Meanwhile, Up North, A Newspaper Chain Actually Flourishes

By: Mark Fitzgerald Profits up 22.4% on a revenue jump of 22.3%, with cash flow up more than 35% and margins actually increasing to 26.8% from 24.2% a year-ago -- these aren't the kind of second-quarter results we've seen much of in this dismal financial reporting season.

Oh, and this particular newspaper chain has a light debt load of 2.2 times EBITA (earnings before interest, taxes, and amortization) to debt, and can handle future acquisitions with cash on hand. That we definitely haven't seen elsewhere in August.

But while publicly traded U.S. newspaper companies troop to Business Wire with reports of sinking revenues, poor same-store comps -- and difficulty staying within their loan covenants ratio limits of 6 or 7 times -- out in Vancouver, B.C., Glacier Media Inc. this week quietly released some eye-popping Q2 results.

Glacier said its second-quarter profit jumped 22.4% to $10.4 million on revenue that rose 22.3% to $68.9 million. Earnings rose to 14 cents a share, up from 11 cents a share in the year-ago period.

Glacier also managed to bump up its EBITA margin for the quarter to 26.8% from 24.2% in Q2 '07.

The results seem a vindication for Glacier's strategy of diversifying its portfolio of newspapers -- many of them cast off from the old Hollinger International just before and after Conrad Black's fall from grace -- with trade, B2B, and agricultural publications. It's a strategy smoothed these days by the economy boom in the Western Canada oil and natural gas patch.

"Glacier's strategic diversification in the strong Western Canadian local newspaper, agriculture, mining and energy sectors, as well as a variety of other trade and business and professional information niches, continues to produce strong consolidated revenue, EBITA and cash flow growth," the company said in its earnings release.

Glacier said its newspapers, located in more than 70
communities in British Columbia, Alberta, Saskatchewan and Manitoba, grew revenue as a group during the quarter.

"Unlike some of the factors affecting publishers of large metropolitan daily newspapers, Glacier's local daily and weekly community newspapers continue to be the primary source of local information for readers, and continue to enjoy high readership levels because of the demand for this information," Glacier said.

Another huge difference between Glacier and American big city publishers is its debt situation. Read the following excerpt from Glacier's earnings release and weep -- GateHouse Media, Journal Register Co., Tribune Co., and all you other debt-laden companies:

"During the quarter Glacier repaid $3.4 million of debt and funded $12.0 million of acquisitions and sustaining capital investments with cash flow from operations and cash on hand. Glacier's net consolidated debt (net of cash on hand) to EBITA ratio is now approximately 2.2x, based on the trailing 12 months EBITA for all of Glacier's operations, regardless of the date acquired. This lower level of leverage has reduced Glacier's interest rate paid on borrowings and overall interest expense."

Glacier added that its leverage levels, along with its growing profits, "are such that sufficient free cash flow is being generated to internally fund additional accretive acquisitions while maintaining prudent debt levels, and pursue other initiatives where appropriate that will enhance shareholder value."

The company does share one trait with its American cousins -- its stock is mired in the market pessimism about the newspaper sector. Glacier trades in the Toronto Stock Exchange under the symbol GVC. Early Wednesday, its stock was at C$3.84 cents, up 90 Canadian cents, or 2.4%. It has traded in a 52-week range of $3.20 to $5.00.

And there is a hint in the earnings release that the legacy of Black's corrupt reign at Hollinger International might have left something of a time bomb inside Glacier's acquisition of the papers.

Tucked away in a footnote on the 28th page of the earnings report, is the disclosure that one of Glacier's "subsidiaries is in discussions with the Canada Revenue Agency in respect of various matters pertaining to the taxation years 2002 through 2005."

It's not clear if this is a reference to newspapers sold off by Hollinger. In some sales, it's alleged Black, his lieutenant David Radler, and other top Hollinger executives fraudulently claimed non-compete fees. Black was found guilty on several counts of fraud, and acquitted on other counts, after a trial in federal court in Chicago. He is serving a sentence in a Florida prison now.

Glacier said it believes it has "substantial defenses to any potential claims and it is unlikely that any material additional tax liability will result."

Until shareholders approved a name change last month, Glacier went by the far grander moniker Glacier Ventures International Corp. But staying comfortably local in Western Canada seems to agree with the company just fine.

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This story has been corrected. An earlier version gave an incorrect former name for Glacier Media Inc.