Newfoundland Capital Corporation Limited - First Quarter 2009 - Period Ended March 31 (unaudited)



    DARTMOUTH, NS, May 7 /CNW/ - Newfoundland Capital Corporation Limited
("Company") today announces its financial results for the first quarter ending
March 31, 2009.

    Highlights

    Revenue in the broadcasting segment continued to grow in the first
quarter despite the current economic climate.

    
    - Revenue of $23.1 million was $1.4 million, or 6% higher than last year
      due primarily to new stations launched by the Company within the past
      year.

    - Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"(1)) of $3.0 million in the quarter were $0.2 million higher
      than last year, mostly attributable to lower corporate costs.

    - Net income of $0.6 million was on par with the same quarter last year.

    Significant events

    - In January, the Company announced that it would not proceed with its
      previously announced acquisition in Ontario. Because of the seriously
      deteriorating credit markets, increased costs of borrowing and the
      current economic climate, it was determined that it was not the
      appropriate time to increase the debt levels of the Company. The
      Company has the option to continue with this acquisition under the same
      terms and conditions up until April 30, 2010.

    - The Company launched a new FM repeating signal in Pincher Creek,
      Alberta.

    - The Company was approved for four new repeater licences in Prince
      Edward Island, and received approval to convert two more AM stations to
      FM in Alberta.
    

    "We are pleased that revenue grew in the first quarter, despite the poor
economic environment", commented Rob Steele, President and Chief Executive
Officer. "Our short-term strategy remains consistent: grow the Company
organically, astutely continue our revenue producing efforts,reduce debt and
continue with planned expansion activities. These include launching the new FM
station in Sudbury which we hope to have on-air by early fall and we are
developing plans to launch recently awarded FM conversions."

    
    Financial Highlights - First Quarter                       (restated)(2)
    (thousands of dollars except share information)      2009          2008
    -------------------------------------------------------------------------
    Revenue                                        $   23,118        21,738
    EBITDA(1)                                           3,022         2,850
    Net income                                            552           574
    -------------------------------------------------------------------------
    Earnings per share - basic and diluted               0.05          0.05
    Share price, NCC.A (closing)                        19.00         20.00
    Weighted average number of shares outstanding
     (in thousands)                                    10,991        11,091
    -------------------------------------------------------------------------
    Total assets                                      232,327       230,010
    Long-term debt                                     71,840        64,499
    Shareholders' equity                               89,675       103,293
    -------------------------------------------------------------------------
    (1) Refer to page 12 for the reconciliation of EBITDA to net income.
    (2) Refer to page 10 for additional information on restatement of
        comparative figures.
    

    Management's Discussion and Analysis

    The following interim discussion and analysis of financial condition and
results of operations of Newfoundland Capital Corporation Limited (the
"Company") has been prepared as of May 7, 2009. The purpose of the
Management's Discussion and Analysis ("MD&A") is to provide readers with
additional complementary information regarding the Company's financial
condition and results of operations and should be read in conjunction with the
unaudited interim consolidated financial statements and related notes for the
periods ended March 31, 2009 and 2008 as well as the annual audited
consolidated financial statements and related notes and the MD&A contained in
the Company's 2008 Annual Report. These documents along with the Company's
Annual Information Form and other public information are filed electronically
with various securities commissions in Canada through the System for
Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at
www.sedar.com.
    Management's Discussion and Analysis of financial condition and results
of operations contains forward-looking statements. These forward-looking
statements are based on current expectations. The use of terminology such as
"expect", "intend", "anticipate", "believe", "may", "will", and other similar
terminology relate to, but are not limited to, our objectives, goals, plans,
strategies, intentions, outlook and estimates. By their very nature, these
statements involve inherent risks and uncertainties, many of which are beyond
the Company's control, which could cause actual results to differ materially
from those expressed in such forward-looking statements. Readers are cautioned
not to place undue reliance on these statements. The Company disclaims any
intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

    Corporate Profile

    The Company is one of Canada's leading radio broadcasters with 81
licences across Canada. The Company reaches millions of listeners each week
through a variety of formats and is a recognized industry leader in radio
programming, sales and networking.

    Strategy and Objectives

    With the Company's main goal being to increase value for shareholders,
the Company's long-term strategy remains the same - maximizing returns on
existing operations, converting AM stations to FM, and adding new licences
through business and licence acquisitions and through the Canadian
Radio-television and Telecommunications Commission ("CRTC") licence
application process.
    While all of these continue to be important and form the basis of the
long-term plan, due to the uncertain economic climate, management's short-term
focus is on organic growth and reducing debt. Management will continue to
explore acquisition opportunities that fit the Company's growth strategy;
however, it will not proceed with any transactions, projects or activities
that are not cash accretive in the near term, pose unnecessary risks, or
result in increasing debt to a level beyond management's tolerance. Decisions
as to proceeding with new undertakings will be made in the best interest of
the Company and its shareholders.
    As stated in the Company's 2008 Annual Report, the short-term goals have
been re-aligned to focus on growth of existing operations and reducing debt.
To date in 2009, operating results have been positive and the Company's total
debt has been reduced thus far by $2.4 million.

    Corporate Developments

    During 2008, the Company's investment portfolio of marketable securities
experienced unrealized declines in value of $7.9 million. In the first quarter
of 2009, the value of these securities recovered by almost $1.0 million. Until
the global financial markets stabilize, fluctuations in the value of the
portfolio could continue.
    The following is a review of the key corporate developments which should
be considered when reviewing the "Consolidated Financial Review" section.
    
    2009 developments

    - January 2009 - Received CRTC approval for four new FM repeater
      licences. These will allow the Company to broadcast the two FM stations
      in Charlottetown, Prince Edward Island to two new communities in the
      same province.

    - March 2009 - Hot 89.9, located in Ottawa, Ontario, was named the 2008
      Contemporary Hits Radio station of the year during Canada Music Week.

    - April 2009 - CRTC approved two AM to FM conversions for stations in
      St. Paul and High Prairie, Alberta.

    2008 developments

    - March 2008 - Re-launched two stations in Alberta; CIQX-FM in Calgary as
      XL103-FM, and CKRA-FM in Edmonton as Capital-FM. Both feature Classic
      Hits from the 60's, 70's, and 80's and are outperforming their
      predecessors.

    - June 2008 - Launched three new FM stations in Fort McMurray, Alberta,
      and in Kentville and Sydney, Nova Scotia. The formats are Classic Rock
      for Fort McMurray and Kentville while the Sydney station plays Top 40
      music.

    - July 2008 - Completed the purchase of the remaining 50% interest in
      Metro Radio Group Inc. for $8.5 million. Metro Radio Group Inc.
      operates CKUL-FM in Halifax, Nova Scotia.

    - July 2008 - Announced an agreement to exchange radio stations with
      Rogers Broadcasting Limited (a Division of Rogers Communications Inc.
      RCI.A and RCI.B) subject to approval from the CRTC. The Company will
      exchange its AM broadcast licence in Halifax, Nova Scotia and receive
      in return Rogers' AM licence in Sudbury, Ontario and cash consideration
      of $5.0 million. Both simultaneously submitted applications for this
      transfer of assets along with applications requesting conversion of the
      AM licences to FM. In November 2008, the CRTC approved these
      applications and the new Sudbury FM should be on-air within the next
      six months.

