Torstar Corporation Reports Second Quarter Results
/EINPresswire.com/ -- TORONTO, ON--(Marketwired - July 27, 2016) - Torstar Corporation (TSX: TS.B) today reported financial results for the second quarter ended June 30, 2016.
Highlights for the second quarter:
- Effective July 3
rd , printing of The Toronto Star was successfully transitioned to Transcontinental Printing. The sale process for the printing facility and land in Vaughan is well underway and we have been pleased with the level of interest and progress thus far.
- Ended the second quarter of 2016 with $42.9 million of cash and cash equivalents and restricted cash; Torstar has no bank indebtedness.
- Our net loss from continuing operations was $24.3 million ($0.30 per share) in the second quarter of 2016. This compares to a net loss of $1.1 million ($0.01 per share) in the second quarter of 2015. The second quarter of 2016 included $26.5 million of additional non-cash amortization and depreciation expense associated with our investment in VerticalScope as well as $4.5 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 $23.9 million ($0.30 per share) in the second quarter of 2016 compared to net loss attributable to equity shareholders of $1.1 million ($0.01 per share) in the second quarter of 2015.
- Adjusted loss per share was $0.13 in the second quarter of 2016, down $0.27 from adjusted earnings per share of $0.14 in the second quarter of 2015. Adjusted loss per share in 2016 included a $0.40 per share effect of amortization and depreciation.
- Our segmented operating loss was $32.1 million in the second quarter of 2016 which included $40.7 million non-cash amortization and depreciation expense as well as $6.9 million of restructuring and other charges.
- Our segmented adjusted EBITDA was $15.6 million in the second quarter of 2016, down $5.3 million from the second quarter of 2015. The decline in the second quarter includes an incremental $1.5 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 decrease of $2.4 million was the result of revenue declines which were partially offset by $7.9 million of net savings from restructuring initiatives, other cost reductions, and $4.0 million of higher contribution from our Digital Ventures segment which was entirely attributable to the inclusion of VerticalScope and which more than offset reductions in other properties in the segment.
- Segmented revenue was $196.5 million in the second quarter of 2016, down $20.4 million (9.4%) from $216.9 million in the second quarter of 2015.
- Subsequent to the end of the second quarter, Torstar's Board of Directors announced that it intends to reduce the dividend to 10 cents per share annually effective the third quarter of 2016.
"Results in the quarter were lower with segmented adjusted EBITDA down $5.3 million to $15.6 million as the impact of continued print advertising pressures and $1.5 million of incremental costs associated with Toronto Star Touch 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 digital advertising. In our Digital Ventures segment, segmented adjusted EBITDA increased $4.0 million in the second quarter entirely attributable to the inclusion of earnings from VerticalScope which more than offset declines in other properties in the segment. Revenues at VerticalScope again posted double digit growth in the quarter. We continue to be pleased with the progress at VerticalScope where revenue grew 15% and earnings are up 17% during our period of ownership."
"Looking forward, we expect earnings in the balance of the year to benefit from growth at VerticalScope, efforts on costs, including outsourcing of printing the Toronto Star, 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, and with VerticalScope, a meaningful digital orientation for Torstar as a whole."
