Newfoundland Capital Corporation Limited - First Quarter 2010 - Period Ended
March 31 (unaudited)

DARTMOUTH, NS, May 5 /CNW/ - Newfoundland Capital Corporation Limited ("Company") today announces its financial results for the first quarter ending March 31, 2010.

Highlights

Double digit revenue growth propelled the Company to one of its best first quarter's ever.

    
    - Revenue of $25.7 million was $3.0 million, or 13% higher than last
      year. This increase was almost entirely attributable to organic
      (same-station) revenue growth.
    - Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"(1)) of $4.4 million in the quarter were $2.3 million, or
      115% higher than last year, primarily attributable to improved revenue.
    - Net income of $1.2 million was $0.7 million, or 124% better than the
      same quarter last year primarily due to increased revenue.
    

Significant events

    
    - The Company launched four repeater stations in Prince Edward Island.
    - Approval was received to convert the Westlock, Alberta station from
      AM to FM.
    - Subsequent to quarter end, approval was received to convert the AM
      station in Brooks, Alberta to FM.
    

"Local revenue has continued to drive our success and we are very pleased to see a rebound in national advertising. Both local and national advertising revenue grew over 2009 by 14% which is significantly higher than industry results", commented Rob Steele, President and Chief Executive Officer. "Our realigned strategy to narrow our focus on maximizing existing operations and paying down debt has solidified our financial position and we are well positioned for future growth."

    
    Financial Highlights - First Quarter
    (thousands of dollars except share information)        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                                           $  25,706      22,660
    EBITDA(1)                                             4,392       2,044
    Net income                                            1,237         552
    -------------------------------------------------------------------------
    Earnings per share - basic and diluted                 0.04        0.02
    Share price, NCC.A (closing)                           6.90        6.33
    Weighted average number of shares outstanding
     (in thousands)                                      32,972      32,972
    -------------------------------------------------------------------------
    Total assets                                        228,701     232,327
    Long-term debt (classified as current in 2010)       56,000      71,840
    Shareholders' equity                                105,349      89,675
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 16 for the reconciliation of EBITDA to net income.
    

Management's Discussion and Analysis

The purpose of the Management's Discussion and Analysis ("MD&A"), dated May 5, 2010, is to provide readers with additional complementary information regarding the financial condition and results of operations for Newfoundland Capital Corporation Limited (the "Company") and should be read in conjunction with the unaudited interim consolidated financial statements and related notes for the periods ended March 31, 2010 and 2009 as well as the annual audited consolidated financial statements and related notes and the MD&A contained in the Company's 2009 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. All amounts are stated in Canadian dollars. Certain of the comparative figures have been reclassified to conform to the financial statement presentation adopted in Fiscal 2010.

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. Unless otherwise required by applicable securities laws, 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

Newfoundland Capital Corporation Limited (the "Company") is Canada's largest pure-play radio company, employing approximately 800 of the best radio professionals across the country. The Company's portfolio of radio assets includes 60 FM and 19 AM licences which can be heard throughout 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

The Company's long-term strategy is to maximize returns on existing operations, convert AM stations to FM, and add new licences through business and licence acquisitions and through the Canadian Radio-television and Telecommunications Commission ("CRTC") licence application process.

As stated in the 2009 Annual Report, this year the Company will continue to grow its existing operations by increasing advertising revenue and remaining focused on controlling discretionary costs to drive EBITDA margins. It will launch recently awarded AM to FM conversions - four in Alberta and two in Newfoundland and Labrador. Management continues to explore acquisition and expansion opportunities that fit the Company's acquisition objectives and it will make applications to the CRTC for new licences and additional AM to FM conversions. The Company's commitment to its talented employees, its customers, its listeners and to the communities it serves remains critical to its success.

CORPORATE DEVELOPMENTS

The following is a review of the key corporate developments which should be considered when reviewing the "Consolidated Financial Review" section. The results of the acquired or launched stations have been included in the consolidated financial statements since the respective acquisition and launch dates.

    
    2010 Developments:

    - February - launched the four repeater signals in Prince Edward Island.
    - February - CFCB in Corner Brook, Newfoundland and Labrador celebrated
      its 50th anniversary.
    - February - received CRTC approval to convert the AM station in
      Westlock, Alberta to FM.
    - March - CFRQ-FM, otherwise known as Q104, serving Halifax, Nova Scotia
      was named mid-market station of the year during Canada Music Week.
    - April - received CRTC approval to convert the AM station in Brooks,
      Alberta to FM.

    2009 Developments:

    - January - Launched the new FM station in Pincher Creek, Alberta playing
      country music.
    - April - CRTC approved two AM to FM conversions for stations in St. Paul
      and High Prairie, Alberta. Planning for the conversions is underway.
    - June - CRTC approved the Company's applications to convert AM stations
      to FM in Wabush and Goose Bay, Newfoundland and Labrador. Anticipated
      on-air dates are mid 2010.
    - June - Re-branded CFUL in Calgary, Alberta as a Contemporary Hits Radio
      format, branded as AMP Radio. This format is similar to the very
      popular Ottawa station, Hot 89.9, which was named the 2008 Contemporary
      Hits Radio station of the year.
    - July - Completed the previously announced exchange of assets with
      Rogers Broadcasting Limited. The Company's Halifax AM licence was
      exchanged for Rogers' AM licence in Sudbury, Ontario plus $5.0 million.
    - August - Launched Hot 93.5, the newly acquired Sudbury, Ontario radio
      station which was converted to FM. Its format is Top 40 and has been
      met with a very positive response from both listeners and clients.
    - August - Launched the converted FM radio station in Athabasca, Alberta.
      94.1 FM The River plays Classic Hits.
    - November - The Company's stock was split on a three-for-one basis.
    - December - Completed the previously announced sale of the broadcasting
      assets related to the two FM stations in Thunder Bay, Ontario for $4.5
      million.

