SOURCE: Torstar Corporation

Torstar Corporation

May 04, 2016 06:30 ET

Torstar Corporation Reports First Quarter Results

TORONTO, ON--(Marketwired - May 04, 2016) - Torstar Corporation (TSX: TS.B) today reported financial results for the first quarter ended March 31, 2016.

Highlights for the first quarter:

  • In January 2016, we announced the transition of printing of the Toronto Star to Transcontinental Printing which is expected to commence in July 2016. Also in connection with this decision, we have initiated the sale process of the printing facility and land in Vaughan.
  • During the first quarter of 2016, $22.8 million of restricted cash was released from the Harlequin escrow and we ended the quarter with $51.2 million of cash and cash equivalents and restricted cash.
  • Our net loss from continuing operations was $53.5 million ($0.66 per share) in the first quarter of 2016. This compares to a net loss of $0.5 million ($0.01 per share) in the first quarter of 2015. The first quarter of 2016 included $27.6 million of additional non-cash amortization and depreciation expense associated with our investment in VerticalScope as well as $22.4 million of restructuring charges and $4.8 million of additional non-cash amortization and depreciation expense of equipment related to the transition of printing of the Toronto Star to Transcontinental Printing.
  • Our net loss attributable to equity shareholders was $53.5 million ($0.66 per share) in the first quarter of 2016 compared to net loss attributable to equity shareholders of $3.7 million ($0.05 per share) in the first quarter of 2015.
  • Adjusted loss per share (see "Non-IFRS measures") was $0.40 in the first quarter of 2016, down $0.42 from adjusted earnings per share of $0.02 in the first quarter of 2015. Adjusted loss per share in 2016 included a $0.52 per share effect of amortization and depreciation.
  • Our segmented operating loss (see "Non-IFRS measures") was $74.8 million in the first quarter of 2016 which included $41.9 million non-cash amortization and depreciation expense as well as $31.8 million of restructuring and other charges, $22.4 million of which related to the transition of printing of the Toronto Star to Transcontinental Printing.
  • Our segmented adjusted EBITDA (see "Non-IFRS measures") was a loss of $1.1 million in the first quarter of 2016, down $12.3 million from the first quarter of 2015. This decline reflects the absence of a $6.0 million digital media tax credit included in the prior year, a $5.1 million net investment in Toronto Star Touch and the loss of $1.4 million in commercial printing contribution at the Vaughan Press Centre. The remaining increase of $0.2 million was the result of revenue declines which were offset by $6.7 million of net savings from restructuring initiatives, higher contribution from our Digital Ventures segment, which includes our investment in VerticalScope, and other cost reductions.
  • Segmented revenue (see "Non-IFRS measures") was $174.8 million in the first quarter of 2016, down $17.5 million (9.1%) from $192.3 million in the first quarter of 2015.

"Transition to a more digital future continues at Torstar as we report another quarter of earnings from our VerticalScope investment. In the media operations, the quarterly result was affected by a continuing challenging print advertising environment as well as certain other factors that will not continue through the balance of the year. Results in the quarter were lower with segment adjusted EBITDA down $12.3 million to a loss of $1.1 million as the absence of a $6.0 million digital media tax credit reported in the first quarter of 2015, a $5.1 million investment in Toronto Star Touch and print advertising revenue declines exceeded contributions from VerticalScope and the effect of continuing efforts on costs," said David Holland, President and CEO of Torstar Corporation. "On a positive note, we were pleased with our continued progress in local digital advertising at Metroland and the relative stability of subscriber revenue at the Toronto Star. Looking forward, we do not see the earnings performance this quarter as indicative of our year. We anticipate growth in segment adjusted EBITDA in the remaining nine months of 2016 due to efforts on costs, and as anticipated, lower net investment in Toronto Star Touch compared to the 2015 launch. We remain very committed to a multi-platform evolution across our media operations. In our Digital Ventures segment, adjusted EBITDA increased $4.5 million in the first quarter as we benefited from the inclusion of earnings from our investment in VerticalScope."

