Torstar Corporation Reports Fourth Quarter Results

March 6, 2013

TORONTO, ONTARIO--(Marketwire - Mar 6, 2013) - Torstar Corporation (TSX:TS.B) today reported financial results for the fourth quarter ended December 31, 2012.

Highlights for the quarter:

  • Revenue was $395.7 million in the fourth quarter of 2012, down $29.6 million from $425.3 million in the fourth quarter of 2011. Excluding the impact of acquisitions and a decrease at TMGTV resulting from lower product sales, revenue was down $23.0 million (5.4%) in the fourth quarter.

  • EBITDA (see "non-IFRS measures") was $64.6 million in the fourth quarter of 2012, down $16.6 million from $81.2 million in the fourth quarter of 2011. Media Segment EBITDA was down $12.5 million including the benefit of acquisitions. Book Publishing Segment EBITDA was down $4.4 million including a decline of $1.1 million from the impact of foreign exchange. Corporate expenses were $3.3 million, down $0.3 million from $3.6 million in 2011. 

  • Net income attributable to equity shareholders was $24.1 million ($0.30 per share) in the fourth quarter, down $40.2 million ($0.51 per share) from $64.3 million ($0.81 per share) last year. 

  • Adjusted earnings per share for the fourth quarter of 2012 (excluding restructuring and other charges, impairment of assets, non-cash foreign exchange, other income and gain on sale of assets) was $0.49 in the fourth quarter of 2012, down $0.21 from $0.70 in the fourth quarter of 2011.

  • Net debt was $149.0 million at December 31, 2012, down $10.5 million from $159.5 million at September 30, 2012.

Highlights for the year:
  • Revenue was $1,485.7 million in 2012, down $63.1 million from $1,548.8 million in 2011. Excluding the impact of acquisitions and a decrease at TMGTV resulting from lower product sales, revenue was down $64.9 million (4.2%) in 2012.

  • EBITDA was $207.7 million in 2012, down $34.5 million from $242.2 million in 2011. Media Segment EBITDA was down $27.0 million primarily as a result of lower print advertising revenues. Book Publishing Segment EBITDA was down $9.2 million including a decline of $1.7 million from the impact of foreign exchange. Corporate expenses were down $1.6 million in 2012 as a result of lower compensation costs and a mark-to-market adjustment of a share-based compensation hedging instrument.

  • Net income attributable to equity shareholders was $103.2 million or $1.30 per share in 2012 down $114.5 million or $1.44 per share from $217.7 million or $2.74 per share in 2011. Excluding the impact of CTV Inc. in 2011, Torstar would have reported net income attributable to equity shareholders of $143.1 million or $1.80 per share in 2011. 

  • Net debt was $149.0 million at December 31, 2012, down $4.3 million from $153.3 million at December 31, 2011.

"Results in the quarter continue to be affected by industry challenges in our media operations and the current economic environment," said David Holland, President and CEO of Torstar Corporation. "EBITDA was down $16.6 million to $64.6 million with the Media and Book Publishing Segments both down in the quarter."

"In the Media operations, the softening of the print advertising environment which emerged in September continued through the fourth quarter and had a more significant impact on Star Media Group results. Revenue and earnings declines experienced in the quarter were more moderate at Metroland Media''s community operations. A combination of weaker revenues, higher digital royalty rates and negative foreign exchange impact contributed to the decline in Harlequin results. An encouraging sign is that the quarter-to-quarter stability in the print and digital book publishing markets continued through the fourth quarter."

"Looking forward, visibility remains limited for the Media operation. The print advertising environment remained soft in the early part of 2013. We intend to continue to be diligent in seeking out revenue opportunity across our media platform including the introduction of a paywall at the Star. We also expect to adjust the cost structure in the Media operation as we continue to adapt. Restructuring initiatives undertaken to date in 2013 across the Media operation are expected to yield annualized savings of $6.6 million. At Harlequin, our 2012 result was up against a record 2011 underlying performance. Our objective going into 2013 is to deliver relatively stable full-year book publishing results assuming global economic conditions do not deteriorate. Across Torstar''s operations, we continue to benefit from our modest leverage as we take the necessary steps to successfully evolve."

