Postmedia Network Canada Corp. Q4 F2014 Investor and Analyst Conference Call October 24, 2014 Forward Looking Statements This presentation may include certain 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. Forward-looking statements in this presentation include statements with respect to the acquisition of certain Sun Media publications, the review of the transaction by the Competition Bureau, the proposed debt and equity financing for the transaction and the anticipated benefits to Postmedia from the transaction and financings, including improved financial strength, free cash flow, leverage ratios and synergies. Any "financial outlook" in this presentation, as defined by applicable securities legislation, has been approved by management of Postmedia and is included for the purpose of illustrating the materiality of the acquisition of the assets of QMI’s English language publications, and for no other purpose. 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: the possibility that the transaction, including the related financings, will not close (including, without limitation, as a result of the failure to gain regulatory approvals); the risks associated with the possible failure to realize the anticipated synergies in integrating the operations of the Sun Media publications with the operations of Postmedia; competition from digital and other forms of media; the effect of economic conditions and structural changes in the industry 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 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 & analysis for the year ended August 31, 2014, which can be found on the Company’s website at www.postmedia.com, on SEDAR at www.sedar.com or on the SEC’s website at www.sec.gov. 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 presentation. 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. Unless otherwise noted, all references to “$” are to Canadian dollars. 2 Our English-language paid daily newspapers have, in total, the highest weekly print readership when compared to other media organizations in Canada, reaching 3.9 million Canadians each week(1) Digital properties with 6.1 million average monthly unique visitors(2), including newspaper sites ranked #1 in Canada that reach 33% of Canadian newspaper site visitors(2) (1) Source: NADbank 2013, 10 owned Postmedia daily newspapers. Weekly print readership includes print or pdf replica (2) Source: comScore, MediaMetrix, Total Canada, All Locations, Q4F’14 (3 month Average June/July/August ‘14) 3 Acquisition of Sun Media Transaction Overview Sun Media Acquisition • Postmedia Network Inc. has entered into an agreement with Quebecor Media Inc. to acquire its Sun Media’s English language newspaper assets, associated digital properties, as well as its Toronto printing facility (collectively “Sun Media”) • 175 publications, including: o 6 major market urban daily newspapers o 27 daily newspapers in smaller communities largely in Ontario o 140 weekly community newspapers and specialty publications across Canada o The 24 Hours free “commuter” papers in Toronto and Vancouver • Sun Media’s associated digital properties (Sun chain of dailies), including the English portions of the Canoe Network and Autonet, as well as yourlifemoments.ca, classifiedextra.ca, homes-extra.ca and autodealersolutions.com • Real estate assets with >1mm ft2 and an estimated value of $50-$60 million Purchase Price • $306 million; 100% cash consideration o $316 million less an adjustment of $10 million related to real estate disposals to be completed prior to closing o Includes working capital, but subject to customary working capital adjustment • 3.5x acquisition multiple on LTM (June 30, 2014) adjusted EBITDA of $87 million (excl. synergies) o 3.3x multiple including synergies of $6 million Financing • $140 million add-on to Postmedia’s first lien 8.25% Notes due 2017 o Fully committed from existing investor via subscription agreement • Equity Rights Offering - ~$186 million less net proceeds of any real estate proceeds prior to launch o Could reduce offering by up to $50 million o Fully backstopped by GoldenTree Asset Management o Preliminary prospectus to be filed in January 2015 Timing • Transaction remains subject to regulatory and competition approval o Review process of 4-6 months anticipated 4 Newspapers