Newfoundland Capital Corporation Limited - Third Quarter 2009 - Period Ended
September 30 (unaudited)

DARTMOUTH, NS, Nov. 6 /CNW/ - Newfoundland Capital Corporation Limited (the "Company"), one of Canada's leading radio broadcasters, today announces its financial results for the third quarter ended September 30, 2009.

    
    - Revenue has continued to post positive growth for the first nine months
      of fiscal 2009. Consolidated revenue was $25.4 million in the quarter,
      $0.7 million lower than 2008; however, year-to-date revenue of
      $74.8 million was $0.8 million better than last year. While advertising
      revenue slowed in the third quarter, the Company continues to outpace
      the industry which has experienced negative growth this year.
    - Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"(1)) were $4.7 million in the quarter and $14.0 million year-
      to-date, $8.9 million and $5.4 million higher than the respective prior
      periods. During the third quarter in 2008, significant unrealized
      losses from the Company's marketable securities negatively impacted
      prior year results. Excluding such unrealized gains and losses, EBITDA
      would
      have been $0.5 million higher year-to-date because of increased revenue
      and lower corporate costs.
    - Net income in the quarter was $6.2 million and $9.9 million year-to-
      date, much higher than last year due to a $5.6 million gain on disposal
      in the third quarter this year as well as improved EBITDA.

    Significant events

    - The Company is awaiting a decision from the Canadian Radio-television
      and Telecommunications Commission ("CRTC") on its previously announced
      agreement to sell its FM radio stations in Thunder Bay, Ontario for
      cash proceeds of $4.5 million.
    - The Company completed the divestiture of CFDR-AM in Halifax, Nova
      Scotia in exchange for an AM station in Sudbury, Ontario and proceeds
      of $5.0 million. The station in Sudbury was re-launched on the FM band
      in August.
    - Year-to-date total bank debt has been reduced by $8.8 million.
    - Subsequent to quarter end the Canadian Association of Broadcasters
      reached an agreement on the disputed CRTC Part II fees. The Company's
      provision for these fees of approximately $2.0 million will not be
      required to be paid and accordingly operating expenses in the fourth
      quarter will be reduced by this amount.
    

"We have been successful in achieving year-over-year growth in revenue and continue to outpace the industry", commented Rob Steele, President and Chief Executive Officer. "This is something we are proud of given the uncertainty that has plagued the economy throughout 2009. Our goal for the rest of the year is to continue what we've successfully been able to do so far; continue growing existing operations and reducing debt. Enhancements in programming have been positive contributors to the business this year with ratings' gains and growing market share in large markets. This puts us in a good position to take full advantage as the economy improves."

    
    Financial Highlights - Third Quarter                       (restated)(2)
    (thousands of dollars except share information)      2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                                          $ 25,408        26,069
    EBITDA(1)                                           4,726        (4,182)
    Net income (loss)                                   6,209        (7,580)
    -------------------------------------------------------------------------
    Earnings per share - basic                           0.56         (0.69)
    Share price, NCC.A (closing)                        21.98         18.95
    Weighted average number of shares outstanding
     (in thousands)                                    10,991        10,991
    -------------------------------------------------------------------------
    Total assets                                      240,086       243,298
    Long-term debt, including current portion          65,840        72,351
    Shareholders' equity                              101,095        97,712
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 15 for the reconciliation of EBITDA to net income
        (loss).
    (2) Refer to pages 5 & 12 for additional information on restatement of
        comparative figures.
    

Management's Discussion and Analysis

The purpose of the Management's Discussion and Analysis ("MD&A"), dated November 6, 2009, 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 September 30, 2009 and 2008 as well as the annual audited consolidated financial statements and related notes and the MD&A contained in the Company's 2008 Annual Report. These documents along with the Company's Annual Information Form and other public information are filed electronically with various securities commissions in Canada through the System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at www.sedar.com. All amounts are stated in Canadian dollars.

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

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

Strategy and Objectives

The Company's long-term strategy has not changed since the publication of the Company's 2008 Annual Report. Maximizing returns on existing operations, converting AM stations to FM, and adding new licences through business and licence acquisitions and through the Canadian Radio-television and Telecommunications Commission ("CRTC") licence application process form the basis of the long-term plan.

While management remains committed to long-term growth, in response to the uncertainty within the Canadian economy which began in the latter half of 2008, it re-aligned its short-term goals to focus on growth of existing operations and reducing debt. Acquisition opportunities that fit the Company's growth strategy will continue to be explored; however, management will not proceed with any transactions, projects or activities that are not cash accretive in the near term, pose unnecessary risks, or result in increasing debt to a level beyond management's tolerance. Decisions as to proceeding with new undertakings will be made in the best interest of the Company and its shareholders.

The decision to divest of the two FM radio stations in Thunder Bay, Ontario was made because there was little opportunity to expand the presence of the Company and build on a cluster of stations in close proximity to Thunder Bay. The Company therefore decided to divest itself of these non-core properties and re-deploy the capital for other uses.

Corporate Developments

The following is a review of the key corporate developments which should be considered when reviewing the "Consolidated Financial Review" section.

2009 developments

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

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

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

    - June 2009 - CRTC approved the Company's applications to convert AM
      stations to FM in Wabush and Goose Bay, Newfoundland and Labrador.

    - June 2009 - Re-launched CFUL in Calgary, Alberta as a Contemporary Hits
      Radio format, branded as AMP Radio. This format is similar to Hot 89.9
      in Ottawa, Ontario which has been a very successful station for the
      Company.

    - July 2009 - Announced it had entered into an agreement to divest of its
      two FM radio stations in Thunder Bay, Ontario for cash consideration of
      $4.5 million. The transaction is subject to CRTC approval.

    - August 2009 - Launched Hot 93.5, the new FM station in Sudbury,
      Ontario. Its format is Top 40 and has been met with a very positive
      response from both listeners and clients.

    2008 developments

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

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

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

    - July 2008 - Announced an agreement to exchange radio stations with
      Rogers Broadcasting Limited ("Rogers" - a Division of Rogers
      Communications Inc. RCI.A and RCI.B) subject to approval from the CRTC.
      The Company will exchange its AM broadcast licence in Halifax, Nova
      Scotia and receive in return Rogers' AM licence in Sudbury, Ontario and
      cash consideration of $5.0 million. Both simultaneously submitted
      applications for this transfer of assets along with applications
      requesting conversion of the AM licences to FM. In November 2008, the
      CRTC approved these applications. The transaction closed in July 2009
      and the proceeds were used to reduce debt. For additional information
      on this transaction, refer to note 3 of the unaudited interim
      consolidated financial statements.

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

    - December 2008 - CRTC approved the Company's application to convert an
      AM signal to FM in Athabasca, Alberta. The FM station was launched in
      August 2009.
    

The results of the above acquired or launched stations have been included in the consolidated financial statements since the respective acquisition and launch dates.

Consolidated Financial Review

For full details explaining the variances in revenue, other income, operating expenses and EBITDA, please refer to the section entitled "Financial Review by Segment".

Revenue

In the quarter consolidated revenue of $25.4 million was $0.7 million or 3% lower than last year; however, year-to-date consolidated revenue increased by $0.8 million, or 1%, to finish at $74.8 million. These variances were mostly derived from the Broadcasting segment.

Other income

Other income consists primarily of unrealized gains and losses on marketable securities. In the third quarter other income was $1.1 million and for the nine months ended September 30, 2009, it was $3.1 million. These results were much better than the 2008 comparative periods because of the significant unrealized losses incurred in the third quarter last year.

Operating expenses

Third quarter consolidated operating expenses of $21.8 million were $0.1 million lower than 2008. Year-to-date consolidated operating expenses of $63.9 million were $0.2 million higher than last year.

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

Consolidated EBITDA in the quarter was $4.7 million compared to a loss of $4.2 million last year. Year-to-date consolidated EBITDA of $14.0 million was also better than last year's $8.6 million. In 2008, unrealized losses on the marketable securities negatively impacted EBITDA.

Depreciation and amortization

For the quarter and year-to-date, depreciation and amortization expense was higher than last year due to a larger asset base.

Interest expense

Interest expense of $0.9 million was $0.2 million lower than the same quarter last year while year-to-date interest expense of $2.9 million was also lower than the prior year by $0.1 million. The decrease was a result of lower average debt levels.

