Source Interlink Companies, Inc. F4Q08 (Qtr End 01/31/08) Earnings Call Transcript

Apr.15.08 | About: Source Interlink (SORC)

Source Interlink Companies, Inc. (SORC)

April 15, 2008 4:30 pm ET

Executives

Jeff Matika - Brainerd Communicators Inc.

Michael Duckworth - Chairman

Mark Fierman - Chief Financial Officer

Alan Tuchman - Interim Co-Chief Executive Officer

Analysts

James Buckman - Dawson James

Robert Andreotti - [Violin Capital Partners]

Jaime Lester - Soundpost Partners

Ken [Phu] - Private Investor

David Allen - Private Investor

Robert Andrade - Ryland Capital Partners

Operator

Welcome to Source Interlink Company's fiscal 2008 fourth quarter earnings teleconference call. (Operator Instructions) Please note that Source Interlink has posted a supporting slide presentation on the company's website which is available on the Investor Relations page by selecting corporate materials.

At this time, I will turn the conference over to Jeff Matika of Brainerd Communicators to read the forward-looking statements.

Jeff Matika-Brainerd Communicators Inc.

I'd like to remind everyone on the call today that the call and the corresponding presentation contains certain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934 and the US Private Securities Litigation Reform Act of 1995 including statements relating to among other things acquisition related cost savings, future business plans, strategies, and financial results and growth opportunities.

These forward-looking statements reflects Source Interlink's current views about future events and are subject to risks, uncertainties, assumptions, and changes and circumstances that may cause future events, achievements or results to differ materially from those expressed by the forward-looking statements.

Factors that may cause actual results to differ include adverse trends and advertising spending, interest rate volatility and the consequences of significantly increased debt obligations, price volatility in fuel, paper, and other raw materials used in our businesses, market acceptance of and continuing retail demand for physical copies of magazines, books, DVDs, CDs, and other home entertainment products, our ability to realize additional operating efficiencies, cost savings, and other benefits from recent acquisitions and evolving markets for entertainment media, the ability to obtain product in sufficient quantities, adverse changes in general economic or market conditions, the ability to attract and retain employees, intense competition in the market place and other events and other important factors disclosed previously and from time to time in Source Interlink's filings with the Securities and Exchange Commission including its annual report on Form 10-K filed with the SEC today, April 15, 2008.

In addition, the company presents financial results on a GAAP and non-GAAP basis. The non-GAAP presentation is intended to reflect the manner in which management views the business which for example eliminates certain non-cash items such as amortization of intangible assets resulting from acquisitions, non-cash income taxes as well as certain costs related to consolidating and integrating acquisitions. For a detailed review of the company's quarterly and full year results as well as a reconciliation of our GAAP and adjusted results, please refer to the press release issued earlier today and the reconciliations posted on the company website at www.sourceinterlink.com.

The company does not intend and disclaims any duty or obligation to update or revise any forward-looking statements or industry information set forth in this presentation to reflect new information future events or otherwise. With that, I will turn the call over to Source Interlink's Chairman, Mike Duckworth.

Michael Duckworth

Thank you for joining us on Source Interlink's fourth quarter earnings call. After my opening remarks, Mark Fierman, our CFO, will review our financial results, and joining us on the call for Q&A are Jim Gillis and Alan Tuchman, our Co-Chief Executive Officers, and Steve Parr, the president of Source Interlink Media.

Fiscal 2008 was a great year for Source on many levels. We delivered improved, year-over-year financial results despite a challenging economic environment. We diversified our company into content ownership online and in print, providing a platform for future top-line growth and margin expansion, and we continue to successfully execute our strategy in our fulfillment businesses where we are building share, streamlining operations, and driving the benefit of scale for the bottom line.

Highlighting our financial results for the full year, we are pleased to have delivered revenue above our guidance and EBITDA near the midpoint of our range. For the full year ended January 31, 2008, we reported revenues of approximately $2.3 billion, a 23.4% increase over last year and above our guidance of between $2.1 and $2.2 billion.

In the same period, our adjusted EBITDA increased 84.8% to $132.1 million from $71.5 million last year. Legacy Source adjusted EBITDA of $82.4 million hit the midpoint of our guidance of $80 to $85 million and since 12 month EBITDA at $110 million was also consistent with our guidance and excludes $5.4 million of realized synergies.

