Glacier Media Inc. ("Glacier" or the "Company") (TSX:GVC) reported cash flow,
earnings and revenue for the period ending December 31, 2009.
Summary Results
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thousands of dollars
except share and per Year Ended Year Ended Year Ended Year Ended
share amounts 31-Dec-09 31-Dec-08 31-Dec-07 31-Dec-06
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Revenue $229,128 $249,093 $216,402 $186,189
Gross profit $82,179 $97,252 $85,156 $66,793
Gross margin 35.9% 39.0% 39.4% 35.9%
EBITA (1) $35,792 $51,822 $47,313 $35,935
EBITA margin (1) 15.6% 20.8% 21.9% 19.3%
EBITA per share (1) $0.38 $0.56 $0.51 $0.49
Interest expense, net $6,450 $9,100 $10,537 $9,070
Net income before
non-recurring items (2)(3) $22,163 $34,963 $30,579 $12,976
Net income before
non-recurring items per
share (2)(3) $0.24 $0.38 $0.33 $0.18
Net income $13,926 $28,269 $30,579 $12,976
Net income per share $0.15 $0.30 $0.33 $0.18
Cash flow from operations
(1)(2)(3) $30,456 $44,782 $38,554 $27,418
Cash flow from operations
per share (1)(2)(3) $0.33 $0.48 $0.41 $0.37
Capital expenditures $9,345 $9,483 $2,944 $1,948
Total assets $503,747 $518,950 $469,960 $476,740
Debt net of cash outstanding
before deferred financing
charges and other
expenses $99,939 $112,577 $111,231 $124,890
Shareholders' equity $311,043 $297,517 $269,828 $237,835
Weighted average shares
outstanding, net 92,721,210 93,131,183 93,107,923 73,932,324
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(1) Refer to "Financial Measures" following for disclosure regarding
non-GAAP measures used in this table. (2) Fiscal 2009 excludes $5.8
million goodwill and intangible assets impairment charge, $2.0 million
restructuring expense, and $0.4 million non-recurring item. (3) Fiscal
2008 excludes $6.3 million non-recurring item and $0.4 million
restructuring expense.
- Glacier's fourth quarter results for 2009 showed significant improvements,
with EBITA increasing 9.9% from the same period last year and revenue declining
only 2.4%;
- Glacier's consolidated revenue declined 8% to $229.1 million from $249.1
million for the year prior;
- Glacier's consolidated EBITA declined 30.9% to $35.8 million from $51.8
million for the year prior;
- Glacier's consolidated cash flow from operations (before changes in non-cash
operating accounts and adjusted for non-recurring items) declined 32.0% to $30.5
million from $44.8 million for the year prior; and
- Glacier's consolidated cash flow from operations (before changes in non-cash
operating accounts and adjusted for non-recurring items) per share declined
31.7% to $0.33 per share from $0.48 per share last year.
Operating Performance
2009 was a challenging year for Glacier as revenue and EBITA were negatively
impacted by the recession.
The significant downturn in the economy caused a reduction in advertising and
other customer spending across the majority of Glacier's operations. On a
same-store basis for 2009, revenues declined 7% for the business and
professional information group and 11% for the local newspaper and trade
information group.
As previously reported, revenues began to decline in December of 2008 then
gradually worsened during the first three quarters of 2009, with the third
quarter decline of 15.2% being the largest. Revenues began to improve in
September as local newspaper and business and professional revenues both
recovered to 90% of prior year levels, with local newspaper revenues being 10.3%
less than prior year and business and professional revenues being 9.7% less. For
comparative purposes, it is important to note that 2008 represented record
revenue levels for Glacier. Glacier's consolidated revenue grew 15.1% in 2008
compared to the year prior, with organic revenue generating approximately half
of the growth. Revenue grew strongly until and including October of 2008, grew
at a slower pace in November of 2008, then declined 3% in December.
Fourth Quarter Results Stronger
Glacier's sales improved significantly in the fourth quarter of 2009.
Consolidated revenues for the quarter ending December 31, 2009 were $60.0
million, representing a decline of only 2.4% from the fourth quarter of 2008.