The following chart provides a continuity of earnings per share from 2011 to 2012:

  Fourth Quarter Full Year  
Net income attributable to equity shareholders per share 2011     $0.81     $2.74  
• CTV - gain on sale (2011)           (0.94 )
Adjusted net income attributable to equity shareholders 2011     0.81     1.80  
Changes              
• Operations (0.15 )   (0.37 )    
• Restructuring and other charges 0.06     0.01      
• Impairment of assets (0.15 )   (0.16 )    
• Interest and financing costs       0.07      
• Non-cash foreign exchange       0.03      
• Adjustment to contingent consideration       (0.02 )    
• Loss of associated businesses       (0.02 )    
• Other income (remeasurement gains) (0.24 )   (0.14 )    
• Gain on sale of assets 0.03     0.10      
• Deferred taxes (0.06 )          
Net income attributable to equity shareholders per share 2012     $0.30     $1.30  
 
OPERATING RESULTS - THREE MONTHS ENDED DECEMBER 31, 2012 
Overall Performance 
The following table sets out, in $000''s, the segmented results for the three months ended December 31, 2012 and 2011. 
 
  2012   2011  
  Media   Book Publishing   Corporate   Total   Media   Book Publishing   Corporate   Total  
Operating revenue $290,757   $104,989       $395,746   $307,281   $118,055       $425,336  
                                 
Salaries and benefits (106,251 ) (23,747 ) $(2,541 ) (132,539 ) (104,414 ) (25,382 ) $(2,889 ) (132,685 )
Other operating costs (133,376 ) (64,490 ) (786 ) (198,652 ) (139,307 ) (71,443 ) (713 ) (211,463 )
EBITDA 51,130   16,752   (3,327 ) 64,555   63,560   21,230   (3,602 ) 81,188  
Amortization & depreciation (8,910 ) (1,080 ) (16 ) (10,006 ) (8,305 ) (884 ) (10 ) (9,199 )
Operating earnings 42,220   15,672   (3,343 ) 54,549   55,255   20,346   (3,612 ) 71,989  
Restructuring and other charges (5,706 ) (944 )     (6,650 ) (13,550 ) (113 )     (13,663 )
Impairment of assets (11,734 )         (11,734 )                
Operating profit $24,780   $14,728   $(3,343 ) $36,165   $41,705   $20,233   $(3,612 ) $58,326  

Revenue

Total revenue was $395.7 million in the fourth quarter of 2012, down $29.6 million from $425.3 million in the fourth quarter of 2011. Excluding the impact of $4.6 million from acquisitions and an $11.2 million decrease in Metroland Media Group''s TMGTV resulting from lower product sales, revenue was down $23.0 million or 5.4% in the fourth quarter of 2012. Media Segment revenues, excluding the above items, were down $9.9 million or 3.2% in the fourth quarter, largely due to print advertising revenue declines. Book Publishing Segment revenues, excluding the $4.3 million impact of foreign exchange, were down $8.8 million in the fourth quarter with revenues down in both North America and Overseas. Declines in print revenues were only partially offset by increases in digital revenues.

Salaries and benefits

Salaries and benefits expense was consistent with the prior year in the fourth quarter as savings in the Book Publishing Segment as well as $5.4 million of savings from restructuring initiatives in the newspaper businesses in the Media Segment were offset by the impact of acquisitions, increased pension costs and regular wage increases. 

Other operating costs

Other operating costs were down $12.8 million or 6.1% in the fourth quarter of 2012 resulting from revenue declines, and a $9.7 million decrease in TMGTV costs resulting from lower product sales, partially offset by investment spending related to Metro.

EBITDA

EBITDA was $64.6 million in the fourth quarter of 2012, down $16.6 million from $81.2 million in the fourth quarter of 2011. Media Segment EBITDA was down $12.5 million primarily as a result of lower print advertising revenues. Book Publishing Segment EBITDA was down $4.4 million including a decline of $1.1 million from the impact of foreign exchange. Corporate expenses were $3.3 million, down $0.3 million from $3.6 million in 2011.

Restructuring and other charges

Restructuring and other charges of $6.7 million and $13.7 million were recorded in the fourth quarter of 2012 and 2011 respectively. Fourth quarter 2012 restructuring provisions of $6.3 million are expected to result in annual net savings of $5.9 million and a reduction of approximately 67 positions. $0.4 million of the savings were realized in the fourth quarter of 2012. 

