Torstar Corporation Reports Second Quarter Results

News provided by

Torstar Corporation

Aug 01, 2018, 06:30 ET

TORONTO, Aug. 1, 2018 /CNW/ - Torstar Corporation (TSX:TS.B) today reported financial results for the second quarter ended June 30, 2018.

Highlights for the second quarter:

  • As part of our transformation plan, on April 10, 2018, we launched a major national expansion with more robust digital offerings on thestar.com in Vancouver, Calgary, Edmonton, Toronto and Halifax aimed at driving future digital subscription revenues. This expansion leverages the Star brand and its history and unique position of local and investigative reporting.

  • On April 12, 2018, Workopolis.com and Workopolis' related assets were sold to Recruit Holdings Co., Ltd. Following the sale and subsequent wind up of the remaining Workopolis business, we estimate that the net proceeds will be in the range of $3.5 million to $4.0 million, with $3.2 million of proceeds received to date.

  • Ended the second quarter of 2018 with $49.4 million of cash and cash equivalents and $7.7 million of restricted cash; Torstar has no bank indebtedness.

  • Our net income attributable to equity shareholders was $4.8 million ($0.06 per share) in the second quarter of 2018 an improvement relative to a net loss of $7.0 million ($0.09 per share) in the second quarter of 2017.

  • Our net income from continuing operations in the second quarter of 2018 was $4.8 million ($0.06 per share) compared to a net loss of $7.5 million ($0.10 per share) in the second quarter of 2017.

  • Adjusted earnings per share was $0.16 in the second quarter of 2018, an improvement of $0.19 per share relative to the second quarter of 2017.

  • Our segmented operating profit was $2.2 million in the second quarter of 2018 which included $17.9 million of non-cash amortization and depreciation expense as well as $7.6 million of restructuring and other charges.

  • Our segmented adjusted EBITDA was $27.8 million in the second quarter of 2018, an improvement of $9.8 million from the second quarter of the prior year. Segmented adjusted EBITDA in the Daily Brands segment was $18.7 million in the second quarter, an improvement of $15.6 million relative to 2017. The improvement in adjusted EBITDA included the benefit of a $15.8 million digital media tax credit. This tax credit related to a claim made in respect of 2015 and not current year operations. Segmented adjusted EBITDA in the Community Brands segment was $7.9 million, down $2.5 million relative to the comparable period in 2017 while segmented adjusted EBITDA in the Digital Ventures segment was $5.7 million, down $1.2 million relative to the second quarter of 2017, $0.5 million of which was related to the sale of Workopolis in early April. Corporate costs were also $2.0 million higher in the second quarter of 2018 relative to the second quarter of 2017.

  • Segmented revenue was $160.7 million in the second quarter of 2018, down $20.1 million (11%) from $180.8 million in the second quarter of 2017 and included revenue growth of $1.3 million or 12% (16% growth in USD) from VerticalScope. On a same store and comparable timing basis, segmented revenue was down $9.9 million (5%) in the second quarter.

"I am very pleased with the progress we are making across many fronts in laying the foundation for our transformation plan. A major national digital expansion, an exclusive deal with the Wall Street Journal, an increased investment in more sharply focused investigative journalism, hyper-local and local content are all outputs of our push towards digital subscriptions.  What is less obvious but critically important is the progress we are making in the areas of data infrastructure, advanced analytics capability, single sign-on/identity management and paywall/subscription platform implementations and customer life cycle management capabilities.  While we are in the early days of a comprehensive multi-phased transformation plan, signs of progress are clear." said John Boynton, President and CEO of Torstar. "In terms of results in the quarter, segmented adjusted EBITDA was up $9.8 million over last year and included the benefit of a $15.8 million digital media tax credit.  While print advertising trends remain challenging we saw trends improve in the local category and we continue to be pleased with the stability we are seeing in subscriber revenue which is a large and more resilient part of our business.  Our results also benefitted from synergies associated with the purchase and sale of a number of daily and community papers in late 2017 as well as continued efforts on costs which helped to offset continued pressure on print advertising revenues and necessary investments in our transformation. Earnings in the quarter also included $5.7 million from VerticalScope."

