Newfoundland Capital Corporation Limited - Third Quarter 2010 - Period Ended<br>September 30 (unaudited)
DARTMOUTH, NS, Oct. 28 /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, 2010.
Highlights Double digit growth has continued into the third quarter.
- Revenue was $28.7 million in the quarter, $3.3 million higher than
2009; year-to-date revenue of $85.2 million was $10.4 million higher
than last year. The 13% growth in the quarter and 14% growth year-to-
date was primarily attributable to same station revenue growth.
- Earnings before interest, taxes, depreciation and amortization
("EBITDA"(1)) were $6.4 million in the quarter and $16.9 million year-
to-date, $2.8 million and $6.0 million higher than the respective
periods in 2009. This is significant growth year over year and is net
of $2.6 million in copyright fees which arose due to a Copyright Board
ruling in July. Excluding this ruling, year-to-date EBITDA would have
been 79% higher than the prior year.
- Net income in the quarter was $2.6 million and was $6.0 million year-
to-date, $3.5 million and $3.9 million lower than their respective
periods in 2009. Net income was lower due to a $5.6 million gain on
disposal recorded in the third quarter of 2009 and the $1.6 million
impairment loss in the second quarter of this year. If the results
excluded these items, net income would have been higher by
approximately $1.8 million year-to-date.
Significant events
- On August 5, 2010, the Company declared dividends of $0.06 per share on
each of its Class A Subordinate Voting Shares and Class B Common
Shares. This was paid September 15, 2010 to shareholders of record as
at August 31, 2010. This represents a 20% increase over the $0.05 per
share dividend which has historically been declared at this time of
year.
- As announced in the previous quarter, the Copyright Board issued its
ruling in July on certain tariffs which resulted in a $2.6 million
increase in copyright fees year-to-date, of which $1.8 million related
to previous years. As a result of this ruling, copyright fees as a
whole have increased from 7.3% to 8.9% of revenue, subject to certain
exemptions for low use and low revenue stations.
"This year has continued to exceed our expectations, with double digit revenue growth for the first nine months of the year", commented Rob Steele, President and Chief Executive Officer. "We are pleased with the growth in our major markets this year, which is a direct result of programming improvements as well as improved economic conditions. Our goal is to continue to post positive growth for the remainder of the year making 2010 a very successful year for the Company."
Financial Highlights - Third Quarter
(thousands of dollars except share information) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue $ 28,708 25,408
EBITDA(1) 6,409 3,649
Net income (loss) 2,604 6,209
-------------------------------------------------------------------------
Earnings per share - basic 0.08 0.19
Share price, NCC.A (closing) 7.75 7.33
Weighted average number of shares outstanding
(in thousands) 32,972 32,972
-------------------------------------------------------------------------
Total assets 231,683 240,086
Long-term debt, including current portion 49,102 65,840
Shareholders' equity 107,849 101,095
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Refer to page 17 for the reconciliation of EBITDA to net income.
Management's Discussion and Analysis
The purpose of the Management's Discussion and Analysis ("MD&A"), dated October 28, 2010, is to provide readers with additional complementary information regarding the financial condition and results of operations for Newfoundland Capital Corporation Limited (the "Company") and should be read in conjunction with the unaudited interim consolidated financial statements and related notes for the periods ended September 30, 2010 and 2009 as well as the annual audited consolidated financial statements and related notes and the MD&A contained in the Company's 2009 Annual Report. These documents along with the Company's Annual Information Form and other public information are filed electronically with various securities commissions in Canada through the System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at www.sedar.com. All amounts are stated in Canadian dollars. Certain of the comparative figures have been reclassified to conform to the financial statement presentation adopted in Fiscal 2010.
Management's Discussion and Analysis of financial condition and results of operations contains forward-looking statements. These forward-looking statements are based on current expectations. The use of terminology such as "expect", "intend", "anticipate", "believe", "may", "will", and other similar terminology relate to, but are not limited to, our objectives, goals, plans, strategies, intentions, outlook and estimates. By their very nature, these statements involve inherent risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from those expressed in such forward-looking statements. Readers are cautioned not to place undue reliance on these statements. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CORPORATE PROFILE
Newfoundland Capital Corporation Limited (the "Company") is Canada's largest pure-play radio company, employing approximately 800 of the best radio professionals across the country. The Company's portfolio of radio assets includes 62 FM and 18 AM licences which can be heard throughout Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking.
STRATEGY AND OBJECTIVES
The Company's long-term strategy is to maximize returns on existing operations, convert AM stations to FM, and add new licences through business and licence acquisitions and through the Canadian Radio-television and Telecommunications Commission ("CRTC") licence application process.
As stated in the 2009 Annual Report, this year the Company will continue to grow its existing operations by increasing advertising revenue and remaining focused on controlling discretionary costs to drive EBITDA margins. It will launch recently awarded AM to FM conversions - four in Alberta and two in Newfoundland and Labrador. Management continues to explore acquisition and expansion opportunities that fit the Company's acquisition objectives and it will make applications to the CRTC for new licences and additional AM to FM conversions. The Company's commitment to its talented employees, its customers, its listeners and to the communities it serves remains critical to its success.
CORPORATE DEVELOPMENTS
The following is a review of the key corporate developments which should be considered when reviewing the "Consolidated Financial Review" section. The results of the acquired or launched stations have been included in the consolidated financial statements since the respective acquisition and launch dates.
2010 Developments:
- February - launched the four repeater signals in Prince Edward Island.
- February - CFCB in Corner Brook, Newfoundland and Labrador celebrated
its 50th anniversary.
- February - received CRTC approval to convert the AM station in
Westlock, Alberta to FM. Planning for the conversion is underway.
- March - CFRQ-FM, otherwise known as Q104, serving Halifax, Nova Scotia
was named mid-market station of the year during Canada Music Week.
- April - received CRTC approval to convert the AM station in Brooks,
Alberta to FM. Conversion is underway.
- May - re-launched CHNO-FM as Rewind 103.9 playing Sudbury, Ontario's
Greatest Hits.
- July - changed the format of CHNK-FM in Winnipeg, Manitoba, re-branding
it as K-Rock 100.7 World Class Rock. The station plays primarily
classic rock music as well as a diverse mix of blues and roots music.
- September - received CRTC approval for a repeater in Springvale,
Newfoundland and Labrador.
2009 Developments:
- January - Launched the new FM station in Pincher Creek, Alberta playing
country music.
- April - CRTC approved two AM to FM conversions for stations in St. Paul
and High Prairie, Alberta. Planning for the St. Paul conversion is
underway while the High Prairie station is expected to be on-air in the
fall of 2010.
- June - CRTC approved the Company's applications to convert AM stations
to FM in Wabush and Goose Bay, Newfoundland and Labrador. These
conversions were launched in September 2010.
- June - Re-branded CFUL in Calgary, Alberta as a Contemporary Hits Radio
format, branded as AMP Radio. This format is similar to the very
popular Ottawa station, Hot 89.9, which was named the 2008 Contemporary
Hits Radio station of the year.
- July - Completed the previously announced exchange of assets with
Rogers Broadcasting Limited. The Company's Halifax AM licence was
exchanged for Rogers' AM licence in Sudbury, Ontario plus $5.0 million.
- August - Launched Hot 93.5, the newly acquired Sudbury, Ontario radio
station which was converted to FM. Its format is Top 40 and has been
met with a very positive response from both listeners and clients.
- August - Launched the converted FM radio station in Athabasca, Alberta.
94.1 FM The River plays Classic Hits.
- November - The Company's stock was split on a three-for-one basis.
- December - Completed the previously announced sale of the broadcasting
assets related to the two FM stations in Thunder Bay, Ontario for
$4.5 million.
CONSOLIDATED FINANCIAL REVIEW
Consolidated Financial Results of Operation
(thousands of dollars, except percentages)
-------------------------------------------------------------------------
Three months ended Sept. 30 Nine months ended Sept. 30
2010 2009 Growth 2010 2009 Growth
-------------------------------------------------------------------------
Revenue $ 28,708 25,408 13% 85,199 74,840 14%
Operating
expenses 22,299 21,759 2% 68,255 63,923 7%
-------------------------------------------------------------------------
EBITDA(1) 6,409 3,649 76% 16,944 10,917 55%
Depreciation
and
amortization 919 964 (5%) 2,713 2,776 (2%)
Interest
expense 1,087 911 19% 2,637 2,854 (8%)
Accretion of
other
liabilities 171 211 (19%) 551 665 (17%)
-------------------------------------------------------------------------
4,232 1,563 - 11,043 4,622 -
Other
(expense)
income (188) 1,077 - (109) 3,082 -
Gain on
disposal of
broadcast
licence
(note 4) - 5,616 - - 5,616 -
Impairment
charge - - - (1,609) - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings from
continuing
operations 4,044 8,256 (51%) 9,325 13,320 (30%)
Provision for
income taxes 1,440 2,112 (32%) 3,357 3,510 (4%)
-------------------------------------------------------------------------
Net income
from
continuing
operations 2,604 6,144 (58%) 5,968 9,810 (39%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income
from
discontinued
operations - 65 - - 95 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 2,604 6,209 (58%) 5,968 9,905 (40%)
-------------------------------------------------------------------------
(1) EBITDA - Earnings before interest, taxes, depreciation and
amortization - refer to page 17 for reconciliation to net income.