The following chart provides a continuity of earnings per share from the first quarter of 2015 to the first quarter of 2016:

       
    First quarter  
    Earnings (Loss) Per Share     Adjusted Earnings (Loss) Per Share**  
Earnings (loss) per share from continuing operations attributable to equity shareholders in 2015   ($0.01 )   $0.02  
Changes            
  • Adjusted EBITDA*   (0.15 )   (0.15 )
  • Amortization and depreciation*   (0.43 )   (0.43 )
  • Operating earnings*   (0.59 )   (0.56 )
  • Restructuring and other charges*   (0.35 )      
  • Operating profit (loss)*   (0.94 )   (0.56 )
  • Non-cash foreign exchange   0.01        
  • Income from associated businesses (excluding VerticalScope)   0.01     0.01  
  • Other income (expense)   0.02        
  • Change in current and future taxes (including associated businesses)   0.24     0.15  
Earnings (loss) per share from continuing operations attributable to equity shareholders in 2016   ($0.66 )   ($0.40 )

*Includes proportionately consolidated share of joint venture operations in 2016 and 2015 and 56% interest in VerticalScope in 2016. These include Non-IFRS or additional IFRS measures.
** Refer to discussion of "Non-IFRS measures" including definition of adjusted earnings (loss) per share.

OPERATING RESULTS -FIRST QUARTER 2016
The following tables sets out, in $000's the segmented results for the three months ended March 31, 2016 and 2015.

   
Three months ended March 31, 2016  
(in $000's)   MMG     SMG     Digital
Ventures
    Corporate     Total
Segmented*
    Adjustments & Eliminations 1     Total Per Consolidated Statement of Loss  
Operating revenue   $89,065     $69,815     $15,939           $174,819     ($18,138 )   $156,681  
Salaries and benefits   (45,006 )   (31,136 )   (5,894 )   ($1,909 )   (83,945 )   6,722     (77,223 )
Other operating costs   (40,924 )   (44,878 )   (5,540 )   (636 )   (91,978 )   5,699     (86,279 )
Adjusted EBITDA**   3,135     (6,199 )   4,505     (2,545 )   (1,104 )   (5,717 )   (6,821 )
Amortization & depreciation   (3,383 )   (9,519 )   (28,944 )   (7 )   (41,853 )   28,588     (13,265 )
Operating earnings (loss)**   (248 )   (15,718 )   (24,439 )   (2,552 )   (42,957 )   22,871     (20,086 )
Restructuring and other charges   (2,262 )   (29,538 )               (31,800 )         (31,800 )
Operating profit (loss)**   ($2,510 )   ($45,256 )   ($24,439 )   ($2,552 )   ($74,757 )   $22,871     ($51,886 )
Loss from continuing operations                                       ($53,532 )
Net loss                                       ($53,532 )
                                           
   
Three months ended March 31, 2015  
(in $000's)   MMG     SMG     Digital
Ventures
    Corporate     Total
Segmented*
    Adjustments & Eliminations 1     Total Per Consolidated Statement of Loss  
Operating revenue   $100,882     $82,998     $8,426           $192,306     ($11,137 )   $181,169  
Salaries and benefits   (50,883 )   (27,624 )   (3,914 )   ($2,962 )   (85,383 )   4,605     (80,778 )
Other operating costs   (44,495 )   (46,009 )   (4,531 )   (689 )   (95,724 )   4,328     (91,396 )
Adjusted EBITDA**   5,504     9,365     (19 )   (3,651 )   11,199     (2,204 )   8,995  
Amortization & depreciation   (3,404 )   (3,144 )   (887 )   (11 )   (7,446 )   672     (6,774 )
Operating earnings (loss)**   2,100     6,221     (906 )   (3,662 )   3,753     (1,532 )   2,221  
Restructuring and other charges   (1,565 )   (2,176 )   (11 )         (3,752 )   11     (3,741 )
Operating profit (loss)**   $535     $4,045     ($917 )   ($3,662 )   $1     ($1,521 )   ($1,520 )
Loss from continuing operations                                       ($459 )
Net loss from discontinued operations                                       ($3,500 )
Net loss                                       ($3,959 )

