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Press release from Marketwire

FP Newspapers Inc. Reports Third Quarter 2012 Results and November 2012 Dividend

Wednesday, November 14, 2012

FP Newspapers Inc. Reports Third Quarter 2012 Results and November 2012 Dividend20:21 EST Wednesday, November 14, 2012WINNIPEG, MANITOBA--(Marketwire - Nov. 14, 2012) - FP Newspapers Inc. ("FPI") (TSX:FP) announces financial results for the quarter ended September 30, 2012. FPI owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP").Third quarter operating results of FPIFPI had net earnings of $1.0 million, or $0.143 per share, during the three months ended September 30, 2012, which is unchanged from the same quarter last year. Third quarter operating results of FPLPFPLP's revenue for the three months ended September 30, 2012 was $26.3 million, a decrease of $0.1 million or 0.3% from the same three months in the prior year. Advertising revenues for the three months ended September 30, 2012 were $17.5 million, a $0.2 million or 1.0% decrease compared to the same period last year. FPLP's largest advertising revenue category, display advertising including colour, was $11.1 million, an increase of $0.2 million or 1.6% from the same period in the prior year, primarily due to increased spending in the automotive category together with increased spending by two hospital lotteries, partly offset by decreased spending in the telecommunication and travel categories. Classified advertising revenues for the third quarter decreased by $0.4 million or 13.9% compared to the same period last year, primarily due to decreased spending in the employment and automotive categories. Flyer distribution revenues for the quarter increased by $0.1 million or 1.6% primarily due to a small increase in flyer volumes. Circulation revenues for the third quarter were $6.7 million, a decrease of $0.1 million from the third quarter of 2011, with lower unit sales offsetting increased revenue from higher subscription rates. Commercial printing revenues for the quarter increased by $0.3 million, primarily attributable to increased printing at the Derksen Printers operation. Digital revenues for the third quarter increased by $0.1 million primarily due to increases in online and mobile product revenues and website design services. Other revenues for the third quarter decreased by $0.1 million, primarily due to non-recurring custom book orders revenue in the third quarter of 2011.Operating expenses for the three months ended September 30, 2012 were $23.0 million, virtually unchanged from the same quarter last year. Operating expenses excluding restructuring charges were lower by $0.4 million or 1.6% compared to the same quarter last year. Employee compensation costs for the third quarter were unchanged from the prior year, primarily due to fewer employees, partially offset by the 2% wage increase included in the collective agreements and an increase in the expense for the defined benefit pension plan. In the third quarter of 2012, seventeen positions were eliminated through a combination of retirements, voluntary resignations and layoffs. During the third quarter, a restructuring charge of $0.4 million was incurred relating to termination payments to employees. Newsprint expense for FPLP's own publications for the quarter decreased by $0.2 million or 9.8% compared to the same period in the prior year, primarily due to lower volumes resulting from fewer circulation copies, as newsprint prices remained unchanged from the prior year. Newsprint expense for commercial printing increased by $0.1 million primarily due to increased commercial printing at Derksen Printers compared to the third quarter in 2011. Other expenses decreased $0.2 million or 4.7% compared to the same quarter last year, primarily due to some non-recurring maintenance expenses incurred mainly at the Winnipeg facility in 2011.For the third quarter, EBITDA(1) was lower by $0.2 million or 3.7% compared to the third quarter last year. EBITDA(1), for the third quarter excluding restructuring charges of $0.4 million, increased by $0.2 million or 5.4% compared to the same quarter last year. Net earnings for the three months ended September 30, 2012 were $2.9 million, an increase of $0.1 million, primarily due to lower finance costs. For the three months ended September 30, 2012, distributable cash attributable to FPI(2) was $0.8 million or $0.118 per share, virtually unchanged from the same quarter in the prior year. Nine months operating results of FPIFPI's net earnings were $3.1 million for the nine months ended September 30, 2012, compared to net earnings of $3.7 million for the same period last year. The decrease in net earnings for the nine months ended September 30, 2012 is primarily due to lower equity earnings from FPI's investment in FPLP compared to 2011. Nine months operating results of FPLPFPLP's revenue for the nine months ended September 30, 2012 was $81.3 million, unchanged from the same period in the prior year. Excluding revenue