    - July 2008 - CRTC approved the Company's application for a new FM
      repeating signal in Pincher Creek, Alberta. This was on-air in early
      January 2009.

    - December 2008 - CRTC approved the Company's application to convert an
      AM signal to FM in Athabasca, Alberta.
    
    The results of the above acquired or launched stations have been included
in the consolidated financial statements since the respective acquisition and
launch dates.

    Consolidated Financial Review

    Revenue

    In the quarter, consolidated revenue of $23.1 million was $1.4 million or
6% higher than last year; this improvement came exclusively from the
broadcasting segment.

    Other income

    Other income for the quarter of $1.0 million was $0.1 million or 10%
higher than last year largely due to unrealized gains on marketable securities
of $1.0 million compared to last year's $0.7 million.

    Operating expenses

    Consolidated operating expenses of $21.1 million were $1.3 million or 7%
higher than the first quarter last year. The increase was a result of higher
costs in the broadcasting segment due to recent new station launches.

    Earnings before interest, taxes, depreciation and amortization
    ("EBITDA"(1))

    Consolidated EBITDA in the quarter of $3.0 million was $0.2 million
higher than last year. The improvement was achieved by reducing corporate
costs.
    A more detailed discussion on revenue, other income, operating expenses
and EBITDA are described in the section entitled "Financial Review by
Segment".

    Depreciation and amortization

    In the quarter, depreciation and amortization expense was $0.1 million or
12% higher compared to 2008; a result of an increased depreciable asset base.

    Interest expense

    Interest expense in the first quarter was slightly higher than the prior
year.

    Accretion of other liabilities

    Accretion of other liabilities arises from discounting Canadian Content
Development ("CCD") commitments to reflect the fair value of the obligations.
The expense in the quarter of $0.2 million was on par with accretion
recognized in the first quarter last year.

    Income taxes

    The effective income tax rate this quarter was on par with the statutory
rate of 35%.

    Net income

    First quarter net income of $0.6 million was on par with last year.

    Other comprehensive income ("OCI")

    OCI consists of the net change in the fair value of the Company's cash
flow hedges. These include interest rate swaps and an equity total return
swap. The net change in the fair value of the interest rate swaps recorded in
OCI in the quarter was after-tax income of $0.1 million (2008 - $0.4 million
after-tax expense). The net change in the fair value of the equity total
return swap recorded in OCI was after-tax income of $0.4 million (2008 - $0.1
million after-tax expense).

    Financial Review by Segment

    Consolidated financial figures include the results of operation of the
Company's two separately reported segments - Broadcasting and Corporate and
other. The Company provides information about segment revenue, segment EBITDA
and operating income because these financial measures are used by its key
decision makers in making operating decisions and evaluating performance. For
additional information about the Company's segmented information, see Note 9
of the Company's unaudited interim consolidated financial statements.
    As a result of adopting a new accounting policy more fully described in
Note 2 of the Company's unaudited interim consolidated financial statements,
the 2008 operating expenses were restated to include costs that were
previously capitalized as pre-operating costs. As a result, the 2008 first
quarter operating expenses were increased by $0.3 million.

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial Results by Segment
    (thousands of dollars,                            (restated)
     except percentages)                       2009        2008      Growth
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue
      Broadcasting                         $ 22,255      21,002           6%
      Corporate and other                       863         736          17%
    -------------------------------------------------------------------------
    Consolidated revenue                     23,118      21,738           6%
    -------------------------------------------------------------------------
    Other income
      Corporate and other                     1,007         917          10%
    -------------------------------------------------------------------------
    Consolidated revenue and
     other income                            24,125      22,655           6%
    -------------------------------------------------------------------------
    Operating expenses
      Broadcasting                           18,855      17,407           8%
      Corporate and other                     2,248       2,398          (6%)
    -------------------------------------------------------------------------
    Consolidated operating expenses          21,103      19,805           7%
    -------------------------------------------------------------------------
    EBITDA
      Broadcasting                            3,400       3,595          (5%)
      Corporate and other                      (378)       (745)         49%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consolidated EBITDA                    $  3,022       2,850           6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA Margins                             2009        2008      Growth
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Broadcasting                                 15%         17%         (2%)
    Consolidated                                 13%         13%          -
    -------------------------------------------------------------------------
    

    Broadcasting segment

    The Broadcasting segment derives its revenue from the sale of broadcast
advertising from its 81 licences across the country. The performance of all
reporting units within this segment is evaluated based on the same financial
measure - EBITDA.
    Broadcasting revenue in the quarter of $22.3 million was $1.3 million or
6% better than last year. The growth came primarily from incremental revenue
derived by the new stations launched in the summer of 2008 as well as the 50%
incremental interest in CKUL-FM acquired in July 2008.
    For the quarter, broadcasting operating expenses were $18.9 million, up
$1.4 million or 8% over last year. Variable costs were higher in line with the
increased broadcasting revenue. In addition, incremental costs associated with
the new stations accounted for approximately 6% of the 8% increase in
operating expenses.
    Broadcasting EBITDA in the first quarter of $3.4 million was $0.2 million
or 5% lower than last year. This decline was a result of higher programming
and marketing costs as the Company executes its strategy to differentiate
itself from its competition. Corresponding EBITDA margins declined as well.

    Corporate and other segment

    The Corporate and other segment derives its revenue from hotel
operations. Corporate and other also includes other income and expenses
attributed to head office functions and investment income from the Company's
marketable securities.
    Corporate and other revenue in the first quarter of $0.9 million was $0.1
million or 17% higher than last year, due to increased hotel revenue.
    Other income is solely derived from this operating segment. It consists
of realized and unrealized gains and losses related to marketable securities,
interest, dividends and distributions from investments. This quarter's other
income of $1.0 million was $0.1 million or 10% better than last year due
mostly to higher unrealized gains from the portfolio of marketable securities.
During the 2009 first quarter, unrealized gains were $1.0 million compared to
$0.7 million last year.
    Corporate and other operating expenses of $2.2 million were down from
$2.4 million in 2008. The primary reason for the decrease was lower costs
associated with executive compensation.
    The above-noted increases in hotel revenue and other income, along with
lower operating costs, resulted in a $0.4 million improvement over last year's
corporate and other EBITDA.

    Selected Quarterly Financial Information

    The Company's revenue is derived primarily from the sale of advertising
airtime which is subject to seasonal fluctuations and as such the first
quarter of the year is generally a period of lower retail spending. Other
factors affecting the variability of net income in the quarters presented
below are as follows. In 2008, the unrealized changes in the value of
marketable securities affected net income in the quarters as follows: positive
variance of $4.8 million in the second quarter and negative fluctuations of
$8.8 million and $4.6 million in the third and fourth quarters, respectively.
In 2007, the second quarter's net income was affected by a $3.8 million gain
on disposal.

