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FP Newspapers Inc. — Management Reports 2025
May 7, 2025
46696_rns_2025-05-07_6ae84872-8513-4d00-856e-78f8b14b88e4.pdf
Management Reports
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Approved for issuance: May 7, 2025
FP NEWSPAPERS INC.
INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
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MANAGEMENT'S DISCUSSION AND ANALYSIS
This management's discussion and analysis is dated May 7, 2025, and does not reflect changes or information subsequent to this date. Additional regulatory filings for FP NEWSPAPERS INC. ("FPI") can be found on the SEDAR+ website at www.sedarplus.ca.
The following discussion and analysis is supplementary to, and should be read in conjunction with our financial statements for the three months ended March 31, 2025.
Forward-Looking Statements
Certain statements in this discussion and analysis may constitute forward-looking statements that reflect management's expectations regarding future growth, financial performance and business opportunities that are not historical facts. Such forward-looking statements are subject to risks and uncertainties set out below under the heading "Caution Regarding Forward-Looking Statements". All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance and speak only as of the date of this discussion and analysis. They are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
Interim Financial Statements
Our interim financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board applicable to the preparation of interim financial statements, including International Accounting Standard ("IAS") 34 – Interim Financial Reporting. Because interim financial statements do not include the same information and disclosures that are required for annual financial statements, this discussion and analysis should also be read in conjunction with our most recent audited financial statements for the year ended December 30, 2024, which are available on the SEDAR+ website.
All monetary amounts, unless otherwise indicated, are expressed in Canadian dollars.
OVERVIEW AND BACKGROUND
FP NEWSPAPERS INC. has no active business. It owns securities entitling it to 49% of the distributable cash flow of FP CANADIAN NEWSPAPERS LP ("FPLP"). FPLP owns and operates the Winnipeg Free Press, along with other Manitoba based news and media publications that are available in both print and digital formats. The informative and engaging content we produce has an extensive reach throughout the province of Manitoba. The breadth of our reach provides compelling platforms for those looking to effectively reach a Manitoba audience.
OPERATING RESULTS
A discussion of our quarterly operating results
| ($ in 000's) | For the three months ended March 31, | |
|---|---|---|
| 2025 | 2024 | |
| Equity interest in FP Canadian Newspapers LP Income (loss) | $ 252 | $ (153) |
| Administration expenses | (53) | (52) |
| Other income | 1 | 2 |
| Income (loss) before income taxes | 200 | (203) |
| Current income tax (expense) recovery | (112) | 114 |
| Income (loss) and comprehensive income (loss) for the period | 88 | (89) |
| Weighted average number of Common Shares outstanding | 6,902,592 | 6,902,592 |
| Income (loss) per share – basic and diluted | 0.013 | (0.013) |
Equity interest in FP Canadian Newspapers LP Income (Loss)
FPI's proportionate share of FPLP comprehensive income for the three months ended March 31, 2025, was $0.3 million compared to a loss of $(0.2) million in the same period of the prior year. See the supplemental management and analysis of FPLP included herein.
Administrative Expenses
Administrative expenses are relatively flat compared to the same period last year.
Income Taxes
Current income taxes include FPI's proportionate share of FPLP's non-conterminous taxable income resulting in fluctuations of FPI's effective tax rate.
Income (loss) and Comprehensive Income (loss)
Income and comprehensive income for the period reflects FPI's investment in FPLP and its underlying performance for the period. Income and comprehensive income for the three months ended March 31, 2025, was $0.1 million compared to a loss and comprehensive loss of $(0.1) million for the same period in the prior year.
