Torstar Corporation Reports Fourth Quarter Results
TORONTO, Feb. 28, 2018 /CNW/ - Torstar Corporation (TSX:TS.B) today reported financial results for the fourth quarter ended December 31, 2017.
Highlights for the fourth quarter:
- In November 2017, we completed a transaction with Postmedia Network Inc. ("Postmedia"), in which we purchased and sold a number of daily and community newspapers. As part of the transaction, we acquired eight weekly community publications, seven daily community newspapers and two free daily newspapers from Postmedia. In addition, we sold 22 weekly community newspapers in eastern and southern Ontario and the Metro Winnipeg and Metro Ottawa free daily publications to Postmedia. Readers and advertisers of certain publications we acquired are now being serviced by one or more of our other Community properties while we continue to operate four daily newspapers acquired from Postmedia now included in our Daily Brands segment. This transaction is expected to contribute to an improvement in annualized operating earnings in the range of $5 million to $7 million.
- Ended 2017 with $71.4 million of cash and cash equivalents as well as $9.1 million of restricted cash; Torstar has no bank indebtedness.
- Cash provided by operating activities was $23.6 million in the fourth quarter of 2017 reflecting $31.6 million of cash generated by operating activities partially offset by an $8.1 million increase in working capital.
- Our net income from continuing operations was $7.8 million ($0.10 per share) in the fourth quarter of 2017. This compares to net income of $0.7 million ($0.01 per share) in the fourth quarter of 2016.
- Adjusted earnings per share (see "Non-IFRS measures") was $0.32 in the fourth quarter of 2017, up $0.16 from the fourth quarter of 2016. Adjusted earnings per share included a $0.19 per share effect of amortization of intangible assets, primarily associated with the investment in VerticalScope.
- Segmented adjusted EBITDA (see "Non-IFRS measures") was $43.0 million in the fourth quarter of 2017, an improvement of $11.1 million from the fourth quarter of 2016. Segmented adjusted EBITDA in the Daily Brands segment was $24.2 million in the fourth quarter of 2017, an improvement of $12.7 million relative to the fourth quarter of 2016 and which included the benefit of a $13.4 million digital media tax credit. This tax credit related to a claim made in respect of 2012 and not current year operations. Segmented adjusted EBITDA in the Community Brands segment was $14.5 million, up $0.7 million relative to the comparable period in 2016 while segmented adjusted EBITDA in the Digital Ventures segment was $7.7 million, a decrease of $1.2 million relative to the fourth quarter of 2016.
- Segmented revenue (see "Non-IFRS measures") was $189.5 million in the fourth quarter of 2017, down $19.2 million (9.2%) from $208.7 million in the fourth quarter of 2016.
Highlights for the year:
- On March 31, 2017, John Boynton was appointed President and Chief Executive Officer of Torstar and Publisher of the Toronto Star. Mr. Boynton comes to Torstar with deep expertise in marketing, technology and business transformation.
- Cash provided by operating activities was $15.4 million in 2017 reflecting $22.9 million of cash generated by operating activities partially offset by a $10.2 million increase in working capital.
- Our net loss from continuing operations was $30.6 million ($0.38 per share) in 2017 compared to $76.0 million ($0.94 per share) in 2016. Our net loss in 2017 included $66.9 million of non-cash amortization and depreciation, $28.1 million of which related to our investment in VerticalScope, and $11.1 million of non-cash impairment charges. Our net loss in 2016 included $122.0 million of non-cash amortization and depreciation and $7.5 million of non-cash impairment charges.
- Adjusted earnings per share was $0.01 in 2017, an improvement of $0.47 from an adjusted loss per share of $0.46 in 2016. Adjusted earnings per share included an $0.83 per share effect of amortization and depreciation.
- Our segmented adjusted EBITDA was $74.2 million in 2017, an improvement of $13.7 million relative to the prior year. Segmented adjusted EBITDA in the Daily Brands segment was $26.4 million, an improvement of $19.0 million relative to 2016. The improvement in 2017 included the benefit of a $13.4 million digital media tax credit. Segmented adjusted EBITDA in the Community Brands segment was $31.5 million in 2017, down $4.4 million relative to 2016, while segmented adjusted EBITDA in the Digital Ventures segment was $26.9 million in 2017, a decrease of $0.4 million compared to 2016.
- Segmented revenue was $691.6 million in 2017, down $70.1 million (9.2%) from $761.7 million in 2016.
"We were pleased with results in the quarter with segmented adjusted EBITDA up $11.1 million which included the benefit of a $13.4 million digital media tax credit. We also benefitted from continued efforts on costs which largely offset continued pressure on print advertising revenues. Earnings in the quarter included $6.6 million from VerticalScope." said John Boynton, President and CEO of Torstar. "We were also very pleased with our cash flow in the fourth quarter having generated $23.6 million in operating cash flow."
"Looking forward, we expect to continue to benefit from a solid financial position, having finished 2017 with $71.4 million in unrestricted cash and no bank debt. In 2018, we expect earnings to benefit from growth at VerticalScope and continued efforts on costs which we anticipate will help to offset pressures on print advertising revenues in the newspaper operations while we transform our core brands."
The following chart provides a continuity of earnings per share from the fourth quarter and twelve months ended 2016 to the fourth quarter and twelve months ended 2017:
| Fourth quarter |
Year ended December 31 |
||||
| Earnings (Loss) |
Adjusted |
Earnings (Loss) |
Adjusted |
||
| Earnings (loss) per share from continuing operations attributable |
$0.01 |
$0.16 |
($0.94) |
($0.46) |
|
| Changes |
|||||
| • |
Adjusted EBITDA* |
0.14 |
0.14 |
0.17 |
0.17 |
| • |
Amortization and Depreciation* |
0.68 |
0.68 |
||
| • |
Operating earnings (loss)* |
0.15 |
0.30 |
(0.09) |
0.39 |
| • |
Restructuring and other charges* |
(0.02) |
0.35 |
||
| • |
Impairment of assets* |
(0.01) |
(0.04) |
||
| • |
Operating profit (loss) * |
0.12 |
0.30 |
0.22 |
0.39 |
| • |
Interest and financing costs |
0.01 |
0.01 |
||
| • |
Non-cash foreign exchange |
0.01 |
|||
| • |
Income (loss) from associated businesses (excluding VerticalScope) |
(0.09) |
(0.09) |
(0.14) |
(0.14) |
| • |
Other income |
0.05 |
(0.25) |
||
| • |
Change in deferred taxes (including associated businesses) |
0.02 |
0.11 |
(0.23) |
(0.25) |
| Earnings (loss) per share from continuing operations attributable to |
$0.10 |
$0.32 |
($0.38) |
$0.01 |
|
| Earnings per share from discontinued operations attributable to equity shareholders in 2017 |
$0.01 |
$0.02 |
|||
| Earnings (loss) per share attributable to equity shareholders in 2017 |
$0.11 |
$0.32 |
($0.36) |
$0.01 |
|
| * |
Includes our proportionately consolidated share of joint venture operations and VerticalScope's operations. 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 –FOURTH QUARTER 2017
During the fourth quarter of 2017, we realigned our management structure and operating segments in order to better align our operations by type of publication. We now have three reportable operating segments: Community Brands ("Communities"), Daily Brands ("Dailies") and Digital Ventures. Relevant comparative information has been restated to reflect these changes.