    
    (thousands
     of dollars  2009          2008 (restated)            2007 (restated)
     except per  ----   ------------------------------  ---------------------
     share data)  1st     4th     3rd     2nd     1st     4th     3rd     2nd
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue  $ 23,118  29,962  26,658  27,423  21,738  27,736  25,405  26,159
    Net income
     (loss)       552  (3,796) (7,580)  6,157     574   5,613   1,179   5,654
    Earnings
     per share
      - Basic    0.05   (0.34)  (0.69)   0.56    0.05    0.51    0.11    0.51
      - Diluted  0.05   (0.34)  (0.69)   0.54    0.05    0.49    0.11    0.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Liquidity and capital resources

    Selected cash flow information - three months ended March 31, 2009

    Cash from operating activities of $4.0 million was used to repay $2.4
million in total debt, to purchase $0.6 million of capital assets and to pay
$0.5 million toward CCD commitments.

    Selected cash flow information - three months ended March 31, 2008

    Total cash inflows for the quarter aggregated $4.7 million and they were
used primarily to pay dividends of $1.7 million and to purchase property and
equipment of $1.6 million.

    Capital Structure and Debt Financing

    As at March 31, 2009, the Company had $1.6 million of current bank
indebtedness outstanding and $71.8 million of long-term debt. The working
capital of $3.5 million was $1.7 million lower than the December 31, 2008
balance primarily due to the decrease in accounts receivable. The capital
structure consisted of 38.6% equity ($89.7 million) and 61.4% debt ($142.6
million) at quarter end.

    Credit Facility and Future Financing

    The Company's syndicated credit facility of $80.0 million is a revolving
credit facility. The maturity date is June 2010 and as a result no portion of
the revolving facility has been classified as current. Management anticipates
that its facility will be renewed in 2010. Given the tightening credit
markets, it is expected that interest costs and bank fees will increase upon
renewal. The Company has chosen this type of credit facility because it
provides flexibility with no scheduled repayment terms.
    The Company's debt covenants include certain maximum or minimum ratios
such as total debt to EBITDA, interest coverage and fixed charge coverage
ratio. The total bank debt to EBITDA ratio, calculated in accordance with the
Company's credit facility, was 3.9 to 1.0. Other covenants include seeking
prior approval for: capital expenditures over a certain dollar limit, dividend
payments in excess of certain thresholds, acquisitions in excess of a
quantitative threshold and limits on the number of shares that can be
repurchased in any given year. The Company was in compliance with the
covenants throughout the quarter and at quarter end. The Company's focus on
reducing debt, maximizing revenue and tight cost control will enable the
Company to continue to meet its covenants for the foreseeable future.

    Capital Expenditures and Capital Budget

    The capital expenditures for 2009 are expected to be approximately $5.0
million. The major planned expenditures include launching recently awarded AM
to FM conversions as well as general improvements and upgrades. The Company
continuously upgrades its broadcast equipment to improve operating
efficiencies.

    Cash Requirements in 2009

    Other than for operations, the Company's cash requirements are mostly for
interest payments, repayment of debt, capital expenditures, Canadian Content
Development payments, dividends and other contractual obligations as disclosed
in the Company's 2008 Annual Report. Cash generated from operations, combined
with the availability of the credit facility, is sufficient to meet the
Company's cash requirements. Based on this, the Company anticipates it will be
able to meet all its future known cash requirements.

    Commitments and Contractual Obligations

    There has been no substantial change in the Company's commitments and
contractual obligations since the publication of the 2008 Annual Report.

    Off-Balance Sheet Arrangements

    The Company's off-balance sheet arrangements consist of operating leases.
Other than these, which are considered in the ordinary course of business, the
Company does not have any other off-balance sheet arrangements and does not
expect to enter into any other such arrangement other than in the ordinary
course of business.

    Financial Condition

    Capital employed

    Assets at quarter end totalled $232.3 million, down from $235.8 million
at December 31, 2008 primarily due to decreased accounts receivable.

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase
up to 486,659 Class A Subordinate Voting Shares ("Class A shares") and 62,877
Class B Common Shares. This bid expires February 8, 2010. The Company did not
repurchase any of its outstanding Class A shares during the first quarter in
2009 and 2008.

    Outstanding share data

    The weighted average number of shares outstanding was 10,991,000 as
compared to last year's 11,091,000; the reduction due to the repurchase of
100,000 Class A shares in April 2008 for a total cost of $1.8 million pursuant
to the Normal Course Issuer Bid. As at May 7, 2009, there are 9,733,189 Class
A shares and 1,257,551 Class B Common Shares outstanding.

    Executive Compensation

    Executive stock option plan

    Compensation expense related to executive stock options for the three
months ended March 31, 2009 was less than $0.1 million (2008 - less than $0.1
million). Refer to Note 3 of the unaudited interim consolidated financial
statements for further details relating to the executive stock option plan.

    Stock appreciation rights plan

    For the quarter ended March 31, 2009, the compensation expense related to
stock appreciation rights ("SARs") was $0.2 million (2008 - $0.1 million) and
the total obligation was $0.3 million (2008 - $0.8 million). Refer to Note 5
of the unaudited interim consolidated financial statements for further details
relating to SARs.

    Derivative Financial Instruments and Financial Risk Management

    For more detailed disclosures about derivative financial instruments and
financial risk management, refer to Note 7 of the unaudited interim
consolidated financial statements.

    Interest rate risk management

    To hedge its exposure to fluctuating interest rates on its long-term
debt, the Company has entered into interest rate swap agreements with Canadian
chartered banks. The swap agreements expire in 2013 and involve the exchange
of the three-month bankers' acceptance floating interest rate for a fixed
interest rate. The difference between the fixed and floating rates is settled
quarterly with the bank and recorded as an increase or decrease to interest
expense. The aggregate notional amount of the swap agreements was $60.0
million (2008 - $45.0 million). The Company formally assesses effectiveness of
the swaps at inception and on a regular basis and has concluded that the swaps
are effective in offsetting changes in interest rates. The aggregate fair
value of the swap agreements, which represents the amount that would be
payable by the Company if the agreements were terminated at March 31, 2009 was
$6.9 million (2008 - $0.7 million). After-tax, the unrealized non-cash gain
recognized in OCI for the quarter was $0.1 million (2008 - loss of $0.4
million).

    Share price volatility management

    In July 2006, the Company entered into an agreement to hedge its
obligations under the stock appreciation rights plan using an equity total
return swap agreement to reduce the volatility in cash flow and earnings due
to possible future increases in the Company's share price. Gains or losses
realized on the quarterly settlement dates are recognized in income in the
same period as the SARs compensation expense. Unrealized gains and losses, to
the extent that the hedge is effective, are deferred and included in OCI until
such time as the hedged item affects net income. If at any time, the hedge is
deemed to be ineffective or the hedge is terminated or de-designated, gains or
losses, including those previously recognized in OCI, will be recorded in net
income immediately.
    The Company has concluded that this cash flow hedge is effective. The
estimated fair value of the equity total return swap receivable at March 31,
2009 was $0.6 million (2008 - $1.0 million). After-tax the unrealized non-cash
gain recognized in OCI for the quarter was $0.4 million (2008 - loss of $0.1
million).

