FP Newspapers Inc. Reports Fourth Quarter 2020 Results

WINNIPEG, MB / ACCESSWIRE / April 21, 2021 / FP Newspapers Inc. ("FPI") announces financial results for the quarter ended December 30, 2020. FPI owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP").

Fourth quarter operating results of FPI
FPI reported net income of $2.5 million for the three months ended December 30, 2020, compared to net income of $0.7 million for the same period in 2019.

Fourth quarter operating results of FPLP
FPLP's revenue for the three months ended December 31, 2020 was $14.4 million, a decrease of $1.8 million or 11.0% from the same three months in the prior year. Print advertising revenues for the three months ended December 31, 2020 were $7.0 million, an 18.2% decrease compared to the same quarter last year. FPLP's largest print advertising revenue category, display advertising including colour, was $3.4 million, a decrease of $0.9 million or 21.2% from the same period in the prior year, primarily due to the business closures as a result of the COVID-19 pandemic. Classified advertising revenues for the fourth quarter increased by $0.1 million or 11.0% compared to the same period last year, primarily due to an increase in obituaries. Flyer distribution revenues for the fourth quarter decreased by $0.8 million or 26.2% compared to the same period last year, primarily due to COVID-19 related business closures.

Circulation revenues for the three months ended December 31, 2020 remained at relatively the same level compared to 2019 as a result of an increase in print subscription prices and increased digital subscription revenue, offset by decreases in print unit sales. Commercial services revenues for the fourth quarter decreased by $0.2 million compared to the same period last year, primarily due to business closures due to COVID-19. Digital advertising revenues and other revenue for 2020 remained at relatively the same level compared to 2019.

Operating expenses for the three months ended December 31, 2020 remained at relatively the same level compared to 2019. Employee compensation costs, excluding restructuring charges, for the fourth quarter increased by $0.5 million or 7.2%, primarily due to the repayment of temporary wage reductions, offset by the Canada Employment Wage Subsidy of $0.4 million for the fourth quarter. There were no restructuring charges in the three months ended December 31, 2020 but restructuring costs for the same period in 2019 were $0.1 million due to voluntary and involuntary severance payments for employees. Newsprint expense for FPLP's own publications and for commercial use remained at relatively the same level compared to the same period in 2019. Slightly higher newsprint prices were offset by lower page counts resulting from the print advertising decline from COVID-19. Delivery costs for the three months ended December 31, 2020 decreased by $0.1 million or 3.5% primarily due to reduced flyer volumes as a result of the business closures from the COVID-19 pandemic. Production costs for the three months ended December 31, 2020 decreased by $0.1 million or 9.5% primarily due to lower page counts resulting from the print advertising decline from COVID-19.

On December 14, 2020, as a result of the transfer of defined benefit plan asset to the CAAT Pension Plan, FPLP recognized a settlement gain in the Consolidated Statements of Income of $6.8 million.

EBITDA(1), for the three months ended December 31, 2020 was $7.5 million, an increase of $4.6 million or 155.0% from the same period last year, primarily due to the pension settlement. EBITDA(1) margin, for the three months ending December 31, 2020 was 52.2%, compared to 18.2% in the same period last year.

FPLP's net income was $6.8 million for the three months ended December 31, 2020, compared to $2.1 million for the same period last year.

Twelve month operating results of FPI
Revenue for the year ended December 30, 2020 was $5.6 million compared to $2.2 million in 2019. The increase was primarily the result of higher equity earnings from FPI's investment in FPLP. Net income for the year ended December 30, 2020 was $4.0 million compared to $1.4 million in 2019. This is primarily due to the transfer of the defined benefit plan asset to the CAAT Pension Plan that occurred on December 14, 2020. FPLP recognized a settlement gain on the Consolidated Statement of Income of $6.8 million. For the year ended December 30, 2018, a non-cash write-down of $3.1 million was recorded. This was based on FPI's determination that its 49% equity investment in FPLP was impaired, primarily due to continued declines in revenue and earnings experienced by FPLP. For the year ended December 30, 2020, FPI recorded a current income tax expense of $0.6 million and a deferred income tax expense of $0.9 million compared to a current income tax expense of $0.2 million and a deferred income tax expense of $0.4 million in 2019. The deferred income tax expense is primarily from the deferral of taxes from amounts owing from the general partners of FPLP who have agreed to pay FPLP for their respective shares of the refundable tax credit for qualifying Canadian Journalism Organizations and timing differences between FPLP's year end and FPI's year end. Other comprehensive loss for 2020 was $2.0 million compared to $0.8 million in 2019. The change in other comprehensive income (loss) results from FPI's equity share of FPLP's recognition of remeasurements gains and losses related to its defined benefit pension plan.

