Postmedia Network Reports First Quarter Results

Postmedia Network Reports First Quarter Results

TORONTO--(BUSINESS WIRE)-- Postmedia Network Canada Corp. ("Postmedia" or the "Company") today released financial information for the three months ended November 30, 2012.

First Quarter Operating Results
Net earnings in the quarter ended November 30, 2012 were $8.3 million compared to net earnings of $28.3 million in the same period in the prior year. The decrease in net earnings is primarily due to lower revenue partially offset by operating cost reductions and the gain on sale of the Times Colonist in Victoria and British Columbia based community newspaper assets in the same period in the prior year.


Operating income of $26.7 million in the quarter decreased $7.5 million compared to operating income of $34.2 million in the same period in the prior year.

Operating income before depreciation, amortization and restructuring of $49.1 million in the quarter represents a decrease of $5.5 million, relative to the same period in the prior year.

Revenue for the quarter totaled $211.7 million, a decrease of $19.4 million (8.4%) relative to the same period in the prior year. This decrease was primarily due to a decrease in print advertising revenue of $16.6 million (11.1%) with declines occurring in classified, national, retail and insert advertising categories. Print circulation revenue decreased $5.0 million (9.2%) due to declines in circulation volumes. Digital revenue increased $2.2 million (9.7%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization and restructuring decreased $13.9 million (7.9%) 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.

Business Transformation Initiatives
As previously announced, the Company is implementing a three-year transformation program that is targeted to result in operating cost savings of 15%-20%. As of November 30, 2012 the Company has implemented initiatives which will result in net annualized cost savings of approximately $42 million.

Redemption of Notes
On October 12, 2012, the Company completed the sale of 1450 Don Mills Road in Don Mills, Ontario for gross proceeds of approximately $24 million. On November 12, 2012, the net proceeds from the sale were used for a mandatory redemption of $23.2 million aggregate principal amount of 8.25% Senior Secured Notes due 2017 ("First-Lien Notes") at par in accordance with the terms and conditions of the First-Lien Notes indenture.

Management Commentary
"We are pleased with the progress of our transformation program and continued cost reductions remain a top priority," said Paul Godfrey, President and Chief Executive Officer. "Our revenue outlook remains challenging; however, we are confident we can continue to evolve as an industry leader in multi-platform product and audience development and continue to deliver solid results and innovative programs for advertisers and marketers."

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 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
For the three months ended November 30, 2012 and 2011
(UNAUDITED)

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

2012

2011

Revenues

Print advertising

132,741

149,368

Print circulation

49,276

54,269

Digital

24,813

22,622

Other

4,842

4,831

Total revenues

211,672

231,090

Expenses

Compensation

82,948

87,121

Newsprint

12,108

14,634

Distribution

28,192

32,705

Other operating

39,318

41,983

Operating income before depreciation, amortization and restructuring

49,106

54,647

Depreciation

6,890

6,462

Amortization

10,734

11,021

Restructuring and other items

4,797

2,982

Operating income

26,685

34,182

Interest expense

16,167

16,837

Net financing expense related to employee benefit plans

383

975

Loss on disposal of property and equipment

268

-

(Gain) loss on derivative financial instruments

697

-10,040

Foreign currency exchange losses

866

12,132

Earnings before income taxes

8,304

14,278

Provision for income taxes

-

-

Net earnings from continuing operations

8,304

14,278

Net earnings from discontinued operations, net of tax of nil

-

14,053

Net earnings attributable to equity holders of the Company

8,304

28,331

Earnings per share from continuing operations

Basic

$0.21

$0.35

Diluted

$0.20

$0.34

Earnings per share from discontinued operations

Basic

$0.00

$0.35

Diluted

$0.00

$0.34

Earnings per share attributable to equity holders of the Company

Basic

$0.21

$0.70

Diluted

$0.20

$0.70


Postmedia Network Canada Corp.
Consolidated Statements of Financial Position
(UNAUDITED)

(In thousands of Canadian dollars)

As at

November 30, 2012

As at

August 31, 2012

Assets

Current Assets

Cash

33,233

22,189

Accounts receivable

112,902

90,923

Inventory

3,264

3,829

Prepaid expenses and other assets

9,745

10,258

Total current assets

159,144

127,199

Non-Current Assets

Property and equipment

261,007

267,491

Asset held-for-sale

410

23,139

Derivative financial instruments

23,411

24,108

Other assets

1,345

1,549

Intangible assets

368,084

377,862

Goodwill

223,500

223,500

Total assets

1,036,901

1,044,848

Liabilities and Equity

Current Liabilities

Accounts payable and accrued liabilities

81,676

65,268

Provisions

25,890

29,888

Deferred revenue

24,655

25,915

Current portion of derivative financial instruments

2,671

6,069

Current portion of long-term debt

15,103

32,153

Total current liabilities

149,995

159,293

Non-Current Liabilities

Long-term debt

464,330

467,749

Derivative financial instruments

8,061

12,369

Other non-current liabilities

180,069

169,413

Provisions

970

1,588

Deferred income taxes

681

681

Total liabilities

804,106

811,093

Equity

Capital stock

371,132

371,132

Contributed surplus

8,242

7,888

Deficit

(138,538)

(139,357)

Accumulated other comprehensive loss

(8,041)

(5,908)

Total equity

232,795

233,755

Total liabilities and equity

1,036,901

1,044,848



Postmedia Network Canada Corp.
Consolidated Statements of Cash Flows
For the three months ended November 30, 2012 and 2011
(UNAUDITED)

(In thousands of Canadian dollars)

2012

2011

Cash Generated (Utilized) by:

Operating Activities

Net earnings attributable to equity holders of the Company

8,304

28,331

Items not affecting cash:

Depreciation

6,890

6,625

Amortization

10,734

11,076

(Gain) loss on derivative financial instruments

697

-11,029

Non-cash interest

1,331

8,688

Loss on disposal of property and equipment

268

-

Non-cash foreign currency exchange losses

824

12,007

Gain on sale of discontinued operations

-

-17,109

Share-based compensation plans and other long-term incentive plan expense (recovery)

878

-1,250

Net financing expense relating to employee benefit plans

383

982

Non-cash compensation expense of employee benefit plans

1,909

-

Employee benefit funding in excess of compensation expense

-

-9,440

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

-8,976

-

Net change in non-cash operating accounts

-10,014

-18,959

Cash flows from operating activities

13,228

9,922

Investing Activities

Net proceeds received on the sale of discontinued operations

-

85,890

Net proceeds from the sale of property and equipment and asset held-for-sale

24,691

-

Additions to property and equipment

-2,636

-1,499

Additions to intangible assets

-956

-1,500

Cash flows from investing activities

21,099

82,891

Financing activities

Repayment of long-term debt

-23,187

-90,825

Debt issuance costs

-96

-37

Cash flows from financing activities

-23,283

-90,862

Net change in cash

11,044

1,951

Cash at beginning of period

22,189

10,483

Cash at end of period

33,233

12,434

Supplemental disclosure of operating cash flows

Interest paid

1,222

5,879

Income taxes paid

-

-



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

KEYWORDS: North America Canada

INDUSTRY KEYWORDS:

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