Postmedia Network Reports Third Quarter Results

TORONTO--(BUSINESS WIRE)-- Postmedia Network Canada Corp. ("Postmedia" or the "Company") today released financial information for the three and nine months ended May 31, 2013.

Third Quarter Operating Results


Net loss in the quarter ended May 31, 2013 was $112.2 million compared to a net loss of $12.1 million in the same period in the prior year. The increase in net loss was primarily the result of a $93.9 million non-cash impairment charge. Also contributing to the increased net loss were lower revenues which were largely offset by operating cost reductions.

Operating loss was $95.6 million as compared to operating income of $4.1 million in the same period in the prior year primarily as a result of a $93.9 million non-cash impairment charge.

Operating income before depreciation, amortization, impairment and restructuring of $32.9 million in the quarter represents a decrease of $3.4 million (9.3%), relative to the same period in the prior year. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating income before depreciation, amortization, impairment and restructuring declined $1.8 million (5.1%).

Revenue for the quarter was $191.8 million, a decrease of $20.2 million (9.5%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $17.7 million (13.5%) with the declines occurring across all categories. Print circulation revenue decreased $3.1 million (5.9%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $0.5 million (2.2%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $16.9 million (9.6%) relative to the same period in the prior year. Expense reductions occurred in all operating expense categories including compensation, newsprint, distribution and other operating expenses. Excluding non-cash share-based compensation and other long-term incentive plan expense, operating expenses excluding depreciation, amortization, impairment and restructuring declined $18.5 million, or 10.4%.

During the three months ended May 31, 2013, the Company recorded asset impairments totaling $93.9 million. This total includes an impairment loss of $6.1 million with respect to a production facility that was reclassified from property and equipment to asset held-for-sale, and goodwill and intangible asset impairments totaling $87.8 million as a result of revisions to the long-term financial forecast to reflect greater revenue uncertainty.

Year-to-Date Operating Results

Net loss in the nine months ended May 31, 2013 was $118.0 million compared to net earnings of $5.1 million in the same period in the prior year. The decrease was primarily the result of a $93.9 million non-cash impairment charge. Also contributing to the decrease were lower revenues which were largely offset by operating cost reductions, and a gain on sale of the Times Colonist in Victoria and British Columbia based community newspaper assets to Glacier Media Inc. in the same period in the prior year.

Net loss from continuing operations, which includes non-cash impairment charges of $93.9 million, was $118.0 million, compared to net loss of $8.9 million in the same period in the prior year.

Operating loss was $63.2 million as compared to operating income of $41.6 million in the same period in the prior year primarily as a result of a non-cash impairment charge of $93.9 million.

Operating income before depreciation, amortization, impairment and restructuring was $107.2 million, a decrease of $9.0 million relative to the prior year. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating income before depreciation, amortization, impairment and restructuring declined $5.4 million (4.7%).

Revenue for the nine months ended May 31, 2013 was $582.3 million, a decrease of $59.5 million (9.3%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $51.3 million (12.7%) with the largest declines occurring in the classified and national advertising categories. Print circulation revenue decreased $11.4 million (7.2%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $3.1 million (4.6%) relative to the same period in the prior year as a result of increases in local digital advertising revenue partially offset by declines in digital classified revenue.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $50.5 million (9.6%) relative to the same period in the prior year. Expense reductions occurred in all operating expense categories including compensation, newsprint, distribution and other operating expenses. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating expenses excluding depreciation, amortization, impairment and restructuring declined $54.1 million (10.2%).

Business Transformation Initiatives

As announced in July 2012, the Company is implementing a three-year transformation program that is targeted to result in operating cost savings of 15%-20%. During the three months ended May 31, 2013, the Company implemented transformation initiatives which are expected to result in net annualized cost savings of approximately $4 million. This brings total net annualized cost savings, since the beginning of the program, to approximately $62 million.