    CONSOLIDATED FINANCIAL REVIEW

    Consolidated Financial Results of Operation
    -------------------------------------------------------------------------
    (thousands of dollars, except          March 31,   March 31,          %
     percentages)                              2010        2009      Change
    -------------------------------------------------------------------------
    Revenue                               $  25,706      22,660          13%
    Operating expenses                       21,314      20,616           3%
    -------------------------------------------------------------------------
    EBITDA(1)                                 4,392       2,044         115%
    Depreciation and amortization               876         901          (3%)
    Interest expense                            764       1,008         (24%)
    Accretion of other liabilities              190         227         (16%)
    Other expense (income)                      545      (1,007)          -
    -------------------------------------------------------------------------
    Earnings from continuing operations       2,017         915         120%
    Provision for income taxes                  780         332         135%
    -------------------------------------------------------------------------
    Net income from continuing operations     1,237         583         112%
    -------------------------------------------------------------------------
    Loss from discontinued operations             -          31        (100%)
    -------------------------------------------------------------------------
    Net income                                1,237         552         124%
    -------------------------------------------------------------------------
    (1) EBITDA - Earnings before interest, taxes, depreciation and
        amortization - refer to page 16 for reconciliation to net income
    

Revenue

In the quarter, consolidated revenue of $25.7 million was $3.0 million or 13% higher than last year; this improvement came exclusively from the broadcasting segment.

Operating expenses

Consolidated operating expenses of $21.3 million were $0.7 million or 3% higher than the first quarter last year. The increase was primarily due to higher variable costs in the Broadcasting segment.

EBITDA

Consolidated EBITDA in the quarter of $4.4 million was $2.3 million or 115% higher than last year. The improved EBITDA was due to growth in the broadcasting segment.

A more detailed discussion on revenue, 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 just slightly lower than 2009.

Interest expense

Interest expense in the first quarter was less than the prior year due to the lower debt balance.

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 decreases as CCD obligations are drawn down.

Other expense (income)

Other expense (income) generally consists of gains and losses, realized and unrealized, on the Company's marketable securities. During the first quarter of 2010, the Company has had minimal activity in its holdings. Other expense (income) was a net expense this year partially due to a small realized loss while in 2009 unrealized mark-to-market gains were $1.0 million.

Discontinued operations

In 2009, the Company disposed of its net assets associated with the two FM radio stations in Thunder Bay, Ontario and therefore, the 2009 comparative financial results of operations from this component were treated as discontinued operations.

Provision for income taxes

The provision for income taxes is higher than 2009 due to improved pre-tax earnings. The effective income tax rate was 39% which is higher than the statutory rate of 34% primarily due to the non-taxable portion of realized capital losses.

Net income

First quarter net income of $1.2 million was $0.7 million or 124% higher than last year. The increase was all due to improved financial results in the broadcasting segment.

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 $0.3 million (2009 - $0.1 million). The net change in the fair value of the equity total return swap recorded in OCI was an after-tax expense of $0.1 million (2009 - $0.4 million after-tax income).

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 10 of the Company's unaudited interim consolidated financial statements.

Broadcasting Segment

The broadcasting segment derives its revenue from the sale of broadcast advertising from its licences across the country. Advertising revenue can vary based on market and economic conditions, the audience share of a radio station, the quality of programming and the effectiveness of a company's team of sales professionals.

Reporting units within the broadcasting segment are managed and evaluated based on their revenue and EBITDA. Here are the key operating results of the broadcasting segment.

    
    Broadcasting Financial Results of Operation
    -------------------------------------------------------------------------
    (thousands of dollars, except          March 31,   March 31,          %
     percentages)                              2010        2009      Change
    -------------------------------------------------------------------------
    Revenue                               $  24,896      21,797          14%
    Operating expenses                       18,833      18,368           3%
    -------------------------------------------------------------------------
    EBITDA                                    6,063       3,429          77%
    -------------------------------------------------------------------------
    EBITDA margin                                24%         16%          8%
    -------------------------------------------------------------------------
    

Revenue

Broadcasting revenue in the quarter of $24.9 million was $3.1 million or 14% better than last year. The increase came almost entirely from organic (same-station) revenue growth.

The Company achieved increases over the same period last year of 8% in its Western Canadian properties, a 38% increase in Central Canada and a 16% improvement in Atlantic Canada. These rates have exceeded industry growth. Local advertising revenue contributed significantly to the double digit growth. The Company also saw a solid rebound in national ad revenue contributing to the overall increase.

The Company enjoyed some of its best ratings results in late 2009 and the effect of these results has contributed to revenue growth and is expected to continue to impact revenue bookings in 2010. The improved outlook in the Canadian economy has also had a positive impact on revenue.

Operating expenses

For the quarter, broadcasting operating expenses were $18.8 million, up $0.5 million or 3% over last year. The increase in operating expenses was all due to higher variable costs. Fixed costs were 5% lower than 2009 due to management's efforts at reducing discretionary costs.

EBITDA

One of the Company's main objectives is to improve organic EBITDA margins. While variable costs have fluctuated with increased revenue, discretionary spending was closely monitored which led to a 77% or $2.6 million increase in EBITDA. Margins of 24% were also greatly improved compared to 16% for the same period last year.

Corporate and Other Segment

The Corporate and Other segment derives its revenue from hotel operations. Corporate and other expenses are related to head office functions and hotel operations.

    
    Corporate and Other Financial Results of Operation

    -------------------------------------------------------------------------
    (thousands of dollars, except          March 31,   March 31,          %
     percentages)                              2010        2009      Change
    -------------------------------------------------------------------------
    Revenue                               $     810         863          (6%)
    Operating expenses                        2,481       2,248          10%
    -------------------------------------------------------------------------
    EBITDA                                   (1,671)     (1,385)        (21%)
    -------------------------------------------------------------------------
    

Revenue

Revenue in the first quarter of $0.8 million was $0.1 million or 6% lower than last year, due to decreased hotel revenue.

Operating expenses

Corporate and Other operating expenses of $2.5 million were $0.2 million higher than 2009 due to a slight increase in corporate costs for head office.

EBITDA

EBITDA was $0.3 million lower than the same period last year because of the higher operating expenses.

SELECTED QUARTERLY FINANCIAL INFORMATION

The Company's revenue and operating results vary depending on the quarter. The first quarter is generally a period of lower retail spending and as a result, advertising revenue is generally lower. The fourth quarter tends to be a period of higher retail spending. In 2009, a gain on the disposal of a broadcasting licence positively impacted net income by $5.6 million in the third quarter. 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.

