FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November, 2002.
SUN MEDIA CORPORATION
(Translation of registrant's name into English)
333 King Street East, Toronto, Ontario M5A 3X5 CANADA
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F
or Form 40-F.
Form 20-F /X/ Form 40-F / /
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes / / No /X/
Total number of pages: 9
Page number of document list: 2
| Document | Description | Sequential Page No. | ||
|---|---|---|---|---|
| 1 | Interim Financial Statements | 3-8 |
SUN MEDIA CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Thousands of Canadian dollars)
| | Three months ended | Nine months ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | September 30 2002 | September 30 2001 | September 30 2002 | September 30 2001 | ||||||||||
| REVENUES | $ | 200,163 | $ | 197,304 | $ | 625,048 | $ | 616,638 | ||||||
| OPERATING EXPENSES | ||||||||||||||
| Wages and employee benefits | 77,021 | 75,248 | 238,220 | 237,847 | ||||||||||
| Newsprint | 24,878 | 30,457 | 76,804 | 96,541 | ||||||||||
| Other operating expenses | 50,928 | 47,215 | 153,568 | 149,725 | ||||||||||
| 152,827 | 152,920 | 468,592 | 484,113 | |||||||||||
| OPERATING INCOME BEFORE THE UNDERNOTED | 47,336 | 44,384 | 156,456 | 132,525 | ||||||||||
| Depreciation and amortization (note 2) | 6,139 | 11,798 | 18,732 | 35,160 | ||||||||||
| Restructuring costs (note 3) | — | — | — | 11,500 | ||||||||||
| Financial expenses | 8,142 | 10,361 | 25,587 | 32,489 | ||||||||||
| Dividend income (note 4) | (49,863 | ) | (45,479 | ) | (149,589 | ) | (45,479 | ) | ||||||
| (35,582 | ) | (23,320 | ) | (105,270 | ) | 33,670 | ||||||||
| INCOME BEFORE INCOME TAXES & NON-CONTROLLING INTEREST | 82,918 | 67,704 | 261,726 | 98,855 | ||||||||||
| Income taxes | 10,246 | 8,668 | 37,925 | 20,816 | ||||||||||
| Non-controlling interest | 253 | 210 | 799 | 731 | ||||||||||
| NET INCOME | $ | 72,419 | $ | 58,826 | $ | 223,002 | $ | 77,308 | ||||||
SUN MEDIA CORPORATION
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Unaudited)
(Thousands of Canadian dollars)
| | Three months ended | Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | September 30 2002 | September 30 2001 | September 30 2002 | September 30 2001 | |||||||||
| BALANCE — BEGINNING OF PERIOD | $ | 162,782 | $ | 114,189 | $ | 144,442 | $ | 95,707 | |||||
| Net income for the period | 72,419 | 58,826 | 223,002 | 77,308 | |||||||||
| Dividends on common stock | — | (7,117 | ) | (70,945 | ) | (7,117 | ) | ||||||
| Interest on Convertible Obligation net of tax (note 4) | (32,473 | ) | (27,850 | ) | (93,541 | ) | (27,850 | ) | |||||
| Adjustment on related party transaction (note 5) | — | — | (230 | ) | — | ||||||||
| BALANCE — END OF PERIOD | $ | 202,728 | $ | 138,048 | $ | 202,728 | $ | 138,048 | |||||
SUN MEDIA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Thousands of Canadian dollars)
| | Three months ended | Nine months ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | September 30 2002 | September 30 2001 | September 30 2002 | September 30 2001 | |||||||||||
| Cash provided by (used for): | |||||||||||||||
| OPERATIONS | |||||||||||||||
| Net income | $ | 72,419 | $ | 58,826 | $ | 223,002 | $ | 77,308 | |||||||
| Items not involving cash: | |||||||||||||||
| Depreciation of fixed assets | 6,101 | 6,394 | 18,614 | 19,007 | |||||||||||
| Amortization of goodwill & deferred charges | 38 | 5,404 | 118 | 16,153 | |||||||||||
| Future income taxes | 1,000 | — | 3,750 | 2,798 | |||||||||||
| Non-controlling interest | 253 | 210 | 799 | 731 | |||||||||||
| Other | (21 | ) | 171 | 294 | 904 | ||||||||||
| 79,790 | 71,005 | 246,577 | 116,901 | ||||||||||||
| Changes in non-cash operating working capital | 25,991 | (40,539 | ) | 34,423 | (44,611 | ) | |||||||||
| Change in receivable from Quebecor Media Inc. relating to dividend income (note 4) | 32,328 | — | 53,150 | — | |||||||||||
| Cash provided by operating activities | 138,109 | 30,466 | 334,150 | 72,290 | |||||||||||
| FINANCING | |||||||||||||||
| Issuance of Convertible Obligation (note 4) | — | 1,600,000 | — | 1,600,000 | |||||||||||
| Interest paid on Convertible Obligation (note 4) | (79,890 | ) | — | (197,063 | ) | — | |||||||||