1Reflects eliminations of proportionate share of joint ventures in 2016 and 2015 and 56% interest in VerticalScope in 2016.
* Includes proportionately consolidated share of joint venture operations in 2016 and 2015 and 56% interest in VerticalScope in 2016.
** These are non-IFRS or additional IFRS measures, see "Non-IFRS measures".

Revenue
Segmented revenue was down $17.5 million or 9.1% in the first quarter of 2016 with revenues negatively impacted by several factors including the absence of $2.9 million of net revenue associated with the closure of Olive Media at the end of 2015, the absence of $2.0 million of commercial printing revenue at the Vaughan Press Centre, and shifts in revenue at Metroland Media Group due to the year end publishing calendar and the timing of the Easter holiday which shifted from the second quarter last year into the first quarter this year as well as the closures of a few large retail customers in 2015. These negative factors were partially offset by an $8.3 million increase in revenue associated with our investment in VerticalScope. Adjusting for these factors, segmented revenue in the first quarter of 2016 reflected lower print advertising revenues, with particular softness in national advertising revenues, combined with a 4.6% decline in distribution revenues and a 3.0% decrease in subscriber revenue. Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56% interest in VerticalScope) was down $24.5 million or 13.5% in the first quarter.

Excluding the impact of Olive Media, digital revenue across all segments increased 32.4% in the first quarter of 2016, which was primarily attributable to the investment in VerticalScope on July 28, 2015. Digital revenues for the first quarter of 2016 also reflected lower revenues at Workopolis and Save.ca offset by revenues from Toronto Star Touch combined with continued growth in local digital advertising within the community websites at Metroland Media Group. Digital revenues were 17.1% of total segment revenues in the first quarter of 2016 compared to 13.2% in the first quarter of 2015.

Salaries and benefits
Segmented salaries and benefits costs were down $1.5 million or 1.8% in the first quarter of 2016 reflecting the benefit of savings from restructuring initiatives, lower commission costs and lower pension costs, partially offset by: (i) the absence of $6.0 million of digital media tax credits recorded in the first quarter of 2015; (ii) the inclusion of our proportionate share of salaries and benefit costs of VerticalScope; and (iii) increased staffing costs associated with Toronto Star Touch.

Other operating costs
Segmented other operating costs primarily consist of circulation/flyer distribution costs, production costs and newsprint costs which represented 38.1%, 10.1% and 10.9% respectively of segmented other operating costs for the first quarter.

Segmented other operating costs were down $3.7 million or 3.9% in the first quarter of 2016 as a result of lower print volumes and the impact of other cost reductions partially offset by increased costs related to Toronto Star Touch, as well as our proportionate share of VerticalScope's other operating costs.

Adjusted EBITDA
Segmented adjusted EBITDA was a loss of $1.1 million in the first quarter of 2016, down $12.3 million from the first quarter of 2015. This decline reflects the absence of a $6.0 million digital media tax credit included in the prior year, a $5.1 million net investment in Toronto Star Touch and the loss of $1.4 million in commercial printing contribution at the Vaughan Press Centre. The remaining increase of $0.2 million was the result of the above noted revenue declines which were offset by $6.7 million of net savings from restructuring initiatives, higher contribution from our Digital Ventures segment, which includes our investment in VerticalScope, and other cost reductions.

Amortization and depreciation
Total segmented amortization and depreciation increased $34.5 million in the first quarter of 2016, $27.6 million of which was the result of amortization of intangible assets associated with our investment in VerticalScope and $4.8 million of which was due to accelerated amortization of equipment related to the transition of printing of the Toronto Star to Transcontinental Printing.

