C O R P O R A T I O N
2001 Annual Report
Our Year at a Glance
Financial Highlights
To Our Shareholders
Tribute to David Galloway
Newspapers
The Toronto Star
Regional Dailies
Interactive Media
Community Newspapers
Metroland
Business Ventures
Harlequin Enterprises
Management’s Discussion and Analysis
Financial Statements
Notes
Seven Year Highlights
Corporate Information
C O R P O R A T
I O N
1
2
4
6
7
9
11
12
14
18
26
30
38
39
The Annual Meeting of Shareholders will be held May 1, 2002 at the King Edward Hotel, 37 King Street East, Toronto, Ontario in
the Vanity Fair Ballroom beginning at 10:00 a.m. It will also be webcast live on tmgtv.ca with interactive capabilities.
Torstar Corporation is a broadly based publishing company. Its operations include the Torstar Media Group, including The Toronto
Star, Canada’s largest daily newspaper, The Hamilton Spectator, The Record and Metroland Printing, Publishing & Distributing,
publishers of approximately 68 community newspapers and distributors of advertising materials; Harlequin Enterprises, the world’s
largest publisher of series romance fiction; the Interactive Media Division, which includes Torstar’s approximately 40 websites,
Toronto Star Television and a portfolio of Internet-related investments.
Annual Report 2001
Financial Highlights
Operating Results ($000)
2001
2000
Operating revenue
$1,422,663
$1,445,074
Operating profit
Operating cash flow
Income from continuing operations
Operating Results
Operating profit –
percentage of revenue
Operating cash flow –
percentage of average shareholders’ equity
Per A and B shares
Income from continuing operations
Operating cash flow
Dividends
143,726
109,333
2,980
10.1%
18.3%
$0.04
1.45
0.58
198,856
165,598
83,715
13.8%
24.6%
$1.12
2.22
0.58
Price range high/low
22.50/16.01
25.85/14.00
Financial Position ($000)
Long-term debt
$508,848
$494,477
Shareholders’ equity
534,398
660,001
5
4
4
,
1
3
2
4
,
1
1
5
3
,
1
0
9
1
,
1
4
9
0
,
1
9
9
1
5
8
0 1
7
1
0
6
1
4
4
1
2
1
.
1
2
1
.
1
2
1
.
1
8
0
.
1
2
2
.
2
5
9
.
1
2
9
.
1
4
0
.
2
5
4
.
1
4
0
.
0
Annual Report 2001 1
To Our Shareholders
This will be my last report to shareholders, as I will be stepping
down at Torstar’s 45th Annual General Meeting. It has been a
privilege to serve as Chief Executive Officer of Torstar for the last
14 years and as President and CEO of Harlequin for eight years.
I want to thank the Board of Directors, the Torstar Voting Trust
and, particularly, Torstar employees for the support they have
given me throughout my tenure.
Torstar’s next CEO will be Rob Prichard. I am very proud to have
someone with Rob’s stature, intelligence and leadership ability
replacing me. Shareholders will be well served.
Performance
Torstar has three wonderful businesses – daily newspapers,
weekly newspapers, and book publishing – that generate a
significant amount of cash. Daily newspapers tend to be cyclical
and require capital investment, whereas the weeklies and
Harlequin are free cash generators. The dailies have been
impacted recently by the newspaper war in Toronto and a poor
economy, but they are well positioned competitively and poised
for a turn in the economy. Metroland’s weeklies have seen their
earnings before interest, taxes, depreciation and amortization
(EBITDA) grow from $24 million in 1996 to $63 million in 2000,
and decline marginally with the economy to $56 million in 2001.
Harlequin’s EBITDA has shown continuous steady growth from
$93 million in 1996 to $114 million in 2001 – with virtually no
capital investment.
While our core businesses have performed well, we have had
mixed results in our diversification attempts. In late 2000, we
decided to cut our losses and focus on the core. The timing of
our exit, with the drop in acquisition multiples in a poor economy,
could not have been worse. As a result, we suffered a loss of
$90 million this year. Of some consolation is the fact that this
loss, combined with previous CSEP losses, was offset for the
most part by our gains on the sale of Hebdo Mag during this period.
It hurts to have given back this gain.
We have provided reasonable returns to shareholders. Over the last
five years, including last year, we outperformed the TSE and
significantly outperformed our competitors in the newspaper
business – Quebecor,
Hollinger and CanWest.
Total Return to Shareholders
5 Year
152
140
120
112
(Base=100)
Torstar Corp.
TSE 300
Hollinger
CanWest
Quebecor
1 Year
113
87
77
100
91 79
Convergence
Our position on
convergence is pretty
clear: we are believers.
Convergence is not
new to us. We have
been cross selling and cross promoting our dailies, weeklies, eye
weekly, MetroToday, and our websites for some time. The only
issue for us is “convergence at what price?” There is still a large
question as to whether the benefits justify the acquisition
premiums being paid to achieve it.
Annual Report 2001
2
We recognize that, while we can argue about the prices paid, we
are now competing against “converged players”. Fortunately, our
main competitor, the Sun, does not enjoy convergence. We are by
no means complacent, but our exclusive readership in the Toronto
market is greater than the other three papers combined. It is difficult
to buy around The Star if
you want to reach people
through
in
newspapers. A comparison
of Saturday readership is
instructive.
NADbank–CMA % Readership
Saturday Star vs.
The Toronto Star
The Toronto Sun
Toronto
12.9
40.1
3.1x
–
The Globe and Mail
10.8
3.7x
The National Post
7.4
5.4x
We have applied for new
television licences to serve Kitchener-Waterloo, Hamilton and
Toronto. If we win approval from the Canadian Radio-television
Telecommunications Commission (CRTC), we will be able to
provide both our viewers and advertisers with a truly local station.
We will be able to cross-sell and cross-promote these stations
with our other properties in the region. The decision by the CRTC
will not be made public until after this report is issued.
The Newspaper War
The newspaper war continued in 2001, but we have seen signs
of the war abating. Mr. Black has abandoned the field. The
Aspers are determined to make the Post a viable proposition but,
in our opinion, there is not room in this country for two national
business papers, let alone four Toronto papers. There is only one
Wall Street Journal in the U.S. and only one Financial Times of
London. Why would Canada be able to support two? As a result,
both the Globe and the National Post are losing substantial
amounts of money. The Star remains the dominant paper in this
market by a wide margin – and it remains profitable.
On another front, Torstar’s “transit” paper, Today, combined
forces with Swedish-owned Metro to launch MetroToday, with a
circulation of approximately 182,000. This means Torstar owns
The Star – the largest circulation paper in Toronto – and 50% of
MetroToday – the second largest paper in the market. The Sun’s
entry, FYI, has closed down. MetroToday should break even in
2002.
Metroland
Our weekly newspapers continue to perform well. People depend
on these papers for local information. But, unlike dailies,
advertising drives the business; that is, if a community can
support a paper more than one day a week, Metroland increases
their frequency. Many Metroland papers publish three days a
week. By contrast, a daily newspaper cannot drop Monday when
there is not enough advertising to support it. This is a very flexible
entrepreneurial – driven organization that contributed $56 million
in EBITDA in 2001.
Harlequin
Harlequin had another excellent year, with EBITDA growing from
$109 million to $114 million, a 5% increase. Harlequin is a
consistent performer. In the 20 years that Torstar has owned 100%
To Our Shareholders
of Harlequin, this is the 16th time Harlequin has grown its profit.
Harlequin continues to invest close to 5% per annum in new
product development to ensure it changes with the times. Book
lines that accounted for 97% of sales in 1981, when Torstar
bought the last 30% of Harlequin, only account for 25% of
revenue today. In the last five years, our single title line (as
opposed to Harlequin and Silhouette series) has grown to almost
25% of overall revenues. There is a real energy at Harlequin today
that augurs well for the future.
I want to express my thanks to Brian Hickey. Brian retired as
Chairman and CEO of Harlequin at the end of 2001 after 20 years
of outstanding leadership. He developed a solid management
team. Donna Hayes, a 16-year veteran of the company, is the new
President. I am confident that she will lead Harlequin to even
higher levels of growth.
Outlook
We have now come full circle. The disposition of non-core assets
is behind us. We have a strong balance sheet with reasonable
financial leverage after buying the regional dailies from Quebecor
for $345 million in early 1999. Our net debt sits at a very
reasonable $502 million. We expect to generate free cash flow
after dividends (before capital expenditures) of approximately
$100 million on an annual basis.
How Torstar decides to allocate this capital in the future will be an
important call for the CEO and the Board. I think it is safe to say, in the
short term, that Torstar will “stick to its knitting”, focusing on internal
growth and paying down debt. Future acquisitions will be related to our
core businesses, assuming prices are reasonable. Torstar is in a strong
position in this market – there are no “must buys”.
We look forward to an improved year in 2002. Our newspaper
revenues depend on the economy, and revenue growth will
depend on whether there is an economic turnaround in the latter
half of the year. Harlequin’s growth is expected to continue in the
single title area, and with the launch of more contemporary series
targeted at a new, younger audience.
On the cost side, we see $31 million from newspapers and $13
million from Harlequin flowing to the bottom line in 2002 through
a combination of factors, including lower newsprint prices, labour
savings in circulation, and the elimination of losses from GTA Today
and Harlequin’s craft program, and so on. On a base of $200
million EBITDA, this $44 million in savings is a good start.
Torstar is well positioned entering 2002. As I pass the reins over
to Rob, I am most proud of the management team we have put in
place across Torstar. Your company is in good hands.
Torstar Executives: (L to R) David A. Galloway, Chief Executive Officer, John R. Evans, Chairman
of the Board, J. Robert S. Prichard, Chief Operating Officer and President, Torstar Media Group.
Annual Report 2001 3
David Galloway
David A. Galloway joined Torstar Corporation in 1981. He became
President and Chief Executive Officer for Harlequin worldwide in 1982.
He deserves much of the credit for Harlequin’s recovery in the early
1980’s by cutting costs and enhancing Harlequin’s direct marketing
operations. Under his leadership, Harlequin acquired the Silhouette
Book Publishing Division of Simon & Schuster, delivering a dramatic
upswing in Harlequin’s earnings and returning the company to its
position as the largest publisher of series romance fiction in every
market in which it competes. Harlequin has shown profit growth for 16
of the last 20 years, rising from $13 million in 1982 when David took
over as Chief Executive Officer to over $100 million this year.
David was appointed President and CEO of Torstar Corporation in 1988.
In his 14 years as CEO, he has led the company successfully through
challenging economic and competitive climates. From the takeover bid
for Sun Media Corporation in 1998, David and his team successfully
negotiated the purchase of four regional daily newspapers – The
Hamilton Spectator, The Record, The Cambridge Reporter and the
Guelph Mercury – extending Torstar’s reach into the most lucrative
region outside of Toronto.
Under David’s leadership, Torstar built its Interactive Media Division,
which now includes Toronto Star Television and more than 40 web sites
that cumulatively attract nearly one billion page views annually. He also
initiated Torstar’s strategy to expand its television business with
Hometown Television, a proposal to build local TV stations in Toronto,
Hamilton and Kitchener-Waterloo. This led to the company’s formal
submission to the CRTC last December.
As a pioneer of and believer in convergence, David resisted fashion and
market pressure to find a convergence partner at any price. While other
media companies were buying at unsupportable multiples, David was
pursuing a different strategy, wisely questioning what convergence must
be worth to justify the acquisition premiums. His strategy has been
vindicated by subsequent changes in the relative market capitalization
of Torstar and its converged media competitors.
David’s most recent and significant contribution has been his role in the
recruitment of an outstanding successor and in orchestrating a seamless
transition in CEO leadership – a feat always expected but rarely
achieved. The Board of Directors appreciates the wise and sensitive
leadership David Galloway has given Torstar for more than two decades.
