our assets. But rather it results from impairment testing rules which dictate that we reconcile our book carrying values to our public market value and consider the current economic environment. This is a non-cash charge that has no impact on current or future cash flows.

We also announced two very important strategic capital management decisions this morning, both approved by our board. First we have set the first quarter dividends at 20 cents per share. Second, we have put in place a $75 million stock repurchase program. We believe that these strategic decisions are important to GateHouse for a number of reasons.

First, we will have access to capital to accretively acquire assets when good opportunities arise, and we do believe they will arise.

Second, we will be able to opportunistically and accretively buy back shares of stock.

Third, we feel it is prudent to have liquidity during these uncertain economic times.

Our best and least expensive source of capital right now is our internally generated cash flow and the reduction in the dividend will allow approximately $45-50 million to be available for these very strategic purchases over the next year. It is important that we continue to be as proactive as possible to position GateHouse to not only weather the current environment, but also to be in a position to grow our free cash flow per share through this cycle.

I believe these decisions will put GateHouse in an even stronger position to grow and provide greater shareholder value over the quarters and years to come.

I would now like to turn the call over to Mark, who will walk you through our financial results in greater detail. Mark?

Mark [Merring]

Thanks Mike.

Fourth quarter as adjusted revenues were $177.1 million, down 3.4% on a same store sales basis from the fourth quarter 2006. Full year as adjusted revenues were $611.6 million, down 2.5% percent on a same store basis from 2006.

Fourth quarter as adjusted advertising revenues were $131.7 million, down 4.7% on a same store sales basis. Full year as adjusted advertising revenues were down 3.9% on a same store sales basis.

The primary driver of our advertising declines was the classified category in 2007. Classified revenues were down 8.8% for the full year and 11.2% for the fourth quarter. Within the classified category weakness was primarily related to the real estate, help wanted and auto categories particularly in our Massachusetts properties.

National advertising, a very small category for us was down $800,000 or 11.8% for the quarter, 5.9% for the year.

Total online revenues which are included in advertising revenues were up $5.4 million for Q4 2007 or 60.1% on a same store sales basis. For the full year, online sales revenues were up 48% on a same store sales basis.

Online revenues are now 2.5% of total revenues, up from 1% in 2006.

Fourth quarter circulation revenues were 35.6, up $800,000 or 2.3% on a same store sales basis. Full year 2007 circulation revenues were up $2.3 million or 1.9% on a same store sales basis.

Our circulation revenue and same store sales gains came primarily from price increases which were modest but we put in price increases in both home delivery as well as single copy rack prices. Paid circulation volumes continued to trend down slightly. Company wide we are down 0.9% at December 31, 2007.

As adjusted EBITDA was $44.2 million for the quarter on a same store basis. We were up $1.9 million or 4.4% driven primarily by cost reductions obtained from the synergies and margin improvements from our 2007 acquisitions. Full year as adjusted EBITDA was $141 million, down 0.7% on a same store basis over the prior year.

We have provided a statement in the press release that shows how we arrived at as adjusted EBITDA. Excluding our corporate costs, full year EBITDA was actually up 2.8%.

Interest expense for the quarter was $21.8 million which is up $11.5 million from the comparable 2006 period. Interest expense for the year was $76.7 million which is up $40.7 million from the comparable 2006. Included in this is $5.2 million of interest on our bridge loan which is repaid from our proceeds from our 501 offering.

The increase in interest costs results from our increased borrowings primarily to fund the $1 billion in acquisitions that we completed in 2007. All of our term debt of $1.195 billion is hedged at year end. Therefore, our ongoing costs associated with this hedged debt are fixed. Our blended interest rate of 6.937% makes our ongoing permanent quarterly interest costs about $20.7 million on our term debt.

Also at year end we had $11 million outstanding on our revolver. Capital expenditures during the quarter were $2.7 million. In addition during the quarter we sold non-strategic assets at $2.6 million, offsetting these capital expenditure charges.

At year end we had $12.1 million of cash on our balance sheet. At the end of the fourth quarter we had 57,857,000 shares outstanding, of which one million were restricted stock grants.

We believe that the proactive decisions that Mike mentioned earlier allow the company to make its balance sheet stronger and position the company to grow in the future leading to greater long-term shareholder value creation.