Twelve month operating results of FPLP
FPLP's revenue for the year ended December 31, 2020 was $53.4 million, a decrease of $10.4 million or 16.3% from the prior year. Print advertising revenues for the year ended December 31, 2020 were lower by $8.8 million or 26.5% compared to last year. FPLP's largest print advertising revenue category, display advertising including colour, was $11.7 million, a decrease of $5.5 million or 31.7% from the prior year, primarily due to the business closures due to the COVID-19 pandemic. Classified advertising revenues for the 2020 year decreased by $0.4 million or 6.4% compared to last year, with decreases in the real estate and employment categories, partly offset by increases in obituaries. Flyer distribution revenues were $7.5 million, a decrease of $3.0 million or 28.6% from 2019, once again, primarily due the business closures as a result of COVID-19.

Circulation revenues for the year ended December 31, 2020 were $24.2 million, a decrease of $0.4 million or 1.4% compared to 2019, with a small increase in home delivery rates offset by slightly lower print home delivery volumes and lower single copy revenues due to the business closures resulting from the COVID-19 pandemic. Commercial services revenues decreased by $1.0 million, primarily due to business closures as a result of COVID-19. Digital advertising decreased by $0.2 million compared to 2019, due to lower advertising revenues due to COVID-19.

Operating expenses for the year ended December 31, 2020 were $41.6 million, a $17.1 million or 29.1% decrease from last year. Employee compensation costs, excluding restructuring charges, for the year decreased by $7.7 million or 27.8%, primarily due to government support from CEWS and lower staffing levels implemented in response to the lower advertising revenues due to the COVID-19 pandemic. Restructuring charges for the year ending December 31, 2020 were $0.1 million, which is $0.1 million lower than the prior year and represents voluntary and involuntary severance payments for employees. Newsprint expense for FPLP's own publications for the year decreased by $0.8 million or 18.8%, primarily due to lower page counts resulting from the print advertising decline from COVID-19. Newsprint for commercial printing decreased by $0.3 million, due to the decline in commercial print contracts. Delivery costs decreased by $0.9 million or 7.7% primarily due to the decrease in flyer delivery volumes resulting from the business closures due to COVID-19. Production expenses decreased by $1.0 million or 18.6%, primarily due to lower page counts resulting from the print advertising decline from COVID-19. Other expenses for the year remained at relatively the same level compared to the same period in 2019.

On December 14, 2020, as a result of the transfer of defined benefit plan asset to the CAAT Pension Plan, FPLP recognized a settlement gain in the Consolidated Statements of Income of $6.8 million.

EBITDA(1) for the year ended December 31, 2020 was $14.5 million compared to $8.0 million in 2019, an increase of 81.4%, primarily due to the pension settlement. EBITDA(1) margin for the year ended December 31, 2020 was 27.2% compared to 12.5% in 2019.

For the year ended December 31, 2020, finance costs decreased by $0.4 million or 49.8% primarily due to the lower level of debt outstanding.

FPLP's net income was $11.4 million for the year ended December 31, 2020, compared to $4.4 million in the prior year. The increase was primarily due to a pension settlement gain of $6.8 million.

Outlook
We are continuing to address the current challenges related to the COVID-19 pandemic and have seen gradual improvements in advertising and commercial print revenues month over month. This is despite the reinstatement of restrictions by Province on how businesses may operate if they are allowed to operate all. The duration to which Provincial restrictions continue to remain in effect, will have a direct impact on our near-term revenue.