| Long-term debt | 467 | 147 | 1,838 | 16,556 | |||||||||||
| Repayment of long-term debt | — | (446 | ) | (37,738 | ) | (41,093 | ) | ||||||||
| Dividends on common stock | — | (7,117 | ) | (70,945 | ) | (7,117 | ) | ||||||||
| Other | (425 | ) | (1,575 | ) | (861 | ) | (1,997 | ) | |||||||
| Cash provided by (used in) financing activities | (79,848 | ) | 1,591,009 | (304,769 | ) | 1,566,349 | |||||||||
| INVESTMENTS | |||||||||||||||
| Investments (notes 4 and 5) | — | (1,600,000 | ) | (756 | ) | (1,600,000 | ) | ||||||||
| Additions to fixed assets | (4,362 | ) | (4,980 | ) | (6,493 | ) | (16,750 | ) | |||||||
| Proceeds from disposal of assets | 748 | 393 | 1,716 | 440 | |||||||||||
| Other | — | — | 925 | (9 | ) | ||||||||||
| Cash provided by (used in) investing activities | (3,614 | ) | (1,604,587 | ) | (4,608 | ) | (1,616,319 | ) | |||||||
| INCREASE IN CASH | 54,647 | 16,888 | 24,773 | 22,320 | |||||||||||
| CASH — BEGINNING OF PERIOD | 9,294 | 8,879 | 39,168 | 3,447 | |||||||||||
| CASH — END OF PERIOD | $ | 63,941 | $ | 25,767 | $ | 63,941 | $ | 25,767 | |||||||
SUN MEDIA CORPORATION
CONSOLIDATED BALANCE SHEET
(Thousands of Canadian dollars)
| | September 30 2002 | December 31 2001 | |||||
|---|---|---|---|---|---|---|---|
| | (Unaudited) | | |||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash | $ | 63,941 | $ | 39,168 | |||
| Accounts receivable | 101,814 | 110,371 | |||||
| Inventories | 11,442 | 12,010 | |||||
| Prepaid expenses | 5,139 | 3,507 | |||||
| Receivable from Quebecor Media Inc. (note 4) | 42,192 | 95,342 | |||||
| Income and other taxes | 11,785 | — | |||||
| Future income taxes | 4,341 | 4,341 | |||||
| 240,654 | 264,739 | ||||||
| FIXED ASSETS | 213,482 | 227,199 | |||||
| INVESTMENT IN QUEBECOR MEDIA INC. (note 4) | 1,600,000 | 1,600,000 | |||||
| GOODWILL | 751,317 | 751,735 | |||||
| OTHER ASSETS | 51,337 | 54,450 | |||||
| $ | 2,856,790 | $ | 2,898,123 | ||||
| LIABILITIES | �� | ||||||
| CURRENT LIABILITIES | |||||||
| Accounts payable and accrued liabilities | $ | 97,288 | $ | 109,269 | |||
| Income and other taxes | — | 1,456 | |||||
| Deferred subscription revenue | 15,927 | 15,213 | |||||
| Current portion of long-term debt | 50,000 | 5,000 | |||||
| 163,215 | 130,938 | ||||||
| LONG-TERM DEBT | 467,019 | 549,512 | |||||
| FUTURE INCOME TAXES | 40,821 | 38,981 | |||||
| OTHER LIABILITIES | 38,127 | 37,661 | |||||
| NON-CONTROLLING INTEREST | 1,844 | 1,838 | |||||
| SHAREHOLDER'S EQUITY | |||||||
| CONVERTIBLE OBLIGATION (note 4) | 1,641,011 | 1,692,673 | |||||
| CAPITAL STOCK | 301,801 | 301,801 | |||||
| RETAINED EARNINGS | 202,728 | 144,442 | |||||
| TRANSLATION ADJUSTMENT | 224 | 277 | |||||
| 2,145,764 | 2,139,193 | ||||||
| $ | 2,856,790 | $ | 2,898,123 | ||||
SUN MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Thousands of Canadian dollars)
1. Basis of presentation
The unaudited consolidated financial statements in this report have been prepared in conformity with generally accepted accounting principles in Canada and should be read in connection with Sun Media Corporation's ("the Company's") annual audited consolidated financial statements and notes thereto. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of the Company, considered necessary for fair presentation. The results of operations for the interim periods should not be considered indicative of the results to be expected for the full year due to the seasonality of the Company's business.
2. Changes in Accounting Policies
In fiscal 2001, the Canadian Institute of Chartered Accountants ("CICA") issued section 1581,Business Combinations, of the CICA Handbook. Under section 1581, business combinations initiated after June 30, 2001 are to be accounted for as a purchase. Also, the section specifies that certain criteria for intangible assets acquired in a purchase method business combination must be met to be recognized and reported apart from goodwill. For purchase business combinations consummated after June 30, 2001, goodwill and intangibles are to be recorded and amortized in accordance with section 1581 and section 3062 of the Handbook (see item (b)).