John R. Evans
Chairman, Board of Directors
IMPACT
David A. Galloway
The Toronto Star
The Hamilton Spectator
The Record
Guelph Mercury
The Cambridge Reporter
I
S
N
O
S
S
E
R
P
M
I
Newspapers
Torstar Media Group’s vision
is to be the premier source of local and regional
news, information and entertainment in southern
Ontario. No other media company can offer the
reach and penetration of Canada’s most lucrative
market that TMG can. Torstar’s combination of
daily, community and specialty newspapers gives
us the unique ability to reach and influence a
large group of consumers, as well as drill down
into highly targeted communities.
Torstar is the dominant newspaper publisher in
southern Ontario. Torstar’s newspaper businesses
are in the second fastest growing urban market
in North America. They include four leading daily
newspapers, 68 award-winning community
newspapers, the largest Chinese daily in Canada,
50% ownership of Toronto’s transit paper, and a
host of specialty publications. Torstar has
developed new relationships with consumers
through its on-line properties and investment in
Toronto Star TV.
The Toronto Star and the regional daily newspapers – The
Hamilton Spectator, The Record, the Guelph Mercury and The
Cambridge Reporter – have a combined regional circulation of
approximately 662,000 papers a day. Metroland has a weekly
circulation of 3.7 million people. Sing Tao’s past week readership
is approximately 200,000 in Canada. Revenue from daily and
community newspapers in the southern Ontario market was
nearly $800 million in 2001.
The ongoing newspaper war continues to make Toronto one of the
most competitive media markets in North America. At the
beginning of 2001, Toronto was served by four daily newspapers
and three commuter newspapers. The four daily papers remain in
the market and The Toronto Star remains twice as large as any of
its daily competitors.
Only one of the three commuter papers survived the year. After
merging its transit paper with competitor
Metro International S.A., Torstar now owns
50% of the new product, MetroToday.
With a circulation of 182,000, MetroToday
is now the second largest circulation
daily in Toronto.
9
.
8
4
5 1
.
2
2
1
2
.
8
5
1
9
.
1
1
1
1
.
8
1
1
in 2001. The decline
Newspaper revenues decreased 5%
from $843 million in 2000 to $800
million
in
advertising revenues and increased
newsprint costs (prices up 12% year
over year) resulted in a 29% decline in
EBITDA from $158.2 million earned in
2000 to $111.9 million in 2001.
97 98 99 00 01
EBITDA ($ Millions)
Newspaper Segment
Annual Report 2001
6
John Honderich
Publisher, The Toronto Star
The Toronto Star
Despite dramatic changes in the competitive
landscape in 2001, year three of Toronto’s
newspaper war saw The Toronto Star maintain
its position as the pre-eminent paper in the
marketplace. Significant changes at
the
competing National Post – including the exit of
Conrad Black from the Toronto newspaper
scene – did not distract The Star from waging a
highly successful battle
for newspaper
supremacy. The Star remains by far the number
one newspaper in Greater Toronto and the
largest circulation daily in Canada. Despite a
severe downturn in advertising results, The Star
generated $40.7 million of EBITDA, down from
$70.1 million earned in 2000.
Editorial
Following the devastating terrorist attacks in
New York and Washington on September 11,
The Star was swift to react with a special eight-
page Extra that hit city streets five hours after the first plane hit
the Twin Towers. The next day, The Star sold an additional
172,000 copies of a special edition of the paper, setting a one-
day record for single copy sales. The Star also devoted significant
resources to covering the disaster’s aftermath and the resulting
war on terrorism, assigning more editorial staff and photographers
to cover the war in Afghanistan than any other Toronto daily.
The Star also led the way with coverage of the other big story of
2001, Toronto’s bid for the 2008 Summer Olympics. The Star’s
editorial excellence was recognized in 2001 with three prestigious
National Newspaper Awards. Latin American bureau chief Linda
Diebel won for a look at kidnapping in Colombia; photographer
Andrew Stawicki was honoured in the feature photography
category for a poignant photo of a husband comforting his wife
about to undergo organ transplant surgery; and Leslie Papp, a
member of The Star’s medical investigative team, won for a series
of stories on the burgeoning herbal medicine industry. Diebel also
won the 2001 Amnesty International Canadian media award for a
story on children who disappeared during the military dictatorship
in Argentina.
A program of strategic hiring continued in the newsroom with the
addition of several high-profile writers and columnists including
entertainment columnist Martin Knelman and business
columnists Jennifer Wells and David Olive. Editorial expanded its
business coverage during the year and unveiled a new Prestige
Wheels section. STARWEEK, The Star’s
television and
entertainment magazine, was redesigned and relaunched in
March with a larger format, more photos and more engaging
editorial content.
The Star continued to build an ongoing partnership with the
Canadian Broadcasting Corporation with a series of joint projects.
In May 2001, Star Publisher John Honderich was elected
chairman of Canadian Press, Canada’s national news service.
Newspapers
Advertising
The economic downturn, the highly competitive Toronto
newspaper market and the aftermath of the September 11
tragedy contributed
in most advertising
to declines
categories in 2001. Linage declined by 12.7% as compared
to prior year. Substantial declines were experienced in
categories such as Careers/Help Wanted, National and
Technology.
There was significant change in the marketplace in the last
half of 2001, including a change of ownership, layoffs and
editorial sections cut at the National Post. An analysis of the
Audit Bureau of Circulations (ABC) figures from the last three
months of the ABC year (from July – September) shows the
Post down 12.6% on weekdays and 8.6% on Saturday.
During this time, The Star’s weekday circulation grew 0.8%
and declined 0.7% on Saturday.
Despite this, The Star responded to readers and advertisers
with flexibility, creativity and an eye to creating value. The
Star launched a midweek Travel section to aid an industry in
distress after the events of September 11th. It also created
two new products to support the homebuilder industry – a
weekday Home Buyer’s Guide and a Home Builder Profile
magazine.
The company reaffirmed its vision for and commitment to
integrated marketing and sales across the Torstar Media
Group in 2001. The group intends to build on the success of
fully integrated sales campaigns with Scotiabank Mortgages
and the Rogers AT&T Cup in 2002.
in April, containing 67
A company-wide effort resulted in a dazzling 3D edition of
The Star
three-dimensional
photographs. One million cardboard 3D viewing glasses were
distributed for free in STARWEEK Magazine and at selected
retailers in the GTA. 3D Day won an international award and
was showcased at several industry conventions as an
example of innovation in newspaper advertising.
Beating out 120 Canadian companies, Advertising’s
Classifieds Call Centre was ranked number one for employee
satisfaction for the 2001 Service Quality Management Award.
TOTAL WEEKDAY CIRCULATION
Third Quarter Comparison
0
4
2
,
4
5
4
4
3
8
,
7
5
4
2000
2001
1
1
8
,
0
8
3
2
3
0
,
7
8
3
5
3
8
,
4
2
3
6
5
8
,
3
8
2
6
0
6
,
6
2
2
4
0
4
,
6
1
2
R
A
T
S
N
U
S
E
B
O
L
G
T
S
O
P
The Star’s circulation grew in the
latest ABC results.
Source: ABC Audit Statements ending Sept. 30, 2001
Circulation
With 453,935 average daily
sales, The Star’s weekday
circulation remains very close to
the previous year’s levels. On
Saturday, The Star experienced
an average decline in circulation
for the year of 2.4%, due in part
to the impact of a carrier strike
last spring. A 10% decline in
Sunday circulation reflects the
impact of a circulation offer we
ended last fall with sister papers
The Record ( Kitchener–Waterloo)
and The Cambridge Reporter.
Without this impact, the true
decline in Sunday circulation is
less than 2%.
The Star has maintained its leadership position while, at the
same time, outsourcing the management of its home delivery
operation in the Greater Toronto Area. This transition was
completed on schedule by the end of August, reducing staff
distribution costs by more than 50 per cent, and generating
savings of more than six million dollars a year. On-time
delivery of The Star was significantly improved during the
year and the customer complaints ratio was dramatically
reduced.
Philanthropy
The Star’s public charities, The Fresh Air Fund and The Santa
Claus Fund, were again successful in helping children in
Toronto. The Fresh Air Fund, which celebrated its 100th
anniversary in 2001, over-achieved its goal of $470,000 and
collected more than $615,000 from Star readers to help
send underprivileged children to summer camp. The Santa
Claus Fund, which provided more than 40,000 Christmas gift
boxes to deserving children in 2001, collected an impressive
$1.1 million in its fall campaign.
The Star also ran a successful employee United Way
campaign in 2001, collecting more than $265,000 in staff
donations. An equal amount was contributed at the
corporate level bringing The Star’s total contribution to more
than $500,000. This contribution placed The Star among the
top 10 United Way contributors in Toronto.
Regional Dailies
Local newspapers are an important medium for all markets.
No other company has the voice and relationships with
consumers in Hamilton, Kitchener-Waterloo, Cambridge and
Guelph as Torstar enjoys with its local daily newspapers. The
Regional Daily newspaper group consists of The Hamilton
Spectator and the three Grand River Valley Newspapers: The
Record, the Guelph Mercury, and The Cambridge Reporter.
These rich and diversified markets complete the coverage of
Canada’s most lucrative region outside of Toronto, reaching
60% of all adults across the region.
Leadership at the Regional Dailies changed in 2001 with
former Toronto Star General Manager, Jagoda Pike, becoming
Publisher of The Hamilton Spectator and Senior Vice-
President of Regional Daily Newspapers. She replaced former
Spectator Publisher Pat Collins, who became CFO and Senior
Vice-President of Operations for Torstar Media Group.
Annual Report 2001 7
Newspapers
The Hamilton Spectator
A major focus at The Hamilton Spectator in 2001 was cost
reduction, given the economic softness and the resulting decline
in advertising revenue, particularly in the national category.
Earnings declined despite the positive impact of the cost
reduction measures and the creation of new revenue sources,
including an innovative auction program. Advertisers offered their
product for a Spectator auction with the funds raised going toward
the purchase of advertising space. The program generated more
than $600,000 in ad revenue at The Spectator and has since
been shared with other newspapers within TMG. Additionally, an
agreement was struck with CanWest to sell auction services to
most of their newspapers across Canada.
Despite the availability of low-priced, competing Toronto
newspapers, The Spectator maintained net paid circulation levels
by focusing on high editorial quality and leveraging its local news
franchise. A series on mental health was awarded the B’nai Brith
Canada Media Human Rights Award and The Spectator received
three Western Ontario Newspaper Awards. Special afternoon
editions of The Spectator were published and sold through single
copy outlets on September 11 following the terrorist attacks in
the U.S. and on October 8 following the start of air strikes in
Afghanistan. Improvements such as a Saturday magazine section
and an expanded and redesigned Spectator TV television listings
book were also introduced in 2001. As a result, The Hamilton
Spectator remains the dominant paper in the Hamilton/Burlington
market with NADbank six-day cumulative readership increasing
more than three percentage points to 71.6% of adults.
The Spectator successfully negotiated settlements with unions in
the editorial and mailroom departments. The mailroom settlement
contains provisions that improve efficiency and reduce wage costs
significantly over the three-year term.
Early in the year, The Spectator became the first daily newspaper
in North America to achieve ISO 9002 registration. This
internationally recognized standard was awarded following the
establishment of quality systems that meet the rigorous standards
required for ISO 9002 status.
from
received
Recognition was also
the
International Newspaper Marketing Association
with an award for promoting Newspaper In
Education programs at The Spectator. Six first place
awards were also received from the Northeast
Classified Advertising Managers’ Association for
excellence in classified advertising initiatives.
On the community relations front, The Spectator’s
Summer Camp fund enjoyed its most successful
year with donations up more than 30% from 2000.
The fund raised more than $150,000 to help send
underprivileged children to camp.
Annual Report 2001
8
Jagoda Pike
Publisher, The Hamilton Spectator
Senior Vice-President, Regional Daily Newspapers,TMG
Grand River Valley Newspapers
2001 was a year of change for the Grand River Valley Newspapers
(GRVN) comprised of The Record, the Guelph Mercury and The
Cambridge Reporter. Efforts that began in 2000 to integrate
operations of the three newspapers continued in 2001 in order to
improve efficiency and grow revenue by sharing resources.