As a result of the requirement to adopt new accounting standards related to start-up operations, the 2008 comparative figures were restated to include pre-operating costs that had been previously capitalized and amortized. The earnings per share information was restated to reflect the three-for-one stock split that occurred during the fourth quarter in 2009. Discontinued operations, as described in note 3 of the Company's unaudited interim consolidated financial statements, also impacted the comparative figures presented below.

    
    (thousands
     of
     dollars
     except
     per       2010              2009                      2008 (restated)
     share --------- -------------------------------- -----------------------
     data)      1st     4th     3rd    2nd      1st     4th     3rd     2nd
    -------------------------------------------------------------------------
    Reve-
     nue   $ 25,706  30,458  25,408  26,772  22,660  29,306  26,069  26,798
    Net
     income
     (loss)   1,237   5,461   6,209   3,144     552  (3,796) (7,580)  6,157
    Earnings
     per
     share
      - Basic  0.04    0.17    0.19    0.10    0.02   (0.12)  (0.23)   0.19
      - Dilu-
         ted   0.04    0.16    0.18    0.09    0.02   (0.12)  (0.23)   0.18
    -------------------------------------------------------------------------
    

Selected cash flow information - three months ended March 31, 2010

Cash from operating activities were $3.6 million. During the quarter, the Company paid dividends of $3.3 million, purchased $0.5 million of capital assets and paid $0.4 million toward CCD commitments.

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.

Capital expenditures and capital budget

The capital expenditures for 2010 are expected to be approximately $6.0 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.

FINANCIAL CONDITION

Total assets

Assets of $228.7 million were $4.2 million lower than those reported at December 31, 2009. This was largely due to a decrease in trade receivables.

Liabilities, shareholders' equity and capital structure

As at March 31, 2010 the Company had $1.7 million of current bank indebtedness outstanding and $56.0 million of long-term debt which was classified as current because the debt's maturity date is within the next twelve months. (Further information on long-term debt and its accounting reclassification can be found in the paragraph below under the heading "Credit Facility and Covenants".) The capital structure consisted of 46% equity ($105.3 million) and 54% debt ($123.4 million) at quarter end.

LIQUIDITY

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. Management deems its liquidity risk to be low and this is explained in the paragraphs that follow.

Credit facility and covenants

The Company's syndicated credit facility of $76.5 million is a revolving credit facility. The Company chooses this type of credit facility because it provides flexibility with no scheduled repayment terms. The maturity date is June 2010. As described in the section below, the Company is in the process of finalizing the details of a renewed credit facility which will be completed prior to the maturity date; however, because the new facility is not yet finalized, the Company's debt is required to be classified as a current liability as at March 31, 2010.

The Company is subject to covenants on its credit facility. The Company's bank covenants include certain maximum or minimum ratios such as total debt to EBITDA ratio, interest coverage and fixed charge coverage ratio. Other covenants include dividend payment restrictions, seeking prior approval for capital expenditures over a certain dollar limit, 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.

Funding sources and future financing

Cash flow from operations and funds available from the Company's $76.5 million credit facility have been the primary funding sources of working capital, capital expenditures, Canadian Content Development payments, dividend payments, debt repayments, and other contractually required payments through the past several years. As at March 31, 2010, the Company's cash generated from operating activities was $3.6 million and its long-term debt balance was $56.0 million which left $20.5 million available to be drawn upon from the credit facility.

The Company and its lenders have agreed in principal on the terms and conditions of the new facility which will be finalized prior to the maturity of the Company's existing facility. The Company's debt to EBITDA ratio was 2.5 to 1.0 as at March 31, 2010 which is significantly below the required covenant level and puts the Company in solid financial position to renew its facility. Management did not renew the credit facility early in order to delay the increased interest costs which will begin once it is renewed. The increased cost of borrowing under the new facility is expected to be approximately 2% higher as the new facility will reflect current market rates.

Positive cash balances

The Company does not maintain any significant positive cash balances; instead it uses the vast majority of its positive cash balances to reduce debt and minimize interest expense. As a result, the Company nets its deposits in banks with bank indebtedness. The fact that the Company does not have positive cash positions on its balance sheet does not pose an increase to its liquidity risk because the Company generates cash from operations and, as part of its $76.5 million credit facility, it has a $5.0 million current operating credit line to fund any current obligations and it can also access any unused capacity in its credit facility to fund obligations.

Working capital requirements

As at March 31, 2010, the Company's working capital balance, excluding the long-term debt classified as a current liability, was $4.5 million. The cash from current receivables will be sufficient to cover the Company's current obligations to its suppliers and employees and in combination with ongoing cash from operations and the availability of cash from its debt facility, the Company will be able to meet all other current cash requirements as they arise. If cash inflows from customers are not sufficient to cover current obligations, because of timing issues, the Company has access to a $5.0 million operating credit line.

Future cash requirements

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. Management anticipates that its cash flows from operations will provide sufficient funds to meet its cash requirements, with the exception of the long-term debt which is in the process of being refinanced.

Based on the above discussion and internal analysis, management deems its liquidity risk to be low.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

There has been no substantial change in the Company's commitments and contractual obligations since the publication of the 2009 Annual Report.

SHARE CAPITAL

Stock split

Effective on November 25, 2009, the Class A Subordinate Voting Shares and Class B Common Shares were split on a three-for-one basis. Accordingly, the comparative number of shares and per share amounts have been retroactively adjusted to reflect the three-for-one split.

Outstanding share data

The weighted average number of shares outstanding at March 31, 2010 was 32,972,220 (2009 - 32,972,220). As of this date, there are 29,199,567 Class A Subordinate Voting Shares and 3,772,653 Class B Common Shares outstanding.

Dividends

Dividends of $0.10 per share were declared in December to all shareholders of record as of December 31, 2009. The dividends were paid January 29, 2010.

Share repurchases

The Company has approval under a Normal Course Issuer Bid to repurchase up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and 75,453 Class B Common Shares. This bid expires February 8, 2011. The Company did not repurchase any of its outstanding Class A shares during the first quarter in 2010 and 2009.