attributable to the Derksen operation for the first quarter of 2012 and 2011, revenue decreased by $0.9 million or 1.2%. Advertising revenues for the nine months ended September 30, 2012, excluding the Derksen business for the first quarter, were $54.0 million, a $1.5 million or 2.7% decrease compared to the same period last year. FPLP's largest advertising revenue category, display advertising including colour, excluding the Derksen business for the first quarter, was $34.7 million, a decrease of $0.7 million or 2.1% from the same period in the prior year, primarily due to decreased spending in the telecommunications and travel categories, partly offset by increased spending in the automotive category and new revenue from two third-party magazines. Classified advertising revenues for the nine months ended September 30, 2012, on a same-store basis, decreased by $0.9 million or 9.7% compared to the same period last year, primarily due to decreased spending in the employment, automotive and obituary categories, partly offset by increased revenue in the real estate category. Flyer distribution revenues for the nine months increased by $0.1 million, primarily due to increased volumes. Circulation revenues for the nine months ended September 30, 2012, excluding the Derksen business for the first quarter, were $20.2 million, a decrease of $0.3 million or 1.5% compared to the same period in 2011, with lower unit sales offsetting increased revenue from higher subscription rates. Commercial printing revenues, excluding the Derksen business from the first quarter, for the nine months ending September 30, 2012 increased by $0.4 million, which is primarily attributable to increased printing volumes at Derksen Printers during the second and third quarters. Digital revenues for the nine months increased by $0.2 million or 24.9%, primarily due to the increase in Winnipeg Free Press website banner advertising and revenues from online web ads and other digital offerings introduced in 2011. Other income increased by $0.2 million, primarily due to sales of the Winnipeg Jets 2011/12 Officially Licensed Medallion Collection in the first quarter of 2012.Operating expenses for the nine months ended September 30, 2012 were $70.9 million, a $2.0 million or 2.9% increase from the same period last year. Operating expenses year to date, excluding the Derksen business for the first quarter, increased $1.1 million or 1.6% compared to last year. Employee compensation costs for the nine months, excluding the Derksen business for the first quarter, increased by $0.2 million or 0.6%, primarily due to the 2% wage increase included in the collective agreements, partially offset by employee reductions in the second and third quarters and to-date in the fourth quarter, which resulted in thirty positions being eliminated through a combination of retirements, voluntary resignations and layoffs. During the nine months ending September 30, 2012 a restructuring charge of $0.5 million was incurred relating to termination payments for positions eliminated in the second and third quarters, compared to a charge for similar purposes of $0.3 million in the prior year. Newsprint expense for FPLP's own publications for the nine months, excluding the Derksen business for the first quarter, decreased by $0.5 million compared to the prior year, primarily due to lower volumes mainly from fewer circulation copies. Newsprint expense for commercial printing, excluding the Derksen business for the first quarter, increased by $0.2 million primarily due to an increase in commercial printing at Derksen Printers in the second and third quarters compared to 2011. Other expenses for the first nine months ending September 30, 2012, increased by $1.1 million or 7.9% compared to the same period last year primarily due to increases during the first quarter, which included new outside print costs for two third-party magazines, costs for the Winnipeg Jets medallion circulation promotion project, a non-recurring reduction in an accrual relating to a labour matter during the first quarter in the prior year and increased costs on our long-term sponsorship agreement with the Winnipeg Jets. Depreciation and amortization remained at approximately the same level compared to the same period last year. For the nine months ending September 30, 2012, EBITDA(1) was lower by $2.1 million or 12.9% compared to last year. EBITDA(1) for the nine months ending September 30, 2012, excluding the restructuring charges, was lower by $1.8 million or 11.8%. Net earnings for the nine months ending September 30, 2011 were $9.0 million, a decrease of $1.7 million or 15.7%. Distributable cash attributable to FPI(2) for the nine months ending September 30, 2012 was $2.4 million or $0.342 per share, down from $2.9 million or $0.416 per share for the same period of 2011. The decrease in distributable cash attributable to FPI(2) is primarily a result of lower EBITDA(1) of FPLP.DividendsFPI declared dividends to shareholders of $1.0 million or $0.15 per share and $3.1 million or $0.45 per share for the three and nine months ended September 30, 2012, unchanged from the same periods of 2011.November 2012 DividendFPI today announced a cash dividend of $0.05 per share, payable on December 31, 2012 to shareholders of record at the close of business on November 30, 2012. Outlook During the third quarter and early into the fourth quarter we have seen an improvement in the level of advertising revenues compared to the first two quarters of this year. Stronger automotive advertising is primarily the reason for this change, and in the fourth quarter we will benefit from new advertising spending along with incremental revenues related to new retail openings, including the long-anticipated opening of Manitoba's first IKEA store, which will open in Winnipeg on November 28, 2012. The fourth quarter of 2012 includes one less Saturday publication compared to the prior year, which could have a negative impact on the overall revenue reported versus the prior year.Newsprint prices have not changed since September 2010 and we are not anticipating a change before the end of this year. The fourth quarter results and the 2013 operating costs will benefit from the restructuring changes implemented during the first three quarters of this year.As other newspapers have introduced systems of paid digital content as a way to capture new revenue to recover some of the diminishing print advertising revenue, FPLP management is actively monitoring these efforts and studying whether a paid digital content system would be appropriate for our publications.Additional InformationAdditional information including financial statements and management's discussion and analysis can be found on the Company's website at www.fpnewspapers.com or on SEDAR at www.sedar.com.Caution Regarding Forward-looking StatementsCertain statements in this news release may constitute forward-looking statements within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These statements include but are not limited to statements regarding management's intent, belief or current expectations with respect to market and general economic conditions, future costs and operating performance. Generally, but not always, forward-looking statements will be indicated by words such as "may", "will", "intend", "anticipate", "expect", "believe", "plan", "is budgeting for" or similar terminology. Forward-looking statements are subject to known and unknown risks and uncertainties that may cause the actual results, performance or achievements of FPI or FPLP, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the current general economic uncertainty, FPLP's ability to effectively manage growth and maintain its profitability, FPLP's ability to operate in a highly competitive industry, FPLP's ability to compete with other forms of media, FPLP's ability to attract advertisers, FPLP's reliance upon key personnel, FPLP's relatively high fixed costs, FPLP's dependence upon particular advertising customer segments, indebtedness incurred in making acquisitions, the availability of financing for capital improvements, the availability of an extension or refinancing of FPLP's term loan facilities, costs related to capital expenditures, cyclical and seasonal variations in FPLP's revenues, the risk of acts of terrorism, the cost of newsprint, the potential for labour disruptions, the risk of equipment failure, and the effect of Canadian tax laws. Additional information about these and other factors is discussed under "Risk Factors" in FPI's Annual Information Form dated March 15, 2012, which is available at www.sedar.com.In addition, although the forward-looking statements contained in this news release are based upon what management of FPI and FPLP believe are reasonable assumptions, such assumptions may prove to be incorrect.Forward-looking statements speak only as of the date hereof and, except as required by law, FPI and FPLP assume no obligation to update or revise them to reflect new events or circumstances. Because forward-looking statements are inherently uncertain, readers should not place undue reliance on them.About FPIFPI owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP"). FPLP owns the Winnipeg Free Press, the Brandon Sun, and their related businesses, as well as the Canstar Community News division, the publisher of six community newspapers in the Winnipeg region, The Carillon in Steinbach with its related commercial printing operations, and the Carberry Express News weekly publication. The Winnipeg Free Press publishes six days a week for delivery to subscribers and single copy sales, serving Winnipeg and Manitoba with an average Monday through Saturday circulation of approximately 123,300 copies. On Sundays the Winnipeg Free Press publishes a newspaper sold through single-copy retail outlets and vending boxes. The Brandon Sun publishes six days a week, serving the region with an average circulation of approximately 15,000 copies. Canstar Community News publishes weekly with an average circulation