Accretion of other liabilities

Accretion of other liabilities arises from discounting Canadian Content Development ("CCD") commitments to reflect the fair value of the obligations. The expense in the quarter and for the nine month period was slightly lower than last year.

Gain on disposal of broadcast licence

As part of the transaction to exchange assets with Rogers, as previously disclosed, the Company disposed of its AM broadcast licence in Halifax, Nova Scotia which resulted in a gain of $5.6 million.

Income taxes

The effective income tax rate of 26% this quarter and year-to-date was lower than the statutory rate of 36% mainly because investment gains and the gain on disposal are taxed at one-half the normal tax rate.

Net income

Net income in the quarter was $6.2 million; $13.8 million higher than last year and year-to-date net income of $9.9 million was $10.8 million higher. The unrealized losses in 2008 negatively impacted the prior year's results while this third quarter's $5.6 million gain on disposition of a broadcast licence positively affected net income.

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 after-tax income recorded in OCI for the interest rate swaps was $0.2 million in the quarter (2008 - $0.8 million after-tax expense) and year-to-date was $2.0 million (2008 - $1.1 million after-tax expense). The after-tax loss related to the equity total return swap was $0.4 million for the quarter (2008 - $0.1 million after-tax gain). Year-to-date, the after-tax gain was $0.4 million (2008 - $0.2 million after-tax loss).

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

As a result of adopting a new accounting policy, as required by the Canadian Institute of Chartered Accountants (more fully described in note 2 of the Company's unaudited interim consolidated financial statements), the 2008 operating expenses were restated to include costs that were previously capitalized as pre-operating costs for comparative purposes only. Operating expenses were increased by $0.2 million in the quarter and by $0.9 million year-to-date.

As more fully disclosed in note 4 of the Company's unaudited interim consolidated financial statements, the revenue, operating expenses and EBITDA from discontinued operations have been excluded from the Broadcasting segment results presented in the table below for 2009 and 2008.

    
    Financial Results by Segment
    (thousands of dollars, except percentages)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                  Three months ended Sept. 30    Nine months ended Sept. 30
                     2009      2008    Growth      2009      2008    Growth
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue
      Broad-
       casting   $ 24,329    25,023        (3%)  72,093    71,415         1%
      Corporate
       and Other    1,079     1,046         3%    2,747     2,661         3%
    -------------------------------------------------------------------------
    Consolidated
     revenue       25,408    26,069        (3%)  74,840    74,076         1%
    -------------------------------------------------------------------------
    Other income
     (expense)
      Corporate
       and Other    1,077    (8,372)        -     3,082    (1,767)        -
    -------------------------------------------------------------------------
    Consolidated
     revenue and
     other
     income        26,485    17,697        50%   77,922    72,309         8%
    -------------------------------------------------------------------------
    Operating
     expenses
      Broad-
       casting     18,980    19,056         -    56,195    55,408         1%
      Corporate
       and Other    2,779     2,823        (2%)   7,728     8,295        (7%)
    -------------------------------------------------------------------------
    Consolidated
     operating
     expenses      21,759    21,879        (1%)  63,923    63,703         -
    -------------------------------------------------------------------------
    EBITDA
      Broad-
       casting      5,349     5,967       (10%)  15,898    16,007        (1%)
      Corporate
       and Other     (623)  (10,149)        -    (1,899)   (7,401)        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Consolidated
     EBITDA      $  4,726    (4,182)        -    13,999     8,606        63%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA
     Margins         2009      2008    Growth      2009      2008    Growth
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Broadcasting       22%       24%       (2%)      22%       22%        -
    Consolidated       18%        -         -        18%       12%        6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Broadcasting segment

The Broadcasting segment derives its revenue from the sale of broadcast advertising from its 81 licences across the country. The performance of all reporting units within this segment is evaluated based on the same financial measure - EBITDA.

Broadcasting revenue in the quarter of $24.3 million was lower than last year by 3%; however, on a year-to-date basis, Broadcasting revenue of $72.1 million was 1% higher than 2008. The third quarter was particularly slow compared to the first six months of 2009; however, the Company has continued to post year-over-year growth and outpace industry which has been reporting negative growth. Current revenue bookings for the fourth quarter are positive compared to 2008. As a result, management is confident it will continue to outpace the industry and is optimistic to end the year with higher revenue compared to 2008.

For the first nine months of 2009, growth has been steady for the properties in the Atlantic Provinces and the new FM stations launched in summer 2008 continue to achieve better than expected results. Organic revenue growth for the Atlantic properties was 7% in the quarter and 4% year-to-date; significantly stronger than industry averages. A softening in revenue has continued for the stations in Ontario and across Alberta; however, it is worth noting that while they may have experienced slower revenue growth, they have outperformed the industry in their respective markets. Recent format changes in Calgary and Edmonton, Alberta have resulted in higher ratings and larger market shares. These are expected to contribute to higher revenue in future. While advertising revenue has been impacted industry-wide, management continues to improve the on-air product, making it intensely locally focused and more relevant. These efforts are expected to have a favourable impact as the economy improves.

National revenue continued to be slower than anticipated for the first nine months of 2009; however strong relationships with local advertisers have been beneficial as local revenue is a significant contributor to profitability.

For the quarter, Broadcasting operating expenses were $19.0 million, a decrease of $0.1 million from last year. Year-to-date Broadcasting operating expenses of $56.2 million were $0.8 million or 1% higher than 2008. As stated earlier, the Company was required to adopt new accounting rules for pre-operating costs and as a result operating expenses for 2008 were restated. The 2008 third quarter operating expenses were increased by $0.2 million and year-to-date the increase was $0.9 million. Excluding these costs, operating expenses for the third quarter would have been slightly higher than last year while year-to-date operating expenses would have been $1.8 million higher than 2008. Incremental costs associated with the new FM stations launched last summer are a large portion of the year-to-date increase in operating expenses.

Broadcasting EBITDA in the third quarter of $5.3 million was $0.6 million or 10% lower than last year; a result of a decline in revenue. Year-to-date Broadcasting EBITDA of $15.9 million was $0.1 million lower than last year.

Corporate and Other segment

This segment's revenue is from hotel operations and Other income is investment income from the Company's marketable securities. The segment also includes expenses attributed to head office functions.

This segment's revenue in the third quarter was $1.1 million, on par with 2008 while year-to-date revenue of $2.7 million was $0.1 million or 3% higher than last year. This was due to hotel revenue.

Other income consists of realized and unrealized gains and losses on marketable securities, interest, dividends and distributions from investments. Unrealized gains on the marketable securities were $1.3 million in the quarter and $3.3 million year-to-date. This compares favourably to last year's unrealized losses of $8.8 million in the quarter and $3.3 million year-to-date.

Third quarter operating expenses of $2.8 million were comparable to last year; however, on a year-to-date basis, operating expenses of $7.7 million were $0.6 million lower. The overall decrease in Corporate and Other operating expenses is primarily attributable to lower costs associated with executive compensation.

The results for Corporate and Other EBITDA for the quarter and year-to-date were much better than last year's numbers; a result of the significant unrealized losses posted in the third quarter of 2008.

Selected Quarterly Financial Information

The Company's revenue is derived primarily from the sale of advertising airtime which is subject to seasonal fluctuations and as such the first quarter of the year is generally a period of lower retail spending. Other factors affecting the variability of net income in the quarters presented below are as follows. In the third quarter 2009, the Company benefited from a $5.6 million gain on disposal of one of its broadcast licences. In 2008, the unrealized gains and losses on the marketable securities affected net income in the quarters as follows: positive variance of $4.8 million in the second quarter and negative variances of $8.8 million and $4.6 million in the third and fourth quarters, respectively.

    
    (thousands
     of
     dollars
     except                                (restated)             (restated)
     per              2009                      2008                   2007
     share   ----------------------  ------------------------------  --------
     data)      3rd     2nd     1st     4th     3rd     2nd     1st     4th
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reve-
     nue   $ 25,408  26,772  22,660  29,306  26,069  26,798  21,209  27,060
    Net
     income
     (loss)   6,209   3,144     552  (3,796) (7,580)  6,157     574   5,613
    Earnings
     per
     share
      - Basic  0.56    0.29    0.05   (0.34)  (0.69)   0.56    0.05    0.51
      - Dilu-
         ted   0.55    0.28    0.05   (0.34)  (0.69)   0.54    0.05    0.49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Selected cash flow information and capital resources

Below is a summary of cash inflows and outflows for the quarters and the nine month periods ended September 30, 2009 and 2008.