Wayne MacDonald retired in March following 10 successful years
as Publisher of The Record. In July, Fred Kuntz was appointed
Publisher, The Record and Group Publisher, Grand River Valley
Newspapers. The makeup of the senior management team
changed significantly as new Directors of Advertising, Circulation,
Finance, Production, Human Resources and Marketing were all
appointed during the year.
Declining ad revenue negatively affected earnings at GRVN in
2001 as lower ad linage more than offset significant gains in The
Record’s advertising line rate. Improved print quality and colour
capability when The Record transferred printing to the Vaughan
Press Centre in 2000 were positive factors in growing the line
rate. A new, improved television book was launched during the
year and The Record earned an impressive 11 Western Ontario
Newspaper Awards for editorial excellence.
GRVN leadership carefully studied and analyzed the market to
develop a regional strategy that would strengthen the franchise in
the face of declining circulation at The Record and the Guelph
Mercury, and financial losses at The Cambridge Reporter. The
resulting initiatives, announced in November 2001, will be
implemented in 2002 to improve the products, market share and
profitability.
As part of the change, GRVN will stop publishing the Guelph
Mercury’s Sunday edition and reinvest those resources into the
other six publication days to improve editorial content. The
Cambridge Reporter is being transformed from a daily newspaper
with a circulation of 7,000 to a twice weekly community
newspaper delivered free to 50,000 homes in Cambridge and
south Kitchener, offering excellent advertising reach and insert
distribution.
The Record, the last afternoon-delivery newspaper
of its size in Canada, will convert to a morning
publication, offering delivery by 6:30 a.m. Monday
to Friday. This is expected to increase readership
and circulation of The Record and improve
advertising effectiveness as
the newspaper
becomes more timely and available for longer
during the day. The Record will also target the
Cambridge market as the only daily newspaper
providing local, regional, national and world news.
Newspapers
Interactive Media
Torstar Media Group’s interactive properties continue to support
core businesses and grow into profitable entities.The newspapers’
interactive properties generated total revenues of $25.8 million in
2001 compared with $14.9 million in 2000. EBITDA losses
decreased from $10.8 million in 2000 to $7.7 million in 2001 due
to reduced development spending.
over 900 companies posting to its job database and 500 searching
its resume database per month. Workopolis also acquired Campus
Worklink this year, giving it the leading position in online Canadian
campus recruiting.
A number of new services were launched including Workopolis
Corporate Works, a service that gives employers the ability to have
Workopolis’ industry-leading functionality power their own recruitment
site.
)
S
N
O
I
L
L
I
M
(
S
W
E
V
I
E
G
A
P
L
A
T
O
T
S
E
T
I
S
E
V
I
T
C
A
R
E
T
N
I
R
A
T
S
R
O
T
2
.
7
2 6
.
8
5
9
.
6
6
7
.
3
4
5
.
4
4
0
.
8
3
9
.
7
6
9
.
2
3
0
.
2
7
4
.
1
7
4
.
3
7
6
.
8
7
5
.
7
4
5
.
6
4
4
.
5
4
8
.
6
4
1
.
5
8
9
.
2
8
2
.
1
5
3
.
2
5
1
.
8
6
9
.
9
4
2
.
9
6
4
.
6
4
2001
2000
Workopolis provides clear evidence that, by combining the
promotional capacity of newspapers with the accessibility and
ubiquity of the internet, one can create a Canadian company better
able to serve job-seeking Canadians and recruiters. In 2001, Torstar
Media Group exercised a condition in the original partnership
agreement with Bell Globemedia
and increased its ownership share in
Workopolis from 40% to 50%.
N
A
J
B
E
F
R
A
M
R
P
A
Y
A
M
N
U
J
L
U
J
G
U
A
T
P
E
S
T
C
O
V
O
N
C
E
D
thestar.com
In 2001, thestar.com continued to reach new highs in both traffic and
revenue. Record-breaking page views of 5.9 million per week in
September and October, due largely to the interest in breaking news
post September 11, contributed to an overall increase in traffic on
newspaper web sites of 45% over 2000. Revenues continued to grow
by double-digits despite a decline in the Canadian online advertising
market in 2001.
2001 also saw the launch of WayMoreSports.com, a sports portal
serving all of Torstar’s properties. WayMoreSports.com offers
coverage of all major sports from professional to the high school level
and includes detailed content on sports that receive only limited
coverage in the newspapers. With
WayMoreSports.com, traffic to the
company’s online sports content grew
by 60% over the previous year, to
average page views of 1.1 million per
week in December.
Much effort in 2001 was spent preparing the web sites for improved
performance in the future. Major initiatives in 2001 included
automating the content publishing system and building a publishing
system for online Classifieds. As a result of these activities, Torstar
web sites now have automatic access to all editorial content of The
Toronto Star that can be instantly repurposed to the web by our
editors. As a result of our Classified online publishing system, The
Toronto Star has unbundled the online component of classified ads
and has begun charging its Classified advertisers to place their ads
on thestar.com.
workopolis.com
workopolis.com, Canada’s largest job site, saw significant revenue
improvement in 2001, growing by 96% year-over-year to $13.8
million. This was accomplished in the face of a recruitment market hit
hard by a weak economy. Throughout the year, Workopolis averaged
toronto.com
toronto.com not only increased revenue by 16%, but it also reduced
its losses by $2 million and expects to break even in 2002. Torstar
owns 50% of toronto.com. toronto.com is Canada’s leading city guide
and the second most trafficked city guide in North America. It finished
the year with 11 million page views in December, an increase of 30%
over the prior year. Over 1,000
businesses in Toronto now benefit
from toronto.com’s unique ability to
deliver a highly targeted audience.
Torstar Media Group Television
Torstar Media Group Television (TMG TV) has enjoyed significant
gains in the infomercial business, commercial television production
and broadband services.
TMG TV operates: Toronto Star TV, a successful 24-hour infomercial
channel reaching 1.4 million households in the Greater Toronto
Area; TMG Production, a full-service video production facility
featuring Avid editing suites, a 3D virtual set studio, post-
production, webcasting and encoding services; and TMG
Entertainment, which develops television concepts and pilots to
extend Torstar brands into television and onto the web. TMG
Entertainment was instrumental in the development of the new teen
series on YTV, Road Scholars, and its companion web site.
Torstar made its submission to the Canadian Radio-television
Telecommunications Commission (CRTC) for three licensed
television stations in Toronto, Hamilton and Kitchener-Waterloo in
December 2001. Torstar’s approach, called Hometown Television,
will be overwhelmingly Canadian, drawing on the roots of television.
As local stations serving the Golden Horseshoe, Hometown
Television would greatly expand access to television and provide
cost-effective advertising opportunities for local businesses.
The CRTC is expected to issue its decision in the Spring of 2002.
Annual Report 2001 9
S
R
U
O
B
H
G
I
E
N
Newspapers
Community Newspapers
Metroland Printing,
Publishing & Distributing
Metroland, Ontario’s largest and most successful
community newspaper publisher, provides local news
and advertising media in Canada’s heartland. It
currently publishes 68 newspapers with a total of 114
editions. Combined distribution of Metroland’s
newspapers exceeds 3.8 million copies per week.
Newspapers are concentrated in southern Ontario
and centred around Toronto.
97 98 99 00 01
EBITDA ($ Millions)
There is more to Metroland than community
newspapers. Metroland also publishes seven local “Business
Times” editions, monthly specialty products such as Forever
Young and City Parent, annual large-print phone books, a variety
of niche products, and a number of other publications. The
company produces several consumer shows including the Toronto
and Montreal Golf and Travel Shows, the National Bridal Show
and the Fifty Plus Lifestyles and Travel Show.
Metroland prints most of its own newspapers on company-owned
presses housed in five different printing locations. Metroland is
also a large commercial printer for other publications.
Metroland is one of the most sophisticated distributors of flyers
and circulars in Canada. Flyers are distributed to households in
advertiser-defined areas, primarily using Metroland’s newspapers.
Flyers are also delivered in bags and hung on apartment doors in
communities with a high concentration of apartment buildings.
Metroland’s flyer distribution volumes continued to grow in 2001
to more than 1.8 billion pieces, an increase of 9.3% over 2000
levels. Distribution volumes have grown every year for 18
consecutive years.
Financial Highlights
Metroland continued its legacy of success and profits in 2001.
Although the company finished behind its record profit of 2000,
Metroland recorded its second most profitable year in history.
Metroland earned $51.0 million in 2001 compared to $58.2
million in 2000 and $49.3 million in 1999. The
economic downturn, which affected all media
companies in 2001, had a negative affect on earnings
but was minimized through cost control and new sales
initiatives. These included the introduction of on-line
auctions, additional special sections and a variety of
advertising packages. These new initiatives contributed
to Metroland’s operating revenue of $265 million in
2001, up 2.7% from the prior year.
8
.
3
5
1
1
.
6
3
1
2
.
7
6
1
Advertising linage in 2001 fell 1.2% from 2000 levels
(down 4.3% after backing out the effect of acquisitions
made during 2000). The downturn had its largest
effect on classified advertising, which started the year
97 98 99 00 01
LINAGE
(Millions of Lines)
Murray Skinner
President
7
.
2
3 6
.
3
5
1
.
6
5
with strong first quarter linage results but weakened as
the year progressed and finished 8.4% below 2000.
EBITDA for 2001 was $56.1 million compared to
$62.7 million in 2000 and $53.3 million in 1999.
1
.
8
7 4
.
0
4
A Tradition of Excellence
Metroland continued its tradition as an industry leader
by producing community newspapers
that are
consistently rated the best in Ontario or best in
Canada. During 2001, Metroland received 42 national
awards from the Canadian Community Newspaper
Association (CCNA) including 18 first-place, seven
second-place and 17 third-place finishes. Of particular
note, the Oshawa/Whitby This Week was named best
all-around newspaper in Canada in the largest circulation class.
At the provincial level, Metroland was honoured with 49 awards
from the Ontario Community Newspaper Association (OCNA),
including 18 first-place, 12 second-place and 19 third-place
awards. The awards included firsts in general excellence for the
Stouffville Sun (under 1,999 circulation), the Bowmanville
Statesman (12,500 to 24,999 circulation) and the Newmarket
Era-Banner (above 25,000 circulation).
Metroland also garnered a number of awards at the annual
Suburban Newspapers of America (SNA) competition including
Ron Lenyk, Publisher of The Mississauga News, being recognized
as Suburban Newspaper Publisher of the Year and winner of the
Dean Lesher Award.
2001 Market Research
Metroland commissioned Kubas Consultants to conduct its
seventh consecutive biennial readership study covering each
Metroland newspaper. The study is the largest and most
comprehensive, dedicated community newspapers readership
study in North America.
Results of the 2001 study confirm that Metroland newspapers are
well read, and deliver results for advertisers. For example, 3.2
million adults read a Metroland newspaper in the last week, a
number that has more than doubled in the last 10
years. Metroland readers spend an average of 20
minutes reading each Metroland newspaper issue,
they keep it in their homes for an average of 2.5 days
and refer to each issue an average of 1.8 times.
5
.
4
8
1
7
.
6
8
1
Metroland newspapers are rated ahead of daily
newspapers, radio, television and direct mail as a
good or excellent source of shopping news and
information in the markets they serve. Over 81% of
adults receiving a Metroland newspaper find flyers very
useful or somewhat useful and 56.8% or 2.6 million
adults receiving a Metroland newspaper prefer to
receive flyers in their Metroland newspaper.
Annual Report 2001 11
Newspapers
Community Newspapers
Business Ventures
This group consists of MetroToday, the Sing Tao dailies, eye
weekly and Real Estate News. The Business Ventures Group had
revenues of $26.8 million in 2001, a 4% increase from 2000.
Labour disruptions at Sing Tao and start up losses associated
with Today resulted in an EBITDA loss of $3.7 million in 2001
compared with a loss of $1.6 million in 2000.
Sing Tao also announced a Canada-wide restructuring plan,
including a staff reduction, that resulted in savings of $1.6
million annually.
Sing Tao launched its new, full-colour Sunday magazine on
January 27th, 2002. Since then, Sunday circulation is up 50%
in Toronto, despite a price increase. Circulation is also up
significantly in Vancouver.
