Glacier Media Inc. (TSX:GVC) ("Glacier" or the "Company") reported cash flow,
earnings and revenue for the year ended December 31, 2012.
Summary Results
thousands of dollars
except share and per share amounts 2012 2011 2010
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Revenue $ 330,016 $ 267,394 $ 242,605
EBITDA (1) $ 50,393 $ 49,140 $ 43,969
EBITDA margin (1) 15.3% 18.4% 18.1%
EBITDA per share (1) $ 0.56 $ 0.55 $ 0.48
Net income attributable to common
shareholders (5) $ 10,630 $ 25,731 $ 13,584
Net income attributable to common
shareholders per share (5) $ 0.12 $ 0.29 $ 0.15
Cash flow from operations (1)(2)(3) $ 44,261 $ 44,874 $ 39,074
Cash flow from operations per share
(1)(2)(3) $ 0.50 $ 0.50 $ 0.42
Debt net of cash outstanding before
deferred financing charges and other
expenses $ 127,107 $ 131,413 $ 94,732
Dividends paid (4) $ 5,362 $ 2,681 -
Dividends paid per share (4) $ 0.06 $ 0.03 -
Weighted average shares outstanding,
net 89,357,465 89,991,561 92,023,970
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Notes:
1. Refer to "Non-IFRS Measures" section of the financial statements.
2. 2012 excludes $1.4 million of restructuring expense, $2.1 million of
transaction and transition costs, $3.1 million of other income, $1.1
million gain on acquisition, $8.5 million impairment and $0.2 million
loss on disposal of assets.
3. For non-recurring items excluded in the prior period, refer to
previously reported financial statements.
4. Glacier commenced paying semi-annual dividends in 2011. The year ended
December 31, 2011 represents only one dividend payment.
5. 2011 includes a $15.1 million one-time gain within an associate entity.
Highlights
-- Consolidated revenue increased 23.4% to $330.0 million for the year
ended December 31, 2012 from $267.4 million for year prior;
-- EBITDA increased 2.5% to $50.4 million from $49.1 million for the prior
year;
-- Glacier's consolidated cash flow from operations (before changes in non-
cash operating accounts) for the year ended December 31, 2012 was $44.3
million compared to $44.9 million for the year prior;
-- Glacier's net income attributable to common shareholders was $10.6
million compared to $25.7 million for the prior year which included a
one-time gain in earnings from associates of $15.1 million;
-- The Company repaid $15.7 million of senior debt during the year;
-- Subsequent to year-end the Company increased its annual dividend 33% to
$0.08 per share, payable quarterly.
Review of Operations
Consolidated revenue grew 23.4% during the year ended 2012 compared to 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 increased $1.3 million or 2.5% for the year.
On a same-store basis, business information revenues showed strong growth in key
sectors, underpinned by a variety of initiatives - including new digital tools -
that further strengthened the market positions held by key brands in those
sectors. This growth translated into strong profitability and continues to
ensure solid brand equity.
Meanwhile, community media same-store revenues and EBITDA were affected by
weaker economic conditions which included softness in national advertising.
Increased digital competition has also affected revenues, more so in the urban
markets. Consolidated EBITDA was also impacted by operating investments made to
strengthen some of the community media properties acquired from Postmedia as
well as investments made in a new digital real estate information business.
Overall, revenues, profitability and cash flows remained strong.
Sales Performance
Business Information
Glacier's business information operations (which include business & professional
and trade information) continued to deliver strong growth, with revenue
increases generated across a wide variety of verticals that are key lynchpins of
the Canadian economy. They achieved growth in sectors such as energy,
agriculture, mining and environmental risk and compliance services. As well, the
medical and financial services sectors experienced positive growth. Central to
the growth were product and service innovation initiatives underpinned by strong
brand equity. These initiatives included new digital enhancements, integrated
marketing solutions for key customers, as well as broadened international
exposure to global markets for major advertisers.
Given that the overall Canadian economy is still challenged, some business
revenues have been adversely affected, although a number of growth initiatives
are being pursued and are expected to produce strong sales results.
In addition to core business information print and digital sales, management is
focused on strategies designed to offer customers increasingly richer value
propositions. These include multi-platform solutions - with a key focus on
mobile offerings - designed to integrate more seamlessly with customer
decision-making processes, thus ensuring heightened levels of decision
dependency on specific information tools. Such dependence is enhanced through a
focus on effective pricing and targeted timing. Consequently, these information
tools are increasingly integrated in customer decision-making and as a result
sales efficiency, renewal and retention improves.
Key efforts are under way to distinguish different types of digital content,
advertising and subscriptions based on research designed to highlight individual
sector needs. Premium subscription and related products are being enhanced and
developed with a particular focus on essential content, data, search,
interpretation, contextualization and analytics. A consistent focus on various
ways of enriching content results in improved rates for advertising positioned
alongside rich information.
Overall, the business information operations in key sectors offer attractive
opportunities for growth with high levels of profitability. Management is
currently assessing each sector to determine its appropriateness for future
investment.
