Yellow Pages posts $168.8 million loss in third quarter as goodwill written down

By Luann Lasalle, The Canadian Press

MONTREAL - Yellow Pages Income Fund (TSX: YLO-UN.TO) assured investors Wednesday that it will maintain cash distributions at the current rate until it converts into a corporation, despite challenging economic times and a loss in the third quarter.

The Montreal-based fund, which owns Canada's largest directories business, took a $315-million non-cash accounting charge against its goodwill intangible assets, putting Yellow Pages into the red.

Goodwill arises in corporate acquisitons and the writedown announced Wednesday reflects the impaired value of the Trader classified-ad publications, which the fund bought in 2006 for $760 million.

Chief financial officer Christian Paupe called it an accounting adjustment and said it has no effect on liquidity.

"Given the accounting loss, we felt it was appropriate to affirm our cash distributions leading to conversion," Paupe told a conference call with analysts to discuss the financial results.

The fund's Vertical Media segment, which includes the published directors and websites produced by Trader for specialized markets, saw revenue fall by 25 per cent from a year earlier to $61.5 million

Paupe said Yellow Pages Income Fund plans to convert to a corporation in late 2010, which will be just ahead of a change in federal tax law for income trusts that will take away their advantage over dividend-paying corporations.

Yellow Page's net loss was $168.8 million, or 33 cents per unit, and compared with net income of $146.1 million or 28 cents per unit in the third quarter of 2008.

"We continue to deliver good results in the face of a weak economy," CEO Marc Tellier also to the conference call.

"YPG is very well positioned for sustained growth when the economy recovers," Tellier said.

During the quarter, Yellow Pages declared distributions of 20 cents per unit, or at an annualized rate of 80 cents per unit. The distribution rate was cut to that rate last spring.

In total, Yellow Pages paid out $102 million in cash distributions to unitholders during the quarter, down from $150.2 million or 29 cents per unit a year ago.