Torstar Corporation Reports First Quarter Results

TORONTO, ON--(Marketwired - May 06, 2015) - Torstar Corporation (TSX: TS.B) today reported financial results for the first quarter ended March 31, 2015.

Highlights for the first quarter:

• Segmented revenue (see "non-IFRS measures") was $192.3 million in the first quarter of 2015, down $19.0 million (9.0%) from $211.3 million in the first quarter of 2014. 

• Segmented adjusted EBITDA (see "non-IFRS measures") was $11.2 million in the first quarter of 2015, down $3.3 million (22.9%) from $14.5 million in the first quarter of 2014 and included the benefit of a digital media tax credit. 

• First quarter 2015 segmented operating profit (see "non-IFRS measures") decreased $1.7 million or 100% from the first quarter of 2014. 

• Net loss from continuing operations was $0.5 million ($0.01 per share) in the first quarter of 2015, an improvement of $1.1 million ($0.01 per share) from a loss of $1.6 million ($0.02 per share) in the first quarter of 2014. 

• Net loss attributable to equity shareholders was $3.7 million ($0.05 per share) in the first quarter of 2015 compared to net income attributable to equity shareholders of $7.1 million ($0.09 per share) in the first quarter of 2014.

• Adjusted earnings per share (see "non-IFRS measures") was $0.02 in the first quarter of 2015, consistent with the first quarter of 2014.

• Ended the first quarter of 2015 with total cash and cash equivalents and restricted cash of $271.7 million.

• During the quarter, Torstar signed definitive documents with La Presse Ltée in respect of the Toronto Star's new tablet product which is currently expected to launch in the fall of 2015.

"The quarter's results were affected by continued pressures on print advertising revenue, which more than offset the benefit of the ongoing efforts to reduce cost," said David Holland, President and CEO of Torstar Corporation. "Segmented adjusted EBITDA, which benefited from a digital media tax credit, was down $3.3 million to $11.2 million. The year got off to a slow start in January but we have seen some relative improvement since then."

"We were pleased with the continued growth of local digital advertising revenue at Metroland and we remain very committed to a multi-platform evolution across our media operations. In keeping with this, the Toronto Star launch of its new tablet offering remains on track for the fall of 2015. Our assessment of options available to employ the capital arising from the Harlequin sale is ongoing." 

The following chart provides a continuity of earnings per share for the first quarter ended March 31, 2015 to the first quarter ended March 31, 2014:

* Items are excluded from definition of adjusted earnings per share, see "Non-IFRS measures"

OPERATING RESULTS - FIRST QUARTER 2015
The following tables sets out, in $000's the segmented results for the three months ended March 31, 2015 and 2014.

* Includes proportionately consolidated share of joint venture operations
** These are non-IFRS or additional IFRS measures, see "non-IFRS measures".

Revenue
Segmented revenue was down $19.0 million or 9.0% largely due to print advertising revenue declines, combined with declines in flyer distribution revenues and relatively stable multi-platform subscriber revenues. At the Star Media Group, the trends in print advertising revenue declines in the first quarter of 2015 eased somewhat relative to the fourth quarter of 2014 reflecting a moderation in the rate of decline in national advertising at the Toronto Star. Star Media Group revenues in the first quarter of 2015 were also negatively affected by the closure of print operations in three of Metro's smaller regions in the third quarter of 2014. At Metroland Media Group, the decline in print advertising and flyer distribution revenues experienced in the first quarter of 2015 was largely the result of particularly weak revenues in January which moderated significantly in both February and March. Flyer distribution revenues were also down largely as a result of closures and financial challenges of a few large retail customers. 

Digital revenue in the first quarter of 2015 was down 3.3% relative to the first quarter of 2014. This decrease was the result of lower revenues at Olive Media, Workopolis and WagJag. Excluding the declines in revenue at these properties, digital revenues were up 7.1%, as compared with the first quarter of 2014 reflecting continued growth at eyeReturn Marketing, Metroland's local community websites and digital services. Digital revenues were 13.1% of total segment revenues in the first quarter of 2015 compared to 12.3% in the first quarter of 2014.

