Postmedia Network Reports Fourth Quarter Results Business Wire TORONTO -- October 24, 2013 Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months and year ended August 31, 2013. Fourth Quarter Operating Results Net loss in the quarter ended August 31, 2013 was $35.8 million compared to a net loss of $28.4 million in the same period in the prior year. The increase in net loss was primarily the result of an $11.6 million increase in operating losses, partially offset by a reduction in expenses related to long-term debt and derivative financial instruments. Operating loss in the quarter was $13.9 million as compared to an operating loss of $2.3 million in the same period in the prior year primarily as a result of revenue declines of $20.8 million and a non-cash impairment charge of $6.1 million, partially offset by decreases in operating expenses. Operating income before depreciation, amortization, impairment and restructuring of $23.2 million in the quarter represents a decrease of $4.9 million (17.5%), relative to the same period in the prior year. Revenue for the quarter was $169.3 million, a decrease of $20.8 million (10.9%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $18.2 million (16.2%) with the declines occurring across all categories. Print circulation revenue decreased $1.9 million (3.6%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue decreased $0.5 million (2.4%) relative to the same period in the prior year. Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $15.9 million (9.8%) 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. In August 2013, the Company entered into a print outsourcing agreement for the production of the Calgary Herald newspaper commencing in November, 2013. In addition, on September 9, 2013, the Company announced its intention to sell two of its real estate holdings: a printing facility in Surrey, BC and the Calgary Herald building in Alberta. Full Year Operating Results Net loss in the year ended August 31, 2013 was $153.8 million compared to a net loss of $23.2 million in the prior year. The decrease was primarily the result of non-cash impairment charges of $100.0 million. 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 prior year. Net loss from continuing operations, which includes non-cash impairment charges of $100.0 million, was $153.8 million, compared to a net loss of $37.3 million in the prior year. Operating loss was $77.0 million as compared to operating income of $39.3 million in the prior year primarily as a result of non-cash impairment charges. Operating income before depreciation, amortization, impairment and restructuring was $130.4 million, a decrease of $13.9 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 $10.2 million (7.2%). Revenue for the twelve months ended August 31, 2013 was $751.6 million, a decrease of $80.3 million (9.7%) relative to the prior year. This decrease was primarily due to a decline in print advertising revenue of $69.4 million (13.5%) with the largest declines occurring in the classified and national advertising categories. Print circulation revenue decreased $13.3 million (6.3%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $2.5 million (2.8%) relative to 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 $66.4 million (9.7%) relative to 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 $70.2 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 August 31, 2013, the Company implemented transformation initiatives which are expected to result in net annualized cost savings of approximately $20 million. This brings total net annualized cost savings, since the beginning of the program, to approximately $82 million representing approximately 12% of operating costs at the time the program was announced. Management Commentary “This past year was one of accelerated transformation for our industry and our Company,” said Paul Godfrey, President and Chief Executive Officer. “We have changed the overall design of our organization from local silos to a functional reporting structure, had important conversations with various stakeholders from unions and employees to advertisers and readers, and made progress rationalizing our real estate portfolio. With significant progress made on our structure, our teams are better equipped to focus on differentiated product offerings, deepening relationships with our audiences and effectively monetizing these offerings and insights.” Also announced today that with Paul Godfrey acting as Interim Chairman, Peter Sharpe has been appointed to the role of Lead Director of the boards of both the Company and its subsidiary, Postmedia Network Inc. Mr. Sharpe has served as a Director of both boards since the Company’s formation. Mr. Sharpe served as President and CEO of Cadillac Fairview Corporation until his retirement in 2010, having served with the company for over 25 years. Mr. Sharpe is currently a Director of Morguard Corporation, First Industrial REIT (US), and Allied Property REIT. Mr. Sharpe is also a past chairman and current trustee of the International Council of Shopping Centers. 