A more thorough discussion on revenue, operating expenses and EBITDA are described in the section entitled "Financial Review by Segment".
Revenue
In the quarter, consolidated revenue of $28.7 million was $3.3 million or 13% higher than last year; for the nine month period ended September 30, 2010 the increase was $10.4 million or 14%. This improvement was a result of increased revenue in the broadcasting segment.
Operating expenses
Consolidated operating expenses of $22.3 million were $0.5 million or 2% higher than the third quarter last year due to higher variable costs and year-to-date operating expenses of $68.3 million were $4.3 million or 7% higher than 2009. The increase year-to-date was due to higher variable costs and the increased copyright fees in the broadcasting segment further described below.
EBITDA
Consolidated EBITDA in the quarter of $6.4 million was $2.8 million or 76% higher than the same period in 2009. Year-to-date consolidated EBITDA of $16.9 million was $6.0 million or 55% higher than last year. Improved EBITDA was due to growth in the broadcasting segment. Excluding the Copyright Board ruling, year-to-date EBITDA would have been 79% higher than the prior year.
Depreciation and amortization
In the quarter and year-to-date, depreciation and amortization expense was comparable with the same periods in 2009.
Interest expense
Interest expense in the third quarter was slightly higher than the prior period due to increased rates in the Company's renewed credit facility. Year-to-date interest expense was less than the prior year due to the lower average debt balance.
Accretion of other liabilities
Accretion of other liabilities arises from discounting Canadian Content Development ("CCD") commitments to reflect the fair value of the obligations. The expense decreases as CCD obligations are drawn down.
Other income
Other income generally consists of gains and losses, realized and unrealized, on the Company's marketable securities. Third quarter unrealized losses were $0.3 million (2009 - gain of $1.3 million) and year-to-date unrealized gains were $0.5 million (2009 - gain of $3.3 million).
Gain on disposal of broadcasting licence
In July 2009, upon the completion of the radio asset exchange, the Company disposed of its AM licence in Halifax, Nova Scotia and recorded a gain of $5.6 million.
Broadcast licence impairment charge
During the second quarter, management conducted a broadcast licence impairment analysis for one of its reporting units due to a triggering event in which the Company's request for the removal of certain format restrictions on one of its Winnipeg broadcast licences was not approved by the CRTC. As a result of the analysis, management recorded a broadcast licence impairment charge of $1.6 million, which is more fully described in note 4 of the Company's unaudited interim consolidated financial statements.
Discontinued operations
In 2009, the Company disposed of its net assets associated with the two FM radio stations in Thunder Bay, Ontario and therefore, the 2009 comparative financial results of operations from this component were treated as discontinued operations.
Provision for income taxes
The provision for income taxes is lower than 2009 due to lower pre-tax earnings. The effective income tax rate approximated 36% in the quarter and year-to-date, slightly higher than the statutory rate of 34%. The effective rate for 2009 was lower than the current period because the prior period included gains which are taxed at one half of the normal tax rate.
Net income
Third quarter net income of $2.6 million was $3.6 million or 58% lower than last year. Net income year-to-date of $6.0 million decreased by $3.9 million or 40%. These declines were primarily a result of the $1.6 million broadcast licence impairment charge incurred in the second quarter this year and last year's $5.6 million gain on disposal in the third quarter. Excluding these items, year-to-date net income would have been $1.8 million higher than 2009.
Other comprehensive income ("OCI")
OCI consists of the net change in the fair value of the Company's cash flow hedges. These include interest rate swaps and an equity total return swap. The net change in the fair value of the interest rate swaps recorded in OCI in the quarter was after-tax expense of $0.1 million (2009 - $0.2 million after-tax income) and year-to-date was $0.2 million (2009 - $2.0 million after-tax income). The net change in the fair value of the equity total return swap recorded in OCI in the quarter was after-tax income of $0.2 million (2009 - $0.4 million after-tax expense). Year-to-date the after-tax income was less than $0.1 million (2009 - $0.4 million after-tax income).
FINANCIAL REVIEW BY SEGMENT
Consolidated financial figures include the results of operation of the Company's two separately reported segments - Broadcasting and Corporate and Other. The Company provides information about segment revenue, segment EBITDA and operating income because these financial measures are used by its key decision makers in making operating decisions and evaluating performance. For additional information about the Company's segmented information, see note 12 of the Company's unaudited interim consolidated financial statements.
Broadcasting Segment:
---------------------
The broadcasting segment derives its revenue from the sale of broadcast advertising from its licences across the country. Advertising revenue can vary based on market and economic conditions, the audience share of a radio station, the quality of programming and the effectiveness of a company's team of sales professionals.
Reporting units within the broadcasting segment are managed and evaluated based on their revenue and EBITDA. Here are the key operating results of the broadcasting segment.
Broadcasting Financial Results of Operation
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(thousands
of dollars,
except Three months ended Sept 30 Nine months ended Sept 30
percentages) 2010 2009 % Change 2010 2009 % Change
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue $ 27,662 24,329 14% 82,433 72,093 14%
Operating
expenses 19,541 18,980 3% 60,498 56,195 8%
-------------------------------------------------------------------------
EBITDA $ 8,121 5,349 52% 21,935 15,898 38%
-------------------------------------------------------------------------
EBITDA
margin 29% 22% 7% 27% 22% 5%
-------------------------------------------------------------------------
Revenue
Broadcasting revenue in the quarter of $27.7 million was $3.3 million or 14% better than last year. For the nine month period, broadcasting revenue was $82.4 million, an increase of $10.3 million or 14% over the same period in 2009. The increase came almost entirely from organic (same-station) revenue growth.
The significant revenue improvements were attributed to both local and national advertising revenue. Local revenue growth was 11% while national growth was 13%. Year-to-date, the Company achieved increases over the same period last year of 15% in its Western Canadian properties, a 12% increase in Central Canada and a 9% improvement in Atlantic Canada. These rates have exceeded industry growth rate of 5%.
The Company continues to benefit from successful ratings results and is optimistic that positive growth will carry on throughout 2010.
Operating expenses
For the quarter, broadcasting operating expenses were $19.5 million, up $0.6 million or 3% over last year. Year-to-date operating expenses were $60.5 million, $4.3 million or 8% higher than the same period in 2009. The increase in operating expenses was due to higher variable costs and the Copyright Board ruling which is described below.
In July 2010, the Copyright Board of Canada rendered a decision on an ongoing copyright fee issue. New tariffs were introduced and one component of the existing tariffs was increased. The ruling was retroactive to January 2008. The cumulative impact of this ruling year-to-date was a $2.6 million increase in operating expenses; of which $1.8 million related to prior years.
EBITDA
Broadcasting EBITDA for the third quarter was $8.1 million, $2.8 million or 52% higher than the same period in 2009. Year-to-date EBITDA was $21.9 million, $6.0 million or 38% higher than the first nine months of 2009. Excluding the effect of the increased copyright fees, EBITDA for the year-to-date period would have been $24.5 million, $8.6 million or 54% higher than last year. These significant EBITDA improvements were due to higher revenue and continued monitoring of discretionary costs which allowed the Company to improve EBITDA margins.
Corporate and Other Segment:
----------------------------
The Corporate and Other segment derives its revenue from hotel operations. Corporate and other expenses are related to head office functions and hotel operations.
Corporate and Other Financial Results of Operation
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(thousands
of dollars,
except Three months ended Sept 30 Nine months ended Sept 30
percentages) 2010 2009 % Change 2010 2009 % Change
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue $ 1,046 1,079 (3%) 2,766 2,747 1%
Operating
expenses 2,758 2,779 (1%) 7,757 7,728 -
-------------------------------------------------------------------------
EBITDA $ (1,712) (1,700) (1%) (4,991) (4,981) -
-------------------------------------------------------------------------
Revenue
Revenue for the third quarter was slightly lower (3%) than the same period in 2009. Year-to-date was slightly higher (1%) than the same period in 2009 both due to changes in hotel revenue.
