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Yellow Media takes $2.9-billion impairment charge

Marc Tellier, president and chief executive officer of Yellow Media Inc., in Montreal in 2010. The company announced Monday, May 7, 2012, that it was cancelling its annual meeting planned for Tuesday because it didn't have enough shareholder votes to reach quorum.


At 9 a.m. (ET), Steve Ladurantaye reports live from the Yellow Media conference call.

Things just got worse at Yellow Media Inc., with the company's executives warning investors that digital ads aren't making up for the losses piling up in its printed phonebooks division.

With its share price near zero and bond holders thinking out loud about what it might take to privatize the company to recoup at least some of their investments, Yellow Media said late Monday that the business is worth far less than they believed only a few months ago as it recorded a $2.9-billion impairment charge.

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"During the quarter, we noted changes in our revenue trends affecting our long-term projections," the company said in regulatory filings released late Monday. "Specifically, we now believe online revenue growth will be slower than previously anticipated and print decline will be steeper based on a more rapid and enduring change than previously anticipated."

The company said the trends are "significantly" different than they had expected throughout 2011, a harsh truth being noted by publishers of all kinds this year. But it was particularly concerned after an April deal that saw AT&T sell a majority stake in its phonebook division to Cerebrus Capital for about $950-million, which was "considerably less" than Yellow Media would have expected.

"[The deal]was for a price considerably lower than our estimated enterprise value," the company said. "The transaction highlights the challenges and the execution risks associated with our business and the industry in which we operate as we attempt to transition from a print-centric business to a digital company."

The company was once a staple in the investment portfolios of thousands of individuals who counted on its shares to produce steady dividends. But while it has been making strides in converting its customers to its digital offerings, it isn't generating enough digital revenue to make up for the losses in print.

It made the disclosure as it reported a first quarter loss of $2.9-billion. Without the impairment charge – a non-cash item that reflects the perceived value of a company – the company earned $57.5-million in the quarter, compared to $70.5-million a year ago.

Revenue was $289-million, compared to $349-million a year ago. The 17 per cent difference was attributed to lower print revenue in its phonebooks and its decision to shutter its Canpages division.

Now, with more than $700-million in debt due by the end of 2013, according to Standard & Poor's Capital IQ, the company is struggling to come up with an alternate business plan and refinance its debt.

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Investors who have seen their shares lose about 90 per cent of their value in the last year (as directors received a 26 per cent pay raise) may have voiced concerns at the annual general meeting which was scheduled for today in Montreal.

But the company said "due to low participation levels" it didn't have enough votes to meet quorum as it officially cancelled the proceedings.

"The adjournment of the meeting has no impact on the business and operations of the company," chairman Marc Reisch said. "The board of directors will continue to oversee the business and affairs of the company."

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