TORONTO--(BUSINESS WIRE)--Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months and year ended August 31, 2017.
Fourth Quarter Operating Results
Net earnings in the quarter ended August 31, 2017 were $40.3 million, as compared to a net loss of $99.4 million in the same period in the prior year. The change was primarily the result of a gain on the sale of Infomart, decreases in non-cash impairment charges, as well as a decrease in interest expense and costs related to the recapitalization transaction in Q1 of fiscal 2017.
Operating income before depreciation, amortization, impairment and restructuring of $12.4 million in the quarter represents an increase of $7.1 million relative to the same period in the prior year. The increase is due to operating cost savings related to cost savings initiatives, partially offset by a decrease in total revenues.
Revenue for the quarter was $176.8 million as compared to $194.6 million in the prior year, a decrease of $17.8 million or 9.2%. The revenue decline was primarily due to decreases in print advertising revenue of $14.7 million or 15.0% and print circulation revenue of $4.7 million or 7.3%. Digital revenue increased $3.4 million or 15.0% in the quarter with digital advertising revenue up 19.7%.
Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $24.9 million or 13.2% for the quarter, relative to the same period in the prior year. The decrease was primarily related to cost savings initiatives.
Full Year Operating Results
Net earnings for the year ended August 31, 2017 were $44.8 million, as compared to a net loss of $352.5 million in the same period in the prior year. The increase in net earnings was primarily the result of a $241.9 decrease in non-cash impairment charges, a gain on debt settlement of $78.6 million and a decrease in interest expense, both as a result of the recapitalization transaction in Q1 of fiscal 2017 and a gain on the sale of Infomart.
Operating income before depreciation, amortization, impairment and restructuring for the year ended August 31, 2017 was $54.6 million, a decrease of $19.5 million relative to the same period in the prior year. The decrease is due to revenue declines which were only partially offset by operating cost savings.
Revenue for the year ended August 31, 2017 was $754.3 million as compared to $860.4 million in the prior year, a decrease of $106.1 million or 12.3%. The revenue decline was primarily due to decreases in print advertising revenue of $93.1 million or 19.9% and print circulation revenue of $21.8 million or 8.4%. Digital revenue increased $11.7 million or 12.4% in the year ended August 31, 2017 with digital advertising up 16.5%.
Total operating expenses excluding depreciation, amortization, impairment, and restructuring decreased $86.6 million or 11.0% for the year ended August 31, 2017, relative to the same period in the prior year. The decrease was primarily related to cost reduction initiatives.
Business Transformation Initiatives
During the three months and year ended August 31, 2017, the Company implemented initiatives which are expected to result in approximately $9 million and $84 million of net annualized cost savings, respectively.
The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.
Infomart Transaction
On June 22, 2017, the Company entered into an agreement with Meltwater News Canada Inc. to sell Infomart, its media monitoring division, for gross proceeds of approximately $38.3 million subject to adjustments (the “Infomart Transaction”). Included in the Infomart Transaction are Infomart’s media monitoring business, direct feed business and professional services operations, including clients of such services. The Infomart Transaction closed on August 15, 2017, at which time an amount of $5.7 million was paid into escrow to satisfy any closing adjustments arising under the purchase agreement. The remaining net proceeds of the Infomart Transaction will be used to redeem a portion of the Company’s long-term debt. During the three months and year ended August 31, 2017, the Company recognized a gain on sale of $36.1 million related to the Infomart Transaction. As a result of the Infomart Transaction, the earnings of Infomart have been reported as earnings from discontinued operations for the three months and years ended August 31, 2017 and 2016.
Debt Repayment
Subsequent to August 31, 2017, the Company used $62.1 million to make principal payments of $60.0 million on the Company’s long-term debt and pay accrued interest of $2.1 million with the net proceeds from the Infomart Transaction and other asset sales, including the Islington production facility which was sold in the three months ended August 31, 2017.
On October 23, 2017, the net proceeds of $9.9 million from an additional asset sale will be used to make a principal payment of $9.5 million on the Company’s long-term debt and pay accrued interest of $0.4 million.
Management Commentary
“This quarter we have continued to divest of non-core assets – including the sales of the Infomart business and the Islington, Ontario print facility – with the net proceeds applied to debt repayment,” said Paul Godfrey, Chief Executive Officer Postmedia. “On the revenue front, while traditional print revenues continue to be under significant pressure, this was our third quarter of continued digital advertising revenue growth – a positive sign that new customers are embracing our innovative solutions.”