Operating expenses
Corporate and Other operating expenses for the third quarter of 2010 and 2009 were $2.8 million. For the nine month period, Corporate and Other operating expenses of $7.8 million were on par with the same period in 2009.
EBITDA
Third quarter EBITDA and year-to-date EBITDA were on par with the same respective periods in 2009.
SELECTED QUARTERLY FINANCIAL INFORMATION
(thousands
of
dollars
except
per 2010 2009 2008
share ------------------------- ------------------------------- --------
data) 3rd 2nd 1st 4th 3rd 2nd 1st 4th
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Reve-
nue $ 28,708 30,785 25,706 30,458 25,408 26,772 22,660 29,306
Net
income
(loss) 2,604 2,127 1,237 5,461 6,209 3,144 552 (3,796)
Earnings
per
share
- Basic 0.08 0.06 0.04 0.17 0.19 0.10 0.02 (0.12)
- Dilu-
ted 0.08 0.06 0.04 0.16 0.18 0.09 0.02 (0.12)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company's revenue and operating results vary depending on the quarter because of seasonal fluctuations in advertising sales. The 2010 second quarter net income was impacted by the broadcast licence impairment charge of $1.6 million. In 2009, a gain on the disposal of a broadcasting licence positively impacted net income by $5.6 million in the third quarter. In 2008, unrealized declines in the value of marketable securities affected net income by $4.6 million in the fourth quarter.
As a result of the requirement to adopt CICA 3064 "Goodwill and Intangible Assets" in 2009 which set new accounting standards related to start-up operations, the 2008 comparative figures were restated to include pre-operating costs that had been previously capitalized and amortized. The earnings per share information was restated to reflect the three-for-one stock split that occurred during the fourth quarter in 2009. Discontinued operations, as described in note 3 of the Company's unaudited interim consolidated financial statements, also impacted the comparative figures.
Selected cash flow information - three months ended September 30, 2010
Cash from operating activities was $8.1 million. During the quarter, the Company repaid long-term debt in the amount of $2.8 million, paid dividends of $2.0 million, purchased $1.1 million of property and equipment and paid $1.6 million toward CCD commitments.
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 - nine months ended September 30, 2010
Cash from operating activities was $16.8 million. During the nine month period, the Company repaid $6.6 million of debt, paid dividends of $5.3 million, purchased $2.1 million of property and equipment and paid $2.4 million toward CCD commitments.
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.
Capital expenditures and capital budget
The capital expenditures for 2010 are expected to be approximately $5.0 million. The major planned expenditures include launching recently awarded AM to FM conversions as well as general improvements and upgrades. The Company continuously upgrades its broadcast equipment to improve operating efficiencies.
FINANCIAL CONDITION
Total assets
Assets of $231.7 million were $1.2 million lower than those reported at December 31, 2009. This was mainly due to the reduction of $1.6 million in broadcast licences due to an impairment charge in the second quarter.
Total liabilities
As at September 30, 2010 the Company's total liabilities were $123.8 million, $5.2 million lower than those reported at December 31, 2009 primarily due to the repayment of long-term debt in the amount of $7.6 million.
LIQUIDITY
Liquidity risk
Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can do so only at excessive cost. The Company's growth is financed through a combination of the cash flows from operations and borrowings under the existing credit facility. One of management's primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows.
Management deems its liquidity risk to be low and this is explained in the paragraphs that follow.
Credit facility and covenants
The Company's syndicated credit facility of $76.5 million expires in June 2012. The Company has chosen a revolving facility because it provides flexibility with no scheduled repayment terms. The cost of borrowing under the facility is approximately 2 1/4% higher than the facility in place prior to June 2010. Additional details on long-term debt are included in note 8 of the unaudited interim consolidated financial statements.
The Company is subject to covenants on its credit facility. The Company's bank covenants include certain maximum or minimum ratios such as a total debt to EBITDA ratio, interest coverage and a fixed charge coverage ratio. Other covenants include seeking prior approval for acquisitions or disposals in excess of a quantitative threshold. The Company was in compliance with the covenants throughout the quarter and at quarter end.
Funding sources
Cash flow from operations and funds available from the Company's $76.5 million credit facility have been the primary funding sources of working capital, capital expenditures, CCD payments, dividend payments, debt repayments, and other contractually required payments through the past several years. For the nine months ended September 30, 2010, the Company's cash generated from operating activities was $16.8 million, its long-term debt balance was $49.5 million and its bank indebtedness was $1.1 million which left $25.9 million available to be drawn upon from the credit facility.
Positive cash balances
The Company does not maintain any significant positive cash balances; instead it uses the vast majority of its positive cash balances to reduce debt and minimize interest expense. As a result, the Company nets its deposits in banks with bank indebtedness. The fact that the Company does not have positive cash positions on its balance sheet does not pose an increase to its liquidity risk because the Company generates cash from operations and, as part of its $76.5 million credit facility, it has a $5.0 million current operating credit line to fund any current obligations and it can also access any unused capacity in its credit facility to fund obligations.
Working capital requirements
As at September 30, 2010, the Company's working capital balance was $0.9 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. The balance remaining on this operating credit line is $3.9 million.
Future cash requirements
Other than for operations, the Company's cash requirements are mostly for interest payments, repayment of debt, capital expenditures, CCD payments, dividends and other contractual obligations. Management anticipates that its cash flows from operations and the availability of the credit facility will provide sufficient funds to meet its cash requirements.
Based on the above discussion and internal analysis, management deems its liquidity risk to be low.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS
There has been no substantial change in the Company's commitments and contractual obligations since the publication of the 2009 Annual Report.
SHARE CAPITAL
Stock split
Effective on November 25, 2009, the Class A Subordinate Voting Shares and Class B Common Shares were split on a three-for-one basis. Accordingly, the comparative number of shares and per share amounts have been retroactively adjusted to reflect the three-for-one split.
Outstanding share data
The weighted average number of shares outstanding at September 30, 2010 was 32,972,220 (2009 - 32,972,220). As of this date, there are 29,200,518 Class A Subordinate Voting Shares and 3,771,702 Class B Common Shares outstanding.
Dividends
Dividends of $0.06 per share were declared in August to all shareholders of record as of August 31, 2010. The dividends were paid on September 15, 2010. Annual dividends of $0.10 per share were declared in December to all shareholders of record as of December 31, 2009. Those dividends were paid January 29, 2010.
Share repurchases
The Company has approval under a Normal Course Issuer Bid to repurchase up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and 75,453 Class B Common Shares. This bid expires February 8, 2011. Year-to-date in 2010 and in 2009, the Company did not repurchase any of its outstanding Class A shares.
Subsequent to quarter end, the Company received approval from the TSX to increase the allowable Class A shares repurchased under the Normal Course Issuer Bid to 1,459,978 Class A shares. All other terms of the bid remain the same.
EXECUTIVE COMPENSATION
Executive stock option plan
Compensation expense related to executive stock options for the three months ended September 30, 2010 was $0.1 million (2009 - $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 quarter ended September 30, 2010, the compensation expense related to stock appreciation rights ("SARS") was $0.4 million (2009 - $0.5 million). Year-to-date, the expense was $0.6 million (2009 - $1.4 million). The total obligation was $1.6 million (2009 - $1.4 million). Refer to note 7 of the unaudited interim consolidated financial statements for further details relating to SARS.
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
For more detailed disclosures about derivative financial instruments and financial risk management, refer to note 10 of the unaudited interim consolidated financial statements.
Interest rate risk management
To hedge its exposure to fluctuating interest rates on its long-term debt, the Company has entered into interest rate swap agreements with Canadian chartered banks. The swap agreements expire in 2013 and involve the exchange of the three-month bankers' acceptance floating interest rate for a fixed interest rate. The difference between the fixed and floating rates is settled quarterly with the bank and recorded as an increase or decrease to interest expense. The aggregate notional amount of the swap agreements was $55.0 million (2009 - $60.0 million). The Company formally assesses effectiveness of the swaps at inception and on a regular basis and has concluded that the swaps are effective in offsetting changes in interest rates. The aggregate fair value of the swap agreements, which represents the amount that would be payable by the Company if the agreements were terminated at September 30, 2010 was $3.8 million (2009 - $4.2 million). After-tax, the unrealized non-cash loss recognized in OCI for the quarter was $0.1 million (2009 - $0.2 million after-tax income) and year-to-date was a non-cash after-tax loss of $0.2 million (2009 - $2.0 million after-tax income).
