Postmedia Reports Third Quarter Results

World News: . []

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three and nine months ended May 31, 2018.

Third Quarter Operating Results

Revenue for the quarter was $171.0 million as compared to $190.0 million in the same period in the prior year, a decrease of $19.0 million or 10.0%. The revenue decline was primarily due to decreases in print advertising revenue of $14.8 million or 15.8% and print circulation revenue of $4.5 million or 7.6%. Digital revenue increased by $2.0 million or 7.2% in the quarter with digital advertising revenue up 10% – the sixth consecutive quarter of double-digit revenue growth in this area. Excluding the impact of the publications acquired and sold in the Company’s first quarter, revenue for the quarter decreased 7.2% relative to the same period in the prior year including decreases in print advertising revenue of 13.6%, print circulation revenue of 4.4% and an increase in digital revenue of 11.3% which includes an increase in digital advertising revenue of 14.7%.

“We are encouraged to see our sixth straight quarter of double-digit revenue increases from our digital advertising initiatives yet we continue to see a rate of legacy revenue declination that outpaces our digital revenue growth,” said Paul Godfrey, Executive Chairman and Chief Executive Officer. “That reality means that we must continue to take the necessary steps to focus on areas where we can win and make the tough, yet decisive, decisions about where we need to make changes.”

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $15.9 million or 9.3% for the quarter, relative to the same period in the prior year. The decrease was as a result of various cost reduction initiatives as well as a compensation expense recovery of $2.9 million related to the Company’s Ontario Interactive Digital Media Tax Credit (“OIDMTC”) claim. Excluding the recovery related to the OIDMTC claim, total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $13.0 million or 7.6% for the quarter, relative to the same period in the prior year.

Operating income before depreciation, amortization, impairment and restructuring of $15.5 million in the quarter represents a decrease of $3.1 million relative to the same period in the prior year. The decrease is due to decreases in print advertising and circulation revenues only partially offset by increased digital revenue and operating expense decreases.

Net loss in the quarter ended May 31, 2018 was $15.5 million which includes a $9.4 million non-cash impairment charge, as compared to net earnings of $13.0 million in the same period in the prior year. The change was primarily the result of an increase in impairment expense, a decrease in operating income before depreciation, amortization, impairment and restructuring as compared to the same period in the prior year and a recovery of restructuring expense of $22.8 million related to changes in the Company’s employee benefit plans in the prior year.

Year-to-Date Operating Results

Revenue for the nine months ended May 31, 2018 was $517.6 million as compared to $577.5 million in the same period in the prior year, a decrease of $59.8 million or 10.4%. The revenue decline was primarily due to decreases in print advertising revenue of $50.9 million or 17.5% and print circulation revenue of $12.9 million or 7.2%. Digital revenue increased by $8.4 million or 10.6% year to date with digital advertising revenue up 13%.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $78.1 million or 14.6% for the nine months ended May 31, 2018, relative to the same period in the prior year. The decrease was as a result of various cost reduction initiatives as well as a compensation expense recovery of $19.9 million related to the Company’s OIDMTC claim. Excluding the recovery related to the OIDMTC claim, total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $58.2 million or 10.9% for the nine months ended May 31, 2018, relative to the same period in the prior year.

Operating income before depreciation, amortization, impairment and restructuring of $60.5 million in the nine months ended May 31, 2018 represents an increase of $18.2 million relative to the same period in the prior year. The increase is due to operating expense decreases partially offset by a decrease in total revenues.

Net loss for the nine months ended May 31, 2018 was $11.0 million, as compared to net earnings of $4.4 in the same period in the prior year. The change was primarily as a result of a gain on debt settlement in the nine months ended May 31, 2018 as well as decreases in impairment and restructuring expenses.

Business Transformation Initiatives

This past quarter the Company has continued to implement cost savings initiatives aimed at reducing operating costs including outsourcing production, office space rationalization and changes to printing schedules. During the three months ended May 31, 2018, the Company implemented initiatives which are expected to result in approximately $7 million of net annualized cost savings.