Consolidated EBITA increased 9.9% to $11.1 million for the fourth quarter of
2009 compared to 2008. The improved profitability was a result of both improved
revenues and cost reduction measures.
A number of efforts were made during 2009 to increase sales effectiveness
despite the recession. These have proven successful, as Glacier's revenue
declines have been less than other media companies, and many businesses in
general. New revenues were generated in a number of areas including special
publishing initiatives, special features, supplements, new community magazines,
production and promotion of community events, custom publishing, sponsored
industry specific research studies, conferences and tradeshows, new directories,
and other new revenue initiatives. Glacier was the exclusive publisher of the
Olympic Official Vancouver 2010 Souvenir Program as well as the Olympic Hockey
Guide. Efforts continue to be made to leverage and monetize content across
print, online, wireless and other channels and platforms. These sales
initiatives contributed to the fourth quarter improvement, as well as improved
economic conditions in various markets.
Of particular importance, Glacier continued to increase its investment in
electronic, wireless and Internet platforms and resources throughout the
recession. The investment has resulted in a variety of new sources of revenue
for the Company's local newspapers, trade information and business information
operations.
Investments to improve printing facilities have also resulted in increased
revenues and cash flows as well as improvements in quality. Subsequent to year
end, Glacier was awarded the contract to print The Globe and Mail for
Saskatchewan and Manitoba.
Cost Reduction Strategy and Results
Glacier reduced its cost base significantly during 2009 in order to mitigate the
impact of the decline in revenues. As previously reported, management was
proactive in the period preceding the recession and began efforts to identify
comprehensive cost reduction opportunities and contingency plans at the
beginning of 2008 in order to be prepared for a potential economic downturn.
Some of these initiatives were implemented during the year which contributed to
the higher profit levels achieved in 2008, which made the Company's
year-over-year EBITA decline appear greater than would have been the case had
management waited until 2009 to reduce costs.
Beginning in the first quarter of 2009, significant additional cost reduction
measures were targeted to offset the revenue declines experienced by the
Company's operations, including staff layoffs, reduction in hours for part-time
employees, reduction in newsprint consumption, and a wide variety of other
measures. The Company structured these cost reduction initiatives to reduce
operating expenses while maintaining the strength of its businesses and
competitiveness as much as possible.
Consequently, management chose to monitor revenue declines as the recession
unfolded and phase in cost reductions as required so as not to overreach in the
reduction of resources. This was deemed better for the business than cutting
costs deeper initially than might have been required and weakening operating
strength.
The result of this was that some of the initiatives were implemented part way
through the first, second and third quarters with only a portion of the benefit
of the savings being realized in 2009. The full annualized benefit will be
realized in 2010. In total, non-variable costs were reduced more than $14
million on an annualized basis.
Variable costs including newsprint consumption and sales commission expense also
reduced in 2009 as revenues declined. The reduced newsprint volumes were
initially offset by newsprint price increases in January 2009, which prices
remained at this level for the first three months of 2009, then declined and
remained at June 2009 levels for the remainder of the year.
The contribution of the cost savings was partially offset by lower advertising
rates that resulted from price discounting in some markets. While considerable
efforts have been made to maintain prices, some discounting has been required to
retain revenue and corresponding profit, albeit at lower margins.
Financial Position
Management focused on reducing debt levels during the recession and did not make
any material acquisitions as a result of this prioritization of resource
utilization and capital allocation. Proactive efforts had been made to reduce
debt to 2.2x EBITA at the end of 2008 in order to be in a strong financial
position with which to sustain operations during the recession and not be forced
to damage the long-term viability of the business as a result of higher leverage
levels.
The Company used its cash flow from operations to pay down $14.5 million of debt
during the year. Glacier's consolidated debt net of cash outstanding before
deferred financing charges and other expenses was $99.9 million as at December
31, 2009 compared to $112.6 million as at December 31, 2008.
While paying down debt, Glacier was also able to fund $9.3 million of capital
expenditures, $6.1 million of which were investment capital expenditures made
primarily to consolidate and expand several printing facilities and upgrade
production technology. These investments have resulted in attractive direct
revenue and cash flow improvements and payback consistent with Glacier's
targeted return on investment, as well as improved quality and colour capacity.