Impairment of assets

During the fourth quarter, Torstar incurred charges related to asset impairments totaling $11.7 million related to certain equipment, intangible assets and goodwill in the Media Segment. These charges have no impact on cash flows. During the fourth quarter, in connection with restructuring activities, Torstar incurred charges related to asset impairments totaling $0.4 million related to certain equipment in the Metroland Media Group of cash generating units ("CGUs") and $0.3 million related to certain equipment and finite life intangible assets in the Toronto Star Group CGU. Additionally, during the fourth quarter of 2012, Torstar performed its annual impairment test on the value of intangible assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. A goodwill impairment charge of $11.0 million was recorded in the Workopolis CGU as a result of increased competition in the online recruitment and job search markets and prevailing economic conditions.

Interest and financing costs

Interest expense increased in the fourth quarter of 2012 reflecting a higher level of average net debt outstanding in the fourth quarter of 2012 and higher effective interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $154.2 million in the fourth quarter of 2012, up $33.7 million from $121.1 million in the same period last year. Torstar''s effective interest rate on long-term debt was 4.0% in the fourth quarter of 2012 and 3.0% in the fourth quarter of 2011. 

Income from associated businesses

Income from associated businesses was $0.1 million in the fourth quarter of 2012 inclusive of Torstar''s share of Blue Ant''s income of $0.6 million and Tuango''s income of $0.2 million. This was partially offset by Torstar''s share of losses of $0.2 million from Shop.ca and a $0.5 million loss in Canadian Press. Loss of associated businesses was $0.4 million from Q-ponz in the fourth quarter of 2011. Torstar recorded a loss of $0.5 million in the fourth quarter of 2012 to reduce its carrying value in Canadian Press to nil. Torstar did not record its share of Black Press''s results in the fourth quarter of 2012 as Torstar''s carrying value in Black Press had previously been reduced to nil. 

Other income

When a business combination is achieved in stages, the acquirer is required to remeasure its previously held interest in the acquiree to the acquisition date fair value and recognize the resulting gain or loss, if any, in profit or loss. This remeasurement resulted in other income of $19.0 million in the fourth quarter of 2011 related to Torstar''s increased ownership of Metro.

Gain on sale of assets

In the fourth quarter of 2012, Torstar recorded a gain of $2.7 million in connection with the sale of the assets of Insurance Hotline for net proceeds of $7.0 million comprised of $2.0 million in cash and a 12.6% interest in Kanetix Ltd. (an online Canadian Insurance marketplace) valued at $5.0 million. This investment has been recorded at cost and is included in portfolio investments. At the same time, Torstar received an additional $4.0 million of cash in exchange for Media inventory to be provided to Kanetix Ltd. over the next two years.

Income and other taxes

Torstar''s effective tax rate in the fourth quarter of 2012 was 33.7%, which was higher than the Canadian statutory rate of 26.5% primarily due to the impairment of goodwill that was not tax affected. 

Net income attributable to equity shareholders

Torstar reported net income attributable to equity shareholders of $24.1 million or $0.30 per share in the fourth quarter of 2012, down $40.2 million or $0.51 per share from $64.3 million or $0.81 per share in the fourth quarter of 2011. 

 
OPERATING RESULTS - YEAR ENDED DECEMBER 31, 2012
Overall Performance
The following table sets out, in $000''s, the segmented results for the years ended December 31, 2012 and 2011.
   
  2012   2011  
  Media   Book Publishing   Corporate   Total   Media   Book Publishing   Corporate   Total  
Operating revenue $1,059,261   $426,483       $1,485,744   $1,089,330   $459,427       $1,548,757  
                                 
Salaries and benefits (414,135 ) (96,002 ) $(10,698 ) (520,835 ) (398,842 ) (100,014 ) $(12,227 ) (511,083 )
Other operating costs (500,417 ) (253,550 ) (3,210 ) (757,177 ) (518,818 ) (273,320 ) (3,287 ) (795,425 )
EBITDA 144,709   76,931   (13,908 ) 207,732   171,670   86,093   (15,514 ) 242,249  
Amortization & depreciation (34,027 ) (4,107 ) (48 ) (38,182 ) (29,415 ) (3,695 ) (55 ) (33,165 )
Operating earnings 110,682   72,824   (13,956 ) 169,550   142,255   82,398   (15,569 ) 209,084  
Restructuring and other charges (16,498 ) (1,280 )     (17,778 ) (18,860 ) (551 )     (19,411 )
Impairment of assets (13,003 )         (13,003 )                
Operating profit $81,181   $71,544   $(13,956 ) $138,769   $123,395   $81,847   $(15,569 ) $189,673  

