Glacier Media Inc. ("Glacier" or the "Company") (TSX:GVC) reported
cash flow, earnings and revenue for the period ended March 31,
2013.
Summary Results
Results are reported below on an adjusted basis to include the
Company's share of the results of its joint ventures. Management
continues to base its operating decisions and performance
evaluation utilizing these results. Refer to Change in Accounting
Policy on page 5 for discussion of the accounting change and
results in accordance with IFRS.
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thousands of dollars Three months ended Three months ended
except share and per share amounts March 31, 2013 (5) March 31, 2012 (5)
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Revenue $ 76,840 $ 76,421
EBITDA (1) $ 7,889 $ 10,878
EBITDA margin (1) 10.3% 14.2%
EBITDA per share (1) $ 0.09 $ 0.12
Net income attributable to common
shareholders $ (430) $ 2,914
Net income attributable to common
shareholders per share $ 0.00 $ 0.03
Cash flow from operations
(1)(2)(3) $ 7,031 $ 9,431
Cash flow from operations per
share (1)(2)(3) $ 0.08 $ 0.11
Debt net of cash outstanding
before deferred financing charges $ 120,907 $ 127,182
Dividends paid (4) $ - $ 2,770
Dividends paid per share (4) $ - $ 0.03
Weighted average shares
outstanding, net 89,243,102 89,358,410
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Notes:
(1) Refer to "Non-IFRS Measures" section of the financial statements.
(2) 2013 excludes $0.7 million of restructuring expense and $0.4 million of
transaction and transition costs.
(3) For non-recurring items excluded in the prior period, refer to
previously reported financial statements.
(4) Dividends totalling $1.8 million were declared in January 2013 and paid
on April 5, 2013.
(5) These results are presented on an adjusted basis to include the
Company's share of the results of its joint ventures, as management
continues to base its operating decisions and performance evaluation
utilizing adjusted results.
Highlights
-- For the three months ended March 31, 2013, Glacier's adjusted
consolidated revenue increased 0.5% to $76.8 million from $76.4 million
in the prior period. This increase was primarily due to the acquisition
of control of Alta Newspaper Group Limited Partnership ("ANGLP")
completed on April 1, 2012 as well as growth in a number of the
Company's business information operations offset by continued weakness
in community media operations;
-- Adjusted consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) decreased by 27.5% to $7.9 million from $10.9
million;
-- Adjusted cash flow from operations (before changes in non-cash operating
accounts and non-recurring items) decreased 25.4% to $7.0 million;
-- Adjusted net income attributable to common shareholders was $(0.4)
million compared to net income of $2.9 million;
-- Adjusted EBITDA per share decreased 27.5% to $0.09 from $0.12 for the
period compared to the same period in the prior year and net income
attributable to common shareholders per share decreased to $0.00 from
$0.03 for the same period last year;
-- Adjusted cash flow from operations (before changes in non-cash operating
accounts and non-recurring items) per share decreased to $0.08 per share
from $0.11 for the same period last year;
-- The Company's adjusted results for the quarter were affected by the
acquisition of control of ANGLP on April 1, 2012; whereby the adjusted
results for the three months ended March 31, 2012 only include the
Company's previous percentage ownership; and
-- Glacier became a 50% partner in a new venture, Weather INnovations
("WIN") Consulting - created as the result of merging WeatherFarm (a
former Canadian Wheat Board asset acquired by Glacier in late 2012) and
Weather INnovations Inc. (an agricultural meteorology information
business), of which Glacier acquired an interest in subsequent to March
31, 2013.
Review of Operations
Glacier Media Inc. ("Glacier" or the "Company") continued to
generate strong revenue, profit and cash flows from a number of its
operations and through its diversified base of information
communications businesses. However, weaker economic conditions in
the quarter adversely affected operating results. Business and
trade information revenue weakened in some operations during the
three months ended March 31, 2013 due to softness in key economic
sectors, particularly those in which volatile commodity pricing
affect business information activity. Community media revenue
continued to be softer compared to the same period last year.