In the fourth quarter, our revenue of $706.4 million was up 47.3% as compared to the prior year. This revenue increase was driven by the impact of Source Interlink Media which met expectation and experienced continued growth in its digital platforms, a key component to our media-neutral approach to readers and to advertisers.

Our DVD and CD division delivered year-over-year revenue improvement of 5.1% as we expanded our market share by leveraging our multiple service offerings and the value derived from the depth of our music and movie catalog. Our Magazine Fulfillment division also contributed significantly as we continue to see the benefits of integrating the businesses we have previously acquired.

Fourth quarter adjusted EBITDA increased 110.5% year-over-year to $48.6 million and we continue to rationalize our infrastructure and integrate both fulfillment businesses as well as Source Interlink media.

Now let me provide a bit more detail on our three major segments starting with magazine fulfillment. The magazine fulfillment division saw a revenue increase in the fourth quarter of 45.6% despite increasing in volatility at the newsstand.

EBITDA for the division during the fourth quarter increased $4.4 million or 73.3%. For the full year, revenue increased 17.4% to $950.3 million and EBITA grew almost 61% to $34.9 million. Our EBITDA margin improved to 3.1% from 2.3% as we begin to see the results from the continued integration of previously acquired assets and the ongoing rationalization of our infrastructure.

Key wins in this division included discount drugs in Ohio, and Marsh supermarkets in Indiana as well as the expansion of our services to CBS pharmacy stores in Arizona and to Costco stores throughout the country. Our End Store division had several wins as well, including major picture orders from Home Depot, Super Value, and Kroger and as a result Source Interlink manufacturing is well positioned for a strong performance this year.

We also expect continued growth from our international business by opening new channels of retail distribution for our imported publications while broadening our publisher base. This is an increasingly important business segment for Source as the higher cover prices of these international titles generate an attractive per-unit contribution.

On the cost side, the consolidation of our magazine distribution centers continues. We are eliminating redundancy and further reducing costs by integrating our two distinct distribution systems. This will allow us to service our specialty and mass market accounts with one inventory pool from the same logistics network without any compromise in quality. We took the first major step in this integration earlier this year when we consolidated existing facilities in Minnesota and n the city of Chicago into a new facility in the suburbs of Chicago.

Moving to our DVD and CD business, we continue to out perform the industry. Recent customer wins continue to validate our strategy in this business as more retailers seek to outsource their product ad service needs to stores.

The fourth quarter is typically our strongest for the division and this year was no exception. Net revenue for the quarter increased 11.5% compared to the prior year. DVD revenue growth was strong and we continue to significantly out perform the industry in music. EBITDA for the quarter was up approximately $530,000 or 2.8% compared to the prior year, despite a continued mix shift towards lower margin DVDs.

Full-year DVD net revenue is up approximately 21.8% against an industry that was down 2% for the same period. Looking forward, we are pleased to have a resolution on the DVD format and we are starting to see sales respond as the industry coalesces around the Blu-ray standard. As adoption of Blu-ray increases, we believe our DVD business will benefit accordingly.

We held our full-year revenue from CDs to a modest 6.6% decrease versus an overall industry decline of more than 18%. We continue to grow our business by adding new customers and expanding our existing relationship. The DVD and game segments of our business are growing and there is opportunity in managing the tail of the CD business. We believe more retailers will look to out-source their CD business as the volatility in music continues. This creates a tremendous opportunity for Source and we are taking full advantage of it.

Internet fulfillment is proving to be an avenue of growth for us as well. More and more of our products are moving from traditional brick and mortar distribution channels to the Internet. As the distributor to almost every major Internet retailer, our market share online improved again this year. Our E-commerce offerings are expanding as the number of sites we serve is up 28% over the prior year.

Looking ahead to fiscal 2009, our growth initiatives for the DVD and CD division include the expansion of our video games business, which is now the fastest growing segment in the industry, the launch of an expanded program to import CDs for sale into the US and the continued growth of our In Circle Division, as a result of expanding it's catalog of licensed titles and increasing it's penetration at retail.

Source Interlink Media also performed well in the fourth quarter. Our digital platform posted a 63% increase in online advertising. This growth was offset by a challenging advertising environment in print, leading to a revenue decline of 2% from the comparable period last year. EBITDA decreased 700,000 or 3% from the same quarter last year, due to both top-line impact and increased costs for paper, ink and delivery, factors affecting the entire publishing industry. We continue to invest in our digital platform to exploit the outstanding growth prospects in online. Through continued investment in product development, we increased the number of unique visitors by approximately 17% this year and we grew revenue by 25% over the last 12 months.

