Press release from Marketwire
Torstar Corporation Reports First Quarter Results
Wednesday, May 08, 2013
Torstar Corporation Reports First Quarter Results06:30 EDT Wednesday, May 08, 2013
TORONTO, ONTARIO--(Marketwired - May 8, 2013) - Torstar Corporation (TSX:TS.B) today reported financial results for the first quarter ended March 31, 2013.
Highlights for the quarter:
- Total Segmented Revenue was $332.4 million in the first quarter of 2013, down $18.4 million from $350.8 million in the first quarter of 2012.
- Total Segmented EBITDA (see "non-IFRS measures") was $29.4 million in the first quarter of 2013, down $9.4 million from $38.8 million in the first quarter of 2012.
- Net income attributable to equity shareholders was $4.2 million ($0.05 per share) in the first quarter down $13.3 million ($0.17 per share) from $17.5 million ($0.22 per share) last year.
- Adjusted earnings per share (excluding restructuring and other charges and non-cash foreign exchange in both years, and gain on sale of assets in 2012) was $0.14 in the first quarter of 2013, down $0.08 from $0.22 in the first quarter of 2012.
- Net debt was $167.7 million at March 31, 2013, up $4.8 million from $162.9 million at December 31, 2012.
- Dividend to remain unchanged at an annualized rate of $0.525 per share.
"Results continue to be affected by a challenging print advertising market and we are responding to this pressure with further reductions in the cost base that we believe will not compromise our commitment to quality," said David Holland, President and CEO of Torstar Corporation. "EBITDA from the segments was down $9.4 million to $29.4 million with the Media operation down $5.7 million due to lower results at Star Media Group. We were however encouraged that our community media operations, Metroland Media, reported a modest increase in earnings in the quarter. At Harlequin, EBITDA was down by $2.8 million to $18.2 million excluding the impact of foreign exchange. Lower results were anticipated due to comparison to a very strong first quarter in 2012 and the impact of higher year over year digital author royalty rates."
"Looking forward, revenue visibility remains limited for the Media operation. In the face of revenue pressures in certain areas of our business, we remain committed to seeking new revenue opportunity which include the introduction of the paywall at The Toronto Star this summer and our ongoing efforts to grow the Metro franchise across Canada. We are also very focused on adjusting the cost base in the Media operation. These efforts are expected to benefit operating results through 2013 and in the future. At Harlequin, our objective for 2013 continues to be delivering relatively stable results assuming global economic conditions do not deteriorate. As expected, Harlequin's year-over-year results in the first half of the year will be negatively affected by factors such as the transition to higher digital royalty rates which will cease to be a factor after the second quarter of this year."
"Our modest leverage continues to be an advantage as we evolve. We announced this morning that Torstar's dividend will be maintained at an annual rate of $0.525. We feel that this is a balanced approach to the dividend and takes into account factors such as our current pension funding obligations."
The following table provides a continuity of earnings per share from 2012 to 2013:
|Net income attributable to equity shareholders per share 2012||$0.22|
|•||Restructuring and other charges||(0.05||)|
|•||Interest and financing costs||0.01|
|•||Gain on sale of assets (2012)||(0.04||)|
|Net income attributable to equity shareholders per share 2013||$0.05|
OPERATING RESULTS - FIRST QUARTER 2013 Overall Performance
The following tables set out the segmented results for the three months ended March 31, 2013 and 2012.