Revenues and EBITDA in the community media operations were affected
by weaker conditions in the general economy and by related national
advertising softness, as well as digital competition. Consolidated
EBITDA was also affected by operating resource expense investments
made to strengthen some community media assets acquired from
Postmedia, and increased digital investment including a new real
estate information portal, amongst other things.
Many of the Company's business information operations continue
to grow and provide attractive opportunities for future growth in
both existing and new verticals through multi-platform offerings,
including rich information products and solutions. Community media
operations continue to offer a strong value proposition through
local information they provide to readers and key marketing
channels they provide in the small community markets they serve
across complementary multi-media platforms. As mentioned, weaker
economic conditions in the first quarter adversely affected
national advertising revenues - a trend which appears to be largely
cyclical. Digital competition exacerbated the weaker economic
conditions in the larger urban markets, but has been less of a
factor in the smaller regional markets.
Notwithstanding the current market softness, a variety of
significant growth opportunities are still available. The Company's
strategy is to invest cash flow generated from the community media
operations and the business and trade information operations in
both operational opportunities and acquisitions. In particular, the
Company intends to increase capital allocated to business and trade
information acquisitions and growth opportunities, which includes
internal product development related technology investments. The
Company also intends to provide returns to shareholders through
increasing dividends as well as share buy-backs.
Sales Performance
Business Information
Many of Glacier's business and trade information operations
continued to deliver growth, with revenue increases generated
across a wide variety of verticals - driven by a diverse variety of
product and information innovations. While in some verticals this
growth was slower than the prior year, the various products and
services still outperformed peer groups active in those
sectors.
To the degree revenues have been adversely affected by general
economic malaise, a number of growth initiatives are being pursued
and are generating strong sales results, especially those
associated with sectors of the economy which are experiencing
relatively stable conditions in a pan-Canadian context. This is a
result of a stronger inter-divisional collaboration framework
created between the various operations.
In particular, Glacier's business and trade information
operations enjoyed growth in the energy, environmental risk,
environmental compliance networks, medical and financial
information sectors as a result of targeted initiatives designed to
align with growth areas within those sectors. Glacier's business
and trade information portfolio contains many brands that have
decades of service in their respective sectors. The intrinsic
equity associated with these brands is a key competitive advantage
as the products evolve and extend.
In addition to core business and trade 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. This includes a focus
on advertising solutions that are underpinned by a strong economic
development framework. As a result, Glacier expects to develop
increased business with non-traditional customers.
Key efforts are under way to distinguish different types of
digital content, advertising and subscriptions based on research
designed to highlight individual industry 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.
Digital revenues now represent more than a quarter of Glacier's
business and trade information revenues and are growing steadily.
Significant focus and related investment will continue to be made
to enhance Glacier's digital business and trade information
verticals, through both organic development and new business
acquisition. These acquisitions will be targeted to expand the
markets that Glacier covers, extend the breadth of information
products and marketing solutions provided, and to enrich Glacier's
digital media staff, technology and other relevant resources - all
focused on consistently enhancing "decision dependence".
Overall, the business and trade information operations and
various markets offer attractive opportunities for growth with high
levels of profitability - particularly when aligned with Glacier's
leading position in key sectors. An integration framework which
permits management teams in various verticals to remain
entrepreneurial and market- focused will enhance the Company's
ability to service its key customers with more integrated
solutions.
Community Media
Glacier's community media operations continue to experience
weaker revenue performance in a number of markets, primarily the
result of softer national advertising. 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 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 in 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. 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 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 and trade 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.
Operational Performance
As stated, adjusted consolidated EBITDA decreased $3.0 million
or 27.5% to $7.9 million compared to $10.9 million in the same
period last year. While adjusted consolidated revenues showed a
slight increase on an overall dollar basis, due to the acquisition
of control of ANGLP, the economic environment and related softness
resulted in lower same- store EBITDA in certain trade information
businesses and in the community media operations.