At the newsstand, we are increasing retail cover prices on a number of our titles in order to offset the higher manufacturing and delivery costs. While there is always concern for sell-through when cover prices are increased, we do not anticipate any significant deterioration in sales. We are the market leader in our categories and our unique and targeted content is highly valued by our audience. In addition, we are also testing modest increases in subscription prices in an effort to improve overall circulation economic, while still delivering exceptional value to our readers.

As part of our culture of continuous cost reduction, we reduced headcount by over 12% in the last 12 months. We also implemented additional cost reduction initiatives in consumer marketing and in general overhead. Our objective is to stay ahead of the weakening economy. Source Interlink Media continues to execute on its plan in the following areas:

In fiscal 2008, we reduced Draw by 10.8 million copies, excluding acquisitions and launches and we will reduce Draw by an additional $7.4 million copies in fiscal 2009. We have offset approximately 60% of the increases in paper costs through Draw, reductions and changes to product specifications, including trim size and paper style. We launched six new titles in fiscal 2008 and increased frequency on 17 titles. For fiscal 2009, we plan to launch seven new titles and increase frequency on 11 titles.

We are working diligently to better integrate our online and our print properties in the key areas of sales and marketing and content creation, by hiring additional digital focus staff, implementing automates sales force and content management systems and improving training of our existing staff. We have substantially completed the migration of our automotive online properties to a much more robust technology platform and are now focused on providing the user with a more enriched experience through more timely content and more enhanced features in order to drive traffic.

Before turning the call over to Mark Fierman, I would like to provide financial guidance for fiscal 2009. We anticipate full-year revenue of between $2.4 and $2.5 billion and adjusted combined EBITDA of between $190 and $200 million. These numbers include achievement of all targeted synergies through the balance of the fiscal year.

Taking into account the significant investment we are making this year in our digital platform and in our Fulfillment infrastructure, we anticipate our business will generate free cash flow in the range of $30 to $45 million. Adjusted EPS under these assumptions will range from $0.87 to $1.06.

While the overall economy is uncertain, we believe we are well positioned to navigate this environment as we continue to execute on our strategy of consolidating market share, rationalizing our infrastructure, and continuing our migration into higher margin content. We believe Source has a unique opportunity to capitalize on the changes in media and content distribution, particularly with our digital platform, and we look forward to reporting on our progress throughout this year.

I'll turn the call over to Mark Fierman, our CFO.

Mark Fierman

I will be providing a review of fourth quarter and full-year consolidated operating results for both the Company and our major operating segments. I will also comment on certain cash flow and balance sheet items.

We've also prepared a slide presentation that corresponds with our comments that can be accessed on the Investor Relations section of our website.

On a consolidated basis prior-year periods only include Legacy Source, the reporting segments in place prior to the Source Interlink Media acquisition on August 1, 2007.

Please note that our release and slide presentation provide some insight into SIMs historical revenue and EBITDA as a stand-alone entity in the comparable periods.

Consolidated fourth quarter adjusted revenue increased 47.3% to $706 million, of which $121 million came from the SIM acquisition. The Legacy Source fourth quarter revenue increased 23.5% to $592 million. Revenue in our Magazine Fulfillment segment increased 45.5% to $246 million, due in part to new business, as well as the prior year impact of a significant customer converting to stand based trading.

In our DVD/CD segment, revenue was up 11.5% due to the ramp up of a new customer. In Q4 DVD revenue grew 33.9% to $183 million and CD revenues decreased 7.1% to $144 million as compared to the prior year. For the full year, adjusted revenue on a consolidated basis was up 23.4% to $2 billion, $156 million of which $255 million came from six months of SIM.

Full year revenue for Legacy Source increased 10.2% to $2 billion $15 million. Annual revenue for the Magazine Fulfillment segment was up 17.4% or $140 million to $950 million. Approximately $39 million of the increase was due to the prior year containing only ten months of revenue from the Anderson acquisitions. Revenue at our DVD/CD segment grew 5.1% to $1 billion 21 million. DVD revenue increased 21.8% to $511 million partially offset by a CD revenue decline of 6.6% to $491 million.

