POSTMEDIA NETWORK CANADA CORP January 8, 2015 (TORONTO) - Postmedia Network Canada Corp. ("Postmedia" or the "Company")
today released financial information for the three months ended November 30, 2014.
First Quarter Operating ResultsNet loss in the quarter ended November 30, 2014 was $10.3 million compared to a net loss of $11.8 million in the same period in the prior year.
Operating income in the quarter was $18.0 million as compared to operating income of $2.3 million in the same period in the prior year. The improvement in operating income was primarily due to lower restructuring costs.
Operating income before depreciation, amortization, impairment and restructuring of $45.6 million in the quarter represents a decrease of $0.4 million (0.8%), relative to the same period in the prior year. The decrease was the result of revenue declines of $24.5 million, offset by decreases in operating expenses of $24.1 million. The decrease in operating expenses was partially due to a compensation expense recovery totaling $13.8 million related to the company's Ontario Interactive Digital Media Tax Credit claim.
Revenue for the quarter was $169.5 million compared to $194.0 million in the prior year, a decrease of
12.6%. This decrease was primarily due to a decline in print advertising revenue of $23.5 million (20.1%) with the declines occurring across all categories, including national, local and insert advertising. Print circulation revenue decreased $2.2 million (4.3%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $0.7 million (3.0%) relative to the same period in the prior year due to increases in local digital advertising and digital subscription revenue partially offset by declines in digital classified advertising.
Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased
$24.1 million (16.3%) relative to the same period in the prior year. The decrease includes the claim for the Ontario Interactive Digital Media Tax credit as it primarily relates to previously recognized compensation expense. Excluding the recovery, operating expenses excluding depreciation, amortization, impairment and restructuring decreased $10.3 million, or 6.9%, as compared to the same period in the prior year. Expense reductions occurred in most operating expense categories including compensation, newsprint, distribution and other operating expenses. Production expenses increased as a result of production of the Montreal Gazette and Calgary Herald being outsourced in August 2014 and November 2013, respectively.
Business Transformation InitiativesAs 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 November 30,
2014, the Company implemented transformation initiatives which are expected to result in net
annualized cost savings of approximately $3 million. This brings total net annualized cost savings, since
the beginning of the program, to approximately $112 million representing approximately 16% of operating costs at the time the program was announced.
On October 31, 2014, the Company completed the sale of the Montreal Gazette production facility. The net proceeds of approximately $12.4M will be used to reduce the size of the rights offering of subscription receipts to be conducted by Postmedia in connection with the equity financing of the Company's acquisition of Sun Media Corporation's English language newspapers, speciality publications and digital properties.
Management Commentary"Great work by teams across the organization led to the launch of reimagined products on four
platforms in Montreal and Calgary this quarter," said Paul Godfrey, President and CEO. "Management's
significant focus now is on working through the regulatory approval process with the Competition Bureau for the Sun Media acquisition, working on the integration plan and, subject to regulatory approval, ultimately welcoming new brands and new audiences into the fold."
Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.
Additional InformationAdditional 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 InformationThis 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 acquisition of certain Sun Media publications, the review of the transaction by the Competition Bureau, the proposed debt and equity financing for the transaction and the anticipated benefits to Postmedia from the transaction and financings. 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: the possibility that the transaction, including the related financings, will not close (including, without limitation, as a result of the failure to gain regulatory approvals); the risks associated with the possible failure to realize the
anticipated synergies in integrating the operations of the Sun Media publications with the operations of Postmedia; competition from digital and other forms of media; the effect of economic conditions and structural changes in the industry 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 years ended August 31, 2014, 2013 and 2012. 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.