The following tables set out, in $000's, the segmented results for the three months ended December 31, 2017 and 2016.
| Three months ended December 31, 2017 |
|||||||
| (in $000's) |
Communities |
Dailies |
Digital |
Corporate |
Total Segmented* |
Adjustments & Eliminations1 |
Total Per |
| Operating revenue |
$83,185 |
$86,061 |
$20,279 |
$189,525 |
($20,186) |
$169,339 |
|
| Salaries and benefits |
(35,401) |
(13,902) |
(5,662) |
($2,143) |
(57,108) |
5,744 |
(51,364) |
| Other operating costs |
(33,307) |
(47,969) |
(6,884) |
(1,272) |
(89,432) |
6,040 |
(83,392) |
| Adjusted EBITDA** |
14,477 |
24,190 |
7,733 |
(3,415) |
42,985 |
(8,402) |
34,583 |
| Amortization & depreciation |
(3,187) |
(3,188) |
(9,089) |
(15,464) |
8,530 |
(6,934) |
|
| Share based compensation |
(133) |
17 |
(319) |
(472) |
(907) |
907 |
|
| Operating earnings (loss)** |
11,157 |
21,019 |
(1,675) |
(3,887) |
26,614 |
1,035 |
27,649 |
| Restructuring and other charges |
(4,060) |
(1,852) |
(123) |
(6,035) |
123 |
(5,912) |
|
| Impairment of assets |
(8,133) |
(8,133) |
(8,133) |
||||
| Operating profit (loss)** |
$7,097 |
$19,167 |
($9,931) |
($3,887) |
$12,446 |
$1,158 |
$13,604 |
| Net income from continuing |
$7,847 |
||||||
| Net income from discontinued |
$850 |
||||||
| Net income |
$8,697 |
||||||
| Three months ended December 31, 2016 |
|||||||
| (in $000's) |
Communities |
Dailies |
Digital |
Corporate |
Total Segmented* |
Adjustments |
Total Per |
| Operating revenue |
$92,176 |
$95,665 |
$20,828 |
$208,669 |
($20,261) |
$188,408 |
|
| Salaries and benefits |
(40,731) |
(30,171) |
(4,977) |
($1,760) |
(77,639) |
4,798 |
(72,841) |
| Other operating costs |
(37,640) |
(54,028) |
(6,985) |
(466) |
(99,119) |
5,661 |
(93,458) |
| Adjusted EBITDA** |
13,805 |
11,466 |
8,866 |
(2,226) |
31,911 |
(9,802) |
22,109 |
| Amortization & depreciation |
(4,103) |
(2,743) |
(8,687) |
(30) |
(15,563) |
8,214 |
(7,349) |
| Share based compensation |
(123) |
(84) |
(209) |
(502) |
(918) |
918 |
|
| Operating earnings (loss)** |
9,579 |
8,639 |
(30) |
(2,758) |
15,430 |
(670) |
14,760 |
| Restructuring and other charges |
(2,558) |
(1,418) |
16 |
(480) |
(4,440) |
742 |
(3,698) |
| Impairment of assets |
(800) |
(6,700) |
(7,500) |
6,700 |
(800) |
||
| Operating profit (loss)** |
$6,221 |
$7,221 |
($6,714) |
($3,238) |
$3,490 |
$6,772 |
$10,262 |
| Income from continuing operations |
$683 |
||||||
| Net income from discontinued operations |
$400 |
||||||
| Net income |
$1,083 |
||||||
| 1 |
Reflects eliminations of our proportionate share of joint ventures and our 56% interest in VerticalScope. |
| * |
Includes our proportionately consolidated share of joint venture operations and VerticalScope. |
| ** |
These are non-IFRS or additional IFRS measures, see "Non-IFRS measures". |
Revenue
Segmented revenue was down $19.2 million or 9.2% in the fourth quarter and included revenue growth of $0.8 million (6.9%) from VerticalScope (12% in USD). Segmented revenue in the fourth quarter of 2017 reflected declines of 16% in print advertising revenues, with particular softness in national advertising revenues, an 8.9% decrease in distribution revenues and subscriber revenues which were comparable to the fourth quarter of 2016. As a result of the sale of a number of our weekly community newspapers and our purchase of additional daily newspaper publications in November 2017, revenues in the Community Brands segment were $2.7 million lower in the fourth quarter of 2017, while revenues in the Daily Brands segment increased by $1.2 million in the fourth quarter.
Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56% interest in VerticalScope) was down $19.1 million or 10% in the fourth quarter of 2017.
Digital revenue in the fourth quarter of 2017 was down 1.1% relative to the fourth quarter of 2016 reflecting lower revenues at eyeReturn Marketing, Workopolis, Toronto Star Touch and WagJag offset by continued solid growth at VerticalScope as well as in local digital advertising within the community websites in the Communities segment. Toronto Star Touch was discontinued effective July 31, 2017 and we sold WagJag and related assets for gross proceeds of $0.5 million on October 30, 2017, both of which are accretive to our earnings. Digital revenues were 19% of total revenue in 2017 compared to 18% in 2016.
Salaries and benefits
Our segmented salaries and benefits costs decreased $20.5 million or 26% in the fourth quarter of 2017 and included the benefit of a $13.4 million digital media tax credit (as this represents recoveries of previously incurred salary and benefits costs). This tax credit related to a claim made in respect of 2012 and not current year operations. Excluding the impact of the tax credit, segmented salaries and benefit costs in the fourth quarter of 2017 were down $7.1 million or 9.2% reflecting the benefit of savings from restructuring initiatives, as well as lower staffing costs associated with Toronto Star Touch and $0.7 million of lower costs associated with the sale of publications to Postmedia.