The following chart provides a continuity of earnings per share from the second quarter and first six months of 2017 to the second quarter and first six months of 2018:


Three months ended June 30

Six months ended June 30

 

Earnings (Loss)
Per Share

Adjusted
Earnings (Loss)
Per Share**

Earnings (Loss)
Per Share

Adjusted
Earnings (Loss)
Per Share**

Loss per share from continuing operations attributable to equity shareholders in 2017

($0.10)

($0.03)

($0.40)

($0.24)

Changes








•    Adjusted EBITDA*

0.12

0.12

0.12

0.12





•    Amortization and depreciation*

0.01

0.01

0.03

0.03





•    Operating earnings (loss)*

0.03

0.10

(0.25)

(0.09)





•    Restructuring and other charges*

(0.01)

(0.01)





•    Impairment of assets*

0.04





•    Operating profit (loss)*

0.02

0.10

(0.22)

(0.09)





•    Non-cash foreign exchange

(0.01)

(0.01)





•    Other

0.05

0.06

0.03

0.05





Earnings (Loss) per share from continuing operations attributable to equity shareholders in 2018

$0.06

$0.16

($0.20)

($0.04)

Earnings per share from discontinued operations attributable to equity shareholders in 2018

$0.08





Earnings (Loss) per share attributable to equity shareholders in 2018

$0.06

$0.16

($0.12)

($0.04)

*Includes proportionately consolidated share of joint venture 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 –SECOND QUARTER 2018

The following tables set out, in $000's, the segmented results for the three months ended June 30, 2018 and 2017:

Three months ended June 30, 2018

(in $000's)

Communities

Dailies

Digital Ventures

Corporate

Total
Segmented*

Adjustments

&

Eliminations1

Total Per
Consolidated
Statement of
Income (Loss)








Operating revenue

$68,661

$75,406

$16,598

$160,665

($17,494)

$143,171








Salaries and benefits

(31,965)

(12,669)

(5,155)

($1,681)

(51,470)

6,165

(45,305)








Other operating costs

(28,807)

(44,034)

(5,738)

(2,814)

(81,393)

5,616

(75,777)








Adjusted EBITDA**

7,889

18,703

5,705

(4,495)

27,802

(5,713)

22,089








Amortization & depreciation

(2,758)

(3,192)

(11,911)

(17,861)

11,327

(6,534)








Share based compensation

(61)

72

(411)

197

(203)

203








Operating earnings (loss)**

5,070

15,583

(6,617)

(4,298)

9,738

5,817

15,555








Restructuring and other charges

(4,071)

(1,663)

(1,818)

(7,552)

1,768

(5,784)








Operating profit (loss)**

$999

$13,920

($8,435)

($4,298)

$2,186

$7,585

$9,771








Net income





$4,849

Three months ended June 30, 2017

(in $000's)

Communities

Dailies

Digital
Ventures

Corporate

Total
Segmented*

Adjustments
&
Eliminations1

Total Per
Consolidated
Statement of
Income (Loss)








Operating revenue

$82,620

$79,794

$18,358

$180,772

($19,015)

$161,757








Salaries and benefits

(36,031)

(29,142)

(5,649)

($1,562)

(72,384)

5,928

(66,456)








Other operating costs

(36,147)

(47,560)

(5,763)

(919)

(90,389)

5,562

(84,827)








Adjusted EBITDA**

10,442

3,092

6,946

(2,481)

17,999

(7,525)

10,474








Amortization & depreciation

(3,425)

(8,454)

(7,317)

(19,196)

6,779

(12,417)








Share based compensation

(206)

(22)

(491)

75

(644)

644








Operating earnings (loss)**

6,811

(5,384)

(862)

(2,406)

(1,841)

(102)

(1,943)








Restructuring and other charges

(3,053)

(2,816)

(142)

(200)

(6,211)

141

(6,070)








Operating profit (loss)**

$3,758

($8,200)

($1,004)

($2,606)

($8,052)

$39

($8,013)








Loss from continuing operations





($7,499)








Income from discontinued operations





$500








Net loss





($6,999)

1

Reflects adjustments and eliminations of proportionately consolidated results of, and transactions with joint ventures and VerticalScope Holdings Inc. ("VerticalScope").

*

Includes proportionately consolidated share of joint venture operations and VerticalScope .

**

These are non-IFRS or additional IFRS measures, see "Non-IFRS measures".

