Postmedia Network Reports First Quarter Results

Net earnings up by $22.3 million in the quarter due to gains on transaction with Glacier Media Inc., reduced restructuring expenses and focus on cost control. Downward pressure on national advertising contributed to reduced revenues in the quarter

Postmedia Network Canada Corp. ("Postmedia" or "the Company") today released financial information for the first quarter ended November 30, 2011.

First Quarter Operating Results

Net earnings in the quarter ended November 30, 2011 were $28.3 million compared to $6.0 million in the same period in the prior year. The increase was due to an increase in net earnings from continuing operations as well as the gain resulting from the transaction with affiliates of Glacier Media Inc. ("Glacier") announced previously.

Net earnings from continuing operations in the quarter ended November 30, 2011 were $14.3 million, an increase of $9.7 million compared to the same period in the prior year.

Operating income for the quarter ended November 30, 2011 increased $4.8 million relative to the prior year due to decreases in restructuring of operations and other items of $18.3 million offset by declines in operating income before depreciation, amortization and restructuring.

For the quarter ended November 30, 2011, operating income before depreciation, amortization and restructuring was $54.6 million, a decrease of $14.5 million, or 21.0% relative to the same period in the prior year. The decrease was due to revenue declines partially offset by lower operating costs.

Revenue for the quarter ended November 30, 2011 totaled $231.1 million, a decrease of $23.0 million (down 9%) relative to the same period in the prior year. This decline was primarily due to a decrease in print advertising revenue of $19.8 million (down 11.7%) with approximately 75% of the print advertising decline due to weakness in the national category. Print circulation revenue declined $1.8 million (down 3.1%) and other revenue declined $1.1 million due to the previously reported loss of a commercial print contract in the first quarter of the prior fiscal year. Digital revenue was also affected by weakness in national advertising and was down $0.3 million or 1.4%, relative to the same period in the prior year.

Operating expenses excluding depreciation, amortization and restructuring and other items for the quarter ended November 30, 2011 declined $8.5 million or 4.6% relative to the same period in the prior year. This decrease was largely due to cost savings achieved through various restructuring and cost containment initiatives implemented during fiscal 2011.

Transaction with Glacier Media Inc.

On November 30, 2011, the Company completed the sale to Glacier of three daily newspapers (the Times Colonist, Nanaimo Daily News and Alberni Valley Times) and twenty British-Columbia based community publications for gross proceeds of $86.5 million. The proceeds of the transaction have been used to repay a portion of the US$ term loan. As a result of this transaction, the results of the newspapers that were sold are reported as earnings from discontinued operations for the three months ended November 30, 2011 and November 30, 2010.

Debt Repayment

For the quarter ended November 30, 2011, Postmedia made total debt repayments of $90.8 million (US$88.9 million) related to its US$ term loan, inclusive of the gross proceeds from the Glacier transaction. After giving effect to these payments, outstanding long term debt at November 30, 2011 consisted of US$251 million under our term loan credit facilities and US$275 million of 12.5% senior secured notes.

Management Commentary

"In this first quarter of our second year, we continue to see the effects of a slower than expected economic recovery," said Paul Godfrey, President and CEO. "Some of our largest national advertisers have scaled back their spending and these cuts are being felt across our industry. In the near term, our priorities remain aggressive control of operating expenses and capital expenditures, and use of available cash flow to repay debt."

Transition to International Financial Reporting Standards ("IFRS")

Postmedia adopted IFRS on September 1, 2011. The Company's condensed consolidated financial statements for the three months ended November 30, 2011 have therefore been prepared in accordance with IFRS and comparative financial information for the three months ended November 30, 2010 has been restated.

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 press 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. 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; the realization of anticipated cost savings; 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 annual management's discussion and analysis for the year ended August 31, 2011 and the period ended August 31, 2010. 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. Operating Results for the three months ended November 30, 2011 and November 30, 2010
	(In thousands of Canadian dollars)		Q1 F2012		Q1 F2011		Q1 F2012 to Q1 F2011 Variance Favourable (Unfavourable)
	Revenues
	Print advertising		149,368		169,197		(19,829)
	Print circulation		54,269		56,030		(1,761)
	Digital		22,622		22,937		(315)
	Other		4,831		5,935		(1,104)
	Total revenue		231,090		254,099		(23,009)
	Expenses
	Compensation		87,121		96,886		9,765
	Newsprint		14,634		16,654		2,020
	Distribution		32,705		32,819		114
	Other operating		41,983		38,558		(3,425)
	Operating income before depreciation, amortization and restructuring		54,647		69,182		(14,535)
	Depreciation		6,462		7,140		678
	Amortization		11,021		11,464		443
	Restructuring and other items		2,982		21,239		18,257
	Operating income		34,182		29,339		4,843
	Interest expense		16,837		19,341		2,504
	Net financing expense related to employee benefit plans		975		844		(131)
	(Gain) loss on derivative financial instruments		(10,040)		12,950		22,990
	Foreign currency exchange (gains) losses		12,132		(10,157)		(22,289)
	Acquisition costs		-		1,787		1,787
	Earnings before income taxes		14,278		4,574		9,704
	Provision for income taxes		-		-		-
	Net earnings from continuing operations		14,278		4,574		9,704
	Net earnings from discontinued operations, net of tax of nil		14,053		1,431		12,622
	Net earnings attributable to equity holders of the Company		28,331		6,005		22,326

Postmedia Network Canada Corp.
Media Contact
Phyllise Gelfand
Vice President, Communications
[phone]
[e-mail]
or
Investor Contact
Doug Lamb
Executive Vice President and Chief Financial Officer
[phone]
[e-mail]