With respect to our balance sheet, I would like to focus on our credit facility. In May 2007 we closed our 7.5 year credit facility consisting of $1.195 billion term loan and $40 million revolver. This facility is covenant like with only a 6.5 times EBITDA maintenance test for the life of the facility. In addition we have no amortization and therefore no mandatory principal prepayments on this facility until it matures in 2014. We are well within the maintenance tests and without reciting the calculation here the bank EBITDA within the agreement allows for certain add backs and synergies for acquisitions. This is a very attractive and stable financing. We are fortunate that this debt term allowed us to avoid refinancing for the next six years.

Finally, we have hedged all of the term debt for approximately five years and therefore have no cash flow exposure to changing Libor rates.

Considering the assets that we own today, March 14, 2007, we would have generated 2007 full year revenue of $761.4 million. Applying a normalized margin of 24-25% which we expect to achieve that creates an EBITDA of $182.5 to $190 million. All of our term debt is hedged and we would expect interest costs to be approximately $85 million. Capital expenditures and cash taxes are expected to be approximately $9 million.

The vast majority of our acquisitions are also structured as asset purchases. Thereby creating significant step up in basis and give us significant depreciable tax shield for the next 5-6 years. In addition, we have approximately $200 million of NOL’s which further enhance our tax shield.

Projecting the current dividend over the next year we would expect the payout ratio to be in the range of 50-55%. With that I would like to turn it back over to Mike.

Michael Reed

Thanks Mark. Let me recap where I started this morning. Our fourth quarter and 2007 results were solid, especially given the state of the economy. Our uniqueness in our strategy is proving its worth and is being validated with our results.

Our 2007 acquisitions performed up to expectations and the pipeline remains attractive. We believe there will be some very attractive and accretive opportunities over the next year.

The strategic capital management decisions we have made are important. They will allow the company to use internally generated cash flow to accretively acquire good assets to opportunistically and accretively buy back our stock and to prudently maintain liquidity.

If I can leave you with just a couple of thoughts about how our management team is thinking and what our primary objectives are, which are three. They are operations, portfolio optimization and capital management.

What do I mean by that? Operations…we aim to operate our businesses as efficiently as possible, maximizing revenue and cash flow opportunities leading to increases in free cash flow.

Portfolio optimization…we look at potential acquisitions that fit strategically and can be acquired accretively to free cash flow per share. We also review our portfolio to divest of non-core assets such as real estate or businesses that may become a drag on value.

Finally, capital management. We aim to be good stewards of capital and will proactively make decisions with regard to our capital in order to create long-term shareholder value.

With that I would like to open up the line to questions.

Question-And-Answer Session

Thank you. Ladies and gentlemen if you would like to ask a question please press *1 on your touchtone telephone keypad at this time. If you are using a speakerphone we do ask that your mute function is turned off to allow your signal to reach our equipment.

Once again ladies and gentlemen please press *1 at this time for a question.

We’ll go first to John Janedis with Wachovia. Please go ahead.

Jaime Neuman – Wachovia Capital Markets

Hi. This is actually Jaime Neuman for John. Could you give us an update on how the selling of the SureWest] book in [Roseville] went relative to your expectations and how you see the year evolving given comments from others in the industry over the past few weeks?

Michael Reed

Sure. Jaime thanks for the question. Let me start by saying our directories revenue, which is our SureWest operation in Sacramento, California, represents about 2.4% of GateHouse total revenues so its specific performance is really not material to overall GateHouse performance. Having said that, our directories in Sacramento and specifically our [Roseville] book continue to perform well. The 2007 revenues for SureWest were up 4.4% in 2007 over 2006 and we see SureWest revenues and more specifically the [Roseville] book being up 1-2% in 2008 versus 2007 based on the recently completed canvass. The canvas was softer than we had originally anticipated going into it last April due to the economic factors across the country and more specifically in California but the opportunities we had with regard to that acquisition with regard to price increasing power, increasing the size of the sales force, better penetration rates with that increased sales force still allowed us to show growth. So we still remain enthusiastic about that business although our expectations are tempered a little bit.

Jamie Neuman – Wachovia Capital Markets

Okay. Given where the stock is trading what is your timing on the buy back? Do you have an annual target and what is your preference for buy back versus asset purchases?

Michael Reed

Thanks Jaime for that question. We maintain maximum flexibility with regard to the share buy back so that we can do it obviously accretively but also opportunistically. We have to be mindful of our capital and our liquidity position at all times, and we have to be mindful of the acquisition opportunities that come our way as well because those can be not only immediately accretive but also assets that can grow for years to come adding to future years.