Management Commentary

"The transformation of Postmedia continued this quarter with the roll out of our paid content model to all of our newspapers, traction on our cost savings initiatives and the completion of our organizational redesign to a functional operating model," said Paul Godfrey, President and Chief Executive Officer. "We will continue on this path, transforming a traditional media company into one that leverages future opportunities with a structure that supports a new model."

Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.

Additional Information

Additional information, including financial statements and management's discussion and analysis can be found on the Company's website at www.postmedia.com/investors/financial-reports, on SEDAR at www.sedar.comor on the website maintained by the U.S. Securities and Exchange Commission (the "SEC") at www.sec.gov.

About Postmedia Network Canada Corp.

Postmedia Network Canada Corp. (TSX:PNC.A, PNC.B) is the holding company that owns Postmedia Network Inc., the largest publisher by circulation of paid English-language daily newspapers in Canada, representing some of the country's oldest and best known media brands. Reaching millions of Canadians every week, Postmedia engages readers and offers advertisers and marketers integrated solutions to effectively reach target audiences through a variety of print, online, digital, and mobile platforms.

Forward-Looking Information

This news release may include information that is "forward-looking information" under applicable Canadian securities laws and "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. The Company has tried, where possible, to identify such information and statements by using words such as "believe," "expect," "intend," "estimate," "anticipate," "may," "will," "could," "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. Forward-looking statements in this news release include statements with respect to the implementation and results of the Company's transformation initiatives, the realization of anticipated cost savings, the impact of the Company's organizational redesign and the ability of the Company to leverage future opportunities. 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 other newspapers and alternative forms of media; the effect of economic conditions on advertising revenue; the ability of the Company to build out its digital media and online businesses; the failure to maintain current print and online newspaper readership and circulation levels; possible damage to the reputation of the Company's brands or trademarks; possible labor disruptions; possible environmental liabilities, litigation and pension plan obligations; fluctuations in foreign exchange rates and the prices of newsprint and other commodities. For a complete list of our risk factors please refer to the section entitled "Risk Factors" contained in our interim management's discussion and analysis for the three and nine months ended May 31, 2013 and 2012 and our annual management's discussion and analysis for the years ended August 31, 2012 and 2011. Although the Company bases 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 the Company operates, 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, the Company 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.

 

Postmedia Network Canada Corp.

Consolidated Statements of Operations

(UNAUDITED)

 
(In thousands of Canadian dollars, except per share amounts)

For the three months

ended May, 31

     

For the nine months

ended May 31

  2013 2012       2013 2012
     
Revenues
Print advertising 113,395 131,077 351,579 402,830
Print circulation 49,401 52,484 146,540 157,954
Digital 24,093 23,584 70,198 67,139
Other 4,895 4,876       13,957 13,830
Total revenues 191,784 212,021 582,274 641,753
Expenses
Compensation 82,956 89,469 247,076 266,766
Newsprint 10,147 13,644 32,111 40,911
Distribution 27,542 31,456 82,099 94,654
Other operating 38,268 41,224       113,826 123,259

Operating income before depreciation, amortization, impairment and

restructuring

32,871

36,228

107,162

116,163

Depreciation 6,706 6,585 20,336 19,564
Amortization 11,111 10,828 32,679 32,685
Impairments 93,883 - 93,883 -
Restructuring and other items 16,814 14,730       23,425 22,341
Operating income (loss) (95,643) 4,085 (63,161) 41,573
Interest expense 14,994 16,084 46,767 47,720
Net financing expense related to employee benefit plans 383 975 1,149 2,925
(Gain) loss on disposal of property and equipment and intangible assets (202) 43 (989) 78
(Gain) loss on derivative financial instruments 760 (9,836) 2,650 (15,260)
Foreign currency exchange losses 588 8,956       5,286 15,034
Loss before income taxes (112,166) (12,137) (118,024) (8,924)
Provision for income taxes - -       - -
Net loss from continuing operations (112,166) (12,137) (118,024) (8,924)
Net earnings from discontinued operations, net of tax of nil - -       - 14,053
Net earnings (loss) attributable to equity holders of the Company (112,166) (12,137) (118,024) 5,129
 