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SUMMARY OF QUARTERLY PERFORMANCE
A summary view of our quarterly financial performance
The following table presents selected financial information for each of the nine most recently completed quarters:
| Quarter Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ in '000's, except share $) | 2025 Mar – 31 | 2024 Dec - 30 | 2024 Sep - 30 | 2024 Jun - 30 | 2024 Mar – 31 | 2023 Dec - 30 | 2023 Sep - 30 | 2023 Jun - 30 | 2023 Mar – 31 |
FP CANADIAN NEWSPAPERS LP
| Revenue | $ 11,122 | 13,070 | 11,301 | 11,784 | 12,308 | 13,070 | 12,896 | 13,604 | 13,323 |
|---|---|---|---|---|---|---|---|---|---|
| Income (loss) and comprehensive income (loss) | $ 514 | 1,361 | (75) | 1,683 | (312) | 428 | 360 | 934 | (7,980) |
| Proportionate % of Income (loss) and comprehensive Income (Loss) attributable to FP NEWSPAPERS INC | 49.0% | 49.0% | 49.0% | 49.0% | 49.0% | 49.0% | 49.0% | 49.0% | 49.0% |
| Income (loss) and comprehensive income (loss) attributable to FP NEWSPAPERS INC | $ 252 | 667 | (37) | 825 | (153) | 210 | 177 | 458 | (3,910) |
| FP NEWSPAPERS INC. | |||||||||
| Income (loss) and comprehensive income (loss) | $ 88 | 945 | - | 866 | (89) | 165 | 140 | 426 | (3,950) |
| Income (loss) and comprehensive income (loss) per Share | $ 0.013 | 0.137 | - | 0.125 | (0.013) | 0.024 | 0.020 | 0.062 | (0.572) |
| Outstanding Shares | # 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 | 6,902.6 |
INTERNAL CONTROL OVER FINANCIAL REPORTING
A discussion of our disclosure controls and internal controls over financial reporting
In connection with National Instrument 52-109 (Certificate of Disclosure in Issuer's Annual and Interim Filings), the Chief Executive Officer and Chief Financial Officer of the Company have filed a Venture Issue Basic Certificate with respect to the financial information contained in the financial statements for the quarter ended and this accompanying MD&A. This can be found on SEDAR+.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
A description of accounting estimates that are critical to determining our financial results
The accounting policies adopted in preparation of the interim condensed financial statements are consistent with those followed in the preparation of our most recent annual financial statements.
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SUPPLEMENTAL DISCLOSURE BY FP NEWSPAPERS INC. OF
FP CANADIAN NEWSPAPERS LIMITED PARTNERSHIP
INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
OPERATING RESULTS
A discussion of our quarterly operating results
| ($ in 000's) | For the three months ended March 31, | |
|---|---|---|
| 2025 | 2024 | |
| Revenue | ||
| Print advertising | $ 4,066 | $ 4,617 |
| Circulation | 5,591 | 5,690 |
| Digital advertising and services | 869 | 810 |
| Other | 596 | 1,191 |
| TOTAL REVENUE | 11,122 | 12,308 |
| Operating expenses | ||
| Employee compensation | 4,953 | 5,432 |
| Newsprint and other paper | 784 | 794 |
| Delivery | 1,965 | 2,133 |
| Production | 949 | 1,596 |
| Other | 1,156 | 1,255 |
| Depreciation and amortization | 757 | 1,216 |
| OPERATING INCOME (LOSS) BEFORE UNDERNOTED ITEMS | 558 | (118) |
| Restructuring charge | (14) | (126) |
| OPERATING INCOME (LOSS) | 544 | (244) |
| Other income | 21 | 52 |
| Finance costs | (55) | (129) |
| Gain on disposal of property, plant, and equipment | 4 | 9 |
| INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD | $ 514 | $ (312) |
Revenue
Revenue decreased $1.2 million or 9.6% to $11.1 million for the three months ended March 31, 2025, as compared to the same period in the prior year. The decrease is reflective of decreases in sheet-fed commercial work, display advertising and flyer inserts.
