Postmedia Reports Third Quarter Results

Postmedia Network Canada Corp. (“Postmedia” or the “Company”) today released financial information for the three and nine months ended May 31, 2014.

Third Quarter Operating Results
Net loss in the quarter ended May 31, 2014 was $20.6 million compared to $103.3 million in the same period in the prior year. The decrease in net loss was primarily the result of a $93.9 million non-cash impairment charge in the prior year.

Operating loss was $5.6 million as compared to $85.3 million in the same period in the prior year which included non-cash impairment charges of $93.9 million.

Operating income before depreciation, amortization, impairment and restructuring of $25.7 million in the quarter represents a decrease of $7.1 million (21.6%), relative to the same period in the prior year. This decrease is the result of revenue declines of $20.8 million, partially offset by net decreases in compensation, newsprint, distribution and other expenses totaling $13.7 million.

Revenue for the quarter was $171.0 million, a decrease of $20.8 million (10.8%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $18.7 million (16.5%) with the declines occurring across all categories. Print circulation revenue decreased $0.4 million (0.8%) and digital revenue decreased $1.0 million (4.3%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $13.7 million (8.6%) relative to the same period in the prior year. Expense reductions occurred in most operating expense categories including compensation, newsprint, and distribution expenses.

Year-to-Date Operating Results
Net loss in the nine months ended May 31, 2014 was $57.7 million compared to $112.3 million in the same period in the prior year. The decrease in net loss was primarily the result of a $93.9 million non-cash impairment charge in the third quarter of fiscal 2013.

Operating loss for the nine months ended May 31, 2014 was $7.4 million as compared to $53.0 million in the same period in the prior year which included non-cash impairment charges of $93.9 million.

Operating income before depreciation, amortization, impairment and restructuring for the nine months ended May 31, 2014 was $93.8 million, a decrease of $13.0 million relative to the prior year. This decrease is the result of revenue declines of $54.8 million, partially offset by net decreases in compensation, newsprint, distribution and other expenses totalling $41.8 million.

Revenue for the nine months ended May 31, 2014 was $527.5 million, a decrease of $54.8 million (9.4%) relative to the same period in the prior year. This decrease was primarily due to a decline in print advertising revenue of $50.3 million (14.3%) with the declines occurring across all categories. Print circulation revenue decreased $0.4 million (0.3%) and digital revenue decreased $2.4 million (3.5%) relative to the same period in the prior year.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $41.8 million (8.8%) in the nine months ended May 31, 2014, relative to the same period in the prior year. Expense reductions occurred in most operating expense categories including compensation, newsprint, and distribution 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 May 31, 2014, the Company implemented transformation initiatives which are expected to result in net annualized cost savings of approximately $8 million. This brings total net annualized cost savings to approximately $106 million or 15% of operating costs since the program was announced.

Redemption of Notes
On April 30, 2014, the Company completed a mandatory redemption of $6.3 million aggregate principal amount of 8.25% Senior Secured Notes due 2017 (“First-Lien Notes”) at par in accordance with the terms and conditions of the First-Lien Notes indenture.

Subsequent Event
On July 9, 2014 the Company signed a commitment letter for a new senior secured asset-based revolving credit facility (the “New ABL Facility”) for an aggregate amount of up to $20.0 million, subject to completion of definitive documentation. The New ABL Facility will mature one year from the closing date and will replace the Company’s existing facility that will terminate on July 13, 2014.

Management Commentary
“This quarter we took a big step into reimagining our product offerings across our local markets with the launch of four all new products in Ottawa,” said Paul Godfrey, President and Chief Executive Officer. “While we continue to face the same challenges as our industry peers with respect to our traditional business, we believe that Postmedia’s four platform strategy, our focus on engaging our audiences and delivering targeted results to advertisers holds tremendous excitement around the opportunities ahead.”

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. 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, the impact of the Company’s organizational redesign and the ability of the Company to leverage future opportunities. 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 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; 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; not being able to refinance our ABL Facility on attractive terms or at all; 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, 2013, 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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