TORONTO--(BUSINESS WIRE)--Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2018.
Highlights from the Quarter
- Continued digital growth – Digital advertising revenue up 10.1%– the eighth consecutive quarter of double-digit growth in this area1
- Slowing legacy decline – Print advertising revenue down 13.9% and print circulation revenue down 4.8% versus 17.6% and 5.5% respectively in Q1 F20181
- Operating income before depreciation amortization and restructuring was $21.7 million in the quarter down $2.2 million from prior year reflecting the above noted revenue changes as well as transformation initiatives which resulted in a 9.4% reduction in operating costs
- Debt repayment in the quarter was $8.7 million and subsequent to quarter end, a real estate sale will result in further debt repayment of $20.4 million.
- After this repayment, first-lien debt will be reduced by 53% by retiring $119.7 million of the original $225.0 million since October 2016.
First Quarter Operating Results
Revenue for the quarter was $171.3 million as compared to $189.0 million in the same period in the prior year, a decrease of $17.7 million or 9.4%. The revenue decline was primarily due to decreases in print advertising revenue of $14.0 million or 15.4% and print circulation revenue of $4.6 million or 7.9%. Digital revenue increased by $1.5 million or 4.7% in the quarter with digital advertising revenue up 6.3%.
Notably, adjusted for the impact of the publications acquired and sold in the Company’s first quarter of Fiscal 2018, revenue for the quarter decreased 6.9% relative to the same period in the prior year including decreases in print advertising revenue of 13.9%, print circulation revenue of 4.8% and an increase in digital revenue of 7.9% which includes an increase in digital advertising revenue of 10.1%.
”We are pleased to report ongoing traction on the key elements of our strategy including digital revenue growth,” said Paul Godfrey, Executive Chairman and Chief Executive Officer, Postmedia. “Our teams are focused on continuing to promote the great value of Postmedia’s brands among audiences and marketers and working together to transform our Company amid a shifting landscape.”
Total operating expenses excluding depreciation, amortization and restructuring decreased $15.5 million or 9.4% for the quarter, relative to the same period in the prior year. The decrease was as a result of various cost reduction initiatives.
Operating income before depreciation, amortization and restructuring of $21.7 million in the quarter represents a decrease of $2.2 million or 9.2% 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 November 30, 2018 was $1.4 million, as compared to net earnings of $5.8 million in the same period in the prior year. The change was primarily the result of a gain on disposal of operations in Q1 of Fiscal 2018, losses on derivative financial instruments and the disposal of property and equipment in Q1 of Fiscal 2019, partially offset by a decrease in restructuring expense.
Business Transformation Initiatives
During the three months ended November 30, 2018, the Company implemented initiatives – including compensation expense reductions, real estate rationalization, production efficiencies and other transformation programs – which are expected to result in approximately $4 million of net annualized cost savings.
The Company intends to continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.
Debt Repayment
During the three months ended November 30, 2018 the Company made a mandatory debt repayment of $8.7 million bringing the total principal amount of first-lien notes outstanding to $125.6 million.
Subsequent to the end of the quarter, the company sold the Ottawa Citizen facility. Net proceeds from the sale will be used as part of a redemption of $20.4 million first-lien notes at par in accordance with the terms and conditions of the amended and restated first-lien notes indenture. After this redemption the Company will have $105.3 million of first-lien debt outstanding – bringing the total repayments made, since October 2016, to $119.7 million.
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, 2018 and 2017. 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.
1 Adjusted for the impact of the publications acquired and sold in the Company’s first quarter of Fiscal 2018.
Postmedia Network Canada Corp.
Consolidated Statements of
Operations
(UNAUDITED)
| (In thousands of Canadian dollars, except per share amounts) |
For the three months |
||||
| 2018 | 2017 | ||||
| Revenues | |||||
| Print advertising | 77,091 | 91,125 | |||
| Print circulation | 53,451 | 58,013 | |||
| Digital | 32,747 | 31,289 | |||
| Other | 7,984 | 8,563 | |||
| Total revenues | 171,273 | 188,990 | |||
| Expenses | |||||
| Compensation | 58,324 | 66,364 | |||
| Newsprint | 9,760 | 10,801 | |||
| Distribution | 31,443 | 35,461 | |||
| Production | 20,921 | 22,048 | |||
| Other operating | 29,119 | 30,405 | |||
| Operating income before depreciation, amortization and restructuring | 21,706 | 23,911 | |||
| Depreciation | 4,999 | 5,335 | |||
| Amortization | 4,192 | 3,389 | |||
| Restructuring and other items | 2,678 | 6,924 | |||
| Operating income | 9,837 | 8,263 | |||
| Interest expense | 7,185 | 7,552 | |||
| Gain on disposal of operations | - | (4,676) | |||
| Net financing expense related to employee benefit plans | 541 | 735 | |||
| (Gain) loss on disposal of property and equipment and assets held-for-sale | 226 | (1,542) | |||
| (Gain) loss on derivative financial instruments | 557 | (3,100) | |||
| Foreign currency exchange losses | 2,747 | 3,521 | |||
| Earnings (loss) before income taxes | (1,419) | 5,773 | |||
| Provision for income taxes | - | - | |||
| Net earnings (loss) attributable to equity holders of the Company | (1,419) | 5,773 | |||
| Earnings (loss) per share attributable to equity holders of the Company | |||||
| Basic | $(0.02) | $0.06 | |||
| Diluted | $(0.02) | $0.06 | |||
Postmedia Network Canada Corp.
