2013 Annual Report
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2013 ANNUAL REPORT TORSTAR CORPORATION 2013 ANNUAL REPORT PB OPERATING RESULTS ($000) 2013 2012 (2) Operating revenue $1,308,791 $1,406,768 EBITDA (1) 161,900 185,742 Operating profit 11,321 131,077 Net income (loss) (27,413) 82,933 Cash from operating activities 80,732 89,835 EBITDA – Percentage of revenue 12.4% 13.2% Operating profit – percentage of revenue 0.9% 9.3% Cash from operating activities – percentage of average equity 10.6% 12.6% PER CLASS A AND CLASS B SHARES Net income (loss) ($0.35) $1.03 Dividends $0.5250 $0.5188 Price range (high/low) $8.36/$5.20 $11.30/$6.56 FINANCIAL POSITION ($000) Long-term debt $175,898 $178,027 Equity $796,784 $723,680 The Annual Meeting of shareholders will be held Wednesday, May 7, 2014 at The Westin Harbour Castle Hotel, 1 Harbour Square, Toronto beginning at 10 a.m. It will also be webcast live on the Internet. OPERATING REVENUE ($MILLIONS) (2) OPERATING PROFIT ($MILLIONS) (2) 09 1,451 09 95 10 1,484 10 186 11 1,549 11 190 12 1,407 12 131 13 1,309 13 11 INCOME (LOSS) PER SHARE (2) EBITDA ($MILLIONS) (1) (2) 09 0.45 09 192 10 2.65 10 250 11 2.74 11 242 12 1.03 12 186 (0.35) 13 13 162 (1) Consolidated operating profit, as presented on the consolidated statement of income, which is before charges for interest and taxes adjusted for depreciation and amortization of intangible assets. It also excludes restructuring and other charges and impairment of assets. Please see “Non-IFRS Measures” on page 39. (2) 2012 is restated for the impact of the adoption of IAS 19R, IFRS 11, IFRS 12 and IAS 28; prior periods have not been restated. 2009 is based on Canadian GAAP and is not restated to IFRS. This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario). We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, targets, outlooks, expectations, goals, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 8. under the heading “Forward-Looking Statements”. TORSTAR CORPORATION 2013 ANNUAL REPORT 2 TORSTAR CORPORATION 2013 ANNUAL REPORT 3 MESSAGE FROM THE CHAIR John Honderich Chair, Board of Directors It has been a year of economic challenge for Torstar, but also one of unparalleled publishing excellence. The economic headwinds combined with the relentless challenges presented by the new digital era certainly made 2013 a daunting year financially. Yet we remained Canada’s most-read weekday English-language newspaper company, Canada’s leading community newspaper group and one of the world’s leading publishers of books for women. Torstar has always prided itself on the quality of its work. It seems even in the toughest of times, we buckle down and excel at what we know how to do best. At Harlequin, 61 of our books appeared on The New York Times bestseller lists for a total of 195 weeks. Four of those titles won the coveted number one spot. And Harlequin was named Mass Market Publisher of the Year in the United States. At Metroland Media Group, the company’s community newspapers won 129 Local Media Association (LMA) editorial awards, the highest across North America. The Waterloo Region Record won first place in the daily newspaper category. On the advertising and marketing side, Metroland won 38 LMAs, again leading all media companies in North America. At the Toronto Star, the paper showed extraordinary leadership and courage in its ongoing coverage of Toronto Mayor Rob Ford. It also won four National Newspaper Awards and was nominated for the prestigious Michener Award in Public Service Journalism. Finally, Torstar’s The Grid, a weekly city publication published in Toronto, was named one of the best designed newspapers in the world by the Society for News Design. In a world where quality content is so critical, Torstar stands out for its publishing excellence. This provides a critical strategic advantage for Torstar as we continue to compete in a very competitive environment. 2013 also marked the departure of Donna Hayes, Harlequin’s Publisher and Chief Executive Officer. After 28 glorious years with the company, 12 of them at the helm, Ms Hayes decided to retire. She was replaced by veteran Harlequin executive Craig Swinwood, 190 who took over in December. As part of a restructuring, Torstar Digital was absorbed by other divisions, with President Chris Goodridge returning to corporate headquarters in charge of several digital operations. At the top, President and Chief Executive Officer David Holland and Chief Financial Officer and Executive Vice-President Lorenzo DeMarchi continued to provide the critical strategic thinking and steady hand on the corporate tiller required in such difficult times. Ian Oliver, President of Metroland Media Group, enriched the consolidation of Metroland as Ontario’s premier community newspaper company. Finally, John Cruickshank, Publisher of the Toronto Star and President of Star Media Group, carried on with the