Consolidated adjusted EBITDA in the fourth quarter grew 110.5% to $48.6 million, of which $19.7 million came from SIM. Full year consolidated adjusted EBITDA increased 84.7% to $132.1 million, of which $49.7 million came from six-months of SIM. Legacy Source Q4 adjusted EBITDA increased 25.1% to $28.9 million and for the full year was up 15.2% to $82.4 million. Q4 adjusted EBITDA for Magazine Fulfillment increased 73.3% to $10.4 million and for the year was up 60.7% to $34.9 million.

Q4 adjusted EBITDA for the DVD/CD segment was up 3.3% to $19.6 million but for the year declined 4.1% to $51.8 million. During the fourth quarter, the company generated free cash flow of $6.9 million and free cash flow for the full year was $49.7 million. We define free cash flow as follows.

Cash provided by operating activities as shown in our GAAP financial statements, less CapEx, and also included is the net effect of cash collections and disbursements related to our RDA Advance Pay Program.

CapEx for Q4 and the year were $9.6 million and $30 million, respectively. Depreciation was $5.7 million in Q4 and approximately $18.9 million for the full year.

Adjusted interest expense net of interest income was $32.8 million and that excludes approximately $2.3 million in non-cash amortization of bridge loan fees. Q4 consolidated adjusted income from continuing operations were $10.3 million compared to $9.3 million last year and for the full year $33.8 million compared to $27.4 million last year. Q4 adjusted earnings per share from continuing operations of $0.20 compared to $0.18 last year and full year adjusted earnings per share total $0.64 compared to $0.52 cents last year.

On a GAAP basis the company reported a loss from continuing operations of $27.4 million or $0.52 per share in Q4 compared to a loss of $36.4 million at $0.69 per share last year. Both years were impacted by non-cash impairments of goodwill and intangible assets. In the current years fourth quarter the DVD/CD segment recorded a $35.3 million non-cash intangible asset impairment charge related to its customer list.

I will further discuss the current year’s impairments towards the end of my remarks.

On a full year GAAP basis from continuing operations the company reported a loss of $26.2 million or $0.50 a share compared to a similar amount last year.

Some balance sheet highlights as of January 31, 2008, are cash on hand, $35.7 million, average cash balanced during the fourth quarter was $20.6 million, our revolving loan facility was undrawn, and we had approximately $280 million of access availability on the line. The average monthly revolver balance during the fourth quarter was $19.9 million. Our total debt is $1 billion 375 million, over which half is currently at a fixed interest rate.

I will now update cost savings progress.

As discussed previously, at the beginning of fiscal year 2008, the company expected the magazine fulfillment segment to achieve approximately $18 million of additional cost savings over a three-year period related to the continued integration of our magazine distribution network. In fiscal year 2008 we recognized approximately $8.9 million and expect to recognize approximately $4 million in fiscal year ‘09 with the balance in fiscal year 2010. As it relates to the acquisition of the SIM businesses, the company expected to achieve $18 million in cost savings within 12 months on an annualized basis and $5 million of cost savings on the first six months. We have exceeded this goal as of January 31, 2008 and recognized approximately $5.4 million of cost savings which equates to about $14 million on an annualized basis.

I will now provide some additional details to the fiscal year 2009 expected free cash flow of $30 to $45 million that might provide it. Our guidance is based on the following assumptions: $190 to $200 million of projected adjusted EBIDTA; cash interest payments of between $107 to $112 million; cash tax payments of approximately $2 million; $39 million of CapEx and one-time costs of approximately $7 million related to integration and relocation of distribution facilities not included in our adjusted EBITDA.

Our fiscal year 2009 CapEx budget is approximately $39 million. As Mike stated earlier, it includes approximately $14 million of investments in our digital media business and in the consolidation of distribution facilities. These investments are expected to enable the company to grow our digital media business and to achieve future cost savings in our distribution businesses. We would expect it to come down significantly next year.

Before I finish, I would like to add some color to the $35.3 million non-cash impairment charge related to the DVD/CD segment. The charge relates to the write-down of amortizable, intangible assets, specifically the acquired customer list. The fair value of some of those original customers from 2005 has been determined to be less today than their carrying value reflected on our books.

