Glacier Media - 2012 Second Quarter Update

As usual, Glacier Media recently reported strong results for the second quarter of 2012.  Quarter-over-quarter sales were up 27.4%, though EBITDA increased at a more modest 12.1%, and cash flows increased by 10.8%.  These latter two figures are more important than the robust increase in revenues, and are largely explained by lingering weakness in the assets acquired from Postmedia late last year. 

However, these same properties offer an opportunity to grow over time simply by making much-needed operational improvements, which can be achieved with only modest incremental investments.  Because of a substantial debt load, the previous owner cut costs to the point that the product was weakened.  Glacier, while always conscious of costs, carefully avoids diminishing the editorial product that readers and advertisers expect, and it doesn't it allow sales capacity to wane.  There are straightforward steps that can and are being taken, with some encouraging early results.

Consolidated net debt fell to $137 million in the quarter, and now stands at about 2.5x trailing twelve months EBITDA, a significant but manageable amount of obligations.  At $6.9 million, capital spending was significantly higher than usual in the quarter, though the vast majority of outlays were for investment, rather than maintenance, mostly for a new printing press.  Management expects these heightened expenditures, which should fall by the first quarter of 2013, to generate both sales growth and cost savings.  Unfortunately, the company was not able to repurchase any shares, which remain dirt-cheap, though management correctly prioritizes debt repayment above buybacks.

One of the most important tasks for management over the next few years is to wring enhanced profits from the Postmedia assets.  Given their consistent past success in doing so, and encouraging early results, shareholders can be confident that Glacier's leadership team will do just that.  Here's looking forward to the third quarter.

My original write-up on Glacier Media is here.


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