Operating earnings (loss)
Segmented operating loss was $43.0 million in the first quarter of 2016 compared to operating earnings of $3.8 million in the first quarter of 2015. The loss in the first quarter of 2016 included the impact of $32.4 million of additional amortization expense associated with our investment in VerticalScope and amortization of equipment related to the transition of printing of the Toronto Star to Transcontinental Printing combined with the impact of lower segmented adjusted EBITDA, discussed above.

Restructuring and other charges
Total segmented restructuring and other charges were $31.8 million in the first quarter of 2016 and $3.8 million in the comparable period of 2015. The first quarter of 2016 included a charge of $22.4 million for severance and facility related expenses in respect of our decision to outsource printing of the Toronto Star. The balance of these charges related to other cost reduction initiatives. Restructuring charges through the end of the first quarter of 2016 reflect a reduction of approximately 350 positions which are expected to result in annualized net savings of $17.5 million with $11.9 million of the savings expected to be realized in 2016 (including $1.2 million in the first quarter) and $5.6 million in 2017.

Operating profit (loss)
In the first quarter of 2016, segmented operating loss was $74.8 million compared to segmented operating profit of $nil in the first quarter of 2015. Our first quarter of 2016 operating loss included $41.9 million of non-cash amortization and depreciation expense as well as $31.8 million of restructuring and other charges.

Our operating loss excluding our proportionate share of operating profit (loss) from VerticalScope and our joint ventures increased $50.4 million in the first quarter of 2016.

Foreign exchange
Non-cash foreign exchange gains were $1.5 million in the first quarter of 2016 compared to $0.4 million in the first quarter of 2015. The gain in the first quarter of 2016 included $2.2 million of foreign exchange gains associated with the ineffective portion (for accounting purposes) of the hedge of the net investment in VerticalScope partially offset by $0.7 million of foreign exchange losses associated with the Canadian dollar being stronger at the end of the period relative to the beginning of the period with our operations being in a net asset position in U.S. dollars for the period.

Income (loss) from associated businesses
Our loss from associated businesses was $17.2 million in the first quarter of 2016 compared to a loss of $0.6 million in the first quarter of 2015. The 2016 first quarter included income of $0.8 million from Black Press and income of $0.2 million from Blue Ant, offset by a loss of $0.6 million from Shop.ca and a loss of $17.5 million from VerticalScope. The first quarter loss from VerticalScope included $27.6 million of amortization expense. The first quarter of 2015 included a loss of $0.6 million from Shop.ca, and a loss of $0.3 million from Blue Ant partially offset by income of $0.3 million from Black Press.

Investment in VerticalScope
During the third quarter of 2015, we acquired a 56% interest in VerticalScope. Pursuant to certain terms in the shareholders agreement, the investment is accounted for as an associated business using the equity method, rather than a subsidiary or joint venture. The results of VerticalScope are reported as part of our Digital Ventures Segment in our segmented reporting.

In connection with the investment in VerticalScope, and consistent with the general methodology VerticalScope uses when making its acquisitions, we allocated the difference between the fair value of the purchase price paid and the book value of the net assets of VerticalScope to customer relationships, technology, domain names, acquired content and goodwill. The amortization periods for these intangible assets generally range from 5-10 years, with the exception of acquired content which, consistent with VerticalScope's accounting policy, is amortized over one year. Given the relatively large value allocated to acquired content (U.S. $60.6 million) and the one year amortization period associated with it, we expect large amortization charges related to these intangible assets to continue through the end of July 2016.

Our 56% share of VerticalScope's first quarter 2016 net loss included $27.6 million in respect of amortization and depreciation expense. This included amortization of fair value differences of intangible assets identified when we made our investment in VerticalScope as well as the amortization of fair value differences which VerticalScope has identified on acquisitions it has made subsequent to July 28, 2015. Further details of the operating results for this investment during the first quarter of 2016 are outlined in our discussion of the operating results for the Digital Ventures segment below.