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.com or 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; 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; not being able to refinance our ABL Facility in July, 2014 on attractive terms or at all; 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, 2013, 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 news 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 For the three months For the years dollars, except per share ended August, 31 ended August 31 amounts) 2013 2012 2013 2012 Revenues Print advertising 93,968 112,157 445,547 514,987 Print circulation 49,359 51,223 195,899 209,177 Digital 21,408 21,937 91,606 89,076 Other 4,574 4,807 18,531 18,637 Total revenues 169,309 190,124 751,583 831,877 Expenses Compensation 73,673 81,367 320,749 348,133 Newsprint 8,791 11,717 40,902 52,628 Distribution 25,806 29,218 107,905 123,872 Other operating 37,800 39,649 151,626 162,908 Operating income before depreciation, amortization, impairment and restructuring 23,239 28,173 130,401 144,336 Depreciation 9,613 6,593 29,949 26,157 Amortization 10,646 10,881 43,325 43,566 Impairments 6,100 - 99,983 - Restructuring and other items 10,746 13,014 34,171 35,355 Operating income (loss) (13,866) (2,315) (77,027) 39,258 Interest expense 15,133 17,726 61,900 65,446 Loss on debt prepayment - 9,178 - 9,178 Net financing expense related to 387 975 1,536 3,900 employee benefit plans (Gain) loss on disposal of property and equipment and (16) 180 (1,005) 258 intangible assets (Gain) loss on derivative 4,656 6,628 7,306 (8,632) financial instruments Foreign currency exchange 1,779 (8,651) 7,065 6,383 (gains) losses Loss before income taxes (35,805) (28,351) (153,829) (37,275) Provision for income taxes - - - - Net loss from continuing (35,805) (28,351) (153,829) (37,275) operations Net earnings from discontinued - - - 14,053 operations, net of tax of nil Net loss attributable to equity (35,805) (28,351) (153,829) (23,222) holders of the Company Loss per share from continuing operations Basic $(0.89) $(0.70) $(3.82) $(0.92) Diluted $(0.89) $(0.70) $(3.82) $(0.92) Earnings per share from discontinued operations Basic - - - $0.35 Diluted - - - $0.35 Loss per share attributable to equity holders of the Company Basic $(0.89) $(0.70) $(3.82) $(0.58) Diluted $(0.89) $(0.70) $(3.82) $(0.58) Postmedia Network Canada Corp. Consolidated Statements of Financial Position (UNAUDITED) As at As at (In thousands of Canadian dollars) August 31, 2013 August 31, 2012 Assets Current Assets Cash 40,812 22,189 Accounts receivable 82,615 90,923 Inventory 3,234 3,829 Current portion of derivative financial 1,411 - instruments Prepaid expenses and other assets 10,128 10,258 Total current assets 138,200 127,199 Non-Current Assets Property and equipment 223,173 267,491 Asset held-for-sale 10,530 23,139 Derivative financial instruments 16,802 24,108 Other assets 732 1,549 Intangible assets 323,760 377,862 Goodwill 149,600 223,500 Total assets 862,797 1,044,848 Liabilities and Equity Current Liabilities Accounts payable and accrued liabilities 67,618 65,268 Provisions 26,097 29,888 Deferred revenue 24,645 25,915 Current portion of derivative financial - 6,069 instruments Current portion of long-term debt 12,500 32,153 Total current liabilities 130,860 159,293 Non-Current Liabilities Long-term debt 474,380 467,749 Derivative financial instruments - 12,369 Other non-current liabilities 120,142 169,413 Provisions 826 1,588 Deferred income taxes 681 681 Total liabilities 726,889 811,093 Equity Capital stock 371,132 371,132 Contributed surplus 9,020 7,888 Deficit (240,250) (139,357) Accumulated other comprehensive loss (3,994) (5,908) Total equity 135,908 233,755 Total liabilities and equity 862,797 1,044,848 Postmedia Network Canada Corp. Consolidated Statements of Cash Flows (UNAUDITED) (In thousands of Canadian For the three months For the years dollars) ended August 31, ended August 31, 2013 2012 2013 2012 Cash Generated (Utilized) by: Operating Activities Net loss attributable to equity (35,805) (28,351) (153,829) (23,222) holders of the Company Items not affecting cash: Depreciation 9,613 6,593 29,949 26,320 Amortization 10,646 10,881 43,325 43,621 Impairments 6,100 - 99,983 - (Gain) loss on derivative 4,656 (3,673) 7,306 (22,414) financial instruments Non-cash interest 644 2,653 4,114 12,831 Non-cash loss on debt repayment - 9,178 - 9,178 (Gain) loss on disposal of property and equipment and (16) 180 (1,005) 258 intangible assets Non-cash foreign currency 1,651 (8,497) 6,879 5,721 exchange (gains) losses Gain on sale of discontinued - - - (17,109) operations Share-based compensation plans and other long-term incentive 237 4 1,386 (2,459) plan expense (recovery) Net financing expense relating 387 975 1,536 3,907 to employee benefit plans Non-cash compensation expense - - 2,112 - of employee benefit plans Employee benefit funding in (18) (9,268) - (24,856) excess of compensation expense Settlement of foreign currency interest rate swap designated - - (8,976) - as a cash flow hedge Net change in non-cash (9,657) 11,853 5,567 30,765 operating accounts Cash flows from operating (11,562) (7,472) 38,347 42,541 activities Investing Activities Net proceeds received on the - - - 87,340 sale of discontinued operations Net proceeds from the sale of property and equipment, 41 - 25,925 4 intangible assets and asset held-for-sale Additions to property and (2,152) (2,592) (7,566) (8,227) equipment Additions to intangible assets (1,995) (1,573) (5,932) (6,732) Cash flows from investing (4,106) (4,165) 12,427 72,385 activities Financing activities Proceeds from the issuance of - 250,000 - 250,000 long-term debt Repayment of long-term debt on - (238,268) - (238,268) refinancing Repayment of long-term debt - - (32,040) (108,310) Debt issuance costs - (6,605) (111) (6,642) Cash flows from financing - 5,127 (32,151) (103,220) activities Net change in cash (15,668) (6,510) 18,623 11,706 Cash at beginning of period 56,480 28,699 22,189 10,483 Cash at end of period 40,812 22,189 40,812 22,189 Supplemental disclosure of operating cash flows Interest paid 19,278 24,170 53,173 60,080 Income taxes paid - - - - Contact: Postmedia Network Canada Corp. Media Contact Phyllise Gelfand, (416) 442-2936 Vice President, Communications firstname.lastname@example.org or Investor Contact Doug Lamb, (416) 383-2325 Executive Vice President and Chief Financial Officer email@example.com
Postmedia Network Reports Fourth Quarter Results
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