Postmedia Network Reports Fourth Quarter Results

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Postmedia Network Reports Fourth Quarter Results

TORONTO--(BUSINESS WIRE)-- Postmedia Network Canada Corp. ("Postmedia" or the "Company") today released financial information for the fourth quarter and year ended August 31, 2012.

Fourth Quarter Operating Results


Net loss in the quarter ended August 31, 2012 was $28.4 million compared to a net loss of $0.4 million in the same period in the prior year. Contributing to the larger loss was a non-cash loss on debt repayment of $9.2 million relating to unamortized financing fees as a result of the refinancing of the Company's term loan in August, increased restructuring costs, and lower revenue partially offset by reduced operating costs.

Net loss from continuing operations in the quarter was $28.4 million compared to a net loss from continuing operations of $0.8 million in the same period in the prior year.

An operating loss of $2.3 million in the quarter compares with operating income of $12.7 million in the same period in the prior year. The decrease was due to an increase in restructuring expenses as a result of the business transformation initiatives announced previously and a decline in revenue, partially offset by lower operating costs.

Operating income before depreciation, amortization and restructuring of $28.2 million in the quarter represents a decrease of $5.4 million, relative to the same period in the prior year.

Revenue for the quarter totaled $190.1 million, a decrease of $12.0 million (or 5.9%) relative to the same period in the prior year. The decrease in the current quarter was primarily due to a decrease in print advertising revenue of $10.1 million (or 8.3%) with the largest declines occurring in the classified category. Print circulation revenue decreased $3.2 million (or 5.9%) and digital revenue increased $0.7 million (or 3.5%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization and restructuring in the quarter decreased $6.7 million (or 4.0%) relative to the same period in the prior year. Operating expenses decreased across all categories other than restructuring.

Full Year Operating Results

Net loss in the year ended August 31, 2012 was $23.2 million compared to a net loss of $9.6 million in the prior year. The increased net loss is due to the increase in net loss from continuing operations partially offset by the gain on sale of the Times Colonist in Victoria and British Columbia based community newspaper assets.

Net loss from continuing operations was $37.3 million, compared to a net loss from continuing operations of $12.2 million in the prior year. The increased net loss from continuing operations is primarily the result of decreased operating income due to weakness in print advertising revenue.

Operating income before depreciation, amortization and restructuring in the year of $144.3 million represents a decrease of $44.9 million relative to the prior year due to a decrease in revenue partially offset by lower operating expenses.

Revenue for the year was $831.9 million, a decrease of $67.0 million (or 7.5%) relative to the prior year. Print advertising revenue decreased $58.9 million (or 10.3%) with the most significant declines occurring in the national advertising category. Print circulation revenue decreased $10.1 million (or 4.6%) with volume declines being partially offset by a higher price per copy. Digital revenue increased $2.0 million as gains in local digital advertising and Infomart revenue more than offset the weakness in national digital advertising revenue.

Total operating expenses excluding depreciation, amortization and restructuring in the year decreased $22.1 million (or 3.1%) relative to the prior year. Expense reductions were due to lower compensation, newsprint and distribution expenses partially offset by increases in other operating expenses.

Business Transformation Initiatives

Since its formation in July 2010, Postmedia has implemented a series of restructuring initiatives which have significantly reduced operating costs. During the fourth quarter of fiscal 2012, the Company implemented a number of new initiatives which are expected to yield net annualized cost savings of approximately $37 million. These savings represent the first phase of a three-year business transformation program that, in total, is targeted to reduce operating costs by 15% to 20%.

Refinancing

On August 16, 2012, the Company issued $250.0 million in aggregate principal amount of 8.25% Senior Secured Notes due 2017. The proceeds from the issuance were used to repay amounts then outstanding on the Term Loan Facility of $238.3 million (US$240.0 million), accrued and unpaid interest of $3.4 million, and transaction fees of $6.6 million. In conjunction with the refinancing, we settled the foreign currency interest rate swaps associated with the Term Loan Facility for cash consideration of $9.4 million.

Closing of the sale of 1450 Don Mills Road, Toronto

On June 26, 2012, Postmedia announced that it had entered into an agreement of sale and purchase with The Rose & Thistle Group Ltd. for the sale of the Company's headquarters at a purchase price of $24 million. The transaction closed October 12, 2012 and Postmedia will apply the net proceeds of approximately $23.2 million to redeem a portion of its 8.25% Senior Secured Notes due 2017 at par in accordance with the provisions of the Senior Secured Notes indenture.