The following chart provides a continuity of earnings per share from the second quarter and first six months of 2015 to the second quarter and first six months of 2016:
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Three months ended June 30 Six months ended June 30
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Adjusted Adjusted
Earnings Earnings Earnings Earnings
(Loss) Per (Loss) Per (Loss) Per (Loss) Per
Share Share** Share Share**
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Earnings (loss) per
share from continuing
operations
attributable to ($0.01) $0.14 ($0.02) $0.16
equity shareholders
in 2015
Changes
-- Adjusted EBITDA* (0.06) (0.06) (0.21) (0.21)
-- Amortization and
depreciation* (0.40) (0.40) (0.83) (0.83)
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-- Operating
earnings* (0.47) (0.32) (1.06) (0.88)
-- Restructuring and
other charges* 0.08 (0.27)
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-- Operating loss* (0.39) (0.32) (1.33) (0.88)
-- Interest and
financing costs (0.01) (0.01)
-- Non-cash foreign
exchange 0.01
-- Income from
associated
businesses
(excluding
VerticalScope) 0.01 0.01 0.02 0.02
-- Other income (0.01) 0.01
-- Change in current
and future taxes
(including
associated
businesses) 0.09 0.18 0.34 0.34
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Net loss per share
from continuing
operations
attributable to
equity shareholders
in 2016 ($0.30) ($0.13) ($0.96) ($0.53)
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*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 - SECOND QUARTER 2016
The following tables sets out, in $000's the segmented results for the three months ended June 30, 2016 and 2015
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Three months ended June 30, 2016
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Digital
(in $000's) MMG SMG Ventures Corporate
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Operating revenue $108,175 $71,155 $17,209
Salaries and benefits (48,142) (29,330) (6,114) ($1,948)
Other operating costs (46,223) (42,190) (6,381) (651)
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Adjusted EBITDA** 13,810 (365) 4,714 (2,599)
Amortization & depreciation (3,293) (9,500) (27,887) (6)
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Operating earnings (loss)** 10,517 (9,865) (23,173) (2,605)
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Restructuring and other
charges (4,282) (2,605) (55)
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Operating profit (loss)** $6,235 ($12,470) ($23,173) ($2,660)
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Loss from continuing
operations
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Income from discontinued
operations
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Net loss
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Three months ended June 30, 2016
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Total Per
Consolidated
Total Adjustments & Statement of
(in $000's) Segmented* Eliminations(1) Loss
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Operating revenue $196,539 ($18,627) $177,912
Salaries and benefits (85,534) 6,755 (78,779)
Other operating costs (95,445) 6,226 (89,219)
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Adjusted EBITDA** 15,560 (5,646) 9,914
Amortization & depreciation (40,686) 27,499 (13,187)
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Operating earnings (loss)** (25,126) 21,853 (3,273)
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Restructuring and other
charges (6,942) 50 (6,892)
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Operating profit (loss)** ($32,068) $21,903 ($10,165)
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Loss from continuing
operations ($24,268)
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Income from discontinued
operations $400
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Net loss ($23,868)
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Three months ended June 30, 2015
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Digital
(in $000's) MMG SMG Ventures Corporate
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Operating revenue $119,089 $88,124 $9,718
Salaries and benefits (53,752) (33,384) (3,769) ($2,689)
Other operating costs (49,335) (47,257) (5,212) (698)
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Adjusted EBITDA** 16,002 7,483 737 (3,387)
Amortization & depreciation (3,453) (3,095) (966) (10)
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Operating earnings (loss)** 12,549 4,388 (229) (3,397)
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Restructuring and other
charges (13,782) (1,997) (80)
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Operating profit (loss)** ($1,233) $2,391 ($309) ($3,397)
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Loss from continuing
operations
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Net loss
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Three months ended June 30, 2015
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Total Per
Consolidated
Total Adjustments & Statement of
(in $000's) Segmented* Eliminations(1) Loss
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Operating revenue $216,931 ($10,604) $206,327
Salaries and benefits (93,594) 4,447 (89,147)
Other operating costs (102,502) 4,403 (98,099)
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Adjusted EBITDA** 20,835 (1,754) 19,081
Amortization & depreciation (7,524) 721 (6,803)
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Operating earnings (loss)** 13,311 (1,033) 12,278
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Restructuring and other
charges (15,859) 235 (15,624)
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Operating profit (loss)** ($2,548) ($798) ($3,346)
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Loss from continuing
operations ($1,131)
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Net loss ($1,131)
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* 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 $20.4 million or 9.4% in the second quarter of 2016 with revenues negatively impacted by several factors including the absence of $3.2 million of net revenue associated with the closure of Olive Media at the end of 2015 and the absence of $2.2 million of commercial printing revenue at the Vaughan Press Centre. These negative factors were partially offset by a $9.3 million increase in revenue associated with our investment in VerticalScope and the timing of the Easter holiday which shifted from the second quarter last year into the first quarter this year. Segmented revenue in the second quarter reflected declines of 16.9% in print advertising revenues, with particular softness in national advertising revenues, combined with a 7.7% decline in distribution revenues and a 6.1% decrease in subscriber revenue. Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56% interest in VerticalScope) was down $28.4 million or 13.8% in the second quarter of 2016.
