Newspaper & Mailroom
FP Newspapers Inc. Reports Second Quarter 2013 Results and August 2013 Dividend
Tuesday 06. August 2013 - FP Newspapers Inc. (TSX:FP) ("FPI") announces financial results for the quarter ended June 30, 2013. FPI is the successor to the business of the FP Newspapers Income Fund and owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP").
Second quarter operating results of FPI
FPI reported net earnings of $1.5 million or $0.217 per share for the three months ended June 30, 2013, compared to net earnings of $1.3 million or $0.190 per share in the same period last year.
Second quarter operating results of FPLP
FPLP’s revenue for the three months ended June 2013 was $27.3 million, a decrease of $0.7 million or 2.6% from the same three months in the prior year. Advertising revenues for the three months ended June 2013 were $18.1 million, a $0.9 million or 4.6% decrease compared to the same period last year. FPLP’s largest advertising revenue category, display advertising including colour, was $11.3 million, a decrease of $0.8 million or 6.2% from the same period in the prior year, primarily due to decreased spending in the automotive and employment categories, partially offset by increased spending in the department store and government categories. Classified advertising revenues for the second quarter decreased by $0.2 million or 8.3% compared to the same period last year, primarily due to lower spending in the employment, automotive and real estate categories. Flyer distribution revenues for the quarter increased by $0.1 million or 3.1% primarily due to an increase in flyer volumes and slightly higher earned rates.
Circulation revenues for the three months ended June 2013 were $6.7 million, a decrease of $0.3 million from the second quarter of 2012, with lower unit sales offsetting increased revenue from higher subscription rates. Commercial printing revenues for the quarter increased by $0.1 million, primarily attributable to increased printing at the Derksen Printers operation and the Winnipeg Free Press. Digital revenues for the second quarter increased by $0.2 million or 31.0%, primarily due to an increase in Winnipeg Free Press revenues from online web ads on the Winnipeg Free Press website and other digital offerings.
Operating expenses for the three months ended June 30, 2013 were $22.6 million, a decrease of $1.1 million or 4.6% compared to the same quarter last year. Employee compensation costs for the second quarter decreased by $0.3 million from the same period in the prior year, primarily due to fewer employees, partially offset by wage increases included in the collective agreements effective October 1, 2012 and an increase in the defined benefit pension plan expense. Newsprint expense for FPLP’s own publications for the second quarter decreased by $0.2 million or 11.1% compared to the same period in the prior year, primarily due to lower volumes resulting from fewer circulation copies and a slightly lower average rate per metric tonne. Newsprint expense for commercial printing remained at relatively the same level as the second quarter of 2012. Other expenses decreased by $0.3 million or 7.0% compared to the same quarter last year, primarily due to a drawdown of bad debt reserve due to favourable collection experience and reductions in legal and marketing costs.
EBITDA(1) for the three months ended June 30, 2013 was $5.7 million compared to $5.4 million for the same period last year, an increase of 6.5%. EBITDA(1) margin for the three months ending June 30, 2013 was 21.0%, compared to 19.2% in the same period last year.
FPLP’s net earnings were $4.3 million for the three months ended June 30, 2013, compared to $3.8 million for the same period last year.
Finance costs for the three months ended June 30, 2013 decreased by $0.1 million compared to the previous year, primarily due to lower principal balances together with a reduction in interest rates resulting from the long-term loan renewal agreement effective the beginning of June 2012 and the elimination of the guarantee fee.
Cash available for distribution attributable to FPI(2) was $1.1 million or $0.160 per share for the three months ended June 30, 2013, compared to $1.1 million or $0.164 per share for the same period last year.
Dividends
FPI declared dividends to shareholders of $1.0 million or $0.15 per share for the three months ended June 30, 2013 and the three months ended June 30, 2012.
August 2013 Dividend
FPI today announced a cash dividend of $0.05 per share, payable on September 30, 2013 to shareholders of record at the close of business on August 30, 2013.
Outlook
Advertising revenue year-over-year declines in the second quarter were slightly improved from levels experienced in the first quarter. While April and May results were showing positive signs, June was a disappointing month for advertising revenues, which, as we have previously reported, are difficult to predict. July advertising revenue is showing an improvement over our June advertising revenue performance, but is still lower than the previous year.
The new collective agreements covering unionized employees at the Winnipeg Free Press and Canstar Community News and contracted delivery agents at the Winnipeg Free Press went into effect on July 1, 2013. Unionized and non-unionized employees have increased their contributions to the defined benefit pension plan, and on an annual basis will increase their total contributions by approximately $0.7 million, bringing the employees total full year contributions to approximately $1.6 million. The Company’s minimum contribution to this pension plan has been determined by our consulting actuaries at $3.9 million for the 2013 full year compared to $3.5 million for the 2012 year. In addition to this minimum funding level, the Company is required to fund the solvency deficiency for those members electing to receive a commuted value transfer from the plan.