In June 2018 the Company began implementation of a cost saving initiative aimed at further reducing compensation expenses by approximately 10% by the end of the fiscal year through a combination of voluntary and involuntary headcount reductions.

The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.

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 or on SEDAR at www.sedar.com.

Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.

About Postmedia Network Canada Corp.

Postmedia Network Canada Corp. (TSX:PNC.A, PNC.B) is the holding company that owns Postmedia Network Inc., a Canadian newsmedia company representing more than 140 brands across multiple print, online, and mobile platforms. Award-winning journalists and innovative product development teams bring engaging content to millions of people every week whenever and wherever they want it. This exceptional content, reach and scope offers advertisers and marketers compelling solutions to effectively reach target audiences. For more information, visit www.postmedia.com.

Forward-Looking Information

This news release may include information that is “forward-looking information” under applicable Canadian securities laws. 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 and the identification and undertaking of ongoing cost savings initiatives. 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 digital and other 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 labour 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, 2017 and 2016. 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
(UNAUDITED)

         

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

For the three months
ended May 31,

For the nine months ended
May 31,

 

  2018   2017 2018   2017
 
Revenues
Print advertising 78,580 93,352 239,776 290,679
Print circulation 54,816 59,349 166,441 179,370
Digital 29,890 27,873 87,551 79,147
Other 7,763 9,450 23,848 28,255
Total revenues 171,049 190,024 517,616 577,451
Expenses
Compensation 63,525 74,049 179,236 235,601
Newsprint 9,880 11,554 29,738 35,314
Distribution 32,540 37,373 99,925 113,332
Production 21,895 18,781 62,895 55,439
Other operating 27,757 29,758 85,346 95,525
Operating income before depreciation, amortization, impairment and restructuring

15,452

18,509

60,476

42,240

Depreciation 5,490 5,171 16,016 17,157
Amortization 4,259 3,538 11,926 11,194
Impairment 9,400 4,166 9,400 25,758
Restructuring and other items 2,961 (16,691) 13,455 36,098
Operating income (loss) (6,658) 22,325 9,679 (47,967)
Interest expense 6,343 8,029 20,696 23,912
Gain on disposal of operations - - (4,676) -
Gain on debt settlement - - - (78,556)
Net financing expense related to employee benefit plans 735 1,471 2,206 4,413
(Gain) loss on disposal of property and equipment and asset held-for-sale 46 184 (1,496) 119
(Gain) loss on derivative financial instruments 331 (512) (204) (1,668)
Foreign currency exchange losses 1,426 2,020 4,171 5,386
Earnings (loss) before income taxes (15,539) 11,133 (11,018) (1,573)
Provision for income taxes - - - -
Net earnings (loss) from continuing operations (15,539) 11,133 (11,018) (1,573)
Net earnings from discontinued operations, net of tax of nil - 1,913 - 6,001
Net earnings (loss) attributable to equity holders of the Company (15,539) 13,046 (11,018) 4,428
 
         
Earnings (loss) per share from continuing operations
Basic $(0.17) $0.12 $(0.12) $(0.01)
Diluted $(0.17) $0.12 $(0.12) $(0.01)
         
Earnings per share attributable from discontinued operations
Basic $ - $0.02 $ - $0.05
Diluted $ - $0.02 $ - $0.05
         
Earnings (loss) per share attributable to equity holders of the Company
Basic $(0.17) $0.14 $(0.12) $0.04
Diluted $(0.17) $0.14 $(0.12) $0.04