However, while the value of these older customer lists has been diminished, we continue to add new customers who are not included in the intangible asset calculations and who increasingly are driving the sales and performance of the DVD/CD segments. In other words, while the write-off reflects the diminished value of the acquired customer base, it does not take into account what is today a larger business being supported by new customers.

One final note concerning the guidance that Mike provided, beginning of fiscal 2009 and effective February 1, 2008, the company will be reporting results for four segments: Periodical Fulfillment Services, DVD/CD Fulfillment, Source Interlink Media, and Shared Service. The newly named Periodical Fulfillment Services segment encompasses what was previously called Magazine Fulfillment and In Store Services. The change requires no other structural or accounting changes since operationally, Magazine Fulfillment and the In Store segments were already functioning as a single unit under the same management structure.

I will now open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from James Buckman - Dawson James.

James Buckman - Dawson James

With regard to your, the debt that you have, $1.375 billion. Do you intend on paying any of that down in the coming 12 months?

Michael Duckworth

Beyond the investments that we're making in our existing business under the CapEx that we described in the call, we really don't have a lot of other places that we could put that debt other than to apply it to debt repayment under the terms of our credit agreement. So I would expect that to the extent we have excess cash, we will be paying down debt.

James Buckman - Dawson James

Do you have any goal, any parameters, ballpark, that you might see it come off a little bit?

Michael Duckworth

In terms of how much we would reduce the debt?

James Buckman - Dawson James

Yes, yes. Obviously your business is very good; the only overhang that you seem to have is the debt.

Michael Duckworth

I said that and to the extent that we don't find other opportunities to invest in things that generate significant returns or justifiable returns, I would expect us to be applying our excess cash to the reduction of debt.

Operator

Our next question is from Robert Andreotti - [Violin Capital Partners].

Robert Andreotti - [Violin Capital Partners]

A few questions, the first one is you mentioned that about half the 1.375 debt, if I misheard please correct me, is at a fixed rate, when I thought that based on the slide it floated with LIBOR, is there something different there or?

Michael Duckworth

Yes, our high yield ultimately is currently floating, but at the end of the 12-month period it will lock in, it's capped at 11.25%. Then most recently we entered into some interest rate protection with one of our lending institutions to lock in LIBOR at 210 million, to lock in LIBOR at about 3.1%. So slightly over half of our total debt is now fixed.

Robert Andreotti - [Violin Capital Partners]

Just so I'm clear, so you locked in 210 million of LIBOR, or a turn around of the debt at LIBOR 3.1, and then the rest you're talking about the bridge facility of 465 which would be locked at 11.25, is that about accurate?

Michael Duckworth

That's correct, at the end of 12 months from August 1.

Robert Andreotti - [Violin Capital Partners]

Have you already paid; I think you also have to pay a fee once you convert this into permanent to Citigroup? Has that already been paid and are we already moving forward with that, or do we have to wait actually until August 1 again?

Michael Duckworth

That fee has not yet been paid, and we would expect that it would be paid sometime between now and August 1, depending on circumstances.

Mark Fierman

Or when we convert.

Michael Duckworth

When we convert

Mark Fierman

Or take out the bridge with permanent financing...

Robert Andreotti - [Violin Capital Partners]

And that's at our option or Citibank's option or, it doesn’t matter?

Mark Fierman

No. It really doesn't matter. If Citi can ultimately place the debt, it would convert at that time. We can at the end of 12 months, than it could convert and we’d take it.

Robert Andreotti - [Violin Capital Partners]

Then secondly on the CapEx, it's $39. You mentioned $14 million was with digital media. Is that a one time in nature or is that something that we expect recurrent? I know you also mentioned that it would come down significantly, but just wanted to kind of gauge the...

Michael Duckworth

Yes, the two components of that, the investment and the fulfillment infrastructure I think is really look at, more of a one-time event. I think the investment on digital side; I would expect it to continue if the prospects for that business continue as we see them today. They're very significant and it is a major component of our strategy to remain, I’d say what we're calling media neutral as we watch the advertising community, require essentially, folks like ourselves to be both in print and in digital.

The good news for us is we are in both and we expect to remain in both to be able to take advantage of, you know wherever the advertiser wants to go we're going to be in that place. So, I think there will be continue investments there.

Robert Andreotti - [Violin Capital Partners]

So to clarify, of the 14 million how much is one-time, in your mind, at least currently versus if it continues to grow and then we'll continue to invest in it?