Selected cash flow information - three months ended September 30, 2009

Cash from operating activities of $5.0 million, combined with the $5.0 million cash proceeds on disposition of a broadcast licence, was used primarily to repay $7.0 million of debt, to contribute $1.7 million toward CCD and to finance property and equipment additions of $1.3 million.

Selected cash flow information - three months ended September 30, 2008

Cash from operating activities of $4.1 million combined with net debt borrowings of $7.5 million were used for the $8.5 million purchase of the remaining 50% interest in Metro Radio Group Inc., to finance a 29.9% interest in a radio station undertaking for $1.0 million and to buy property and equipment totalling $0.9 million.

Selected cash flow information - nine months ended September 30, 2009

Cash from operating activities of $11.2 million, combined with the $5.0 million cash proceeds on disposition of a broadcast licence, was used to repay $8.8 million of debt, purchase property and equipment totalling $3.7 million and to contribute $3.1 million toward CCD.

Selected cash flow information - nine months ended September 30, 2008

Cash from operating activities of $7.4 million combined with net debt proceeds of $14.2 million were used mainly to finance the purchase of the remaining 50% in Metro Radio Group Inc. for $8.5 million, to buy property and equipment for $5.0 million, to repurchase capital stock for $1.8 million, to pay CCD in the amount of $1.8 million, to pay dividends of $1.7 million and to fund the recent launch of three new FM stations.

Capital Structure and Debt Financing

As at September 30, 2009, the Company had $1.2 million of current bank indebtedness outstanding and $65.8 million of long-term debt which has been 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 and also under the heading "Liquidity Risk".) The working capital was negative as at September 30, 2009 due to the reclassification of long-term debt to current. Excluding the long-term debt, the working capital would have been $6.7 million, $1.5 higher than the December 31, 2008 balance which was due to a decrease in current liabilities. The capital structure consisted of 42% equity ($101.1 million) and 58% debt ($139.0 million).

Credit Facility

The Company's syndicated credit facility of $80.0 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. The Company intends to renew this facility prior to the maturity date; however, because expiry is within the next twelve months, the Company's debt has been classified as a current liability as at September 30, 2009. Please refer to the section entitled "Liquidity Risk" for further details on the credit facility and future financing.

The Company is subject to 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.

Capital Expenditures and Capital Budget

The capital expenditures for 2009 are expected to be approximately $5.0 million and will be funded by cash provided from operations. Capital expenditures were required to build and launch the new FM station in Sudbury, Ontario. The Company also incurred capital related to a recent relocation to new premises in Halifax, Nova Scotia. The Company continuously upgrades its broadcast equipment to improve operating efficiencies.

Commitments and Contractual Obligations

There has been no substantial change in the Company's commitments and contractual obligations since the publication of the 2008 Annual Report, except for the fact that long-term debt has been classified as current. For further reference to when commitments and contractual obligations become payable, refer to note 9 of the unaudited interim consolidated financial statements.

Off-Balance Sheet Arrangements

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

Financial Condition

Capital employed

Assets at quarter end totalled $240.1 million, up from $235.8 million at December 31, 2008 due mainly to increases in property and equipment and other non-current assets.

Share repurchases

The Company has approval under a Normal Course Issuer Bid to repurchase up to 486,659 Class A Subordinate Voting Shares ("Class A shares") and 62,877 Class B Common Shares. This bid expires February 8, 2010. The Company has not repurchased any of its outstanding Class A shares in 2009. During the second quarter in 2008, the Company repurchased 100,000 of its Class A shares for a total cost of $1.8 million.

Outstanding share data

The weighted average number of shares outstanding was 10,991,000; consistent with the same time last year. As at September 30, 2009, there are 9,733,189 Class A shares and 1,257,551 Class B Common Shares outstanding.

Stock split

The Company is seeking shareholder approval to split the stock on a three for one basis for its Class A shares and Class B common shares. The Special Shareholders' Meeting will take place on November 13, 2009.

Executive Compensation

Executive stock option plan

Compensation expense related to stock options for the three months ended September 30, 2009 was $0.1 million (2008 - less than $0.1 million) and year-to-date was $0.2 million (2008 - $0.1 million). Refer to note 5 of the unaudited interim consolidated financial statements for further details relating to the executive stock option plan.

Stock appreciation rights plan

For the three months ended September 30, 2009, the compensation expense related to stock appreciation rights ("SARs") was $0.5 million (2008 - recovery of $0.1 million). The year-to-date expense was $1.4 million (2008 - recovery of less than $0.1 million). Refer to note 7 of the unaudited interim consolidated financial statements for further details relating to SARs.

Derivative Financial Instruments

For more detailed disclosures about derivative financial instruments and financial risk management, refer to note 9 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 aggregate notional amount of the swap agreements was $60.0 million (2008 - $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 September 30, 2009 was $4.2 million (2008 - $1.6 million). After-tax, the unrealized income recognized in OCI for the quarter was $0.2 million (2008 - expense of $0.8 million) and on a year-to-date basis was $2.0 million (2008 - unrealized expense of $1.1 million).

Share price volatility management

To hedge its obligations under the stock appreciation rights plan, the Company entered into 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. The Company has concluded that a small portion of this cash flow hedge was ineffective and as such has recognized certain amounts in net income; however, the remainder of the hedge continued to be accounted for using hedge accounting. The estimated fair value of the equity total return swap receivable at September 30, 2009 was $1.8 million (2008 - $0.6 million). After-tax the unrealized non-cash loss recognized in OCI for the quarter was $0.4 million (2008 - gain of $0.1 million) and year-to-date was a gain of $0.4 million (2008 - loss of $0.2 million).

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The fair value of the Company's marketable securities is affected by changes in the quoted share prices in active markets. Such prices can fluctuate and are affected by numerous factors beyond the Company's control. In order to minimize the risk associated with changes in the share price of any one particular investment, the Company diversifies its portfolio by investing in various stocks in varying industries. It also conducts regular financial reviews of publicly available information related to its investments to determine if any identified risks are within tolerable risk levels. Despite the Company's intent to minimize this risk, the current stock market volatility has caused significant fluctuations in all its marketable securities. While it is uncertain when this volatility will fully stabilize, there has been improvement in the markets recently. As at September 30, 2009, a 10% change in the share prices of each marketable security would result in a $0.6 million after-tax change in net income.

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.

Current classification of credit facility and future financing

In accordance with guidance taken from 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 has been presented as current debt as at September 30, 2009. Despite this classification, the Company is in full compliance with its debt covenants and continues to have access to these funds. In addition, since management intends to renew its credit facility prior to maturity, which is June 2010, repayment of the debt is not expected. Management is anticipating a possible increase in interest and bank fees upon renewal because of the current credit markets; but it does not have any reason to believe the facility will not be renewed. The Company does not deem its liquidity risk to be high even though debt is classified as current.

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 $80.0 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.

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. Excluding the long-term debt which has been classified as a current liability, obligations due within the next twelve months approximate $4.8 million (refer to note 9 of the unaudited consolidated financial statements for a table showing the Company's commitments). Cash generated from operations, the availability of the credit facility, and the cash proceeds of $4.5 million (expected from a pending business transaction explained in note 4 of the unaudited interim consolidated financial statements) will provide sufficient funds to meet the Company's upcoming cash requirements.

Working capital requirements

As at September 30, 2009, the Company's working capital balance, excluding the long-term debt classified as a current liability, was $6.7 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.

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

Credit Risk

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 September 30, 2009, the Company's credit exposure as it related to its receivables was deemed higher than in the past due to the uncertainty in the Canadian economy. The Company sells advertising airtime primarily to retail customers and since their results may also be affected by the economy, it is difficult to predict the impact this could have on the Company's receivables' balance. The Company maintains a provision for potential credit losses and it believes the provision to be adequate at this time given the current circumstances. The provision approximated $1.2 million as at September 30, 2009. Approximately 83% of trade receivables are outstanding for less than 90 days.