Community Media
Glacier's community media operations experienced weaker revenue performance in a
number of markets, 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 prevailing economic conditions, as financial
and government revenues have been significantly lower. Digital competition also
affected national print spending levels, although this trend primarily affected
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 - including sales capacity - incurred over
many years under previous ownership due to high debt levels. Operating
investments have been partially offset by savings in overhead costs as a result
of operational alignments with Glacier's existing infrastructure. While it will
take time to strengthen and revitalize operations, it is encouraging that direct
revenue increases are being realized as investments are made. Digital
investments are also being made to exploit revenue opportunities of the larger
markets, with a specific focus on content delivery and advertising
effectiveness.
While transition and ongoing integration activities for the acquired properties
characterized the first half of 2012, several key initiatives characterized the
second half of the year in that group and existing operations. These investment
initiatives are designed to enhance digital utility for readers and advertisers,
as well as to continue to strengthen market-based links to respective
communities.
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. 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 debt repayments, dividend payments and share
repurchases.
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 advertising and
marketing channels they offer. The value of community content is provided to
readers in print and online, by tablet and smartphone platforms. As described
above, 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. 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. An important advantage is that
being local often means being integrally rooted in the fabric of a community and
Glacier's community media management and staff work assiduously to remain tied
to the rhythms of the markets they serve. Glacier's view aligns closely with
that of Warren Buffet, whose Berkshire Hathaway now owns nearly 270 community
properties. In his annual letter to shareholders released recently, Buffett
wrote at length about the investment value proposition of community media.
"Newspapers continue to reign supreme, however, in the delivery of local news.
If you want to know what's going on in your town - whether the news is about the
mayor or taxes or high school football - there is no substitute for a local
newspaper that is doing its job. A reader's eyes may glaze over after they take
in a couple of paragraphs about Canadian tariffs or political developments in
Pakistan; a story about the reader himself or his neighbors will be read to the
end. Wherever there is a pervasive sense of community, a paper that serves the
special informational needs of that community will remain indispensable to a
significant portion of its residents. ...I believe that papers delivering
comprehensive and reliable information to tightly-bound communities and having a
sensible Internet strategy will remain viable for a long time."
Operational Performance
As stated, consolidated EBITDA increased $1.3 million or 2.5% to $50.4 million
compared to $49.1 million in the prior year. While revenues showed a significant
increase on an overall dollar basis due to acquisitions, the economic
environment and related softness resulted in a lower EBITDA margin from these
newly acquired operations and the community media operations in general. Despite
the softness in the community media operations, consolidated EBITDA was ahead of
last year due to the strength of the performance of the business information
operations.
Glacier's consolidated EBITDA margin decreased to 15.3% for the year from 18.4%
for last year as a result of softness in overall community media revenues and
the lower margins of the Postmedia assets. Management will seek to improve these
margins and profit performance 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 addresses 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
information markets. The strategy's premise is that customer utility and value
should drive 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
digital platforms offer many attractive new opportunities, print platforms
continue 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 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 the 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
heightening customer decision dependence of Glacier's products and services.
This dependence moves 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 December 31, 2012. The Company repaid $25.2 million of debt during the year
and incurred $17.0 million of additional borrowings consisting of $12.6 million
from the acquisition of control of ANGLP and $4.4 million of borrowing related
to its 50% interest in Great West Newspapers Limited Partnership ("GWNLP") for
the construction of its new printing facilities. Glacier's consolidated debt net
of cash outstanding before deferred financing charges was $127.1 million as at
December 31, 2012.
Glacier invested $16.9 million of capital expenditures during the year primarily
on press facility construction and expansion to accommodate new press equipment,
additional production equipment, information technology infrastructure and
software. $14.5 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 2013. The investment will
result in lower operating costs, better quality, and new long-term
contract-based revenues (specifically, Glacier's joint venture operation, GWNLP,
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 and Summary
While economic conditions have impacted some 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 business information operations, as well as a variety of community
media markets where local market conditions are stronger. In this regard,
management will continue to closely monitor economic conditions in various
markets and verticals to ensure appropriate decisions are made in a timely
fashion.
Management will focus in the short-term on a balance of paying down debt,
integrating the operations acquired, enhancing existing operations, targeting
select acquisition opportunities and returning value to shareholders.
Given strong cash flows resulting from operations and acquisitions as indicated,
an increasing portion of cash generated can also be returned to shareholders
through increased dividends. In January 2013, the Board of Directors reviewed
the Company's dividend policy and announced a 33% increase in the annual
dividend to $0.08 from $0.06 per share - to be paid quarterly instead of
semi-annually.
As indicated, significant focus and related investment will continue to be made
to enhance Glacier's business information verticals, through both organic
development and acquisition. These acquisitions will be targeted to expand
markets that Glacier covers; expand the breadth of information products and
marketing solutions; and expand Glacier's digital media staff, technology and
related resources.
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 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 headings "Sales Performance",
"Operational Performance", "Financial Position" and "Outlook and Summary" and
statements relating to the Company's expectations regarding revenues, expenses,
cash flows and future profitability, including its expectations that growth will
continue in Glacier's business segments, its expectations as to acquisitions and
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, tax risk, 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Glacier Media Inc.
Mr. Orest Smysnuik
Chief Financial Officer
604-708-3264
www.glaciermedia.ca
Glacier Media (TSX:GVC)
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