In early 2002, Business Ventures was reorganized as a division
of Metroland Printing, Publishing and Distributing. In this new
structure, Business Ventures will continue as an important
growth vehicle for Torstar.
MetroToday
Torstar entered into a joint venture with the Swedish-owned
Metro International S.A. to merge Torstar’s transit paper Today
with Metro. The original two free daily papers were launched in
July 2000 and had been competing vigorously prior to the
merger. The newly merged MetroToday launched on July 9th,
2001. Daily circulation is 182,000 copies across the GTA,
making it the second largest circulation newspaper in Toronto.
The other free daily, FYI, published by Sun Media, ceased
operation in October 2001.
Monday to Friday, MetroToday strives to publish a daily
newspaper that meets the needs of customers, readers and
advertisers. Editorially the paper is designed for the time-
starved, young, educated, employed person who has a light
appetite for traditional daily newspapers. The paper delivers a
complete but succinct news package that can be read in less
than 30 minutes.
MetroToday provides the advertiser with a cost effective vehicle
that targets a primary audience of non-newspaper readers
between the ages of 18-34, skewing slightly female. The
concise format of 24 to 32 pages increases advertising
awareness.
Sing Tao
In 1998, Torstar formed a strategic alliance with Sing Tao
Holdings Limited. Torstar owns an approximate 50% interest in
the Canadian operations of Sing Tao's media group. Sing Tao
Daily publishes the largest Chinese language newspaper in
Canada, with editions in Toronto, Vancouver, Calgary and
Montreal. In addition to the newspaper, Sing Tao's Canadian
media group is also involved in printing, outdoor advertising,
radio broadcasting and magazines. Past week readership in
Canada is approximately 200,000. Sing Tao provides Chinese
language news radio programs through a strategic alliance with
CHIN Radio-TV International.
Sing Tao’s operations in Toronto were unionized in 2000. The
newspaper continued to publish every edition during a six-week
strike in early spring 2001, and successfully negotiated a first
contract for its staff in May 2001.
Annual Report 2001
1 2
eye Weekly
eye, a weekly arts and entertainment publication, commenced
publishing in 1991. eye is distributed free every Thursday to over
2,400 outlets in Metropolitan Toronto. eye reaches the much
sought after demographic of readers between the ages of 18-
34. This demographic is important to advertisers for their long-
term buying power and potential. eye’s appeal and successful
penetration among this group is a result of its ability to reflect its
readers’ active lifestyle. Circulation is approximately 108,000
copies per week, while readership is around 267,000, according
to the Print Measurement Bureau.
Real Estate News
Real Estate News is Toronto’s largest real estate publication, and
is produced, marketed, printed and distributed weekly by The
Toronto Star through a joint venture agreement with the Toronto
Real Estate Board. Real Estate News comprises three weekly
publications: Real Estate News GTA edition (with a circulation of
approximately 100,000); Kitchener-Waterloo Real Estate News
(with a circulation of approximately 10,000); and Town &
Country Real Estate News, published in Stratford servicing Huron
and Perth counties (with a circulation of approximately 5,000).
M
e
t
r
o
T
o
d
a
y
L
E
V
O
N
Harlequin Enterprises
Harlequin Enterprises
Harlequin creates entertaining and enriching experiences for
women to enjoy, to share and to return to.
Harlequin is a leading publisher of women’s fiction, with 2001
revenues of $583 million.
Harlequin is unique in the publishing
business, combining imprints – Harlequin,
Silhouette and MIRA – that are well-
recognized by consumers, global reach in
94
international markets, a highly
successful book club, and a web site which
is second
to none. These unique
capabilities allow Harlequin to promote and
sell its authors around the world, wherever
and whenever women shop. In 2001,
Harlequin sold 150 million books, written
by over 1,300 authors and achieved
EBITDA (excluding eHarlequin) of $114.2
million, a 5% increase over 2000.
2
.
4
1
1
9
.
0
0
1
8
.
4
9
7
.
8
0
7 1
.
4
9
97 98 99 00 01
EBITDA ($ Millions)
Harlequin has also extended beyond publishing to create activity-
based products that deliver on the company’s promise of providing
wonderful experiences for a woman’s discretionary time.
Harlequin’s overall strategy is to continue to show excellent results
in the core series romance business, aggressively grow its market
share in the broader arena of single title women’s fiction and
extend its reach into other areas of women’s discretionary time
through its Creativity Division. Under the Harlequin and Silhouette
imprints, the company enjoys a very strong position in the
romance category, publishing 13 different series with 64 titles
each month. Each series is distinctly positioned, offering a wide
variety of stories to capture readers’ interest. In addition,
Harlequin publishes anthologies and single titles under the
Harlequin and Silhouette imprints. As well, several Harlequin
romance series in Spanish are exported into the U.S. market and,
through
imprint, Harlequin publishes
heartwarming inspirational romance for the Christian market.
the Steeple Hill
MIRA is Harlequin’s fastest growing imprint in mainstream
women’s fiction, ranging from romance to psychological suspense
to relationship novels. MIRA publishes at least four new titles each
month, many of which become national and international
bestsellers with multiple listings on the New York Times, USA
Today and many other lists.
The company has also expanded its recently launched hardcover
and trade size format publishing program and views this as an
opportunity for significant growth in the future. Additionally,
Harlequin’s Worldwide Mystery imprint publishes excellent mystery
fiction and the Gold Eagle imprint publishes action adventure
fiction.
Annual Report 2001
1 4
Donna Hayes
President & Chief Operating Officer
Editorial
Harlequin has established a strong level of reader trust and brand
equity within the imprints by consistently delivering quality editorial
content that meets readers’ taste and exceeds their expectations.
Editors in three acquisition centres in Toronto, New York and
London are responsible for publishing more than 1,000 new titles
annually, working closely with our 1,300-plus authors.
The Harlequin and Silhouette imprints acquire and develop more
first-time authors than most publishers, maintaining a strong,
diverse author base that is able to respond to the changing needs
of the marketplace. Red Dress Ink, Harlequin’s newest imprint,
demonstrates the company’s ability to find and develop new talent
and new voices, with almost half the first year’s young authors
making their publishing debut. A young woman from Denmark
became the first author acquired through eHarlequin.com’s writer
website. Of the over 20,000 aspiring authors’ work that is
assessed each year, between 25-50 new authors join the
Harlequin family.
Harlequin’s multi-national editorial group continues to deliver on a
tradition of excellence and innovation that has sustained and
expanded the author base, readership and genre for decades.
Editors effectively select and build talent from within, in addition
to acquiring brand new as well as established and successful top
authors in the women’s fiction field through the very successful
MIRA imprint.
Retail – North America
The North American retail business showed excellent growth in
2001, posting revenue gains of 17%, fuelled by strong series and
MIRA product introductions and the continuing success of
Harlequin’s dedicated sales force.
In response to strong reader demand for sexier editorial, Harlequin
added a new series, Harlequin Blaze, to its product offering in
2001. The successful launch of Harlequin Blaze was supported by
a national print campaign, coupons, public relations and
consumer promotions programs in North America, and the new
series is currently being rolled out around the world.
Capitalizing on the new genre of women’s fiction known as “chick
lit”, made famous by the success of Bridget Jones’ Diary,
Harlequin launched an exciting new program in trade paperback
format under a new imprint. Red Dress Ink is a women’s fiction
program that depicts young, single, primarily urban women coping
with the pressures that accompany a career, the dating scene and
all other aspects of modern life. The launch of Red Dress Ink was
met with accolades from reviewers: “Harlequin gets hip”—The
New York Post; “Harlequin flirts with young female readers. Red
Dress Ink novels are different from the stereotype many non-
readers hold of romantic fiction.”—USA Today.
Harlequin Enterprises
This imprint is key in attracting new and younger readers to
Harlequin. Both media attention and response from the trade and
consumers has been extremely positive.
Overall, Harlequin’s titles made a strong showing on the New York
Times bestseller list in 2001. Across all imprints, Harlequin placed
six titles among the top 15 bestsellers for a total of 29 weeks, with
Nora Roberts’ Time and Again spending four weeks at #1. Authors
like Debbie Macomber and Sandra Brown also figured prominently.
Carla Neggars, Susan Wiggs, Heather Graham, Erica Spindler,
Candace Camp and others have become national bestsellers, with
multiple appearances on key lists such as USA Today and book
retailer lists. In the first full year of the hardcover program, over half
of the titles Harlequin published placed among the top 30 New
York Times bestsellers.
to
commitment
Harlequin’s
building
the Harlequin and
Silhouette brands and MIRA
authors is significant. Harlequin
ran a $3 million consumer print
campaign in support of the brand
in nationally distributed magazines
such as People, Cosmopolitan,
Glamour, Soap Opera Digest and
Parenting. Harlequin’s annual
Romance Report generated more than 300 million media
impressions in 2001. Harlequin’s quarterly newsletter, Inside
Romance, reaches over 300,000 women with news about
upcoming titles and promotions. Television, print and radio
advertising, public relations campaigns, consumer contests and
special in-store merchandising resulted in millions of advertising
impressions reaching the consumer throughout the year.
Harlequin’s website, eHarlequin.com, promoted the Harlequin
business through more than 200 million impressions.
Direct-to-Consumer Group
In early 2002, eHarlequin.com and the Direct Marketing division
merged into one group that will be known as the Direct-to-
Consumer Group. This new group will combine all of the skills of
the Internet group with Harlequin’s direct marketing capabilities –
from consumer insight to cost-effective customer acquisition. In
addition, the Internet marketing initiatives will benefit from the
success in loyalty marketing achieved in the Direct channel. The
combined group will achieve its revenue and earnings targets in
2002 by focusing on providing more choice and convenience to
Harlequin’s customers through customer development, product
development and technology and by achieving cost savings in the
streamlined operation.
Direct Marketing
The Direct Marketing Division provides Harlequin with a unique,
competitive advantage in the marketplace, allowing Harlequin
authors exposure to a completely different segment of the reading
public. 2001 Direct Marketing results were solid, but were
pressured by a general industry decline in the direct mail list
market and by the combined impact of three United States postal
rate increases totaling 25% in an eighteen-month period.
Harlequin eliminated the use of sweepstakes in its direct mail
acquisition programs in 2001. Legislative pressures and market
reactions to highly promotional sweepstakes offers resulted in a
decline in the effectiveness of these techniques. Helping combat
negative market pressures, the Direct Marketing group launched
the “Diamond Club” loyalty program. This program, aimed at the
most loyal of Harlequin’s direct-to-home consumers, rewards long-
standing customers with a variety of benefits and has had an
extremely positive impact on how well members pay and how long
they remain active with Harlequin.
The continued success of Steeple Hill is opening up new market
niches for the Direct Marketing group. Strong growth in this area
has helped offset the decline in the traditional direct mail list
market.
eHarlequin.com
eHarlequin.com provides Harlequin with an outstanding opportunity
to speak directly to Harlequin’s readers around the world, to create
a community where readers and authors can come together, and to
promote and sell books. eHarlequin.com moved into its second year
of operation in 2001. Revenues reached $13.3 million in 2001, up
121% from 2000. EBITDA losses decreased by $11 million to $6
million, as the start-up development and marketing costs in 2000
were not repeated in 2001.
Despite challenges posed by a disintegrating Internet supplier
network, eHarlequin achieved several key objectives, the most
significant of which was the delivery of an exceptional online
experience for the Harlequin reader. In particular, the eHarlequin
Community or message boards continued to grow as readers
eagerly contributed their thoughts on reading and writing Harlequin
books. To tap into this keen reader interest in writing, a new
channel called “Learn to Write” was launched in March. The Online
Reads channel continues to be the most popular. These serialized
stories are exclusive to the site and prove to be an excellent free
sampling mechanism for new and avid readers alike.
The financial instability that plagued the entire Internet industry in
2001 affected eHarlequin.com to the extent that several of its
suppliers went out of business. As a result, effort intended to
deliver new features to the site was redirected to putting new
)
S
N
O
I
L
L
I
M
(
S
W
E
V
I
E
G
A
P
I
.