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

Capital Management

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

The Board of Directors has deferred the determination of the amount of dividends to be declared in 2009 until its December Board meeting.

Adoption of new accounting policies

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

As a result of adopting this accounting policy, the effects on the comparative unaudited interim consolidated statements of income are presented below:

    
                                                 Three months   Nine months
                                                        ended         ended
                                                 September 30  September 30
    (thousands of dollars)                               2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses increased by                  $    188           948
    Amortization expense decreased by                    (169)         (437)
    Provision for income tax expense
     decreased by                                          (5)         (135)
    -------------------------------------------------------------------------
    Net income decreased by                          $    (14)         (376)
    -------------------------------------------------------------------------
    Basic and diluted earnings per share
     decreased by                                    $  (0.00)        (0.03)
    -------------------------------------------------------------------------

    The impact on the unaudited interim consolidated balance sheets was as
follows:

                                                  December 31, September 30,
    (thousands of dollars)                               2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other assets decreased by                        $ (2,858)       (2,994)
    Future income tax liabilities decreased by           (824)         (860)
    -------------------------------------------------------------------------
    Retained earnings reduced by                     $ (2,034)       (2,134)
    -------------------------------------------------------------------------
    

In 2009, amendments were made to certain paragraphs in CICA Section 3862 Financial Instruments - Disclosures which aligns the standard more closely with International Financial Reporting Standards ("IFRS"). Specifically, it provides enhanced disclosure requirements around fair value measurement of financial instruments and disclosure of liquidity risk. The amended paragraphs are to be applied for fiscal years ending on or after September 30, 2009. Earlier adoption is permitted. The Company does not anticipate any significant impact from the adoption of these disclosure requirements.

During 2009, the CICA issued EIC-173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities which requires an entity to consider its own credit risk and that of its counterparty to a financial instrument when determining the fair value of financial assets and liabilities. This applies to the Company's derivative instruments. The adoption of this EIC did not have a significant impact on the Company.

Future Accounting Policy Changes

Following is a brief description of accounting policies that will be adopted by the Company in future.

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 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 will continue to evaluate the impact of these amendments.

Section 1601 Consolidated Financial Statements and Section 1602 Non-controlling Interests were also 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 potential impact of these Sections.

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. The Company is currently evaluating the impact of adopting IFRS. Specifically, management is in the process of identifying the IFRS standards that are most likely to impact the Company and those that will require the most resources for implementation. Management is also in the process of making decisions as it relates to adopting IFRS for the first time and considering the exceptions and exemptions permitted under IFRS-1 First-time Adoption of International Financial Reporting Standards. Management is in the process of quantifying the impact the changes will have on its consolidated results.

Subsequent Events

Subsequent to quarter end, the Government of Canada and members of the broadcasting industry that are required to pay CRTC Part II licence fees announced they had settled the Part II licence fee issue. Under the terms of the settlement, the government agreed to waive the fees payable for the fiscal years 2007, 2008 and 2009 that were not collected due to the ongoing legal dispute. In exchange, the Canadian Association of Broadcasters agreed to discontinue its court action against the Government of Canada. The Government of Canada agreed to recommend to the CRTC that it develop a new Part II fee regime which would be capped at $100 million, indexed for annual inflation, effective beginning September 1, 2009.

As at September 30, 2009, the Company had approximately $2.0 million recorded as a liability relating to these fees. As a result of the settlement, operating expenses in the fourth quarter will be reduced by this amount.

Critical Accounting Estimates

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

Risks and Opportunities

There has been no substantial change in the Company's risks and opportunities since the publication of the 2008 Annual Report; except that the CRTC Part II fee dispute has been resolved as explained above under "Subsequent Events".

Changes in Internal Controls over Financial Reporting

There were no changes in the Company's internal controls over financial reporting that occurred in the nine months ending September 30, 2009 that have materially affected, or are likely to materially affect, the Company's internal controls over financial reporting.

Outlook

Year-to-date, the Company has continued to post revenue growth in its Broadcasting segment despite negative growth experienced by the broadcasting industry. Management remains confident that it will outpace the industry for the rest of the year.

While management has focused on controlling costs, it has not lost sight of the importance of offering a better product. Management has continued improving programming, making it relevant to the listener and intensely locally focused. This has garnered results which are demonstrated by recent market share gains in certain large markets, like Calgary and Edmonton, Alberta. With such recent ratings' gains, the Company is positioned to positively benefit as the economy improves.

The status of the Company's current growth initiatives are as follows:

    
    - The new Sudbury, Ontario FM station was successfully launched in late
      August 2009. The reaction to the station has been very positive.

    - The Athabasca, Alberta AM station was re-launched as an FM station in
      August.

    - Management is in the planning stages of launching four repeater
      licences in Prince Edward Island and will begin planning the AM to FM
      conversions in St. Paul and High Prairie, Alberta and in Wabush and
      Goose Bay, Newfoundland and Labrador.

    - Management continues to be active in submitting applications to the
      CRTC for new licences and for AM to FM conversions.

    The decision made by management in late 2008 to focus steadfastly on
short-term goals such as reducing debt, controlling costs and driving revenue
has benefited the Company in many ways. So far this year, the Company has
achieved the following:

    - Repaid $8.8 million of debt;

    - Grew revenue in 2009 despite an uncertain economy and considerably
      outpaced the industry;

    - Closely monitored and reduced discretionary costs; and

    - Increased ratings and audience shares in competitive markets.

    As a result of the above achievements, the Company is in a good position
to positively benefit as the economy improves.

    Non-GAAP Measure

    (1) EBITDA is defined as net income (loss) from continuing operations
        excluding depreciation and amortization expense, interest expense,
        accretion of other liabilities, goodwill impairment loss, gain on
        disposal of broadcast licence and provision for income taxes
        (recovery). A calculation of this measure is as follows:


                                 Three months ended       Nine months ended
                                           Sept. 30                Sept. 30
                                          (restated)              (restated)
    (thousands of dollars)         2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss) from
     continuing operations     $  6,144      (7,587)      9,810        (876)
    Provision for income taxes
     (recovery)                   2,112        (116)      3,510       2,000
    Gain on disposal of
     broadcast licence           (5,616)          -      (5,616)          -
    Goodwill impairment loss          -       1,334           -       1,334
    Accretion of other
     liabilities                    211         264         665         748
    Interest expense                911       1,071       2,854       2,921
    Depreciation and
     amortization expense           964         852       2,776       2,479
                               ----------------------------------------------
    EBITDA                     $  4,726      (4,182)     13,999       8,606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

This measure is not defined by Generally Accepted Accounting Principles and is not standardized for public issuers. This measure may not be comparable to similar measures presented by other public enterprises. The Company has included this measure because the Company's key decision makers believe certain investors use it as a measure of the Company's financial performance and for valuation purposes. The Company also uses this measure internally to evaluate the performance of management.

    
    Newfoundland Capital Corporation Limited

    Notice of Disclosure of Non-Auditor Review of Interim Financial
    Statements for the three months and nine months ended September 30, 2009
    and 2008
    

Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities Administrators, the interim financial statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor if an auditor has not performed a review of the interim financial statements.

The accompanying unaudited interim consolidated financial statements of the Company for the interim periods ended September 30, 2009 and 2008 have been prepared in accordance with Canadian generally accepted accounting principles and are the responsibility of the Company's management.

The Company's independent auditors, Ernst & Young LLP, have not performed a review of these interim consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.