Adjusted EBITDA
Segmented adjusted EBITDA was $11.2 million in the first quarter of 2015, down $3.3 million from the first quarter of 2014, reflecting declines in print advertising revenues and general wage increases which were only partially offset by the impact of cost reductions and a $6.0 million digital media tax credit. Overall costs at Metroland Media Group and Star Media Group decreased by $16.2 million in the first quarter of 2015, including the benefit of a $6.0 million digital media tax credit, $5.2 million of savings from restructuring initiatives, and the impact of lower newsprint price and consumption.

Operating earnings
Segmented operating earnings were $3.8 million in the first quarter of 2015, down $1.7 million from $5.5 million in the first quarter of 2014.

Restructuring and other charges
Total segmented restructuring and other charges were $3.8 million in the first quarter of 2015. These charges primarily related to ongoing efforts to reduce costs and reflect a reduction of approximately 35 positions which are expected to result in annualized net labour savings of $3.0 million. Of the annualized savings anticipated as a result of the initiatives undertaken within the first quarter of 2015, $2.7 million of the savings are expected to be realized in 2015 (including $0.4 million in the first quarter) and $0.3 million in 2016.

Net loss from continuing operations
Net loss from continuing operations was $0.5 million ($0.01 per share) in the first quarter of 2015, an improvement of $1.1 million ($0.01 per share) from a loss of $1.6 million ($0.02 per share) in the first quarter of 2014. 

Income (loss) from discontinued operations
On August 1, 2014 Torstar sold all of the shares of Harlequin to a division of HarperCollins Publishers L.L.C., a subsidiary of News Corp., for a purchase price of $455.0 million, subject to certain adjustments for working capital and other related items. Effective the second quarter of 2014, Harlequin was reclassified as Assets Held for Sale and Discontinued Operations. Upon the closing of the sale in the third quarter of 2014, the net assets of Harlequin were no longer included in Assets Held for Sale. In connection with the sale of Harlequin, Torstar indemnified the Purchaser for costs and fees related to certain matters including certain tax and pre-existing litigation matters, estimated the exposure under these indemnities and recorded a contingent liability in respect of these matters. The loss from discontinued operations of $3.5 million in the first quarter of 2015 reflects the appreciation of the U.S. dollar relative to the Canadian dollar in respect of these provisions as well as revised estimates of the amounts of these provisions in respect of taxes and legal costs. Net Income from discontinued operations was $8.7 million in the first quarter of 2014. 

Net income (loss) attributable to equity shareholders
Net loss attributable to equity shareholders was $3.7 million ($0.05 per share) in the first quarter of 2015 compared to net income attributable to equity shareholders of $7.1 million ($0.09 per share) in the first quarter of 2014.

OUTLOOK
While the challenges experienced by Metroland Media Group and Star Media Group as a result of continued shifts in spending by advertisers in the first quarter of 2015 are expected to continue in the balance of the year, early indications at the Star Media Group are that the rate of print advertising revenue decline in April has moderated relative to the first quarter of 2015. At Metroland Media Group, after a particularly weak January, the improved trends experienced in February and March have not continued into April with revenue trending down modestly and results mixed throughout the month. However, it is difficult to predict if these trends will continue in the balance of 2015. Torstar expects that flyer distribution revenues in the balance of the year will continue to be negatively affected by closures and financial challenges of a few large retail customers, partially offset by the benefit of price increases. Multi-platform subscriber revenues were relatively stable in the first quarter of 2015 but will likely experience some degree of decline in the balance of 2015 arising from the decision to launch the Toronto Star's new tablet product and the elimination of the paywall effective April 1, 2015. Digital revenue is expected to grow in the balance of 2015.

In the area of operating costs, costs associated with the Toronto Star's planned launch of the tablet product in the balance of 2015 are currently expected to be in the range of $8 to $9 million and, as previously communicated, are expected to increase throughout the year and peak in the fourth quarter when the product is currently expected to launch and begin to generate revenue. Across Torstar, cost reduction will remain an important area of focus and Metroland Media Group and Star Media Group are anticipated to realize $9.0 million of savings in the balance of 2015 from restructuring initiatives undertaken through the end of the first quarter of 2015 ($2.9 million in Metroland Media Group and $6.1 million in the Star Media Group). Excluding the impact of launching the Toronto Star's tablet product, net investment spending associated with growth initiatives in the balance of 2015 is currently expected to be somewhat lower than 2014 levels.

DIVIDEND
On May 5, 2015, Torstar declared a quarterly dividend of 13.125 cents per share on its Class A shares and Class B non-voting shares, payable on June 30, 2015, to shareholders of record at the close of business on June 12, 2015. Torstar advises that, for the purposes of the Income Tax Act, Canada and for any relevant provincial tax legislation, this dividend is designated as an eligible dividend.