Glacier's adjusted consolidated EBITDA margin decreased to 10.3%
for the three months ended March 31, 2013 from 14.2% for same
period last year as a result of softness in both community media
and some business information operations. Management will seek to
improve these margins and profit performance through improved print
and digital sales effectiveness, cost efficiency and other
initiatives.
In accordance with IFRS, Glacier's EBITDA was $6.2 million for
the three months ended March 31, 2013, a decrease of $1.0 million
or 13.7% and its EBITDA margin decreased to 8.8% from 11.1% for the
same period in the prior year. As discussed above, the economic
environment and related softness resulted in a lower same-store
revenue and EBITDA in certain trade information businesses and in
the community media operations.
EBITDA was also impacted by higher pension and post-retirement
benefit costs, accounting changes relating to certain business
directory digital revenue recognition, increased operating
infrastructure investment made in digital media management, staff,
information technology and related resources, development of a new
real estate information portal, as well as other content and
quality related areas. These investments were made consistent with
Glacier's complementary media platform and product strategy and
business and trade information strategies.
Additional cost reduction measures are being implemented
consistently 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.
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 and trade 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 and trade 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
On an adjusted basis to include the Company's share of its joint
ventures, Glacier's consolidated debt net of cash outstanding
before deferred financing charges and other expenses was 2.55x
trailing 12 months EBITDA as at March 31, 2013.
Including Glacier's joint ventures, the Company invested $2.1
million of capital expenditures during the period primarily on its
new printing facility at 50% owned GWNLP and software related to
the transition of the digital assets from Postmedia. 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.
The Company (excluding its joint ventures) repaid $2.5 million
of debt during the three months ended March 31, 2013. Glacier's
consolidated debt net of cash outstanding before deferred financing
charges was $118.5 million as at March 31, 2013.
As previously reported, in March 2013, an affiliate of the
Company received correspondence from Canada Revenue Agency ("CRA")
proposing to issue a notice of reassessment with respect to the
utilization of non-capital losses by the affiliate, pertaining to
taxation years 2008 to 2011. The Company believes that it has
reported its tax position appropriately and believes the Company's
affiliate has substantial defences to the matters raised by the
CRA; however, should the proposed reassessment by CRA ultimately be
upheld against the Company's affiliate, the resulting payment would
materially affect the Company's financial statements and cash
flows. Notwithstanding, the Company's affiliate has the financial
capacity to pay such amounts, if any. The likely timing to resolve
this matter may take years.
Change in accounting policy
As a result of a change in IFRS accounting policies effective
January 1, 2013, the Company is now required to account for its
joint ventures under the equity method. Previously, the Company's
joint ventures were accounted for using proportionate
consolidation. As a result of the change in accounting, the Company
no longer presents the revenues, expenses, assets and liabilities
of its share of these operations in the Company's results on a line
by line basis. The Company now carries its interest as a net
investment on its balance sheet and includes the net results from
these operations in its statement of operations as earnings from
joint ventures and associates.
Despite this accounting change, management believes that
including its share of revenues and expenses in the Company's
results (consistent with its prior accounting treatment) provides
an important basis for assessing the overall operations of the
Company. The table below adjusts the Company's reported results
under IFRS to include the revenues and expenses of its joint
ventures, consistent with its historical presentation. Management
continues to base its operating decisions and performance
evaluation using the adjusted results and has reported its results
above on this basis.