During the first quarter of 2016 VerticalScope made acquisitions totalling U.S. $1.0 million which were financed from VerticalScope's operating cash flow. VerticalScope's debt, net of cash on hand, was U.S. $73.8 million at March 31, 2016 down U.S. $5.1 million from U.S. $78.9 million at December 31, 2015.

Other income
Other income was $1.3 million in the first quarter of 2016 and $nil in the first quarter of 2015. Other income for the first three months of 2016 primarily reflects a gain recognized on the sale of one of Metroland Media Group's real estate properties.

Income and other taxes
We recorded a tax recovery of $13.0 million in the first quarter of 2016. This compares to income tax recovery of $0.1 million in the first quarter of 2015. Our effective tax rate was 19.5% in the first quarter of 2016 and 17.9% in the first quarter of 2015.

Net loss attributable to equity shareholders
Our net loss attributable to equity shareholders was $53.5 million ($0.66 per share) in the first quarter of 2016 compared to net loss attributable to equity shareholders of $3.7 million ($0.05 per share) in the first quarter of 2015. The first quarter of 2016 included $27.6 million of additional non-cash amortization and depreciation expense associated with our investment in VerticalScope as well as $22.4 million of restructuring charges and $4.8 million of additional non-cash amortization and depreciation expense related to the transition of printing of the Toronto Star to Transcontinental Printing.

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 2016 are expected to continue in the balance of the year, early indications at Metroland Media Group are that the rate of print advertising revenue decline in April has moderated relative to the first quarter of 2016. However, it is difficult to predict if these trends will continue in the balance of 2016. We currently expect that flyer distribution revenues will experience moderate declines in the balance of 2016. Subscriber revenues declined moderately in the first quarter of 2016 and this trend is expected to continue in the balance of the year. Excluding the impact of the closure of Olive Media, Metroland Media Group and Star Media Group digital revenue is expected to grow in the balance of 2016 as a result of revenues from Toronto Star Touch, growth at thestar.com as well as growth in local digital advertising at Metroland Media Group. Within the Digital Ventures segment, the trend in revenue growth from a combination of acquisitions and organic revenue growth at VerticalScope experienced in the first quarter of 2016 is expected to be somewhat stronger in the balance of the year. In addition, the organic revenue growth which eyeReturn experienced in the first quarter of 2016 is expected to continue through the balance of the year.

Cost reduction remains an important area of focus for us in the balance of 2016. Net savings related to restructuring initiatives undertaken through the end of the first quarter of 2016 are expected to be $20.7 million in the balance of 2016 ($8.2 million in Metroland Media Group, $11.4 million in the Star Media Group and $1.1 million in Digital Ventures), including an expected $5 million of cost savings relative to 2015 (in the range of approximately $10 million on an annual basis) associated with the transition of printing the Toronto Star to Transcontinental Printing which is currently expected to occur in July 2016. While newsprint pricing has increased in 2016, we expect that any impact of price increases will continue to be more than offset by lower consumption in the balance of the year.

Our net investment in Toronto Star Touch was $5.1 million in the first quarter of 2016 and included significant marketing costs. We continue to anticipate that full year net investment spending for this initiative will be approximately $10 million in 2016.

While segmented adjusted EBITDA was down $12.3 million in the first quarter, we anticipate growth in segmented adjusted EBITDA in the balance of the year due to the impact of cost savings and lower net investment in Toronto Star Touch compared to the 2015 launch.

We have initiated the sale process of the printing facility and land in Vaughan and have been pleased with the level of interest thus far. However, at this point we cannot be certain as to the timing of a potential sale of this property and the amount of any proceeds that may be realized.

The paywall at the Toronto Star was eliminated effective April 1, 2015. Revenues associated with the paywall were not material and were excluded from both the current and prior periods for comparison purposes in the discussions of digital and multi-platform subscriber revenues.

