TORONTO--(BUSINESS WIRE)--
Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months ended November 30, 2016.
On July 7, 2016, the Company announced a proposed recapitalization transaction which was completed on October 5, 2016 (the “Recapitalization Transaction”) by way of a corporate plan of arrangement under the Canada Business Corporations Act.
First Quarter Operating Results
Net income in the quarter ended November 30, 2016 was $17.8 million, as compared to a net loss of $4.2 million in the same period in the prior year. Net income was primarily the result of a gain on debt settlement realized as part of the Recapitalization Transaction, partially offset by an operating loss which includes a $21.6 million non-cash impairment charge and an increase in restructuring and other items expense.
Operating income before depreciation, amortization, impairment and restructuring of $21.8 million in the quarter represents a decrease of $20.7 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 related to cost saving initiatives.
Revenue for the quarter was $214.9 million as compared to $251.1 million in the prior year, a decrease of $36.2 million (14.4%). The revenue decline was primarily due to decreases in print advertising revenue of $31.1 million (21.9%) and print circulation revenue of $6.1 million (9.0%). Digital revenue increased by $1.2 million (4.1%) in the quarter.
Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $15.5 million (7.4%) for the quarter, 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 ended November 30, 2016, the Company implemented initiatives which are expected to result in $18 million of net annualized cost savings.
The Company will continue to identify and undertake ongoing cost reduction initiatives in an effort to address revenue declination in the legacy print business.
Recapitalization Transaction
As part of the Recapitalization Transaction, on October 5, 2016, the Company’s 12.5% Senior Secured Notes due 2018 were exchanged for shares of the Company that represented approximately 98% of the outstanding shares at that time. The Company issued US$88.6 million ($115.5 million) of 10.25% Second-Lien Secured Notes due 2023 and with these proceeds redeemed $77.8 million aggregate principal amount of 8.25% Senior Secured Notes due 2017 at par. The resulting $225.0 million of 8.25% Senior Secured Notes due 2017 outstanding were amended and restated such that the maturity date was extended to July 15, 2021 and they are subject to semi-annual mandatory principal redemptions equal to 50% of excess cash flow, with a minimum of $10.0 million annually.
Management Commentary
“This quarter we made important strides in the transformation of our company including significant cost reduction initiatives and the completion of a recapitalization transaction that nearly halved our corporate debt,” said Paul Godfrey, President and CEO. “These efforts help provide the runway we need for some of our promising newer initiatives, like digital marketing services and programmatic, to gain traction – as we saw with increases in digital revenues this quarter.”
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, the realization of anticipated cost savings. 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, 2016 and 2015. 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 |
|||
| 2016 | 2015 | |||
| Revenues | ||||
| Print advertising | 110,997 | 142,142 | ||
| Print circulation | 61,786 | 67,910 | ||
| Digital | 31,411 | 30,168 | ||
| Other | 10,656 | 10,860 | ||
| Total revenues | 214,850 | 251,080 | ||
| Expenses | ||||
| Compensation | 86,002 | 94,739 | ||
| Newsprint | 13,134 | 13,798 | ||
| Distribution | 39,189 | 42,193 | ||
| Production | 19,271 | 17,946 | ||
| Other operating | 35,445 | 39,896 | ||
| Operating income before depreciation, amortization, impairment and restructuring |
21,809 |
42,508 |
||
| Depreciation | 6,428 | 5,647 | ||
| Amortization | 4,097 | 5,656 | ||
| Impairment | 21,592 | - | ||
| Restructuring and other items | 35,983 | 11,795 | ||
| Operating income (loss) | (46,291) | 19,410 | ||
| Interest expense | 7,901 | 18,720 | ||
| Gain on debt settlement | (78,556) | - | ||
| Net financing expense related to employee benefit plans | 1,471 | 1,449 | ||
| (Gain) loss on disposal of property and equipment | 513 | (61) | ||
| Gain on derivative financial instruments | (183) | (1,844) | ||
| Foreign currency exchange losses | 4,728 | 5,377 | ||
| Earnings (loss) before income taxes | 17,835 | (4,231) | ||
| Provision for income taxes | - | - | ||
| Net earnings (loss) attributable to equity holders of the Company | 17,835 | (4,231) | ||
| Earnings (loss) per share attributable to equity holders of the Company | ||||
| Basic | $0.31 | $(0.02) | ||
| Diluted | $0.31 | $(0.02) | ||
Postmedia Network Canada Corp.