Revenue

Total revenue was down $63.1 million or 4.1% in 2012. Excluding the impact of $36.1 million from acquisitions and a $34.3 million decrease in Metroland Media Group''s TMGTV resulting from lower product sales, revenue was down $64.9 million or 4.2%. The declines in product sale revenues in TMGTV operations are consistent with expected product life cycles in this business. Media Segment revenues, excluding the above items, were down $31.8 million or 2.9% in 2012. Print advertising revenues were down at the Toronto Star and the Metroland Media Group, partially offset by revenue growth at the Metro newspapers. Digital revenue in the Media Segment was down 4.7% in 2012 due primarily to a decline at WagJag and a change to equity accounting for Torstar''s investment in Tuango in the first quarter of 2012. Excluding these two items, digital revenue was up 1.1%. Book Publishing Segment revenues, excluding the impact of foreign exchange, were down $27.4 million or 6.0% in 2012 with declines in print revenue more than offsetting digital revenue growth. Beginning in the second quarter of 2012, digital revenue growth and print revenue declines began to moderate and this trend continued for the balance of the year.

Salaries and benefits

Total salaries and benefits expense increased 1.9% in 2012 as savings of $16.6 million from restructuring initiatives in the newspaper businesses in the Media Segment reduced the impact of acquisitions, additional pension costs and regular wage increases. Book Publishing Segment salaries and benefits reflect lower variable compensation costs. Corporate expenses were down $1.6 million in 2012 as a result of lower variable compensation costs and a favourable mark-to-market adjustment related to a share-based compensation hedging instrument.

Other operating costs

Total other operating costs were down 4.8% in 2012 resulting from revenue declines and a $30.4 million decrease in costs at TMGTV resulting from lower product sales, partially offset by additional expenses related to investment spending at Metro and in the digital operations. In the Media Segment, newsprint pricing was flat year over year while consumption was down. The Book Publishing Segment had lower costs resulting from lower revenues and reduced promotional spending in 2012.

EBITDA

EBITDA was $207.7 million in 2012, down $34.5 million from $242.2 million in 2011. Prior year acquisitions provided $5.8 million of EBITDA growth in 2012. Media Segment EBITDA was down $27.0 million primarily as a result of lower print advertising revenue. Book Publishing Segment EBITDA was down $9.2 million including a decline of $1.7 million from the impact of foreign exchange. Corporate expenses were $13.9 million, down $1.6 million from $15.5 million in 2011.

Restructuring and other charges

Restructuring and other charges of $17.8 million were recorded in 2012. This included $16.5 million for restructuring initiatives in the Media Segment and $0.9 million for restructuring initiatives and $0.4 million for other charges in the Book Publishing Segment. The 2012 restructuring initiatives in the Media Segment are expected to result in annualized net labour savings of approximately $17.5 million and a reduction of approximately 260 positions. The 2012 restructuring initiatives in the Book Publishing Segment are expected to result in annualized savings of approximately $0.9 million and a reduction of 9 positions. $6.0 million of the savings were realized in 2012. 

Restructuring and other charges of $19.4 million were recorded in 2011, including $18.8 million in the Media Segment and $0.6 million in the Book Publishing Segment. The 2011 restructuring charge for the Media Segment included $15.6 million in respect of labour restructuring and a $3.2 million provision for rented space that was vacated as reduced staff counts allowed for space consolidation. 

Impairment of assets

In 2012, Torstar incurred charges related to asset impairment totaling $13.0 million related to certain equipment, intangible assets and goodwill in the Media Segment. These charges have no impact on cash flows. 

As a result of restructuring initiatives, which included the consolidation of some facilities, during the year ended December 31, 2012, Torstar recorded impairment losses of $0.4 million with respect to equipment in the Metroland Media Group of CGUs and $0.2 million with respect to equipment and $1.4 million of finite life intangible assets in the Toronto Star Group CGU.

