Postmedia Reports Fourth Quarter Results

TORONTO--(BUSINESS WIRE)--Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three months and year ended August 31, 2022 which include the results of the daily and weekly newspapers, digital properties and parcel delivery business acquired from J. D. Irving, Limited on March 25, 2022 (the “BNI Acquisition”).


“As with our industry peers and all Canadian businesses we are operating in a challenging environment exacerbated by recessionary headwinds,” said Andrew MacLeod, President and Chief Executive Officer, Postmedia. “We are managing proactively to meet the challenges ahead and taking the opportunity to accelerate our transformation to digital and growth in our parcel business.”

Fourth Quarter Operating Results

Revenue for the quarter was $117.0 million as compared to $107.7 million in the same period in the prior year, representing an increase of $9.4 million or 8.7%. Excluding the impact of the BNI Acquisition, revenue for the three months ended August 31, 2022 was $102.2 million, a decrease of $5.4 million (5.1%) relative to the prior year. The revenue decline, excluding the impact of the BNI Acquisition, was primarily due to decreases in print circulation revenue of $4.8 million (11.6%) and print advertising revenue of $1.2 million (3.3%).

Total operating expenses excluding depreciation, amortization, impairment and restructuring increased $8.7 million or 8.1% for the quarter ended August 31, 2022, relative to the same period in the prior year. Excluding the impact of the BNI Acquisition, total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $8.1 million or 7.5%. The decrease relates to compensation, production and other operating expenses partially offset by increases in newsprint and distribution expenses. The decrease in compensation expense was partially offset by a reduction in the compensation expense recovery related to the Canada Emergency Wage Subsidy (“CEWS”) of $5.0 million.

Operating income before depreciation, amortization, impairment and restructuring in the quarter was $1.2 million, an increase of $0.7 million relative to the prior year. Excluding the impact of the BNI Acquisition, operating income before depreciation, amortization, impairment and restructuring in the quarter was $3.1 million, an increase of $2.6 million relative to the prior year. The increase is due to the decrease in operating expenses excluding depreciation, amortization, impairment and restructuring, partially offset by a decrease in total revenues.

Net loss in the quarter ended August 31, 2022 was $31.4 million, as compared to $28.6 million in the same period in the prior year. The increase in net loss was primarily the result of increases in impairment and restructuring expenses partially set by an increase in operating income before depreciation, amortization, impairment and restructuring, a decrease in loss on derivative financial instruments and financial assets at fair value through profit and loss.

Fiscal 2022 Operating Results

Revenue for the year ended August 31, 2022 was $458.2 million as compared to $442.3 million in the prior year, an increase of $15.9 million or 3.6%. Excluding the impact of the BNI Acquisition, revenue for the year ended August 31, 2022 was $432.0 million as compared to $442.3 million in the prior year, a decrease of $10.4 million or 2.3%. The revenue decline was primarily due to decreases in print circulation revenue of $18.9 million or 11.0% and decreases in print advertising revenue of $8.3 million or 5.5%, partially offset by increases in digital revenue of $14.3 million or 13.9% and other revenue of $2.5 million or 15.8%.

Total operating expenses excluding depreciation, amortization, impairment, settlement gain and restructuring increased $40.0 million or 9.9% for the year ended August 31, 2022, relative to the same period in the prior year. Excluding the impact of the BNI Acquisition, total operating expenses excluding depreciation, amortization, impairment, settlement gain and restructuring increased $11.1 million or 2.7%. The change primarily relates to increases in compensation expense as a result of a reduction in the compensation expense recovery related to CEWS of $21.4 million and production costs related to the increase in digital revenue.

Operating income before depreciation, amortization, impairment, settlement gain and restructuring of $13.0 million in the year ended August 31, 2022 represents a decrease of $24.1 million relative to the prior year. Excluding the impact of the BNI Acquisition, operating income before depreciation, amortization, impairment, settlement gain and restructuring for the year ended August 31, 2022 was $15.6 million, a decrease of $21.4 million relative to the prior year. The decrease is due to a decrease in total revenues and an overall increase in total operating expenses excluding depreciation, amortization, impairment, settlement gain and restructuring.

Net loss in the year ended August 31, 2022 was $74.7 million, as compared to net earnings of $33.7 million in the same period in the prior year. The change was primarily the result of a non-cash settlement gain related to employee benefit plans of $63.1 million in the year ended August 31, 2021, the decrease in operating income depreciation, amortization, impairment, settlement gain and restructuring, and losses on derivative financial instruments and financial assets at fair value through profit and loss, debt refinancing and foreign exchange, partially offset by a decrease in impairment expense.

COVID-19 Update

The COVID-19 pandemic resulted in governments worldwide enacting emergency measures to combat the spread of the virus which included travel bans, self-imposed quarantine periods and social distancing that caused disruption to businesses resulting in an economic slowdown. On April 11, 2020, the Government of Canada passed CEWS to support employers facing financial hardship as measured by certain revenue declines as a result of the COVID-19 pandemic. CEWS provided a reimbursement of compensation expense to October 23, 2021, provided the applicant has met the applicable criteria. During the year ended August 31, 2022, the Company filed and received all the remaining claims available under the program and during the three months and year ended August 31, 2022, recognized a recovery of compensation expense of nil and $1.6 million, respectively, related to CEWS (2021 - $5.0 million and $23.0 million, respectively) and in total recognized $64.9 million related to CEWS since the program was announced.