Other operating costs
Segmented other operating costs primarily consist of circulation/flyer distribution costs, newsprint costs and other production costs which represented 42%, 12% and 14% respectively of segmented other operating costs in the fourth quarter of 2017. Segmented other operating costs were down $9.7 million or 10% in the fourth quarter as a result of lower print volumes and the impact of other cost reductions as well as $1.2 million of lower costs associated with the sale of publications to Postmedia.
Adjusted EBITDA
Our segmented adjusted EBITDA was $43.0 million in the fourth quarter of 2017, an improvement of $11.1 million from the fourth quarter of 2016. Segmented adjusted EBITDA in the Daily Brands segment was $24.2 million in the fourth quarter of 2017, an improvement of $12.7 million relative to the fourth quarter of 2016 and which included the benefit of a $13.4 million digital media tax credit. Segmented adjusted EBITDA in the Community Brands segment was $14.5 million, up $0.7 million relative to the comparable period in 2016 while segmented adjusted EBITDA in the Digital Ventures segment was $7.7 million, a decrease of $1.2 million relative to the fourth quarter of 2016. Segmented adjusted EBITDA in the fourth quarter of 2017 included $5.7 million of savings from restructuring initiatives and $0.8 million of costs related to our transformation initiatives.
Operating earnings
Segmented operating earnings were $26.6 million in the fourth quarter of 2017, an improvement of $11.2 million from operating earnings of $15.4 million in the fourth quarter of 2016 due primarily to an increase in adjusted EBITDA.
Restructuring and other charges
Total segmented restructuring and other charges were $6.0 million in the fourth quarter of 2017 and $4.4 million in the comparable period in 2016. Of the restructuring provisions in the fourth quarter of 2017, $3.6 million related to ongoing efforts to reduce costs while $2.4 million related to restructuring associated with publications we acquired from Postmedia in November 2017. Excluding the restructuring associated with publications we acquired from Postmedia, the 2017 restructuring initiatives are expected to result in annualized net savings of $2.8 million and a reduction of approximately 30 positions. $0.1 million of the savings associated with these initiatives were realized in the fourth quarter of 2017.
Impairment of assets
During the fourth quarter of 2017, we incurred non-cash charges related to asset impairment of $8.1 million in respect of goodwill in the Digital Ventures Cash Generating Unit ("CGU") (2016 - $7.5 million related to intangible assets and investments in joint ventures). These charges had no impact on cash flows.
Operating profit
In the fourth quarter of 2017 our segmented operating profit was $12.4 million compared to $3.5 million in the fourth quarter of 2016. Our operating profit, excluding our proportionate share of operating profit from our joint ventures and our investment in VerticalScope, increased $3.3 million in the fourth quarter of 2017 to $13.6 million.
Income (loss) from joint ventures
Income from joint ventures was $0.6 million in the fourth quarter of 2017 compared to a loss of $6.5 million in the fourth quarter of 2016. The loss in the fourth quarter of 2016 included a non-cash impairment charge of $6.7 million related to our joint venture investment in Workopolis.
Income (loss) from associated businesses
Loss from associated businesses was $2.0 million in the fourth quarter of 2017 compared to income of $2.3 million in the fourth quarter of 2016. The loss in the fourth quarter of 2017 included a loss of $2.9 million from Black Press and a loss of $0.3 million from Blue Ant, partially offset by income of $1.5 million from VerticalScope. Income from VerticalScope in the fourth quarter of 2017 included a $5.0 million gain related to one of their acquisitions as well as $8.1 million of amortization expense. Income from associated businesses in the fourth quarter of 2016 included income of $2.2 million from Black Press and $1.7 million from Blue Ant partially offset by a loss of $1.5 million from VerticalScope. The fourth quarter 2016 loss from VerticalScope included $7.7 million of amortization expense.
Other income
Other income was $3.9 million in the fourth quarter of 2017 and $nil in the fourth quarter of 2016. Other income in the fourth quarter of 2017 included a gain of $3.2 million related to the sale of publications to Postmedia as well as a gain of $0.5 million on the sale of WagJag and related assets.
Income and other taxes
We recorded income tax expense of $6.9 million in the fourth quarter of 2017 and income tax expense of $4.2 million in the fourth quarter of 2016. Excluding the impact of non-deductible impairment charges, loss of joint ventures and associated businesses and the movement in deferred income tax assets not recognized, the Company's effective tax rate in the fourth quarter of 2017 would have been 23.7% (2016 - 18.6%).
Net income from continuing operations
Our net income from continuing operations was $7.8 million ($0.10 per share) in the fourth quarter of 2017. This compares to net income of $0.7 million ($0.01 per share) in the fourth quarter of 2016.
OPERATING RESULTS – YEAR ENDED DECEMBER 31, 2017
The following tables set out, in $000's, the segmented results for the years ended December 31, 2017 and 2016.