Dated this 6th day of November, 2009

    
    Interim Consolidated Balance Sheets
    (unaudited)
                                                                  (restated)
                                                 September 30   December 31
    (thousands of Canadian dollars)                      2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Marketable securities (note 9 (a))             $  6,725         4,196
      Receivables                                      21,165        23,621
      Prepaid expenses                                  1,182           965
      Other asset (note 9 (c))                          1,321             -
      Future income tax assets                          3,495         4,156
      Current assets held for disposal (note 4)           418           442
                                                     ------------------------
        Total current assets                           34,306        33,380
    Property and equipment                             38,027        36,807
    Other assets                                        4,989         4,167
    Broadcast licences (notes 3 and 4)                149,641       148,396
    Goodwill (note 3)                                   7,045         7,045
    Future income tax assets                            2,219         2,069
    Non-current assets held for disposal (note 4)       3,859         3,912
                                                     ------------------------
                                                     $240,086       235,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
      Bank indebtedness                              $  1,206         2,003
      Accounts payable and accrued liabilities         18,785        17,446
      Income taxes payable                              7,603         8,719
      Current portion of long-term debt (note 9)       65,840             5
                                                     ------------------------
        Total current liabilities                      93,434        28,173

    Long-term debt (note 9)                                 -        73,840
    Other liabilities                                  20,435        23,953
    Future income tax liabilities                      23,454        19,575
    Non-current liabilities held for disposal
     (note 4)                                           1,668         1,592
    Shareholders' equity                              101,095        88,643
                                                     ------------------------
                                                     $240,086       235,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments and contingencies (notes 9 and 11)
    Subsequent event (note 11)
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Income (Loss)
    (unaudited)
                                 Three months ended       Nine months ended
    (thousands of Canadian           September 30            September 30
     dollars except per                   (restated)              (restated)
     share data)                   2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                    $ 25,408      26,069      74,840      74,076
    Other income (expense)
     (note 9 (a))                 1,077      (8,372)      3,082      (1,767)
                               ----------------------------------------------
                                 26,485      17,697      77,922      72,309
    Operating expenses
     (note 11)                   21,759      21,879      63,923      63,703
    Depreciation                    952         840       2,739       2,443
    Amortization of deferred
     charges                         12          12          37          36
                               ----------------------------------------------
    Operating income (expense)    3,762      (5,034)     11,223       6,127
    Interest  expense (note 9)      911       1,071       2,854       2,921
    Accretion of other
     liabilities (note 9)           211         264         665         748
    Goodwill impairment loss
     (note 3)                         -       1,334           -       1,334
                               ----------------------------------------------
                                  2,640      (7,703)      7,704       1,124
    Gain on disposal of
     broadcast licence (note 3)   5,616           -       5,616           -
                               ----------------------------------------------
                                  8,256      (7,703)     13,320       1,124
    Provision for income taxes
     (recovery)                   2,112        (116)      3,510       2,000
                               ----------------------------------------------
    Net income (loss) from
     continuing operations        6,144      (7,587)      9,810        (876)
    Net income from
     discontinued operations
     (note 4)                        65           7          95          27
                               ----------------------------------------------
    Net income (loss)          $  6,209      (7,580)      9,905        (849)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share from
     continuing operations
     (note 10)
      - basic                  $   0.56       (0.69)       0.89       (0.08)
      - diluted                    0.54       (0.69)       0.86       (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     (note 10)
      - basic                  $   0.56       (0.69)       0.90       (0.08)
      - diluted                    0.55       (0.69)       0.87       (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Shareholders' Equity
    (unaudited)
                                                         Nine months ended
                                                            September 30
                                                                  (restated)
    (thousands of Canadian dollars)                      2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Retained earnings, beginning of period           $ 50,581        59,621
    Retrospective application of change in
     accounting policy (note 2)                        (2,034)       (1,758)
                                                     ------------------------
    Retained earnings, beginning of period,
     as restated                                       48,547        57,863
    Net income (loss)                                   9,905          (849)
    Dividends declared                                      -        (1,649)
    Repurchase of capital stock (note 5)                    -        (1,373)
                                                     ------------------------
    Retained earnings, end of period                   58,452        53,992
    Capital stock (note 5)                             42,913        42,913
    Contributed surplus (note 6)                        2,097         1,901
    Accumulated other comprehensive loss               (2,367)       (1,094)
                                                     ------------------------
    Total shareholders' equity                       $101,095        97,712
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Comprehensive Income (Loss)
    (unaudited)
                                  Three months ended      Nine months ended
                                     September 30            September 30
    (thousands of Canadian                (restated)              (restated)
     dollars)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income (loss)          $  6,209      (7,580)      9,905        (849)
                               ----------------------------------------------

    Other comprehensive
     income (loss):
    Change in fair values of
     cash flow hedges
      Interest rate swaps
       (note 9 (b)):
        Increase (decrease)
         in fair value              295      (1,091)      2,563      (1,557)
        Reclassification to
         net income of realized
         interest expense            17          26         167          97
        Related income tax
         recovery (expense)         (80)        283        (724)        401
                               ----------------------------------------------
                                    232        (782)      2,006      (1,059)
                               ----------------------------------------------
      Total equity return swap
       (note 9 (c)):
        Increase (decrease) in
         fair value                 (53)        (21)      2,072        (446)
        Reclassification to net
         income of realized
         losses (gains)            (465)        100      (1,524)         77
        Related income tax
         recovery (expense)         114         (27)       (159)        126
                               ----------------------------------------------
                                   (404)         52         389        (243)
                               ----------------------------------------------

    Other comprehensive income
     (loss)                        (172)       (730)      2,395      (1,302)
                               ----------------------------------------------
    Comprehensive income
     (loss)                    $  6,037      (8,310)     12,300      (2,151)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statement of Accumulated Other
    Comprehensive Loss
    (unaudited)
                                                         Nine months ended
                                                            September 30
    (thousands of Canadian dollars)                      2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss),
     beginning of period                             $ (4,762)          208
    Other comprehensive income (loss) for the period    2,395        (1,302)
                                                     ------------------------

    Accumulated other comprehensive loss, end of
     period                                          $ (2,367)       (1,094)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Cash Flows
    (unaudited)
                                  Three months ended      Nine months ended
                                     September 30            September 30
    (thousands of Canadian                (restated)              (restated)
     dollars)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating Activities
    Net income (loss) from
     continuing operations     $  6,144      (7,587)      9,810        (876)
    Items not involving cash
      Depreciation and
       amortization                 964         852       2,776       2,479
      Future income taxes         2,325         687       3,583       2,492
      Executive stock-based
       compensation plans
       (notes 5 and 7)              537         (12)      1,488          90
      Accretion of other
       liabilities (note 9)         211         264         665         748
      Gain on disposal of
       broadcast licence
       (note 3)                  (5,616)          -      (5,616)          -
      Unrealized losses on
       marketable securities
       (note 9 (a))              (1,310)      8,787      (3,284)      3,257
      Goodwill impairment loss
       (note 3)                       -       1,334           -       1,334
      Other                        (283)        (44)     (1,363)       (141)
                               ----------------------------------------------
                                  2,972       4,281       8,059       9,383
    Change in non-cash working
     capital relating to
     operating activities from
     continuing operations        1,927        (236)      2,961      (2,114)
                               ----------------------------------------------
    Cash flow from continuing
     operating activities         4,899       4,045      11,020       7,269
    Discontinued operations          96          85         174         114
                               ----------------------------------------------
                                  4,995       4,130      11,194       7,383
    -------------------------------------------------------------------------
    Financing Activities
    Change in bank indebtedness    (955)      1,654        (797)      2,925
    Long-term debt borrowings         -       5,840           -      11,340
    Long-term debt repayments    (6,000)         (5)     (8,005)        (17)
    Repurchase of capital stock
     (note 5)                         -           -           -      (1,805)
    Dividends paid                    -           -           -      (1,664)
                               ----------------------------------------------
                                 (6,955)      7,489      (8,802)     10,779
    -------------------------------------------------------------------------
    Investing Activities
    Property and equipment
     additions                   (1,270)       (909)     (3,733)     (4,971)
    Canadian Content
     Development payments        (1,713)       (736)     (3,136)     (1,786)
    Proceeds from disposal
     of asset (note 3)            5,000           -       5,000           -
    Acquisition of businesses
     and licences (note 3)            -      (9,505)          -      (9,505)
    Other                           (57)       (469)       (523)     (1,900)
                               ----------------------------------------------
                                  1,960     (11,619)     (2,392)    (18,162)
    -------------------------------------------------------------------------
    Cash, beginning and end of
     period                    $      -           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental Cash Flow
     Information
      Interest paid            $    965         959       2,631       2,606
      Income taxes paid
       (recovered)                  308        (270)      1,092        (155)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Notes to the Interim Consolidated Financial Statements - September 30,
    2009 and 2008 (unaudited)
    -------------------------------------------------------------------------

    1. ACCOUNTING PRESENTATIONS AND DISCLOSURES

    The interim financial statements presented herein were prepared by the
    Company and follow the same accounting policies and their methods of
    application as the 2008 annual financial statements with the exception of
    the adoption of new accounting policies described in note 2. These
    financial statements are prepared in accordance with Canadian generally
    accepted accounting principles ("GAAP") for interim financial statements.
    They do not include all of the information and disclosures required by
    GAAP for annual financial statements. Accordingly, these financial
    statements should be read in conjunction with the Company's audited
    consolidated financial statements and the accompanying notes contained in
    the Company's 2008 Annual Report.