Excluding the impact of Olive Media, digital revenue across all segments increased 34.9% in the second quarter of 2016, which was primarily attributable to the investment in VerticalScope on July 28, 2015. Digital revenues for the second quarter also reflected lower revenues at eyeReturn Marketing, Workopolis and WagJag offset by revenues from Toronto Star Touch combined with continued growth in local digital advertising within the community websites at Metroland Media Group and growth at thestar.com. Digital revenues were 16.9% of total segment revenues in the second quarter of 2016 compared to 12.9% in the second quarter of 2015.
Salaries and benefits
Segmented salaries and benefits costs were down $8.1 million (8.6%) in the second quarter of 2016 reflecting the benefit of savings from restructuring initiatives, lower commission costs and lower pension costs, partially offset by the inclusion of our proportionate share of salaries and benefits costs of VerticalScope and increased staffing costs associated with Toronto Star Touch.
Other operating costs
Segmented other operating costs primarily include newspaper circulation and flyer distribution costs, production costs and newsprint costs which represented 39.5%, 9.7% and 11.4% respectively of segmented other operating costs for the second quarter.
Segmented other operating costs were down $7.1 million or 6.9% in the second 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 $15.6 million in the second quarter of 2016, down $5.3 million from the second quarter of 2015. The decline in the second quarter includes a $1.5 million incremental net investment in Toronto Star Touch and the loss of $1.4 million in commercial printing contribution at the Vaughan Press Centre. The remaining decrease of $2.4 million was the result of the above noted revenue declines which were partially offset by $7.9 million of net savings from restructuring initiatives, other cost reductions, and $4.0 million of higher contribution from our Digital Ventures segment which was entirely attributable to the inclusion of VerticalScope and which more than offset reductions in other properties in the segment.
Amortization and depreciation
Total segmented amortization and depreciation increased $33.2 million in the second quarter of 2016 compared to the second quarter of 2015, $26.5 million of which was the result of amortization of intangible assets associated with our investment in VerticalScope and $4.5 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 $25.1 million in the second quarter of 2016 compared to operating earnings of $13.3 million in the second quarter of 2015. The loss in the second quarter of 2016 included the impact of $31.0 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 combined with the impact of lower segmented adjusted EBITDA, discussed above.
Restructuring and other charges
Total segmented restructuring and other charges were $6.9 million in the second quarter of 2016 compared to $15.9 million in the second quarter of 2015. Restructuring charges through the end of the second quarter of 2016 reflect a reduction of approximately 425 positions which are expected to result in annualized net savings of $22.8 million with $15.5 million of the savings expected to be realized in 2016 (including $4.1 million in the first six months) and $7.3 million in 2017.
Operating profit (loss)
Segmented operating profit decreased $29.6 million in the second quarter of 2016. Operating loss for the second quarter of 2016 included $40.7 million of non-cash amortization and depreciation expense as well as $6.9 million of restructuring and other charges.
Our operating loss excluding our proportionate share of operating profit (loss) from VerticalScope and our joint ventures increased $6.9 million in the second quarter of 2016 compared to 2015.
Interest and financing costs
Interest and financing costs were $0.8 million in the second quarter of 2016, up $0.6 million from the second quarter of 2015 primarily reflecting lower interest earned on cash and cash equivalents.
Income from joint ventures
Our income from joint ventures was $nil in the second quarter of 2016 compared to income of $0.6 million in the second quarter of 2015 the results of which are included in our discussions of segmented revenue and segmented adjusted EBITDA above.
Income (loss) from associated businesses
Our loss from associated businesses was $16.0 million in the second quarter of 2016 compared to income of $1.3 million in the second quarter of 2015.