Revenue
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 and subsequently closed 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.  Refer to Section 12 of our MD&A for the three and six months ended June 30, 2018 as well as Section 16 of our annual MD&A for further discussion. As a result of publications sold and acquired, revenues in the Community Brands segment were estimated to be $6.8 million lower in the second quarter of 2018, while revenues in the Daily Brands segment were $2.4 million higher in the second quarter of 2018. Revenues in the second quarter of 2018 were also impacted by the sale of Workopolis in April 2018 and wagjag.com in October 2017. When we refer to same store basis in the following discussion, the comparisons have been adjusted to exclude these factors.

In addition, there were other minor differences in revenues in the second quarter predominantly in the Daily Brands segment as a result of a shift in the days of the week within the calendar quarter. The impact on adjusted EBITDA as a result of these shifts was minimal. 

Segmented revenue was down $20.1 million or 11% in the second quarter of 2018 and included revenue growth of $1.3 million (12%) from VerticalScope (16% in USD).  On a same store and comparable timing basis, segmented revenue was down $9.9 million (5%) in the second quarter of 2018.

Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56% interest in VerticalScope) was down $18.6 million or 11% in the second quarter of 2018.

On a reported basis, segmented revenue in the second quarter reflected an increase of 5% in subscriber revenues, a decline of 19% in print advertising revenues and a decline of 15% in flyer distribution revenues.  On a same store and comparable timing basis, segmented revenue reflected subscriber revenues which were almost flat compared to the prior year, a decline of 14% in print advertising revenues and a decline of 5% in flyer distribution revenues.

On a same store basis, digital revenue in the second quarter of 2018 was up 3% relative to the second quarter of 2017 reflecting continued solid growth at VerticalScope, growth in local digital advertising within the community websites and growth at thestar.com.  Gains in these areas were partially offset by declines in other properties. Digital revenues were 19% of total revenue in the second quarter of 2018 compared to 18% in the second quarter of 2017 on a reported basis.

The following charts provide a breakdown of total segmented operating revenue:



Three months ended
 June 30, 2018

Communities

Dailies

Digital Ventures

Total

$

%

$

%

$

%

$

%









Print advertising

$27,963

41%

$29,480

39%

$57,443

36%









Digital advertising

6,517

9%

6,921

9%

$16,598

100%

30,036

19%









Distribution

24,465

36%

5,591

7%

30,056

19%









Subscriber

115

—%

30,355

40%

30,470

19%









Other

9,601

14%

3,059

5%

12,660

7%









Total

$68,661

100%

$75,406

100%

$16,598

100%

$160,665

100%





Three months ended
 June 30, 2017

Communities

Dailies

Digital Ventures

Total

$

%

$

%

$

%

$

%









Print advertising

$35,248

43%

$35,690

45%

$70,938

39%









Digital advertising

8,058

10%

6,338

8%

$18,358

100%

32,754

18%









Distribution

29,241

35%

6,105

8%

35,346

20%









Subscriber

186

—%

28,928

36%

29,114

16%









Other

9,887

12%

2,733

3%

12,620

7%









Total

$82,620

100%

$79,794

100%

$18,358

100%

$180,772

100%

Salaries and benefits
Segmented salaries and benefits costs were down $20.9 million (29%) in the second quarter of 2018 and included the benefit of a $15.8 million digital media tax credit (as this represents recoveries of previously incurred salary and benefit costs). Excluding the impact of the tax credit, segmented salaries and benefit costs were down $5.1 million (7%) in the second quarter of 2018 reflecting lower costs associated with the Postmedia transaction ($2.0 million in the second quarter) as well as the benefit of savings from restructuring initiatives, including lower staffing costs associated with Toronto Star Touch.  These reductions were partially offset by the impact of higher minimum wage in Ontario, additional staffing related to our transformation activities as well as increased salary and benefit costs in support of organic and acquisition related growth at VerticalScope.

Other operating costs
Segmented other operating costs primarily include newspaper circulation and flyer distribution costs, production costs and newsprint costs, which represented 40%, 13% and 11%, respectively, of segmented other operating costs for the second quarter of 2018. Segmented other operating costs were down $9.0 million (10%) in the second quarter of 2018, largely as a result of lower costs associated with the sale of publications to Postmedia ($4.3 million in the second quarter) as well as lower print volumes and the impact of other cost reductions, in part associated with an increase focus on print subscriber profitability, partially offset by additional costs related to our transformation activities.