M
O
C
N
U
Q
E
L
R
A
H
e
1
.
9
3
.
9
1
.
9
3
.
7
2
.
7
5
.
6
3
.
6
2
.
7 5
.
2 4
.
4
6
.
6
7
.
5
9
.
5
1
.
6
3
.
5
0
.
7
5
.
8
5
.
7
5
.
9
7
.
8
2001
0
.
7
9
.
6
2000
7
.
1
N
A
J
B
E
F
R
A
M
R
P
A
Y
A
M
N
U
J
L
U
J
G
U
A
T
P
E
S
T
C
O
V
O
N
C
E
D
Annual Report 2001 15
Harlequin Enterprises
supporting structures in place. In particular,
eHarlequin.com’s partner Women.com
was acquired by iVillage and the resulting
combined network of women’s sites no
longer held significant value for the
achievement of eHarlequin.com’s
objectives. eHarlequin.com is no longer
part of the Women.com/iVillage network
and has seen no negative impact due to
ending the relationship.
While the behind-the-scenes work proved challenging in 2001,
consumer facing activity met with great success. Over 500,000
new members joined eHarlequin.com in North America, viewing
over 95 million pages of content. According to Bizrate.com,
which collects direct feedback from millions of customers
immediately after online purchase, eHarlequin.com ranks #2
among all online booksellers in North America. eHarlequin sites
were launched in eight overseas markets in 2001, further
extending Harlequin’s global reach.
Overseas
In Overseas, revenues were stable as readers purchased larger-
format, more expensive books, despite a small decline in
overall unit sales. Revenue growth is expected in 2002 as this
strategic effort gathers momentum in all overseas markets. The
MIRA single title program launch in Japan was particularly
successful, attracting outstanding press coverage and retail
involvement.
The United Kingdom was successful in getting its first two MIRA
titles onto the bestseller list in the U.K. for the first time, which
is key to growing sales and distribution in that market. The
MIRA single-title business in every overseas market will be
expanded in 2002 and beyond.
In 2001, earnings in Overseas were flat as a result of some
restructuring changes which, combined with the general softening
of economies around the world, made trading conditions more
difficult than in 2000. Japan struggled to maintain its impressive
2000 series growth rates, and Spain/Latin America saw a number
of its South American markets soften with the political and
economic unrest in countries such as Argentina. The U.K., the
second largest overseas market after Japan, grew earnings by
almost 20%, Australia grew profits more than 20% over the soft
2000 results and the Polish business recovered very well from a
significant loss in 2000, due largely to efforts in marketing and
distribution.
The launch of eight additional Overseas Harlequin websites
(making a total of nine – all with a common look and feel) in
the second half of 2001 will not only generate sales, but will
Annual Report 2001
1 6
open a new channel for customer
communications and services. Two new
product launches will take place in most
markets in 2002 – Red Dress Ink and
the Harlequin Blaze series (The U.K.
and Australia successfully launched
Blaze in the last quarter of 2001), both
targeted to a new, younger audience.
With a number of new country
managers in place, and an emphasis on
growing the series business while
introducing the very successful MIRA single-title program
around the world, Overseas anticipates a strong 2002 with
growth in books sold, revenues and earnings.
Creativity Division
Within Harlequin’s mission to “create entertaining and
enriching experiences for women to enjoy, to share, and to
return to,” the Creativity Division’s mandate is to extend those
experiences beyond book publishing to include activity-based
products that address other relevant areas in women’s lives.
In 2001 the Creativity Division focused its efforts on its two
core business units: Brighter Vision Learning Adventures
(BVLA), and Curiosity Kits, and decided to cease further
investment in a number of additional continuity concepts that
were in test phase. BVLA and Curiosity Kits represent
established businesses creating and marketing products to
mothers of young children. The products they create help
mothers help their children develop early childhood and pre-
school skills and express their creativity and imagination.
Brighter Vision Learning Adventures is a direct-to-home
continuity program for children aged one to six. It is designed
to allow mothers and children to spend quality time together
developing early school skills. 2001 marked another successful
year in this business with earnings growing 21% over 2000. In
addition, substantial effort was directed at expanding the
program’s distribution as well as developing additional new
products, setting the stage for another strong year in 2002.
Curiosity Kits creates and markets activity kits for children aged
four to 14 and sells to consumers predominantly through
specialty retail channels. After a very successful 2000,
Curiosity Kits experienced a difficult 2001, due primarily to the
impact of retailer consolidation in the specialty channel. The
company invested in strengthening its sales force and product
development capabilities in 2001 and should benefit from
these initiatives in 2002.
Y
T
I
L
I
B
A
T
N
U
O
C
C
A
Management’s Discussion
& Analysis
Certain statements in this report may constitute forward-looking
statements. Such forward-looking statements involve risks,
uncertainties and other factors which may cause actual results,
performance or achievements of the company to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
BUSINESS OF THE CORPORATION
The principal activities of Torstar are the publication of
newspapers, women’s fiction and their related Internet activities.
Torstar reports its operations in three segments: Newspapers,
Book Publishing, and Interactive Media.
Consolidated Operating Results
Earnings per share from continuing operations fell to $0.04 in
2001 versus $1.12 in 2000. The lower earnings were due to
significant unusual losses in the year and the economic driven
decline in newspaper results.
Excluding the impact of the unusual items and the Interactive
Media portfolio gains which cause variability in comparing the
company’s year over year results, earnings per share from
continuing operations would have been:
As reported
Unusual items
Interactive media
portfolio (gains) losses
2001
$0.04
0.60
0.05
$0.69
2000
$1.12
(0.05)
(0.21)
$0.86
Revenues were $1.423 billion in 2001, down $22 million from
$1.445 billion in 2000. Revenue for the Newspaper segment was
down $43 million, while Interactive Media and Book Publishing
revenues were up $17 million and $4 million respectively.
The 2001 results include an unusual loss of $71 million. This loss
consists of a $29 million write-off of Torstar’s investment in ITI
Education Corporation, $25 million for the costs associated with
the strike by The Toronto Star’s carrier force and a strike at Sing
Tao, a $13 million provision for restructuring primarily within the
Newspaper segment, and $4 million related to the windup of an
overseas pension plan.
Income from continuing operations before the amortization of
goodwill fell to $21 million in 2001 from $101 million in 2000.
The amortization of goodwill, net of tax, was $18 million in 2001
compared with $17 million in 2000. Beginning in 2002, Torstar
will apply the recommendations of The Canadian Institute of
Chartered Accountants (“CICA”) on business combinations and
intangible assets and will cease to amortize its goodwill.
Annual Report 2001 18
Robert Steacy
Vice-President, Finance
During 2001, Torstar sold the education operations – Frank
Schaffer Publications, Tom Snyder Productions and Delta
Education – of its Children’s Supplementary Education Publishing
(“CSEP”) segment. The results of these operations have been
accounted for as a discontinued operation. Due to a downturn in
market conditions, the proceeds on the sale were lower than
originally anticipated, resulting in losses from discontinued
operations of $90 million in 2001 ($48 million in 2000).
Net loss, including the loss from discontinued operations, was
$87 million in 2001 compared to a net income of $36 million in
2000.
NEWSPAPERS
The Newspaper segment consists of both daily and community
newspapers. The daily newspapers include The Toronto Star and
the Regional Dailies – The Hamilton Spectator and the Grand
River Valley Newspapers (The Record (Kitchener-Waterloo), The
Cambridge Reporter, and the Guelph Mercury). The Community
Newspapers include the newspaper and distribution operations of
Metroland Printing, Publishing and Distributing as well as the
jointly owned MetroToday and Sing Tao newspapers, the wholly
owned eye Weekly, and the Real Estate News publications.
Revenues for the segment decreased 5% from $843 million in
2000 to $800 million in 2001. The decline in revenues along with
higher operating costs produced operating profit for the segment
of $64 million in 2001 compared with $112 million in 2000.
Details (in thousands of dollars) are set out in the table below.
2001
Toronto Star Regional Community
Dailies Newspapers
Total
Operating revenue
$378,943 $129,582 $291,437 $799,962
Operating profit
4,951
13,176
46,268
64,395
Depreciation
35,754
5,629
6,125
47,508
Segment EBITDA
$40,705
$18,805
$52,393 $111,903
Return on revenue:
• operating profit
• segment EBITDA
2000
1.3%
10.7%
10.2%
14.5%
15.9%
18.0%
8.0%
14.0%
Operating revenue
$423,386 $136,237 $283,443 $843,066
Operating profit
34,244
21,961
55,610
111,815
Depreciation
35,892
5,050
5,455
46,397
Segment EBITDA
$70,136
$27,011
$61,065 $158,212
Return on revenue:
• operating profit
• segment EBITDA
8.1%
16.6%
16.1%
19.8%
19.6%
21.5%
13.3%
18.8%
EBITDA is earnings before interest, taxes, depreciation and amortization. Management
believes that most of its shareholders, creditors, other stakeholders and analysts prefer to
analyze the company’s results based on this performance measure.
Management’s Discussion
& Analysis
This has been a difficult year for the Newspaper segment. Each of
the operating units felt the impact of the softening of advertising
revenues that began in the last quarter of 2000 and continued
throughout the year. The tragic events of September 11th
exacerbated the market challenges.
The economic situation in Southern Ontario strongly impacts this
segment. The Conference Board of Canada reported an increase
in Canadian consumer confidence in December of 2001 and is
expecting the U.S. economy to rebound in the second half of
2002. Both of these factors could result in an improvement in the
Southern Ontario economy during 2002.
The strong competition in the Toronto newspaper market
continued throughout 2001, but with some changes late in the
year. The National Post’s strategy appears to have been altered
with CanWest’s acquisition of Hollinger’s interests in September.
Under CanWest’s ownership, the National Post has laid off 130
employees, eliminated sections and features like Saturday Night,
and reduced the number of bulk copies being distributed. Bell
Globemedia continues to compete strongly in the national market
with the Globe and Mail, while integrating its various media
properties together. While there is some indication that some
stability may be coming to the market place, it is anticipated that
the advertising market will continue to be a challenge in 2002.
In addition to the economy, newsprint prices directly impact the
results for the Newspaper segment. As the economy has
softened, newsprint prices have been rolled back. The spring
2001 price increase was fully rescinded by mid year and
newsprint prices have declined every month since. The current
expectation is that newsprint prices will be stable for the
upcoming year. The Newspaper segment consumes approximately
150,000 tonnes of newsprint each year. If current pricing holds,
the Newspaper segment will realize savings of $13 million over
2001 costs.
During 2001, this segment undertook various cost reduction
initiatives. The Toronto Star completed the outsourcing of its
home delivery distribution and the restructuring of its interactive
operations, Sing Tao restructured its workforce, and both
Metroland and the Regional Dailies reduced staff. In total, 254
positions were eliminated for annual estimated savings of $12
million. In 2002, the Newspaper segment will reap most of the
full year benefit of these initiatives.
The Toronto Star’s collective bargaining agreements all expired at
the end of 2001. Contract negotiations began at the end of
November with proposals being exchanged with the Joint Council
of Unions. Negotiations are continuing with The Star’s unions.
The Regional Dailies have 12 agreements covering approximately
700 employees. The largest two agreements, covering 300
employees, will expire in 2003. An agreement covering 100
advertising employees in Hamilton will expire in December 2002.
Metroland has four agreements covering 190 employees that will
expire in 2003 and 2004.
R.O.P advertising revenues of $307 million were 8% lower than
last year due to a 13% linage decline. The linage decline can be
attributed to economic conditions impacting the key advertising
categories of employment (down 38%), retail and national (both
down 11%). The World Trade Center tragedy on September 11th
caused a dramatic decline in the travel category. A portion of the
linage decline has been offset by a 6% realized increase in line
rates.
The Star’s circulation faced a number of challenges during the
year including the outsourcing of home delivery and the three-
week strike by its carrier force. Circulation revenues were down $6
million to $60 million, while net paid circulation volumes have
been maintained.