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

    2. ADOPTION OF NEW ACCOUNTING POLICIES

    Impact of adopting new accounting policies

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

    As a result of adopting this accounting policy, the effects on the
    comparative interim consolidated statements of income are presented
    below:

                                                 Three months   Nine months
                                                        ended         ended
                                                 September 30  September 30
    (thousands of Canadian dollars)                      2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating expenses increased by                  $    188           948
    Amortization expense decreased by                    (169)         (437)
    Provision for income tax expense decreased by          (5)         (135)
    -------------------------------------------------------------------------
    Net income decreased by                          $    (14)         (376)
    -------------------------------------------------------------------------
    Basic and diluted earnings per share
     decreased by                                    $  (0.00)        (0.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The impact on the interim consolidated balance sheets was as follows:

                                                  December 31  September 30
    (thousands of Canadian dollars)                      2008          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other assets decreased by                        $ (2,858)       (2,994)
    Future income tax liabilities decreased by           (824)         (860)
    -------------------------------------------------------------------------
    Retained earnings reduced by                     $ (2,034)       (2,134)
    -------------------------------------------------------------------------


    During 2009, the CICA issued EIC-173 Credit Risk and the Fair Value of
    Financial Assets and Financial Liabilities which requires an entity to
    consider its own credit risk and that of its counterparty to a financial
    instrument when determining the fair value of financial assets and
    liabilities. This applies to the Company's derivative instruments. The
    adoption of this EIC did not have a significant impact on the Company.

    Impact of adopting future accounting policies

    Following is a brief description of accounting policies that will be
    adopted by the Company in future.

    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 will continue to evaluate the
    impact of the amendments.

    Section 1601 Consolidated Financial Statements and Section 1602 Non-
    controlling Interests were also 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.

    In 2009, the CICA amended certain paragraphs in CICA Section 3862
    Financial Instruments - Disclosures which aligns the standard more
    closely with IFRS. Specifically, it provides enhanced disclosure
    requirements around fair value measurement of financial instruments and
    disclosure of liquidity risk. The amended paragraphs are to be applied
    for fiscal years ending on or after September 30, 2009. Earlier adoption
    is permitted. The Company does not anticipate any significant impact from
    the adoption of these disclosure requirements.

    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. The Company is currently evaluating the impact of adopting IFRS.
    Specifically, management is in the process of identifying the IFRS
    standards that are most likely to impact the Company and those that will
    require the most resources for implementation. Management is also in the
    process of making decisions as it relates to adopting IFRS for the first
    time and considering the exceptions and exemptions permitted under IFRS-1
    First-time Adoption of International Financial Reporting Standards.
    Management is in the process of quantifying the impact the changes will
    have on its consolidated results.

    3. BROADCAST LICENCE ADDITIONS AND DISPOSALS

    In the third quarter of 2009, the Company finalized the previously
    announced asset exchange transaction with Rogers Broadcasting Limited
    ("Rogers" - a Division of Rogers Communications Inc. RCI.A and RCI.B).
    The transaction involved the exchange of the Company's AM broadcast
    licence in Halifax, Nova Scotia for Rogers' AM broadcast licence in
    Sudbury, Ontario. The fair value of the asset given up was determined to
    be $6,898,000. Consideration received was $5,000,000 cash and the Sudbury
    AM broadcast licence valued at $1,898,000. As a result of this asset
    exchange, the Company increased its licence value by $1,898,000 for the
    Sudbury licence, increased CCD obligations by $523,000 related to the new
    licence, decreased the licence carrying value by $689,000 related to the
    Halifax AM licence given up and recorded a gain on the disposal of the
    Halifax licence totalling $5,616,000. The assets obtained and the results
    of their operations have been consolidated effective as of August 25,
    2009.

    During 2008, the Company launched its new FM radio stations in Carbonear,
    Newfoundland and Labrador, Lac LaBiche and Fort McMurray, Alberta and
    Kentville and Sydney, Nova Scotia.  Upon the launch dates, the Company
    became obligated to pay $225,000 in Canadian Content Development ("CCD")
    commitments per year for seven years.  Using the amortized cost basis to
    record these commitments on the consolidated balance sheets, $1,236,000
    was capitalized as broadcast licences and recorded in other liabilities.
    Costs incurred related to the award of new broadcast licences such as
    application costs were also capitalized bringing the total amount
    capitalized to broadcast licences related to these stations to
    $1,434,000.

    On July 2, 2008, the Company acquired the remaining 50% interest in Metro
    Radio Group Inc. which operates CKUL-FM in Halifax, Nova Scotia. The
    purchase price of $8,500,000 was allocated to the net identifiable assets
    acquired on the basis of their estimated fair market values using the
    purchase method of accounting. The fair value of the most significant
    assets acquired and liabilities assumed was allocated as follows:
    broadcast licences - $7,032,000; goodwill - $3,674,000; and future income
    tax liabilities - $1,832,000.

    On July 2, 2008, the Company paid $1,005,000 for a 29.9% interest in a
    company that operates an FM radio station. The Company used the equity
    method to account for the investment and accordingly its share of net
    profits or losses are accounted for in net income.

    Annual impairment testing of broadcast licences and goodwill

    The Company performed its annual impairment analysis of its long-lived
    intangible assets, which consist of broadcast licences and goodwill. The
    Company's policy for assessing impairment remained unchanged from the
    accounting policy published in the 2008 annual report. As at August 31,
    2009, the Company concluded that no provision for impairment was required
    for its broadcast licences and goodwill. As at August 31, 2008, the
    Company concluded that no provision for impairment of broadcast licences
    was required; however, an impairment loss on goodwill was recognized in
    net income. As a result of conducting the 2008 annual goodwill impairment
    analysis, as at August 31, 2008, the value for goodwill that arose in
    2005 and 2006 related to two business acquisitions in Winnipeg, Manitoba
    could not be supported and therefore, an impairment loss of $1,334,000
    was recorded in 2008.

    4. ASSETS HELD FOR DISPOSAL AND DISCONTINUED OPERATIONS

    On July 14, 2009, the Company announced it had entered into an agreement
    to dispose of the net assets associated with its two FM radio stations
    located in Thunder Bay, Ontario for proceeds of $4,500,000. As such, the
    Company is required to apply the guidance in CICA Section 3475 Disposal
    of Long-lived Assets and Discontinued Operations. The financial results
    from this reporting unit have been treated as discontinued operations in
    the interim consolidated statements of income and cash flows for both
    2009 and 2008. The assets and liabilities held for disposal have been
    segregated on the interim consolidated balance sheets. The results of
    this reporting unit were also excluded from the Broadcasting segment
    results in segmented information presented in note 12 of the interim
    consolidated financial statements.

    This transaction is subject to the approval of the Canadian Radio-
    television and Telecommunications Commission ("CRTC").

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

                                  Three months ended      Nine months ended
    (thousands of Canadian           September 30            September 30
     dollars)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                    $    571         589       1,608       1,743
    -------------------------------------------------------------------------
    Income before income taxes       95          10         140          39
    Provision for income taxes      (30)         (3)        (45)        (12)
    -------------------------------------------------------------------------
    Net income from
     discontinued operations   $     65           7          95          27
    -------------------------------------------------------------------------

    The major classes of assets and liabilities held for disposal are as
    follows:

                                                 September 30   December 31
    (thousands of Canadian dollars)                      2009          2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Current assets:
      Accounts receivable and other current
       assets                                        $    418           442
    -------------------------------------------------------------------------
    Non-current assets:
      Property and equipment                         $    482           535
      Broadcast licences                                3,377         3,377
    -------------------------------------------------------------------------
                                                     $  3,859         3,912
    -------------------------------------------------------------------------
    Non-current liabilities:
      Future income tax liabilities                    (1,668)       (1,592)
    -------------------------------------------------------------------------
    Net assets of discontinued operations            $  2,609         2,762
    -------------------------------------------------------------------------


    5. CAPITAL STOCK

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase
    up to 486,659 Class A Subordinate Voting Shares ("Class A shares") and
    62,877 Class B Common Shares. This bid expires February 8, 2010. The
    Company has not repurchased any of its outstanding Class A shares in
    2009. During the second quarter in 2008, the Company repurchased 100,000
    of its Class A shares for a total cost of $1,805,000 which resulted in
    reducing capital stock by $432,000 and retained earnings by $1,373,000.