So what we will do is on a continuous basis…daily, weekly, monthly review possible transactions that we have in front of us…acquisitions and share buy backs as well as continually monitor our liquidity position so that we can make sure that we are using to the maximum or to the best of our ability our available capital.

Jamie Neuman – Wachovia Capital Markets

Okay. I guess I’ll just ask one more. Talking about Boston, can you talk a little bit about category specifics in that market and what you’re seeing the first quarter versus the fourth quarter in that market specifically?

Michael Reed

We saw revenue declines. The majority of our revenue declines as we said on the call were tied to our Massachusetts properties. In fact, if you eliminated those declines the rest of the company was relatively flat. For the year, our Massachusetts revenues were down about 7.5%. They were down about the equivalent in the fourth quarter…they were down just slightly more in the fourth quarter, 7.6% so we saw a little bit more erosion but not material. The weakness in Massachusetts continues to be the classified category which did weaken further in Q3 and then in Q4. However, in the first two months of this year it seem as though those trends have maybe just gotten slightly worth but again not material, so again we are in that 7.5-8% decline range. So to us it seems like things are stabilizing up there, not getting worse as they did over the first several quarters of 2007.

Jaime categorically the weakness really continues to persist with classifieds. The real estate market is still difficult up there. Existing home sales in Massachusetts are down significantly the last two years. GDP is at an extremely low level in the state of Massachusetts. Foreclosure rates are high. But those are economic conditions we fully expect will improve and the good thing about that is the conversations we are having with our customers – our realtors and our auto dealers, are that they are not spending their money elsewhere. They are just spending less right now. We feel really good about the cyclic nature of these losses being tied to the Massachusetts economy and we feel the economic downturn will turn back and we’ll be poised to capture that growth because the feedback we are getting is it is cyclic and that spending will return to us.

Mark [Merring]

Jaime this is Mark. I will just add one other thing. In the expense management in Boston we have taken a lot of cost on that business so as Mike mentioned when the revenue comes back up the margins will greatly improve there.

Operator

We’ll go next to Peter Appert with Goldman Sachs.

Peter Appert – Goldman Sachs

Thanks. Hey Mike can you give us a little color on how you see the major components of costs playing out in 2008, specifically I’m speaking about the pressure associated with newsprint and in the context of that how are you feeling about the ability to improve margin in 2008 even in the context of this current revenue environment you are seeing?

Michael Reed

Sure. Thanks Peter. With regard to your first question, we are looking for newsprint prices to increase nearly 10%. When you look at the full year of January through December compared with the full year of January to December of 2007 and you average it out we are looking for newsprint pricing to increase about 10%. We are forecasting some slight consumption decline so we would expect our newsprint costs to be up anywhere from 3-5% in 2008.

We expect compensation expense to be down pretty significantly mainly driven by the reduction in staffing we have been able to take at a lot of the acquisitions that we did in 2007. They were significant. We acquired some big assets last year with margins well below 20% and improving those margins to 25% a significant amount of those savings come through compensation. So we expect our compensation expense to be down as much as 6-7% this year, Peter, and our other expenses as well. With the merger last year of about ten press plants we will have significantly less costs that go along with those press rooms, utilities on the buildings and just the general upkeep on just the buildings and the staffing, so we have pretty good cost saving opportunities in other expenses ahead of us in 2008. So, we do feel where revenue conditions are today if they hold or improve as the year goes on we do feel good about our ability to increase margins this year, Peter.

Peter Appert – Goldman Sachs

Great. I may have missed this, but could you give us specifically what the retail number was in the fourth quarter in terms of year-to-year rate of change?

Michael Reed

Our local retail revenues in the fourth quarter were down 3.3% exactly.

Peter Appert – Goldman Sachs

Okay. And can you remind me Mike how big is the Massachusetts cluster as percent of total revenue?

Michael Reed

Our Massachusetts group is about 22% of total revenues.

Peter Appert – Goldman Sachs

Okay. And then any other noteworthy differentials in terms of geographic mix in terms of performance in your clusters?

Michael Reed

Not particularly, Peter. We’re very pleased with the performance with a flattish revenue year across the rest of the company. I think I would highlight where we are really pleased is our performance in the Ohio cluster we received from Copley. The top line has improved rather significantly there. It is a big operation and cash flows have improved really significantly there and we’re really pleased on the plus side with our performance in Ohio.

Peter Appert – Goldman Sachs

And then how…and I know you are going to be opportunistic obviously from an acquisition standpoint. You are freeing up some capital. How should we think about how aggressively you are going to pursue acquisitions in the context of the current economic environment?