The Canada Emergency Wage Subsidy ("CEWS") program continued to provide financial relief. We applied for CEWS for the period from March 15 to December 31, 2020 and during the three months and twelve months ended December 31, 2020, recognized a recovery of compensation expense of $0.4 million and $5.4 million, respectively. On September 23, 2020, the Government of Canada announced they will extend CEWS to the summer of 2021. We will continue to monitor our eligibility under the CEWS program.

Despite the fact that the impact of the COVID-19 pandemic remains unpredictable, we continue to identify and undertake cost reduction initiatives in an effort to address the underlying revenue declines in the legacy print business.

Additional Information
Additional information including financial statements and management's discussion and analysis can be found on the Company's website at www.fpnewspapers.com and in the disclosure documents filed by FP Newspapers Inc. with the securities regulatory authorities available at www.sedar.com.

Caution Regarding Forward-Looking Statements
Certain statements in this news release may constitute forward-looking statements within the meaning of applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These statements include but are not limited to statements regarding management's intent, belief or current expectations with respect to market and general economic conditions, future costs and operating performance. Generally, but not always, forward-looking statements will be indicated by words such as "may", "will", "intend", "anticipate", "expect", "believe", "plan", "forecast", "is budgeting for" or similar terminology.

Forward-looking statements are subject to known and unknown risks and uncertainties that may cause the actual results, performance or achievements of FPI or FPLP, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the current general economic uncertainty, FPLP's ability to effectively manage growth and maintain its profitability, FPLP's ability to operate in a highly competitive industry, FPLP's ability to compete with other forms of media, FPLP's ability to attract advertisers, FPLP's reliance upon key personnel, FPLP's relatively high fixed costs, FPLP's dependence upon particular advertising customer segments, indebtedness incurred in making acquisitions, the availability of financing for capital improvements, costs related to capital expenditures, cyclical and seasonal variations in FPLP's revenues, the risk of acts of terrorism, the cost of newsprint, the potential for labour disruptions, the risk of equipment failure, and the effect of Canadian tax laws.

In addition, although the forward-looking statements contained in this news release are based upon assumptions that management of FPI and FPLP believe to be reasonable, such assumptions may prove to be incorrect.

Forward-looking statements speak only as of the date hereof and, except as required by law, FPI and FPLP assume no obligation to update or revise them to reflect new events or circumstances. Because forward-looking statements are inherently uncertain, readers should not place undue reliance on them.

About FPI
FPI owns securities entitling it to 49% of the distributable cash of FP Canadian Newspapers Limited Partnership ("FPLP"). FPLP owns the Winnipeg Free Press, the Brandon Sun, and their related businesses, as well as the Canstar Community News division, the publisher of six community newspapers in the Winnipeg region, The Carillon in Steinbach with its related commercial printing operations. The businesses employ approximately 364 full-time equivalent people in Winnipeg, Brandon, Steinbach, Manitoba.

Further information can be found at www.fpnewspapers.com and in disclosure documents filed by FP Newspapers Inc. with the securities regulatory authorities, available at www.sedar.com.

Non-IFRS financial measures

(1) EBITDA

FPLP believes that in addition to net earnings as reported on FPLP's interim condensed consolidated statements of earnings, EBITDA is a useful supplemental measure as it is a measure used by many of FPLP's unitholders, creditors and analysts as a proxy for performance and the amount of cash generated by FPLP's operating activities. EBITDA is not a recognized measure of financial performance under IFRS. Investors are cautioned that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of FPLP`s performance. FPLP's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to measures used by other issuers. FPLP's method of calculating EBITDA is detailed in the Management's Discussion and Analysis for the year ended December 30, 2020 on FPI's website www.fpnewspapers.com or on SEDAR at www.sedar.com.

For further information please contact:
Ryan Kolaski, CFO
FP Newspapers Inc.
Phone (204) 771-1897

FP Newspapers Inc.
Statements of Income (Loss) and Comprehensive Income (Loss)
(unaudited, in thousands of Canadian dollars except per share amounts)

FP Canadian Newspapers Limited Partnership
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(unaudited, in thousands of Canadian dollars)

SOURCE: FP Newspapers Inc.