    Market risk

    Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices. The
fair value of the Company's marketable securities is affected by changes in
the quoted share prices in active markets. Such prices can fluctuate and are
affected by numerous factors beyond the Company's control. In order to
minimize the risk associated with changes in the share price of any one
particular investment, the Company diversifies its portfolio by investing in
various stocks in varying industries. It also conducts regular financial
reviews of publicly available information related to its investments to
determine if any identified risks are within tolerable risk levels. Despite
the Company's intent to minimize this risk, the current stock market
volatility has caused significant fluctuations in all its marketable
securities. It is uncertain when this volatility will stabilize. As at March
31, 2009, a 10% change in the share prices of each marketable security would
result in a $0.4 million after-tax change in net income.

    Credit risk management

    Credit risk is the exposure that the Company faces with respect to
amounts receivable from other parties. Credit exposure is managed through
credit approval and monitoring procedures.
    The Company is subject to normal credit risk with respect to its
receivables. A large customer base and geographic dispersion minimize credit
risk. The Company reviews its receivables for possible indicators of
impairment on a regular basis and as such, it maintains a provision for
potential credit losses.
    At March 31, 2009, the Company's credit exposure as it related to its
receivables was slightly higher than in the past due to the recent Canadian
economic conditions. The Company sells advertising airtime primarily to retail
customers and since their results may also be impacted by the current economy,
it is difficult to predict the impact this could have on the Company's
receivables' balance. The Company maintains a provision for potential credit
losses and it believes the provision to be adequate at this time given the
current circumstances.
    Credit exposure on financial instruments arises from the possibility that
a counterparty to an instrument in which the Company is entitled to receive
payment fails to perform. With regard to the interest rate swaps and the
equity total return swap, the Company does not anticipate any counterparties
that it currently transacts with will fail to meet their obligations as the
counterparties are Canadian Chartered Banks.

    Liquidity Risk

    Liquidity risk is the risk that the Company is not able to meet its
financial obligations as they become due or can do so only at excessive cost.
Management believes its liquidity risk is low given the known future cash
requirements. The Company's growth is financed through a combination of the
cash flows from operations and borrowings under the existing credit facility.
One of management's primary goals is to maintain an optimal level of liquidity
through the active management of the assets and liabilities as well as the
cash flows. Please refer to the earlier discussion in the "Liquidity and
Capital Resources" section for a more thorough discussion on this topic.

    Capital Management

    The Company defines its capital as shareholders' equity. The Company's
objective when managing capital is to pursue its strategy of growth through
acquisitions and through organic operations so that that it can continue to
provide adequate returns for shareholders. The Company manages the capital
structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Company may adjust the amount of
dividends paid to shareholders, issue new shares or repurchase shares. The
Directors and Senior Management of the Company are of the opinion that from
time to time the purchase of its shares at the prevailing market price would
be a worthwhile investment and in the best interests of the Company and its
shareholders. Material transactions and those considered to be outside the
ordinary course of business, such as acquisitions and other major investments
or disposals, are reviewed and approved by the Board of Directors.

    Adoption of new accounting policies

    Effective January 1, 2009, the Company adopted the recommendations of the
Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3064 -
Goodwill and Intangible Assets. This Section establishes the standard for
recognition, measurement, presentation and disclosure of goodwill and
intangible assets. The adoption of this Section resulted in a change in how
the Company accounts for its pre-operating costs related to new station
launches. Prior to adopting this policy, the Company capitalized pre-operating
costs and amortized them over the initial term of the related broadcast
licences. Capitalization of these costs is no longer permitted and therefore
will be recorded in net income as incurred. For pre-operating balances that
existed on January 1, 2009, they were accounted for retrospectively with
restatement of comparative figures in accordance with Section 1506 Accounting
Changes.
    As a result, March 31, 2008 comparative figures were restated as follows:
operating expenses were increased by $0.3 million, amortization expense was
reduced by $0.1 million and future income tax expense was decreased by $0.1
million. These restatements caused basic earnings per share to decrease from
$0.07 to $0.05 and diluted earnings per share went from $0.06 to $0.05. The
2008 opening retained earnings were reduced by $1.8 million, which represented
the after-tax adjustments relating to periods prior to January 1, 2008. The
December 31, 2008 comparative balance sheet was restated as follows: other
assets were reduced by $2.8 million, future tax liabilities were reduced by
$0.8 million and retained earnings were reduced by $2.0 million.

    Future Accounting Policy Changes

    On February 13, 2008, the Accounting Standards Board confirmed that
International Financial Reporting Standards ("IFRS") will be required for
publicly accountable profit-oriented enterprises for fiscal years beginning on
or after January 1, 2011. After that date, IFRS will replace Canadian GAAP for
those enterprises. The Company will apply IFRS beginning January 1, 2011. The
Company is in the process of assessing the effect of IFRS on its accounting
policies, information systems, internal controls, financial statements and
other business activities.

    Critical Accounting Estimates

    There has been no substantial change in the Company's critical accounting
estimates since the publication of the 2008 Annual Report.

    Risks and Opportunities

    There has been no substantial change in the Company's risks and
opportunities since the publication of the 2008 Annual Report.

    Changes in Internal Controls over Financial Reporting

    There were no changes in the Company's internal controls over financial
reporting that occurred in the three months ending March 31, 2009 that have
materially affected, or are likely to materially affect, the Company's
internal controls over financial reporting.

    Outlook

    During the first quarter of 2009, the Company continued to post revenue
growth in its core operating segment. It is difficult to predict if positive
growth will be sustainable throughout the rest of the year given the current
economic climate.
    To mitigate the impact of potential slower growth in revenue, management
has undertaken cost-saving measures towards achieving its EBITDA targets.
These cost-saving measures include keeping salaries in 2009 more or less at
the same levels as 2008, reducing discretionary costs and deferring certain
other costs to a time when the economy begins to show positive momentum. Thus
far, these measures have had the intended effect.
    Management is using free cash flow to pay down debt. Given the tightening
credit markets, the increased costs of borrowing, and since there are no major
financing requirements in the near term, further debt reduction is expected
and is a key objective.
    Despite the economic condition, management remains committed to its
long-term strategy of growing the Company through new licences, and these are
the initiatives currently being worked on:
    
    - The new Sudbury, Ontario FM station is expected to be launched within
      the next six months which will complement the existing FM station there
      and allow the Company to immediately expand revenue and EBITDA;
    - The Athabasca, Alberta AM station is being converted to FM and is
      expected to be on-air in 2009;
    - Management is in the planning stages of launching four repeater
      licences in Prince Edward Island and will begin planning the AM to FM
      conversions in St. Paul and High Prairie, Alberta; and
    - Management continues to be active in submitting applications to the
      CRTC for new licences and for AM to FM conversions.
    
    During periods of economic uncertainty, community involvement is
extremely important and employees of this Company have demonstrated their
dedication to assisting local charities, events, and fundraisers. The
connection with and understanding of the people of the communities where we
operate is an integral part of the Company's success.
    