Adjusted EBITDA
Our segmented adjusted EBITDA was $27.8 million in the second quarter of 2018, an improvement of $9.8 million from the second quarter of 2017.  Segmented adjusted EBITDA in the Daily Brands segment was $18.7 million in the second quarter, an improvement of $15.6 million relative to 2017. The improvement in adjusted EBITDA included the benefit of a $15.8 million digital media tax credit. This tax credit related to a claim made in respect of 2015 and not current year operations.  Segmented adjusted EBITDA in the Community Brands segment was $7.9 million, down $2.5 million relative to the comparable period in 2017 while segmented adjusted EBITDA in the Digital Ventures segment was $5.7 million, down $1.2 million relative to the second quarter of 2017, $0.5 million of which was related to the sale of Workopolis in early April.  Corporate costs were also $2.0 million higher in the second quarter of 2018 relative to the second quarter of 2017.

The second quarter of 2018 included an incremental $1.7 million in segmented adjusted EBITDA resulting from synergies associated with the Postmedia transaction, as well as $3.0 million of savings related to restructuring initiatives offset by $4.9 million of costs related to our transformation activities and higher legal fees.

Our transformation efforts through the end of the second quarter have been concentrated on a major national digital expansion, an exclusive deal with the Wall Street Journal, an increased investment in investigative journalism, hyper-local and local content, development of our data infrastructure, advanced analytics capability, subscription platform implementations and customer life cycle management capabilities.

Amortization and depreciation
Total segmented amortization and depreciation of $17.9 million in the second quarter of 2018 decreased $1.3 million relative to the comparable period in 2017.  This decrease was primarily the result of lower amortization associated with our Daily Brands segment partially offset by higher amortization related to acquisitions made at VerticalScope.

Operating earnings (loss)
Segmented operating earnings were $9.7 million in the second quarter of 2018 compared to a segmented operating loss of $1.8 million in the second quarter of 2017. This improvement was largely the result of a $15.8 million digital media tax credit.

Restructuring and other charges
Total segmented restructuring and other charges were $7.6 million in the second quarter of 2018 compared to $6.2 million in the second quarter of 2017.

Restructuring initiatives undertaken through the end of the second quarter of 2018 are expected to result in annualized net savings of $11.3 million and have resulted in the reduction of approximately 200 positions with $8.1 million of the savings expected to be realized in 2018 (including $2.6 million in the first six months).

Operating profit (loss)
Segmented operating profit was $2.2 million in the second quarter of 2018, reflecting an improvement of $10.3 million relative to the second quarter of 2017 and was largely the result of higher adjusted EBITDA which included the benefit of a $15.8 million digital media tax credit.  Segmented operating profit for the second quarter of 2018 included $17.9 million of non-cash amortization and depreciation expense ($19.2 million - in the second quarter of 2017) and $7.6 million of restructuring and other charges ($6.2 million - in the second quarter of 2017).

Our operating profit (loss) excluding our proportionate share of operating profit (loss) from VerticalScope and our joint ventures improved $17.8 million in the second quarter of 2018 relative to the comparable period in 2017.

Income (loss) from joint ventures
Our income from joint ventures was $1.8 million in the second quarter of 2018 compared to income of $0.4 million in the second quarter of 2017. The results of our joint ventures are included in our discussions of segmented revenue and segmented adjusted EBITDA above. The income from joint ventures in the second quarter of 2018 included a $3.6 million gain on the sale of Workopolis.com and related assets that were sold on April 12, 2018 as well as $1.8 million of restructuring charges related to the closure of the remaining Workopolis business following the sale.

Loss from associated businesses
Our loss from associated businesses was $5.7 million in the second quarter of 2018 compared to a loss of $0.3 million in the second quarter of 2017. The loss in the second quarter of 2018 included income of $0.6 million from Black Press offset by a loss of $6.1 million from VerticalScope and $0.3 million from Nest Wealth.  The loss from VerticalScope included $11.1 million of amortization and depreciation expense largely related to acquisition activity.  The loss in the second quarter of 2017 included income of $1.9 million from Blue Ant and income of $1.1 million from our investment in Nest Wealth offset by losses of $2.0 million from Black Press and $1.2 million from VerticalScope which included $6.3 million of amortization and depreciation expense.