Share price volatility management
In July 2006, the Company entered into an agreement to hedge its obligations under the stock appreciation rights plan using an equity total return swap agreement to reduce the volatility in cash flow and earnings due to possible future increases in the Company's share price. Gains or losses realized on the quarterly settlement dates are recognized in income in the same period as the SARS compensation expense. Unrealized gains and losses, to the extent that the hedge is effective, are deferred and included in OCI until such time as the hedged item affects net income. If at any time the hedge is deemed to be ineffective or the hedge is terminated or de-designated, gains or losses, including those previously recognized in OCI, will be recorded in net income immediately.
The Company has concluded that this cash flow hedge is effective. The estimated fair value of the equity total return swap receivable at September 30, 2010 was $2.4 million (2009 - $1.8 million). After-tax the unrealized non-cash gain recognized in OCI for the quarter was $0.2 million (2009 - after-tax loss of $0.4 million) and year-to-date was less than $0.1 million (2009 - after-tax income of $0.4 million).
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The fair value of the Company's marketable securities is affected by changes in the quoted share prices in active markets. Such prices can fluctuate and are affected by numerous factors beyond the Company's control. In order to minimize the risk associated with changes in the share price of any one particular investment, the Company diversifies its portfolio by investing in various stocks in varying industries. It also conducts regular financial reviews of publicly available information related to its investments to determine if any identified risks are within tolerable risk levels. As at September 30, 2010, a 10% change in the share prices of each marketable security would result in a $0.4 million after-tax change in net income.
Credit risk management
Credit risk is the exposure that the Company faces with respect to amounts receivable from other parties. Credit exposure is managed through credit approval and monitoring procedures.
The Company is subject to normal credit risk with respect to its receivables. A large customer base and geographic dispersion minimize credit risk. The Company reviews its receivables for possible indicators of impairment on a regular basis and as such, it maintains a provision for potential credit losses.
At September 30, 2010, the Company's credit exposure as it related to its receivables continued to be slightly higher than in the past due to the recent Canadian economic conditions. The Company sells advertising airtime primarily to retail customers and since their results may also be impacted by the current economy, it is difficult to predict the impact this could have on the Company's receivables' balance. The Company believes its provision for potential credit losses to be adequate at this time given the current circumstances.
With regard to the Company's derivative instruments, the counterparty risk is managed by only dealing with Canadian Chartered Banks having high credit ratings.
Capital Management
The Company defines its capital as shareholders' equity. The Company's objective when managing capital is to pursue its strategy of growth through acquisitions and through organic operations so that 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.
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 2009 annual report. As at August 31, 2010, the Company concluded that no provision for impairment was required for its broadcast licences and goodwill. This test factored in the lower intangible asset balance resulting from the impairment charge recognized in the second quarter of this year. In the prior year as at August 31, 2009, the Company concluded that no provision for impairment of broadcast licences or goodwill was required at that time.
FUTURE ACCOUNTING POLICIES
Section 1582 Business Combinations
During 2009, the CICA issued Handbook Section 1582 Business Combinations which replaces Section 1581 bearing the same name. This Section is effective for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted, and the changes align the standard with the guidance in International Financial Reporting Standards ("IFRS"). Of the amendments in the Section, the one that will represent the most significant change in how the Company accounts for business combinations is the determination of the cost of the purchase. The cost that is allocated to the fair value of the net assets acquired is the direct cost of the business combination; indirect costs such as legal or restructuring are expensed. The impact the changes will have on its consolidated results will continue to be monitored.
Section 1601 Consolidated Financial Statements and Section 1602 Non-controlling Interests
These Sections were issued and together replace Section 1600 Consolidated Financial Statements. These too are applicable for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted. The new sections establish standards for the preparation of consolidated financial statements and for the accounting of a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The Company will continue to evaluate the impact of the amendments.
International Financial Reporting Standards
On February 13, 2008, the Accounting Standards Board confirmed that IFRS will be required for publicly accountable profit-oriented enterprises for fiscal years beginning on or after January 1, 2011. After that date, IFRS will replace Canadian GAAP for those enterprises. The Company will apply IFRS beginning January 1, 2011 and will present 2010 comparative figures using IFRS, starting in the first quarter of 2011.
The Company has committed adequate internal resources to oversee the IFRS project and external consultants have been engaged throughout the process. The Audit and Governance Committee is regularly updated on the status of the project. Management has satisfied itself that it has sufficient resources, systems and applications in place to meet its financial reporting requirements.
IFRS-1 First-time Adoption of International Financial Reporting Standards provides guidance for transition which generally requires an entity to apply all IFRS standards retrospectively, with prior period restatements, on adoption of the new standards. However, IFRS-1 also includes mandatory exceptions and certain exemptions which enable an entity to apply certain areas of the standards prospectively. Management has analysed the exceptions and exemptions available under IFRS-1 and is considering applying the exemptions listed in the table below. A brief description of the impact of applying these exemptions is discussed as well.
-------------------------------------------------------------------------
Exemption Impact
-------------------------------------------------------------------------
Business combinations The Company will elect to not restate any prior
business combinations on adoption, to the extent
the assets and liabilities meet the recognition
criteria under the relevant IFRS standards.
Broadcast licences and goodwill resulting from a
business combination are not amortized under IFRS.
The Company's previously recognized accumulated
amortization of broadcast licences and goodwill in
the amount of $6.8 million will be reversed
resulting in an increase in retained earnings and
a corresponding increase in broadcast licences and
goodwill upon adoption of IFRS.
-------------------------------------------------------------------------
Fair value or Due to the extensive cost involved in revaluing
revaluation as its property and equipment and the fact that most
deemed cost arose through business combinations, the Company
has chosen not to revalue property and equipment
on the transition date to its fair value.
-------------------------------------------------------------------------
Employee benefits The Company has elected to charge to equity any
unamortized actuarial gains/losses arising from
the defined benefit pension plans. The financial
impact of this election, along with other pension
restatement entries, approximates a $2.0 million
charge to equity.
-------------------------------------------------------------------------
Share-based payment The Company will elect not to retrospectively
transactions apply the IFRS-2 Share-Based Payments standards
for any executive stock options granted prior to
November 2002 and for any options that have fully
vested or have been exercised prior to transition
date.
-------------------------------------------------------------------------
Management has identified the differences between Canadian GAAP and IFRS and has devoted considerable time and resources on those areas that will most significantly impact the Company. The following table sets forth the accounting standards that will most likely impact the Company's consolidated financial statements; however, the actual impact has not been fully measured and conclusions may differ as management continues its analysis. Some of the standards are in the process of being reviewed and/or modified and the impact of those changes could pose differences for the Company's consolidated financial statements as well. Management is monitoring these standards closely.
The following list shows the areas that management believes will present the most significant differences in accounting treatment based on the standards in effect as at September 30, 2010. It is not a complete and exhaustive list of all the Canadian GAAP and IFRS differences. Quantification of the impact is ongoing and will continue to be communicated as the transition date nears.
The following are the key accounting areas management believes will impact the Company's consolidated financial statements with a brief description of the likely impact.
-------------------------------------------------------------------------
Key accounting areas Impact
-------------------------------------------------------------------------
IAS - 1 Presentation Additional financial statement note disclosures
of Financial will be required.
Statements
-------------------------------------------------------------------------
IAS - 12 Income Taxes Future income tax assets/liabilities will be
referred to as deferred income tax
assets/liabilities and no current classification
will be permitted. The criteria to recognize and
measure deferred income taxes may result in
differences compared to existing future income tax
calculations.
-------------------------------------------------------------------------
IAS - 16 Property and Entities are required to split traditional asset
Equipment categories into components based on varying useful
lives which may result in changes to the amount of
annual depreciation expense. This may also result
in an adjustment to retained earnings upon
adoption.
-------------------------------------------------------------------------
IAS - 19 Employee An accounting policy choice is available for
Benefits actuarial gains or losses after adoption;
- an entity may elect to amortize the
gains/losses using the corridor approach;
- it may elect to recognize the gains/losses in
net income annually; or
- it may elect to recognize gains/losses in OCI
annually.
Under IFRS, there are differences in how defined
benefit plan assets are valued and how an entity
measures its plan asset valuation allowance, if
any.
This particular standard is under review by
standard setters and any modification to it may
dictate the accounting treatment the Company will
adopt as it relates to actuarial gains and losses.
-------------------------------------------------------------------------
IAS - 36 Impairment Impairment calculations under IFRS are done at the
of Assets cash-generating unit ("CGU") which is defined as a
unit that has independent cash inflows (as opposed
to independent net cash flows under Canadian
GAAP).