The second quarter of 2016 included income of $1.8 million from Black Press and income of $0.3 million from Blue Ant, offset by a loss of $17.9 million from VerticalScope. The second quarter loss from VerticalScope included $26.5 million of amortization expense. Income in the second quarter of 2015 included income of $1.3 million from Black Press and income of $0.7 million from Blue Ant, partially offset by a loss of $0.7 million from Shop.ca.
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 second quarter 2016 net loss included $26.5 million ($54.1 million in the first six months of 2016) 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.
During the first six months of 2016 VerticalScope made acquisitions totalling U.S. $10.8 million which were primarily financed from VerticalScope's operating cash flow. VerticalScope's debt, net of cash on hand, was U.S. $81.7 million at June 30, 2016 up $0.9 million from U.S. $80.8 million at December 31, 2015.
VerticalScope's U.S. dollar denominated revenue from July 29, 2015 through June 30, 2016 increased 17.2% relative to the comparable period one year earlier, resulting from a combination of acquisitions and organic revenue growth. Excluding the impact of share based compensation expenses, certain tax credits recorded in the fourth quarter of 2014, and transaction related costs related to the investment in VerticalScope by Torstar, VerticalScope's U.S. dollar denominated adjusted EBITDA from July 29, 2015 through June 30, 2016 increased 15.2% relative to the comparable period one year earlier.
Income and other taxes
We recorded tax recoveries of $2.6 million in the second quarter of 2016. This compares to income tax recoveries of $0.4 million in the second quarter of 2015. Our effective tax rate was 9.9% in the second quarter of 2016.
Net loss from continuing operations
Our net loss from continuing operations was $24.3 million ($0.30 per share) in the second quarter of 2016. This compares to a net loss of $1.1 million ($0.01 per share) in the second quarter of 2015. The second quarter of 2016 included $26.5 million of additional non-cash amortization and depreciation expense associated with our investment in VerticalScope as well as $6.9 million of restructuring charges and $4.5 million of additional non-cash amortization and depreciation expense related to the transition of printing of the Toronto Star to Transcontinental Printing.
Income (loss) from discontinued operations
On August 1, 2014 Torstar sold all of the shares of Harlequin Enterprises Limited ("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. 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 and estimated the exposure under these indemnities and recorded a contingent liability in respect of these matters. The gain of $0.4 million from discontinued operations in the second quarter of 2016 primarily reflects recoveries related to insurance reserves as well as revised estimates of provisions related to legal costs.
Net loss attributable to equity shareholders
Our net loss attributable to equity shareholders was $23.9 million ($0.30 per share) in the second quarter of 2016 compared to net loss attributable to equity shareholders of $1.1 million ($0.01 per share) in the second quarter of 2015.
OUTLOOK
Through the second quarter and first six months of 2016, Metroland Media Group and Star Media Group continued to face a challenging print advertising market resulting from continued shifts in spending by advertisers. Indications are that the revenue trends experienced at Star Media Group and Metroland Media Group in the second quarter of 2016 have continued early into the third quarter. 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 six months 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 and adjusted EBITDA growth from a combination of acquisitions and organic growth at VerticalScope experienced in the second quarter of 2016 is expected to be somewhat stronger in 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 second quarter of 2016 are expected to be $16.5 million in the balance of 2016 ($5.8 million in Metroland Media Group, $10.0 million in the Star Media Group and $0.7 million in Digital Ventures), including an expected $6 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. 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.
In addition, in the balance of 2016, we anticipate our 56% share of VerticalScope's non-cash amortization charges, including those related to intangible assets identified at the time of our investment to drop to approximately U.S. $10 million in the third quarter of 2016 and U.S. $5 million in the fourth quarter of 2016 from approximately U.S. $20.0 million in each of the first and second quarters of 2016.