    Non-GAAP Measure

    (1) EBITDA is defined as net income excluding depreciation and
        amortization expense, interest expense, accretion of other
        liabilities and provision for income taxes. A calculation of this
        measure is as follows:

                                                         Three months ended
                                                               March 31
                                                                  (restated)
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                                     $      552           574
    Provision for income taxes                            316           286
    Accretion of other liabilities                        227           242
    Interest expense                                    1,008           928
    Depreciation and amortization expense                 919           820
                                                   --------------------------
    EBITDA                                         $    3,022         2,850
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    
    This measure is not defined by Generally Accepted Accounting Principles
    and is not standardized for public issuers. This measure may not be
    comparable to similar measures presented by other public enterprises. The
    Company has included this measure because the Company's key decision
    makers believe certain investors use it as a measure of the Company's
    financial performance and for valuation purposes. The Company also uses
    this measure internally to evaluate the performance of management.

    Newfoundland Capital Corporation Limited

    Notice of Disclosure of Non-Auditor Review of Interim Financial
    Statements for the three months ended March 31, 2009 and 2008

    Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a)
issued by the Canadian Securities Administrators, the interim financial
statements must be accompanied by a notice indicating that the financial
statements have not been reviewed by an auditor if an auditor has not
performed a review of the interim financial statements.
    The accompanying unaudited interim consolidated financial statements of
the Company for the three months ended March 31, 2009 and 2008 have been
prepared in accordance with Canadian generally accepted accounting principles
and are the responsibility of the Company's management.
    The Company's independent auditors, Ernst & Young LLP, have not performed
a review of these interim consolidated financial statements in accordance with
the standards established by the Canadian Institute of Chartered Accountants
for a review of interim financial statements by an entity's auditor.

    Dated this 7th day of May, 2009

    
    Interim Consolidated Balance Sheets
    (unaudited)
                                                                  (restated)
                                                     March 31   December 31
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS

    Current assets
      Marketable securities                        $    5,188         4,196
      Receivables                                      18,855        24,054
      Prepaid expenses                                    957           974
      Other assets                                        121             -
      Future income tax assets                          4,232         4,156
                                                   --------------------------
        Total current assets                           29,353        33,380

    Property and equipment                             37,031        37,342
    Other assets (note 2)                               5,082         4,167
    Broadcast licences                                151,773       151,773
    Goodwill                                            7,045         7,045
    Future income tax assets                            2,043         2,069
                                                   --------------------------
                                                   $  232,327       235,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                            $    1,582         2,003
      Accounts payable and accrued liabilities         15,495        17,446
      Dividends payable                                     -             -
      Income taxes payable                              8,741         8,719
      Current portion of long-term debt                     -             5
                                                   --------------------------
        Total current liabilities                      25,818        28,173

    Long-term debt                                     71,840        73,840
    Other liabilities                                  23,401        23,953
    Future income tax liabilities (note 2)             21,593        21,167
    Shareholders' equity                               89,675        88,643
                                                   --------------------------
                                                   $  232,327       235,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments (note 7)
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Income
    (unaudited)
                                                         Three months ended
                                                               March 31
                                                                  (restated)
    (thousands of dollars except per share data)         2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                                        $   23,118        21,738
    Other income                                        1,007           917
                                                   --------------------------
                                                       24,125        22,655
    Operating expenses (note 2)                        21,103        19,805
    Depreciation                                          907           808
    Amortization of deferred charges (note 2)              12            12
                                                   --------------------------
    Operating income                                    2,103         2,030
    Interest expense (note 7)                           1,008           928
    Accretion of other liabilities (note 7)               227           242
                                                   --------------------------
                                                          868           860
    Provision for income taxes (note 2)                   316           286
                                                   --------------------------
    Net income                                     $      552           574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share (notes 2 and 8)
      - basic and diluted                          $     0.05          0.05
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Shareholders' Equity
    (unaudited)
                                                         Three months ended
                                                               March 31
                                                                  (restated)
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings, beginning of period, as
     originally stated                             $   50,581        59,621
    Retrospective application of change in
     accounting policy (note 2)                        (2,034)       (1,758)
                                                   --------------------------
    Retained earnings, beginning of period, as
     restated                                          48,547        57,863
    Net income                                            552           574
                                                   --------------------------
    Retained earnings, end of period                   49,099        58,437
    Capital stock                                      42,913        43,345
    Contributed surplus (note 4)                        1,992         1,813
    Accumulated other comprehensive loss               (4,329)         (302)
                                                   --------------------------
    Total shareholders' equity                     $   89,675       103,293
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Comprehensive Income
    (unaudited)
                                                         Three months ended
                                                               March 31
                                                                  (restated)
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income                                     $      552           574
                                                   --------------------------
                                                   --------------------------
    Other comprehensive income (loss):
    Change in fair values of cash flow hedges
      Interest rate swaps (note 7(b)):
        Decrease in fair value                            (58)         (609)
        Reclassification to net income of
         interest expense                                 111            31
        Related income tax recovery                         -           163
                                                   --------------------------
                                                           53          (415)
                                                   --------------------------
                                                   --------------------------

      Total equity return swap (note 7(c)):
        Increase in fair value                            850             -
        Reclassification to net income of realized
         gains                                           (318)         (145)
        Related income tax (expense) recovery            (152)           50
                                                   --------------------------
                                                          380           (95)
                                                   --------------------------
    Other comprehensive income (loss)                     433          (510)
                                                   --------------------------
    Comprehensive income                           $      985            64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statement of Accumulated Other
    Comprehensive Loss
    (unaudited)
                                                         Three months ended
                                                               March 31
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive (loss) income,
     beginning of period                           $   (4,762)          208
    Other comprehensive income (loss) for the
     period                                               433          (510)
                                                   --------------------------
    Accumulated other comprehensive loss, end of
     period                                        $   (4,329)         (302)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Cash Flows
    (unaudited)
                                                         Three months ended
                                                               March 31
                                                                  (restated)
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Activities
    Net income                                     $      552           574
    Items not involving cash
      Depreciation and amortization                       919           820
      Future income taxes                                 223           (36)
      Executive stock-based compensation
       plans (notes 3 and 5)                              231           118
      Accretion of other liabilities (note 7)             227           242
      Unrealized gains on marketable
       securities (note 7)                               (992)         (700)
      Other                                              (368)         (187)
                                                   --------------------------
                                                          792           831
    Change in non-cash working capital relating to
     operating activities                               3,210        (1,445)
                                                   --------------------------
                                                        4,002          (614)
    -------------------------------------------------------------------------
    Financing Activities
    Change in bank indebtedness                          (421)        1,167
    Long-term debt borrowings                               -         3,500
    Long-term debt repayments                          (2,005)           (6)
    Dividends paid                                          -        (1,664)
                                                   --------------------------
                                                       (2,426)        2,997
    -------------------------------------------------------------------------
    Investing Activities
    Property and equipment additions                     (596)       (1,601)
    Canadian Content Development commitment
      Payments                                           (518)         (486)
    Other                                                (462)         (296)
                                                   --------------------------
                                                       (1,576)       (2,383)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, beginning and end of period                       -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental Cash Flow Information
      Interest paid                                $      423           860
      Income taxes paid                                    70            72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Notes to the Interim Consolidated Financial Statements - March 31, 2009
    and 2008 (unaudited)
    -------------------------------------------------------------------------

    1. ACCOUNTING PRESENTATIONS AND DISCLOSURES

    The interim financial statements presented herein were prepared by the
    Company and follow the same accounting policies and their methods of
    application as the 2008 annual financial statements. These financial
    statements are prepared in accordance with Canadian generally accepted
    accounting principles ("GAAP") for interim financial statements. They do
    not include all of the information and disclosures required by GAAP for
    annual financial statements. Accordingly, these financial statements
    should be read in conjunction with the Company's audited consolidated
    financial statements and the accompanying notes contained in the
    Company's 2008 Annual Report.