Calculations are done using a discounted cash flow
method under a one-step approach (as opposed to a
two-step approach under Canadian GAAP).
Goodwill is allocated and tested in conjunction
with its related CGU or group of CGU's that
benefit from collective synergies. Any impairment
of intangible assets that occurs after the
adoption of IFRS, other than goodwill, may be
reversed.
Due to the finer level of detail required for CGU
analyses this may give rise to an increased chance
of Broadcast licence and goodwill impairments.
-------------------------------------------------------------------------
IAS - 38 Intangible After analysing IAS 38, management has concluded
Assets that there will be no significant differences in
how the Company measures its internally-developed
broadcast licences under IFRS.
-------------------------------------------------------------------------
IAS - 39 Financial This standard will effectively be replaced by new
Instruments: IFRS-9 Financial Instruments effective January 1,
Recognition and 2013 and may pose differences in how the Company
Measurement classifies, recognizes and measures its financial
instruments, including how it accounts for hedges.
Earlier adoption may be permitted and the Company
will monitor these standards closely.
-------------------------------------------------------------------------
IFRS - 2 Share-based The Company anticipates a change in how it
Payments measures executive compensation for its stock
appreciation rights' plan because of differences
related to pricing models, vesting periods and how
to account for forfeiture.
-------------------------------------------------------------------------
IFRS - 3 Business Under this standard, acquisition-related costs
Combinations such as legal, accounting, and other
administrative costs, cannot be capitalized; they
are to be expensed as period costs. Under Canadian
GAAP, these costs were included in the cost of the
business combination and capitalized.
The Company is still researching the treatment of
other significant commitments that arise on
business combinations that are payable to third
parties, such as CCD commitments. The outcome of
this research will impact the accounting for any
future business acquisitions the Company
undertakes. Currently these commitments, which are
equal to 6% of the purchase price, are capitalized
under Canadian GAAP.
-------------------------------------------------------------------------
At this time, management is on track with the conversion project; however it is not in a position to quantify the impact of all of the differences that will arise upon the adoption of IFRS. The Company will disclose more detailed information during its fourth quarter interim period as it proceeds with its analyses and conclusions. Certain analyses that will enable full disclosure are still being researched and their conclusions are important to the Company and its consolidated financial results.
CRITICAL ACCOUNTING ESTIMATES
There has been no substantial change in the Company's critical accounting estimates since the publication of the 2009 Annual Report.
OFF-BALANCE SHEET ARRANGEMENTS
The Company's off-balance sheet arrangements consist of operating leases. Other than these, which are considered in the ordinary course of business, the Company does not have any other off-balance sheet arrangements and does not expect to enter into any other such arrangement other than in the ordinary course of business.
RISKS AND OPPORTUNITIES
There has been no substantial change in the Company's risks and opportunities since the publication of the 2009 Annual Report with the exception of the decision on the copyright tariffs as disclosed above under the Broadcasting section.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in the Company's internal controls over financial reporting that occurred in the three months ending September 30, 2010 that have materially affected, or are likely to materially affect, the Company's internal controls over financial reporting.
OUTLOOK
The Company has experienced another impressive quarter by posting double digit revenue growth in its core operating segment. Management is optimistic that the positive growth will continue throughout the remainder of the year. The close monitoring of discretionary costs has helped the Company continue to increase its EBITDA margins
Management will carry on with its successful operating strategy and focus on the following:
- Continue to maximize operating margins from the existing stations by:
- Managing costs to achieve the highest possible EBITDA margins
without compromising the quality of the product;
- Increasing revenues by providing creative solutions to advertisers,
particularly with regard to local revenue where management has the
most ability to influence buying decisions;
- Augmenting audience share by providing locally-focused programming
that delivers the music, news and information that local
communities want.
- Plan and prepare to launch the approved AM to FM conversions;
- Review all acquisition opportunities that are cash accretive in the
near term and that would complement the Company's strategy; and
- Apply for licences in new communities, and seek approval from the CRTC
to convert additional AM stations to FM which will generate immediate
top line growth.
Non-GAAP Measure
(1)EBITDA is defined as net income from continuing operations excluding depreciation and amortization expense, interest expense, accretion of other liabilities, other expense (income), broadcast licence impairment charge and provision for income taxes. A calculation of this measure is as follows:
Three months ended Nine months ended
Sept. 30 Sept. 30
(thousands of dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income from continuing
operations $ 2,604 6,144 5,968 9,810
Provision for income taxes 1,440 2,112 3,357 3,510
Gain on disposal of broadcast
licence - (5,616) - (5,616)
Broadcast licence impairment
charge - - 1,609 -
Other expense (income) 188 (1,077) 109 (3,082)
Accretion of other liabilities 171 211 551 665
Interest expense 1,087 911 2,637 2,854
Depreciation and amortization
expense 919 964 2,713 2,776
-----------------------------------------
EBITDA $ 6,409 3,649 16,944 10,917
-------------------------------------------------------------------------
-------------------------------------------------------------------------
This measure is not defined by Generally Accepted Accounting Principles and is not standardized for public issuers. This measure may not be comparable to similar measures presented by other public enterprises. The Company has included this measure because the Company's key decision makers believe certain investors use it as a measure of the Company's financial performance and for valuation purposes. The Company also uses this measure internally to evaluate the performance of management. Beginning in 2010, other income, which is primarily the results from investment holdings, was excluded from the determination of EBITDA. Consolidated EBITDA for 2009 has been adjusted to reflect this reclassification.
Newfoundland Capital Corporation Limited
Notice of Disclosure of Non-Auditor Review of Interim Financial Statements for the three months and nine months ended September 30, 2010 and 2009
Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities Administrators, the interim financial statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor if an auditor has not performed a review of the interim financial statements.
The accompanying unaudited interim consolidated financial statements of the Company for the interim periods ended September 30, 2010 and 2009 have been prepared in accordance with Canadian generally accepted accounting principles and are the responsibility of the Company's management.
The Company's independent auditors, Ernst & Young LLP, have not performed a review of these interim consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.
Dated this 28th day of October, 2010
Interim Consolidated Balance Sheets
(unaudited)
September 30 December 31
(thousands of dollars) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ASSETS
Current assets
Marketable securities $ 4,748 4,923
Receivables 23,541 23,831
Prepaid expenses 1,219 778
Other assets 2,423 1,810
Future income tax assets 1,151 1,173
-----------------------------
Total current assets 33,082 32,515
Property and equipment 36,679 37,248
Other assets 4,621 4,216
Broadcast licences (note 4) 148,032 149,641
Goodwill 7,045 7,045
Future income tax assets 2,224 2,188
-----------------------------
$ 231,683 232,853
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 1,095 99
Accounts payable and accrued liabilities 21,868 17,118
Income taxes payable 9,205 6,836
Dividends payable - 3,297
Current portion of long-term debt (note 8) - 57,100
-----------------------------
Total current liabilities 32,168 84,450
Long-term debt (note 8) 49,102 -
Other liabilities 16,336 18,946
Future income tax liabilities 26,228 25,668
Shareholders' equity 107,849 103,789
-----------------------------
$ 231,683 232,853
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the interim consolidated financial statements
Interim Consolidated Statements of Income
(unaudited)
Three months ended Nine months ended
(thousands of dollars except September 30 September 30
per share data) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Revenue $ 28,708 25,408 85,199 74,840
Operating expenses 22,299 21,759 68,255 63,923
Depreciation and amortization 919 964 2,713 2,776
-----------------------------------------
Operating income 5,490 2,685 14,231 8,141
Interest expense 1,087 911 2,637 2,854
Accretion of other liabilities 171 211 551 665
-----------------------------------------
4,232 1,563 11,043 4,622
Other (expense) income (188) 1,077 (109) 3,082
Gain on disposal of broadcast
licence (note 3) - 5,616 - 5,616
Broadcast licence impairment
charge (note 4) - - (1,609) -
-----------------------------------------
Earnings from continuing
operations before income taxes 4,044 8,256 9,325 13,320
Provision for income taxes 1,440 2,112 3,357 3,510
-----------------------------------------
Net income from continuing
operations 2,604 6,144 5,968 9,810
Net income from discontinued
operations (note 3) - 65 - 95
-----------------------------------------
Net income $ 2,604 6,209 5,968 9,905
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share from
