Glacier Media Inc. (TSX:GVC) ("Glacier" or the "Company") reported
cash flow, earnings and revenue for the three and nine months ended
September 30, 2012.
Summary Results
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Three Three Nine Nine
(thousands of dollars months months months months
except share and per share ended ended ended ended
amounts) 30-Sep-12 30-Sep-11 30-Sep-12 30-Sep-11
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Revenue $78,245 $61,955 $246,054 $194,375
Gross profit $24,013 $22,192 $82,440 $73,067
Gross margin(3) 30.7% 35.8% 33.5% 37.6%
EBITDA(1) $9,815 $10,572 $37,823 $36,585
EBITDA margin(1) 12.5% 17.1% 15.4% 18.8%
EBITDA per share(1) $0.11 $0.12 $0.42 $0.41
Interest expense, net $1,304 $1,002 $4,488 $3,589
Net income attributable to
common shareholders before non-
recurring items(1)(2)(4) $2,855 $4,211 $12,321 $15,982
Net income attributable to
common shareholders before non-
recurring items per
share(1)(2)(4) $0.03 $0.05 $0.14 $0.18
Net income attributable to
common shareholders $5,183 $3,721 $13,441 $13,510
Net income attributable to
common shareholders per share $0.06 $0.04 $0.15 $0.15
Cash flow from
operations(1)(2)(4) $7,934 $9,880 $32,724 $33,699
Cash flow from operations per
share(1)(2)(4) $0.09 $0.11 $0.37 $0.37
Investment capital expenditures $2,145 $2,953 $10,829 $5,049
Sustaining capital expenditures $522 $1,126 $1,702 $3,314
Total assets $632,626 $513,222 $632,626 $513,222
Debt net of cash outstanding
before deferred financing
charges and other expenses $131,482 $91,971 $131,482 $91,971
Equity attributable to common
shareholders $350,773 $332,108 $350,773 $332,108
Dividends paid(5) $2,681 $2,681 $5,362 $2,681
Dividends paid per share(5) $0.03 $0.03 $0.06 $0.03
Weighted average shares
outstanding, net 89,358,410 89,383,682 89,358,410 90,204,930
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Notes:
(1) Refer to "Non-IFRS Measures" section of the financial statements.
(2) Third quarter 2012 excludes $0.2 million of restructuring expense, $0.6
million of transaction and transition costs, and $3.1 million of other
income.
(3) Gross profit for these purposes excludes depreciation and amortization.
(4) For non-recurring items excluded in the prior period, refer to
previously reported financial statements.
(5) Glacier commenced paying semi-annual dividends in 2011. The nine months
ended September 30, 2011 represents only one dividend payment.
Highlights
-- Consolidated revenue increased 26.3% to $78.2 million for the three
months ended September 30, 2012 from $62.0 million for the same period
in the year prior;
-- EBITDA for the third quarter of 2012 decreased 7.2% to $9.8 million from
$10.6 million in the same period in the prior year;
-- Glacier's consolidated cash flow from operations (before changes in non-
cash operating accounts) for the three months ended September 30, 2012
decreased 19.7% to $7.9 million from $9.9 million in the same period in
the year prior;
-- Glacier's net income attributable to common shareholders was $5.2
million compared to $3.7 million in the same period in the prior year;
and
-- The Company repaid $6.0 million of debt during the quarter.
Review of Operations
Consolidated revenue grew 26.3% during the third quarter of 2012
compared to the same period last year as a result of organic growth
in a variety of operations, the November 2011 acquisition of the
Postmedia British Columbia community media assets, and the
acquisition of control of one of Glacier's community media
partnerships in April 2012. Consolidated EBITDA decreased $0.8
million or 7.2% for the quarter.
On a same-store basis, community media revenue was softer for
the quarter compared to last year and trade and business and
professional revenue was stronger. Revenues and EBITDA were
affected by weaker economic conditions and related national
advertising softness. Consolidated EBITDA was also affected by
operating resource expense investments made to strengthen some of
the community media assets acquired from Postmedia, as well as
operating expense investments made in a new digital real estate
information business. Excluding a small loss for the quarter
relating to the Postmedia community media assets acquired and the
new digital real estate information costs, consolidated EBITDA was
slightly ahead of last year. Overall, revenues, profitability and
cash flow remain strong.