Michael Reed

That’s a good question. I think first and foremost we will be most mindful of our liquidity position and making sure we have adequate liquidity. Freeing up this $45-50 million dollars over the next twelve months, free it up over the next twelve months. It is not $50 million today. So we are mindful of that. We are mindful of liquidity. So I think you expect us to review smaller tuck in acquisitions as we do continuously and look for those that are the most accretive where we can have the most success in the future so that we can spend our capital as wisely as we can to maximize its impact or its enhancement to lever free cash flow per share. I think you will see us concentrate more on smaller tuck in acquisitions that we can do very accretively and you would see those kind of throughout the remainder of the year.

Peter Appert – Goldman Sachs

Got it. Great. Thanks Mike.

Operator

We’ll move next to Alexia Quadrani with Bear Stearns. Please go ahead.

Sylvia [Jusrask] – Bear Stearns

Hi actually this is Sylvia [Jusrask] in for Alexia. Most of my questions have been asked but I was wondering if I could just get a recap. For the dividends cut, I am assuming this is for the full year of 2008 at the 20 cents per quarter level?

Michael Reed

No Sylvia, we have set the dividend for the first quarter here at 20 cents.

Sylvia [Jusrask] – Bear Stearns

Okay so it is just for Q1 for now.

Michael Reed

That’s correct.

Sylvia [Jusrask] – Bear Stearns

Okay. And the timing for the buy back is there a time limit? Is that a one-year buy back?

Michael Reed

There is not a time limit. We have retained a lot of flexibility with regard to this so we make sure we spend our capital prudently. We are not limited to a year. It is flexible with regard to timing. It wont be habitual. We wont buy back shares at a certain amount every month or every week or every quarter. It will be opportunistic so we can do it as accretively as possible while continuing to be mindful of our capital and investment opportunity elsewhere as well as maintaining good liquidity.

Sylvia [Jusrask] – Bear Stearns

Is this buy back completely open market or is this looking to buy back fortresses ownership?

Michael Reed

This is open market.

Sylvia [Jusrask] – Bear Stearns

Now that you have some free cash coming up where does that repayment fall in that list of cash usage priorities?

Michael Reed

Sylvia that is a good question. I’m glad you asked it. Thanks for asking. Our credit facility we view is one of our best assets and the cost of that capital is good. The least accretive use of our capital is to pay back that debt facility, that credit facility. Our cash flow will be more deployed through asset acquisitions at valuations there today and buy back based on where our share price is today.

Sylvia [Jusrask] – Bear Stearns

And if I can squeeze in one more, it seems like you are obviously still looking for opportunistic acquisitions. Are you focusing only on smaller, like you said newspaper focused acquisitions, or are you still open to broader local media companies?

Michael Reed

I think we are open to…our focus is local media businesses, small market local media businesses with a bias towards rural markets. But we are not limited to just newspapers so yes our focus continues to be dominant small market local media businesses and we are open to those types of transactions.

Sylvia [Jusrask] – Bear Stearns

Okay and if I can just get one more in. What is the pro forma debt ratio that you guys are operating under right now with your current portfolio?

Michael Reed

With our…

Sylvia [Jusrask] – Bear Stearns

Relative to your covenant at 6.5?

Michael Reed

Relative to our covenant we’ve got cushion approaching 6.5 and for our forecast for the full year we will move that and our goal is to move that down closer to a 6.

Mark [Merring]

Our recently filed certificate Sylvia with the banks based on bank EBITDA, our leverage is 6.1.

Sylvia [Jusrask] – Bear Stearns

Thank you very much.

Operator

As a reminder, ladies and gentlemen please press *1.

We’ll go next to Lee Westerfield with BMO Capital. Please go ahead.

Leland Westerfield – BMO Capital Markets

Thank you. Good morning. Before I turn to my own questions I just want to clarify a few things related to the last call. Dividends of 20 cents in the first quarter…it is not going to be 20 cents for the rest of the year? I’m trying to understand that…is it just simply because the board hasn’t declared a 20 cent dividend? You’re planning on running that at 20 cents per quarter I assume for now?

Michael Reed

Our board reviews the dividend each quarter before we set it. Obviously we don’t see conditions changing materially in the next three months but we need to take each quarter as it comes. The thought process there is we freed up over the next year a significant amount of free cash flow. I can’t tell you exactly what the dividend will be over the next three quarters, but our focus as a company on growing levered free cash flow per share and growing the dividend remains our focus today.