    Executive stock option plan

    No options were granted pursuant to the executive stock option plan
    during the third quarters in 2009 and 2008. On a year-to-date basis,
    30,000 options (2008 - 35,000) were granted at a weighted average
    exercise price of $17.50 (2008 - $19.99). The options vest at a rate of
    twenty-five percent on the date of grant and twenty-five percent on each
    of the three succeeding anniversary dates and the options expire February
    24, 2014. No options were exercised to date in 2009 (2008 - nil).
    Compensation expense related to stock options for the three months ended
    September 30, 2009 was $53,000 (2008 - $44,000) and year-to-date expense
    was $152,000 (2008 - $123,000).

    6. CONTRIBUTED SURPLUS

    (thousands of Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, January 1, 2008                                       $  1,778
    Executive stock option plan compensation expense                    123
                                                                   ----------
    Balance, September 30, 2008                                       1,901
    Executive stock option plan compensation expense                    196
                                                                   ----------
    Balance, September 30, 2009                                    $  2,097
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    7. STOCK APPRECIATION RIGHTS

    In January 2006, the Company granted 425,000 stock appreciation rights
    ("SARs") at a reference price of $16.53. In 2007, 90,000 SARs were
    granted at a weighted average reference price of $19.83. On February 24,
    2009, 50,000 SARs were granted at a reference price of $17.20. As at
    September 30, 2009, 90,000 SARs were expired and 10,000 SARs were
    exercised. The rights vest at a rate of 50% at the end of year three, 25%
    at the end of year four and 25% at the end of year five. The rights are
    exercisable as they vest. At the date of exercise, cash payments are made
    to the holders based on the difference between the market value of the
    Company's Class A shares and the reference price. All SARs granted under
    this plan expire on the 60th day following the 5th anniversary of the
    grant date. For the quarter ended September 30, 2009, the compensation
    expense related to SARs was $516,000, $32,000 of which was paid due to
    the exercise of SARs, and year-to-date expense was $1,368,000. For 2008,
    there was a recovery of expenses of $57,000 in the quarter and $33,000
    year-to-date. The total obligation at September 30, 2009 was $1,403,000
    of which $927,000 was current (2008 - total obligation of $724,000 of
    which $375,000 was current).

    8. EMPLOYEE BENEFIT PLANS

                                 Three months ended       Nine months ended
    (thousands of Canadian           September 30            September 30
     dollars)                      2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined contribution plan
     expense                   $    342         334       1,044         991
    Defined benefit plan
     expense                        125         126         375         378
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

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

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

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

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

    Financial instruments classified as loans and receivables and other
    liabilities are measured using amortized cost using EIM. Under the EIM,
    interest income and expense are calculated and recorded using the
    effective interest rate which is the rate that exactly discounts
    estimated future cash receipts or payments throughout the expected life
    of the financial instrument. Interest income and expense related to
    financial assets and financial liabilities are being recorded using the
    EIM. Interest expense on long-term debt for the third quarter was
    $898,000 (2008 - $938,000) and year-to-date was $2,811,000 (2008 -
    $2,485,000). Third quarter accretion expense on Canadian Content
    Development commitments ("CCD") aggregated $211,000 (2008 - $264,000) and
    year-to-date accretion was $665,000 (2008 - $748,000) based on EIM rates
    ranging from 8% to 14.3%.

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

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

    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% to 14.3%.

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

    Market risk

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

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

       The fair value of the Company's marketable securities is affected by
       changes in the quoted share prices in active markets. Such prices can
       fluctuate and are affected by numerous factors beyond the Company's
       control. In order to minimize the risk associated with changes in the
       share price of any one particular investment, the Company diversifies
       its portfolio by investing in various stocks in varying industries. It
       also conducts regular financial reviews of publicly available
       information related to its investments to determine if any identified
       risks are within tolerable risk levels. Despite the Company's intent
       to minimize this risk, the current stock market volatility continues
       to cause fluctuations in all its marketable securities. It is
       uncertain when this volatility will stabilize. For the quarter ended
       September 30, 2009, the change in fair value of marketable securities,
       recognized in other income, was an unrealized gain of $1,310,000
       (2008 - unrealized loss of $8,787,000). Year-to-date, the unrealized
       gain recorded in other income was $3,284,000 (2008 - unrealized loss
       of $3,257,000). As at September 30, 2009, a 10% change in the share
       prices of each marketable security would result in a $550,000 after-
       tax change in net income.

    b) Interest rate risk management

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

       In 2008, the Company entered into two new interest rate swap
       agreements; one has a notional value of $15,000,000 and expires in
       June 2013, and the other has a notional amount of $45,000,000 and
       expires in May 2013. Three former interest rate swap agreements,
       having an aggregated notional value of $45,000,000 were terminated at
       that time and as a result the fair value of these agreements ($349,000
       payable) was blended into the interest rate of the new $45,000,000
       swap agreement. This fair value payable is being transferred from
       other comprehensive income ("OCI") to net income (as interest expense)
       over the remaining term of the original three swap agreements which
       expired between 2009 and 2011. The amount related to this fair value
       payable transferred to net income from OCI for the quarter was $17,000
       (2008 - $72,000) while the year-to-date amount was $87,000 (2008 -
       $96,000).

       The aggregate fair value of the swap agreements, which represents the
       amount that would be payable by the Company if the agreements were
       terminated on September 30, 2009, was $4,233,000 (2008 - $1,590,000).
       The before-tax unrealized income recognized in OCI in the quarter was
       $295,000 (2008 - unrealized expense of $1,091,000) while year-to-date
       was $2,563,000 (2008 - unrealized expense of $1,557,000). In the
       quarter, the interest expense transferred from OCI to net income was
       $17,000 (2008 - $26,000) and for the year the amount was $167,000
       (2008 - $97,000). Income tax expense on this swap for the quarter was
       $80,000 and year-to-date was $724,000 (2008 - income tax recovery of
       $283,000 for the quarter and a recovery of $401,000 year-to-date).

    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 Company entered
       into this swap for a total of 425,000 notional Class A shares with a
       hedged price of $17.55.

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

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

       In order to qualify for hedge accounting, there must be reasonable
       assurance that the instrument is and will continue to be an effective
       hedge. At the inception of the hedge and on an ongoing basis, the
       Company formally assesses and documents whether the hedging
       relationship is effective in offsetting changes in cash flows of the
       hedged item. Gains or losses realized on the quarterly settlement
       dates are recognized in 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.

       A portion of the hedge was deemed ineffective and the related gains
       were transferred from OCI to net income. The amounts for the quarter
       were $20,000 (2008 - $11,000) and $442,000 year-to-date (2008 -
       $39,000). The amounts related to the ineffective portion are included
       in the before-tax realized gains transferred from OCI to net income
       presented in the following paragraph.

       The estimated fair value of the equity total return swap receivable at
       September 30, 2009 was $1,838,000, of which $1,321,000 was current
       (2008 - $595,000, of which $582,000 was current). Before tax, the
       unrealized loss recognized in OCI for the quarter was $53,000 (2008 -
       $21,000) and for the nine months ended September 30, 2009, the
       unrealized gain in OCI was $2,072,000 (2008 - unrealized loss of
       $446,000). On a before-tax basis, realized gains of $465,000 were
       transferred from OCI to net income in the quarter (2008 - realized
       losses of $100,000) and the year-to-date realized gains transferred
       were $1,524,000 (2008 - realized losses of $77,000). Income tax
       recovery for the quarter on this swap was $114,000 (2008 - income tax
       expense of $27,000) and for the year was an expense of $159,000
       (2008 - income tax recovery of $126,000).