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Three months ended
March 31, 2013 (4)
thousands of dollars Per Adjustment
except share and per share amounts IFRS (4) Adjusted
----------------------------------------------------------------------------
Revenue $ 70,526 $ 6,314 $ 76,840
EBITDA (1) $ 6,232 $ 1,657 $ 7,889
EBITDA margin (1) 8.8% 10.3%
EBITDA per share (1) $ 0.07 $ 0.09
Net income attributable to common
shareholders $ (368) $ (62) $ (430)
Net income attributable to common
shareholders per share $ 0.00 $ 0.00
Cash flow from operations
(1)(2)(3) $ 5,685 $ 1,346 $ 7,031
Cash flow from operations per
share (1)(2)(3) $ 0.06 $ 0.08
Debt net of cash outstanding
before deferred financing charges $ 118,494 $ 2,413 $ 120,907
Weighted average shares
outstanding, net 89,243,102 89,243,102
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Three months ended
March 31, 2012 (4)
thousands of dollars Per Adjustment
except share and per share amounts IFRS (4) Adjusted
----------------------------------------------------------------------------
Revenue $ 64,859 $ 11,562 $ 76,421
EBITDA (1) $ 7,221 $ 3,657 $ 10,878
EBITDA margin (1) 11.1% 14.2%
EBITDA per share (1) $ 0.08 $ 0.12
Net income attributable to common
shareholders $ 2,746 $ 168 $ 2,914
Net income attributable to common
shareholders per share $ 0.03 $ 0.03
Cash flow from operations
(1)(2)(3) $ 5,757 $ 3,674 $ 9,431
Cash flow from operations per
share (1)(2)(3) $ 0.06 $ 0.11
Debt net of cash outstanding
before deferred financing charges $ 111,167 $ 16,015 $ 127,182
Weighted average shares
outstanding, net 89,358,410 89,358,410
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(1) Refer to "Non-IFRS Measures" section for calculation of non-IFRS
measures used in this table.
(2) 2013 excludes $0.7 million of restructuring expense and $0.4 million of
transaction and transition costs.
(3) For non-recurring items excluded in the prior period, refer to
previously reported financial statements.
(4) Adjustment to include the Company's share of revenues, expenses and cash
flows from its joint venture operations consistent with the Company's
treatment on a historical basis and prior to implementing the new accounting
standards.
For the three months ended March 31, 2013, excluding its share
of revenues and expenses from its joint ventures and in accordance
with IFRS, consolidated revenues were $70.5 million, an increase of
8.7% over the same period in the prior year; EBITDA was $6.2
million, a decrease of $1.0 million or 13.7%; and cash flow from
operations was $5.7 million, a decrease of $0.1 million or 1.3%. On
a per share basis, EBITDA decreased $0.01 for the three months
ended March 31, 2013, and cash flow from operations was $0.06, the
same as the prior year. Under IFRS, the results of ANGLP are
included in the statement of operations as earnings from joint
ventures and associates for the three months ended March 31,
2012.
Acquisitions
Glacier continued its strategy of acquiring businesses that
provide high-value data and information by becoming a 50% partner
in a new venture, Weather INnovations ("WIN") Consulting - created
as the result of merging WeatherFarm (a former Canadian Wheat Board
asset acquired by Glacier in late 2012) and Weather INnovations
Inc. (an agricultural meteorology business), of which Glacier
acquired an interest in subsequent to March 31, 2013. The
partnership blends two key weather information provision systems
that enable farmers and other crop producers to make near real-time
decisions for operations such as seeding, spraying and harvesting.
As well, the partnership will provide predictive modeling tools to
manage disease and pest threats. The new business will operate
closely with Glacier's existing agriculture portfolio of products
and services.
Outlook and Summary
While economic conditions have adversely impacted some community
media operations and business and trade information verticals and
digital competition is stronger in the larger community media
markets, management expects that growth will continue in most of
Glacier's business and trade 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 reducing
certain operating expenses where appropriate, paying down debt,
integrating the operations acquired, enhancing existing operations,
targeting select acquisition opportunities and returning value to
shareholders.
Given continued significant cash flow 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, the first dividend of which was
paid on April 5, 2013. The second quarterly dividend of $0.02 per
share has been declared on May 14, 2013, to shareholders of record
on June 14, 2013 and payable on July 5, 2013.
As indicated, significant focus and related investment will
continue to be made to enhance Glacier's business and trade
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 "Review of Operations, "Sales
Performance", "Operational Performance" 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 cost savings will be realized, and
that annual dividends are expected to be declared, and that the
Company expects to repurchase shares. 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 the
Department of Canadian Heritage's 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.
Contacts: Glacier Media Inc. Mr. Orest Smysnuik Chief Financial
Officer 604-708-3264
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