ADDITIONAL INFORMATION
For additional information, please refer to Torstar's condensed consolidated financial statements for the three months ended March 31, 2015 and the Interim Management's Discussion and Analysis ("MD&A"). Both documents will be filed today on SEDAR and are available on Torstar's corporate website www.torstar.com.

CONFERENCE CALL
Torstar has scheduled a conference call for May 6, 2015 at 8:15 a.m. to discuss its first quarter results. The dial-in number is (416) 340-8527 or 1-800-355-4959. A live broadcast of the conference call will be available over the internet on the Presentations, Events and Conference Calls page (Investor Relations) on Torstar's website www.torstar.com. A recording of the conference call will be available for 9 days at (905) 694-9451 or 1-800-408-3053 reservation number 6387009. An online archive of the broadcast will be available shortly after the completion of the call and will be accessible by visiting the Presentations, Events and Conference Calls (Investor Relations) page on Torstar's website www.torstar.com.

ANNUAL GENERAL MEETING
Torstar will be holding its Annual General Meeting at 10:00 a.m. on May 6, 2015 at The St. James Cathedral Centre, 65 Church Street, Toronto, Ontario in the Snell Room. The Annual General Meeting will also be webcast live on the Presentations, Events and Conference Calls Page (Investor Relations) at www.torstar.com with interactive capabilities. An online archive of the webcast will be available shortly after the completion of the meeting and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) on Torstar's website www.torstar.com. 

About Torstar Corporation
Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include the Star Media Group led by the Toronto Star, Canada's largest daily newspaper and Free Daily News Group Inc., which publishes the English-language Metro newspapers in several Canadian cities; Metroland Media Group, publisher of community and daily newspapers in Ontario; and also include digital properties including thestar.com, Workopolis, wagjag.com, toronto.com, save.ca, Olive Media, and eyeReturn Marketing. 

Non-IFRS measures
In addition to operating profit, an additional IFRS measure, as presented in the consolidated statement of income, management uses segmented revenue, adjusted EBITDA ("EBITDA") (and where applicable segmented adjusted EBITDA), operating earnings (and where applicable segmented operating earnings), and adjusted earnings per share as measures to assess the consolidated performance and the performance of the reporting units and business segments. Please refer to Section 11 of Torstar's MD&A for the three months ended March 31, 2015 for a reconciliation of adjusted EBITDA and Operating earnings (and Segmented adjusted EBITDA/Segmented Operating earnings -- as applicable) with Operating profit (Segmented Operating profit -- as applicable) and adjusted earnings per share to earnings per share.

Segmented revenue
Segmented revenue is calculated in the same manner as operating revenue in the Consolidated Financial Statements, except that it is calculated using total segment results including proportionately consolidated results for joint ventures.

Adjusted EBITDA(Segmented Adjusted EBITDA)
Management believes that adjusted EBITDA is an important proxy for the amount of cash generated by Torstar's ongoing operations (or by a reporting unit or business segment) to generate liquidity to fund future capital needs and management uses this metric for this purpose. Adjusted EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted EBITDA as operating revenue less salaries and benefits and other operating costs as presented on the consolidated statement of income and excludes restructuring and other charges and impairment of assets. Restructuring and other charges and impairment of assets are eliminated as these activities are not related to ongoing operations as of the end of the period. The exclusion of impairment of assets also eliminates the non-cash impact. Adjusted EBITDA is also used by investors and analysts for valuation purposes. The intent of adjusted EBITDA is to provide additional useful information to investors and analysts and financial statement readers and the measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies (including calculating EBITDA on an adjusted basis to exclude restructuring and other charges and impairment of assets). Segmented adjusted EBITDA is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for joint ventures.

Operating earnings/Segmented operating earnings
Operating earnings is used by management to represent the results of ongoing operations inclusive of amortization and depreciation. It is not a recognized measure of financial performance under IFRS. Torstar calculates operating earnings as operating revenue less salaries and benefits and other operating costs and amortization and depreciation. Operating earnings excludes restructuring and other charges and impairment of assets. Restructuring and other charges and impairment of assets are eliminated as these activities are not related to ongoing operations as of the end of the period. Torstar's method of calculating operating earnings (including calculating operating earnings on an adjusted basis to exclude restructuring and other charges and impairment of assets) may differ from other companies and accordingly may not be comparable to measures used by other companies. Segmented operating earnings is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for joint ventures.