| 2017 |
||||||||
| (in $000's) |
Communities |
Dailies |
Digital |
Corporate |
Total Segmented* |
Adjustments & Eliminations1 |
Total Per |
|
| Operating revenue |
$304,253 |
$315,050 |
$72,297 |
$691,600 |
($75,915) |
$615,685 |
||
| Salaries and benefits |
(140,098) |
(100,229) |
(22,062) |
($6,699) |
(269,088) |
23,182 |
(245,906) |
|
| Other operating costs |
(132,643) |
(188,439) |
(23,290) |
(3,931) |
(348,303) |
22,672 |
(325,631) |
|
| Adjusted EBITDA** |
31,512 |
26,382 |
26,945 |
(10,630) |
74,209 |
(30,061) |
44,148 |
|
| Amortization & depreciation |
(13,352) |
(21,491) |
(32,025) |
(66,868) |
29,881 |
(36,987) |
||
| Share based compensation |
(595) |
(199) |
(1,414) |
(284) |
(2,492) |
2,492 |
||
| Operating earnings (loss)** |
17,565 |
4,692 |
(6,494) |
(10,914) |
4,849 |
2,312 |
7,161 |
|
| Restructuring and other charges |
(11,136) |
(6,533) |
(981) |
(200) |
(18,850) |
1,338 |
(17,512) |
|
| Impairment of assets |
(11,133) |
(11,133) |
3,000 |
(8,133) |
||||
| Operating profit (loss)** |
$6,429 |
($1,841) |
($18,608) |
($11,114) |
($25,134) |
$6,650 |
($18,484) |
|
| Net loss from continuing |
($30,638) |
|||||||
| Net income from discontinued |
$1,350 |
|||||||
| Net loss |
($29,288) |
|||||||
| 2016 |
||||||||
| (in $000's) |
Communities |
Dailies |
Digital |
Corporate |
Total Segmented* |
Adjustments & Eliminations1 |
Total Per |
|
| Operating revenue |
$332,379 |
$355,337 |
$73,981 |
$761,697 |
($76,598) |
$685,099 |
||
| Salaries and benefits |
(155,187) |
(137,847) |
(21,361) |
($7,448) |
(321,843) |
22,528 |
(299,315) |
|
| Other operating costs |
(141,333) |
(210,077) |
(25,352) |
(2,614) |
(379,376) |
23,184 |
(356,192) |
|
| Adjusted EBITDA** |
35,859 |
7,413 |
27,268 |
(10,062) |
60,478 |
(30,886) |
29,592 |
|
| Amortization & depreciation |
(12,865) |
(29,451) |
(79,642) |
(66) |
(122,024) |
78,004 |
(44,020) |
|
| Share based compensation |
(528) |
(268) |
(1,128) |
(630) |
(2,554) |
2,554 |
||
| Operating earnings (loss)** |
22,466 |
(22,306) |
(53,502) |
(10,758) |
(64,100) |
49,672 |
(14,428) |
|
| Restructuring and other charges |
(13,504) |
(32,531) |
(262) |
(610) |
(46,907) |
1,084 |
(45,823) |
|
| Impairment of assets |
(800) |
(6,700) |
(7,500) |
6,700 |
(800) |
|||
| Operating profit (loss)** |
$8,162 |
($54,837) |
($60,464) |
($11,368) |
($118,507) |
$57,456 |
($61,051) |
|
| Net loss from continuing operations |
($76,036) |
|||||||
| Net income from discontinued operations |
$1,200 |
|||||||
| Net loss |
($74,836) |
|||||||
| 1 |
Reflects eliminations of our proportionate share of joint ventures and our 56% interest in VerticalScope. |
| * |
Includes our proportionately consolidated share of joint venture operations and VerticalScope. |
| ** |
These are non-IFRS or additional IFRS measures, see "Non-IFRS measures". |
Revenue
Segmented revenue was down $70.1 million or 9.2% in 2017 and included revenue growth of $4.8 million (12%) from VerticalScope (14% revenue growth in USD). Segmented revenue in 2017 reflected declines of 16% in print advertising revenues, with particular softness in national advertising revenues, a 6.6% decrease in distribution revenues and a 3.7% decrease in subscriber revenue. The decrease in print advertising revenues was the result of decreases in both volume and rate, whereas the decreases in flyer distribution and subscriber revenues were predominantly volume related.
Revenue excluding our proportionate share of revenue from joint ventures and our 56% interest in VerticalScope ("operating revenue") was down $69.4 million or 10%.
Digital revenue across all segments decreased 3.4% in 2017, reflecting lower revenues at eyeReturn Marketing, Workopolis, Toronto Star Touch and WagJag partially offset by continued solid growth at VerticalScope as well as in local digital advertising within the community websites in the Community Brands segment. Toronto Star Touch was discontinued effective July 31, 2017 and we sold WagJag and related assets for gross proceeds of $0.5 million on October 30, 2017, both of which are accretive to our earnings. Digital revenues were 19% of total segment revenues in 2017 compared to 18% in 2016.
The following charts provide a breakdown of total segmented operating revenue for 2017 and 2016 ($ in millions):
| Year ended December 31, |
Communities |
Dailies |
Digital Ventures |
Total |
||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
|||
| Print advertising |
$125.5 |
42% |
$144.9 |
46% |
$270.4 |
39% |
||||
| Digital advertising |
30.7 |
10% |
25.5 |
8% |
$72.3 |
100% |
128.5 |
19% |
||
| Distribution |
110.9 |
36% |
19.0 |
6% |
129.9 |
18% |
||||
| Subscriber |
0.7 |
114.3 |
36% |
115.0 |
17% |
|||||
| Other |
36.4 |
12% |
11.4 |
4% |
47.8 |
7% |
||||
| Total |
$304.3 |
100% |
$315.1 |
100% |
$72.3 |
100% |
$691.6 |
100% |
||
| Year ended December 31, |
Communities |
Dailies |
Digital Ventures |
Total |
||||||
| $ |
% |
$ |
% |
$ |
% |
$ |
% |
|||
| Print advertising |
$145.8 |
44% |
$176.7 |
50% |
$322.5 |
42% |
||||
| Digital advertising |
31.9 |
10% |
27.3 |
8% |
$74.0 |
100% |
133.1 |
18% |
||
| Distribution |
117.1 |
35% |
22.0 |
6% |
139.1 |
18% |
||||
| Subscriber |
0.9 |
119.2 |
33% |
120.1 |
16% |
|||||
| Other |
36.6 |
11% |
10.2 |
3% |
46.8 |
6% |
||||
| Total |
$332.4 |
100% |
$355.3 |
100% |
$74.0 |
100% |
$761.7 |
100% |
||
Salaries and benefits
Our segmented salaries and benefits costs were down $52.7 million or 16% in 2017 and included the benefit of a $13.4 million digital media tax credit (as this represents recoveries of previously incurred salary and benefits costs). Excluding the impact of the tax credit, segmented salaries and benefit costs in 2017 were down $39.3 million or 12% reflecting the benefit of savings from restructuring initiatives, including the closure of the Vaughan Printing Facility and lower staffing costs associated with Toronto Star Touch, partially offset by increased salary and benefit costs at VerticalScope.
Other operating costs
Segmented other operating costs primarily consist of circulation/flyer distribution costs, newsprint costs and other production costs which represented 41%, 12% and 13% respectively of segmented other operating costs in 2017. Segmented other operating costs were down $31.1 million (8.2%) in 2017 as a result of lower print volumes and the impact of other cost reductions partially offset by the introduction of outsourcing costs related to printing of the Toronto Star as well as increased operating costs at VerticalScope.