During the fourth quarter of 2012, Torstar performed its annual impairment test on the value of intangible assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. An impairment charge of $11.0 million was recorded in the Workopolis CGU as a result of increased competition in the online recruitment and job search markets and prevailing economic conditions.

Interest and financing costs

Interest and financing costs were $8.8 million in 2012, down $7.8 million from $16.6 million in 2011. 

2012 interest expense reflects a lower level of average net debt outstanding in 2012 partially offset by higher effective interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $154.9 million in 2012, down $16.6 million from $171.5 million in 2011. Torstar''s effective interest rate on long-term debt was 4.1% in 2012 and 3.9% in 2011. Net debt was $149.0 million at December 31, 2012, down $4.3 million from $153.3 million at December 31, 2011.

Interest accretion costs related to contingent consideration estimates, long-term restructuring provisions and deferred acquisition payments were $1.0 million in 2012 and $2.7 million in 2011. 

Loss of associated businesses

Loss of associated businesses was $3.3 million in 2012 and $2.2 million in 2011. 

Torstar''s share of Blue Ant''s net loss was $2.2 million in 2012 ($nil in 2011), representing Blue Ant''s results through November 30, 2012. Blue Ant completed its acquisition of High Fidelity HDTV in 2012 and the loss includes expenses for the Canadian Radio-television and Telecommunications Commission benefit obligations and reorganization charges. Blue Ant has an August fiscal year end and therefore does not have coterminous quarter-ends with Torstar. 

Torstar''s share of the Shop.ca net loss was $0.7 million. Torstar made its initial investment in Shop.ca on June 15, 2012 and the Shop.ca website was launched late in the second quarter of 2012.

Torstar recorded a loss of $0.8 million in 2012 ($1.6 million in 2011) to reduce its carrying value in Canadian Press to nil. Torstar''s unrecognized share of Canadian Press''s net loss was $0.3 million in 2012 down from $0.7 million in 2011. Torstar will begin to report its share of Canadian Press''s results once the unrecognized losses ($6.4 million as of December 31, 2012) have been offset by net income, other comprehensive income or at such time that additional investments are made.

Torstar has not recorded its share of Black Press'' results in either 2012 or 2011 as Torstar''s carrying value in Black Press was previously reduced to nil. Torstar''s share of Black Press''s net income would have been $3.9 million in 2012, up from $3.3 million in 2011. Torstar will begin again to report its share of Black Press''s results once the unrecognized losses ($0.7 million as of December 31, 2012) have been offset by net income or other comprehensive income. 

On February 29, 2012 Torstar sold a portion of its 50% interest in Tuango. As a result of the sale transaction and revised shareholders'' agreement, Torstar lost joint control of Tuango and moved from proportionately consolidating Tuango to accounting for it as an associated business using the equity method. Torstar''s share of Tuango''s net income for the period from February 29, 2012 to December 31, 2012 was $0.4 million.

Torstar ceased to equity account for Q-ponz when it was sold in early 2012. No amounts were recorded related to the Q-ponz results in 2012 ($0.5 million loss in 2011). 

Other income and gain on sale of assets

During 2012, Torstar recognized other income of $10.4 million and a gain on sale of assets of $9.8 million.

Torstar recognized a gain on sale of assets of $3.7 million from the sale of Sing Tao''s land and buildings in Toronto. Torstar''s share of the proceeds included $2.5 million of cash and $3.5 million for a mortgage receivable which will mature in 18 to 24 months from the date of sale.

Torstar also recorded a gain on sale of assets of $3.4 million on the sale of a portion of its 50% joint venture interest in Tuango as noted above. Net proceeds were $3.9 million and Torstar retained a 38.2% interest in Tuango. As a result of the move from proportionately consolidating Tuango to accounting for it as an associated business using the equity method, the investment was remeasured and the investment in associated businesses was recorded at fair value, resulting in a remeasurement gain of $10.4 million which has been included in other income.