Sales Performance
Glacier's trade and business and professional information
operations continued to deliver strong growth, with revenue
increases generated across a wide variety of verticals.
While some revenues have been adversely affected by economic
conditions, a number of growth initiatives are being pursued and
are generating strong sales results.
In particular, Glacier's trade information and business and
professional information operations enjoyed growth in the energy,
agricultural, environmental risk, environmental compliance
networks, medical and financial information sectors. Continued
softness was experienced in several trade verticals as a result of
economic conditions.
In addition to core business information print and digital
sales, management is focused on strategies geared to offer
customers an increasingly richer value proposition through both
enhanced information content and richer and more robust product
solutions that digital platforms and technology can provide, as
well as enhanced customer targeting and marketing effectiveness for
advertisers, amongst other things.
Digital revenues represent more than a quarter of Glacier's
trade information and business and professional information revenue
and are growing steadily. Significant focus and related investment
will continue to be made to enhance Glacier's digital trade and
business and professional information verticals, through both
organic development and the acquisition of new businesses. These
acquisitions will be targeted to expand the markets that Glacier
covers, expand the breadth of information products and marketing
solutions provided, and to expand Glacier's digital media staff,
technology and other relevant resources.
Overall, the business information operations and various market
sectors offer attractive opportunities for growth with high levels
of profitability.
Glacier's community media operations experienced weaker revenue
performance in a number of markets during the quarter, primarily
the result of softer national advertising. The Prairie operations
continued to generate strong revenue and profitability. The B.C.
markets were affected by weaker economic conditions in Victoria,
the Lower Mainland and a variety of Vancouver Island and northern
Interior markets. National advertising revenues were weaker in most
markets, which appear to be the result of cautiousness due to
economic conditions, as financial and government revenues have been
significantly lower. Digital competition is also affecting national
print spending levels, although this trend is primarily occurring
in the larger urban markets. Local advertising revenues were
resilient in both the existing markets where Glacier has operated,
and some of the Lower Mainland and Vancouver Island markets
acquired from Postmedia, although the Victoria market continues to
struggle.
Operating expense investments are being made to improve the
strength and resources of the community media assets acquired from
Postmedia in order to increase competitiveness and sales
effectiveness. The operations had been weakened by significant cost
cutting incurred over many years under previous ownership due to
the high debt levels of these owners. The costs of the operating
investments have been partially offset by savings in overhead costs
as a result of the integration of the operations with Glacier's
existing infrastructure. The operating expense investments resulted
in stronger local advertising sales and classified sales in the
third quarter. While it will take time to strengthen and revitalize
the operations, it is encouraging that direct revenue increases are
being realized as investments are being made. Digital investments
are also being made to exploit the digital revenue opportunities of
the larger markets in which the community media operations acquired
are located.
While economic and market challenges have affected the community
media operations, management believes that these businesses remain
strong and will continue to generate solid cash flow given the
nature of the markets in which Glacier operates and the nature of
local community media. This cash flow can be used to fund growth
through both internal investment and acquisition of digital
business information and digital community media assets, as well as
repayment of debt, payment of dividends and repurchase of
shares.
Glacier's small market community media operations offer a unique
selling proposition and competitive advantage through the local
information that they provide, of which they are a primary source,
and the primary marketing channel they offer to advertisers. The
value of Glacier's local community content is being provided to
Glacier's readers in print and online, by tablet and mobile
smartphone platforms. A number of new digital sales products and
strategies have been introduced, and new digital sales and product
staff are being hired and technology investments are being made to
drive these growth initiatives. Given that the demand for local
community information is expected to exist for the long term,
Glacier expects to be able to monetize the information and
marketing value through advertising and other revenue sources for
the long term. As 85% of Glacier's local newspaper distribution is
free, this also provides for a more durable reach of readership for
advertisers over time wherein total market coverage can always be
provided. The attributes of these community media operations are
significantly different and stronger than larger metropolitan paid
daily newspapers, which have been reflected in the financial
performance of Glacier's community media group.