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 200 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 and the realization of anticipated cost savings and repayment of debt. 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 |
For the year ended
August 31, |
||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Revenues | ||||||||||||
| Print advertising | 82,835 | 97,500 | 373,514 | 466,573 | ||||||||
| Print circulation | 59,666 | 64,357 | 239,036 | 260,885 | ||||||||
| Digital | 26,324 | 22,884 | 105,471 | 93,798 | ||||||||
| Other | 7,988 | 9,901 | 36,243 | 39,121 | ||||||||
| Total revenues | 176,813 | 194,642 | 754,264 | 860,377 | ||||||||
| Expenses | ||||||||||||
| Compensation | 67,067 | 84,686 | 302,668 | 358,967 | ||||||||
| Newsprint | 10,591 | 12,765 | 45,905 | 50,591 | ||||||||
| Distribution | 36,598 | 39,967 | 149,930 | 162,778 | ||||||||
| Production | 19,618 | 18,246 | 75,057 | 70,787 | ||||||||
| Other operating | 30,581 | 33,704 | 126,106 | 143,124 | ||||||||
|
Operating income before depreciation, amortization, impairment
and |
12,358 |
5,274 |
54,598 |
74,130 |
||||||||
| Depreciation | 5,988 | 5,599 | 23,145 | 22,018 | ||||||||
| Amortization | 3,382 | 5,323 | 14,576 | 21,919 | ||||||||
| Impairments | - | 60,700 | 25,758 | 267,700 | ||||||||
| Restructuring and other items | 1,716 | 12,313 | 37,814 | 42,570 | ||||||||
| Operating income (loss) | 1,272 | (78,661) | (46,695) | (280,077) | ||||||||
| Interest expense | 8,809 | 16,645 | 32,721 | 72,649 | ||||||||
| Gain on debt settlement | - | - | (78,556) | - | ||||||||
| Net financing expense related to employee benefit plans | 822 | 1,450 | 5,235 | 5,798 | ||||||||
| (Gain) loss on disposal of property and equipment | (2,229) | 53 | (2,110) | 294 | ||||||||
| (Gain) loss on derivative financial instruments | 701 | 4,433 | (967) | 2,995 | ||||||||
| Foreign currency exchange (gains) losses | (9,248) | 285 | (3,862) | (1,120) | ||||||||
| Earnings (loss) before income taxes | 2,417 | (101,527) | 844 | (360,693) | ||||||||
| Provision for income taxes | - | - | - | - | ||||||||
| Net earnings (loss) from continuing operations | 2,417 | (101,527) | 844 | (360,693) | ||||||||
| Net earnings from discontinued operations, net of tax of nil | 37,910 | 2,087 | 43,911 | 8,211 | ||||||||
| Net earnings (loss) attributable to equity holders of the Company | 40,327 | (99,440) | 44,755 | (352,482) | ||||||||
| Earnings (loss) per share from continuing operations | ||||||||||||
| Basic | $ | 0.03 | $ | (0.36) | $ | 0.01 | $ | (1.28) | ||||
| Diluted | $ | 0.03 | $ | (0.36) | $ | 0.01 | $ | (1.28) | ||||
| Earnings per share attributable from discontinued operations | ||||||||||||
| Basic | $ | 0.40 | $ | 0.01 | $ | 0.39 | $ | 0.03 | ||||
| Diluted | $ | 0.40 | $ | 0.01 | $ | 0.39 | $ | 0.03 | ||||
| Earnings (loss) per share attributable to equity holders of the Company | ||||||||||||
| Basic | $ | 0.43 | $ | (0.35) | $ | 0.40 | $ | (1.25) | ||||
| Diluted | $ | 0.43 | $ | (0.35) | $ | 0.40 | $ | (1.25) | ||||
Postmedia Network Canada Corp.
Consolidated Statements of
Financial Position
(UNAUDITED)
| (In thousands of Canadian dollars) |
As at
August 31, 2017 |
As at
August 31, 2016 |
||
| Assets | ||||
| Current Assets | ||||
| Cash | 10,848 | 17,139 | ||
| Restricted cash | 67,751 | 4,804 | ||
| Accounts receivable | 74,180 | 82,018 | ||
| Asset held-for-sale | 8,292 | - | ||
| Inventory | 6,001 | 7,036 | ||
| Prepaid expenses and other assets | 11,502 | 12,341 | ||
| Total current assets | 178,574 | 123,338 | ||
| Non-Current Assets | ||||
| Property and equipment | 194,758 | 261,986 | ||
| Derivative financial instruments | 1,265 | 298 | ||
| Other assets | 1,508 | 4,339 | ||
| Intangible assets | 85,613 | 117,137 | ||
| Total assets | 461,718 | 507,098 | ||
| Liabilities and Equity | ||||
| Current Liabilities | ||||
| Accounts payable and accrued liabilities | 59,778 | 89,849 | ||
| Provisions | 23,400 | 16,853 | ||
| Deferred revenue | 33,268 | 36,600 | ||
| Current portion of long-term debt | 79,502 | 301,045 | ||
| Total current liabilities | 195,948 | 444,347 | ||
| Non-Current Liabilities | ||||
| Long-term debt | 261,761 | 352,103 | ||
| Employee benefit obligations and other liabilities | 89,030 | 188,479 | ||
| Provisions | 1,097 | 611 | ||
| Total liabilities | 547,836 | 985,540 | ||
| Deficiency | ||||
| Capital stock | 810,836 | 535,468 | ||
| Contributed surplus | 10,412 | 10,315 | ||
| Deficit | (907,366) | (1,024,225) | ||
| Total deficiency | (86,118) | (478,442) | ||
| Total liabilities and deficiency | 461,718 | 507,098 |
Postmedia Network Canada Corp.