Glacier's consolidated debt net of cash outstanding before deferred financing
charges and other expenses was 2.8x EBITA as at year end. During the first
quarter of 2009, Glacier restructured its senior credit facility into a single
revolving loan facility that has no required principal repayments and
significantly increased borrowing capacity. The Company subsequently amended its
revolving facility by extending the maturity date to July 1, 2011 on
substantially the same terms and conditions.
Outlook for 2010
Overall there is reason for cautious optimism. While some areas of Glacier`s
businesses are not yet experiencing signs of growth and are still experiencing
weakened business activity from the recession, it appears that most areas of
Glacier's business have at minimum stabilized in terms of revenue levels (with
some of these revenues stabilizing at levels less than the first part of 2009),
while other areas have begun to show signs of growth.
The combination of the stabilization of revenue for some operations, growth
opportunities for others and the lower cost base should result in significantly
increased profitability during 2010.
It is also important to note that Glacier's operations were generating strong
organic same-store revenue growth in late 2008 just before the recession began,
which reflects the strength of 1) its local newspapers that are a primary source
of information for the communities they serve and a primary marketing channel
for advertisers and 2) its trade and business and professional information
operations that provide essential information for business and industry readers
who need information to make informed and prudent decisions.
In particular, Glacier's local community newspapers were growing organically at
approximately 8% for 2008 and during the months immediately prior to the
downturn. This underscores the different attributes that exist between local
community newspapers and large metropolitan daily newspapers. While secular
risks exist as a result of the Internet, Glacier's local newspapers offer a
unique selling proposition and competitive advantage through the local
information that they provide. This information can be delivered by Glacier in
print or online, or perhaps in tablet form in the future. Given that the demand
for this information is expected to exist for the long term, Glacier expects to
be able to continue to monetize the information and marketing value through
advertising and other revenue sources. As 85% of Glacier's local newspaper
distribution is free, this also provides for a more durable reach of readership
for advertisers over the long term where total market coverage can always be
provided.
Opportunities for Value Creation
Glacier's primary objective during 2009 was to reduce debt and maintain
profitability while preserving operational strength.
Despite the reduction of revenues and profitability during the year, Glacier is
still generating strong operating cash flow, which is expected to improve in
2010 as stated.
Given that the economy appears to be recovering, Glacier is now reviewing
acquisition opportunities that fit with the Company's business strategy.
In this regard, Glacier would like to expand its electronic business information
and online operations given the growth prospects of these businesses. This
strategy will be pursued as a complementary strategy that will augment Glacier's
existing print businesses, which continue to offer significant utility to
readers and advertisers, as both print and online formats continue to work well
for Glacier's customers. Growth will be targeted through a balance of utilizing
print, online and other channels, as well as content and product innovation and
diversification.
Shares in Glacier can be 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
Canadian generally accepted accounting principles (GAAP), Glacier uses certain
non-GAAP measures that may be different from the performance measures used by
other companies. These non-GAAP measures include cash flow from operations
(before changes in non-cash operating accounts and non-recurring items) and
earnings before interest, taxes and amortization (EBITA), which are not
alternatives to GAAP financial measures. Management focuses on operating cash
flow per share as the primary measure of operating profitability, free cash flow
and value. EBITA per share is also an important measure as the Company has low
ongoing capital expenditures and amortization largely relates to acquisition
goodwill and copyrights and does not represent a corresponding sustaining
capital expense. These non-GAAP measures do not have any standardized meanings
prescribed by GAAP 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 "Cost Reduction Strategy and
Results", "Financial Position" "Outlook for 2010", and "Opportunities for Value
Creation" and statements relating to the Company's expectations regarding
revenues, expenses, cash flows and future profitability, including our
expectations that revenue growth will resume once the economy recovers, that
debt will be maintained at manageable levels, and that cost savings will be
realized during in 2010. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, such statements are
based on certain assumptions, including those assumptions described under the
headings "Operating Performance", "Cost Reduction Strategy and Results",
"Financial Position", "Outlook for 2010", and "Opportunities for Value Creation"
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 postal subsidies, 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.
Glacier Media (TSX:GVC)
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