Adjusted earnings per share
Adjusted earnings per share is used by management to represent the per share earnings of results of ongoing operations and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted earnings per share as earnings per share from continuing operations less the per share effect of restructuring and other charges, impairment of assets, non-cash foreign exchange, other income (expense) and change in deferred taxes. Torstar's method of calculating adjusted earnings per share may differ from other companies and accordingly may not be comparable to measures used by other companies.

Operating profit/Segmented operating profit
Operating profit is an additional IFRS measure used by management to represent the results of operations inclusive of impairments and restructuring and other charges and appears in Torstar's consolidated statement of income. Segmented operating profit is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for joint ventures.

Forward-looking statements
Certain statements in this press release and in Torstar's oral and written public communications may constitute forward-looking statements that reflect management's expectations regarding Torstar's future growth, financial performance and business prospects and opportunities as of the date of this press release. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "anticipate", "believe", "plan", "forecast", "expect", "estimate", "intend", "would", "could", "if", "may" and similar expressions.

This press release includes, among others, forward-looking statements regarding Torstar's expected revenues, expected net savings from restructuring initiatives, expected contingent liabilities, the outlook for the balance of 2015, the expected development and launch, including the timing thereof, of the Toronto Star digital tablet edition and expected expenses associated therewith and expected investment spending associated with other growth initiatives. All such statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance, and speak only as of the date of this release. In addition, forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.

By their very nature, forward-looking statements require management to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that management's assumptions may not be accurate and that actual results, performance or achievements may differ significantly from such predictions, forecasts, conclusions or projections expressed or implied by such forward-looking statements. We caution readers not to place undue reliance on the forward-looking statements in this press release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-looking statements. 

These factors include, but are not limited to: Torstar's ability to operate in highly competitive industries; Torstar's ability to compete with digital media, other newspapers and other forms of media; Torstar's ability to respond to the shift to digital media and the shift by advertisers to other digital platforms; Torstar's ability to attract, grow and retain its digital audience and profitably develop its digital platforms; Torstar's ability to attract and retain advertisers; Torstar's ability to maintain adequate circulation/subscription levels; Torstar's ability to attract and retain readers; Torstar's ability to integrate the technology associated with new digital platforms, including the Toronto Star's new digital tablet product; general economic conditions and customer prospects in the principal markets in which Torstar operates; Torstar's ability to reduce costs; loss of reputation; dependence on third party suppliers and service providers; reliance on technology and information systems; Torstar's ability to execute appropriate strategic growth initiatives; unexpected costs or liabilities related to acquisitions and dispositions; changes in employee future benefit obligations; labour disruptions; newsprint costs; reliance on its printing operations; litigation; privacy, anti-spam, communications, e-commerce and environmental laws, health and safety regulations and other laws and regulations applicable generally to Torstar's businesses; availability of insurance; dependence on key personnel; intellectual property rights; credit risk; product revenue and product liability; changes in deposit interest rates; foreign exchange fluctuations and foreign operations; income tax and other taxes; results of impairment tests and uncertainties associated with critical accounting estimates; and control of the Company by the Voting Trust. 

Torstar cautions that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results. 

In addition, a number of assumptions, including those assumptions specifically identified throughout this press release, were applied in making the forward-looking statements set forth in this press release. Some of the key assumptions include, without limitation, assumptions regarding the performance of the North American economies; tax laws; continued availability of printing operations; availability of financing on appropriate terms; exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan obligations; expected future revenues; expected future liabilities; expected future cash flows and discount rates relating to valuation of goodwill and intangible assets; and successful development and launch of new products including the Toronto Star digital tablet edition. There is a risk that some or all of these assumptions may prove to be incorrect. 

When relying on our forward-looking statements to make decisions with respect to Torstar and its securities, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Torstar does not intend, and disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information or otherwise, except as may be required by law.

For more information, please see the discussion of risks affecting Torstar and its businesses in Torstar's 2014 Management's Discussion & Analysis which has been filed on www.sedar.com and is available on Torstar's corporate website www.torstar.com.

Torstar's news releases are available on the Internet at www.torstar.com.

* The 2014 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.

* The 2014 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.