Consolidated Statements of
Cash Flows
(UNAUDITED)
| (In thousands of Canadian dollars) |
For the three months |
For the year ended |
||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Cash Generated (Utilized) by: | ||||||||
| Operating Activities | ||||||||
| Net earnings (loss) attributable to equity holders of the Company | 40,327 | (99,440) | 44,755 | (352,482) | ||||
| Items not affecting cash: | ||||||||
| Depreciation | 5,988 | 5,599 | 23,145 | 22,018 | ||||
| Amortization | 3,382 | 5,323 | 14,576 | 21,919 | ||||
| Impairments | - | 60,700 | 25,758 | 267,700 | ||||
| Gain on debt settlement | - | - | (78,556) | - | ||||
| (Gain) loss on derivative financial instruments | 701 | 4,433 | (967) | 2,995 | ||||
| Non-cash interest | 4,159 | 4,987 | 13,525 | 8,016 | ||||
| (Gain) loss on disposal of property and equipment | (2,229) | 53 | (2,110) | 294 | ||||
| Non-cash foreign currency exchange (gains) losses | (9,264) | 156 | (3,312) | (1,107) | ||||
| Non-cash backstop commitment fee | - | - | 5,500 | - | ||||
| Gain on sale of discontinued operations | (36,387) | - | (36,387) | - | ||||
| Share-based compensation plans and other long-term incentive plan expense (recovery) | - | 82 | 202 | (166) | ||||
| Net financing expense relating to employee benefit plans | 822 | 1,450 | 5,235 | 5,798 | ||||
| Non-cash curtailment gain relating to employee benefit plans | (1,984) | - | (24,752) | - | ||||
| Non-cash compensation expense of employee benefit plans | - | 252 | - | - | ||||
| Employee benefit funding in excess of compensation expense | (5,914) | - | (3,951) | (1,468) | ||||
| Net change in non-cash operating accounts | 1,242 | 11,707 | (18,991) | 19,903 | ||||
| Cash flows from (used in) operating activities | 843 | (4,698) | (36,330) | (6,580) | ||||
| Investing Activities | ||||||||
| Net proceeds from the sale of discontinued operations | 36,392 | - | 36,392 | - | ||||
| Net proceeds from the sale of property and equipment | 30,888 | 4 | 34,884 | 1,949 | ||||
| Purchases of property and equipment | (530) | (5,303) | (3,583) | (11,736) | ||||
| Purchases of intangible assets | (641) | (975) | (2,210) | (3,973) | ||||
| Purchases of warrants | - | - | - | (1,200) | ||||
| Receipt of working capital adjustment | - | - | - | 1,208 | ||||
| Acquisition, net of cash acquired | - | - | - | (915) | ||||
| Cash flows from (used in) investing activities | 66,109 | (6,274) | 65,483 | (14,667) | ||||
| Financing activities | ||||||||
| Net proceeds from issuance of long-term debt | - | - | 110,000 | - | ||||
| Repayment of long-term debt | (6,230) | - | (81,291) | (25,996) | ||||
| Restricted cash | (65,942) | 7,497 | (62,947) | 20,569 | ||||
| Debt issuance costs | - | - | (1,016) | - | ||||
| Share issuance costs |
- |
- | (190) | - | ||||
| Cash flow from (used in) financing activities | (72,172) | 7,497 | (35,444) | (5,427) | ||||
| Net change in cash for the period | (5,220) | (3,475) | (6,291) | (26,674) | ||||
| Cash at beginning of period | 16,068 | 20,614 | 17,139 | 43,813 | ||||
| Cash at end of period | 10,848 | 17,139 | 10,848 | 17,139 | ||||
|
Supplemental disclosure of operating cash flows |
||||||||
|
Interest paid |
(9) |
(11) |
(43,215) |
(49,783) |
||||
|
Income taxes paid |
- |
- |
- |
3,785 |
||||