               
Loss per share from continuing operations
Basic $(2.79) $(0.30) $(2.93) $(0.22)
Diluted $(2.79) $(0.30)       $(2.93) $(0.22)
Earnings per share from discontinued operations
Basic - - - $0.35
Diluted - -       - $0.35
Earnings (loss) per share attributable to equity holders of the Company
Basic $(2.79) $(0.30) $(2.93) $0.13
Diluted $(2.79) $(0.30)       $(2.93) $0.13
 

 

Postmedia Network Canada Corp.

Consolidated Statements of Financial Position

(UNAUDITED)

 
(In thousands of Canadian dollars) As at

May 31, 2013

      As at

August 31, 2012

     
Assets
Current Assets
Cash 56,480 22,189
Accounts receivable 91,082 90,923
Inventory 3,072 3,829
Prepaid expenses and other assets 9,291       10,258
Total current assets 159,925 127,199
Non-Current Assets
Property and equipment 234,255 267,491
Asset held-for-sale 10,530 23,139
Derivative financial instruments 21,458 24,108
Other assets 936 1,549
Intangible assets 334,915 377,862
Goodwill 149,600       223,500
Total assets 911,619       1,044,848
 
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities 77,575 65,268
Provisions 32,895 29,888
Deferred revenue 24,806 25,915
Current portion of derivative financial instruments 2,279 6,069
Current portion of long-term debt 12,500       32,153
Total current liabilities 150,055 159,293
Non-Current Liabilities
Long-term debt 470,194 467,749
Derivative financial instruments - 12,369
Other non-current liabilities 162,352 169,413
Provisions 874 1,588
Deferred income taxes 681       681
Total liabilities 784,156       811,093
 
Equity
Capital stock 371,132 371,132
Contributed surplus 8,695 7,888
Deficit (246,775) (139,357)
Accumulated other comprehensive loss (5,589)       (5,908)
Total equity 127,463       233,755
Total liabilities and equity 911,619       1,044,848
 

 

Postmedia Network Canada Corp.

Consolidated Statements of Cash Flows

(UNAUDITED)

 
(In thousands of Canadian dollars)

For the three months

ended May 31,

     

For the nine months

ended May 31,

  2013 2012       2013 2012
     
Cash Generated (Utilized) by:
Operating Activities
Net earnings (loss) attributable to equity holders of the Company (112,166) (12,137) (118,024) 5,129
Items not affecting cash:
Depreciation 6,706 6,585 20,336 19,727
Amortization 11,111 10,828 32,679 32,740
Impairments 93,883 - 93,883 -
(Gain) loss on derivative financial instruments 760 (10,726) 2,650 (18,741)
Non-cash interest 672 1,467 3,470 10,178
(Gain) loss on disposal of property and equipment and intangible assets (202) 43 (989) 78
Non-cash foreign currency exchange losses 550 9,016 5,228 14,218
Gain on sale of discontinued operations - - - (17,109)

Share-based compensation plans and other long-term incentive plan

expense (recovery)

214

(1,380)

1,149

(2,463)

Net financing expense relating to employee benefit plans 383 975 1,149 2,932
Non-cash compensation expense of employee benefit plans 1,078 - 2,130 -
Employee benefit funding in excess of compensation expense - (2,741) - (15,588)

Settlement of foreign currency interest rate swap designated as a cash flow

hedge

-

-

(8,976)

-

Net change in non-cash operating accounts 12,986 22,116       15,224 18,912
Cash flows from operating activities 15,975 24,046       49,909 50,013
 
Investing Activities
Net proceeds received on the sale of discontinued operations - 1,450 - 87,340

Net proceeds from the sale of property and equipment, intangible assets and


Increase your money and finance knowledge from home

Portfolio Basics

What are stocks? Learn how to start investing.

View Course »

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum