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Morris Publishing Announces 2008 Second-Quarter Results

Morris Publishing Announces 2008 Second-Quarter Results

AUGUSTA, GA August 13, 2008 Morris Publishing Group, LLC today reported second -quarter operating income of $8.6 million, down $7.5 million, or 46.8%, from $16.2 million for the same period in 2007. Total operating revenue was $82.2 million, down $13.4 million, or 14.0%, and total operating cost was $73.6 million, down $5.9 million, or 7.4%.

Total advertising revenue was $65.2 million, down $13.5 million, or 17.2%, with retail down 12.4%; classified down 24.6%; and national down 4.4%. Circulation revenue was $14.8 million, up $0.4 million, or 2.9%, from 2007, due to home delivery price increases and a change in the way we sell home delivery subscriptions in Florida. Other income was $2.2 million, down $0.3 million, or 11.4%.

For the second quarter, labor and employee benefits costs were $33.6 million, down $3.3 million, or 9.1%; newsprint, ink and supplement cost was $9.7 million down $0.3 million, or 3.0%; depreciation and amortization expense was $ 3.5 million, down $0.9 million, or 19.8%; and other operating costs were $26.8 million, down $1.4 million, or 4.8%.

Interest and loan amortization expense totaled $6.9 million, down $2.6 million from $9.4 million last year. At the end of the second quarter, the Company had $417.1 million in outstanding debt compared to $522.0 million at the end of the same period last year.

Income from continuing operations was $2.0 million, down $2.0 million from $4.0 million during the second quarter last year. Income from discontinued operations was $0.9 million during the second quarter last year.

Commenting on the results, William S. Morris IV, Morris Publishing Group's chief executive officer and president, said, "Our advertising revenue results continued to be affected by the weak economy and the secular trends impacting our industry.

"During the quarter, our print advertising revenue was down 19.6%, with declines in all categories. Online advertising revenue was up 2.2%, compared to a 20.9% increase last year. Excluding the employment online category, our online advertising revenue was up 13.7%. "

"Our cost structure benefited from a 9% reduction in head count, with salaries and wages down $2.0 million, or 7.6%. In addition, our second largest expense category, newsprint, was up slightly, with a 27.6% increase in the average cost per ton being offset by reduced consumption."

For the first six months, operating income was $16.2 million, down $10.6 million, or 39.4%, from $26.8 million in 2007. Total operating revenue was $164.9 million, down $22.6 million, or 12.0%, and total operating cost was $148.7 million, down $11.9 million, or 7.4%.

Advertising revenue was $130.5 million, down $23.3 million, or 15.1%, with retail down 10.4%; classified down 21.8%; and national down 6.8%. Circulation revenue was $29.5 million, up $0.9 million, or 3.2%.

For the first six months, labor and employee benefits costs were $68.0 million, down $5.7 million, or 7.7%; newsprint, ink and supplement cost was $18.8 million, down $2.3 million, or 10.8%; depreciation and amortization expense was $7.0 million, down $2.1 million, or 22.8%; and other operating costs were $54.9 million, down $1.9 million, or 3.4%.

Interest and loan amortization expense totaled $14.9 million, down $3.9 million from the first six months last year.

Including the $9.3 million in pre-tax gain on the repurchases of $21.5 million in senior subordinated debt, income from continuing operations for the first six months was $7.6 million, up $2.9 million from $4.8 million last year. Income from discontinued operations was $1.0 million during the first six months last year.

About Morris Publishing
Morris Publishing Group, LLC is a wholly owned subsidiary of Morris Communications Company, LLC, a privately held media company based in Augusta, Ga. Morris Publishing currently owns and operates 13 daily newspapers as well as nondaily newspapers, city magazines and free community publications in the Southeast, Midwest, Southwest and Alaska. For more information, visit our Web site, morris.com.

A conference call will be held Wednesday, August 13, 2008, at 10:00 a.m. Eastern Time. In order to participate, please call 1-888-677-5720 ten (10) minutes prior to the scheduled start. The pass code and leader's name listed below will be required to join the conference call:

LEADER: MR. STEVE STONE
PASS CODE: MORRIS PUBLI

To access the Audio Replay of this call, all parties can:
1. Go to the URL: https://e-meetings.verizonbusiness.com
2. Choose Audio Streaming under Join Events
3. Enter the conference number and pass code.
PASS CODE: MORRIS PUBLI
CONFERENCE NUMBER: 2522133

Replays of the conference call are available for 30 days after the live event at the URL link.

For Further information, please contact:
Craig Mitchell
Senior Vice President of Finance
Morris Communications Company, LLC
706-823-3236

craig.mitchell@morris.com

Second-quarter and six-month results follow: INCOME FROM CONTINUING OPERATIONS

Morris Publishing Group, LLC
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands) Three Months Ended
June 30,
Six Months Ended
June 30,
2008 2007 2008 2007
NET OPERATING REVENUES:
Advertising $65,192 $78,734 $130,509 $153,777
Circulation 14,751 14,339 29,464 28,547
Other 2,228 2,516 4,906 5,039
Total net operating revenues 82,171 95,589 164,879 187,363
OPERATING EXPENSES:
Labor and employee benefits 33,586 36,930 67,997 73,655
Newsprint, ink and supplements 9,657 9,959 18,800 21,082
Other operating costs (excluding depreciation and amortization) 26,836 28,196 54,856 56,765
Depreciation and amortization expense 3,501 4,366 7,025 9,105
Total operating expenses 73,580 79,451 148,678 160,607
Operating income 8,591 16,138 16,201 26,756
OTHER EXPENSES (INCOME):
Interest expense, including amortization of debt issuance costs 6,856 9,437 14,878 18,756
Gain on repurchases of debt (860) - (9,271) -
Interest income (284) (1) (470) (4)
Other, net (41) (44) (72) (85)
Total other expenses, net 5,671 9,392 5,065 18,667
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,920 6,746 11,136 8,089
PROVISION FOR INCOME TAXES 933 2,715 3,504 3,326
1,987 4,031 7,632 4,763
DISCONTINUED OPERATIONS
INCOME FROM DISCONTINUED OPERATIONS, NET OF PROVISIONS FOR INCOME TAXES - 916 - 972
NET INCOME $1,987 $4,947 $7,632 $5,735