DIVIDEND
On May 3, 2016, Torstar declared a quarterly dividend of 6.5 cents per share on its Class A shares and Class B non-voting shares, payable on June 30, 2016, to shareholders of record at the close of business on June 10, 2016. 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 period ended March 31, 2016 (the "Consolidated Financial Statements") 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 4, 2016 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 3544929. 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 4, 2016 at 1 Yonge Street, 3rd Floor Auditorium, Toronto, Ontario. 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 broadcast will be available shortly after the completion of the call and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) on the www.torstar.com website.

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, Toronto Star Touch, Workopolis, wagjag.com, toronto.com, save.ca and eyeReturn Marketing Inc. It also holds a majority interest in VerticalScope, a North American vertically-focused digital media company.

Non-IFRS measures
In addition to operating profit (loss), an additional IFRS measure, as presented in the consolidated statement of income (loss), management uses segmented revenue, adjusted EBITDA (and where applicable segmented adjusted EBITDA), operating earnings (loss) (and where applicable segmented operating earnings (loss)), and adjusted earnings (loss) 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, 2016 for a reconciliation of adjusted EBITDA and operating earnings(loss) (and segmented adjusted EBITDA/segmented operating earnings (loss) - as applicable) with operating profit(loss) (segmented operating profit (loss)- as applicable) and adjusted earnings (loss) per share to earnings (loss) 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 which includes our proportionately consolidated share of revenues from joint ventures and our 56% interest in VerticalScope. Management of each segment is accountable for the revenues, including the proportionately consolidated share of revenues from joint venture operations. Management believes that segmented revenue is a useful measure for investors as it is a measure of the revenues for which management of each segment is accountable. The intent of segmented revenue is to provide additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies.

Adjusted EBITDA (Segmented Adjusted EBITDA)
Management believes that adjusted EBITDA is an important proxy for the amount of cash generated by our 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. We calculate adjusted EBITDA as operating revenue, less salaries and benefits and other operating costs, as presented on the consolidated statement of income, and exclude 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, analysts and readers of our financial statements. 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 our proportionately consolidated results for joint ventures and our 56% interest in VerticalScope for which management is accountable.

VerticalScope's Adjusted EBITDA has been calculated as total revenue less salaries and benefits and other operating costs, as presented on VerticalScope's consolidated statement of income, and excludes amortization, depreciation, and interest expense. It also excludes transaction related costs associated with Torstar's investment as well as certain tax credits. Adjusted EBITDA is not the actual cash provided by VerticalScope's operating activities and is not a recognized measure of financial performance under IFRS. Adjusted EBITDA does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies, including how Torstar presents its own Adjusted EBITDA.

Operating earnings (loss)/Segmented operating earnings (loss)
Operating earnings (loss) is used by management to represent the results of ongoing operations inclusive of amortization and depreciation. Management uses operating earnings (loss) as a measure of the amount of income generated by our ongoing operations (or by a reporting unit or business segment) after giving effect to amortization and depreciation. Management believes this metric is also useful for investors for this purpose. We calculate operating earnings (loss) as operating revenue less salaries and benefits and other operating costs and amortization and depreciation. Operating earnings (loss) 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. Our method of calculating operating earnings (including calculating operating earnings (loss) 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. The intent of operating earnings (loss) is to provide additional useful information to investors, analysts and readers of Torstar's financial statements. The measure does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under IFRS, and accordingly may not be comparable to measures used by other companies. Segmented operating earnings (loss) is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated operating earnings (loss) for our joint ventures and our 56% interest in VerticalScope for which management is accountable.