Adjusted EBITDA
Our segmented adjusted EBITDA was $74.2 million in 2017, an improvement of $13.7 million relative to the prior year. Segmented adjusted EBITDA in the Daily Brands segment was $26.4 million, an improvement of $19.0 million relative to 2016. The improvement in 2017 included the benefit of a $13.4 million digital media tax credit. This tax credit related to a claim made in respect of 2012 and not current year operations. Segmented adjusted EBITDA in the Community Brands segment was $31.5 million in 2017, down $4.4 million relative to 2016, while segmented adjusted EBITDA in the Digital Ventures segment was $26.9 million in 2017, a decrease of $0.4 million compared to 2016. Segmented adjusted EBITDA in 2017 included $31.4 million of savings from restructuring initiatives and $2.2 million of costs related to our transformation initiatives.
Amortization and depreciation
Total segmented amortization and depreciation decreased $55.1 million in 2017 primarily as a result of lower amortization associated with our investment in VerticalScope as well as the impact of the transition of printing of the Toronto Star to Transcontinental Printing in 2016.
Operating earnings (loss)
Segmented operating earnings were $4.8 million in 2017, compared to a segmented operating loss of $64.1 million in 2016. Operating earnings in 2017 included $28.1 million of amortization expense associated with our investment in VerticalScope. The operating loss in 2016 included $74.8 million of amortization expense associated with our investment in VerticalScope as well as the above mentioned amortization of equipment related to the transition of printing of the Toronto Star.
Restructuring and other charges
Total segmented restructuring and other charges were $18.9 million in 2017, $16.5 million of which related to ongoing efforts to reduce costs while $2.4 million related to restructuring associated with publications we acquired from Postmedia in November 2017. Excluding the restructuring associated with publications we acquired from Postmedia, the 2017 restructuring initiatives are expected to result in annualized net savings of approximately $22.0 million and a reduction of approximately 250 positions. Of the expected savings, $12.1 million was realized in 2017. Total segmented restructuring and other charges of $46.9 million were recorded in 2016 which included a charge of $20.0 million for severance and facility related expenses in respect of our decision to outsource printing of the Toronto Star.
Over the last few years we have undertaken several restructuring initiatives in order to reduce our ongoing operating costs. At December 31, 2017, our liability for payments in respect of these restructuring initiatives was $23.6 million (2016 - $37.1 million). The following chart provides a year-over-year summary of the realized and expected net savings by year:
| Year of Initiative |
||||
| (in $000's) |
2015 |
2016 |
2017 |
Total |
| Realized net savings in: |
||||
| 2015 |
$10,000 |
$10,000 |
||
| 2016 |
13,200 |
$19,900 |
33,100 |
|
| 2017 |
100 |
16,600 |
$12,100 |
28,800 |
| Expected net savings in: |
||||
| 2018 |
9,900 |
9,900 |
||
| Annualized net savings |
$23,300 |
$36,500 |
$22,000 |
$81,800 |
Impairment of assets
During 2017, we incurred non-cash charges related to asset impairment of our goodwill and investments in joint ventures totalling $11.1 million. During 2016, we incurred charges related to asset impairment of intangible assets and investments in joint ventures totalling $7.5 million. These charges have no impact on cash flows.
In connection with our impairment test on December 31, 2017, we determined that the carrying amount of goodwill in the Digital Ventures CGU exceeded its value in use "VIU" and accordingly, we recorded an impairment charge of $8.1 million in respect of goodwill in the Digital Ventures CGU. Also, during the first quarter of 2017, we determined that the carrying amount of our joint venture investment in Workopolis exceeded the VIU and we recorded an impairment charge of $3.0 million in respect of this investment as a result of a further downward revision in longer term forecasted revenues reflecting further increased competition in the online recruitment and job search markets.
In carrying out our impairment testing during the fourth quarter of 2016, we determined that the carrying amount of our joint venture investment in Workopolis exceeded VIU and we recorded an impairment charge of $6.7 million in respect of this investment as a result of a further downward revision in longer term forecasted revenues reflecting continued increased competition in the online recruitment and job search markets as well as prevailing economic conditions.
Also, during the fourth quarter of 2016, following lower than forecasted performance in one of our digital CGUs in the Community Brands segment in the quarter, we recorded an impairment charge of $0.8 million in respect of intangible assets within this CGU.
Operating loss
In 2017, our segmented operating loss was $25.1 million compared to $118.5 million in 2016. Our 2017 segmented operating loss included $66.9 million of non-cash amortization and depreciation, $11.1 million of non-cash impairment charges. Our 2016 segmented operating loss included $122.0 million of non-cash amortization and depreciation and $7.5 million of non-cash impairment charges.
Our operating loss excluding our proportionate share of operating profit (loss) from VerticalScope and joint ventures decreased $42.6 million in 2017 compared to 2016.
Loss from joint ventures
Loss from joint ventures was $1.8 million in 2017 and $5.5 million in 2016. These losses primarily reflect non-cash impairment charges of $3.0 million recorded in 2017 and $6.7 million recorded in 2016 related to our joint venture investment in Workopolis, as discussed above. Excluding the impact of these charges, income from joint ventures was $1.2 million in both 2017 and 2016 respectively.
Loss from associated businesses
Loss from associated businesses was $6.8 million in 2017 compared to a loss of $34.9 million in 2016. The 2017 loss included income of $1.4 million from Blue Ant and income of $0.7 million from Nest Wealth offset by a loss of $5.7 million from Black Press and a loss of $3.2 million from VerticalScope. The 2017 loss from VerticalScope included $28.1 million of amortization and depreciation expense. The 2016 loss included income of $5.6 million from Black Press and $2.4 million from Blue Ant offset by a loss of $0.6 million from Shop.ca, and a loss of $42.2 million from VerticalScope. The 2016 loss from VerticalScope included $74.8 million of amortization and depreciation expense.
Our share of Black Press' net loss was $5.7 million in 2017 (income of $5.6 million in 2016), representing Black Press' results through November 30, 2017. Black Press has a February fiscal year end and therefore does not have coterminous quarter-ends with us.
Our share of Blue Ant's net income was $1.4 million in 2017 ($2.4 million in 2016) representing Blue Ant's results through November 30, 2017 which included dilution gains of $0.6 million ($2.3 million in 2016). Our equity interest in Blue Ant was 16% at the end of 2017 relative to 18% at the end of 2016. Blue Ant has an August fiscal year end and therefore does not have coterminous quarter-ends with us.
Our share of the Shop.ca net loss was $0.6 million in 2016 which reduced the carrying value of our investment to $nil. Shop.ca declared bankruptcy in 2016.