Sun Media Overview Printing Digital + weekly community and specialty publications located in Ontario and Western Canada • Broad range of paid and free urban daily newspapers reach ~4 million readers each week across Ontario and Western Canada(1) • Includes 140 properties in smaller communities where it is often the only newspaper • Digital network averages more than 4 million unique monthly visitors, including newspaper websites and related sites(2) (1) Source: NADbank 2013; Weekly Print/PDF (Sun Media English and 24H two markets) (2) Source: Comscore May 2014 Multi-Platform including web and mobile and excluding Quebec vistors 5 Operating Results Q4 Fiscal 2014 Highlights Q4 Operating Results • Consolidated revenue declined 13.3% relative to Q4 F2013. • Revenue declines experienced in all print advertising categories. • Digital revenue decreased $1.1 million or 5.3% relative to Q4 F2013. • Expense decreases of 10.3%, relative to Q4 F2013 were offset by revenue declines resulting in a decrease in operating income before depreciation, amortization and restructuring of $7.4 million to $15.7 million. Three Year Transformation Program • Implemented additional cost reductions in Q4 that are expected to result in net annualized cost savings of $3 million. • Total net annualized cost reductions since the three year program was announced total approximately $109 million or 16% of operating costs. Real Estate Update • Agreement to sell the Montreal building for $12.5M with an expected close date of October 31, 2014 and a conditional agreement for the sale of the Calgary building. Net proceeds from these transactions, if available prior to the launch of the rights offering will be used to reduce the offering amount. • Agreement to sell Vancouver building for $17.5 million with expected close June 30, 2015. 7 Q4 Fiscal 2014 – Financial Highlights (In thousands of Canadian dollars) For the three months ended August 31, 2014 and 2013 Q4 F2014 Revenues Print advertising Print circulation Digital Other Q4 F2013 (1) (revised) For the years ended August 31, 2014 and 2013 Variance favourable (unfavourable) F2014 F2013 (1) (revised) Variance favourable (unfavourable) 74,192 48,009 20,266 4,337 146,804 93,968 49,359 21,408 4,574 169,309 (19,776) (1,350) (1,142) (237) (22,505) 375,457 194,176 88,023 16,599 674,255 445,547 195,899 91,606 18,531 751,583 (70,090) (1,723) (3,583) (1,932) (77,328) Operating expenses Compensation Newsprint Distribution Production Other operating 62,587 6,660 24,804 9,383 27,669 73,791 8,791 25,806 6,474 31,326 11,204 2,131 1,002 (2,909) 3,657 281,085 30,770 101,794 37,671 113,430 321,224 40,902 107,905 28,270 123,356 40,139 10,132 6,111 (9,401) 9,926 Operating income before depreciation, amortization and restructuring 15,701 23,121 (7,420) 109,505 129,926 (20,421) Depreciation Amortization Impairments Restructuring and other items Operating loss 26,332 9,527 7,934 (28,092) 9,613 10,646 6,100 21,255 (24,493) (16,719) 1,119 6,100 13,321 (3,599) 66,646 39,080 39,285 (35,506) 29,949 43,325 99,983 34,171 (77,502) (36,697) 4,245 99,983 (5,114) 41,996 Net loss attributable to equity holders of the Company (49,761) (47,913) (1,848) (107,461) (160,226) 52,765 1. Results for the three months and year ended August 31, 2013 have been revised from amounts previously reported as a result of the adoption of new and amended accounting standards on September 1, 2013. See note 2 of our consolidated financial statements for additional information. 8 Q4 Fiscal 2014 – Factors Affecting Revenue Change vs. Same Period Prior Year for Key Revenue Categories Revenue Category 3 months ended 3 months ended November 30, 2013 February 28, 2014 3 months ended May 31, 2014 3 months ended August 31, 2014 National print advertising -11% -14% -19% -25% Retail print advertising -12% -23% -18% -24% Classified print advertising -24% -22% -21% -24% - +5% -5% -4% Digital revenue - Advertising -7% -4% -10% -10% Digital revenue - Other +1% +6% +9% +5% Print circulation +1% -1% -1% -3% Insert revenue Factors affecting Q4 Fiscal 2014 Revenue • The automotive and technology segments accounted for approximately 50% of the Q4 print advertising revenue decline. 9 Thank you www.postmedia.com facebook.com/Postmedia @postmedianet linkedin.com/company/postmedia-network-inc.
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