During the second quarter of 2018, VerticalScope generated U.S. $5.9 million in cash from operations and made acquisitions totalling U.S. $2.7 million.  VerticalScope's debt, net of cash, decreased U.S. $1.7 million from U.S. $119.2 million at March 31, 2018 to U.S. $117.5 million at June 30, 2018.

Net income (loss) attributable to equity shareholders
Our net income was $4.8 million ($0.06 per share) in the second quarter of 2018.  This compares to a net loss of $7.0 million ($0.09 per share) in the second quarter of 2017.

OUTLOOK
In the second quarter of 2018, the Community Brands and the Daily Brands segments continued to face a challenging print advertising market resulting from ongoing shifts in spending by advertisers. While these trends have continued early into the third quarter, it is difficult to predict if these trends will improve or worsen in the balance of the year.  On a same store and comparable timing basis as well as adjusting for the closure of certain retail clients in 2017, flyer distribution revenues declined 5% through the end of the second quarter and we expect this trend to deteriorate slightly in the balance of the year.  On a same store and comparable timing basis, subscriber revenues were almost flat through the end of the second quarter, however, we expect this will decrease marginally in the balance of 2018 as we continue to increase focus on subscriber profitability. Overall digital revenue at the Community Brands and Daily Brands is expected to continue to grow in the balance of 2018 benefiting from growth at thestar.com and in local digital advertising at both the daily newspaper sites and the community sites partially offset by expected continued declines in other digital verticals.

We expect the transaction with Postmedia in November 2017 to continue to have a positive effect on earnings due to anticipated synergies, but a negative effect on revenue, as we experienced in the first six months of 2018.  We continue to expect that synergies from this transaction will contribute to an improvement in operating earnings in the range of $5 million to $7 million for the full year ($4.3 million in the first six months of 2018).

Within the Digital Ventures segment, revenue growth at VerticalScope experienced through the second quarter of 2018 is expected to increase slightly in the balance of the year. This will be partially offset by declines resulting from the sale of Workopolis.com and related assets on April 12, 2018.  Segmented revenue and adjusted EBITDA in respect of Workopolis was $4.8 million and $0.7 million respectively, in the third and fourth quarter of 2017. The revenue trends experienced at eyeReturn through the end of the second quarter of 2018 are expected to continue through the balance of the year.

In the first six months of 2018, we have incurred an incremental $4.8 million of costs and $1.1 million of capital investment related to our transformation efforts. Our transformation efforts through the end of the second quarter have been concentrated on a major national digital expansion aimed at driving future digital subscription revenues, an exclusive deal with the Wall Street Journal, an increased investment in investigative journalism, hyper-local and local content, development of our data infrastructure, advanced analytics capability, subscription platform implementations and customer life cycle management capabilities. We anticipate that we will incur an approximate $13 million of incremental operating expenses in support of these efforts for the full year in 2018.

We expect these incremental costs will be more than offset by $17.9 million of full year savings related to restructuring initiatives undertaken through the end of the second quarter of 2018 ($8.7 million in the Community Brands segment and $9.2 million in the Daily Brands segment). $8.4 million of this benefit was realized in the first six months of 2018. We also expect to identify additional cost savings in the balance of the year.  We anticipate that capital expenditures for the full year 2018 will be in the range of $15 - $16 million, including approximately $5 - $6 million of capital spending related to technology platforms in connection with our transformation activities.

We continue to make progress on a potential merger of our defined benefit pension plans with the Colleges of Applied Arts & Technology ("CAAT") jointly-sponsored defined benefit pension plan.  On June 21, 2018 we entered into an agreement with the Sponsors Committee and Board of Trustees of the CAAT Pension Plan to merge our eight registered defined benefit pension plans with CAAT Pension Plan effective October 1st, 2018, with Torstar and certain of its subsidiaries becoming participating employers under the CAAT Pension Plan.  The agreement contains customary representations and warranties and is subject to customary closing conditions and approvals, including consent by the Torstar Plan members and approval of the Superintendent of Financial Services (Ontario).

If approved by Torstar Plan members, future benefits will accrue under the new DBplus provisions of the CAAT Pension Plan beginning October 1st, 2018. Members of the Torstar Plans must vote on this proposed merger before September 27, 2018.  The merger also requires regulatory approval by the Superintendent of Financial Services (Ontario) and at the time approval is granted, the liabilities for all past benefits under the Torstar Plans will be transferred to the CAAT Plan together with the assets of the Torstar Plans, and the CAAT Plan will assume responsibility for all pension benefit payments to members of the Torstar Plans going forward. Regulatory approval is not expected to occur prior to the second half of 2019. No additional cash funding related to the transferred liabilities is expected to be required from Torstar in connection with the merger.