Profit Performance
As stated, consolidated EBITDA decreased $0.8 million or 7.2% to
$9.8 million for the quarter compared to $10.6 million for the
third quarter of 2011. While revenues showed a significant increase
on an overall dollar basis due to acquisitions, the economic
environment, related softness in national advertising, and the
operating expense investments made, resulted in lower EBITDA
compared to last year. The community media operations acquired from
Postmedia are historically weaker in the first and third quarter,
and this annual cycle was exacerbated by the weaker economy and
national advertising softness. The Postmedia community media assets
acquired are historically profitable in the second and fourth
quarters. The decrease in EBITDA was also the result of operating
resource expense investments described. As stated, consolidated
EBITDA was slightly ahead of last year excluding a small loss for
the quarter relating to the Postmedia community media assets
acquired and the digital real estate information costs.
Glacier's consolidated EBITDA margin decreased to 12.5% for the
quarter from 17.1% for the same quarter last year as a result of
the softness in overall community media revenues and the lower
margins of the Postmedia assets acquired. Management will seek to
improve the margins and profit performance of the assets acquired
through improved print and digital sales effectiveness, cost
efficiency and other initiatives.
Cost reduction measures continue to be implemented consistent
with management's strategy of maintaining strong product and
editorial quality while reducing operating costs where possible
through initiatives that do not impact quality, sales capacity or
market and competitive positions. Management is being careful to
maintain appropriate levels of resources in staff and technology as
well as business development in order to facilitate long-term
revenue growth.
EBITDA was also impacted by increased operating infrastructure
investment made in digital media management, staff, information
technology and related resources, as well as other content and
quality related areas. The increase in Glacier's consolidated
revenue has both allowed this investment to be made and has been in
part a result of the digital investments already made. These
investments were made consistent with Glacier's complementary media
platform and product strategy and business information
strategies.
The complementary media platform and product strategy is geared
to address both the risks that digital media represents to the
traditional print platform and the opportunities digital media
offers in Glacier's local community and business and trade
information markets. The strategy is based upon the premise that
customer utility and value should drive the structuring of platform
utilization and product design and functionality. Online, mobile,
tablet and other information delivery devices will be fully
utilized, while print content and design quality will also be fully
maintained. While the digital platforms offer many attractive new
opportunities, the print platform continues to offer effective
utility to both readers and advertisers. Maintaining strong print
products also maintains strong brand image and awareness, which
increases the likelihood of success online. Studies of time spent
across media platforms and reader satisfaction support the premise
of the complementary platform and product strategy. Management
expects that customer utility will vary over time and will be
affected by what Glacier and other media providers can creatively
provide. Management believes that the pursuit of a complementary
platform and product strategy will be prudent for the foreseeable
future, and will maximize revenue and profit generation.
As indicated, the business information strategies are focused on
increasing the value provided to customers through richer content,
data and analytic value and deepening the customer decision
dependence of Glacier's products and services, thereby moving
Glacier's products and services further up the value ladder, with
the higher revenue, profitability and recurring cash flow that this
value proposition provides.
Financial Position
Glacier's consolidated debt net of cash outstanding before
deferred financing charges and other expenses was 2.47x trailing 12
months EBITDA (normalized for the acquisition of control of one of
Glacier's community media partnerships) as at September 30, 2012.
The Company repaid $6.0 million of debt during the quarter.
Glacier's consolidated debt net of cash outstanding before deferred
financing charges and other expenses was $131.5 million as at
September 30, 2012.
Glacier invested $2.7 million of capital expenditures during the
quarter primarily on press facility construction and expansion to
accommodate new press equipment, additional production equipment,
information technology infrastructure and software. $2.2 million of
these capital expenditures were investment capital expenditures,
the majority of which relate to the building and installation of a
new press facility that is expected to be completed in Q1 2013. The
investment will result in lower operating costs, better quality,
and new long-term contract based revenues (specifically, Glacier's
joint venture operation, Great West Newspapers Limited Partnership,
which has secured a contract to print the Edmonton Journal
commencing in 2013). The investment capital expenditures are being
made to generate direct revenue and cash flow improvements and
payback consistent with Glacier's targeted return on investment, as
well as quality improvements and other benefits.
Outlook
While economic conditions have impacted some of the community
media operations and business information verticals, and digital
competition is stronger in the larger community media markets,
management expects that growth will continue in Glacier's trade
information and business and professional information operations,
as well as a variety of community media markets in Manitoba,
Saskatchewan, Alberta and parts of British Columbia.
Management will focus in the short-term on a balance of paying
down debt, integrating the operations acquired, continuing to
develop existing operations, targeting select acquisition
opportunities and returning value to shareholders.