Management Commentary

"We are very pleased with the progress we made in the most recent quarter. In addition to the successful launch of the next phase of our transformation program, we completed the refinancing of our term loan, sold our head office building in Toronto and expanded our content metering system to new markets," said Paul Godfrey, President and Chief Executive Officer. "Although the revenue environment remains challenging we are confident we are taking the necessary steps to reposition the Company to compete effectively in an increasingly digital world."

Also announced today, David Emerson has decided not to seek re-election as a director at the Company's Fiscal 2012 meeting of shareholders. "We thank David, one of Postmedia's founding directors, for his tremendous contributions," said Ron Osborne, Chairman. "His insight and experience have been greatly valued by management and fellow board members."

Transition to International Financial Reporting Standards ("IFRS")

Postmedia adopted IFRS on September 1, 2011 and accordingly, the Company's annual audited consolidated financial statements for the years ended August 31, 2012 and August 31, 2011 are the first annual consolidated financial statements prepared under IFRS.

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. 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, statements regarding the implementation and results of the Company's transformation initiatives, including the realization of anticipated cost savings; 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 annual management's discussion and analysis for the years ended August 31, 2012 and August 31, 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.
Operating Results for the three months ended August 31, 2012 and 2011

(In thousands of Canadian dollars) 

 

 

 


Q4 F2012

 

 

 

 


Q4 F2011

 Q4 F2012 to

Q4 F2011

Variance
Favourable

(Unfavourable)

 

Revenues

Print advertising112,157122,283(10,126)
Print circulation51,22354,417(3,194)
Digital21,93721,200737
Other4,8074,251556

Total revenues

190,124202,151(12,027)

Expenses

Compensation81,36784,7453,378
Newsprint11,71712,8851,168
Distribution29,21830,9261,708
Other operating39,64940,062413

Operating income before depreciation, amortization and restructuring

28,173

33,533

(5,360)

Depreciation6,5936,67178
Amortization10,88111,227346
Restructuring and other items13,0142,971(10,043)
Operating income (loss)(2,315)12,664(14,979)
Interest expense17,72616,456(1,270)
Loss on debt repayment9,178-(9,178)
Net financing expense related to employee benefit plans

975

440

(535)

Loss on disposal of property and equipment and intangible assets

180

61

(119)

(Gain) loss on derivative financial instruments

6,628

(8,059)

(14,687)

Foreign currency exchange (gains) losses(8,651)4,60413,255
Loss before income taxes

(28,351)

(838)(27,513)
Provision for income taxes---
Net loss from continuing operations(28,351)(838)(27,513)
Net earnings from discontinued operations, net of tax of nil

-

487

(487)

Net loss attributable to equity holders of the Company

(28,351)

(351)

(28,000)


 

Postmedia Network Canada Corp.
Operating Results for the years ended August 31, 2012 and 2011

(In thousands of Canadian dollars) 

 

 

 


F2012

 

 

 

 


F2011

 F2012 to

F2011

Variance
Favourable

(Unfavourable)

 
Revenues
Print advertising514,987573,920(58,933)
Print circulation209,177219,296(10,119)
Digital89,07687,0502,026
Other18,63718,62215
Total revenues831,877898,888(67,011)
Expenses
Compensation348,133368,51620,383
Newsprint52,62857,4234,795
Distribution123,872126,8252,953
Other operating162,908156,922(5,986)
Operating income before depreciation, amortization and restructuring

144,336

189,202

(44,866)

Depreciation26,15727,015858
Amortization43,56645,2091,643
Restructuring and other items35,35538,0112,656
Operating income39,25878,967(39,709)
Interest expense65,44672,2846,838
Loss on debt repayment9,17811,0181,840
Net financing expense related to employee benefit plans

3,900

2,971

(929)

Loss on disposal of property and equipment and intangible assets

258

176

(82)

(Gain) loss on derivative financial instruments

(8,632)

21,414

30,046

Foreign currency exchange (gains) losses6,383(17,959)(24,342)
Acquisition costs-1,2171,217
Loss before income taxes(37,275)(12,154)(25,121)
Provision for income taxes---
Net loss from continuing operations(37,275)(12,154)(25,121)
Net earnings from discontinued operations, net of tax of nil

14,053

2,565

11,488

Net loss attributable to equity holders of the Company

(23,222)

(9,589)

(13,633)



Postmedia Network Canada Corp.
Media Contact
Phyllise Gelfand
Vice President, Communications
(416) 442-2936
pgelfand@postmedia.com
or
Investor Contact
Doug Lamb
Executive Vice President and Chief Financial Officer
(416) 383-2325
dlamb@postmedia.com

KEYWORDS:   North America  Canada

INDUSTRY KEYWORDS:

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