    Credit risk

    Credit risk is the exposure that the Company faces with respect to
    amounts receivable from other parties. The maximum credit exposure
    approximated $26,600,000 as at September 30, 2009, which included
    accounts receivable and the equity total return swap receivable.

    The Company is subject to normal credit risk with respect to its
    receivables. A large customer base and geographic dispersion minimize the
    concentration of credit risk. The Company does not require collateral or
    other security from clients for trade receivables; however, the Company
    does perform credit checks on customers prior to extending credit. Based
    on the results of credit checks, the Company may require upfront
    deposits or full payments on account prior to providing service. The
    Company reviews its receivables for possible indicators of impairment on
    a regular basis and as such, it maintains a provision for potential
    credit losses which approximated $1,200,000 as at September 30, 2009.
    Approximately 83% of trade receivables are outstanding for less than
    90 days. Amounts would be written off directly against accounts
    receivable and against the allowance only if and when it was clear the
    amount would not be collected due to customer insolvency. Historically,
    the significance and incidence of amounts written off directly against
    receivables have been low.

    At September 30, 2009, the Company's credit exposure as it related to its
    receivables was deemed higher than in the past due to the uncertainty in
    the Canadian economy. The Company sells advertising airtime primarily to
    retail customers and since their results may also be affected by the
    current economy, it is difficult to predict the impact this could have on
    the Company's receivables' balance. The Company believes its provision
    for potential credit losses is adequate at this time given the current
    economic circumstances. Credit exposure on financial instruments arises
    from the possibility that a counterparty to an instrument in which the
    Company is entitled to receive payment fails to perform. With regard to
    the interest rate swaps and the equity total return swap, the Company
    does not anticipate any counterparties that it currently transacts with
    will fail to meet their obligations as the counterparties are Canadian
    Chartered Banks.

    Liquidity risk

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

    In accordance with guidance taken from 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 has been presented as current debt as at
    September 30, 2009. The Company is in full compliance with its debt
    covenants and continues to have access to these funds. Management intends
    to renew its credit facility prior to maturity, which is June 2010, and
    repayment of the debt is not expected. The Company does not deem its
    liquidity risk to be higher than disclosed in previous reports. The
    Company chooses this type of credit facility because it provides
    flexibility with no scheduled repayment terms.

    Excluding the long-term debt from the obligations due within one year,
    which are summarized in a table below, current obligations are
    $4,800,000. Cash generated from operations, the availability of the
    credit facility, along with the cash proceeds of $4,500,000 from a future
    business transaction (note 4) will provide sufficient funds to meet the
    Company's cash requirements.

    The Company's liabilities have contractual maturities which are
    summarized below:
                                             Within
    Obligation                             one year   2010-2014  Thereafter
    (thousands of Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt, classified as current  $ 65,840           -           -
    CCD commitments                           1,600       7,765         290
    Operating leases                          2,700       6,965       1,890
    Pension funding obligation                  500       2,500       2,700
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           $ 70,640      17,230       4,880
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Capital risk management

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

    To comply with Federal Government directions, the Broadcasting Act and
    regulations governing radio stations (the "Regulations"), the Company has
    imposed restrictions respecting the issuance, transfer and, if
    applicable, voting of the Company's shares. Restrictions include
    limitations over foreign ownership of the issued and outstanding voting
    shares. Pursuant to such restrictions, the Company can prohibit the
    issuance of shares or refuse to register the transfer of shares or, if
    applicable, prohibit the voting of shares in circumstances that would or
    could adversely affect the ability of the Company, pursuant to the
    provisions of the Regulations, to obtain, maintain, renew or amend any
    licence required to carry on any business of the Company, including a
    licence to carry on a broadcasting undertaking, or to comply with such
    provisions or with those of any such licence. The Company is subject to
    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 September 30, 2009.

    10. EARNINGS PER SHARE
                                 Three months ended       Nine months ended
                                       September 30            September 30
    (thousands)                    2009        2008        2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average common
     shares used in
     calculation of basic
     earnings per share          10,991      10,991      10,991      11,024
    Incremental common shares
     calculated in accordance
     with the treasury stock
     method                         398         320         351         328
                               ----------------------------------------------
    Weighted average common
     shares used in
     calculation of diluted
     earnings per share          11,389      11,311      11,342      11,352
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    11. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENT

    In 2007, the Company ceased to accrue CRTC Part II licence fees because
    of a court ruling at that point in time. On April 28th, 2008, the Federal
    Court of Appeal reversed the original decision and found that the fees
    were a valid regulatory charge. As a result of this decision, in the
    second quarter of 2008, the Company recognized the obligation as it
    pertained to these fees retroactively to January 1, 2007. The amount
    recorded in operating expenses was $915,000: $613,000 related to fiscal
    2007, $133,000 related to the first quarter of 2008 and $169,000 to the
    second quarter. An appeal was launched by the Canadian Association of
    Broadcasters ("CAB") in December 2008 and the Supreme Court of Canada
    granted the CAB leave to appeal.

    Subsequent to quarter end, the Government of Canada and members of the
    broadcasting industry that are required to pay CRTC Part II licence fees
    announced they had settled the Part II licence fee issue. Under the terms
    of the settlement, the government agreed to waive the fees payable for
    the fiscal years 2007, 2008 and 2009 that were not collected due to the
    ongoing legal dispute. In exchange, the Canadian Association of
    Broadcasters agreed to discontinue its court action against the
    Government of Canada. The Government of Canada agreed to recommend to the
    CRTC that it develop a new Part II fee regime which would be capped at
    $100,000,000, indexed for annual inflation, effective beginning
    September 1, 2009.

    As at September 30, 2009, the Company has approximately $2,000,000
    recorded as a liability relating to these fees. As a result of the
    settlement, operating expenses in the fourth quarter will be reduced by
    this amount.

    12. 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. This segment's revenue
    relates to hotel operations while the other income is investment income.

    Details of segment operations are set out below. 2008 figures were
    restated upon adopting CICA Handbook Section 3064 - Goodwill and
    Intangible Assets as discussed in note 2. Results from the Thunder Bay
    reporting unit have been excluded from 2009 and 2008 figures as a result
    of accounting for discontinued operations as described in note 4.

    (thousands                Corpo-                        Corpo-
     of Canadian    Broad-     rate               Broad-     rate
     dollars)     casting   & Other     Total   casting   & Other     Total
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                  Three months ended Sept. 30    Nine months ended Sept. 30
                 -----------------------------  -----------------------------
    2009
    Revenue      $ 24,329     1,079    25,408    72,093     2,747    74,840
    Other income        -     1,077     1,077         -     3,082     3,082
                 ------------------------------------------------------------
                   24,329     2,156    26,485    72,093     5,829    77,922
    Operating
     expenses      18,980     2,779    21,759    56,195     7,728    63,923
    Depreciation
     and
     Amortiza-
     tion             886        78       964     2,546       230     2,776
                 ------------------------------------------------------------
    Operating
     income
     (loss)      $  4,463      (701)    3,762    13,352    (2,129)   11,223
                 ------------------------------------------------------------
    Assets
     employed                                  $219,001    21,085   240,086
    Goodwill                                      7,045         -     7,045
    Capital
     expendi-
     tures       $  1,259        11     1,270     3,679        54     3,733
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2008
     (restated)
    Revenue      $ 25,023     1,046    26,069    71,415     2,661    74,076
    Other expense       -    (8,372)   (8,372)        -    (1,767)   (1,767)
                 ------------------------------------------------------------
                   25,023    (7,326)   17,697    71,415       894    72,309
    Operating
     expenses      19,056     2,823    21,879    55,408     8,295    63,703
    Depreciation
     and
     Amortiza-
     tion             772        80       852     2,250       229     2,479
                 ------------------------------------------------------------
    Operating
     income      $  5,195   (10,229)   (5,034)   13,757    (7,630)    6,127
                 ------------------------------------------------------------
    Assets
     employed                                  $216,913    26,385   243,298
    Goodwill     $  2,340         -     2,340     7,199         -     7,199
    Capital
     expendi-
     tures       $    855        54       909     4,788       183     4,971
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%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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