Given the strong level of cash flow resulting from operations
and the acquisitions indicated, an increasing portion of the
Company's cash flow can also be returned to shareholders in the
future through increased dividends. The board of directors intends
to review the Company's dividend policy at the beginning of 2013.
The Company also intends to repurchase shares as deemed attractive
and prudent.
As indicated, significant focus and related investment will
continue to be made to enhance Glacier's business information
verticals, through both organic development and the acquisition of
new businesses. These acquisitions will be targeted to expand the
markets that Glacier covers, expand the breadth of information
products and marketing solutions provided, and to expand Glacier's
digital media staff, technology and other relevant resources.
In this regard, management will continue to seek a balance of
maintaining debt at manageable levels and delivering growth through
both operations and acquisitions. In particular, management will
seek to time investment in the acquisition and organic growth
opportunities to allow cash flow from operations to be used to pay
down the increased borrowings incurred in the fourth quarter of
2011.
Shares in Glacier are traded on the Toronto Stock Exchange under
the symbol GVC.
About the Company: Glacier Media Inc. is an information
communications company focused on the provision of primary and
essential information and related services through print,
electronic and online media. Glacier is pursuing this strategy
through its core businesses: the local newspaper, trade information
and business and professional information markets.
Financial Measures
To supplement the condensed interim consolidated financial
statements presented in accordance with International Financial
Reporting Standards (IFRS), Glacier uses certain non-IFRS measures
that may be different from the performance measures used by other
companies. These non-IFRS measures include cash flow from
operations (before changes in non-cash operating accounts and
non-recurring items), net income attributable to common
shareholders before non-recurring items and earnings before
interest, taxes, depreciation and amortization (EBITDA), which are
not alternatives to IFRS financial measures. Management focuses on
operating cash flow per share as the primary measure of operating
profitability, free cash flow and value. EBITDA per share is also
an important measure as the Company has low ongoing capital
expenditures and depreciation and amortization largely relates to
acquisition goodwill and copyrights and does not represent a
corresponding sustaining capital expense. These non-IFRS measures
do not have any standardized meanings prescribed by IFRS and
accordingly they are unlikely to be comparable to similar measures
presented by other issuers.
Forward-Looking Statements
This news release contains forward-looking statements that
relate to, among other things, the Company's objectives, goals,
strategies, intentions, plans, beliefs, expectations and estimates.
These forward-looking statements include, among other things,
statements under the heading "Review of Operations" and the
headings "Sales Performance", "Profit Performance", "Financial
Position" and "Outlook" and statements relating to the Company's
expectations regarding revenues, expenses, cash flows and future
profitability, including our expectations that growth will continue
in Glacier's business segments, our expectations as to organic
revenue and profitability growth, that profitability will continue
to improve as the economy recovers, that cost savings will be
realized, and that annual dividends are expected to be declared.
These forward looking statements are based on certain assumptions,
including continued economic growth and recovery and the
realization of cost savings, and are subject to risks,
uncertainties and other factors which may cause results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements, and undue
reliance should not be placed on such statements.
Important factors that could cause actual results to differ
materially from these expectations are listed in the Company's
Annual Information Form under the heading "Risk Factors" and in the
Company's MD&A under the heading "Business Environment and
Risks", many of which are out of the Company's control. These
factors include, but are not limited to, the ability of the Company
to sell advertising and subscriptions related to its publications,
foreign exchange rate fluctuations, the seasonal and cyclical
nature of the agricultural industry, discontinuation of Department
of Canadian Heritage, Canada Periodical Fund, general market
conditions in both Canada and the United States, changes in the
prices of purchased supplies including newsprint, the effects of
competition in the Company's markets, dependence on key personnel,
integration of newly acquired businesses, technological changes,
and financing and debt service risk.
The forward-looking statements made in this news release relate
only to events or information as of the date on which the
statements are made. Except as required by law, the Company
undertakes no obligation to update or revise publicly any forward-
looking statements, whether as a result of new information, future
events or otherwise, after the date on which the statements are
made or to reflect the occurrence of unanticipated events.
Contacts: Glacier Media Inc. Mr. Orest Smysnuik Chief Financial
Officer 604-708-3264
Glacier Media (TSX:GVC)
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