For more information: Media ContactPhyllise Gelfand
Vice President, Communications (416) 442-2936 pgelfand@postmedia.com
Investor ContactDoug Lamb
Executive Vice President and Chief Financial Officer
(416) 383-2325 dlamb@postmedia.com
Postmedia Network Canada Corp. Consolidated Statements of Operations (UNAUDITED)
(In thousands of Canadian dollars, except per share amounts) For the three months ended
November 30
2014 2013
Revenues
Print advertising 93,127 116,605
Print circulation 47,434 49,588
Digital 24,269 23,554
Other 4,684 4,231
Total revenues 169,514 193,978
Expenses
Compensation 54,149 73,958
Newsprint 7,175 9,120
Distribution 24,464 26,308
Production 11,362 9,102
Other operating 26,742 29,479
Operating income before depreciation, amortization, impairment
and restructuring 45,622 46,011
Depreciation 12,032 13,227
Amortization 9,535 10,412
Impairment 1,843 - Restructuring and other items 4,224 20,113
Operating income 17,988 2,259
Interest expense 15,311 15,733
Net financing expense related to employee benefit plans 1,428 1,404
Gain on disposal of property and equipment and intangible assets (733) (14) Gain on derivative financial instruments (3,235) (4,054) Foreign currency exchange losses 15,472 995
Loss before income taxes (10,255) (11,805) Provision for income taxes - - Net loss attributable to equity holders of the Company (10,255) (11,805)
Loss per share attributable to equity holders of the Company
Basic $(0.26) $(0.29) Diluted $(0.26) $(0.29)
(In thousands of Canadian dollars) As at
November 30,
2014
As at
August 31,
2014
Assets
Current Assets
Cash 20,230 30,490
Restricted cash 12,442 - Accounts receivable 100,398 64,871
Inventory 2,070 2,294
Prepaid expenses and other assets 10,933 9,888
Total current assets 146,073 107,543
Non-Current Assets
Property and equipment 144,799 155,007
Asset held-for-sale 8,687 22,246
Derivative financial instruments 21,627 18,392
Other assets 4,641 17
Intangible assets 278,388 287,789
Goodwill 149,600 149,600
Total assets 753,815 740,594
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities 71,570 59,073
Provisions 14,107 15,629
Deferred revenue 24,726 24,176
Current portion of long-term debt 12,500 12,500
Total current liabilities 122,903 111,378
Non-Current Liabilities
Long-term debt 483,516 473,800
Employee benefit obligations and other liabilities 136,578 143,157
Provisions 586 634
Deferred income taxes 681 681
Total liabilities 744,264 729,650
Equity
Capital stock 371,132 371,132
Contributed surplus 9,970 9,890
Deficit (371,551) (370,078)
Total equity 9,551 10,944
Total liabilities and equity 753,815 740,594
Postmedia Network Canada Corp. Consolidated Statements of Cash Flows (UNAUDITED)
(In thousands of Canadian dollars) For the three months ended
November 30
2014 2013
Cash Generated (Utilized) by: Operating Activities
Net loss attributable to equity holders of the Company (10,255) (11,805) Items not affecting cash:
Depreciation 12,032 13,227
Amortization 9,535 10,412
Impairment 1,843 - Gain on derivative financial instruments (3,235) (4,054) Non-cash interest 780 1,485
Gain on disposal of property and equipment and asset held-for-sale (733) (14) Non-cash foreign currency exchange losses 15,268 916
Share-based compensation plans and other long-term incentive plan expense 255 143
Net financing expense relating to employee benefit plans 1,428 1,404
Non-cash compensation expense of employee benefit plans 424 - Employee benefit funding in excess of compensation expense - (381) Net change in non-cash operating accounts (24,702) (7,110)
Cash flows from operating activities 2,640 4,223
Investing Activities
Net proceeds from the sale of property and equipment and asset held-for-sale 12,449 14
Purchases of property and equipment (1,824) (2,988) Purchases of intangible assets (134) (698)
Cash flows from (used in) investing activities 10,491 (3,672)
Financing activities
Repayment of long-term debt (6,250) (6,250) Restricted cash (12,442) - Debt and subscription receipts financing costs (2,170) - Rights offering financing costs (2,529) -
Cash flows used in financing activities (23,391) (6,250)
Net change in cash for the period (10,260) (5,699) Cash at beginning of period 30,490 40,812
Cash at end of period 20,230 35,113
Supplemental disclosure of operating cash flows | ||
Interest paid | 8,485 | 9,142 |
Income taxes paid | - | - |
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