Acquisition of Brunswick News Inc.

On February 17, 2022 the Company entered into a purchase agreement with J. D. Irving, Limited (“JDI”) to purchase all of the issued and outstanding shares of Brunswick News Inc. (“BNI”). The acquisition closed on March 25, 2022 and included BNI’s daily and weekly newspapers, digital properties and parcel delivery business. The purchase price consisted of cash consideration of $7.5M and share consideration of 4,282,920 Class NC variable voting shares (“Variable Voting Shares”) with a fair value of $7.6 million.

Debt Repayment and Refinancing

Subsequent to August 31, 2022, the Company has drawn $15.0 million on the senior secured asset-based revolving credit facility (“ABL Facility”) and obtained consent of the lender to increase the ABL Facility to $25.0 million. All other terms of the ABL Facility remain unchanged.

During the three months and year ended August 31, 2022, the Company redeemed $1.4 million of First-Lien Notes with the proceeds of asset sales. After this redemption, the Company has $47.1 million of First-Lien Notes outstanding of the original $225.0 million that was issued in October 2016.

On April 7, 2022, the Company completed a refinancing transaction (“Refinancing Transaction”) that included a voluntary redemption of $15.0 million of 8.25% Senior Secured Notes due 2023 (“First-Lien Notes”) and accrued interest of $0.5 million and extended the maturity of its First-Lien Notes and 10.25% Senior Secured Notes due 2024 (‘Second-Lien Notes”) by approximately three and a half years to February 17, 2027 and August 17, 2027, respectively, on substantially similar terms to the existing terms of the original First-Lien Notes and Second-Lien Notes. In connection with the extension of the maturity of the First Lien Notes, the Company issued 794,630 Variable Voting Shares to the holders of the First Lien Notes with a fair value of $1.4 million. The Company also extended the maturity of ABL Facility by three years to October 1, 2025.

There was no excess cash flow redemption required for the six months ended August 31, 2022 as a result of the $15.0 million voluntary redemption described above.

Business Transformation Initiatives

During the three months ended August 31, 2022, the Company implemented cost reduction and transformation initiatives related to compensation expense reductions, real estate rationalization, production efficiencies and other programs, which are expected to result in approximately $5 million of net annualized cost savings.

In F23 the Company intends to focus on key growth areas of Digital Advertising, Digital Subscriptions and Parcel Services.

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 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 130 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 Our expertise in home delivery and expanding distribution network powers Postmedia Parcel Services. For more information, visit www.postmedia.com, www.postmediasolutions.com and www.postmediaparcelservices.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 the implementation and results of the Company’s transformation initiatives, continued benefits of historical results into future periods, 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, 2022 and 2021. 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, 2022

August 31, 2021

August 31, 2022

August 31, 2021

 

 

 

 

 

Revenues

 

 

 

 

Print advertising

36,849

34,660

149,321

151,489

Print circulation

39,334

41,674

157,332

171,824

Digital

28,361

27,555

119,490

102,919

Other

12,504

3,762

32,081

16,111

Total revenues

117,048

107,651

458,224

442,343

Expenses

 

 

 

 

Compensation

41,287

41,229

169,569

155,182

Newsprint

5,069

4,257

17,935

17,506

Distribution

34,566

23,769

112,107

94,990

Production

15,980

15,766

69,384

60,486

Other operating

18,971

22,193

76,249

77,126

Operating income before depreciation, amortization, impairment,
settlement gain and restructuring

1,175

 

437

 

12,980

 

37,053

Depreciation

2,697

2,773

10,995

11,175

Amortization

2,566

2,364

9,345

9,778

Impairment

7,845

5,000

15,745

26,164

Settlement gain

-

-

-

(63,079)

Restructuring

3,675

1,024

5,875

5,920

Operating income (loss)

(15,608)

(10,724)

(28,980)

47,095

Interest expense

7,696

7,280

30,998

30,407

Net financing expense related to employee benefit plans

234

229

938

1,324

Loss (gain) on disposal of property and equipment, assets held-for-sale, right of
use assets and other assets

37

 

9

 

260

 

(507)

Loss (gain) on derivative financial instruments and financial assets at fair value
through profit and loss

 

173

 

2,251

 

3,873

 

(11,930)

Loss on debt refinancing

-

-

1,477

-

Foreign currency exchange losses (gains)

7,666

8,065

8,186

(5,925)

Earnings (loss) before income taxes

(31,414)

(28,558)

(74,712)

33,726

Provision for income taxes

-

-

-

-

Net earnings (loss) attributable to equity holders of the Company

(31,414)

(28,558)

(74,712)

33,726

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to equity holders of the Company

 

 

 

 

Basic

$(0.32)

$(0.30)

$(0.78)

$0.36

Diluted

$(0.32)

$(0.30)

$(0.78)

$0.34

Postmedia Network Canada Corp.

