Vancouver, B.C., March 27, 2013 - Glacier Media Inc. ("Glacier" or the "Company") reported cash flow, earnings and revenue for the year ended December 31, 2012.
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.
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.
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. "
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.
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.
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 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.