In early 2002, The Star entered into an agreement with CanWest
Global Communications to print the entire southern Ontario
edition of the National Post at the Vaughan Press Centre. The
Hamilton Spectator had previously printed half of the National
Post. This contract provides The Star with an opportunity to utilize
printing capacity at the Vaughan facility.
In 2002, The Star will continue to emphasize its market
dominance in Toronto. The need for advertisers to be in The Star
– “you can’t buy around it” – will continue, while some
competitors make changes that reduce their market reach. The
Star will continue its efforts to maintain circulation levels. The
successful completion of outsourcing in 2001 will provide stability
in circulation performance in 2002. The plan is for reduced bulk
sales in 2002, without significant decreases in total circulation.
The Newspaper segment is expected to show some recovery in
operating profits in 2002, realizing on the full year benefit of cost
reductions undertaken in 2001 as well as revenue growth. The
revenue growth is, however, contingent on a recovery in the
Southern Ontario economy by at least the middle of the year.
Daily Newspapers – Regional Dailies
At the Regional Dailies, revenues in 2001 were $130 million,
down from $136 million in 2000. Operating costs increased
slightly, resulting in operating profits of $13 million for the year
compared with $22 million in 2000.
Daily Newspapers – The Toronto Star
Operating profit at The Toronto Star declined to $5 million in
2001, driven by a 10% decrease in revenues. An 8% reduction in
newsprint consumption helped to partially offset higher newsprint
prices resulting in variable costs being 3% higher. Labour and
other costs were down 7% from 2000 reflecting in part a partial
year’s savings from the outsourcing of circulation.
Operating profit at The Hamilton Spectator was primarily affected
by declining advertising revenue. Lower advertising demand in the
automotive and telecommunication categories, as well as
weakening local retail and classified revenue after September
11th were key factors in a decline in R.O.P. advertising revenue.
Lower newsprint costs and cost reduction initiatives undertaken in
Annual Report 2001 19
Management’s Discussion
& Analysis
late 2001 are expected to generate annual savings of $1 million
beginning in 2002, which will offset some of the contribution lost
from the departure of the National Post commercial printing
contract. The challenge for The Spectator in 2002 will be to grow
revenue in an uncertain economy.
The Grand River Valley Newspapers (The Record, The Cambridge
Reporter and the Guelph Mercury) had a difficult year as their
economies were also affected by the downturn. The Record was
printed at The Star’s Vaughan facility for all of 2001. This allowed
it to leverage its colour capacity to help increase its average line
rates. Despite a 13% drop in linage, advertising revenues at The
Record declined only 6%. The Grand River Valley Newspapers saw
significant changes in management during 2001. With most of
the changes complete by the end of the year, these papers are
ready to tackle their growth plans for 2002. As part of those
plans, The Record will move to morning delivery and The Reporter
will convert from a daily to a community-based twice weekly
paper. These initiatives are expected to result in the newspapers
better serving their markets.
Community Newspapers
The Community Newspapers are those that focus on a specific
community or market segment. They include the 68 community
newspapers published by Metroland and the publications of
MetroToday, Sing Tao Daily, eye Weekly and Real Estate News.
Revenues for the Community Newspapers were $291 million in
2001, up $8 million from 2000. This division reported operating
income of $46 million in 2001 compared to $56 million in 2000.
Metroland felt the impact of the economic slow-down in 2001.
Earnings were $51 million, which were $7 million lower than the
record profits of $58 million reported in 2000. Revenues reached
$265 million, up $7 million from the previous year.
Metroland’s R.O.P. linage dropped only slightly year over year (1%)
but was down 4% after backing out the effect of acquisitions
made in mid 2000. Most of the linage decline occurred in the
second half of the year. Average line rates increased by almost
2% during 2001. The distribution business remained strong with
1.8 billion pieces distributed in 2001, up 9% over 2000. The
increase in volume was mainly due to the business transferred as
a result of the closure of The Toronto Star’s Total Market Coverage
product.
Metroland’s 68 newspapers currently publish 114 editions. Their
unique business model focuses on local markets, which allows
the company to experiment with new editions, sections and
related products with a minimum amount of investment and
limited risk. Metroland has responded to the economic challenges
of the past year by decreasing staff, eliminating some editions
and introducing new special sections.
Metroland is expected to weather the current economic
difficulties by continuing to control costs and create new sales
initiatives. Metroland is positioned to take full advantage of an
economic turnaround.
Annual Report 2001 20
During the first six months of 2001, Torstar published GTA Today,
a free commuter newspaper in Toronto. In the second quarter,
Torstar and Metro International S.A. (publisher of Metro, a
competing publication) reached an agreement to jointly publish
MetroToday. The first issue of MetroToday was published on July
9, 2001. With a 182,000 copy press run, MetroToday is the
second largest circulation newspaper in Toronto (second only to
The Toronto Star). MetroToday’s only remaining direct competitor,
FYI (published by Quebecor) ceased publication in mid October.
The merging of operations resulted in lower operating losses in
the latter half of 2001 and the $5 million in start-up losses of
Today will be saved in 2002.
Torstar owns approximately 50% of the Sing Tao Canadian Media
Group, a leading Chinese language publisher. A six-week strike
and the subsequent first contract settlement with Sing Tao’s
union in the spring of 2001 impacted the Sing Tao operations in
Toronto. These events and a weak economy resulted in a 40%
decline in operating profits. Sing Tao ceased publication of
Vancouver’s Taiwan Daily in July and has just completed a
restructuring and streamlining plan. With these changes in place,
Sing Tao should return to historical profit levels in 2002.
BOOK PUBLISHING
Harlequin Enterprises Limited is a leading publisher of women’s
fiction, both series romance and single title. It also operates a
Creativity Division which produces craft kits and a children’s
direct-to-home continuity program. In 2001, Harlequin sold 150
million books in 26 languages in 89 international markets. The
book business is comprised of three divisions: North America
Direct Marketing; North America Retail Marketing; and Overseas.
Harlequin publishes globally under the three main imprints of
Harlequin, Silhouette and MIRA. While Harlequin continues to
dominate the series romance fiction market, its mainstream
single title women’s fiction program has grown significantly. This
program now accounts for approximately one-half of North
American Retail revenues with expansion plans for Overseas in
2002.
Details (in thousands of dollars) are set out in the table below:
Operating revenue
Operating profit
Depreciation and
amortization of intangibles
Segment EBITDA
Return on revenue:
• operating profit
• segment EBITDA
Books sold (thousands)
• North America
• Overseas
2001
2000
$582,573
$579,169
107,536
102,300
6,618
6,384
$114,154
$108,684
18.5%
19.6%
77,000
72,900
17.7%
18.8%
76,000
76,500
149,900
152,500
Management’s Discussion
& Analysis
Operating revenue increased by $3 million in 2001 to $583
million. North America revenues were up $5 million, with 2001
revenues reaching $387 million while Overseas revenues of $196
million were slightly down from 2000. Within North America,
Retail Marketing revenues were up 17% while Direct Marketing
and Creativity revenues were down 7% and 2%, respectively.
appear to be returning to expected levels for its most recent main
mailing.
In addition to the uncertainty caused by disruptions in mail
service, postage rates are expected to increase during 2002,
putting cost pressure on the direct mail business.
2001 operating profits were $108 million up $5 million from
2000. North American results were up $6 million due to higher
Retail earnings ($10 million), the closure of the Newsletter
business ($6 million) and favourable foreign exchange rates ($4
million), offset by lower earnings in Direct ($7 million) and
increased operating losses and development spending in the
Creativity Division ($7 million). Overseas results were down $1
million from 2000 due in part to unfavourable foreign exchange
rates.
In 2002, Harlequin will focus on aggressively growing its single
title business globally while maintaining strong results in the core
series business.
Total 2002 development spending is expected to be $3 million,
$7 million lower than the $10 million spent in 2001. This reflects
the decisions to stop the non-book adult continuity programs in
the Creativity Division and development spending in China.
North America Direct Marketing
North America Direct Marketing results declined $7 million due to
higher postage costs, a shift of business to eHarlequin and a
decline in member intake. This decline was partially offset by a $2
million increase from favourable foreign exchange rates.
North America Direct Marketing volumes continued their
downward trend during 2001. During the year, a 20% decline in
mail quantities and changes to the marketing program produced
lower customer response rates but stronger performing customers
with a better payment and retention profile. The lower mail
quantities result in lower advertising and promotion costs which
improve the contribution from each member.
The decline in mail quantities is partially driven by the reduction
in the availability of mailing lists. This has been an ongoing
problem since 1999 as the direct mail industry began to adjust
its marketing approach and reduce mail volumes. Harlequin has
responded to this trend, in part, by developing more specialized
mailing lists and increasing promotions to existing members.
During 2001, Harlequin introduced its “Diamond Club” loyalty
program on a limited basis. This program resulted in improved
retention of longer-term members. This program will be provided
to 250,000 members in 2002.
The U.S. mail disruptions in the fall of 2001 have created
uncertainty in the direct mail industry in North America. The U.S.
Direct Marketing Association has been working hard to educate
both the public and their members on how to identify reputable
companies and their mailings. Harlequin experienced a drop in
response rates for several small mailings during the fall, but rates
In early 2002, North America Direct Marketing and eHarlequin
were combined to form the North America Direct-To-Consumer
Group. This move recognizes the integration of the Internet with
the traditional direct marketing business. The combination of the
two groups will allow for a single focus on the customer while
providing an alternative source of new members.
In 2002, the North America Direct-To-Consumer Group will focus
on building volume through new product introductions, providing
choice and convenience to consumers, loyalty programs, creating
and leveraging consumer insight and delivering exceptional
consumer experiences on-line.
North America Retail Marketing
The North America Retail Marketing Division continues to be the
largest profit contributor to the Book Publishing segment. In 2001,
price and volume increases arising from the growing single title
business produced a profit improvement of $10 million over 2000.
Favourable foreign exchange rates provided a further $2 million of
profit improvement.
During 2001, Harlequin’s share of the market for single titles
continued to grow with Harlequin books appearing on many influential
best-seller lists. Six titles appeared on the New York Times best seller
list for a total of 29 weeks, while 59 titles appeared for a record 186
weeks on the USA Today list. Included in the single title products are
the new Red Dress Ink titles that were introduced in 2001.
Harlequin’s single title products are higher-priced and sell better than
series products, which produces higher contribution. However, they
can be more variable in their sales performance.
Harlequin’s growth in single titles is complemented by its
continued commitment to its core series product. Harlequin Blaze
was successfully introduced in 2001 as a new series. Harlequin
Blaze is directed to the 18 to 34-year-old segment of the market.
This is an important market segment where Harlequin has the
opportunity to increase its readership.
In 2002, North American Retail will continue to expand its single
title program and develop up to five new programs for the series
business.
Overseas
Overseas results for 2001 were slightly lower than in 2000. The
U.K., Australia and Poland all showed improvements in operating
results, but this was offset by declines in Japan and Spain.
The single title program was launched in Japan during 2001 with
20 MIRA titles being published in September. The program started
its regular publishing schedule of four new titles bi-monthly in
November. While it is still early, initial sales results are positive.
Annual Report 2001 21
Management’s Discussion
& Analysis
For 2002, the Overseas division will look to grow its core series
business through changes in the editorial line-up and pricing.
However, the more significant growth potential is from single
titles. In 2001, single title revenues were just 13% of Overseas
revenues compared with almost 50% of North America Retail
revenues. The U.K. and Australia both have single title programs
that are performing well and other countries continue to add
single titles to their publishing programs.
Details (in thousands of dollars) are set out in the table below.
Operating revenue
Operating losses before
portfolio transactions
Realized portfolio gains
(net of losses & write-downs)
2001
2000
$40,128
$22,839
(17,988)
(31,470)
,556
(17,432)
2,539
26,015
(5,455)
2,398
($14,893)
($3,057)
Creativity Division
This division includes the results of Learning Adventures and
Curiosity Kits along with the non-book adult continuity programs
developed by Harlequin.