EXECUTIVE COMPENSATION

Executive stock option plan

Compensation expense related to executive stock options for the three months ended March 31, 2010 was $0.1 million (2009 - less than $0.1 million). Refer to note 4 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, 2010, the compensation expense related to stock appreciation rights ("SARs") was less than $0.1 million (2009 - $0.2 million) and the total obligation was $1.5 million (2009 - $0.3 million). Refer to note 6 of the unaudited interim consolidated financial statements for further details relating to SARs.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

For more detailed disclosures about derivative financial instruments and financial risk management, refer to note 8 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 $55.0 million (2009 - $60.0 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, 2010 was $3.1 million (2009 - $6.9 million). After-tax, the unrealized non-cash income recognized in OCI for the quarter was $0.3 million (2009 - $0.1 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, 2010 was $1.3 million (2009 - $0.6 million). After-tax the unrealized non-cash loss recognized in OCI for the quarter was $0.1 million (2009 - after-tax income of $0.4 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. As at March 31, 2010, 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, 2010, the Company's credit exposure as it related to its receivables continued to be 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 believes its provision for potential credit losses to be adequate at this time given the current circumstances.

With regard to the Company's derivative instruments, the counterparty risk is managed by only dealing with Canadian Chartered Banks having high credit ratings.

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.

FUTURE ACCOUNTING POLICIES

Section 1582 Business Combinations

During 2009, the CICA issued Handbook Section 1582 Business Combinations which replaces Section 1581 bearing the same name. This Section is effective for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted, and the changes align the standard with the guidance in International Financial Reporting Standards ("IFRS"). Of the amendments in the Section, the one that will represent the most significant change in how the Company accounts for business combinations is the determination of the cost of the purchase. The cost that is allocated to the fair value of the net assets acquired is the direct cost of the business combination; indirect costs such as legal or restructuring are expensed. The Company intends to early adopt this standard if any business combinations should occur in 2010. The impact the changes will have on its consolidated results will continue to be monitored.

Section 1601 Consolidated Financial Statements and Section 1602 Non-controlling Interests

These Sections were issued and together replace Section 1600 Consolidated Financial Statements. These too are applicable for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted. The new sections establish standards for the preparation of consolidated financial statements and for the accounting of a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The Company will continue to evaluate the impact of the amendments.

International Financial Reporting Standards

On February 13, 2008, the Accounting Standards Board confirmed that International Financial Reporting Standards 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 and will present 2010 comparative figures using IFRS, starting in the first quarter of 2011.

The Company has committed adequate internal resources to oversee the IFRS project and external consultants have been engaged throughout the process. The Audit and Governance Committee is regularly updated on the status of the project. Management has satisfied itself that it has sufficient resources, systems and applications in place to meet its financial reporting requirements.

IFRS-1 First-time Adoption of International Financial Reporting Standards provides guidance for transition which generally requires an entity to apply all IFRS standards retrospectively, with prior period restatements, on adoption of the new standards. However, IFRS-1 also includes mandatory exceptions and certain exemptions which enable an entity to apply certain areas of the standards prospectively. Management has analysed the exceptions and exemptions available under IFRS-1 and is considering applying the exemptions listed in the table below. A brief description of the impact of applying these exemptions is discussed as well.

    
    -------------------------------------------------------------------------
    Exemption              Impact
    -------------------------------------------------------------------------
    Business combinations  The Company will elect to not restate any prior
                           business combinations on adoption, to the extent
                           the assets and liabilities meet the recognition
                           criteria under the relevant IFRS standards.
                           (If any business combinations occur during fiscal
                           2010, the Company will early adopt the new rules
                           under Canadian GAAP Section 1582 Business
                           Combinations, described earlier, as they are
                           consistent with IFRS.)
    -------------------------------------------------------------------------
    Fair value or          The Company may elect to revalue some of its
    revaluation as         property and equipment on transition date to its
    deemed cost            fair value.
    -------------------------------------------------------------------------
    Employee benefits      The Company has elected to charge to equity any
                           unamortized actuarial gains/losses arising from
                           the defined benefit pension plans. The financial
                           impact of this election, along with other pension
                           restatement entries, approximates $2.0 million.
    -------------------------------------------------------------------------
    Share-based payment    The Company will elect not to retrospectively
    transactions           apply the IFRS-2 Share-Based Payments standards
                           for any executive stock options granted prior to
                           November 2002 and for any options that have fully
                           vested or have been exercised prior to transition
                           date.
    -------------------------------------------------------------------------
    

Management has identified the differences between Canadian GAAP and IFRS and has devoted considerable time and resources on those areas that will most significantly impact the Company. The following table sets forth the accounting standards that will most likely impact the Company's consolidated financial statements; however, the actual impact has not been fully measured and conclusions may differ as management continues its analysis. Some of the standards are in the process of being reviewed and/or modified and the impact of those changes could pose differences for the Company's consolidated financial statements as well. Management is monitoring these standards closely.

The following list shows the areas that management believes will present the most significant differences in accounting treatment based on the standards in effect as at March 31, 2010. It is not a complete and exhaustive list of all the Canadian GAAP and IFRS differences. Quantification of the impact is ongoing and will continue to be communicated as the transition date nears.

The following are the key accounting areas management believes will impact the Company's consolidated financial statements with a brief description of the likely impact.