In November 2012, Torstar recorded a gain of $2.7 million in connection with the sale of the assets of Insurance Hotline. Net proceeds of $7.0 million were comprised of $2.0 million in cash and a 12.6% interest in Kanetix Ltd. (an online Canadian insurance marketplace) valued at $5.0 million. This investment has been recorded at cost and is included in portfolio investments. At the same time, Torstar received an additional $4.0 million of cash in exchange for Media inventory to be provided to Kanetix Ltd. over the next two years.

In 2011, Torstar recognized other income of $19.1 million. When a business combination is achieved in stages, the acquirer is required to remeasure its previously held interest in the acquiree to the acquisition date fair value and recognize the resulting gain or loss, if any, in profit or loss. This remeasurement resulted in other income of $19.1 million in 2011 related to Torstar''s increased ownership of Metro and save.ca

Gain on sale of CTV Inc. 

In 2011, Torstar recorded a gain of $74.6 million on the sale of its remaining interest in CTV. The transaction closed on April 1, 2011 and Torstar received cash proceeds of $291.6 million.

Income and other taxes

There were several items in Torstar''s net income before taxes in 2012 and 2011 that were not tax-affected and therefore had an impact on Torstar''s effective tax rate in both years. This included the 2012 remeasurement gain on Tuango, the 2011 gain on the sale of CTV, and the 2011 remeasurement gain on the Metro and save.ca transactions. In addition, Torstar recorded $0.8 million in 2012 and $10.0 million in 2011 as a tax benefit from the recognition of tax losses that had previously not been recognized. 

Excluding the impact of these items in both years, Torstar''s effective tax rate was 30.5% in 2012 and 31.6% in 2011. The Canadian statutory rate was 26.5% in 2012, which was lower than the 28.25% Canadian statutory rate in 2011. The Canadian statutory rate had previously been planned to be reduced to 26.25% in 2012 and further to 25% by 2014. The Ontario government passed legislation during 2012 to indefinitely postpone this planned tax rate reduction. Torstar recorded a tax benefit of $0.2 million in 2012 in respect of this tax rate change.

Torstar''s effective tax rate is higher than the Canadian statutory rate due to the impact of non-deductible expenses and income earned in foreign jurisdictions subject to higher rates of tax.

Net income attributable to equity shareholders

Torstar reported net income attributable to equity shareholders of $103.2 million or $1.30 per share in 2012 down $114.5 million or $1.44 per share from $217.7 million or $2.74 per share in 2011. Excluding the impact of CTV in 2011, Torstar would have reported net income attributable to equity shareholders of $143.1 million or $1.80 per share in 2011. 

OUTLOOK

The 2013 revenue outlook for the Media Segment remains uncertain. Print advertising continues to be challenged by shifts in spending by advertisers and economic uncertainty. Early indications in 2013 are that print advertising revenue remains soft. Digital revenue is expected to grow in 2013. Cost reductions remain an important area of focus. The Media Segment is anticipated to realize $15.6 million of savings in 2013 from restructuring initiatives undertaken through the end of 2012. Management anticipates pursuing further cost reductions as the year progresses including recent restructuring initiatives in the Media Segment which are expected to result in annualized net savings of $6.6 million, $5.0 million of which are expected to be realized in 2013. In addition, fixed price arrangements with the suppliers of a majority of Torstar''s newsprint requirements are expected to reduce newsprint costs by approximately $3.5 million in 2013. Net investment spending associated with growth initiatives in 2013 is anticipated to be consistent with 2012 levels.

Harlequin finished 2012 with operating earnings down $7.9 million compared to the prior year, excluding the impact of foreign exchange. Digital revenue growth and print declines began to moderate in North America as some stability emerged in print and digital sales during 2012. This trend is expected to continue. Overseas markets are expected to continue to face economic challenges particularly in Europe. After a challenging 2012, which included the impact of a competitor''s bestseller and the introduction of higher author royalties on digital sales, Harlequin''s earnings are anticipated to be relatively stable in 2013. However, earnings are expected to be lower in the first quarter due to the timing of the increase in author royalties on digital sales part way through 2012 and the strong results posted in the first quarter of 2012. If the Canadian dollar remains at its current levels relative to the U.S. dollar and overseas currencies, Harlequin anticipates the impact of foreign exchange to be relatively neutral in 2013.