Operating losses
Depreciation
Segment EBITDA
The Creativity Division had a disappointing year with lower sales at
Curiosity Kits and poor results from the non-book adult continuity
programs. Operating losses were $9 million in 2001 compared
with a loss of $2 million in 2000. Harlequin has made the
decision to discontinue its non-book adult continuity programs
although it will continue to fulfill existing programs during 2002.
This will result in a $6 million profit improvement in 2002.
Learning Adventures is a direct-to-home continuity program of
children’s education products. Despite a revenue decline of 6%
and postal rate increases, Learning Adventures was able to grow
its operating income by 21% to $3 million through savings in
product costs, promotion and new product development. Learning
Adventures’ major challenge is to continue to increase its
customer base. In 2002, Learning Adventures will explore two
new sources of membership (Internet and partnerships) with the
goal to provide an increase in membership levels and a platform
for future growth. During 2001, 14% of its new members were
acquired through the Internet.
Curiosity Kits creates hands-on activities for adults and children.
Operating results declined from a profit of $2 million in 2000 to
a loss of $2 million in 2001. A significant research and analysis
effort launched midway through 2001 has greatly improved
Curiosity Kit’s understanding of key market success factors,
competitor strengths and weaknesses and its own internal
capabilities. This process should position the business to rebound
in 2002.
INTERACTIVE MEDIA
The Interactive Media segment includes the Newspapers’
eContent operations, eHarlequin, Torstar’s television ventures and
Torstar’s portfolio of Internet-related investments.
In 2001, Interactive Media lost $17 million compared with a loss
of $5 million in 2000. The operating losses in the web-based
businesses have declined by 43% from $31 million in 2000 to
$18 million in 2001. The overall loss for the segment increased
as the net gains realized on the portfolio investments were only
$1 million in 2001 compared with $26 million in 2000. The gains
on the portfolio investments are net of write-downs on
investments that have had an other than temporary decline in
value.
Annual Report 2001 22
Newspaper eContent
The Newspapers’ eContent operations include thestar.com,
waymoresports.com, newinhomes.com, Torstar Syndication
Services, and the jointly owned operations of workopolis.com and
toronto.com. Revenues continue to grow in these businesses and
operating losses are declining. Total revenues were $16 million in
2001 compared with $7 million in 2000 while operating losses
decreased from $15 million in 2000 to $9 million in 2001.
Torstar Syndication Services is a new division that pulled together
several existing operations in order to sell Torstar’s content assets
to other publishers, companies and consumers. In late 2001, the
Pages of the Past product was launched on a trial basis, allowing
over 100 years of Toronto Star published pages to be available for
sale for the first time in a fully searchable internet database.
Workopolis, which is owned 50% by Torstar, has become the pre-
eminent integrated e-cruiting solution in Canada. Product
enhancements were made during the year along with the
acquisition of Campus Worklink, a recruitment site connecting
185 Canadian colleges and universities. Torstar’s share of
Workopolis’ operating loss was $1 million in 2001 compared with
a loss of $3 million in 2000. Workopolis is anticipated to be
slightly profitable in 2002. Page views averaged 38 million per
month in 2001, up 75% over the average of 21 million per month
in 2000. Over 640,000 resumes were posted in December 2001
compared with 312,000 in December 2000.
eHarlequin
eHarlequin has operated for almost two years since its launch in
February 2000. Revenues exceeded $13 million in 2001, up $7
million from 2000 and the site is generating about nine million
page views per month. According to Bizrate.com, which collects
direct feedback from millions of customers immediately after
online purchases, eHarlequin ranks #2 among all online
booksellers in North America. eHarlequin reached its target of 1
million members in 2001. By the end of the year, approximately
3% of the 650,000 active members are purchasing on-line. The
challenge going forward is to grow both the active member base
and the percentage of members buying on a regular basis.
Management’s Discussion
& Analysis
The North American developed eHarlequin web site concept was
used in 2001 to launch local sites in Australia, France, Germany,
Holland, Italy, Japan, Spain and the U.K. In addition to being cost-
effective, this also ensures that all of Harlequin’s sites have a
consistent look, feel and functionality.
Television
Toronto Star Television revenues increased in 2001 to $10 million
from $8 million in 2000 but cost increases, largely attributable to
higher cable access fees, resulted in a decrease in operating
profits from $2 million to $500,000.
In late 2000, Torstar applied to the CRTC for three new
conventional over-the-air television licenses in Toronto, Hamilton
and Kitchener-Waterloo. Torstar’s approach, called Hometown
Television, will take local television beyond the early evening news
program. It will be overwhelmingly Canadian with a minimum of
85% Canadian content at all times. Hometown Television will
provide local advertisers with the opportunity to purchase rate-
effective local television advertising time.
INTEREST EXPENSE
Interest expense decreased by $12 million in 2001 to $29
million. This 29% decrease reflects lower interest rates as well as
reduced debt levels throughout the year.
Torstar’s effective borrowing rate for 2001 was 5.1%, down from
the 6.5% cost of funds for 2000. Torstar has entered into interest
rate swap agreements that fix the interest rate on approximately
60% of its debt at 2.5% throughout most of 2002. This program
will offset the effect of any market increase in interest rates during
2002.
FOREIGN EXCHANGE
Harlequin’s international operations provide Torstar with 40% of
its operating revenues. Fluctuations in exchange rates have an
impact on the profitability of the company. The CDN$/US$
exchange rate is the most significant relationship for Torstar. In
order to manage the currency risk on the majority of its estimated
future U.S. dollar cash flows, the company has entered into
forward foreign exchange and currency options contracts
subsequent to year end to establish the following exchange rates:
If its application is successful, Torstar will be able to bring its
newspaper archives and community resources to the television
stations while maintaining editorial independence. These
television licenses will allow Torstar to build convergence rather
than buying it in order to compete on a level playing field with its
competitors. The CRTC held public hearings on the applications in
Hamilton for two weeks beginning December 3rd. A decision is
not expected until April of 2002.
Year
2002
2003
2004
Amount
(U.S. $000’s)
$70,000
$70,000
$70,000
Exchange Rate Range
1.55
1.56 – 1.67
1.56 – 1.66
Internet-Related Portfolio Investments
During 2001, Torstar realized on most of its publicly traded
portfolio. A gain was realized on the shares held in DigitalThink
offsetting losses on the positions in ivillage (women.com) and
LearningStar (smarterkids). The carrying value of Torstar’s
remaining publicly traded investment approximates its current
market value and is expected to be realized during 2002.
Torstar has written down several of its investments in non-publicly
traded companies to their expected realizable values. The
positions will be realized if opportunities arise. At this time, Torstar
does not anticipate making any significant new Internet related
investments in 2002.
ASSOCIATED BUSINESS
Torstar owned approximately 37% of ITI Education Corporation. ITI
was in the business of providing postgraduate information
technology-related educational
it declared
bankruptcy in August 2001.
training until
Torstar’s share of ITI’s operating losses amounted to $8 million for
the seven months prior to its closure. During 2001, Torstar wrote
off its investment in ITI resulting in a loss of $29 million, which is
included in Unusual items.
The total after tax loss from the ITI investment was 33 cents per
share in 2001 and seven cents in 2000.
These rates are favourable compared to the average exchange
rate of 1.54 applicable to 2001 U.S. dollar cash flows. Further
details are contained in Note 12 of Torstar’s consolidated
financial statements.
ACCOUNTING CHANGES
The company has adopted the CICA’s new accounting standards
for earnings per share effective January 1, 2001. This new
standard has been applied retroactively.
The company will adopt the CICA’s new accounting standard for
Business Combinations and Goodwill effective January 1, 2002.
This standard will be applied prospectively with no goodwill
impairment anticipated on its initial application. For 2002
onward, the company will cease to amortize its goodwill acquired
on acquisitions. As a result, net income will increase by
approximately $18 million or $0.24 per share in 2002. Goodwill
will be tested annually for impairment under this new accounting
standard.
The company will also adopt the CICA’s new accounting standard
for Stock-Based Compensation effective January 1, 2002. This
new standard will be applied for all options granted under the
share option plan on or after that date and to the employee share
purchase plan starting with the 2002 program. Torstar has
chosen to use the intrinsic method for options granted to
employees. As a result, note disclosure will be provided of
earnings per share had the fair value method been selected.
Annual Report 2001 23
Management’s Discussion
& Analysis
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents net of bank overdraft increased by
$33 million to $63 million during 2001. Continuing operating
activities provided cash of $92 million during the year while the
operating activities of discontinued operations used cash of $41
million.
Investing activities by continuing operations during 2001 included
$17 million for acquisitions and $37 million for capital
expenditures. Discontinued operations provided $118 million of
cash from the completed sale transactions.
Cash was used in financing activities for a net debt repayment of
$41 million and dividends of $42 million. The exercise of stock
options and other items provided cash of $5 million.
Capital expenditures in 2002 will increase to approximately $47
million versus the $37 million spent on continuing operations in
2001. Major projects include the ongoing investment in an
integrated software system for advertising, production and billing
for The Toronto Star, colour extensions for the presses in Hamilton
and the first year’s portion of the three-year, $32 million press
replacement for Metroland. An additional $20 million will be
spent on capital additions if the CRTC approves Torstar’s television
license applications.
Approximately 24% of Torstar debt is denominated in U.S. dollars.
This is consistent with the company’s policy of matching the
denomination of debt, wherever possible, to the currency of
operating assets. The level of U.S. dollar debt has decreased
during 2001, reflecting the sale of the CSEP companies which
were based in the U.S. The matching of U.S. dollar debt with U.S.
dollar assets provides Torstar with a hedge against foreign
exchange movements.
Torstar renegotiated its long-term credit facilities in early 2002.
The facilities are comprised of a $200 million five-year, revolving
loan and a $250 million 364-day revolving loan. The $250 million
loan can be extended for up to four additional 364-day terms with
the lenders’ consent or can be converted to a 364-day term loan
at the company’s option. The renegotiation of these facilities
extends Torstar’s ability to borrow and is used to support its
commercial paper borrowing and medium-term note programs.
At December 31, 2001, the company had cash and cash
equivalents net of bank overdraft of $63 million and unused credit
facilities of $186 million. Cash balances, operating cash flow,
existing credit facilities and the borrowing capacity of the
company are considered to be adequate to cover forecasted
financing requirements.
Quarterly Information
2001 Quarter Ended
(Thousands of $ except per share amounts)
March 31
June 30
Sept. 30
Dec. 31
Revenue
$348,588 $357,495 $348,632 $367,948
Income (loss) from
continuing operations
(2,681)
1,909
(7,604)
11,356
Net income (loss)
($92,681)
$1,909
($7,604) $11,356
Per Class A voting and Class B non-voting share
Income (loss) from
continuing operations
• basic
Income (loss) from
continuing operations
• diluted
Net income (loss)
• basic
Net income (loss)
• diluted
($0.04)
$0.03
($0.10)
$0.15
($0.04)
$0.03
($0.10)
$0.15
($1.24)
$0.03
($0.10)
$0.15
($1.24)
$0.03
($0.10)
$0.15
2000 Quarter Ended
(Thousands of $ except per share amounts)
March 31
June 30
Sept. 30
Dec. 31
Revenue
$330,375 $374,464 $357,573 $382,662
Income (loss) from
continuing operations
17,185
21,566
49,701
(4,737)
Net income (loss)
$15,865
$23,551
$51,983 ($55,274)
Per Class A voting and Class B non-voting share
Income (loss) from
continuing operations
• basic
Income (loss) from
continuing operations
• diluted
Net income (loss)
• basic
Net income (loss)
• diluted
$0.23
$0.29
$0.67
($0.06)
$0.23
$0.29
$0.66
($0.06)
$0.21
$0.32
$0.69
($0.74)
$0.21
$0.31
$0.69
($0.74)
Annual Report 2001 24
Management’s Discussion
& Analysis
REPORTING CHANGE – 2002
Torstar’s Interactive operations have evolved into complementary
businesses, very closely linked to the core newspaper and book
publishing businesses. The “dot.coms” have become part of our
“bricks and clicks” business strategy. This has changed how
management views and operates the business. In early 2002, the
Interactive operating activities were merged into the traditional
businesses. As a result of these changes, Torstar will begin to
report two operating segments: Newspapers and Book Publishing
effective with the first quarter of 2002.