Print Advertising
Print Advertising revenues decreased $0.6 million or 11.9% to $4.1 million for the three months ended March 31, 2025, as compared to the same period in the prior year. Classified advertising revenues decreased $0.1 million or 4.9% to $1.2 million for the three months ended March 31, 2025, as compared to the same period in the prior year. Display advertising revenues decreased $0.4 million or 15.5% to $1.9 million for the three months ended March 31, 2025, as compared to the same period in the prior year. Flyer distribution revenues decreased $0.1 million or 13.0% to $0.9 million for the three months ended March 31, 2025, as compared to the same period in the prior year.
Circulation
Circulation revenues decreased $0.1 million or 1.7% to $5.6 million for the three months ended March 31, 2025, as compared to the same period in the prior year.
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Digital Advertising and Services
Digital Advertising and Services revenues increased $0.1 million or 7.3% to $0.9 million for the three months ended March 31, 2025, as compared to the same period in the prior year. This was primarily due to management's accrual with respect to Bill C-18.
Other
Other revenues decreased $0.6 million or 49.9% to $0.6 million for the three months ended March 31, 2025. Other revenues decreased for the quarter as a result of decreased commercial print levels compared to the same period in the prior year due to an agreement entered into by management to license the sheet-fed printing business to a third-party.
Expenses
Operating expenses decreased $1.9 million or 15.0% to $10.6 million for the three months ended March 31, 2025, as compared to the same period in the prior year.
Employee Compensation
Employee compensation costs decreased by $0.5 million or 8.8% to $5.0 million for the three months ended March 31, 2025, as compared to the same period in the prior year. A recovery of $0.5 million was recorded for the three months ended March 31, 2025, related to the federal government's Canadian Journalism Labour Tax Credit program ("JTC"), which is an increase of $0.2 million or 91.7% as compared to the same period in the prior year. The increase represents the enhanced changes to the JTC program approved in the 2024 Federal budget.
Newsprint and Other Paper
Newsprint expenses for the quarter were relatively flat as compared to the first quarter of the prior year.
Delivery
Distribution expenses decreased $0.2 million or 7.9% to $2.0 million for the three months ended March 31, 2025, as compared to the same period in the prior year due to fewer open delivery routes and consolidation of routes which reduces subcontracting expenses.
Production
Production expenses decreased $0.6 million or 40.5% to $0.9 million for the three months ended March 31, 2025, as compared to the same period in the prior year, a result of the licensing agreement mentioned above.
Other
Other operating expenses decreased $0.1 million or 7.9% to $1.2 million for the three months ended March 31, 2025, as compared to the same period in the prior year, a result of decreased property taxes from a successful appeal, and lower expenses relating to sales promotions.
Depreciation and Amortization
Depreciation and amortization decreased $0.5 million or 37.7% to $0.8 million for the three months ended March 31, 2025, as compared to the same period in the prior year, a result of accelerated depreciation on assets in the prior year, whose useful lives had been reassessed.
EBITDA
EBITDA was $1.3 for the three months ended March 31, 2025, compared to $1.0 million for the same period in the prior year, an increase of 33.8%. EBITDA margin for the three months ended March 31, 2025, was 11.7% compared to 7.9% in the same period in the prior year.
Finance Costs
Finance costs decreased $0.1 million or 57.4% for the three months ended March 31, 2025 as compared to the same period in the prior year and relate to interest payments due on the existing RBC credit facility.
Income (Loss) and Comprehensive Income (Loss)
Income and comprehensive income of $0.5 million was reflected for the three months ended March 31, 2025, compared to a loss of $(0.3) million for the same period in the prior year. The income for the three months ended March 31, 2025, is as described above.