    The Company's revenue is derived primarily from the sale of advertising
    airtime which is subject to seasonal fluctuations. The first quarter of
    the year is generally a period of lower retail spending. Because of this,
    revenue and net income are generally lower than the other quarters.

    Certain of the comparative figures have been reclassified to conform to
    the financial statement presentation adopted in the current year.

    The Company's accounting policies have remained unchanged since the 2008
    Annual Report with the exception of the adoption of a new accounting
    policy described in Note 2.

    2. ADOPTION OF NEW ACCOUNTING POLICIES

    Effective January 1, 2009, the Company adopted the recommendations of the
    Canadian Institute of Chartered Accountants ("CICA") Handbook Section
    3064 - Goodwill and Intangible Assets. This Section establishes the
    standard for recognition, measurement, presentation and disclosure of
    goodwill and intangible assets. The adoption of this Section resulted in
    a change in how the Company accounts for its pre-operating costs related
    to new station launches. Prior to adopting this policy, the Company
    capitalized pre-operating costs and amortized them over the initial term
    of the related broadcast licences. Capitalization of these costs is no
    longer permitted and therefore will be recorded in net income as
    incurred. For pre-operating balances that existed on January 1, 2009,
    they were accounted for retrospectively with restatement of comparative
    figures in accordance with Section 1506 Accounting Changes. The effect of
    the changes on the March 31, 2008 statement of income and earnings per
    share comparative figures is tabulated below. The changes in the December
    31, 2008 comparative balance sheet figures are also presented below.

    As a result, March 31, 2008 comparative figures were restated as follows:
    operating expenses were increased by $335,000, amortization expense was
    reduced by $134,000 and future income tax expense was decreased by
    $53,000. These restatements caused basic earnings per share to decrease
    from $0.07 to $0.05 and diluted earnings per share went from $0.06 to
    $0.05. The 2008 opening retained earnings were reduced by $1,758,000,
    which represented the after-tax adjustments relating to periods prior to
    January 1, 2008. The December 31, 2008 comparative balance sheet was
    restated as follows: other assets were reduced by $2,858,000, future tax
    liabilities were reduced by $824,000 and retained earnings were reduced
    by $2,034,000.

    3. CAPITAL STOCK

    The Company has approval under a Normal Course Issuer Bid to repurchase
    up to 486,659 Class A Subordinate Voting Shares ("Class A shares") and
    62,877 Class B Common Shares. This bid expires February 8, 2010. The
    Company did not repurchase any of its outstanding Class A shares during
    the first quarter in 2009 and 2008.

    Pursuant to the executive stock option plan, 30,000 options (2008 -
    35,000) were granted at a weighted average exercise price of $17.50
    (2008 - $19.99) in the first quarter. The options vest at a rate of
    twenty-five percent on the date of grant and twenty-five percent on each
    of the three succeeding anniversary dates and the options expire February
    24, 2014. No options were exercised in the first quarter (2008 - nil).
    Compensation expense related to stock options for the three months ended
    March 31, 2009 was $47,000 (2008 - $35,000).

    4. CONTRIBUTED SURPLUS

    (thousands of dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, January 1, 2008                                     $    1,778
    Executive stock option plan compensation expense                     35
                                                              --------------
    Balance, March 31, 2008                                           1,813
    Executive stock option plan compensation expense                    179
                                                              --------------
    Balance, March 31, 2009                                           1,992
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5. STOCK APPRECIATION RIGHTS

    In January 2006, the Company granted 425,000 stock appreciation rights
    ("SARs") at a reference price of $16.53. In 2007, 90,000 SARs were
    granted at a weighted average reference price of $19.83. On February 24,
    2009, 50,000 SARs were granted at a reference price of $17.20. As at
    March 31, 2009, 85,000 SARs were expired and 5,000 SARs were exercised.
    The rights vest at a rate of 50% at the end of year three, 25% at the end
    of year four and 25% at the end of year five. The rights are exercisable
    as they vest. At the date of exercise, cash payments are made to the
    holders based on the difference between the market value of the Company's
    Class A shares and the reference price. All SARs granted under this plan
    expire on the 60th day following the 5th anniversary of the grant date.
    For the quarter ended March 31, 2009, the compensation expense related to
    SARs was $184,000 (2008 - $83,000) and the total obligation was $251,000
    of which $150,000 was classified as current (2008 - long-term
    compensation payable of $840,000).

    6. EMPLOYEE BENEFIT PLANS
                                                         Three months ended
                                                               March 31
    (thousands of dollars)                               2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined contribution plan expense              $      340           348
    Defined benefit plan expense                          125           126
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

    The Company's financial instruments are categorized and measured as
    follows:

    Asset / Liability             Classification                 Measurement
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and bank
     indebtedness               Held for trading                  Fair value
    Marketable securities       Held for trading                  Fair value
    Receivables            Loans and receivables  Amortized cost using EIM(*)
    Accounts payable and
     accrued liabilities       Other liabilities    Amortized cost using EIM
    Long-term debt             Other liabilities    Amortized cost using EIM
    Canadian Content
     Development commitments,
     included in other
     liabilities               Other liabilities    Amortized cost using EIM
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)EIM - effective interest method

    Marketable securities and cash are able to be settled in the near term;
    therefore, they meet the criteria required to classify them as held for
    trading. Instruments classified as held for trading are measured at fair
    value with unrealized gains and losses recorded immediately in net
    income. The fair value of marketable securities is based on the quoted
    share prices in active markets. Additional information on marketable
    securities is disclosed under the section entitled "Market Risk" below.

    Financial instruments classified as loans and receivables and other
    liabilities are measured using amortized cost using EIM. Under the EIM,
    interest income and expense are calculated and recorded using the
    effective interest rate which is the rate that exactly discounts
    estimated future cash receipts or payments throughout the expected life
    of the financial instrument. Interest income and expense related to
    financial assets and financial liabilities are being recorded using the
    EIM. Interest expense on long-term debt for the first quarter was
    $992,000 (2008 - $867,000). First quarter accretion expense on Canadian
    Content Development commitments ("CCD") aggregated $227,000 (2008 -
    $242,000), based on EIM rates ranging from 8.9% to 14.3%.

    Transaction costs directly attributable to financial instruments
    classified as other than held for trading are included in the initial
    carrying value of such instruments and are amortized using EIM.

