FP Newspapers Inc.

TSX : FP


FP Newspapers Inc.

May 13, 2014 04:00 ET

FP Newspapers Inc. Reports First Quarter 2014 Results and May 2014 Dividend

WINNIPEG, MANITOBA--(Marketwired - May 13, 2014) - FP Newspapers Inc. (TSX:FP) ("FPI") announces financial results for the quarter ended March 31, 2014. FPI is the successor to the business of the FP Newspapers Income Fund and owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP").

First quarter operating results of FPI

FPI had net earnings of $0.5 million, or $0.079 per share, during the three months ended March 31, 2014, compared to net earnings of $1.0 million, or $0.141 per share in the same quarter last year.

First quarter operating results of FPLP

FPLP's print advertising revenues for the three months ended March 31, 2014 were $15.2 million, a $1.9 million or 10.9% decrease compared to the same period last year. FPLP's largest print advertising revenue category, display advertising including colour, was $9.5 million, a decrease of $1.8 million or 15.8% from the same period in the prior year, primarily due to decreased spending in the automotive and telecommunications categories. Classified advertising revenues for the first quarter decreased by $0.1 million or 4.3% compared to the same period last year, primarily due to lower spending in the employment and real estate categories. Flyer distribution revenues for the quarter were unchanged compared to the same period in 2013.

Print circulation revenues for the three months ended March 31, 2014 were $6.0 million, a decrease of $0.4 million or 5.8% from the first quarter of 2013, primarily the result of lower unit sales and lower average realized rates.

Operating expenses for the three months ended March 31, 2014 were $21.5 million, a decrease of $1.0 million or 4.3% compared to the same quarter last year. Employee compensation costs for the first quarter decreased by $0.3 million from the same period in the prior year, primarily due to the reduction in the number of employees. Newsprint expense for FPLP's own publications for the first quarter decreased by $0.1 million or 6.0% compared to the same period in the prior year, primarily due to lower volumes resulting from fewer circulation copies. Newsprint expense for commercial printing remained at relatively the same level as the first quarter in 2013. Other expenses decreased by $0.5 million or 11.6% compared to the same quarter last year, primarily due to the elimination of third-party inserting costs with the start-up of the new high-speed inserting equipment which was added to the Winnipeg Free Press production facility.

EBITDA(1) for the three months ended March 31, 2014 was $3.1 million compared to $4.4 million for the same period last year, a decrease of 29.5%. EBITDA(1) margin for the three months ending March 31, 2014 was 13.1% compared to 16.9% in the same period last year.

FPLP's net earnings were $1.7 million for the three months ended March 31, 2014, compared to $2.9 million for the same period last year.

Cash available for distribution attributable to FPI(2) was $0.4 million or $0.062 per share for the three months ended March 31, 2014, compared to $1.0 million or $0.149 per share in 2013.

Dividends

FPI declared dividends to shareholders of $1.0 million or $0.150 per share for the three months ended March 31, 2014 and the three months ended March 31, 2013.

May 2014 Dividend

FPI today announced a cash dividend of $0.05 per share, payable on June 30, 2014 to shareholders of record at the close of business on May 30, 2014.

All dividends paid by the Company in 2014 and subsequent years, unless stated otherwise, are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends. Holders of shares who are non-residents of Canada will be required to pay all withholding taxes payable in respect of the dividend.

Outlook

Total print advertising revenues for the first quarter were 10.9% lower than the prior year. Early into the second quarter we have seen similar levels of year-over-year declines in print advertising revenues.

Early into the second quarter our Derksen Printing facility in Steinbach completed the installation of new ultra-violet ink processing equipment on its existing web press line. This new equipment provides Derksen the ability to print on brighter paper stock and compete for expanded lines of business. We are anticipating increased commercial printing revenues going forward resulting from this investment.

In response to the declining advertising revenue FPLP has experienced over the recent quarters, we are completing a review of our operating costs at all our business units and have and will continue to implement cost reduction actions wherever this makes business sense.

Additional Information

Additional 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 Statements

Certain 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, 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 13, 2014, which is available at www.sedar.com.

In addition, although the forward-looking statements contained in this news release are based upon assumptions that management of FPI and FPLP believe to be reasonable, 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 FPI

FPI 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 News Express 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 109,700 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 11,900 copies. Canstar Community News publishes weekly with an average circulation of approximately 200,000 copies. The businesses employ approximately 540 people in Winnipeg, Brandon, Steinbach and Carberry, Manitoba.

Conference Call

FPI invites you to participate in a conference call on Tuesday, May 13, 2014 at 1:30 p.m. Eastern (12:30 p.m. Central) to discuss the first quarter results.

The dial-in number is 416-340-2216, or dial toll free at 866-226-1792. 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 June 2, 2014. To hear the replay, dial 905-694-9451 or dial toll free at 800-408-3053. The replay code is 5726358.

Non-IFRS financial measures

(1) EBITDA

FPLP believes that in addition to net earnings as reported on FPLP's interim 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 and 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 other issuers and, accordingly, EBITDA may not be comparable to measures used by other issuers. FPLP's method of calculating EBITDA is detailed in the Management's Discussion and Analysis for the quarter ended March 31, 2014 on FPI's website 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 uses 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 March 31, 2014 on FPI's website www.fpnewspapers.com or on SEDAR at www.sedar.com.

FP Newspapers Inc.
Condensed Statements of Earnings and Comprehensive Income
(unaudited, in thousands of Canadian dollars except per share amounts)
Three Months Ended March 31,
2014 2013
Equity interest from FP Canadian Newspapers Limited Partnership Class A limited partner units $ 809 $ 1,424
Administration expenses (60 ) (83 )
Net earnings before income taxes 749 1,341
Current income tax (expense) (382 ) (367 )
Deferred income tax recovery 178 -
Net earnings for the period $ 545 $ 974
Items that will not be reclassified to net earnings:
Equity interest of other comprehensive (loss) from FP Canadian Newspapers Limited Partnership (500 ) (166 )
Deferred income tax recovery 134 44
Comprehensive income for the period $ 179 $ 852
Weighted average number of Common Shares outstanding 6,902,592 6,902,592
Net earnings per share - basic and diluted $ 0.079 $ 0.141
Condensed Consolidated Income Statements and Statements of Comprehensive Income
FP Canadian Newspapers Limited Partnership
(unaudited, in thousands of Canadian dollars)
Three Months Ended March 31,
2014 2013
Revenue
Print advertising $ 15,185 $ 17,035
Print circulation 6,049 6,424
Commercial Printing 1,240 1,193
Digital 784 721
Promotion and services 235 355
TOTAL REVENUE 23,493 25,728
Operating expenses
Employee compensation 10,344 10,689
Newsprint and other paper 2,102 2,172
Delivery 3,858 3,906
Other 4,066 4,599
Depreciation and amortization 1,044 1,070
Restructuring charge 49 -
OPERATING INCOME 2,030 3,292
Other income 31 44
Finance costs (409 ) (425 )
(Loss) on interest rate swap - (4 )
NET EARNINGS FOR THE PERIOD $ 1,652 $ 2,907
Items that may be reclassified subsequently to net earnings
Unrealized gain on investment - 18
Items that will not be reclassified to net earnings
Remeasurements for defined benefit pension plan (1,020 ) (338 )
COMPREHENSIVE INCOME FOR THE PERIOD $ 632 $ 2,587

Contact Information

  • FP Newspapers Inc.
    Daniel Koshowski
    CFO
    (204) 697-7425
    (204) 632-0281 (FAX)