    
    -------------------------------------------------------------------------
    Key accounting areas   Impact
    -------------------------------------------------------------------------
    IAS - 1 Presentation   Additional financial statement note disclosures
    of Financial           will be required.
    Statements
    -------------------------------------------------------------------------
    IAS - 12 Income Taxes  Future income tax assets/liabilities will be
                           referred to as deferred income tax
                           assets/liabilities and no current classification
                           will be permitted.
                           The criteria to recognize and measure deferred
                           income taxes may result in differences compared to
                           existing future income tax calculations.
    -------------------------------------------------------------------------
    IAS - 16 Property and  Entities are required to split traditional asset
    Equipment              categories into components based on varying useful
                           lives which may result in changes to the amount of
                           annual depreciation expense.
    -------------------------------------------------------------------------
    IAS - 19 Employee      An accounting policy choice is available for
    Benefits               actuarial gains or losses after adoption;
                             - an entity may elect to amortize the
                               gains/losses using the corridor approach;
                             - it may elect to recognize the gains/losses in
                               net income annually; or
                             - it may elect to recognize gains/losses in OCI
                               annually.
                           Under IFRS, there are differences in how defined
                           benefit plan assets are valued and how an entity
                           measures its plan asset valuation allowance, if
                           any. This particular standard is under review by
                           standard setters and any modification to it may
                           dictate the accounting treatment the Company will
                           adopt as it relates to actuarial gains and losses.
    -------------------------------------------------------------------------
    IAS - 36 Impairment    Impairment calculations under IFRS are done at
    of Assets              the cash-generating unit ("CGU") which is defined
                           as a unit that has independent cash inflows (as
                           opposed to independent net cash flows under
                           Canadian GAAP).
                           Calculations are done using a discounted cash flow
                           method under a one-step approach (as opposed to a
                           two-step approach under Canadian GAAP).
                           Goodwill is allocated and tested in conjunction
                           with its related CGU or group of CGU's that
                           benefit from collective synergies. Any impairment
                           of intangible assets that occurs after the
                           adoption of IFRS, other than goodwill, may be
                           reversed.
    -------------------------------------------------------------------------
    IAS - 38 Intangible    Potential change in how the Company measures the
    Assets                 amount capitalized to its broadcast licences under
                           certain circumstances, which is currently being
                           reviewed and analysed by management.
    -------------------------------------------------------------------------
    IAS - 39 Financial     This standard will effectively be replaced by new
    Instruments:           IFRS-9 Financial Instruments effective January 1,
    Recognition and        2013 and may pose differences in how the Company
    Measurement            classifies, recognizes and measures its financial
                           instruments, including how it accounts for hedges.
                           Earlier adoption may be permitted and the Company
                           will monitor these standards closely.
    -------------------------------------------------------------------------
    IFRS - 2 Share-based   The Company anticipates a change in how it
    Payments               measures executive compensation for its stock
                           appreciation rights' plan because of differences
                           related to pricing models, vesting periods and how
                           to account for forfeiture.
    -------------------------------------------------------------------------
    IFRS - 3 Business      This standard explicitly excludes acquisition-
    Combinations           related and/or restructuring-type costs; these are
                           to be expensed as incurred. Other significant
                           commitments that arise on business combinations
                           are also expensed which potentially may pose
                           differences in how the Company has treated certain
                           items in its past acquisitions and in future
                           transactions.
                           Contingent consideration is measured on the
                           transaction date at its fair value; however
                           subsequent changes to the contingent consideration
                           are treated as an expense.
    -------------------------------------------------------------------------
    

At this time, management is on track with the conversion project; however it is not in a position to quantify the impact of all of the differences that will arise upon the adoption of IFRS. The Company will disclose more detailed information during its 2010 interim periods as it proceeds with its analyses and conclusions. Certain analyses that will enable full disclosure are still being researched and their conclusions are important to the Company and its consolidated financial results.

CRITICAL ACCOUNTING ESTIMATES

There has been no substantial change in the Company's critical accounting estimates since the publication of the 2009 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.

RISKS AND OPPORTUNITIES

There has been no substantial change in the Company's risks and opportunities since the publication of the 2009 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, 2010 that have materially affected, or are likely to materially affect, the Company's internal controls over financial reporting.

OUTLOOK

During the first quarter of 2010, the Company posted double digit revenue growth in its core operating segment. Management is optimistic that positive growth will be sustainable throughout the rest of the year given the current economic climate.

Management has continued to monitor discretionary costs. This combined with improved revenue has increased EBITDA and EBITDA margins in the first quarter. Improving margins is one of the Company's main objectives for 2010.

The Company will continue to focus on its successful operating strategy and its current objectives for 2010 are:

    
    - Continue to maximize operating margins from the existing stations by:
        - Managing costs to achieve the highest possible EBITDA margins
          without compromising the quality of the product;
        - Increasing revenues by providing creative solutions to advertisers,
          particularly with regard to local revenue where management has the
          most ability to influence buying decisions;
        - Augmenting audience share by providing locally-focused programming
          that delivers the music, news and information that local
          communities want.
    - Plan and prepare to launch the six AM to FM conversions; four of which
      are in Alberta and the other two in Newfoundland and Labrador.
    - Review all acquisition opportunities that are cash accretive in the
      near term and that would complement the Company's strategy;
    - Apply for licences in new communities, thereby expanding the number of
      licences held; and
    - Seek approval from the CRTC to convert additional AM stations to FM
      which generates immediate top line growth.
    

The Company has experienced an impressive first quarter which sets the tone for the remainder of 2010. Local revenue continues to thrive and management is encouraged to see a rebound in national ad spending.

Non-GAAP Measure

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

    
                                                         Three months ended
                                                               March 31
    (thousands of dollars)                                 2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income from continuing operations             $   1,237         583
    Provision for income taxes                              780         332
    Other expense (income)                                  545      (1,007)
    Accretion of other liabilities                          190         227
    Interest expense                                        764       1,008
    Depreciation and amortization expense                   876         901
                                                      -----------------------
    EBITDA                                            $   4,392       2,044
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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. Beginning in 2010 other expense (income), which is primarily the results from investment holdings, was excluded from the determination of EBITDA. Consolidated EBITDA for 2009 has been adjusted to reflect this reclassification.