    In accordance with the accounting policy for financial instruments, the
    Company has conducted a search for embedded derivatives in its
    contractual arrangements dated or modified subsequent to January 1, 2003.
    An embedded derivative is a component of a hybrid instrument that also
    includes a non-derivative host contract, with the effect that some of the
    cash flows of the combined instrument vary in a way similar to a
    stand-alone derivative. When certain conditions are met, an embedded
    derivative is separated from the host contract and accounted for
    separately as a derivative on the balance sheet at fair value. The
    Company's policy is to recognize embedded derivatives on the consolidated
    balance sheet, when applicable. Because there are no embedded derivatives
    at this time, this rule has no impact on the interim consolidated
    financial statements of the Company.

    The Company's risk management objectives and procedures are described
    below:

    Market risk

    Market risk is the risk that the fair value or future cash flows of a
    financial instrument will fluctuate because of changes in market prices,
    which includes quoted share prices in active markets, interest rates and
    the Company's quoted share price as it relates to the stock appreciation
    rights plan.

       a) Managing risk associated with fluctuations in quoted share prices
          of marketable securities

       The fair value of the Company's marketable securities is affected by
       changes in the quoted share prices in active markets. Such prices can
       fluctuate and are affected by numerous factors beyond the Company's
       control. In order to minimize the risk associated with changes in the
       share price of any one particular investment, the Company diversifies
       its portfolio by investing in various stocks in varying industries. It
       also conducts regular financial reviews of publicly available
       information related to its investments to determine if any identified
       risks are within tolerable risk levels. Despite the Company's intent
       to minimize this risk, the current stock market volatility continues
       to cause fluctuations in all its marketable securities. It is
       uncertain when this volatility will stabilize. For the quarter ended
       March 31, 2009, the change in fair value of marketable securities,
       recognized in other income, was an unrealized gain of $992,000 (2008 -
       $700,000). As at March 31, 2009, a 10% change in the share prices of
       each marketable security would result in a $425,000 after-tax change
       in net income.

       b) Interest rate risk management

       To hedge its exposure to fluctuating interest rates on its long-term
       debt, the Company has entered into interest rate swap agreements with
       Canadian chartered banks. The swap agreements involve the exchange of
       the three-month bankers' acceptance floating interest rate for a fixed
       interest rate. The difference between the fixed and floating rates is
       settled quarterly with the bank and recorded as an increase or
       decrease to interest expense. The Company formally assesses
       effectiveness of the swaps at inception and on a regular basis and has
       concluded that the swaps are effective in offsetting changes in
       interest rates.

       On June 23, 2008, the Company entered into two new interest rate swap
       agreements; one has a notional value of $15,000,000 and expires in
       June 2013, and the other has a notional amount of $45,000,000 and
       expires in May 2013. Three former interest rate swap agreements,
       having an aggregated notional value of $45,000,000 were terminated and
       as a result the fair value of these agreements ($349,000 payable) was
       blended into the interest rate of the new $45,000,000 swap agreement.
       This fair value payable will be transferred from other comprehensive
       income ("OCI") to net income (as interest expense) over the remaining
       term of the original three swap agreements which expired between 2009
       and 2011. The amount related to this fair value payable transferred to
       net income from OCI for the quarter was $53,000 (2008 - $nil).

       The aggregate notional amount of the Company's swap agreements was
       $60,000,000 (2008 - $45,000,000). The aggregate fair value of the swap
       agreements, which represents the amount that would be payable by the
       Company if the agreements were terminated on March 31, 2009, was
       $6,854,000 (2008 - $690,000). The before-tax decrease in fair value
       recognized in OCI was $58,000 (2008 - $609,000). The total amount
       transferred from OCI to net income was $111,000 (2008 - $31,000). OCI
       income tax recorded in the quarter was $nil (2008 - income tax
       recovery of $163,000).

       c) Share price volatility risk management

       In July 2006, the Company entered into a cash-settled equity total
       return swap agreement to manage its exposure to fluctuations in its
       stock-based compensation costs related to the SAR plan. Compensation
       costs associated with the SAR Plan fluctuate as a result of changes in
       the market price of the Company's Class A shares. The Corporation
       entered into this swap for a total of 425,000 notional Class A shares
       with a hedged price of $17.55.

       The swap expires July 2011; however, the Company may elect to
       terminate the agreement prior to that date if the Class A share market
       price is equal to or less than the SAR Plan reference price of $16.53.
       The swap is settled on every quarterly settlement date. If the
       Company's share price is in excess of the hedged price on the
       settlement date, the Company is entitled to receive the difference per
       share, and if the Company's share price is less than the hedged price,
       the Company is obligated to pay the difference per share. A settlement
       date can automatically be triggered if the share price drops by 10% or
       more since the last scheduled settlement date. In this event, the
       Company must cash settle on that date based on that day's share price;
       however, on the quarterly settlement date if the share price has
       rebounded, the Company is reimbursed an amount equal to the difference
       between the hedged price and the share price which triggered the
       automatic settlement.

       The swap includes an interest and dividend component. Interest is
       accrued and payable by the Company on quarterly settlement dates. Any
       dividends paid on the Class A shares are reimbursed to the Company on
       the quarterly settlement dates.

       In order to qualify for hedge accounting, there must be reasonable
       assurance that the instrument is and will continue to be an effective
       hedge. At the inception of the hedge and on an ongoing basis, the
       Company formally assesses and documents whether the hedging
       relationship is effective in offsetting changes in cash flows of the
       hedged item. Gains or losses realized on the quarterly settlement
       dates are recognized in other income in the same period as the SAR
       Plan compensation expense. Unrealized gains and losses, to the extent
       that the hedge is effective, are deferred and included in OCI until
       such time as the hedged item affects net income. If at any time, the
       hedge is deemed to be ineffective or the hedge is terminated or de-
       designated, gains or losses, including those previously recognized in
       OCI, will be recorded in net income immediately.

       The Company has concluded that this cash flow hedge is effective. The
       estimated fair value of the equity total return swap receivable at
       March 31, 2009 was $616,000, of which $121,000 was current (2008 -
       $1,041,000 of which $759,000 was current). Before tax, the increase in
       the fair value of the swap recognized in OCI was $850,000 (2008 -
       $nil). On a before-tax basis, realized gains of $318,000 were
       transferred from OCI to net income (2008 - $145,000). OCI income tax
       expense for the quarter on this swap was $152,000 (2008 - income tax
       recovery of $50,000).

    Credit risk

    Credit risk is the exposure that the Company faces with respect to
    amounts receivable from other parties. The maximum credit exposure
    approximated $19,500,000 as at March 31, 2009, which included accounts
    receivable and the equity total return swap receivable.