Adjusted earnings (loss) per share
Adjusted earnings (loss) per share is used by management to represent the per share earnings (loss) of results of our ongoing operations (or by a reporting unit or business segment) and is not a recognized measure of financial performance under IFRS. Management believes this metric is also useful for investors for this purpose. We calculate adjusted earnings (loss) per share as earnings (loss) 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. 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. Non-cash foreign exchange, other income (expense) and changes in deferred taxes are eliminated as these are not related to ongoing operating activities. The intent of presenting adjusted earnings (loss) per share is to provide additional useful information to investors, analysts and readers of our financial statements. Our method of calculating adjusted earnings (loss) per share may differ from other companies and accordingly may not be comparable to measures used by other companies. The measure does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under IFRS, and accordingly may not be comparable to measures used by other companies.

Operating profit (loss)/Segmented operating profit (loss)
Operating profit (loss) is an additional IFRS measure. Management uses operating profit (loss) to measure the results of operations inclusive of impairments and restructuring and other charges. Operating profit (loss) appears in our consolidated statement of income. Management believes that operating profit (loss) provides additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies. Our method of calculating operating profit (loss) may differ from other companies and accordingly may not be comparable to measures used by other companies. Segmented operating profit (loss) is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for our joint ventures and our 56% interest in VerticalScope for which management is accountable.

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 the expected date of commencement of outsourced services related to the printing of the Toronto Star newspaper, expectations regarding expected savings including savings from restructuring initiatives, Torstar's outlook for the balance of 2016 including anticipated growth in segment adjusted EBITDA, anticipated revenue trends and operating costs (including newsprint costs), expectations regarding expected savings including savings from restructuring initiatives, expected costs related to Toronto Star Touch and expectations regarding the potential sale of the existing printing facility and land in Vaughan, and estimates and expectations relating to amortization and depreciation. 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 press 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 and traffic; Torstar's ability to integrate the technology associated with new digital platforms; 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 and risks of security breaches; changes in employee future benefit obligations; Torstar's ability to execute appropriate strategic growth initiatives including acquisitions; unexpected costs or liabilities related to acquisitions and dispositions; investments in other businesses; labour disruptions; newsprint costs; reliance on 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; foreign exchange fluctuations and foreign operations; availability of insurance; dependence on key personnel; intellectual property rights; credit risk; availability of capital and restrictions imposed by credit facilities; income tax and other taxes; results of impairment tests and uncertainties associated with critical accounting estimates; holding company structure; dividend policy; and control of Torstar 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. There is a risk that some or all of these assumptions may prove to be incorrect. There is no assurance regarding the amount and timing of future dividends.

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 2015 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.

   
   
Torstar Corporation  
Consolidated Statement of Financial Position  
(Thousands of Canadian Dollars)  
(Unaudited)  
   
    As at
March 31, 2016
    As at
December 31, 2015
 
Assets            
  Current:            
  Cash and cash equivalents   $32,476     $35,141  
  Restricted cash   18,725     37,935  
  Receivables   110,526     144,997  
  Inventories   5,954     6,231  
  Derivative financial instruments   4,780        
  Prepaid expenses   7,259     5,944  
  Prepaid and recoverable income taxes   9,658     5,780  
  Total current assets   189,378     236,028  
Investments in joint ventures   33,414     32,861  
Investments in associated businesses   172,383     202,203  
Property, plant and equipment   106,083     117,793  
Intangible assets   65,463     67,821  
Goodwill   8,133     8,133  
Other assets   9,194     9,422  
Employee benefits         6,922  
Deferred income tax assets   24,060     15,233  
Total assets   $608,108     $696,416  
Liabilities and Equity            
  Current:            
  Accounts payable and accrued liabilities   $91,989     $122,296  
  Derivative financial instruments         6,543  
  Provisions   43,144     29,021  
  Income tax payable   5,876     5,943  
  Total current liabilities   141,009     163,803  
Provisions   22,002     13,228  
Other liabilities   7,969     9,872  
Employee benefits   115,087     87,461  
Deferred income tax liabilities   2,842     2,315  
Equity:            
  Share capital   402,592     402,500  
  Contributed surplus   20,047     19,858  
  Accumulated deficit   (103,698 )   (7,560 )
  Accumulated other comprehensive income   (1,051 )   3,121  
  Total equity attributable to equity shareholders   317,890     417,919  
  Minority interests   1,309     1,818  
Total equity   319,199     419,737  
Total liabilities and equity   $608,108     $696,416  
             