Consolidated Statements of Financial Position

(UNAUDITED)

 

(In thousands of Canadian dollars)

As at

August 31,

2022

As at

August 31,

2021

 

 

 

Assets

 

 

Current Assets

 

 

Cash

12,061

61,996

Restricted cash

730

437

Trade and other receivables

49,118

41,255

Assets held-for-sale

17,727

17,727

Inventory

4,950

3,348

Prepaid expenses and other assets

8,275

8,697

Total current assets

92,861

133,460

Non-Current Assets

 

 

Property and equipment

66,747

76,390

Right of use assets

30,095

35,646

Derivative financial instruments and other assets

3,742

6,914

Intangible assets

17,930

23,791

Total assets

211,375

276,201

 

 

 

Liabilities and Deficiency

 

 

Current Liabilities

 

 

Accounts payable and accrued liabilities

39,440

49,599

Provisions

3,766

2,257

Deferred revenue

21,262

22,351

Current portion of lease obligations

8,312

8,120

Current portion of long-term debt

13,000

7,409

Total current liabilities

85,780

89,736

Non-Current Liabilities

 

 

Long-term debt

260,909

248,262

Employee benefit obligations and other liabilities

38,169

44,753

Lease obligations

27,749

33,161

Total liabilities

412,607

415,912

 

 

 

Deficiency

 

 

Capital stock

820,131

810,861

Contributed surplus

17,973

16,570

Deficit

(1,039,336)

(967,142)

Total deficiency

(201,232)

(139,711)

Total liabilities and deficiency

211,375

276,201

Postmedia Network Canada Corp.

Consolidated Statements of Cash Flows

(UNAUDITED)

 

(In thousands of Canadian dollars)

For the three months ended

For the year ended

 

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

 

 

 

 

 

Cash Generated (Utilized) by:

 

 

 

 

Operating Activities

 

 

 

 

Net earnings (loss) attributable to equity holders of the Company

(31,414)

(28,558)

(74,712)

33,726

Items not affecting cash:

 

 

 

 

Depreciation

2,697

2,773

10,995

11,175

Amortization

2,566

2,364

9,345

9,778

Impairment

7,845

5,000

15,745

26,164

Loss on debt refinancing

-

-

1,477

-

Loss (gain) on derivative financial instruments and financial assets at fair
value through profit and loss

 

173

 

2,251

 

3,873

 

(11,930)

Non-cash interest

6,483

5,880

25,093

23,363

Loss (gain) on disposal of property and equipment, assets held-for-sale, right
of use assets and other assets

 

37

 

9

 

260

 

(507)

Non-cash foreign currency exchange losses (gains)

7,720

8,108

8,173

(5,880)

Share-based compensation plans

1,353

121

1,403

645

Net financing expense relating to employee benefit plans

234

229

938

1,324

Non-cash settlement gain

-

-

-

(63,079)

Employee benefit plan funding in excess of compensation expense

(839)

(841)

(4,153)

(3,558)

Net change in non-cash operating accounts

(2,612)

14,574

(19,901)

17,800

Cash flows from (used in) operating activities

(5,757)

11,910

(21,464)

39,021

 

 

 

 

 

Investing Activities

 

 

 

 

Net proceeds from the sale of property and equipment, assets held-for-sale and
other assets

 

762

 

-

 

2,736

 

5,889

Purchases of property and equipment

(211)

(1,037)

(2,005)

(2,475)

Purchases of intangible assets

(132)

(272)

(948)

(449)

Net proceeds from the sale of other assets

-

-

-

10,675

Purchases of other assets

-

-

-

(1,696)

Acquisition, net of cash acquired

-

-

(6,636)

-

Cash flows from (used in) investing activities

419

(1,309)

(6,853)

11,944

 

 

 

 

 

Financing activities

 

 

 

 

Repayment of long-term debt

(1,368)

-

(19,754)

(32,305)

Restricted cash

655

-

(293)

2,965

Advances from senior secured asset-based revolving credit facility

8,000

-

8,000

-

Debt issuance costs

-

-

(418)

-

Lease payments

(1,946)

(1,967)

(9,153)

(9,424)

Cash flows from (used in) financing activities

5,341

(1,967)

(21,618)

(38,764)

 

 

 

 

 

Net change in cash for the period

3

8,634

(49,935)

12,201

Cash at beginning of period

12,058

53,362

61,996

49,795

Cash at end of period

12,061

61,996

12,061

61,996

 

 

 

 

 

Supplemental disclosure of operating cash flows

 

Interest paid

194

11

6,375

7,943

Income taxes paid

-

-

-

-

 


Contacts

Media Contact
Phyllise Gelfand
Vice President, Communications
(647) 273-9287
pgelfand@postmedia.com

Investor Contact
Mary Anne Lavallee
Executive Vice President, Chief Operating Officer and Interim Chief Financial Officer
(416) 442-3448
mLavallee@postmedia.com