Consolidated Statements of
Financial Position
(UNAUDITED)
| (In thousands of Canadian dollars) |
As at
November 30, 2018 |
As at
August 31, 2018 |
|||
| (revised) | |||||
| Assets | |||||
| Current Assets | |||||
| Cash | 11,782 | 26,037 | |||
| Restricted cash | 6,104 | 5,711 | |||
| Accounts receivable | 85,576 | 68,069 | |||
| Assets held-for-sale | 15,502 | 6,827 | |||
| Inventory | 5,699 | 6,219 | |||
| Prepaid expenses and other assets | 9,303 | 9,561 | |||
| Total current assets | 133,966 | 122,424 | |||
| Non-Current Assets | |||||
| Property and equipment | 140,340 | 154,465 | |||
| Derivative financial instruments | 1,922 | 2,479 | |||
| Intangible assets | 69,872 | 73,895 | |||
| Total assets | 346,100 | 353,263 | |||
| Liabilities and Equity | |||||
| Current Liabilities | |||||
| Accounts payable and accrued liabilities | 64,837 | 62,833 | |||
| Provisions | 16,460 | 18,666 | |||
| Deferred revenue | 28,469 | 28,994 | |||
| Current portion of long-term debt | 10,000 | 8,718 | |||
| Total current liabilities | 119,766 | 119,211 | |||
| Non-Current Liabilities | |||||
| Long-term debt | 257,171 | 264,022 | |||
| Employee benefit obligations and other liabilities | 68,733 | 62,703 | |||
| Provisions | 416 | 526 | |||
| Total liabilities | 446,086 | 446,462 | |||
| Deficiency | |||||
| Capital stock | 810,836 | 810,836 | |||
| Contributed surplus | 14,016 | 13,589 | |||
| Deficit | (924,838) | (917,624) | |||
| Total deficiency | (99,986) | (93,199) | |||
| Total liabilities and deficiency | 346,100 | 353,263 |
Postmedia Network Canada Corp.
Consolidated Statements of
Cash Flows
(UNAUDITED)
| (In thousands of Canadian dollars) |
For the three months |
||||
| 2018 | 2017 | ||||
| Cash Generated (Utilized) by: | |||||
| Operating Activities | |||||
| Net earnings (loss) attributable to equity holders of the Company | (1,419) | 5,773 | |||
| Items not affecting cash: | |||||
| Depreciation | 4,999 | 5,335 | |||
| Amortization | 4,192 | 3,389 | |||
| Gain on disposal of operations | - | (4,676) | |||
| (Gain) loss on derivative financial instruments | 557 | (3,100) | |||
| Non-cash interest | 4,540 | 3,822 | |||
| (Gain) loss on disposal of property and equipment and assets held-for-sale | 226 | (1,542) | |||
| Non-cash foreign currency exchange losses | 2,761 | 3,536 | |||
| Share-based compensation plans expense | 427 | - | |||
| Net financing expense relating to employee benefit plans | 541 | 735 | |||
| Employee benefit plan funding in excess of compensation expense | (783) | (59) | |||
| Net change in non-cash operating accounts | (21,241) | (15,671) | |||
| Cash flows used in operating activities | (5,200) | (2,458) | |||
| Investing Activities | |||||
| Net proceeds from the sale of property and equipment and assets held-for-sale | 391 | 9,829 | |||
| Purchases of property and equipment | (166) | (149) | |||
| Purchases of intangible assets | (169) | (239) | |||
| Cash flows from investing activities | 56 | 9,441 | |||
| Financing activities | |||||
| Repayment of long-term debt | (8,718) | (79,442) | |||
| Restricted cash | (393) | 62,044 | |||
| Advances from senior secured asset-based revolving credit facility | - | 14,000 | |||
| Cash flow used in financing activities | (9,111) | (3,398) | |||
| Net change in cash for the period | (14,255) | 3,585 | |||
| Cash at beginning of period | 26,037 | 10,848 | |||
| Cash at end of period | 11,782 | 14,433 | |||
| Supplemental disclosure of operating cash flows | |||||
| Interest paid | 5,510 | 8,816 | |||
| Income taxes paid | - | - |