|Total Segmented*||Adjustments & Eliminations for Joint Ventures||Total Per Consolidated Statement of Income|
|Salaries and benefits||(102,080||)||(25,143||)||($2,858||)||(130,081||)||6,773||(123,308||)|
|Other operating costs||(112,928||)||(59,225||)||(727||)||(172,880||)||8,906||(163,974||)|
|Amortization & depreciation||(8,533||)||(1,006||)||(10||)||(9,549||)||749||(8,800||)|
|Restructuring and other charges||(5,718||)||(2,289||)||(8,007||)||11||(7,996||)|
|(in $000's)||Media*||Book Publishing*||Corporate||Total Segmented*||Adjustments & Eliminations for Joint Ventures||Total Per Consolidated Statement of Income|
|Salaries and benefits||(102,630||)||(24,996||)||($2,449||)||(130,075||)||7,178||(122,897||)|
|Other operating costs||(120,972||)||(60,162||)||(771||)||(181,905||)||8,859||(173,046||)|
|Amortization & depreciation||(8,266||)||(976||)||(11||)||(9,253||)||734||(8,519||)|
|Restructuring and other charges||(2,595||)||(2,595||)||(2,595||)|
|* Includes proportionately consolidated share of joint venture operations|
Segmented revenue was $332.4 million down $18.4 million or 5.2% in the first quarter of 2013 inclusive of a $5.3 million decrease in revenue at Metroland Media Group's TMGTV which was primarily due to lower product sales.
Media Segment revenues, excluding the $5.3 million decrease in Metroland Media Group's TMGTV, were down $9.0 million or 3.7% in the first quarter, largely due to print advertising revenue declines at the newspapers partially offset by growth in distribution revenue and additional publishing days in the quarter at Metroland Media Group and additional revenue from Metro's expansion into new markets. Excluding the impact of a change for Torstar's investment in Tuango in the first quarter of 2012, digital revenue in the Media Segment was down 2.1% in the first quarter of 2013 with growth in some properties being offset by declines in others. Digital revenues were 11.3% of total Media Segment revenues in the first quarter of 2013 up slightly from 11.2% in the same period last year.
Book Publishing Segment revenues were down $4.1 million in the first quarter of 2013 including a $1.0 million decrease from the impact of foreign exchange. Excluding the impact of foreign exchange, revenues were down $3.1 million in the quarter primarily as a result of revenue declines in the direct-to-consumer market both in North America and Overseas. Overall North American retail print and digital revenues were stable in the first quarter.
Total Segmented EBITDA was $29.4 million down $9.4 million in the first quarter of 2013. Media Segment EBITDA was $14.8 million, down $5.7 million in the first quarter as print advertising revenue declines, $0.5 million of higher pension costs and general wage increases were only partially offset by the impact of general cost savings and $5.8 million of savings from restructuring initiatives. Excluding a negative $0.5 million impact from foreign exchange, Book Publishing Segment EBITDA was down $2.8 million compared to a strong first quarter in 2012 and reflects a combination of higher author royalties for digital sales and lower revenues. Excluding a $0.5 million recovery resulting from the mark-to-market of a share-based hedging instrument in the first quarter of 2012, corporate expenses were lower by $0.1 million in the first quarter of 2013.
Restructuring and other charges
In the first quarter of 2013, restructuring and other charges of $5.7 million were recorded in the Media Segment, and $2.3 million in the Book Publishing Segment. These charges reflect ongoing efforts to reduce costs and reflect a reduction of approximately 105 positions which is expected to result in annualized net labour savings of $9.0 million in the Media Segment and $2.1 million in the Book Publishing Segment. Of the $11.1 million of savings anticipated as a result of the initiatives undertaken within the first quarter of 2013, $8.5 million of the savings are expected to be realized in 2013 (including $1.2 million in the first quarter) and $2.6 million in 2014.
Segmented operating profit was $11.9 million in the first quarter of 2013, down $15.0 million from $26.9 million in the first quarter of 2012.
Gain (loss) on sale of assets
During the first quarter of 2012, Torstar sold a portion of its 50% joint venture interest in Tuango for proceeds of $4.2 million and recorded a gain on sale of assets of $3.4 million. Torstar retained a 38.2% interest in Tuango.
Net income attributable to equity shareholders
Torstar reported net income attributable to equity shareholders of $4.2 million or $0.05 per share in the first quarter of 2013 down $13.3 million or $0.17 per share from $17.5 million or $0.22 per share in the first quarter of 2012.