    The Company is subject to normal credit risk with respect to its
    receivables. A large customer base and geographic dispersion minimize the
    concentration of credit risk. The Company does not require collateral or
    other security from clients for trade receivables; however the Company
    does perform credit checks on customers prior to extending credit. Based
    on the results of credit checks, the Company may require upfront deposits
    or full payments on account prior to providing service. The Company
    reviews its receivables for possible indicators of impairment on a
    regular basis and as such, it maintains a provision for potential credit
    losses which approximated $1,200,000 as at March 31, 2009. Approximately
    83% of trade receivables are outstanding for less than 90 days. Amounts
    would be written off directly against accounts receivable and against the
    allowance only if and when it was clear the amount would not be collected
    due to customer insolvency. Historically, the significance and incidence
    of amounts written off directly against receivables have been low.

    At March 31, 2009, the Company's credit exposure as it related to its
    receivables was slightly higher than in the past reporting periods due to
    the recent Canadian economic conditions. The Company sells advertising
    airtime primarily to retail customers and since their results may also be
    affected by the current economy, it is difficult to predict the impact
    this could have on the Company's receivables' balance. The Company
    believes its provision for potential credit losses is adequate at this
    time given the current economic circumstances.

    Credit exposure on financial instruments arises from the possibility that
    a counterparty to an instrument in which the Company is entitled to
    receive payment fails to perform. With regard to the interest rate swaps
    and the equity total return swap, the Company does not anticipate any
    counterparties that it currently transacts with will fail to meet their
    obligations as the counterparties are Canadian Chartered Banks.

    Liquidity Risk

    Liquidity risk is the risk that the Company is not able to meet its
    financial obligations as they become due or can do so only at excessive
    cost. The Company's growth is financed through a combination of the cash
    flows from operations and borrowings under the existing credit facility.
    One of management's primary goals is to maintain an optimal level of
    liquidity through the active management of the assets and liabilities as
    well as the cash flows. Other than for operations, the Company's cash
    requirements are mostly for interest payments, repayment of debt, capital
    expenditures, Canadian Content Development payments, dividends and other
    contractual obligations disclosed below. Cash generated from operations,
    combined with the availability of the credit facility, is sufficient to
    meet the Company's cash requirements.

    The Company's liabilities have contractual maturities which are
    summarized below:

    Obligation (thousands of dollars)     12 months   2010-2014  Thereafter
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt                        $       -      71,840           -
    CCD commitments                           2,665       9,187         165
    Operating leases                          2,940       8,663       2,891
    Pension funding obligation                  375       2,500       3,200
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          $   5,980      92,190       6,256
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital Management

    The Company defines its capital as shareholders' equity. The Company's
    objective when managing capital is to pursue its strategy of growth
    through acquisitions and through organic operations so that it can
    continue to provide adequate returns for shareholders. The Company
    manages the capital structure and makes adjustments to it in light of
    changes in economic conditions and the risk characteristics of the
    underlying assets. In order to maintain or adjust the capital structure,
    the Company may adjust the amount of dividends paid to shareholders,
    issue new shares or repurchase shares. The Directors and Senior
    Management of the Company are of the opinion that from time to time the
    purchase of its shares at the prevailing market price would be a
    worthwhile investment and in the best interests of the Company and its
    shareholders. Material transactions and those considered to be outside
    the ordinary course of business, such as acquisitions and other major
    investments or disposals, are reviewed and approved by the Board of
    Directors.

    To comply with Federal Government directions, the Broadcasting Act and
    regulations governing radio stations (the "Regulations"), the Company has
    imposed restrictions respecting the issuance, transfer and, if
    applicable, voting of the Company's shares. Restrictions include
    limitations over foreign ownership of the issued and outstanding voting
    shares. Pursuant to such restrictions, the Company can prohibit the
    issuance of shares or refuse to register the transfer of shares or, if
    applicable, prohibit the voting of shares in circumstances that would or
    could adversely affect the ability of the Company, pursuant to the
    provisions of the Regulations, to obtain, maintain, renew or amend any
    licence required to carry on any business of the Company, including a
    licence to carry on a broadcasting undertaking, or to comply with such
    provisions or with those of any such licence.

    The Company is subject to certain covenants on its credit facility. The
    Company's debt covenants include certain maximum or minimum ratios such
    as total debt ratio, interest coverage and fixed charge coverage ratio.
    Other covenants include seeking prior approval for capital expenditures
    over a certain dollar limit, dividend payments over a certain amount per
    share, acquisitions in excess of a quantitative threshold and limits on
    the number of shares that can be repurchased in any given year. The
    Company was in compliance with the covenants throughout the quarter and
    at quarter end.

    Financial projections are updated and reviewed regularly to reasonably
    ensure that financial debt covenants will not be breached in future
    periods. The Company monitors the covenants and foreign ownership status
    of the issued and outstanding voting shares and presents this information
    to the Board of Directors quarterly. The Company was in compliance with
    all the above as at March 31, 2009.

    8. EARNINGS PER SHARE

                                                         Three months ended
                                                               March 31
    (thousands)                                          2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average common shares used
     in calculation of basic earnings per share        10,991        11,091
    Incremental common shares calculated in
     accordance with the treasury stock method            296           341
                                                   --------------------------
    Weighted average common shares used in
     calculation of diluted earnings per share         11,287        11,432
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9. SEGMENTED INFORMATION

    The Company has two reportable segments - broadcasting and corporate and
    other. The broadcasting segment consists of the operations of the
    Company's radio and television licences. This segment derives its revenue
    from the sale of broadcast advertising. This reportable segment is a
    strategic business unit that offers different services and is managed
    separately. The Company evaluates performance based on earnings before
    interest, taxes, depreciation and amortization. Corporate and other
    consists of a hotel and the head office functions. Its revenue relates to
    hotel operations and its other income relates primarily to investment
    income. Details of segment operations are set out below.

                                                      Corporate
    (thousands of dollars)             Broadcasting   and other       Total
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2009
    Revenue                               $  22,255         863      23,118
    Other income                                  -       1,007       1,007
                                       --------------------------------------
                                             22,255       1,870      24,125
    Operating expenses                       18,855       2,248      21,103
    Depreciation and amortization               843          76         919
                                       --------------------------------------
    Operating income (loss)               $   2,557        (454)      2,103
                                       --------------------------------------
    Assets employed                       $ 213,196      19,131     232,327
    Goodwill                                  7,045           -       7,045
    Capital expenditures                        572          24         596
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2008
    Revenue                               $  21,002         736      21,738
    Other income                                  -         917         917
                                       --------------------------------------
                                             21,002       1,653      22,655
    Operating expenses                       17,407       2,398      19,805
    Depreciation and amortization               748          72         820
                                       --------------------------------------
    Operating income (loss)               $   2,847        (817)      2,030
                                       --------------------------------------
    Assets employed                       $ 200,853      29,157     230,010
    Goodwill                                  4,859           -       4,859
    Capital expenditures                      1,530          71       1,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    
    %SEDAR: 00002995E




For further information:

For further information: REF: Robert G. Steele, President and Chief
Executive Officer; Scott G.M. Weatherby, Chief Financial Officer and Corporate
Secretary, Newfoundland Capital Corporation Limited, 745 Windmill Road,
Dartmouth, Nova Scotia B3B 1C2, Tel: (902) 468-7557, Fax: (902) 468-7558,
e-mail: investorrelations@ncc.ca, Web: www.ncc.ca


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