Effective January 1, 2013 Torstar will be required to adopt the amended IAS 19 accounting standard surrounding Employee Benefits. After restating 2012 for the adoption of this standard, it is expected that 2013 employee future benefit expense will increase by approximately $2.0 million.

From a cash flow perspective, in 2013, Torstar anticipates spending approximately $65.0 million for the minimum required funding of registered defined benefit pension plans and $33.0 million for additions to property, plant, equipment and intangible assets. The 2013 capital expenditures are anticipated to include continued investment in technology and software in the Media Segment in addition to general capital maintenance spending.

DIVIDEND

On March 5, 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 March 31, 2013, to shareholders of record at the close of business on March 15, 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.

ADDITIONAL INFORMATION

For additional information, please refer to Torstar''s audited consolidated financial statements for the year ended December 31, 2012 and the 2012 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 March 6, 2013 at 8:15 a.m. to discuss its fourth quarter results. The dial-in number is 416-340-8527 or 1-877-240-9772. 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 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

About Torstar Corporation

Torstar Corporation is a broadly based media and book publishing company listed on the Toronto Stock Exchange (TS.B). Its businesses include the Star Media Group led by the Toronto Star, Canada''s largest daily newspaper and digital properties including thestar.com, toronto.com, Workopolis, Olive Media, and eyeReturn Marketing; Metroland Media Group, publishers of community and daily newspapers in Ontario; and Harlequin, a leading global publisher of books for women. 

Non-IFRS measures

In addition to operating profit, as presented in the consolidated statement of income, management uses EBITDA and operating earnings as measures to assess the consolidated performance and the performance of the reporting units and business segments. 

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.

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 other operating costs, salaries and benefits 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.

Forward-looking statements

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 our 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 economy; 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.

Torstar Corporation  
Consolidated Statement of Financial Position  
(Thousands of Canadian Dollars)  
   
  As at December 31 2012   As at December 31 2011  
Assets        
  Current:        
  Cash and cash equivalents $39,021   $50,588  
  Receivables 274,383   278,010  
  Inventories 34,001   36,995  
  Derivative financial instruments 1,272   367  
  Prepaid expenses and other current assets 44,236   47,063  
  Prepaid and recoverable income taxes 11,195   2,451  
  Total current assets 404,108   415,474  
Property, plant and equipment 167,104   177,245  
Investment in associated businesses 42,835   16,935  
Intangible assets 108,130   107,845  
Goodwill 648,861   665,029  
Other assets 11,823   1,798  
Deferred income tax assets 88,383   100,441  
Total assets $1,471,244   $1,484,767  
Liabilities and Equity        
  Current:        
  Bank overdraft $9,962   $7,661  
  Current portion of long-term debt     196,191  
  Accounts payable and accrued liabilities 212,741   210,567  
  Provisions 15,964   22,599  
  Income tax payable 11,522   17,398  
  Total current liabilities 250,189   454,416  
Long-term debt 178,027      
Derivative financial instruments 7,018   8,761  
Provisions 14,520   16,906  
Other liabilities 25,847   26,749  
Employee benefits 255,434   264,027  
Deferred income tax liabilities 8,315   7,644  
Equity:        
  Share capital 397,425   395,334  
  Contributed surplus 16,057   14,828  
  Retained earnings 325,247   301,863  
  Accumulated other comprehensive loss (9,699 ) (8,286 )
  Total equity attributable to equity shareholders 729,030   703,739  
  Minority interests 2,864   2,525  
Total equity 731,894   706,264  
Total liabilities and equity $1,471,244   $1,484,767  
   
   
Torstar Corporation  
Consolidated Statement of Income  
 
(Thousands of Canadian Dollars except per share amounts)
   