DIVIDEND
On July 31, 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 September 28, 2018, to shareholders of record at the close of business on September 7, 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 condensed consolidated financial statements for the period ended June 30, 2018 (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 August 1, 2018 at 8:15 a.m. to discuss its second quarter results.  The dial-in number is 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 855-859-2056 reservation number 2486216.  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 StarMetro newspapers in several Canadian cities; more than 80 weekly community newspapers in Ontario; flyer distribution services; and digital properties including thestar.com, wheels.ca, save.ca, toronto.com, a number of regional online sites and eyeReturn Marketing. Torstar 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, 2018 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 Condensed 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. We believe 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 we use 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 restructuring and other charges, share based compensation 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. We use 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.  We believe 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 (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 our 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. We believe 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 routine 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). We believe 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 Torstar's estimates and expectations regarding the expected net proceeds from the recent Workopolis transaction, estimates and expectations regarding our transformation efforts, our efforts to obtain digital subscription revenue, anticipated revenue trends, transformation of our core brands and related costs, expected savings including savings from restructuring initiatives and other cost reductions, estimates and expectations related to contingent liabilities, and Torstar's outlook for the balance of 2018, including anticipated revenue trends within the Daily and Community Brands segments, the expected effects of the Postmedia transaction on Torstar's earnings and revenue, anticipated revenue trends within the Digital Ventures segment, operating expenses, capital expenditures and transformation efforts, and the proposed merger of our defined benefit pension plans with the CAAT jointly sponsored defined benefit pension plan (including the expected timing and benefits of the transaction, obtaining member and regulatory approvals and the satisfaction of other closing conditions).  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 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 build and 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; changes in employee future benefit obligations; unexpected costs or liabilities related to acquisitions and dispositions; investments in other businesses; reliance on printing operations; labour disruptions; newsprint costs; privacy, anti-spam, communications, competition, 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; control of Torstar by the Voting Trust; and the ultimate outcome of the proposed transaction with CAAT, including the risk that the transaction may not close, and the ability to obtain member consents and regulatory approvals on a timely basis.

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; successful development and launch of strategic initiatives and new products; and expected benefits from the proposed transaction with CAAT. 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, and the Management's Discussion & Analysis for the three and six months ended June 30, 2018, which have been filed on www.sedar.com and are available on Torstar's corporate website www.torstar.com.

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

Torstar Corporation

Consolidated Statement of Financial Position

(Thousands of Canadian Dollars)

(Unaudited)

As at
June 30, 2018

As at
December 31, 2017

Assets


Current:


Cash and cash equivalents

$49,389

$71,377

Restricted cash

7,692

9,056

Receivables

113,698

112,946

Inventories

4,072

4,326

Derivative financial instruments

57

Prepaid expenses

6,945

4,373

Prepaid and recoverable income taxes

808

1,000

Total current assets

182,604

203,135

Investments in joint ventures

24,339

23,420

Investments in associated businesses

138,630

142,769

Property, plant and equipment

52,052

55,259

Intangible assets

34,728

40,217

Other assets

14,239

12,967

Deferred income tax assets

118

3,460

Total assets

$446,710

$481,227

Liabilities and Equity


Current:


Accounts payable and accrued liabilities

$61,469

$72,962

Deferred revenue

14,917

16,170

Derivative financial instruments

1,799

Provisions

14,042

18,113

Income tax payable

482

6,781

Total current liabilities

92,709

114,026

Provisions

6,250

6,714

Other liabilities

5,861

6,599

Employee benefits

82,938

104,716

Deferred income tax liabilities

3,342

Equity:


Share capital

403,364

403,040

Contributed surplus

21,588

21,322

Accumulated deficit

(165,716)

(176,180)

Other components of equity

(82)

(2,207)

Total equity attributable to equity shareholders

259,154

245,975

Minority interests

(202)

(145)

Total equity

258,952

245,830

Total liabilities and equity

$446,710

$481,227

Torstar  Corporation

Consolidated Statement of Income (Loss)

(Thousands of Canadian Dollars except per share amounts)