Through the first quarter of 2013, the Media Segment continued to face challenges as a result of continued shifts in spending by advertisers and economic uncertainty. Visibility on how advertising revenues will evolve over the balance of the year remains limited. Digital revenue is expected to grow in 2013. Across Torstar, cost reduction has been and is expected to remain an important area of focus. The Media Segment is anticipated to realize $14.8 million of savings in the balance of 2013 from restructuring initiatives undertaken through the end of the first quarter of 2013. Net investment spending associated with growth initiatives in 2013 are currently expected to be somewhat lower than 2012 levels. Plans to reduce operating costs in the Media Segment over the balance of the year have been developed to mitigate the potential impact of continued revenue declines.
Harlequin anticipated that earnings would be lower in the first quarter of 2013 relative to the prior year as a result of higher author royalties for digital sales and lower revenues. Excluding the impact of foreign exchange, Harlequin's earnings for the full year are expected to be comparable to 2012 assuming global economic conditions do not deteriorate. Harlequin is anticipated to realize $2.2 million of savings in the balance of 2013 from restructuring initiatives undertaken through the end of the first quarter of 2013 and will also benefit from recent consumer price increases for certain product lines in North America. In addition, the unfavourable year over year effect of higher author royalties for digital sales will end in the second half of the year as the new rates were effective July 1, 2012. If the Canadian dollar remains at its current levels relative to the U.S. dollar and overseas currencies, Harlequin anticipates a negative $1.0 million year over year impact from foreign exchange ($0.5 million unfavourable in the first quarter), including the impact of the U.S. dollar hedges currently in place.
Effective January 1, 2013, in accordance with International Financial Reporting Standards ("IFRS"), Torstar was required to adopt several new and revised accounting standards on a retroactive basis. The comparative financial information presented in this release has been restated to reflect the adoption of these IFRS accounting standards. Please refer to Torstar's First Quarter 2013 Management Discussion and Analysis for a summary of the full impact of the adoption of these new and revised accounting standards.
On May 7, 2013, Torstar declared a quarterly dividend of 13.125 cents per share on its Class A shares and Class B non-voting shares, payable on June 28, 2013, to shareholders of record at the close of business on June 14, 2013. 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.
For additional information, please refer to Torstar's condensed consolidated financial statements and interim Management's Discussion and Analysis for the period ended March 31, 2013. Both documents will be filed today on SEDAR and are available on Torstar's corporate website www.torstar.com.
Torstar has scheduled a conference call for May 8, 2013 at 8:15 a.m. to discuss its first quarter results. The dial-in number is 416-340-8527 or 1-877-240-9772. A live broadcast of the conference call will also 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 by calling 905-694-9451 or 1-800-408-3053 and entering reservation number 7117631. An online archive of the broadcast will be available shortly after the completion of the call and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) page on Torstar's website www.torstar.com.
ANNUAL GENERAL MEETING
Torstar will be holding its Annual General Meeting at 10:00 a.m. on May 8, 2013 at The Westin Harbour Castle, 1 Harbour Square, Toronto, Ontario in the A&B Room. The Annual General Meeting will also be webcast live on the Presentations, Events and Conference Calls Page (Investor Relations) at www.torstar.com with interactive capabilities. An online archive of the webcast will be available shortly after the completion of the meeting and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) page on Torstar's website www.torstar.com.
About Torstar Corporation
Torstar Corporation is a broadly based media and book publishing company listed on the Toronto Stock Exchange (TSX:TS.B). Its businesses include the Star Media Group led by the Toronto Star, Canada's largest daily newspaper and digital properties including thestar.com, toronto.com, Workopolis, Olive Media, and eyeReturn Marketing; Metroland Media Group, publisher of community and daily newspapers in Ontario; and Harlequin, a leading global publisher of books for women.
In addition to operating profit, as presented in the consolidated statement of income, management uses EBITDA (and where applicable Segmented EBITDA) and operating earnings (and where applicable Segmented operating earnings) as measures to assess the consolidated performance and the performance of the reporting units and business segments.
Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")/Segmented EBITDA
EBITDA (earnings before interest, taxes, depreciation and amortization) is a measure that is also used by many of Torstar's shareholders, creditors, other stakeholders and analysts as a proxy for the amount of cash generated by Torstar's operations or by a reporting unit or business segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Torstar calculates EBITDA as operating revenue less salaries and benefits and other operating costs as presented on the consolidated statement of income. EBITDA excludes restructuring and other charges and impairment of assets. Torstar's method of calculating EBITDA may differ from other companies and accordingly may not be comparable to measures used by other companies. Segmented EBITDA is calculated in the same manner described above, except that it is calculated using total segment results prior to the elimination of proportionately consolidated results for joint ventures.
Operating earnings/Segmented operating earnings
Operating earnings is used by management to represent the results of ongoing operations and is not a recognized measure of financial performance under IFRS. Torstar calculates operating earnings as operating revenue less salaries and benefits and other operating costs and amortization and depreciation. Operating earnings excludes restructuring and other charges and impairment of assets. Torstar's method of calculating operating earnings may differ from other companies and accordingly may not be comparable to measures used by other companies. Segmented operating earnings is calculated in the same manner described above, except that it is calculated using total segment results prior to the elimination of proportionately consolidated results for joint ventures.
Adjusted Earnings per Share
Adjusted earnings per share is used by management to represent the per share earnings of results of ongoing operations and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted earnings per share as earnings per share less the per share effect of restructuring and other charges, non-cash foreign exchange and gain (loss) on sale of assets. Torstar's method of calculating adjusted earnings per share may differ from other companies and accordingly may not be comparable to measures used by other companies.
Certain statements in this press release and in the Company's oral and written public communications may constitute forward-looking statements that reflect management's expectations regarding the Company'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", "intend", "would", "could", "if", "may" and similar expressions. All such statements are made pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance, and speak only as of the date of this release. In addition, forward-looking statements are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
By their very nature, forward-looking statements require management to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that management's assumptions may not be accurate and that actual results, performance or achievements may differ significantly from such predictions, forecasts, conclusions or projections expressed or implied by such forward-looking statements. We caution readers not to place undue reliance on the forward-looking statements in this press release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-looking statements.
These factors include, but are not limited to: the Company's ability to operate in highly competitive industries; the Company's ability to compete with other newspapers and other forms of media and media platforms; general economic conditions in the principal markets in which the Company operates; the Company's ability to attract and retain advertisers; the Company's ability to maintain adequate circulation levels; the Company's ability to attract and retain readers; the Company's ability to retain and grow its digital audience and profitably develop its digital businesses; the trend towards digital books and the Company's ability to distribute its books through the changing distribution landscape; the Company's ability to accurately estimate the rate of book returns through the wholesale and retail channels; the popularity of its authors and its ability to retain popular authors; labour disruptions; newsprint costs; the Company's ability to reduce costs; foreign exchange fluctuations; credit risk; restrictions imposed by existing credit facilities, debt financing and availability of capital; changes in pension fund obligations; results of impairment tests; reliance on its printing operations; reliance on technology and information systems; risks related to business development and acquisition integration; interest rates; availability of insurance; litigation; environmental, privacy, anti-spam, communications and e-commerce laws and regulations applicable generally to the Company's businesses; dependence on key personnel; dependence on third party suppliers and service providers; loss of reputation; product liability; intellectual property rights; control of Torstar by the Voting Trust; and uncertainties associated with critical accounting estimates.
We caution 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 and global economies; tax laws in the countries in which we operate; continued availability of printing operations; continued availability of financing on appropriate terms; exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan obligations; royalty rates, expected future revenues, expected future cash flows and discount rates relating to valuation of goodwill and intangible assets; and successful development of new products. There is a risk that some or all of these assumptions may prove to be incorrect.