Michael Duckworth

I think if you look at where...

Robert Andreotti - [Violin Capital Partners]

I'm just trying to get a maintenance kind of...

Michael Duckworth

Right, okay, that's where I was going to head, Robert. If you're trying to get to a maintenance number, I would argue more on a continuous investment kind of number. We're probably closer to the $25 million, 28...

Robert Andreotti - [Violin Capital Partners]

25, okay.

Michael Duckworth

And on a maintenance basis, which is where you're really battening down the hatches, I think that number is probably $15 to $18 million.

Robert Andreotti - [Violin Capital Partners]

On the synergies left, can you just; you kind of went through it quickly. What do you have left and what's embedded in the 2009 guidance and then what, is there anything left for 2010 and beyond I guess?

Michael Duckworth

Mark, you want to go through that?

Mark Fierman

There's two pieces to it; on the magazine side, what we had said was there was $18 million over a 36-month period; approximately 9 million has been achieved through fiscal 2008; we expect another 4 next year, that's included in the guidance we just gave and the balance in fiscal 2010.

And, on the SIM side, we said that we originally laid out $18 million, we achieved $5.4 million of actual synergies that equate to approximately $14 million on an annualized basis. That $14 million of annualized cost savings are also built into the guidance we just gave.

Robert Andreotti - [Violin Capital Partners]

All right so roughly you have maybe nine left for 2010.

Mark Fierman

Yes, that’s correct.

Robert Andreotti - [Violin Capital Partners]

If my math is perfect maybe.

Mark Fierman

Yes.

Operator

Our next question is from Jaime Lester - Soundpost Partners.

Jaime Lester - Soundpost Partners

Two questions, is there any way to quantify Blu-ray in terms of how meaningful that could be to results and how much of that will the margin structure be, would it be any different than the old DVDs? How much is cannibalization versus incremental, that sort of thing?

Alan Tuchman

Sure first of all on the Blu-ray, there is about a $10 spread at the retail so the gross dollars are going to be larger than DVD is today. I think now we are first starting to see the emergence of the blue ray at retail. Retail is first starting to create section for Blu-ray, so I think by the end of the year, it will become material, I mean the early percents that we’re seeing increase is anywhere from 100 to 150% above what we had before they had decided which technology was going to win. So I think it’s too early to…

Jaime Lester - Soundpost Partners

That’s off probably a meaningless number, right?

Alan Tuchman

Yes. I mean it’s too early to be able to pinpoint what the number is going to be at the end of the year. It’s how the consumer behaves right now and how the build-up is towards Christmas. But, the encouraging thing is that all the retailers right now are creating space for Blu-ray.

Michael Duckworth

I think clearly this is not going to be an overnight phenomenon. The good news is that it should have some legs for some period of time. First obviously you’ve got to get people to go out and replace their DVD player, get a new one, and then ultimately begin to build up their library. So I think it’s something that we’ll continue to be talking about on our calls as we go forward.

Jaime Lester - Soundpost Partners

Then can you remind me the kind of the window or the appetite for management to buy stock at these levels?

Michael Duckworth

The window…

Jaime Lester - Soundpost Partners

Well does a window open up in a day and there is no reason?

Michael Duckworth

The window opens up on the second trading day following this conference call, so what’s today, Tuesday, so Thursday morning is the window. In terms of anybody’s appetite, I can only tell you that people continue to ask our general counsel when the window opens, whether they will act upon that or not I really can’t speculate.

Operator

Our next question is from Ken Phu a private investor.

Ken [Phu] - private investor

My question is, with the short interest currently one of the highest on NASDAQ, on the basis of days to cover and with all of your analyst coverage loss last year and presumably little or no institutional road shows or investment conference participation this past quarter. My question is what is your future strategy to restore shareholder value and to create some buying interest in the stock?

Mark Fierman

I think a couple of things, obviously through the greater part of last year we were focused on a strategical alternatives process. We then towards the end of the year obviously and through the end of this last year made a significant acquisition to our business, really doubling the size of our EBITDA and getting into a new business. And we are in the process; close to the end here of really fully integrating that business, so clearly we’ve been focused on that.

I think the last thing or the next thing as I look at it was, what we needed to do was deliver and to provide a string of quarters of meeting expectations and I think we’ve done a pretty good job at that, this being fourth quarter, consecutive quarter of delivering numbers within our guidance. So, that’s where we have been focused historically and obviously a lot to do there as we move forward.