continuing operations
(note 11)
- basic $ 0.08 0.19 0.18 0.30
- diluted 0.08 0.18 0.18 0.29
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share (note 11)
- basic $ 0.08 0.19 0.18 0.30
- diluted 0.08 0.18 0.18 0.29
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the interim consolidated financial statements
Interim Consolidated Statements of Shareholders' Equity
(unaudited)
Nine months ended
September 30
(thousands of dollars) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 60,616 48,547
Net income 5,968 9,905
Dividends paid (1,978) -
-----------------------------
Retained earnings, end of period 64,606 58,452
Capital stock 42,913 42,913
Contributed surplus (note 6) 2,422 2,097
Accumulated other comprehensive loss (2,092) (2,367)
-----------------------------
Total shareholders' equity $ 107,849 101,095
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the interim consolidated financial statements
Interim Consolidated Statements of Comprehensive Income
(unaudited)
Three months ended Nine months ended
September 30 September 30
(thousands of dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 2,604 6,209 5,968 9,905
-----------------------------------------
Other comprehensive income:
Change in fair values of cash
flow hedges
Interest rate swaps (note
10(b)):
Increase (decrease) in fair
value net of $328
settlement (164) 295 (278) 2,563
Reclassification to net
income of realized
interest expense 22 17 52 167
Credit risk adjustment 3 - (59) -
Related income tax recovery
(expense) 36 (80) 76 (724)
-----------------------------------------
(103) 232 (209) 2,006
-----------------------------------------
Total equity return swap
(note 10(c)):
Unrealized increase
(decrease) in fair value 701 (53) 956 2,072
Reclassification to net
income of realized gains (462) (465) (936) (1,524)
Related income tax recovery
(expense) (78) 114 (6) (159)
-----------------------------------------
161 (404) 14 389
-----------------------------------------
Other comprehensive income
(loss) 58 (172) (195) 2,395
-----------------------------------------
Comprehensive income $ 2,662 6,037 5,773 12,300
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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 dollars) 2010 2009
-------------------------------------------------------------------------
Accumulated other comprehensive loss,
beginning of period $ (1,897) (4,762)
Other comprehensive (loss) income for
the period (195) 2,395
-----------------------------
Accumulated other comprehensive loss, end
of period $ (2,092) (2,367)
-------------------------------------------------------------------------
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 dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
Operating Activities
Net income from continuing
operations $ 2,604 6,144 5,968 9,810
Items not involving cash
Depreciation and
amortization 919 964 2,713 2,776
Future income taxes 461 2,325 613 3,583
Executive stock-based
compensation plans
(notes 5 and 7) 496 537 899 1,488
Accretion of other
liabilities 171 211 551 665
Gain on disposal of
broadcast licence (note 3) - (5,616) - (5,616)
Unrealized losses (gains) on
marketable securities 271 (1,310) (546) (3,284)
Broadcast licence impairment
charge (note 4) - - 1,609 -
Other (512) (283) (1,094) (1,363)
-----------------------------------------
4,410 2,972 10,713 8,059
Change in non-cash working
capital relating to operating
activities from continuing
operations 3,667 1,927 6,057 2,961
-----------------------------------------
Cash flow from continuing
operating activities 8,077 4,899 16,770 11,020
Discontinued operations - 96 - 174
-----------------------------------------
8,077 4,995 16,770 11,194
-------------------------------------------------------------------------
Financing Activities
Change in bank indebtedness (817) (955) 996 (797)
Long-term debt repayments (2,000) (6,000) (7,600) (8,005)
Dividends paid (1,978) - (5,275) -
Other (419) - (419) -
-------------------------------------------------------------------------
(5,214) (6,955) (12,298) (8,802)
-------------------------------------------------------------------------
Investing Activities
Property and equipment additions (1,121) (1,270) (2,107) (3,733)
Canadian Content Development
payments (1,626) (1,713) (2,431) (3,136)
Proceeds from disposal of
asset (note 3) - 5,000 - 5,000
Other (116) (57) 66 (523)
-----------------------------------------
(2,863) 1,960 (4,472) (2,392)
-------------------------------------------------------------------------
Cash, beginning and end
of period $ - - - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental Cash Flow
Information
Interest paid $ 1,268 965 3,019 2,631
Income taxes paid 57 308 380 1,092
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to the interim consolidated financial statements
Notes to the Interim Consolidated Financial Statements - September 30,
2010 and 2009 (unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1. ACCOUNTING PRESENTATIONS AND DISCLOSURES
The interim financial statements presented herein were prepared by the
Company and follow the same accounting policies and their methods of
application as the 2009 annual financial statements. These financial
statements are prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") for interim financial statements. They do
not include all of the information and disclosures required by GAAP for
annual financial statements. Accordingly, these financial statements
should be read in conjunction with the Company's audited consolidated
financial statements and the accompanying notes contained in the
Company's 2009 Annual Report.
Certain of the comparative figures have been reclassified to conform to
the financial statement presentation adopted in the current year.
2. FUTURE ACCOUNTING POLICIES
Section 1582 Business Combinations
During 2009, the CICA issued Handbook Section 1582 Business Combinations
which replaces Section 1581 bearing the same name. This Section is
effective for fiscal years beginning on or after January 1, 2011, with
earlier adoption permitted, and the changes align the standard with the
guidance in International Financial Reporting Standards ("IFRS"). Of the
amendments in the Section, the one that will represent the most
significant change in how the Company accounts for business combinations
is the determination of the cost of the purchase. The cost that is
allocated to the fair value of the net assets acquired is the direct cost
of the business combination; indirect costs such as legal or
restructuring are expensed. The impact the changes will have on its
consolidated results will continue to be monitored.
Section 1601 Consolidated Financial Statements and Section 1602 Non-
controlling Interests
These Sections were issued and together replace Section 1600 Consolidated
Financial Statements. These too are applicable for fiscal years beginning
on or after January 1, 2011, with earlier adoption permitted. The new
sections establish standards for the preparation of consolidated
financial statements and for the accounting of a non-controlling interest
in a subsidiary in consolidated financial statements subsequent to a
business combination. The Company will continue to evaluate the impact of
the amendments.
3. DISCONTINUED OPERATIONS AND BROADCAST LICENCE DISPOSALS
The Company disposed of its net assets associated with the two FM radio
stations located in Thunder Bay, Ontario in 2009. The financial results
of operations from this component have been treated as discontinued
operations in the consolidated statements of income and cash flows for
2009. The results of this component were also excluded from the
comparative figures from the Broadcasting segment results in segmented
information presented in note 12. Selected financial information for the
reporting unit included in discontinued operations is presented below.
Three months ended Nine months ended
September 30 September 30
(thousands of dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income from operations
from discontinued component $ - 95 - 140
Income tax expense - (30) - (45)
-----------------------------------------
Net income from discontinued
operations $ - 65 - 95
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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.
4. BROADCAST LICENCE IMPAIRMENT CHARGE
During the second quarter, management recorded an impairment charge of
$1,609,000 related to its Winnipeg, Manitoba broadcast licences. The
Company had applied to the Canadian Radio-television and
Telecommunications Commission ("CRTC") for relief of certain restrictions
imposed on one of its licences in Winnipeg and the application was
unsuccessful. As a result, the Company performed an impairment test of
the licences in Winnipeg and determined that a portion was impaired.
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 2009 annual report. As at August 31,
2010, the Company concluded that no provision for impairment was required
for its broadcast licences and goodwill. This test factored in the lower
intangible asset balance resulting from the impairment charge recognized
in the second quarter of this year. In the prior year as at August 31,
2009, the Company concluded that no provision for impairment of broadcast
licences or goodwill was required at that time.
5. CAPITAL STOCK
Stock split
On November 25, 2009, the Class A Subordinate Voting Shares and Class B
Common Shares were split on a three-for-one basis. Accordingly, the
comparative number of shares and per share amounts have been
retroactively adjusted to reflect the three-for-one split.
Share repurchases
The Company has approval under a Normal Course Issuer Bid to repurchase
up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and
75,453 Class B Common Shares. This bid expires February 8, 2011. The
Company did not repurchase any of its outstanding Class A shares during
the third quarter in 2010 and 2009.
Subsequent to quarter end, the Company received approval from the TSX to
increase the allowable Class A shares repurchased under the Normal Course
Issuer Bid to 1,459,978 Class A shares. All other terms of the bid remain
the same. A copy of the amended notice of intention to make a normal
course issuer bid may be obtained, without charge, by contacting the
Company at 745 Windmill Road, Dartmouth, N.S. B3B 1C2 or by calling
(902) 468-7557.