innovative transformation of operations at Canada’s largest newspaper. As the economic times have toughened, so has the need to trim cost, realign and restructure. One of Torstar’s greatest assets is its workforce of more than 6,000 employees. The dedication, sense of innovation, and professionalism shown by this group is simply amazing. Despite all the outside pressures, they prove day in and day out why we remain so competitive and so highly regarded. Given the downward trends, we have continued to scrutinize carefully how we operate and where we can do things differently. This has resulted in some tough decisions on downsizing across the company. To those who have left, we salute your contribution and recognize your significant contribution to the company. Torstar is also served by an exceptional and inquisitive Board of Directors. Throughout the year, they have brought a collective insight, wisdom and strategic perspective to our discussions. 2013 also marked the last full year of board service for Don Babick, one of Canada’s true newspaper icons. Don has served as Publisher for many of Canada’s leading newspapers, including a stint as interim Publisher of The Star. Mr. Babick has served for 10 years on the Board, always bringing his trademark savvy, wit and extensive experience to every discussion. TORSTAR CORPORATION 2013 ANNUAL REPORT 2 TORSTAR CORPORATION 2013 ANNUAL REPORT 3 2013_TORSTAR AR_2.indd 3 14-03-18 4:35 PM Digital revenues from Star Media Group properties increased 2.0% in TO OUR SHAREHOLDERS 2013, reflecting revenue growth in eyeReturn Marketing, Olive Media and local digital revenue at thestar.com, partially offset by lower revenue from Workopolis. David Holland During the year, we completed a reorganization of the media operation. President and Chief Executive Officer We transferred Torstar Digital’s Commerce operations, including the WagJag business, to Metroland Media. Olive Media was transferred into Star Media Group. The remaining operations and investments, eyeReturn Marketing and our interests in Workopolis, Tuango, Kanetix, Teamsnap and Golden Ventures all now report into Chris Goodridge, Torstar’s evolution continued in 2013 with increasing emphasis on Our media operations include the Toronto Star, our flagship, the largest Senior Vice-President, Digital Ventures at Torstar corporate. publishing across multiple platforms. The operating environment daily newspaper in Canada, the award-winning Metroland community continues to be challenging in the newspaper industry and change newspapers with operations throughout Ontario, and the Metro English Torstar Digital was created in 2005 and the organization benefitted greatly continues in the book publishing industry. We were encouraged by newspapers in cities across Canada. from the innovation demonstrated and the dedication of its employees. the earnings performance of our media operations and the meaningful Much has changed since 2005. Torstar’s media operations are uniformly improvement in the condition of our pension plans in 2013. Harlequin We made considerable progress in 2013 on the cost base, a necessary embracing their multi-platform future. The reorganization is a part of our continues to make the necessary adjustments to succeed in the more element of the continued transformation of the media division. This evolution and has simplified structure, improved alignment and enabled digital environment. The strength of our financial position enables us to cost reduction combined with investment in areas of opportunity should improvement of execution of strategy. take the long-term view in the best interest of our shareholders. enable us to take advantage of the new opportunities ahead for both OPERATING RESULTS our print and digital businesses. We have made these changes while As in past years, our newspapers and digital properties were recognized ensuring the high quality of publishing and services that our readers and for their outstanding editorial, advertising and marketing efforts. Segment EBITDA of $173 million was down $29 million from $202 our advertisers have come to expect from Torstar is maintained. million earned in 2012. Segment revenue was $1.38 billion, down 7% The Toronto Star received widespread praise and admiration for its from $1.49 billion in the prior year. Media Segment EBITDA of $131 In the Canadian Media division, segment revenues of $984 million were ground-breaking investigative coverage of Toronto mayor Rob Ford, million was down $8 million. Harlequin’s EBITDA was $56 million, down down 7% in 2013, largely because of print advertising declines at our which received international recognition. The paper also captured four $21 million from the previous year. newspapers. On a more positive note, distribution revenues were up in prestigious National Newspaper Awards and was nominated for the the year and multi-platform subscriber revenues were stable.