Our net investment in Toronto Star Touch was $7.8 million in the first six months 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 and approach break-even for the full year in 2017. In addition, as we look forward to 2017 we expect the cost base to benefit from reduced net investment in Toronto Star Touch, a full year impact of outsourced printing of the Toronto Star as well as approximately $4.5 million of savings related to restructuring initiatives undertaken to date.
The sale process for the printing facility and land in Vaughan is well underway and we have been pleased with the level of interest and progress thus far. However, at this point we cannot be certain as to the timing and proceeds related to a potential sale of this property.
On July 22, 2016, we signed an agreement in respect of the sale of a property in Guelph and expect to receive net proceeds of $1.9 million. We expect to recognize a gain of approximately $1.3 million during the three and nine months ending September 30, 2016.
Subsequent to the end of the second quarter, Torstar's Board of Directors announced that it intends to reduce the dividend, if, as and when declared, to 10 cents per share annually effective the third quarter of 2016.
DIVIDEND
On July 26, 2016, Torstar declared a quarterly dividend of 2.5 cents per share on its Class A shares and Class B non-voting shares, payable on September 30, 2016, to shareholders of record at the close of business on September 9, 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 June 30, 2016 (the "Condensed 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 July 27, 2016 at 8:15 a.m. to discuss its second 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 3756525. 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.
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 and six months ended June 30, 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 and stock based compensation expense. 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 (loss). 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 expectations regarding the potential sale of the existing printing facility and land in Vaughan, anticipated future dividend payments, expectations regarding earnings and net investment in Toronto Star Touch in the balance of 2016, expectations regarding expected savings including savings from restructuring initiatives, expectations relating to loss from discontinued operations, Torstar's outlook for the balance of 2016 including anticipated growth in adjusted EBITDA, anticipated revenue trends and operating costs (including newsprint costs), expectations regarding expected savings including savings from restructuring initiatives, expected non-cash amortization charges, expected costs related to Toronto Star Touch, expectations regarding the potential sale of the existing printing facility and land in Vaughan, expectations regarding net proceeds and gains in respect of the anticipated sale of a property in Guelph and anticipated future dividend payments, 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.
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Torstar Corporation
Consolidated Statement of Financial Position
(Thousands of Canadian Dollars)
(Unaudited)
As at
As at December 31,
June 30, 2016 2015
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Assets
Current:
Cash and cash equivalents $24,145 $35,141
Restricted cash 18,725 37,935
Receivables 113,347 144,997
Inventories 5,750 6,231
Derivative financial instruments 1,002
Prepaid expenses 7,510 5,944
Prepaid and recoverable income taxes 9,883 5,780
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Total current assets 180,362 236,028
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Investments in joint ventures 33,735 32,861
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Investments in associated businesses 156,041 202,203
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Property, plant and equipment 98,677 117,793
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Intangible assets 62,882 67,821
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Goodwill 8,133 8,133
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Other assets 9,220 9,422
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Employee benefits 6,922
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Deferred income tax assets 27,122 15,233
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Total assets $576,172 $696,416
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Liabilities and Equity
Current:
Accounts payable and accrued liabilities $91,640 $122,296
Derivative financial instruments 6,543
Provisions 46,230 29,021
Income tax payable 6,172 5,943
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Total current liabilities 144,042 163,803
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Provisions 17,708 13,228
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Other liabilities 7,441 9,872
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Employee benefits 158,619 87,461
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Deferred income tax liabilities 3,503 2,315
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Equity:
Share capital 402,780 402,500
Contributed surplus 20,236 19,858
Accumulated deficit (177,548) (7,560)