Executive stock option plan
No options were granted pursuant to the executive stock option plan
during the third quarters in 2010 and 2009. Year-to-date, 60,000 options
(2009 - 90,000) were granted at a weighted average exercise price of
$6.77 (2009 - $5.83). The options vest at a rate of twenty-five percent
on the date of grant and twenty-five percent on each of the three
succeeding anniversary dates and the options expire March 4, 2015. No
options were exercised to date in 2010 (2009 - nil). Compensation expense
related to stock options for the three months ended September 30, 2010
was $80,000 (2009 - $53,000) and year-to-date expense was $265,000
(2009 - $152,000).
6. CONTRIBUTED SURPLUS
(thousands of dollars) 2010 2009
-------------------------------------------------------------------------
Balance, January 1 $ 2,157 1,945
Executive stock option plan compensation
expense 265 152
-----------------------------
Balance, September 30 $ 2,422 2,097
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. STOCK APPRECIATION RIGHTS
A total of 1,745,000 stock appreciation rights ("SARS" or "rights") have
been granted since 2006 at a weighted-average reference price of $5.75.
The SARS' expiry dates range from March 2011 to February 2015. As at
September 30, 2010, 270,000 rights had expired and 416,350 rights had
been exercised. The rights vest at a rate of 50% at the end of year
three, 25% at the end of year four and 25% at the end of year five and
are exercisable as they vest. At the date of exercise, cash payments are
made to the holders based on the difference between the market value of
the Company's Class A shares and the reference price. All rights granted
under this plan expire on the 60th day following the 5th anniversary of
the grant date. For the quarter ended September 30, 2010, 6,000 SARS
(2009 - 30,000) were exercised for cash proceeds of $8,400 (2009 -
$32,000) and year-to-date 386,350 SARS were exercised (2009 - 30,000) for
cash proceeds of $550,000 (2009 - $32,000). Compensation expense in the
third quarter was $416,000 (2009 - $516,000) and year-to-date expense was
$634,000 (2009 - $1,368,000). The total obligation for SARS compensation
was $1,629,000, of which $1,450,000 was current and classified as
accounts payable and accrued liabilities (2009 - compensation payable was
$1,403,000, of which $927,000 was current).
8. LONG-TERM DEBT
September 30 December 31
(thousands of dollars) 2010 2009
-------------------------------------------------------------------------
Revolving term credit facility of
$76.5 million, renewable bi-annually,
maturing June 2012 $ 49,500 57,100
Less: Current portion - 57,100
Less: Debt transaction costs, net of
accumulated amortization of $58
(2009 - $nil) (398) -
-----------------------------
$ 49,102 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
During the second quarter, the Company extended its $76.5 million
revolving term credit facility with the bank to mature in June 2012. The
transaction costs associated with negotiating the new facility were
$456,000 and these are being amortized over the term of the debt.
Long-term debt bears interest at bankers' acceptance rates plus a premium
based on certain financial ratios. To manage interest rate risk and
ensure stability in the Company's interest costs, the Company has
interest rate swap agreements on a portion of long-term debt which fixes
the floating bankers' acceptance rate.
9. EMPLOYEE BENEFIT PLANS
Three months ended Nine months ended
September 30 September 30
(thousands of dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Defined contribution plan
expense $ 348 342 1,073 1,044
Defined benefit plan expense 119 125 356 375
-------------------------------------------------------------------------
-------------------------------------------------------------------------
10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Estimated fair value of financial instruments
Current assets and current liabilities' carrying values are
representative of their fair values due to the relatively short period to
maturity. The fair value of long-term debt approximates the carrying
value because the interest charges under the terms of the long-term debt
are based on the 3-month Canadian banker's acceptance rates. The fair
values of Canadian Content Development commitments approximated their
carrying values as they were recorded at the net present values of their
future cash flows, using discount rates ranging from 8.0% to 14.3%.
The following table outlines the hierarchy of inputs used in the
calculation of fair value for each financial instrument:
Level 1 Level 2 Level 3
-------------------------------------------------------------------------
Quoted
prices Signifi-
in active cant Signifi-
markets other cant
for identi- observa- unobser-
(thousands of dollars) cal ble vable
Description Total assets inputs inputs
-------------------------------------------------------------------------
Cash and bank indebtedness $ (1,095) (1,095) - -
Marketable securities 4,748 4,748 - -
Accounts receivable 23,541 - 23,541 -
Equity total return
swap receivable 2,423 - 2,423 -
Accounts payable and
accrued liabilities (19,116) - (19,116) -
Long-term debt (49,500) - (49,500) -
CCD commitments (7,056) - (7,056) -
Interest rate swap payable (3,799) - (3,799) -
-------------------------------------------------------------------------
The Company uses the following hierarchy for determining and disclosing
the fair value of financial instruments by valuation techniques:
Level 1: quoted (unadjusted) prices in active markets for identical
assets and liabilities
Level 2: other techniques for which all inputs that have a significant
effect on the recorded value are observable, either directly or
indirectly
Level 3: techniques which use inputs that have a significant effect on
the recorded fair value that are not based on observable market
data
The following sections discuss the Company's risk management objectives
and procedures as they relate to credit risk, market risk, liquidity risk
and capital risk.
Credit risk
Credit exposure on financial instruments arises from the possibility that
a counterparty to an instrument in which the Company is entitled to
receive payment fails to perform. The maximum credit exposure
approximated $26,000,000 as at September 30, 2010, which included
accounts receivable and the equity total return swap receivable.
The Company is subject to normal credit risk with respect to its
receivables. A large customer base and geographic dispersion minimize the
concentration of credit risk. Credit exposure is managed through credit
approval and monitoring procedures. The Company does not require
collateral or other security from clients for trade receivables; however
the Company does perform credit checks on customers prior to extending
credit. Based on the results of credit checks, the Company may require
upfront deposits or full payments on account prior to providing service.
The Company reviews its receivables for possible indicators of impairment
on a regular basis and as such it maintains a provision for potential
credit losses which totaled $1,455,000 as at September 30, 2010. The
Company is of the opinion that the provision for potential losses
adequately reflects the credit risk associated with its receivables.
Approximately 86% of trade receivables are outstanding for less than 90
days. Amounts would be written off directly against accounts receivable
and against the allowance only if and when it was clear the amount would
not be collected due to customer insolvency. Historically, the
significance and incidence of amounts written off directly against
receivables have been low. The total amount written off in the third
quarter was $262,000, and year-to-date was $523,000.
As at September 30, 2010, the Company's credit exposure related to its
receivables continued to be slightly higher than in the past due to the
recent Canadian economic conditions. The Company sells advertising
airtime primarily to retail customers and since their results may also be
affected by the current economy, it is difficult to predict the impact
this could have on the Company's receivables' balance. The Company
believes its provision for potential credit losses is adequate at this
time given the current economic circumstances.
With regard to the Company's derivative instruments, the counterparty
risk is managed by only dealing with Canadian Chartered Banks having high
credit ratings.
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices,
which includes quoted share prices in active markets, interest rates and
the Company's quoted share price as it relates to the stock appreciation
rights plan.
a) Managing risk associated with fluctuations in quoted share prices of
marketable securities
The fair value of the Company's marketable securities is affected by
changes in the quoted share prices in active markets. Such prices can
fluctuate and are affected by numerous factors beyond the Company's
control. In order to minimize the risk associated with changes in the
share price of any one particular investment, the Company diversifies
its portfolio by investing in various stocks in varying industries. It
also conducts regular financial reviews of publicly available
information related to its investments to determine if any identified
risks are within tolerable risk levels. As at September 30, 2010, a
10% change in the share prices of each marketable security would
result in a $400,000 after-tax change in net income.
For the quarter ended September 30, 2010, the change in fair value of
marketable securities, recorded in other income, was an unrealized
loss of $271,000 (2009 - gain $1,310,000) and year-to-date was an
unrealized gain of $546,000 (2009 -$3,284,000).
b) Interest rate risk management
To hedge its exposure to fluctuating interest rates on its long-term
debt, the Company has entered into interest rate swap agreements with
Canadian Chartered Banks. The swap agreements involve the exchange of
the three-month bankers' acceptance floating interest rate for a fixed
interest rate. The difference between the fixed and floating rates is
settled quarterly with the bank and recorded as an increase or
decrease to interest expense. The Company elected to apply hedge
accounting and as such formally assesses effectiveness of the swaps at
inception and on a regular basis and has concluded that the swaps are
effective in offsetting changes in interest rates.
Interest rate fluctuations would have an impact on the Company's
results. A 0.5% change in the floating interest rates would have
impacted OCI due to changes in fair value of the interest rate swaps
by approximately $600,000 after-tax. There would have been no impact
to net income.