Newfoundland Capital Corporation Limited

Notice of Disclosure of Non-Auditor Review of Interim Financial Statements for the three months ended March 31, 2010 and 2009

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, 2010 and 2009 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 5th day of May, 2010

    
    Interim Consolidated Balance Sheets
    (unaudited)

                                                       March 31 December 31
    (thousands of Canadian dollars)                        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Marketable securities (note 8 (a))              $   4,387       4,923
      Receivables                                        20,567      23,831
      Prepaid expenses                                      919         778
      Other assets (note 8 (c))                           1,339       1,810
      Future income tax assets                            1,288       1,173
                                                      -----------------------
        Total current assets                             28,500      32,515
    Property and equipment                               36,888      37,248
    Other assets                                          4,371       4,216
    Broadcast licences                                  149,641     149,641
    Goodwill                                              7,045       7,045
    Future income tax assets                              2,256       2,188
                                                      -----------------------
                                                      $ 228,701     232,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
      Bank indebtedness                               $   1,672          99
      Accounts payable and accrued liabilities           15,023      17,118
      Dividends payable                                       -       3,297
      Income taxes payable                                7,336       6,836
      Current portion of long-term debt (note 8)         56,000      57,100
                                                      -----------------------
        Total current liabilities                        80,031      84,450
    Long-term debt (note 8)                                   -           -
    Other liabilities                                    17,311      18,946
    Future income tax liabilities                        26,010      25,668
    Shareholders' equity                                105,349     103,789
                                                      -----------------------
                                                      $ 228,701     232,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Income
    (unaudited)
                                                         Three months ended
                                                               March 31
    (thousands of Canadian dollars
     except per share data)                                2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenue                                           $  25,706      22,660
    Operating expenses                                   21,314      20,616
    Depreciation and amortization                           876         901
                                                      -----------------------
    Operating income                                      3,516       1,143
    Interest expense                                        764       1,008
    Accretion of other liabilities                          190         227
    Other expense (income)                                  545      (1,007)
                                                      -----------------------
    Earnings from continuing operations
     before income taxes                                  2,017         915
    Provision for income taxes                              780         332
                                                      -----------------------
    Net income from continuing operations                 1,237         583
    Loss from discontinued operations (note 3)                -          31
                                                      -----------------------
    Net income                                        $   1,237         552
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share from continuing operations
     (notes 4 and 9)
      - basic and diluted                             $    0.04        0.02

    Earnings per share (notes 4 and 9)
      - basic and diluted                             $    0.04        0.02
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Shareholders' Equity
    (unaudited)

                                                         Three months ended
                                                               March 31
    (thousands of Canadian dollars)                        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings, beginning of period            $  60,616      48,547
    Net income                                            1,237         552
                                                      -----------------------
    Retained earnings, end of period                     61,853      49,099
    Capital stock                                        42,913      42,913
    Contributed surplus (note 5)                          2,262       1,992
    Accumulated other comprehensive loss                 (1,679)     (4,329)
                                                      -----------------------
    Total shareholders' equity                        $ 105,349      89,675
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Comprehensive Income
    (unaudited)

                                                         Three months ended
                                                               March 31
    (thousands of Canadian dollars)                        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                                        $   1,237         552
                                                      -----------------------
    Other comprehensive income:
    Change in fair values of cash flow hedges
      Interest rate swaps (note 8(b)):
        Increase (decrease) in fair value, net
         of $328 settlement and tax expense of
         $122 (2009 - $nil)                                 333         (58)
        Reclassification to net income of interest
         (recovery) expense, net of tax recovery of
         $9 (2009 - $nil)                                   (24)        111
        Credit risk adjustment, net of tax recovery
         of $7 (2009 - $nil)                                (18)          -
                                                      -----------------------
                                                            291          53
                                                      -----------------------
      Total equity return swap (note 8(c)):
        Increase (decrease) in fair value, net of
         tax recovery of $43 (2009 - tax expense
         of $243)                                           (84)        607
        Reclassification to net income of realized
         loss (gains), net of tax expense of $6
         (2009 - tax recovery of $91)                        11        (227)
                                                      -----------------------
                                                            (73)        380
                                                      -----------------------
    Other comprehensive income                              218         433
                                                      -----------------------
    Comprehensive income                              $   1,455         985
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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 Canadian dollars)                        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive loss,
     beginning of period                              $  (1,897)     (4,762)
    Other comprehensive income for the period               218         433
                                                      -----------------------
    Accumulated other comprehensive loss, end
     of period                                        $  (1,679)     (4,329)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Cash Flows
    (unaudited)

                                                         Three months ended
                                                               March 31
    (thousands of Canadian dollars)                        2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Activities
    Net income from continuing operations             $   1,237         583
    Items not involving cash
      Depreciation and amortization                         876         901
      Future income taxes                                    90         223
      Executive stock-based compensation
       plans (notes 4 and 6)                                 76         231
      Accretion of other liabilities                        190         227
      Unrealized gains on marketable
       securities (note 8 (a))                             (185)       (992)
      Other                                                 (31)       (368)
                                                      -----------------------
                                                          2,253         805
    Change in non-cash working capital relating to
     operating activities from continuing operations      1,306       3,149
                                                      -----------------------
    Cash flow from continuing operating activities        3,559       3,954
    Cash flow from discontinued operations                    -          48
                                                      -----------------------
                                                          3,559       4,002
    -------------------------------------------------------------------------
    Financing Activities
    Change in bank indebtedness                           1,573        (421)
    Long-term debt repayments                            (1,100)     (2,005)
    Dividends paid                                       (3,297)          -
                                                      -----------------------
                                                         (2,824)     (2,426)
    -------------------------------------------------------------------------
    Investing Activities
    Property and equipment additions                       (504)       (596)
    Canadian Content Development commitment
      payments                                             (441)       (518)
    Other                                                   210        (462)
                                                      -----------------------
                                                           (735)     (1,576)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash, beginning and end of period                         -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental Cash Flow Information
      Interest paid                                   $     920         423
      Income taxes paid                                     191          70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Notes to the Interim Consolidated Financial Statements - March 31, 2010
    and 2009 (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 2009 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 2009 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.

    2. FUTURE ACCOUNTING POLICIES

    Section 1582 Business Combinations

    During 2009, the CICA issued Handbook Section 1582 Business Combinations
    which replaces Section 1581 bearing the same name. This Section is
    effective for fiscal years beginning on or after January 1, 2011, with
    earlier adoption permitted, and the changes align the standard with the
    guidance in International Financial Reporting Standards ("IFRS"). Of the
    amendments in the Section, the one that will represent the most
    significant change in how the Company accounts for business combinations
    is the determination of the cost of the purchase. The cost that is
    allocated to the fair value of the net assets acquired is the direct cost
    of the business combination; indirect costs such as legal or
    restructuring are expensed. The Company intends to early adopt this
    standard if any business combinations should occur in 2010. The impact
    the changes will have on its consolidated results will continue to be
    monitored.