In fiscal 2001, the CICA issued section 3062,Goodwill and Intangible Assets, of the CICA Handbook. Section 3062 requires that goodwill and intangible assets with indefinite lives no longer be amortized, but instead be tested for impairment at least annually by comparing the carrying value to the respective fair value. Section 3062 also requires that intangible assets with estimated useful lives be amortized over their respective useful lives to their estimated residual values, and reviewed for impairment by assessing the recoverability of the carrying values. The Company has adopted the provisions of section 3062, effective January 1, 2002.
In connection with section 3062's transitional goodwill impairment evaluation, the Company is required to assess whether goodwill is impaired as of January 1, 2002. The Company has completed the transitional goodwill impairment assessment, and has determined that no impairment existed as of the date of adoption.
Effective January 1, 2002, the Company had unamortized goodwill of $751,735, which is no longer being amortized. This change in accounting policy is not applied retroactively and the amounts presented for prior periods have not been restated for this change. The table below outlines the impact of the change had it been applied retroactively.
| | Three months ended Sept 30, 2002 | Three months ended Sept 30, 2001 | Nine months ended Sept 30, 2002 | Nine months ended Sept 30, 2001 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net income | $ | 72,419 | $ | 58,826 | $ | 223,002 | $ | 77,308 | ||||
| Add back goodwill amortization net of income taxes | — | 5,044 | — | 15,078 | ||||||||
| Net income before goodwill amortization | $ | 72,419 | $ | 63,870 | $ | 223,002 | $ | 92,386 | ||||
3. Charge for Restructuring of Operations
The Company implemented restructuring initiatives in the second quarter of 2001 in response to difficult market conditions. The initiatives resulted in a work-force reduction charge of $11,500 in the quarter, or $7,000 net of tax. Employee terminations were made across all geographic regions and departments of the Company, and included employees at all levels. The work-force reduction costs consisted primarily of severance, benefit,
and other personnel-related costs. A total of 225 employees were terminated. As at September 30, 2002, $300 was included in accrued liabilities relating to the 2001 termination costs. The remaining termination costs are expected to be paid by the end of the year.
4. Convertible Obligation and Investment in Quebecor Media Inc.
On July 9, 2001, the Company issued a $1,600,000 Convertible Obligation to its parent, Quebecor Media Inc. ("QMI"). This Convertible Obligation is due July 14, 2007 and carries a rate of 12.15% per year, payable semi-annually. At the option of the Company, each payment may be deferred and paid in Common Shares of the Company. The Convertible Obligation is also convertible at the option of the Company into Common Shares of the Company. The total interest paid on the Convertible Obligation for the nine months ended September 30, 2002 was $197,063, and $79,890 for the three months ended September 30, 2002. In the nine month period ended September 30, 2002, the interest on the convertible obligation amounted to $93,541, net of income taxes of $51,860. In the three month period ended September 30, 2002, the interest on the convertible obligation amounted to $32,473, net of income taxes of $15,994. At September 30, 2002 the unpaid distribution on the convertible obligation amounted to $41,011.
The proceeds on the Convertible Obligation were invested into $1,600,000 Cumulative First Preferred Shares of QMI, which carry fixed cumulative preferential dividends at a rate of 12.50% per year, payable semi-annually. During the nine months ended September 30, 2002, dividends of $149,589 were declared on the Cumulative First Preferred Shares owned by the Company, and $49,863 for the three months ended September 30, 2002. For the nine months ended September 30, 2002, the Company received payments of dividend income of $202,739 from QMI, and at September 30, 2002, the unpaid dividend receivable from QMI was $42,192.
5. Acquisition of 3351611 Canada Inc. and Communications Gratte-Ciel Ltd.
On March 29, 2002, the Company acquired 3351611 Canada Inc. ("3351611") and Communications Gratte-Ciel Ltd. ("Gratte-Ciel") from its parent, QMI, for net cash proceeds of $756. As this transaction was between related parties, the excess of the purchase price over the net book value of the two acquired companies of $230 was recorded as an adjustment to retained earnings. 3351611 is the holding company of Gratte-Ciel, which operates two weekly publications,the Montreal Mirror andIci Montreal.
6. Description of the Business
The Company publishes urban dailies in eight of the top eleven markets in Canada and seven community dailies. The Company also publishes approximately 191 weeklies, buyer's guides and other specialty publications in communities across Canada and Florida. The Company's principal sources of revenue are from advertising and circulation sales.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SUN MEDIA CORPORATION | ||||
By: | /s/ Kin-Man Lee | |||
| Date: November 5, 2002 | Name: | Kin-Man Lee | ||
| Title: | Vice President, Corporate Controller | |||