We did not record any income or loss during 2017 or 2016 in respect of our investment in Canadian Press as the carrying value had previously been reduced to $nil. We will begin to report our share of Canadian Press' results once the unrecognized losses, including Other Comprehensive Income ("OCI") losses ($5.3 million as of December 31, 2017) have been offset by net income, OCI or additional investments are made. For the year ended December 31, 2017, we would have reported income of $1.1 million and other comprehensive loss of $1.8 million from Canadian Press (2016 – income of $0.3 million and other comprehensive loss of $1.8 million).
Investment in VerticalScope
We own a 56% interest in VerticalScope. During 2017, VerticalScope generated U.S. $32.3 million of cash from operations and made acquisitions totalling U.S. $39.6 million. VerticalScope's debt, net of cash, was up U.S. $12.7 million from U.S. $74.4 million at December 31, 2016 to U.S. $87.1 million at December 31, 2017. In 2017, VerticalScope entered into a new five-year, US $200 million senior credit facility.
In connection with the investment in VerticalScope, during 2017 we recorded $28.1 million of amortization and depreciation expense (2016 - $74.8 million).
Other income
Other income was $3.9 million in 2017 compared to other income of $24.3 million in 2016. Other income in 2017 included a gain of $3.2 million related to the sale of publications to Postmedia and a gain of $0.5 million on the sale of WagJag and related assets.
On November 27, 2017 we entered into an asset purchase agreement with Postmedia relating to the purchase and sale of a number of community and daily newspapers. As part of the transaction, we acquired eight weekly community publications, seven daily community newspapers and two free daily newspapers from Postmedia. As consideration for the purchase, we sold 22 weekly community newspapers in eastern and southern Ontario and the Metro Winnipeg and Metro Ottawa free daily publications to Postmedia. The transaction was a non-monetary transaction as there was no cash exchanged. The estimated fair value of both the net assets acquired from Postmedia and the net assets we sold was $3.5 million. We recognized a gain on sale of $3.2 million which represented the difference between the consideration received, being the net assets acquired at fair value, and the carrying value of the net liabilities transferred and cost of disposal.
Income and other taxes
We recorded income tax expense of $5.7 million in 2017 and an income tax recovery of $3.9 million in 2016. Excluding the impact of non-deductible impairment charges, loss of joint ventures and associated businesses and the movement in deferred income tax assets not recognized, our effective tax rate in 2017 would have been 24.9% (2016 - 24.6%).
Net loss from continuing operations
Our net loss from continuing operations was $30.6 million ($0.38 per share) in 2017, compared to a loss of $76.0 million ($0.94 per share) in 2016. Our loss in 2017 included $66.9 million of amortization and depreciation expense and $11.1 million of non-cash impairment charges. Our 2016 net loss included $122.0 million of non-cash amortization and depreciation and $7.5 million of non-cash impairment charges.
Income (loss) from discontinued operations
In connection with the sale of Harlequin in 2014, 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 income of $1.4 million in 2017 and income of $1.2 million in 2016 relate to revised estimates of indemnity provisions related to legal costs, taxes and other costs.
Net income (loss) attributable to equity shareholders
Our net loss attributable to equity shareholders was $29.2 million ($0.36 per share) in 2017 compared to net loss attributable to equity shareholders of $74.8 million ($0.93 per share) in 2016.
OUTLOOK
In 2017, the Community Brands and the Daily Brands segments continued to face a challenging print advertising market resulting from ongoing shifts in spending by advertisers particularly in the national advertising category while declines were more moderate in the local advertising categories. While these trends have continued early into 2018, it is difficult to predict if these trends will improve or worsen in the balance of the year. Flyer distribution revenues declined 6.6% in 2017 with flyer distribution revenues in the latter half of 2017 being negatively impacted by the financial challenges experienced by certain retail clients, and we expect flyer distribution revenues to continue to be impacted into the early part of 2018. Subscriber revenues declined a modest 3.7% in 2017 and we expect these declines to increase marginally in 2018 as we focus on subscriber profitability. Overall digital revenue at the Community Brands and Daily Brands is expected to grow in 2018 as it continues to benefit from growth at thestar.com and in local digital advertising at both the daily newspaper sites and the community sites offset by expected continued declines in other digital verticals.
We expect that the transaction with Postmedia in November 2017 will have a positive effect on earnings due to anticipated synergies, but a negative effect on revenue. We expect that this transaction will contribute to an improvement in operating earnings in the range of $5 million to $7 million in 2018. The full year impact of properties acquired and sold would have resulted in a net reduction in revenue in 2017 of approximately $14 million ($22 million lower in the Community Brands segment and $8 million higher in the Daily Brands segment).
Segmented operating earnings within the Digital Ventures segment predominantly reflect the underlying results of VerticalScope. In the latter half of 2017, VerticalScope added cost to support additional organic and acquisition related growth which we anticipate will translate into higher rates of growth in both revenue and adjusted EBITDA in 2018 relative to the growth rates experienced in 2017.
In 2018, we expect the cost base to benefit from $9.9 million of savings related to restructuring initiatives undertaken to date, exclusive of those related to the Postmedia transaction ($4.0 million in the Community Brands segment and $5.9 million in the Daily Brands segment). We are expecting to identify additional cost savings which we expect will largely offset additional operating expenses in areas important to our transformation efforts. Capital expenditures in 2018 are currently anticipated to be in the range of $15 million, including approximately $5 million of additional capital spending related to technology platforms in connection with our transformation activities.
From a cash flow perspective, we currently expect full year contributions to our registered defined benefit pension plans in 2018 to be approximately $9 million down from $10.9 million in 2017, and roughly $1.5 million lower than the expected expense included in our operating earnings in 2018.
The Ontario Government has now released final details of their proposed funding framework which is expected to be effective beginning in 2019. While there can be no certainty that the Ontario Government's new funding framework will be enacted as proposed, our preliminary analysis indicates that normal funding of our defined benefit pension plans for 2019 would be in the range of $8 million - $12 million, subject to changes in pension asset returns and interest rates.
In addition, as a result of changes surrounding regulations of single employer and jointly-sponsored pension plans, we are engaged in exploring a potential merger of our defined benefit pension plans with the CAAT jointly-sponsored defined benefit pension plan. We are in the early stages of such a process. Various approvals, including government approvals, member consent, final approval by Torstar and CAAT, would be required to complete such a merger and as a result, there can be no certainty as to the potential outcome.
