First Quarter Operating Results
Net earnings in the quarter ended November 30, 2012 were $8.3 million compared to net earnings of $28.3 million in the same period in the prior year. The decrease in net earnings is primarily due to lower revenue partially offset by operating cost reductions and the gain on sale of the Times Colonist in Victoria and British Columbia based community newspaper assets in the same period in the prior year.
Operating income of $26.7 million in the quarter decreased $7.5 million compared to operating income of $34.2 million in the same period in the prior year.
Operating income before depreciation, amortization and restructuring of $49.1 million in the quarter represents a decrease of $5.5 million, relative to the same period in the prior year.
Revenue for the quarter totaled $211.7 million, a decrease of $19.4 million (8.4%) relative to the same period in the prior year. This decrease was primarily due to a decrease in print advertising revenue of $16.6 million (11.1%) with declines occurring in classified, national, retail and insert advertising categories. Print circulation revenue decreased $5.0 million (9.2%) due to declines in circulation volumes. Digital revenue increased $2.2 million (9.7%) relative to the same period in the prior year.
Total operating expenses excluding depreciation, amortization and restructuring decreased $13.9 million (7.9%) 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 previously announced, the Company is implementing a three-year transformation program that is targeted to result in operating cost savings of 15%-20%. As of November 30, 2012 the Company has implemented initiatives which will result in net annualized cost savings of approximately $42 million.
Redemption of Notes
On October 12, 2012, the Company completed the sale of 1450 Don Mills Road in Don Mills, Ontario for gross proceeds of approximately $24 million. On November 12, 2012, the net proceeds from the sale were used for a mandatory redemption of $23.2 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.
"We are pleased with the progress of our transformation program and continued cost reductions remain a top priority," said Paul Godfrey, President and Chief Executive Officer. "Our revenue outlook remains challenging; however, we are confident we can continue to evolve as an industry leader in multi-platform product and audience development and continue to deliver solid results and innovative programs for advertisers and marketers."
Note: All dollar amounts are expressed in Canadian dollars unless otherwise specified.
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.