Accumulated other comprehensive income
(loss) (973) 3,121
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Total equity attributable to equity
shareholders 244,495 417,919
Minority interests 364 1,818
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Total equity 244,859 419,737
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Total liabilities and equity $576,172 $696,416
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Torstar Corporation
Consolidated Statement of Loss
(Thousands of Canadian Dollars except per share amounts)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2016 2015 2016 2015
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Operating revenue $177,912 $206,327 $334,593 $387,496
Salaries and benefits (78,779) (89,147) (156,002) (169,925)
Other operating costs (89,219) (98,099) (175,498) (189,495)
Amortization and
depreciation (13,187) (6,803) (26,452) (13,577)
Restructuring and other
charges (6,892) (15,624) (38,692) (19,365)
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Operating loss (10,165) (3,346) (62,051) (4,866)
Interest and financing costs (773) (208) (1,547) (287)
Foreign exchange 3 (43) 1,537 362
Income from joint ventures 28 634 581 1,852
Income (loss) from
associated businesses (15,961) 1,277 (33,193) 689
Other income 155 1,273 160
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(26,868) (1,531) (93,400) (2,090)
Income and other taxes
recovery 2,600 400 15,600 500
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Net loss from continuing
operations (24,268) (1,131) (77,800) (1,590)
Income (loss) from
discontinued operations 400 400 (3,500)
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Net loss ($23,868) ($1,131) ($77,400) ($5,090)
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Attributable to:
Equity shareholders ($23,923) ($1,118) ($77,446) ($4,812)
Minority interests $55 ($13) $46 ($278)
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Net loss attributable to
equity shareholders per
Class A (voting) and Class
B (non-voting) share:
Basic and Diluted:
From continuing operations ($0.30) ($0.01) ($0.96) ($0.02)
From discontinued
operations ($0.04)
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($0.30) ($0.01) ($0.96) ($0.06)
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Torstar Corporation
Consolidated Statement of Cash Flows
(Thousands of Canadian Dollars)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2016 2015 2016 2015
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Cash was provided by (used in)
Operating activities $423 $14,074 ($19,894) $12,921
Investing activities (3,475) (10,385) 19,276 (19,391)
Financing activities (5,279) (10,215) (10,378) (20,192)
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Decrease in cash (8,331) (6,526) (10,996) (26,662)
Cash, beginning of period 32,476 231,203 35,141 251,339
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Cash, end of period $24,145 $224,677 $24,145 $224,677
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Operating activities:
Net loss from continuing
operations ($24,268) ($1,131) ($77,800) ($1,590)
Amortization and depreciation 13,187 6,803 26,452 13,577
Deferred income taxes (2,000) (300) (11,500) 800
Income from joint ventures (28) (634) (581) (1,852)
Distributions from joint
ventures 250 1,325
Loss (income) from associated
businesses 15,961 (1,277) 33,193 (689)
Dividend from associated
businesses 194
Non-cash employee benefit
expense 4,509 5,002 9,721 10,006
Employee benefits funding (5,118) (5,163) (9,422) (9,511)
Other (4,835) 780 (326) (1,289)
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(2,592) 4,330 (30,069) 10,777
Decrease (increase) in
restricted cash 174 (3,540) (1,449)
Decrease in non-cash working
capital 3,015 9,570 13,715 3,593
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Cash provided by (used in)
operating activities $423 $14,074 ($19,894) $12,921
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Investing activities:
Additions to property, plant
and equipment and intangible
assets ($3,182) ($8,922) ($8,186) ($16,125)
Investment in associated
businesses (1,467) (500) (1,467)
Investment in joint ventures (293) (293)
Acquisitions and portfolio
investments (40) (5) (1,928)
Receipt of escrowed cash from
sale of Harlequin 22,750
Proceeds from sale of assets 5,509
Other 44 1 129
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Cash provided by (used in)
investing activities ($3,475) ($10,385) $19,276 ($19,391)
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Financing activities:
Dividends paid ($5,199) ($10,387) ($10,344) ($20,747)
Exercise of share options 394
Other (80) 172 (34) 161
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Cash used in financing
activities ($5,279) ($10,215) ($10,378) ($20,192)
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Cash represented by:
Attributed to continuing
operations:
Cash $24,145 $11,035 $24,145 $11,035
Cash equivalents - short-term
deposits 213,642 213,642
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Net cash, end of period $24,145 $224,677 $24,145 $224,677
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For more information please contact:
L. DeMarchi
Executive Vice-President and Chief Financial Officer
Torstar Corporation
(416) 869-4776
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