Mark [Merring]

As the comments that I made earlier I think we would expect the next twelve month we are projecting a 20 cent dividend. I think the only thing we are telling you is that it is up to the board each quarter to make that decision but that is part of our cash flow plan.

Leland Westerfield – BMO Capital Markets

Thank you. That clarifies it perfectly. Of course the board has to authorize it before the report is validated. Mark can you outline what in 2008 would be the add backs to EBITDA as we view it on the income statement as equity folks to derive the 180-185 range for as adjusted EBITDA in 2008?

Mark [Merring]

I can give you the nature of those items. They will continue to be the similar type items which are where we have consolidation and one-time severance and reduction in force type items. Those are the type of items that are the add backs in there where we have plans going forward to have consolidation and continue to exploit the clustering opportunities that we have with the acquisitions that we have today.

Leland Westerfield – BMO Capital Markets

And with the major acquisitions that you closed in the second half of 2007 what substantial one-time cost reduction items that would be add backs to EBITDA would remain?

Michael Reed

Lee let me clarify. Your use of add backs is a little different. When we put these synergies in place they become real EBITDA. It is real cash flow. It is not an add back.

Leland Westerfield – BMO Capital Markets

I understand.

Michael Reed

As we put synergies in place our cash flow will grow and as Mark said the highlights are predominantly those savings or improvements to cash flow come from compensation and then from the merger of our back offices in accounting and production in our clusters as we buy assets geographically close to other assets. We did quite a bit of that in 2007 and then finally we found in quite a few cases in 2007 we were able to save money on supplies and newsprint and things of that nature by putting our size and scale in place and buying those things a little bit cheaper than the previous owners were. So that is predominantly where the savings come from as we look out into 2008. Again, we wouldn’t refer to them as add backs, but that is real cash flow improvement opportunities.

Leland Westerfield – BMO Capital Markets

I guess I didn’t ask that question very clearly. A clearer way to put it if one were to calculate EBITDA on the income statement and then work back to the pro forma EBITDA as calculated for bank governing purposes, what would be the substantial differences this year?

Michael Reed

Between bank EBITDA and between our look at EBITDA?

Leland Westerfield – BMO Capital Markets

Yes.

Michael Reed

In the bank EBITDA, and I think Mark mentioned this, we are allowed to use synergies and cash flow improvement opportunities that we know of going in so we are allowed to include those in our calculations.

Leland Westerfield – BMO Capital Markets

Does your range for EBITDA assume pro forma revenue growth this year?

Michael Reed

It does not.

Leland Westerfield – BMO Capital Markets

The final question I have here is the target the share repurchase program extended out over 24 months you would have the…here is the specific question…how do you evaluate the difference between buying back stock on an accretion basis versus making an acquisition on an accretion basis?

Michael Reed

We run the math on both scenarios, Lee, and the specific acquisition opportunity that is on the table when they come on the table we will run the math on those and look at accretion not only in the current year but accretion over the next several years and just weigh that against the immediate accretion on the stock buy back and see what has really the greatest impact on a positive note for the shareholders over the next several years.

Leland Westerfield – BMO Capital Markets

One final question. Recognizing you have enormous favorable term structures to your debt and the account funded over capitalization I think very effectively. Still in 2014 or sooner you will need to refinance. What gives you the confidence that you will be able to refinance at similar rate structures as you have had in the past or do you see an ultimate need to…

Michael Reed

Lee that’s a good question. Not being an economist I’m not sure what the economic environment will look like in 2014. But I do feel that these things all go in cycles and we are obviously in a down cycle right now and the credit markets are extremely difficult but our country has been through these cycles before and it has generally come out and there has been a more normalized credit market that exists. We would anticipate that some time between now and 2013 there will be a more normalized credit market out there. Having said that, we have a significant amount of free cash flow and we expect to continue to grow that and we would expect to be able to de-lever if necessary if credit markets stay in rough shape for an extended period of time with cash flows. Then we’d have to refinance later at lower levels. This business does generate a tremendous amount of cash flow.

Operator

Thank you. Ladies and gentlemen that will conclude today’s question-and-answer session. At this time I would like to return the conference back over for any additional or closing remarks.

Michael Reed

Thank you all for your time this morning. Thanks for listening. We look forward to talking to you again in a couple of months.

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Source: GateHouse Media, Inc. Q4 2007 Earnings Call Transcript
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