    Section 1601 Consolidated Financial Statements and Section 1602 Non-
    controlling Interests

    These Sections were issued and together replace Section 1600 Consolidated
    Financial Statements. These too are applicable for fiscal years beginning
    on or after January 1, 2011, with earlier adoption permitted. The new
    sections establish standards for the preparation of consolidated
    financial statements and for the accounting of a non-controlling interest
    in a subsidiary in consolidated financial statements subsequent to a
    business combination. The Company will continue to evaluate the impact of
    the amendments.

    3. DISCONTINUED OPERATIONS

    The Company disposed of its net assets associated with the two FM radio
    stations located in Thunder Bay, Ontario in 2009. The financial results
    of operations from this component have been treated as discontinued
    operations in the consolidated statements of income and cash flows for
    2009. The results of this component were also excluded from the
    comparative figures from the Broadcasting segment results in segmented
    information presented in note 10.

    Selected financial information for the reporting unit included in
    discontinued operations is presented below:

    (thousands of dollars)                                 2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss from operations from discontinued component  $       -          47
    Income tax recovery                                       -         (16)
                                                      -----------------------
    Loss from discontinued operations                 $       -          31
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4. CAPITAL STOCK

    Stock split

    Effective on November 25, 2009, the Class A Subordinate Voting Shares and
    Class B Common Shares were split on a three-for-one basis. Accordingly,
    the comparative number of shares and per share amounts have been
    retroactively adjusted to reflect the three-for-one split.

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase
    up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and
    75,453 Class B Common Shares. This bid expires February 8, 2011. The
    Company did not repurchase any of its outstanding Class A shares during
    the first quarter in 2010 and 2009.

    Executive stock option plan

    Pursuant to the executive stock option plan, 60,000 options (2009 -
    90,000) were granted at a weighted average exercise price of $6.77
    (2009 - $5.83) 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 March 4,
    2015. No options were exercised in the first quarter (2009 - nil).
    Compensation expense related to stock options for the three months ended
    March 31, 2010 was $105,000 (2009 - $47,000).

    5. CONTRIBUTED SURPLUS

    (thousands of dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, January 1, 2009                                      $   1,945
    Executive stock option plan compensation expense                     47
                                                                  -----------
    Balance, March 31, 2009                                           1,992
    Executive stock option plan compensation expense                    270
                                                                  -----------
    Balance, March 31, 2010                                       $   2,262
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6. STOCK APPRECIATION RIGHTS

    A total of 1,745,000 stock appreciation rights ("SARS" or "rights") have
    been granted since 2006 at a weighted-average reference price of $5.75.
    The SARS' expiry dates range from March 2011 to February 2015. As at
    March 31, 2010, 270,000 rights had expired and 60,000 rights had been
    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 and 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 rights granted
    under this plan expire on the 60th day following the 5th anniversary of
    the grant date. For the quarter ended March 31, 2010, 30,000 SARS (2009 -
    nil) were exercised for cash proceeds of $37,000 (2009 - $nil).
    Compensation expense in the first quarter was $8,000 (2009 - $184,000).
    The total obligation for SARS compensation was $1,516,000, of which
    $1,430,000 was current and classified as accounts payable and accrued
    liabilities (2009 - compensation payable was $251,000, of which $150,000
    was current).

    7. EMPLOYEE BENEFIT PLANS

                                                         Three months ended
                                                               March 31
    (thousands of dollars)                                 2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined contribution plan expense                 $     357         340
    Defined benefit plan expense                            119         125
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

    Estimated fair value of financial instruments

    Current assets and current liabilities' carrying values are
    representative of their fair values due to the relatively short period to
    maturity. The fair value of long-term debt approximates the carrying
    value because the interest charges under the terms of the long-term debt
    are based on the 3-month Canadian banker's acceptance rates. The fair
    values of Canadian Content Development commitments approximated their
    carrying values as they were recorded at the net present values of their
    future cash flows, using discount rates ranging from 8.0% to 14.3%.

    The following table outlines the hierarchy of inputs used in the
    calculation of fair value for each financial instrument:

                                            Level 1     Level 2     Level 3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                             Quoted
                                             prices
                                          in active     Signifi-    Signifi-
                                            markets        cant        cant
                                                for       other     unobser-
    (thousands of dollars)                identical  observable       vable
     Description                  Total      assets      inputs      inputs
    -------------------------------------------------------------------------

    Cash and bank
     indebtedness             $  (1,672)     (1,672)          -           -
    Marketable securities         4,387       4,387           -           -
    Accounts receivable          20,567           -      20,567           -
    Equity total return
     swap receivable              1,339           -       1,339           -
    Accounts payable and
     accrued liabilities        (15,023)          -     (15,023)          -
    Long-term debt              (56,000)          -     (56,000)          -
    CCD commitments              (8,261)          -      (8,261)          -
    Interest rate swap
     payable                     (3,066)          -      (3,066)          -
    -------------------------------------------------------------------------

    The Company uses the following hierarchy for determining and disclosing
    the fair value of financial instruments by valuation techniques:

    Level 1:  quoted (unadjusted) prices in active markets for identical
              assets and liabilities
    Level 2:  other techniques for which all inputs that have a significant
              effect on the recorded value are observable, either directly or
              indirectly
    Level 3:  techniques which use inputs that have a significant effect on
              the recorded fair value that are not based on observable market
              data

    The following sections discuss the Company's risk management objectives
    and procedures as they relate to credit risk, market risk, liquidity risk
    and capital risk.

    Credit risk

    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. The maximum credit exposure
    approximated $22,000,000 as at March 31, 2010, 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. Credit exposure is managed through credit
    approval and monitoring procedures. 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 totaled $1,160,000 as at March 31, 2010. The Company
    is of the opinion that the provision for potential losses adequately
    reflects the credit risk associated with its receivables. Approximately
    85% 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. The
    total amount written off in the first quarter was $177,000 which
    represents a very small portion of accounts receivable and revenue.