I am probably as frustrated as anybody is with our stock price. I don’t think it reflects our value and we do need to get out and begin to tell our story more. Clearly we’ve suffered a little bit of pain here from what’s gone on in the financial community.

I think one of our analysts was let go, I think another one of our firms that was covering us sold their institutional business and so that went away, and then I think the last individual that I thought did a pretty good job in covering us, you know he covered distribution companies and as we transformed our company to really more than half of our business coming from the content side, it really fell out of his bailey wick.

So, I think you’re right in your analysis. We need to get out there and get folks from the publishing side to begin to look at our business, understand our strategy, but in the mean time we’re really focused on execution and just delivering our numbers.

Operator

We do a question from David Allen, a private investor.

David Allen - private investor

The first question is related to the way our stock has been treated in the market and I have this sort of internal feeling that our slow reporting process, not reporting, you know here we are April 15 and we're finally reporting. I felt like that had a downward pressure. Why do we wait so long to report?

Alan Tuchman

I asked that same question when I got here a year and a half ago, and part of the reason is because our products are returnable, you have to put the product out on the shelf, let it go through its product life cycle and then you have to deal with the returns, specifically on the magazine side, magazine distribution fulfillment side, so it takes a bit of time to do that.

Having said that, we are making a number of changes within our own shop on the finance side with a project that we call Project Jericho, which will enable us to get better access to data on a more timely basis and hopefully close our books a lot sooner. Having said that, because of that returns issue, I don't expect that we're going to cut a month off of this thing by any stretch, but we are trying to move more quickly to close our books. But, that's really the biggest issue in terms of the time it takes to close.

David Allen - private investor

My thought is, if there was some way to communicate that it might be helpful. I wasn't aware, I wasn't fully realizing what you were up against and maybe if there's some way to communicate that to the Street, it would be helpful; so, I don't know if that could be done or not. That was question number one. The second question I had to follow up in a different category was related to the guidance of this $0.87 to $1.06 for the next fiscal year. Did I hear that correctly?

Alan Tuchman

That is correct, David.

David Allen - private investor

Is that actual earnings per share?

Alan Tuchman

That's adjusted EPS.

David Allen - private investor

Could you tell me a little bit more about the adjusted? Does that mean that that would be our target or our guidance, that the company could do that well in this next fiscal year?

Mark Fierman

Yes. Well basically the adjusted EPS that even our former analysts carry, kind of followed the same definition that we're using in this, which is we eliminate certain items, certain non-cash items and certain one time items. We also utilize our cash tax rate as opposed to the statutory rate, not inconsistent with what we've been doing over the last three to four years. So, it is consistent in the way we've measured it. I guess if you look at the release from today or any of the handouts that are on our website, there is a full list of the adjustments to GAAP that we utilize in calculating adjusted financial results.

David Allen - private investor

This guidance of $0.87 to $1.06, that’s our guidance after any adjustments might be needed, is that correct

Alan Tuchman

Again, it’s as how we’ve reported consistently for the last several years and it’s after some of the one time items that Mark talked about, we back out, that are listed on the website in some of the details there. I think it’s consistent for comparative purposes, I think it’s consistent with how the industry looks at it. I think that’s about as much detail as I guess I can make clear here.

David Allen - private investor

Would that be comparable to what I think I heard you talked about the $0.50 for this past year?

Mark Fierman

I think the $0.50 was our GAAP loss and it is not comparable to the GAAP loss.

Alan Tuchman

I think we get, for the full year; we gave adjusted EPS of $0.64. That would be the equivalent number.

David Allen - private investor

Okay, so our guidance is really substantially above last year than.

Alan Tuchman

That’s correct.

Operator

Our next question is from Robert Andrade - Ryland Capital Partners.

Robert Andrade - Ryland Capital Partners

I was wondering, under what terms or at what point does the debt facility allow you, the company itself, to buy back stock?

Alan Tuchman

Basically, under the terms of the agreement, we don’t have any room to buy out stock as the company.

Robert Andrade - Ryland Capital Partners

So there is no restricted, paying it back or something there?

Alan Tuchman

There’s a de minimis basket, there really is.

Michael Duckworth

Thank you all for joining us on this call. We look forward to our next call in June. Take care.

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