DIVIDEND
On February 27, 2018, Torstar declared a quarterly dividend of 2.5 cents per share on its Class A shares and Class B non-voting shares, payable on March 30, 2018, to shareholders of record at the close of business on March 9, 2018. 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 audited consolidated financial statements for the year ended December 31, 2017 and the 2017 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 February 28, 2018 at 8:15 a.m. to discuss its fourth quarter results. The dial-in number is 1-888-231-8191. 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 1-855-859-2056 reservation number 2897945. 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 Toronto Star, Canada's largest daily newspaper, six regional daily newspapers in Ontario including The Hamilton Spectator; English language Metro newspapers in several Canadian cities; more than 80 weekly community newspapers in Ontario; flyer distribution operations; and digital properties including thestar.com, wheels.ca, save.ca, toronto.com, a number of regional online sites, eyeReturn Marketing Inc. and an interest in Workopolis Inc. Torstar also holds a majority interest in VerticalScope, a North American vertically-focused digital media company.
Non-IFRS measures
In addition to operating profit, an additional IFRS measure, as presented in the consolidated statement of income, management uses segmented revenue, adjusted EBITDA (and where applicable segmented adjusted EBITDA), operating earnings (and where applicable segmented operating earnings), and adjusted earnings per share as measures to assess the consolidated performance and the performance of the reporting units and business segments. Please refer to Section 14 of Torstar's MD&A for the year ended December 31, 2017 for a reconciliation of adjusted EBITDA and Operating earnings (and Segmented adjusted EBITDA/Segmented Operating earnings – as applicable) with Operating profit (Segmented Operating profit – as applicable) and adjusted earnings per share to earnings per share.
Segmented revenue
Segmented revenue is calculated in the same manner as operating revenue in the Consolidated Financial Statements, except that it is calculated using total segment results 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(loss), and exclude share based compensation, restructuring and other charges, and impairment of assets. Share based compensation is eliminated as it is a non-cash expense that fluctuates significantly from period to period, in particular for VerticalScope as a result of industry compensation practices. 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, share based compensation 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.
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, other operating costs, share based compensation 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(loss) (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", "assume", "predict", "intend", "would", "could", "if", "may" and similar expressions.
This press release includes, among others, forward-looking statements regarding the expected effects of the recent Postmedia transaction on Torstar's earnings, expectations regarding Torstar's financial position and earnings, anticipated growth at VerticalScope, anticipated revenue trends and achievement of transformation initiatives, expected savings including savings from restructuring initiatives and other cost reductions, estimates and expectations relating to contingent liabilities and impairment of assets, Torstar's outlook for 2018, including anticipated revenue trends and adjusted EBITDA, expected effects of the Postmedia transaction on Torstar's earnings and revenue, anticipated growth at VerticalScope, expected savings including savings from restructuring initiatives and other cost reductions, anticipated operating expenses and capital expenditures, expected defined benefit pension plan contributions, funding obligations and expenses and the anticipated impact of the Ontario Government's proposed new pension funding framework, and the potential merger of our defined benefit pension plans with the CAAT jointly sponsored defined benefit pension plan. 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 and changing 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 and customers; 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; cybersecurity and risks of security breaches; Torstar's ability to execute appropriate strategic growth initiatives including acquisitions; unexpected costs or liabilities related to acquisitions and dispositions; investments in other businesses; changes in employee future benefit obligations; reliance on printing operations; labour disruptions; newsprint costs; privacy, anti-spam, competition, communications, e-commerce, data use and environmental laws, health and safety regulations and other laws and regulations applicable generally to Torstar's businesses; litigation; foreign exchange fluctuations and foreign operations; dependence on key personnel; availability of insurance; intellectual property rights and other content risks; credit risk; availability of capital and restrictions imposed by credit facilities; income tax and other taxes; dividend policy; controls over financial reporting, results of impairment tests and uncertainties associated with critical accounting estimates; holding company structure; 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 conditions and competition; rates of return and discount rates relating to pension expense and pension plan obligations; discount rates and tends in health care costs relating to post employment benefits; expected future revenues; expected future liabilities; expected future cash flows and discount rates relating to valuation of intangible assets; and successful development and launch of strategic initiatives and 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 2017 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) |
|||
| As at |
As at |
||
| Assets |
|||
| Current: |
|||
| Cash and cash equivalents |
$71,377 |
$75,374 |
|
| Restricted cash |
9,056 |
11,847 |
|
| Receivables |
112,946 |
116,487 |
|
| Inventories |
4,326 |
4,829 |
|
| Derivative financial instruments |
57 |
||
| Prepaid expenses |
4,373 |
4,467 |