of approximately 200,000 copies. The businesses employ approximately 570 people in Winnipeg, Brandon and Steinbach. Conference CallThe Corporation invites you to participate in a conference call on Thursday, November 15, 2012 at 12:00 p.m. Eastern (11:00 a.m. Central) to discuss the third quarter results.The dial-in number is 416-340-2217, or dial toll free at 866-696-5910. To ensure your participation, please dial in five minutes before the start of the conference call. Management's presentation will be followed by a question and answer period.For those unable to participate, the call will be available to listeners upon completion of the call until November 29, 2012. To hear the replay dial 905-694-9451 or dial toll free at 800-408-3053. The replay code is 4536903.Non-IFRS financial measures(1) EBITDA FPLP believes that in addition to net earnings as reported on FPLP's condensed consolidated statements of earnings, EBITDA is a useful supplemental measure as it is a measure used by many of FPLP's unitholders, creditors and analysts as a proxy for the amount of cash generated by FPLP's operating activities. EBITDA is not a recognized measure of financial performance under IFRS. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of FPLP`s performance. FPLP's method of calculating EBITDA may differ from that used by other issuers and, accordingly, EBITDA as calculated by FPLP may not be comparable to similar measures used by other issuers. FPLP's method of calculating EBITDA is detailed in the Management's Discussion and Analysis for the quarter ended September 30, 2012, available on FPI's website at www.fpnewspapers.com or on SEDAR at www.sedar.com. (2) Distributable Cash Attributable to FPI FPI believes that in addition to the disclosure of cash flow from operations, distributable cash attributable to FPI is an important supplemental measure of cash flow because it provides investors with an indication of the amount of cash available for distribution to shareholders and because such calculations are required by the terms of the partnership agreement governing FPLP. Distributable cash attributable to FPI is not a defined term under IFRS, and it should not be construed as an alternative to using net earnings or the statements of cash flows as measures of profitability and cash flow. Readers are cautioned that distributable cash as calculated by FPI may not be comparable to similar measures presented by other issuers. FPI used this measure as a factor to determine whether to adjust its monthly dividends to shareholders. FPLP's method of calculating distributable cash attributable to FPI is detailed in the Management's Discussion and Analysis for the quarter ended September 30, 2012, available on FPI's website at www.fpnewspapers.com or on SEDAR at www.sedar.com. FP Newspapers Inc.Condensed Statements of Earnings and Comprehensive Income (Loss)(unaudited, in thousands of Canadian dollars except per share amounts)Three Months Ended September 30,Nine Months Ended September 30,2012201120122011$$$$Equity interest from FP Canadian Newspapers Limited Partnership Class A limited partner units1,4211,3714,4155,236Equity interest from FPCN General Partner Inc.-37-37Administration expenses(60)(78)(186)(266)Other income1244Net earnings before income taxes1,3621,3324,2335,011Current income tax (expense)(485)-(3,373)-Deferred income tax recovery (expense)111(358)2,266(1,308)Net earnings for the period9889743,1263,703Equity interest of other comprehensive (loss) from FP Canadian Newspapers Limited Partnership(240)(2,415)(1,329)(2,450)Deferred income tax recovery65652358662Comprehensive income (loss) for the period813(789)2,1551,915Weighted average number of Common Shares outstanding6,902,5926,902,5926,902,5926,902,592Net earnings per share - basic and diluted$ 0.143$ 0.141$ 0.453$ 0.536FP Canadian Newspapers Limited PartnershipCondensed Consolidated Income Statements and Statements of Comprehensive Income (Loss)(unaudited, in thousands of Canadian dollars)Three Months Ended September 30,Nine Months Ended September 30,2012201120122011$$$$RevenueAdvertising17,48717,67054,38555,674Circulation6,7436,88420,24620,520Commercial Printing1,1288653,3412,262Digital7056072,1361,931Promotion and services2563781,236940TOTAL REVENUE26,31926,40481,34481,327Employee compensation10,61410,64432,75232,118Newsprint and other paper2,3312,4067,3207,300Delivery of newspapers4,1654,17512,63812,532Other4,4484,66514,41713,354Depreciation and amortization1,0651,0943,2533,309Restructuring charge412-502264OPERATING INCOME3,2843,42010,46212,450Other income4832141156Finance costs(438)(654)(1,629)(1,921)Gain on interest rate swap7-37-Net earnings for the period2,9012,7989,01110,685Unrealized gain (loss) on investment8(24)32(29)Actuarial (loss) on defined benefit pension plan(490)(4,929)(2,713)(5,000)Comprehensive income (loss) for the period2,419(2,155)6,3305,656FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: FP Newspapers Inc.Daniel KoshowskiCFO(204) 697-7425(204) 632-0281 (FAX)www.fpnewspapers.com