(Unaudited)

Three months ended
 June 30

Six months ended
 June 30

2018

2017

2018

2017





Operating revenue

$143,171

$161,757

$272,143

$300,433





Salaries and benefits

(45,305)

(66,456)

(108,571)

(131,199)

Other operating costs

(75,777)

(84,827)

(146,709)

(163,317)

Amortization and depreciation

(6,534)

(12,417)

(13,214)

(22,482)

Restructuring and other charges

(5,784)

(6,070)

(9,788)

(10,553)

Operating profit (loss)

9,771

(8,013)

(6,139)

(27,118)

Interest and financing costs

(744)

(575)

(1,474)

(1,137)

Foreign exchange

(66)

1,003

(679)

158

Income (loss) from joint ventures

1,788

367

2,233

(2,449)

Loss from associated businesses

(5,711)

(302)

(9,763)

(2,497)

Other income

11

21

11

47

5,049

(7,499)

(15,811)

(32,996)

Income and other taxes recovery (expense)

(200)

(200)

1,100

Net income (loss) from continuing operations

4,849

(7,499)

(16,011)

(31,896)

Income from discontinued operations

500

6,300

500

Net income (loss)

$4,849

($6,999)

($9,711)

($31,396)

Attributable to:




Equity shareholders

$4,848

($6,988)

($9,654)

($31,266)

Minority interests

$1

($11)

($57)

($130)





Net income (loss) attributable to equity shareholders






per Class A (voting) and Class B (non-voting) share:



Basic and Diluted:




From continuing operations

$0.06

($0.10)

($0.20)

($0.40)

From discontinued operations

$0.01

$0.08

$0.01

$0.06

($0.09)

($0.12)

($0.39)

Torstar  Corporation

Consolidated Statement of Cash Flows

(Thousands of Canadian Dollars)

(Unaudited)

Three months ended
 June 30

Six months ended
 June 30

2018

2017

2018

2017

Cash was provided by (used in)




Operating activities

$3,013

($6,160)

($11,507)

($17,834)

Investing activities

(3,274)

(2,757)

(6,612)

(5,114)

Financing activities

(1,877)

(2,085)

(3,869)

(4,047)

Decrease in cash

(2,138)

(11,002)

(21,988)

(26,995)

Cash, beginning of period

51,527

59,381

71,377

75,374

Cash, end of period

$49,389

$48,379

$49,389

$48,379

Operating activities:




Net income (loss) from continuing operations

$4,849

($7,499)

($16,011)

($31,896)

Amortization and depreciation

6,534

12,417

13,214

22,482

Loss (income) from joint ventures

(1,788)

(367)

(2,233)

2,449

Distributions from joint ventures

1,314

1,814

1,314

1,814

Loss from associated businesses

5,711

302

9,763

2,497

Dividend from associated businesses


194

Non-cash employee benefit expense

3,666

3,816

7,334

7,782

Employee benefits funding

(3,436)

(7,888)

(7,582)

(12,029)

Other

(406)

(2,217)

20

(3,965)

16,444

378

5,819

(10,672)

Decrease in restricted cash

1,364

2,791

Increase in non-cash working capital

(13,431)

(6,538)

(18,690)

(9,953)

Cash provided by (used in) operating activities

$3,013

($6,160)

($11,507)

($17,834)

Investing activities:




Additions to property, plant and equipment and intangible assets

($2,149)

($2,820)

($5,660)

($5,052)

Received from associated businesses

63

63

Acquisitions and portfolio investments

(1,125)

(1,125)

(125)

Other

173

Cash used in investing activities

($3,274)

($2,757)

($6,612)

($5,114)

Financing activities:




Dividends paid

($1,984)

($1,983)

($3,965)

($3,969)

Other

107

(102)

96

(78)

Cash used in financing activities

($1,877)

($2,085)

($3,869)

($4,047)

Cash represented by:



Attributed to continuing operations:




Cash

$13,914

$15,342

$13,914

$15,342

Cash equivalents – short-term deposits

35,475

33,037

35,475

33,037

Net cash, end of period

$49,389

$48,379

$49,389

$48,379

SOURCE Torstar Corporation

Please contact L. DeMarchi, Executive Vice-President and Chief Financial Officer, Torstar Corporation, (416) 869-4776

Related Links

http://www.torstar.com

Organization Profile

Torstar Corporation