SUMMARY OF QUARTERLY PERFORMANCE
A summary view of our quarterly financial performance
The following table presents selected financial information for each of the nine most recently completed quarters:
| Quarter Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| ($ in '000's) | 2025 | ||||||||
| Mar - 31 | 2024 | ||||||||
| Dec - 31 | 2024 | ||||||||
| Sep - 30 | 2024 | ||||||||
| Jun - 30 | 2024 | ||||||||
| Mar - 31 | 2023 | ||||||||
| Dec - 31 | 2023 | ||||||||
| Sep - 30 | 2023 | ||||||||
| Jun - 30 | 2023 | ||||||||
| Mar - 31 | |||||||||
| Revenue | $ 11,122 | 13,070 | 11,301 | 11,784 | 12,308 | 13,070 | 12,896 | 13,604 | 13,323 |
| EBITDA | $ 1,301 | 2,127 | 707 | 2,235 | 972 | 1,124 | 1,138 | 1,828 | 1,548 |
| Income (Loss) and Comprehensive Income (Loss) | $ 514 | 1,361 | (75) | 1,683 | (312) | 428 | 360 | 934 | (7,980) |
| Distributions | $ - | - | - | 408 | - | - | - | 500 | - |
| Restructuring | $ 14 | 6 | 45 | 90 | 125 | 121 | 221 | - | 8 |
| Capital Expenditures | $ 821 | 195 | 161 | 110 | 711 | 260 | 50 | 308 | 1,328 |
LIQUIDITY AND CAPITAL RESOURCES
A discussion of our cash flow and liquidity
Cash and cash equivalents at March 31, 2025 were $4.8 million, compared to $4.7 million at December 31, 2024. Our principal uses of funds are for working capital requirements, debt servicing and capital expenditures. Based on our current and anticipated level of operations, we believe that our cash on hand and cash flows from operations, which include the receipt of the journalism tax credits will enable us to meet our working capital, debt service, capital expenditure and other funding requirements for the next twelve months.
However, our ability to fund our working capital needs, debt service and other funding requirements depends on our future operating performance and cash flows. Our cash flows from operating activities may be impacted by, among other things, the overall strength of the economy, competition from digital media and other forms of media as well as competition from alternative emerging technologies. In recent years there has been a growing shift in advertising dollars from
print advertising to other advertising formats. We manage this risk by monitoring cash flow forecasts, implementing cost reduction initiatives, deferring, or eliminating discretionary spending and monitoring debt obligation compliance terms.
Cash Flow from Operating Activities
During the three months ended March 31, 2025, cash generated from operating activities was $1.5 Million as compared to $1.3 million for the same period in the prior year. The income for the three months ended March 31, 2025, was $0.5 million, compared to a loss of $(0.3) million for the same period in the prior year. The change in cash flow from operating activities is due to reduced expenses noted above. The net change in non-cash working capital items was $0.2 million for the three months ended March 31, 2025, compared to $0.4 million for the same period in the prior year.
Cash Flow from Investing Activities
Capital and intangible assets additions were $0.8 million for the three months ended March 31, 2025 as compared to $0.7 million for the same period in the prior year. Capital asset additions consist of computer software and hardware as well as building improvements.
Cash Flow from Financing Activities
Financing activities used $0.6 million for the three months ended March 31, 2025, compared to using $1.6 million for the same period in the prior year. The quarter consisted of normal principal repayments while the prior year included a one time $1.0 million lump sum principal repayment. No distributions to partners were made during the quarter.
COMMITMENTS AND CONTINGENCIES
A description of changes to our material contractual obligations
There have been no significant changes to contractual obligations since December 31, 2024.
RELATED PARTY TRANSACTIONS
A description of our material transactions with related parties
Virtually all newsprint is purchased from the Alberta Newsprint Company, a related party. Total newsprint purchases for the three months ended March 31, 2025, were $0.5 million, (2024 - $0.6 million).
INTERNAL CONTROL OVER FINANCIAL REPORTING
A discussion of our disclosure controls and internal controls over financial reporting
In connection with National Instrument 52-109 (Certificate of Disclosure in Issuer's Annual and Interim Filings), the Chief Executive Officer and Chief Financial Officer of the Company have filed a Venture Issue Basic Certificate with respect to the financial information contained in the financial statements for the quarter ended and this accompanying MD&A. This can be found on SEDAR+.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
A description of accounting estimates that are critical to determining our financial results
The accounting policies adopted in preparation of the interim condensed financial statements are consistent with those followed in the preparation of our most recent annual financial statements.