  Three months ended December 31   Year ended
December 31
 
         
  2012   2011   2012   2011  
                 
Operating revenue $395,746   $425,336   $1,485,744   $1,548,757  
                 
Salaries and benefits (132,539 ) (132,685 ) (520,835 ) (511,083 )
Other operating costs (198,652 ) (211,463 ) (757,177 ) (795,425 )
Amortization and depreciation (10,006 ) (9,199 ) (38,182 ) (33,165 )
Restructuring and other charges (6,650 ) (13,663 ) (17,778 ) (19,411 )
Impairment of assets (11,734 )     (13,003 )    
Operating profit 36,165   58,326   138,769   189,673  
Interest and financing costs (2,001 ) (2,061 ) (8,759 ) (16,629 )
Adjustment to contingent consideration (19 ) (71 ) (258 ) 630  
Foreign exchange (97 ) (516 ) (246 ) (3,477 )
Income (loss) of associated businesses 74   (388 ) (3,295 ) (2,157 )
Gain on sale of assets 2,663       9,811      
Other income     19,026   10,407   19,055  
Gain on sale of CTV Inc.             74,590  
Investment write-down and loss     (544 ) (93 ) (544 )
  36,785   73,772   146,336   261,141  
Income and other taxes (12,400 ) (9,200 ) (42,500 ) (43,000 )
Net income $24,385   $64,572   $103,836   $218,141  
Attributable to:                
  Equity shareholders $24,140   $64,283   $103,247   $217,721  
  Minority interests $245   $289   $589   $420  
                 
Net income attributable to equity shareholders per Class A (voting) and Class B (non-voting) share:                
Basic $0.30   $0.81   $1.30   $2.74  
Diluted $0.30   $0.81   $1.29   $2.72  
   
   
Torstar Corporation  
Consolidated Statement of Cash Flows  
   
(Thousands of Canadian Dollars)  
   
  Three months ended December 31   Year ended
December 31
 
         
  2012   2011   2012   2011  
Cash was provided by (used in)                
  Operating activities $30,404   $46,311   $90,605   $114,955  
  Investing activities (9,004 ) (101,711 ) (47,733 ) 137,428  
  Financing activities (32,407 ) 52,977   (56,112 ) (245,582 )
Increase (decrease) in cash (11,007 ) (2,423 ) (13,240 ) 6,801  
Effect of exchange rate changes 222   (1,765 ) (628 ) 93  
Cash, beginning of period 39,844   47,115   42,927   36,033  
Cash, end of period $29,059   $42,927   $29,059   $42,927  
Operating activities:                
  Net income $24,385   $64,572   $103,836   $218,141  
  Amortization and depreciation 10,006   9,199   38,182   33,165  
  Deferred income taxes 7,600   (3,700 ) 24,200   4,300  
  Loss (income) of associated businesses (74 ) 388   3,295   2,157  
  Gain on sale of CTV Inc.             (74,590 )
  Impairment of assets 11,734       13,003      
  Non-cash employee benefit expense 4,520   3,692   16,284   14,646  
  Employee benefits funding (20,825 ) (9,937 ) (76,540 ) (51,236 )
  Other (2,635 ) (10,339 ) (24,854 ) (13,491 )
  34,711   53,875   97,406   133,092  
  Increase in non-cash working capital (4,307 ) (7,564 ) (6,801 ) (18,137 )
Cash provided by operating activities $30,404   $46,311   $90,605   $114,955  
Investing activities:                
  Additions to property, plant and equipment and intangible assets $(9,555 ) $(8,720 ) $(33,012 ) $(35,046 )
  Proceeds from sale of CTV Inc.             291,590  
  Investment in associated businesses     (17,268 ) (11,265 ) (17,268 )
  Acquisitions and portfolio investments (1,410 ) (75,726 ) (11,883 ) (101,793 )
  Proceeds from sale of assets 1,957       8,407      
  Other 4   3   20   (55 )
Cash provided by (used in) investing activities $(9,004 ) $(101,711 ) $(47,733 ) $137,428  
Financing activities:                
  Issuance of bankers'' acceptances     $63,109   $5,991   $71,630  
  Repayment of bankers'' acceptances $(22,100 )     (22,211 ) (281,430 )
  Dividends paid (10,386 ) (9,876 ) (41,054 ) (36,862 )
  Exercise of share options     13   413   324  
  Other 79   (269 ) 749   756  
Cash used in financing activities (32,407 ) $52,977   $(56,112 ) $(245,582 )
Cash represented by:                
  Cash $29,248   $42,733   $29,248   $42,733  
  Cash equivalents - short-term deposits 9,773   7,855   9,773   7,855  
  Cash and cash equivalents 39,021   50,588   39,021   50,588  
  Bank overdraft (9,962 ) (7,661 ) (9,962 ) (7,661 )
  $29,059   $42,927   $29,059   $42,927