Glacier Reports Third Quarter Results
Vancouver, B.C., November 13, 2012 – Glacier Media Inc. (“Glacier” or the “Company”) reported cash flow, earnings and revenue for the three and nine months ended September 30, 2012.
- 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.
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.
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.
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.
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.
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”, “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.