Consolidated Statements of
Financial Position
(UNAUDITED)
| (In thousands of Canadian dollars) |
As at
|
As at
|
||
| Assets | ||||
| Current Assets | ||||
| Cash | 13,860 | 17,139 | ||
| Restricted cash | 1,127 | 4,804 | ||
| Accounts receivable | 97,871 | 82,018 | ||
| Inventory | 6,650 | 7,036 | ||
| Prepaid expenses and other assets | 12,791 | 12,341 | ||
| Total current assets | 132,299 | 123,338 | ||
| Non-Current Assets | ||||
| Property and equipment | 248,192 | 261,986 | ||
| Derivative financial instruments | 481 | 298 | ||
| Other assets | 4,420 | 4,339 | ||
| Intangible assets | 98,422 | 117,137 | ||
| Total assets | 483,814 | 507,098 | ||
| Liabilities and Equity | ||||
| Current Liabilities | ||||
| Accounts payable and accrued liabilities | 69,538 | 89,849 | ||
| Provisions | 32,284 | 16,853 | ||
| Deferred revenue | 35,456 | 36,600 | ||
| Current portion of long-term debt | 11,110 | 301,045 | ||
| Total current liabilities | 148,388 | 444,347 | ||
| Non-Current Liabilities | ||||
| Long-term debt | 330,471 | 352,103 | ||
| Employee benefit obligations and other liabilities | 148,676 | 188,479 | ||
| Provisions | 533 | 611 | ||
| Total liabilities | 628,068 | 985,540 | ||
| Deficiency | ||||
| Capital stock | 810,836 | 535,468 | ||
| Contributed surplus | 10,412 | 10,315 | ||
| Deficit | (965,502) | (1,024,225) | ||
| Total deficiency | (144,254) | (478,442) | ||
| Total liabilities and deficiency | 483,814 | 507,098 |
Postmedia Network Canada Corp.
Consolidated Statements of
Cash Flows
(UNAUDITED)
| (In thousands of Canadian dollars) |
For the three |
|||
| 2016 | 2015 | |||
| Cash Generated (Utilized) by: | ||||
| Operating Activities | ||||
| Net earnings (loss) attributable to equity holders of the Company | 17,835 | (4,231) | ||
| Items not affecting cash: | ||||
| Depreciation | 6,428 | 5,647 | ||
| Amortization | 4,097 | 5,656 | ||
| Impairment | 21,592 | - | ||
| Gain on debt settlement | (78,556) | - | ||
| Gain on derivative financial instruments | (183) | (1,844) | ||
| Non-cash interest | 2,589 | 1,046 | ||
| (Gain) loss on disposal of property and equipment | 513 | (61) | ||
| Non-cash foreign currency exchange losses | 5,227 | 5,274 | ||
| Non-cash backstop commitment fee | 5,500 | - | ||
| Share-based compensation plans and other long-term incentive plan expense (recovery) | 202 | (123) | ||
| Net financing expense relating to employee benefit plans | 1,471 | 1,449 | ||
| Employee benefit funding in excess of compensation expense | (80) | (1,347) | ||
| Net change in non-cash operating accounts | (24,554) | (14,178) | ||
| Cash flows used in operating activities | (37,919) | (2,712) | ||
| Investing Activities | ||||
| Net proceeds from the sale of property and equipment | 1,132 | 61 | ||
| Purchases of property and equipment | (879) | (705) | ||
| Purchases of intangible assets | (374) | (225) | ||
| Receipt of working capital adjustment | - | 1,208 | ||
| Cash flows from (used in) investing activities | (121) | 339 | ||
| Financing activities | ||||
| Net proceeds from issuance of long-term debt | 110,000 | - | ||
| Repayment of long-term debt | (77,784) | (16,263) | ||
| Restricted cash | 3,677 | 7,186 | ||
| Debt issuance costs | (942) | - | ||
| Share issuance costs | (190) | - | ||
| Cash flow from (used in) financing activities | 34,761 | (9,077) | ||
| Net change in cash for the period | (3,279) | (11,450) | ||
| Cash at beginning of period | 17,139 | 43,813 | ||
| Cash at end of period | 13,860 | 32,363 | ||
|
Supplemental disclosure of operating cash flows |
||||
|
Interest paid |
33,984 |
13,498 |
||
|
Income taxes paid |
- |
- |
||
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