|
| Prepaid and recoverable income taxes |
1,000 |
9,271 |
|
| Total current assets |
203,135 |
222,275 |
|
| Investments in joint ventures |
23,420 |
27,463 |
|
| Investments in associated businesses |
142,769 |
157,897 |
|
| Property, plant and equipment |
55,259 |
61,969 |
|
| Intangible assets |
40,217 |
55,945 |
|
| Goodwill |
8,133 |
||
| Other assets |
12,967 |
12,414 |
|
| Employee benefits |
7,073 |
||
| Deferred income tax assets |
3,460 |
11,322 |
|
| Total assets |
$481,227 |
$564,491 |
|
| Liabilities and Equity |
|||
| Current: |
|||
| Accounts payable and accrued liabilities |
$89,132 |
$101,133 |
|
| Derivative financial instruments |
472 |
||
| Provisions |
18,113 |
28,473 |
|
| Income tax payable |
6,781 |
7,212 |
|
| Total current liabilities |
114,026 |
137,290 |
|
| Provisions |
6,714 |
11,104 |
|
| Other liabilities |
6,599 |
7,616 |
|
| Employee benefits |
104,716 |
77,407 |
|
| Deferred income tax liabilities |
3,342 |
4,904 |
|
| Equity: |
|||
| Share capital |
403,040 |
402,814 |
|
| Contributed surplus |
21,322 |
20,797 |
|
| Accumulated deficit |
(176,180) |
(102,599) |
|
| Accumulated other comprehensive income (loss) |
(2,207) |
5,176 |
|
| Total equity attributable to equity shareholders |
245,975 |
326,188 |
|
| Minority interests |
(145) |
(18) |
|
| Total equity |
245,830 |
326,170 |
|
| Total liabilities and equity |
$481,227 |
$564,491 |
|
| Torstar Corporation |
|||||
| Consolidated Statement of Income (Loss) |
|||||
| (Thousands of Canadian Dollars except per share amounts) |
|||||
| Three months ended |
Year ended |
||||
| 2017 |
2016 |
2017 |
2016 |
||
| Operating revenue |
$169,339 |
$188,408 |
$615,685 |
$685,099 |
|
| Salaries and benefits |
(51,364) |
(72,841) |
(245,906) |
(299,315) |
|
| Other operating costs |
(83,392) |
(93,458) |
(325,631) |
(356,192) |
|
| Amortization and depreciation |
(6,934) |
(7,349) |
(36,987) |
(44,020) |
|
| Restructuring and other charges |
(5,912) |
(3,698) |
(17,512) |
(45,823) |
|
| Impairment of assets |
(8,133) |
(800) |
(8,133) |
(800) |
|
| Operating profit (loss) |
13,604 |
10,262 |
(18,484) |
(61,051) |
|
| Interest and financing costs |
(505) |
(692) |
(2,213) |
(3,080) |
|
| Foreign exchange |
(847) |
(478) |
493 |
298 |
|
| Income (loss) from joint ventures |
635 |
(6,479) |
(1,845) |
(5,532) |
|
| Income (loss) from associated businesses |
(2,020) |
2,270 |
(6,824) |
(34,919) |
|
| Other income |
3,880 |
3,935 |
24,348 |
||
| 14,747 |
4,883 |
(24,938) |
(79,936) |
||
| Income and other taxes recovery (expense) |
(6,900) |
(4,200) |
(5,700) |
3,900 |
|
| Net income (loss) from continuing operations |
7,847 |
683 |
(30,638) |
(76,036) |
|
| Income from discontinued operations |
850 |
400 |
1,350 |
1,200 |
|
| Net income (loss) |
$8,697 |
$1,083 |
($29,288) |
($74,836) |
|
| Attributable to: |
|||||
| Equity shareholders |
$8,652 |
$1,264 |
($29,171) |
($74,750) |
|
| Minority interests |
$45 |
($181) |
($117) |
($86) |
|
| Net income (loss) attributable to equity shareholders |
|||||
| Basic and Diluted: |
|||||
| From continuing operations |
$0.10 |
$0.01 |
($0.38) |
($0.94) |
|
| From discontinued operations |
$0.01 |
$0.02 |
$0.01 |
||
| $0.11 |
$0.01 |
($0.36) |
($0.93) |
||
| Torstar Corporation |
|||||
| Consolidated Statement of Cash Flows |
|||||
| (Thousands of Canadian Dollars) |
|||||
| Three months ended December 31 |
Year ended December 31 |
||||
| 2017 |
2016 |
2017 |
2016 |
||
| Cash was provided by (used in) |
|||||
| Operating activities |
$23,570 |
$11,749 |
$15,404 |
($10,599) |
|
| Investing activities |
(1,746) |
(4,175) |
(11,520) |
65,337 |
|
| Financing activities |
(1,894) |
(1,981) |
(7,881) |
(14,505) |
|
| Increase (decrease) in cash |
19,930 |
5,593 |
(3,997) |
40,233 |
|
| Cash, beginning of period |
51,447 |
69,781 |
75,374 |
35,141 |
|
| Cash, end of period |
$71,377 |
$75,374 |
$71,377 |
$75,374 |
|
| Operating activities: |
|||||
| Net income (loss) from continuing operations |
$7,847 |
$683 |
($30,638) |
($76,036) |
|
| Amortization and depreciation |
6,934 |
7,349 |
36,987 |
44,020 |
|
| Deferred income taxes |
6,500 |
7,900 |
6,500 |
4,500 |
|
| Loss (income) from joint ventures |
(635) |
6,479 |
1,845 |
5,532 |
|
| Distributions from joint ventures |
247 |
2,187 |
159 |
||
| Loss (income) from associated businesses |
2,020 |
(2,270) |
6,824 |
34,919 |
|
| Dividend from associated businesses |
193 |
194 |
387 |
||
| Impairment of assets |
8,133 |
800 |
8,133 |
800 |
|
| Non-cash employee benefit expense |
3,716 |
4,782 |
15,393 |
18,506 |
|
| Employee benefits funding |
(1,159) |
(15,896) |
(16,768) |
(30,445) |
|
| Gain on sale of assets |
(3,725) |
(3,725) |
(24,338) |
||
| Other |
1,743 |
(2,644) |
(4,074) |
(2,926) |
|
| 31,621 |
7,376 |
22,858 |
(24,922) |
||
| Decrease in restricted cash |
6,878 |
2,791 |
3,338 |
||
| Decrease (increase) in non-cash working capital |
(8,051) |
(2,505) |
(10,245) |
10,985 |
|
| Cash provided by (used in) operating activities |
$23,570 |
$11,749 |
$15,404 |
($10,599) |
|
| Investing activities: |
|||||
| Additions to property, plant and equipment and intangible assets |
($2,412) |
($4,477) |
($11,402) |
($17,670) |
|
| Received from (investment in) associated businesses |
63 |
(500) |
|||
| Sale of (investment in) joint ventures |
167 |
167 |
(293) |
||
| Acquisitions and portfolio investments |
(15) |
(873) |
(373) |
||
| Receipt of escrowed cash from the sale of Harlequin |
22,750 |
||||
| Proceeds from sale of assets |
500 |
(68) |
500 |
61,037 |
|
| Other |
(1) |
385 |
25 |
386 |
|
| Cash provided by (used in) investing activities |
($1,746) |
($4,175) |
($11,520) |
$65,337 |
|
| Financing activities: |
|||||
| Dividends paid |
($1,981) |
($1,999) |
($7,946) |
($14,346) |
|
| Other |
87 |
18 |
65 |
(159) |
|
| Cash used in financing activities |
($1,894) |
($1,981) |
($7,881) |
($14,505) |
|
| Cash represented by: |
|||||
| Attributed to continuing operations: |
|||||
| Cash |
$36,068 |
$25,237 |
$36,068 |
$25,237 |
|
| Cash equivalents – short-term deposits |
35,309 |
50,137 |
35,309 |
50,137 |
|
| Net cash, end of period |
$71,377 |
$75,374 |
$71,377 |
$75,374 |
|
SOURCE Torstar Corporation
L. DeMarchi, Executive Vice-President and Chief Financial Officer, Torstar Corporation, (416) 869-4776
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