Business News

Postmedia Network Reports Third Quarter Results

Tuesday 16. July 2013 - Postmedia Network Canada Corp. ("Postmedia" or the "Company") today released financial information for the three and nine months ended May 31, 2013.

Third Quarter Operating Results
Net loss in the quarter ended May 31, 2013 was $112.2 million compared to a net loss of $12.1 million in the same period in the prior year. The increase in net loss was primarily the result of a $93.9 million non-cash impairment charge. Also contributing to the increased net loss were lower revenues which were largely offset by operating cost reductions.
Operating loss was $95.6 million as compared to operating income of $4.1 million in the same period in the prior year primarily as a result of a $93.9 million non-cash impairment charge.
Operating income before depreciation, amortization, impairment and restructuring of $32.9 million in the quarter represents a decrease of $3.4 million (9.3%), relative to the same period in the prior year. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating income before depreciation, amortization, impairment and restructuring declined $1.8 million (5.1%).
Revenue for the quarter was $191.8 million, a decrease of $20.2 million (9.5%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $17.7 million (13.5%) with the declines occurring across all categories. Print circulation revenue decreased $3.1 million (5.9%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $0.5 million (2.2%) relative to the same period in the prior year.
Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $16.9 million (9.6%) 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. Excluding non-cash share-based compensation and other long-term incentive plan expense, operating expenses excluding depreciation, amortization, impairment and restructuring declined $18.5 million, or 10.4%.
During the three months ended May 31, 2013, the Company recorded asset impairments totaling $93.9 million. This total includes an impairment loss of $6.1 million with respect to a production facility that was reclassified from property and equipment to asset held-for-sale, and goodwill and intangible asset impairments totaling $87.8 million as a result of revisions to the long-term financial forecast to reflect greater revenue uncertainty.
Year-to-Date Operating Results
Net loss in the nine months ended May 31, 2013 was $118.0 million compared to net earnings of $5.1 million in the same period in the prior year. The decrease was primarily the result of a $93.9 million non-cash impairment charge. Also contributing to the decrease were lower revenues which were largely offset by operating cost reductions, and a gain on sale of the Times Colonist in Victoria and British Columbia based community newspaper assets to Glacier Media Inc. in the same period in the prior year.
Net loss from continuing operations, which includes non-cash impairment charges of $93.9 million, was $118.0 million, compared to net loss of $8.9 million in the same period in the prior year.
Operating loss was $63.2 million as compared to operating income of $41.6 million in the same period in the prior year primarily as a result of a non-cash impairment charge of $93.9 million.
Operating income before depreciation, amortization, impairment and restructuring was $107.2 million, a decrease of $9.0 million relative to the prior year. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating income before depreciation, amortization, impairment and restructuring declined $5.4 million (4.7%).
Revenue for the nine months ended May 31, 2013 was $582.3 million, a decrease of $59.5 million (9.3%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $51.3 million (12.7%) with the largest declines occurring in the classified and national advertising categories. Print circulation revenue decreased $11.4 million (7.2%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $3.1 million (4.6%) relative to the same period in the prior year as a result of increases in local digital advertising revenue partially offset by declines in digital classified revenue.
Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $50.5 million (9.6%) 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. Excluding non-cash share-based and other long-term incentive plan compensation expense, operating expenses excluding depreciation, amortization, impairment and restructuring declined $54.1 million (10.2%).
Business Transformation Initiatives
As announced in July 2012, the Company is implementing a three-year transformation program that is targeted to result in operating cost savings of 15%-20%. During the three months ended May 31, 2013, the Company implemented transformation initiatives which are expected to result in net annualized cost savings of approximately $4 million. This brings total net annualized cost savings, since the beginning of the program, to approximately $62 million.
Management Commentary
“The transformation of Postmedia continued this quarter with the roll out of our paid content model to all of our newspapers, traction on our cost savings initiatives and the completion of our organizational redesign to a functional operating model,” said Paul Godfrey, President and Chief Executive Officer. “We will continue on this path, transforming a traditional media company into one that leverages future opportunities with a structure that supports a new model.”
Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.