    As at March 31, 2010, the Company's credit exposure related to its
    receivables continued to be 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
    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.

    With regard to the Company's derivative instruments, the counterparty
    risk is managed by only dealing with Canadian Chartered Banks having high
    credit ratings.

    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. As at March 31, 2010, a 10%
       change in the share prices of each marketable security would result in
       a $360,000 after-tax change in net income.

       For the quarter ended March 31, 2010, the change in fair value of
       marketable securities, recorded in other expense, was an unrealized
       gain of $185,000 (2009 - $992,000).

    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 elected to apply hedge
       accounting and as such 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.

       Interest rate fluctuations would have an impact on the Company's
       results. A 0.5% change in the floating interest rates would have
       impacted OCI due to changes in fair value of the interest rate swaps
       by approximately $630,000, after-tax. There would have been no impact
       to net income.

       The Company has two interest rate swap agreements; one has a notional
       value of $10,000,000 and expires in June 2013, and the other has a
       notional amount of $45,000,000 and expires in May 2013. In 2008, the
       Company early terminated interest rate swap agreements resulting in a
       fair value payable of $349,000 which was blended into the interest
       rate of the $45,000,000 swap. This fair value payable is being
       transferred from OCI to net income (as interest expense) over the
       remaining term of the original swap agreements which expired between
       2009 and 2011. The before-tax amount related to the $349,000 fair
       value payable transferred to net income from OCI for the quarter was
       $17,000 (2009 - $53,000).

       Total before-tax interest transferred for the quarter from OCI to net
       income was interest recovered of $33,000 (2009 - interest expense of
       $111,000). As at March 31, 2010, the Company settled $5,000,000 of the
       $15,000,000 swap which resulted in a payout of $328,000. $5,000,000 of
       the remaining $10,000,000 swap has been de-designated and therefore,
       hedge accounting no longer applies on this portion. Of the amount of
       pre-tax interest recovery transferred to net income from OCI, $48,000
       related to the de-designated portion (2009 - $nil).

       The Company has measured its own credit risk in relation to its
       interest rate swaps and as a result has recognized a $25,000 loss in
       OCI (2009 - $nil).

       The aggregate fair value payable of the swap agreements was $3,066,000
       (2009 - $6,854,000).

    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 1,275,000 notional Class A
       shares with a hedged price of $5.85. The swap expires in July 2011.

       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.

       The Company elected to apply hedge accounting and 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
       net 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.

       As at March 31, 2010, the Company de-designated 330,000 of the
       1,275,000 notional Class A shares; therefore, hedge accounting no
       longer applies on the de-designated portion. Of the $17,000 before-tax
       losses transferred from OCI to net income, a $1,000 gain related to
       the de-designated portion (2009 - $318,000 before tax gains
       transferred from OCI to net income and $167,000 related to gains from
       de-designated portion).

       The estimated fair value of the equity total return swap receivable,
       classified as current other assets, based on the Class A shares'
       market price at March 31, 2010 was $1,339,000 (2009 - $616,000 of
       which $121,000 was current).

    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 that are disclosed below.

    In accordance with CICA 3210 "Long-term debt", long-term debt having a
    maturity date within the next twelve months is required to be classified
    as a current liability. As a result, the Company's long-term debt which
    expires in June 2010 has been presented as current debt as at March 31,
    2010. The Company was in full compliance with its bank covenants
    throughout the quarter and at quarter end and continues to have access to
    the available funds under the existing credit facilities. The Company
    and its lenders have agreed in principal on the terms and conditions of
    the new existing facility which will be finalized prior to the maturity
    of the Company's existing facility. As a result, repayment of the debt
    is not expected and the Company does not deem its liquidity risk to be
    higher than previous years.

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

                                                         2011 -
    Obligation (thousands of dollars)     12 months        2015  Thereafter
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt                        $  56,000           -           -
    Bank indebtedness                         1,672           -           -
    Accounts payable and accrued
     liabilities                             15,023           -           -
    Income taxes payable                      7,336           -           -
    CCD commitments                           2,474       7,628         106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          $  82,505       7,628         106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital risk

    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 dividend payment restrictions, seeking prior
    approval for capital expenditures over a certain dollar limit,
    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, 2010.

    9. EARNINGS PER SHARE

                                                         Three months ended
                                                               March 31
    (thousands)                                            2010        2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average common shares used
     in calculation of basic earnings per share          32,972      32,972
    Incremental common shares calculated in
     accordance with the treasury stock method            1,098         888
                                                      -----------------------
    Weighted average common shares used in
     calculation of diluted earnings per share           34,070      33,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. 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. Details of segment operations are set out below.
    Results from the Thunder Bay reporting unit have been excluded from 2009
    figures as a result of accounting for discontinued operations as
    described in note 3. Beginning in 2010 other expense (income), which is
    primarily the results from investment holdings, was excluded from the
    determination of operating income (loss). The comparative information for
    2009 has been adjusted to reflect this reclassification.

                                                      Corporate
    (thousands of dollars)             Broadcasting   and Other       Total
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2010
    Revenue                               $  24,896         810      25,706
    Operating expenses                       18,833       2,481      21,314
    Depreciation and amortization               806          70         876
                                          -----------------------------------
                                          -----------------------------------
    Operating income (loss)               $   5,257      (1,741)      3,516
                                          -----------------------------------
                                          -----------------------------------
    Assets employed                       $ 211,286      17,415     228,701
    Broadcast licences                      149,641           -     149,641
    Goodwill                                  7,045           -       7,045
    Capital expenditures                        441          63         504
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2009
    Revenue                               $  21,797         863      22,660
    Operating expenses                       18,368       2,248      20,616
    Depreciation and amortization               825          76         901
                                          -----------------------------------
    Operating income (loss)               $   2,604      (1,461)      1,143
                                          -----------------------------------
    Assets employed                       $ 213,196      19,131     232,327
    Broadcast licences                      151,773           -     151,773
    Goodwill                                  7,045           -       7,045
    Capital expenditures                        572          24         596
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00002995E

SOURCE Newfoundland Capital Corporation Limited

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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