Postmedia Network Reports Second Quarter Results

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three and six months ended February 28, 2013.

Second Quarter Operating Results
Net loss in the quarter ended February 28, 2013 was $14.2 million compared to a net loss of $11.1 million in the same period in the prior year. The increase was primarily the result of foreign currency exchange losses partially offset by decreased losses on derivative financial instruments. Lower revenues in the quarter were offset by operating cost reductions.

Operating income of $5.8 million in the quarter increased $2.5 million compared to operating income of $3.3 million in the same period in the prior year.

Operating income before depreciation, amortization and restructuring of $25.2 million in the quarter represents a decrease of $0.1 million, relative to the same period in the prior year.

Revenue for the quarter was $178.8 million, a decrease of $19.8 million (10.0%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $16.9 million (13.8%) with the largest declines occurring in the classified and national advertising categories. Print circulation revenue decreased $3.3 million (6.5%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $0.4 million (1.7%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization and restructuring decreased $19.7 million (11.4%) 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.

Year-to-Date Operating Results
Net loss in the six months ended February 28, 2013 was $5.9 million compared to net earnings of $17.3 million in the same period in the prior year. The decrease was due in part to the gain on sale of the Times Colonist in Victoria and British Columbia-based community newspaper assets to Glacier Media Inc. recorded in the same period of the previous year.

Net loss from continuing operations was $5.9 million, compared to net earnings of $3.2 million in the same period in the prior year.

Operating income was $32.5 million, a decrease of $5.0 million relative to the same period in the prior year due to a decrease in revenue partially offset by lower operating expenses.

Operating income before depreciation, amortization and restructuring was $74.3 million, a decrease of $5.6 million relative to the prior year.

Revenue for the six months ended February 28, 2013 was $390.5 million, a decrease of $39.2 million (9.1%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $33.6 million (12.4%) with the largest declines occurring in the classified and national advertising categories. Print circulation revenue decreased $8.3 million (7.9%) as a result of declines in circulation volumes partially offset by price increases. Digital revenue increased $2.6 million (5.9%) 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 and restructuring decreased $33.6 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.

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 February 28, 2013 the Company implemented transformation initiatives which will result in net annualized savings of approximately $16 million. This brings total net annualized cost savings, since the beginning of the program, to approximately $58 million.

Management Commentary
“As has been noted by several of our industry peers, the outlook remains unpredictable with respect to traditional revenue streams,” said Paul Godfrey, President and Chief Executive Officer. “We are pleased, however, with the substance of our transformation program which to date has exceeded expectations not only on the cost savings front but also the overall workings of our organization. We expect to continue that transformation and accelerate our initiatives in new areas of revenue generation including paid content.”

Also announced today, Jane Peverett has been appointed to the boards of both the Company and its subsidiary, Postmedia Network Inc.

“We are very pleased to welcome Ms. Peverett to our Boards of Directors,” said Paul Godfrey, President and CEO. “Postmedia Network will benefit from Ms. Peverett’s impressive financial and governance expertise.”

Ms. Peverett currently serves as a director on various corporate boards including: Encana Corporation, Northwest Natural Gas Company, Canadian Imperial Bank of Commerce, the B.C. Ferry Authority, and Associated Electric & Gas Insurance Services Limited. Ms. Peverett was President & Chief Executive Officer of BC Transmission Corporation from April 2005 to January 2009, and was previously Vice-President, Corporate Services and Chief Financial Officer. In addition, Ms. Peverett was the President of Union Gas Limited from April 2002 to May 2003 after serving in various senior roles within Westcoast Energy Inc.

Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.

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, on SEDAR at www.sedar.com or on the website maintained by the U.S. Securities and Exchange Commission (the “SEC”) at www.sec.gov.

About Postmedia Network Canada Corp.
Postmedia Network Canada Corp. (TSX:PNC.A, PNC.B) is the holding company that owns Postmedia Network Inc., the largest publisher by circulation of paid English-language daily newspapers in Canada, representing some of the country’s oldest and best known media brands. Reaching millions of Canadians every week, Postmedia engages readers and offers advertisers and marketers integrated solutions to effectively reach target audiences through a variety of print, online, digital, and mobile platforms.

Forward-Looking Information
This news release may include information that is “forward-looking information” under applicable Canadian securities laws and “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. 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, statements regarding the implementation and results of the Company’s transformation initiatives, including the realization of anticipated cost savings; competition from other newspapers and alternative 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; possible damage to the reputation of the Company’s brands or trademarks; possible labor 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, 2012 and 2011. 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.

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