The Company has two interest rate swap agreements; one has a notional
value of $10,000,000 and expires in June 2013, and the other has a
notional amount of $45,000,000 and expires in May 2013. In 2008, the
Company early terminated interest rate swap agreements resulting in a
fair value payable of $349,000 which was blended into the interest
rate of the $45,000,000 swap. This fair value payable is being
transferred from OCI to net income (as interest expense) over the
remaining term of the original swap agreements which expire between
2009 and 2011. The before-tax amount related to the $349,000 fair
value payable transferred to net income from OCI for the quarter was
$17,000 (2009 - $17,000). The year-to-date amount transferred to net
income was $50,000 (2009 - $87,000).
Total before-tax interest expense transferred for the quarter from OCI
to net income was $22,000 (2009 - $17,000) and for the year the amount
was $52,000 (2009 -$167,000). In January 2010, the Company settled
$5,000,000 of the $15,000,000 swap which resulted in a payout of
$328,000. $5,000,000 of the remaining $10,000,000 swap has been
de-designated and therefore, hedge accounting no longer applies on
this portion. Of the amount of pre-tax interest expense transferred to
net income from OCI, $21,000 related to the de-designated portion
(2009 - $nil) in the quarter, and for the year the amount was $31,000
(2009 - $nil).
The Company has measured its own credit risk in relation to its
interest rate swaps and as a result has recognized a $3,000 gain in
OCI (2009 - $nil) in the third quarter and a loss of $59,000 year-to-
date (2009 - $nil).
The aggregate fair value payable of the swap agreements was
$3,799,000 (2009 - $4,233,000).
c) Share price volatility risk management
In July 2006, the Company entered into a cash-settled equity total
return swap agreement to manage its exposure to fluctuations in its
stock-based compensation costs related to the SAR plan. Compensation
costs associated with the SAR Plan fluctuate as a result of changes in
the market price of the Company's Class A shares.
The Corporation entered into this swap for a total of 1,275,000
notional Class A shares with a hedged price of $5.85. The swap expires
in July 2011.
The swap includes an interest and dividend component. Interest is
accrued and payable by the Company on quarterly settlement dates. Any
dividends paid on the Class A shares are reimbursed to the Company on
the quarterly settlement dates.
The Company elected to apply hedge accounting and in order to qualify
for hedge accounting, there must be reasonable assurance that the
instrument is and will continue to be an effective hedge. At the
inception of the hedge and on an ongoing basis, the Company formally
assesses and documents whether the hedging relationship is effective
in offsetting changes in cash flows of the hedged item. Gains or
losses realized on the quarterly settlement dates are recognized in
net income in the same period as the SAR Plan compensation expense.
Unrealized gains and losses, to the extent that the hedge is
effective, are deferred and included in OCI until such time as the
hedged item affects net income. If at any time, the hedge is deemed to
be ineffective or the hedge is terminated or de-designated, gains or
losses, including those previously recognized in OCI, will be recorded
in net income immediately.
As at September 30, 2010, the Company has de-designated 686,350 of the
1,275,000 notional Class A shares; therefore, hedge accounting no
longer applies on the de-designated portion. A total of $462,000
before-tax gains were transferred from OCI to net income in the
quarter (2009 - $465,000) and the amount year-to-date was $936,000
(2009 - $1,524,000). Of the amount transferred to net income, the gain
in the quarter that related to the de-designated portion was $386,000
(2009 - $20,000) and year-to-date it was $959,000 (2009 - $442,000).
The estimated fair value of the equity total return swap receivable,
classified as current other assets, based on the Class A shares'
market price at September 30, 2010 was $2,423,000 (2009 - $1,838,000
of which $1,321,000 was current).
Liquidity risk
Liquidity risk is the risk that the Company is not able to meet its
financial obligations as they become due or can do so only at excessive
cost. The Company's growth is financed through a combination of the cash
flows from operations and borrowings under the existing credit facility.
One of management's primary goals is to maintain an optimal level of
liquidity through the active management of the assets and liabilities as
well as the cash flows. Other than for operations, the Company's cash
requirements are mostly for interest payments, repayment of debt, capital
expenditures, CCD payments, dividends and other contractual obligations
that are disclosed below.
The Company's credit facility expires on June 30, 2012. The Company was
in full compliance with its bank covenants throughout the quarter and at
quarter end.
The Company's liabilities have contractual maturities which are
summarized below:
Obligation (thousands of
dollars) 12 months 2011-2015 Thereafter
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Long-term debt $ - 49,500 -
Bank indebtedness 1,095 - -
Accounts payable and accrued
liabilities 19,116 - -
Income taxes payable 9,205 - -
CCD commitments 2,752 4,198 106
-------------------------------------------
$ 32,168 53,698 106
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital risk
The Company defines its capital as shareholders' equity. The Company's
objective when managing capital is to pursue its strategy of growth
through acquisitions and through organic operations so that it can
continue to provide adequate returns for shareholders.
The Company manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital
structure, the Company may adjust the amount of dividends paid to
shareholders, issue new shares or repurchase shares. The Directors and
senior management of the Company are of the opinion that from time to
time the purchase of its shares at the prevailing market price would be a
worthwhile investment and in the best interests of the Company and its
shareholders. Material transactions and those considered to be outside
the ordinary course of business, such as acquisitions and other major
investments or disposals, are reviewed and approved by the Board of
Directors.
To comply with Federal Government directions, the Broadcasting Act and
regulations governing radio stations (the "Regulations"), the Company has
imposed restrictions respecting the issuance, transfer and, if
applicable, voting of the Company's shares. Restrictions include
limitations over foreign ownership of the issued and outstanding voting
shares. Pursuant to such restrictions, the Company can prohibit the
issuance of shares or refuse to register the transfer of shares or, if
applicable, prohibit the voting of shares in circumstances that would or
could adversely affect the ability of the Company, pursuant to the
provisions of the Regulations, to obtain, maintain, renew or amend any
licence required to carry on any business of the Company, including a
licence to carry on a broadcasting undertaking, or to comply with such
provisions or with those of any such licence.
The Company is subject to covenants on its credit facility. The Company's
bank covenants include certain maximum or minimum ratios such as total
debt to EBITDA ratio, interest coverage and fixed charge coverage ratio.
Other covenants include seeking prior approval for acquisitions or
disposals in excess of a quantitative threshold. 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, 2010.
11. EARNINGS PER SHARE
Three months ended Nine months ended
September 30 September 30
(thousands) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average common shares
used in calculation of basic
earnings per share 32,972 32,972 32,972 32,972
Incremental common shares
calculated in accordance with
the treasury stock method 1,121 1,194 1,116 1,053
-----------------------------------------
Weighted average common shares
used in calculation of diluted
earnings per share 34,093 34,166 34,088 34,025
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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. Its revenue relates to
hotel operations. Details of segment operations are set out below.
Results from the Thunder Bay reporting unit have been excluded from 2009
figures as a result of accounting for discontinued operations as
described in note 3. Beginning in 2010 other income, which is primarily
the results from investment holdings, was excluded from the determination
of operating income (loss). The comparative information for 2009 has been
adjusted to reflect this reclassification.
Corpo- Corpo-
(thousands Broad- rate Broad- rate
of dollars) casting & Other Total casting & Other Total
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Sept 30 Nine months ended Sept 30
-------------------------- -------------------------
2010
Revenue $ 27,662 1,046 28,708 82,433 2,766 85,199
Operating
expenses 19,541 2,758 22,299 60,498 7,757 68,255
Depreciation
and amorti-
zation 845 74 919 2,499 214 2,713
------------------------------------------------------------
------------------------------------------------------------
Operating
income
(loss) $ 7,276 (1,786) 5,490 19,436 (5,205) 14,231
------------------------------------------------------------
------------------------------------------------------------
Assets
employed $ 212,486 19,197 231,683
Broadcast
licences 148,032 - 148,032
Goodwill 7,045 - 7,045
Capital
expendi-
tures $ 1,054 67 1,121 1,908 199 2,107
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2009
Revenue $ 24,329 1,079 25,408 72,093 2,747 74,840
Operating
expenses 18,980 2,779 21,759 56,195 7,728 63,923
Depreciation
and amorti-
zation 886 78 964 2,546 230 2,776
------------------------------------------------------------
Operating
income
(loss) $ 4,463 (1,778) 2,685 13,352 (5,211) 8,141
------------------------------------------------------------
Assets
employed $219,001 21,085 240,086
Broadcast
licences 149,641 - 149,641
Goodwill 7,045 - 7,045
Capital
expendi-
tures $ 1,259 11 1,270 3,679 54 3,733
-------------------------------------------------------------------------
-------------------------------------------------------------------------
%SEDAR: 00002995E
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: [email protected], Web: www.ncc.ca
Share this article