Magazine article Editor & Publisher

In Default, ACN Swings to Q2 Loss on Goodwill Charge

Magazine article Editor & Publisher

In Default, ACN Swings to Q2 Loss on Goodwill Charge

Article excerpt

Dallas-based American Community Newspapers (ACN) Inc. reported a $69.2 million second-quarter loss almost entirely because of a preliminary goodwill impairment charge -- and disclosed that it is in default of its loan agreements.

ACN said the loss, amounting to $4.73 a share, compared to net income of 13 cents a share in the year ago quarter.

The publisher of the Stillwater (Minn.) Gazette and 100 other print products in four states said the Q2 loss included an estimated $69.4 million non-cash goodwill impairment charge. Without the charge, preliminary net income was $200,000, or 1 cent a share.

ACN said its second-quarter revenue fell 14.4% from the year before, with ad revenue down 15.6%.

Internet advertising revenue was up 17.2% year-over-year in the quarter, and represented 2.9% of total revenue.

In a 10Q form filed with the Securities and Exchange Commission (SEC) Thursday, ACN disclosed that as of Aug. 13, it is in violation of the financial covenants under two of its credit facilities.

ACN's senior credit facility required ACN to hold its debt down to debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of 6.5 to 1. In late June, the company said, its ratio was 7.33 to 1 on debt of $108.5 million, and trailing four quarters EBITDA of $14.8 million.

The subordinated credit facility had a looser limit of 8 to 1, but ACN blew past that as of June 29, with debt leverage of 9.68 to 1, based on consolidated total debt for the subordinated facility's purposes of $143. …

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