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

         
(In thousands of Canadian dollars) As at

May 31, 2018

As at

August 31, 2017

 
Assets
Current Assets
Cash 10,704 10,848
Restricted cash 5,711 67,751
Accounts receivable 94,028 74,180
Asset held-for-sale 10,622 8,292
Inventory 5,886 6,001
Prepaid expenses and other assets 7,708 11,502
Total current assets 134,659 178,574
Non-Current Assets
Property and equipment 159,302 194,758
Derivative financial instruments 1,469 1,265
Other assets - 1,508
Intangible assets 77,235 85,613
Total assets 372,665 461,718
 
Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities 59,602 59,778
Provisions 10,430 23,400
Deferred revenue 29,255 33,268
Current portion of long-term debt 18,070 79,502
Total current liabilities 117,357 195,948
Non-Current Liabilities
Long-term debt 263,531 261,761
Employee benefit obligations and other liabilities 70,750 89,030
Provisions 659 1,097
Total liabilities 452,297 547,836
 
Deficiency
Capital stock 810,836 810,836
Contributed surplus 13,294 10,412
Deficit (903,762) (907,366)
Total deficiency (79,632) (86,118)
Total liabilities and deficiency 372,665 461,718


Postmedia Network Canada Corp.
Consolidated Statements of Cash Flows
(UNAUDITED)

         
(In thousands of Canadian dollars)

For the three months
ended May 28,

For the nine months
ended May 28,

  2018   2017 2018   2017
 
Cash Generated (Utilized) by:
Operating Activities
Net earnings (loss) attributable to equity holders of the Company (15,539) 13,046 (11,018) 4,428
Items not affecting cash:
Depreciation 5,490 5,171 16,016 17,157
Amortization 4,259 3,538 11,926 11,194
Impairment 9,400 4,166 9,400 25,758
Gain on disposal of operations - - (4,676) -
Gain on debt settlement - - - (78,556)
(Gain) loss on derivative financial instruments 331 (512) (204) (1,668)
Non-cash interest 3,786 3,410 11,263 9,366
(Gain) loss on disposal of property and equipment and asset held-for-sale 46 184 (1,496) 119
Non-cash foreign currency exchange losses 1,466 2,032 4,272 5,952
Non-cash backstop commitment fee - - - 5,500
Share-based compensation plans and other long-term incentive plan expense

352

-

2,882

202

Net financing expense relating to employee benefit plans 735 1,471 2,206 4,413
Non-cash curtailment gain relating to employee benefit plans - (22,768) - (22,768)
Non-cash compensation expense of employee benefit plans - 1,357 - 1,963
Employee benefit plan funding in excess of compensation expense (1,452) - (5,252) -
Net change in non-cash operating accounts (7,646) (22,363) (34,705) (20,233)
Cash flows from (used in) operating activities 1,228 (11,268) 614 (37,173)
 
Investing Activities
Net proceeds from the sale of property and equipment and asset held-for-sale

(45)

2,054

9,784

3,996

Purchases of property and equipment (336) (1,802) (619) (3,053)
Purchases of intangible assets (167) (791) (596) (1,569)
Cash flows from (used in) investing activities (548) (539) 8,569 (626)
 
Financing activities
Net proceeds from issuance of long-term debt - - - 110,000
Repayment of long-term debt (925) (1,167) (80,367) (80,061)
Advances from (repayments of) ABL Facility (3,000) 5,000 9,000 5,000
Restricted cash (2) (1,071) 62,040 2,995
Debt issuance costs - (30) - (1,016)
Share issuance costs - - - (190)
Cash flow from (used in) financing activities (3,927) 2,732 (9,327) 36,728
 
Net change in cash for the period (3,247) (9,075) (144) (1,071)
Cash at beginning of period 13,951 25,143 10,848 17,139
Cash at end of period 10,704 16,068 10,704 16,068
         
         

Supplemental disclosure of operating cash flows

Interest paid

5,533

9,222

14,436

43,206

Income taxes paid

-

-

-

-

More news and information about Postmedia Network Canada Corp.

Published By:

Business Wire: 15:55 GMT Wednesday 11th July 2018

Published: .

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