Glacier Reports Second Quarter Results
Vancouver, B.C., August 14, 2012 – Glacier Media Inc. (“Glacier” or the “Company”) reported cash flow, earnings and revenue for the three and six months ended June 30, 2012.
- Consolidated revenue increased 27.4% to $91.4 million for the three months ended June 30, 2012 from $71.7 million for the same period in the year prior;
- EBITDA for the second quarter of 2012 increased 12.1% to $17.1 million from $15.3 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 June 30, 2012 increased 10.2% to $15.4 million from $13.9 million in the same period in the year prior; and
- Glacier’s consolidated cash flow from operations (before changes in non-cash operating accounts) per share for the three months ended June 30, 2012 increased to $0.17 per share compared to the same period last year at $0.15 per share.
Review of Operations
Consolidated revenue grew 27.4% during the second 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 grew 12.1% during the quarter.
On a same-store basis, consolidated revenue and normalized EBITDA were relatively flat for the quarter compared to last year. Revenue and EBITDA were affected to some degree by weaker economic conditions, as well as national advertising softness. Consolidated EBITDA was also affected by operating resource expense investments made to strengthen some of the community media assets acquired.
Overall the combination of consolidated revenue growth, mix of businesses, level of performance of the Company’s business units and additional cost efficiencies are expected to result in continued growth in revenue, profitability and cash flow per share in 2012.
Glacier’s business and trade information operations continued to deliver strong growth, with revenue increases generated across a wide variety of verticals, despite weaker economic conditions.
While some revenues have been affected by economic conditions, a number of growth initiatives are being pursued and are generating strong sales results.
Glacier’s trade information and business and professional information operations delivered strong growth in the energy, agriculture, environmental risk, environmental compliance networks, medical and financial information sectors, in particular. Some softness was experienced in several trade verticals as a result of economic conditions.
In addition to core 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 25% of Glacier’s trade information and business & professional information revenue and are growing strongly. 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.
Community media revenue was softer for the quarter, with weaker economic conditions affecting certain markets and resulting in declines in national advertising revenue compared to last year.
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 has been reflected in the financial performance of Glacier’s community media group.
As stated, consolidated EBITDA grew 12.1% to $17.1 million for the quarter compared to $15.3 million for the second quarter of 2011. The growth in EBITDA was the result of organic growth in the profitability of Glacier’s business and professional and trade information operations, the November 2011 acquisition of the Postmedia British Columbia community media assets (these assets showed a strong improvement compared to the first quarter of the year in which they historically lose money as it is their weakest advertising period of the year), and the acquisition of control of one of Glacier’s community media partnerships in April 2012. Glacier’s consolidated EBITDA margin decreased to 18.7% for the quarter from 21.3% for the same quarter last year as a result of 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.
The EBITDA results were achieved while increased operating infrastructure investment was 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 & product strategy and business information strategies.
The complementary media platform & 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 & 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 & 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 farther up the value ladder, with the higher revenue, profitability and recurring cash flow that this value proposition provides.
Glacier’s consolidated debt net of cash outstanding before deferred financing charges and other expenses was 2.49x trailing 12 months EBITDA (normalized for the acquisition of control of one of Glacier’s community media partnerships) as at June 30, 2012. The Company used its cash flow from operations to repay $5.6 million of debt during the quarter. Glacier’s consolidated debt net of cash outstanding before deferred financing charges and other expenses was $137.0 million as at June 30, 2012.
Glacier invested $6.9 million of capital expenditures during the quarter primarily on facility construction and expansion to accommodate new press equipment, additional production equipment, information technology infrastructure and software. $6.4 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, 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.
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 Saskatchewan, Alberta and parts of British Columbia.
The combination of consolidated revenue growth and additional cost efficiencies are expected to result in continued growth in profitability and cash flow in 2012.
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.
Glacier instituted its first dividend payments last year under its new policy whereby the board of directors expects to declare an annual dividend of $0.06 per common share, payable semi-annually. Given the increased cash flow resulting from operational growth and the acquisitions indicated and the strong level of cash flow overall, an increasing portion of the Company’s cash flow can be returned to shareholders in the future through increased dividends. 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.
For further information please contact Mr. Orest Smysnuik, Chief Financial Officer, at 604-708-3264.
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.
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” 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.