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NON-IFRS MEASURES
A description of how we determine EBITDA and distributable cash flow used by management
(1) Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is often referred to as a useful proxy for operating cash flows of a business. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Readers are therefore cautioned against using this as an alternative to net earnings determined in accordance with IFRS as an indicator of our operating performance. Readers are similarly cautioned that our method for calculating EBITDA, may differ from those of other issuers and may not allow for direct comparisons to be made. Our calculation of EBITDA is the income (loss) as presented on the statement of income excluding depreciation, amortization, finance costs, other income, and gain on disposal of property, plant, and equipment.
| For the Three Months Ended March 31, | ||
|---|---|---|
| ($ in 000's) | 2025 | 2024 |
| Income (loss) for the period | $ 514 | $ (312) |
| Add (subtract): | ||
| Depreciation and amortization | 757 | 1,216 |
| Finance costs | 55 | 129 |
| Other income | (21) | (52) |
| Gain on disposal of property, plant, and equipment | (4) | (9) |
| EBITDA | $ 1,301 | $ 972 |
OUTLOOK
The outlook for our business
We anticipate the print advertising market to remain challenging, with a continuing shift in advertising dollars from print into other advertising formats, particularly online, digital search, and social media platforms.
On June 22, 2023, the Government of Canada enacted Bill C-18, commonly referred to as the "Online News Act" ("the Act"), whereby allowing Canadian news organizations the right to reach fair commercial agreements with the largest online platforms, such as search engines and social media sites for access to their news content. Management of FPLP fully expects to participate in all the benefits of collective bargaining mandated by the Act and amounts for the period ended March 31, 2025 have been estimated and accrued for.
We anticipate circulation to remain challenging, with a continuing decline in subscriber volume and shifting dollars from print into digital subscriptions. Historically price increases have mitigated declines in overall circulation volumes that we have experienced over the last few years, and we expect this trend to continue. As our audience transitions, we are focused on various initiatives to remain relevant and accommodate our audience.
The uncertainty of the political landscape continues to impact the newspaper industry. The impact of which may necessitate cost reduction initiatives to address the continued revenue decline and reliance on government subsidies. Management of FPLP believe that despite the ever-growing immediate challenges in the newspaper industry, as well as ever changing market conditions, the business will continue to run, without issue, with existing press equipment and production infrastructure.
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
An elaboration on the above noted title
Certain statements in this management's discussion and analysis may constitute "forward-looking information" under applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. These statements include but are not limited to statements using words such as "anticipate," "believe," "budgeted," "could," "expect," "estimate," "intend," "may," "will," "would," "should" and similar expressions and derivations thereof in connection with any discussion of future events, trends, or prospects or future operating or financial performance. By their nature, forward-looking information and statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These risks and uncertainties include, among others: competition from digital and other forms of media; the effect of economic conditions on advertising revenue; the ability to build out digital media and online businesses; the failure to maintain current print and online newspaper readership and audience levels; the realization of anticipated cost savings; possible damage to the reputation of the Company's brands or trademarks; possible labour disruptions; possible environmental liabilities, litigation and pension plan obligations; fluctuations in foreign exchange rates and the prices of newsprint and other commodities. While both FPI and FPLP base such information and statements on assumptions believed to be reasonable when made, they are not guarantees of future performance and actual results of operations, financial condition and liquidity, and developments in the industry in which they operate, may differ materially from any such information and statements in this press release. Given these risks and uncertainties, undue reliance should not be placed on any forward-looking information or forward-looking statements, which speak only as of the date of such information or statements. Other than as required by law, FPI and FPLP does not undertake, and specifically declines, any obligation to update such information or statements or to publicly announce the results of any revisions to any such information or statements.