When relying on our forward-looking statements to make decisions with respect to the Company and its securities, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company 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 2012 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.
|Consolidated Statement of Financial Position|
|(Thousands of Canadian Dollars)|
|As at||As at|
|December 31||January 1|
|March 31 2013||Restated**||Restated**|
|Cash and cash equivalents||$22,370||$24,827||$36,450|
|Derivative financial instruments||467||1,272||367|
|Prepaid expenses and other current assets||45,835||43,254||46,269|
|Prepaid and recoverable income taxes||14,347||10,775||1,929|
|Total current assets||351,376||375,371||385,270|
|Property, plant and equipment||158,400||161,872||170,454|
|Investments in joint ventures||92,806||91,258||107,512|
|Investments in associated businesses||33,038||32,921||16,935|
|Deferred income tax assets||79,315||89,965||100,246|
|Liabilities and Equity|
|Current portion of long-term debt||196,191|
|Accounts payable and accrued liabilities||183,096||195,822||194,237|
|Income tax payable||10,351||11,016||17,118|
|Total current liabilities||220,067||232,254||437,016|
|Derivative financial instruments||6,295||7,018||8,761|
|Deferred income tax liabilities||10,873||7,593||7,419|
|Accumulated other comprehensive loss||(10,853||)||(9,699||)||(8,286||)|
|Total equity attributable to equity shareholders||749,687||720,816||703,739|
|Total liabilities and equity||$1,406,407||$1,443,888||$1,466,683|
|** Certain amounts shown here do not correspond to the annual consolidated financial statements as at December 31, 2012 and reflect retroactive adjustments made.|
|Consolidated Statement of Income|
|(Thousands of Canadian Dollars except per share amounts)|
|Three months ended March 31|
|Salaries and benefits||(123,308||)||(122,897||)|
|Other operating costs||(163,974||)||(173,046||)|
|Amortization and depreciation||(8,800||)||(8,519||)|
|Restructuring and other charges||(7,996||)||(2,595||)|
|Interest and financing costs||(4,340||)||(5,070||)|
|Adjustment to contingent consideration||77|
|Income from joint ventures||2,025||3,633|
|Loss of associated businesses||(466||)||(350||)|
|Gain (loss) on sale of assets||(31||)||3,417|
|Investment write-down and loss||(62||)|
|Income and other taxes||(2,200||)||(6,400||)|
|Net income attributable to equity shareholders per Class A (voting) and Class B (non-voting) share:|
|Consolidated Statement of Cash Flows|
|(Thousands of Canadian Dollars)|
|Three months ended March 31|
|Cash was provided by (used in)|
|Decrease in cash||(2,608||)||(3,805||)|
|Effect of exchange rate changes||(202||)||(329||)|
|Cash, beginning of period||15,060||29,037|
|Cash, end of period||$12,250||$24,903|
|Amortization and depreciation||8,800||8,519|
|Deferred income taxes||2,000||3,800|
|Income from joint ventures||(2,025||)||(3,633||)|
|Distributions from joint ventures||500||2,400|
|Loss of associated businesses||466||350|
|Dividend from associated businesses||382|
|Non-cash employee benefit expense||8,292||8,146|
|Employee benefits funding||(16,231||)||(18,744||)|
|Decrease (increase) in non-cash working capital||9,589||(3,307||)|
|Cash provided by operating activities||$13,184||$11,327|
|Additions to property, plant and equipment and intangible assets||($4,090||)||($6,835||)|
|Investment in associated businesses||(500||)||(500||)|
|Acquisitions and investments||(1,062||)||(2,513||)|
|Proceeds from sale of assets||4,250|
|Cash used in investing activities||($5,549||)||($5,598||)|
|Issuance of bankers' acceptances||$11|
|Repayment of bankers' acceptances||($111||)|
|Exercise of share options||349|
|Cash used in financing activities||($10,243||)||($9,534||)|
|Cash represented by:|
|Cash equivalents - short-term deposits||3,473||5,167|
|Cash and cash equivalents||22,370||31,152|
|*** Certain amounts shown here do not correspond to the condensed consolidated financial statements as at March 31, 2012 and reflect retroactive adjustments made.|
FOR FURTHER INFORMATION PLEASE CONTACT:
Executive Vice-President and Chief Financial Officer