   
   
Torstar Corporation  
Consolidated Statement of Loss  
(Thousands of Canadian Dollars except per share amounts)  
(Unaudited)  
   
    Three months ended
 March 31
 
    2016     2015  
             
Operating revenue   $156,681     $181,169  
             
Salaries and benefits   (77,223 )   (80,778 )
Other operating costs   (86,279 )   (91,396 )
Amortization and depreciation   (13,265 )   (6,774 )
Restructuring and other charges   (31,800 )   (3,741 )
Operating loss   (51,886 )   (1,520 )
Interest and financing costs   (774 )   (79 )
Foreign exchange   1,534     405  
Income from joint ventures   553     1,218  
Loss from associated businesses   (17,232 )   (588 )
Other income   1,273     5  
    (66,532 )   (559 )
Income and other taxes recovery   13,000     100  
Net loss from continuing operations   (53,532 )   (459 )
Loss from discontinued operations         (3,500 )
Net loss   ($53,532 )   ($3,959 )
Attributable to:            
  Equity shareholders   ($53,523 )   ($3,694 )
  Minority interests   ($9 )   ($265 )
             
Net loss attributable to equity shareholders per Class A (voting) and Class B (non-voting) share:            
Basic and Diluted:            
  From continuing operations   ($0.66 )   ($0.01 )
  From discontinued operations         ($0.04 )
    ($0.66 )   ($0.05 )
             
   
   
Torstar Corporation  
Consolidated Statement of Cash Flows  
(Thousands of Canadian Dollars)  
(Unaudited)  
   
    Three months ended
 March 31
 
    2016     2015  
Cash was provided by (used in)            
  Operating activities   ($20,317 )   ($1,153 )
  Investing activities   22,751     (9,006 )
  Financing activities   (5,099 )   (9,977 )
Decrease in cash   (2,665 )   (20,136 )
Cash, beginning of period   35,141     251,339  
Cash, end of period   $32,476     $231,203  
Operating activities:            
  Net loss from continuing operations   ($53,532 )   ($459 )
  Amortization and depreciation   13,265     6,774  
  Deferred income taxes   (9,500 )   1,100  
  Income from joint ventures   (553 )   (1,218 )
  Distributions from joint ventures         1,075  
  Loss from associated businesses   17,232     588  
  Dividend from associated businesses   194        
  Non-cash employee benefit expense   5,212     5,004  
  Employee benefits funding   (4,304 )   (4,348 )
  Other   4,509     (2,069 )
    (27,477 )   6,447  
  Increase in restricted cash   (3,540 )   (1,623 )
  Decrease (increase) in non-cash working capital   10,700     (5,977 )
Cash used in operating activities   ($20,317 )   ($1,153 )
Investing activities:            
  Additions to property, plant and equipment and intangible assets   ($5,004 )   ($7,203 )
  Investment in associated businesses   (500 )      
  Acquisitions and portfolio investments   (5 )   (1,888 )
  Receipt of escrowed cash from sale of Harlequin   22,750        
  Proceeds from sale of assets   5,509        
  Other   1     85  
Cash provided by (used in) investing activities   $22,751     ($9,006 )
Financing activities:            
  Dividends paid   ($5,145 )   ($10,360 )
  Exercise of share options         394  
  Other   46     (11 )
Cash used in financing activities   ($5,099 )   ($9,977 )
Cash represented by:            
Attributed to continuing operations:            
  Cash   $32,476     $16,945  
  Cash equivalents - short-term deposits         214,258  
  Net cash, end of period   $32,476     $231,203  
             

Contact Information

  • For more information please contact:
    L. DeMarchi
    Executive Vice-President and Chief Financial Officer
    Torstar Corporation
    (416) 869-4776