The Newspaper segment will include the print and interactive
operations of The Toronto Star
thestar.com,
waymoresports.com; Torstar Syndication Services; workopolis.com;
and toronto.com); The Hamilton Spectator; the Grand River Valley
Newspapers (The Record, the Guelph Mercury and The Cambridge
Reporter); the Community Newspapers (Metroland, MetroToday,
Sing Tao, eye, and Real Estate News); and Toronto Star Television.
(including
The Book Publishing Segment will include the results of
Harlequin’s book publishing (the newly formed North America
Direct-to-Consumer Group, North America Retail Marketing and
Overseas) and its Creativity Division.
The gains and losses on Torstar’s portfolio investments in other
interactive business will be reported as unusual items as they
occur. Torstar will apply this change in financial statement
presentation
retroactively with prior period comparative
information being restated.
The pro forma restated quarterly information for 2001 is shown in
the opposite chart.
Quarterly Information
2001 Restated Quarter Ended
(Thousands of $ except per share amounts)
March 31
June 30
Sept. 30
Dec. 31
Operating revenue
Newspapers
$202,474 $216,240 $190,512 $216,539
Book publishing
146,114
141,255
158,120
151,409
$348,588 $357,495 $348,632 $367,948
Operating profit
Newspapers
$8,986
$15,840
$1,782
$27,692
Book publishing
26,513
21,486
28,308
23,336
Corporate
(2,665)
(2,323)
(2,472)
(3,313)
Interest
(9,109)
(8,178)
(6,946)
(4,910)
32,834
35,003
27,618
47,715
Foreign exchange
Unusual items
Income (loss)
before taxes
(19,409)
(6,214)
(25,539)
(19,382)
392
4,316
20,611
(4,867)
23,815
Income and other taxes
(1,500)
(7,300)
1,800
(7,900)
Income (loss) before
loss of associated
business
Loss of associated
business
Income (loss) from
continuing operations
before amortization
of goodwill
Amortization of goodwill
(net of tax)
Income (loss) from
continuing operations
2,816
13,311
(3,067)
15,915
(1,028)
(6,939)
(55)
1,788
6,372
(3,122)
15,915
(4,469)
(4,463)
(4,482)
(4,559)
(2,681)
1,909
(7,604)
11,356
Discontinued operations
(90,000)
Net income (loss)
($92,681)
$1,909
($7,604) $11,356
Per Class A and Class B share
Income (loss) from
continuing operations
Net income (loss)
($0.04)
($1.24)
$0.03
$0.03
($0.10)
($0.10)
$0.15
$0.15
Annual Report 2001 25
Consolidated Financial
Statements
M A N A G E M E N T ’ S R E P O R T O N R E S P O N S I B I L I T Y F O R F I N A N C I A L R E P O R T I N G
Management is responsible for preparation of the consolidated financial statements, notes hereto, and other financial
information contained in this annual report. The financial statements have been prepared in conformity with Canadian
generally accepted accounting principles using the best estimates and judgments of management, where appropriate.
Information presented elsewhere in this annual report is consistent with that in the financial statements.
Management is also responsible for maintaining a system of internal control designed to provide reasonable assurance that
assets are safeguarded and that accounting systems provide timely, accurate and reliable information.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and
internal control. The Board is assisted in exercising its responsibilities by the Audit Committee of the Board. The Committee
meets quarterly with management and the internal and external auditors, and separately with the internal and external
auditors, to satisfy itself that management’s responsibilities are properly discharged, and to discuss accounting and auditing
matters. The Committee reviews the consolidated financial statements and recommends approval of the consolidated
financial statements to the Board.
The internal and external auditors have full and unrestricted access to the Audit Committee to discuss their audits and their
related findings as to the integrity of the financial reporting process.
David A. Galloway,
President and Chief Executive Officer
February 25, 2002
Robert J. Steacy,
Vice-President, Finance
A U D I T O R S ’ R E P O R T T O T H E S H A R E H O L D E R S O F T O R S T A R C O R P O R A T I O N
We have audited the consolidated balance sheets of Torstar Corporation as at December 31, 2001 and 2000 and the
consolidated statements of income, retained earnings and cash flow for the years then ended. These financial statements
are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that
we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
company as at December 31, 2001 and 2000 and the results of its operations and its cash flows for the years then ended
in accordance with Canadian generally accepted accounting principles.
Toronto, Ontario
February 25, 2002
Ernst & Young LLP
Chartered Accountants
Annual Report 2001 26
Torstar Corporation
(Incorporated under the laws of Ontario)
Consolidated Balance Sheets
December 31, 2001 and 2000
(thousands of dollars)
Assets
Current:
Cash and cash equivalents
Receivables (note 2)
Inventories
Prepaid expenses
Prepaid and recoverable income taxes
Future income tax assets (note 9)
Discontinued operations (note 13)
Total current assets
Property, plant and equipment (net) (note 3)
Investment in associated business (note 4)
Goodwill (net)
Other assets (note 5)
Future income tax assets (note 9)
Discontinued operations (note 13)
Total assets
Liabilities and Shareholders’ Equity
Current:
Bank overdraft
Accounts payable and accrued liabilities
Income taxes payable
Current portion of long-term debt (note 6)
Discontinued operations (note 13)
Total current liabilities
Long-term debt (note 6)
Other liabilities (note 7)
Future income tax liabilities (note 9)
Discontinued operations (note 13)
Shareholders’ equity:
Share capital (note 8)
Retained earnings
Foreign currency translation adjustment
Total liabilities and shareholders’ equity
(See accompanying notes)
O N B E H A L F O F T H E B O A R D
John R. Evans
Director
2001
2000
$64,755
210,063
45,699
70,925
27,844
26,212
445,498
410,427
447,095
95,871
91,263
$39,469
220,806
44,438
67,331
5,044
32,647
90,206
499,941
425,380
29,091
456,730
113,466
80,752
150,404
$1,490,154
$1,755,764
$1,901
237,300
34,051
55,881
329,133
508,848
76,126
41,649
295,371
240,975
(1,948)
534,398
$1,490,154
$9,759
238,656
43,792
100,000
48,540
440,747
494,477
78,635
65,147
16,757
288,316
371,641
44
660,001
$1,755,764
Edward L. Donegan
Director
Annual Report 2001 27
Torstar Corporation
Consolidated Statements of Income
Years ended December 31, 2001 and 2000
(thousands of dollars)
Operating revenue
Operating profit
Newspapers
Book publishing
Interactive media
Corporate
Interest (note 6(h))
Foreign exchange
Unusual items (note 14)
Income before taxes
Income and other taxes (note 9)
Income before loss of associated business
Loss of associated business (note 4)
Income from continuing operations before
amortization of goodwill
Amortization of goodwill (net of tax) (note 9)
Income from continuing operations
Discontinued operations (note 13)
Net income (loss)
Earnings (loss) per Class A and Class B share (note 8(f))
Income from continuing operations - Basic
Income from continuing operations - Diluted
Net income (loss) - Basic
Net income (loss) - Diluted
(See accompanying notes)
Consolidated Statements of Retained Earnings
Years ended December 31, 2001 and 2000
(thousands of dollars)
Retained earnings, beginning of year
Net income (loss)
Deduct:
Dividends
Premium on the purchase of shares
for cancellation (note 8(d))
Retained earnings, end of year
(See accompanying notes)
Annual Report 2001 28
2001
2000
$1,422,663
$1,445,074
$64,395
107,536
(17,432)
(10,773)
143,726
(29,143)
392
(71,100)
43,875
(14,900)
28,975
(8,022)
20,953
(17,973)
2,980
(90,000)
($87,020)
$0.04
$0.04
($1.16)
($1.15)
2001
$371,641
(87,020)
284,621
43,646
$111,815
102,300
(5,455)
(9,804)
198,856
(41,283)
(1,395)
(1,600)
154,578
(47,200)
107,378
(6,202)
101,176
(17,461)
83,715
(47,590)
$36,125
$1.12
$1.11
$0.48
$0.48
2000
$381,451
36,125
417,576
43,334
2,601
$240,975
$371,641
Torstar Corporation
Consolidated Statements of Cash Flow
Years ended December 31, 2001 and 2000
(thousands of dollars)
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase in cash
Effect of exchange rate changes
Cash, beginning of year
Cash, end of year
Operating activities:
Income from continuing operations
Depreciation
Amortization
Future income taxes
Loss of associated business
Write-off of associated business
Other
Operating cash flow
Decrease (increase) in non-cash working capital
Discontinued operations (note 13)
Cash provided by operating activities
Investing activities:
Acquisitions (note 10)
Additions to property, plant and equipment
Proceeds on sale of land and building
Other
Discontinued operations (note 13)
Cash provided by (used in) investing activities
Financing activities:
Issuance of long-term debt
Repayment of long-term debt
Dividends
Purchase of shares for cancellation (note 8(d))
Exercise of stock options (note 8(c))
Other
Cash used in financing activities
Cash represented by:
Cash and cash equivalents
Bank overdraft
Operating cash flow per share (note 8(f))
Basic
Diluted
(See accompanying notes)
2001
2000
$50,419
60,479
(78,291)
32,607
537
29,710
$62,854
$2,980
54,653
21,721
(20,729)
8,022
29,300
13,386
109,333
(17,622)
(41,292)
$50,419
($17,060)
(36,588)
(3,639)
117,766
$60,479
$118,256
(159,712)
(42,183)
2,217
3,131
($78,291)
$64,755
(1,901)
$62,854
$1.45
$1.44
$175,501
(61,140)
(104,707)
9,654
(376)
20,432
$29,710
$83,715
53,831
21,237
1,088
6,202
(475)
165,598
19,204
(9,301)
$175,501
($36,468)
(54,522)
45,018
7,994
(23,162)
($61,140)
$70,641
(135,939)
(43,104)
(3,562)
5,108
2,149
($104,707)
$39,469
(9,759)
$29,710
$2.22
$2.20
Annual Report 2001 29
Torstar Corporation
Notes to Consolidated Financial Statements
December 31, 2001 and 2000
(Tabular amounts in thousands of dollars)
1. Accounting policies
The consolidated financial statements are prepared in accordance
with Canadian generally accepted accounting principles. The
following is a summary of significant accounting policies.
(a) Principles of consolidation
The consolidated financial statements include the accounts of
the company and all its subsidiaries. The major subsidiaries are:
Toronto Star Newspapers Limited; Harlequin Enterprises Limited
(“Harlequin”); Metroland Printing, Publishing & Distributing Ltd.
(“Metroland”), and TDNG Inc. (Torstar Daily Newspaper Group).
(b) Foreign currency translation
Assets and liabilities denominated in foreign currencies have
been translated to Canadian dollars primarily at exchange rates
prevailing at the year end. Revenues and expenses are translated
at average rates for the year. Translation exchange gains or
losses relating to self-sustaining foreign operations are deferred
and included in shareholders’ equity as foreign currency
translation adjustments. A proportionate amount of these
deferred gains or losses are recognized in income when there is
a reduction in the company’s net investment in the foreign
operation.
Long-term U.S. dollar denominated debt has been designated as
a hedge against U.S. dollar assets. As a result, unrealized
translation exchange gains or losses are recognized during the
period rather than deferred and amortized.
(c) Derivative financial instruments
The company manages its exposure to currency fluctuations,
primarily U.S. dollars, through the use of derivative financial
instruments. Foreign exchange contracts and options to sell U.S.
dollars have been designated as hedges against future net U.S.
dollar cash flows from operating activities. Gains and losses on
these instruments are unrecognized until realized.
The company uses interest rate swap contracts to manage
interest rate risks. Payments and receipts under interest rate
swap contracts are recognized as adjustments to interest
expense on an accrual basis. Any resulting carrying amounts are
included in receivables in the case of favourable contracts and
accounts payable in the case of unfavourable contracts.
The company does not engage in trading or other speculative
activities with respect to derivative financial instruments.
The fair value of derivative financial instruments reflects the
estimated amount that the company would have been required
to pay if forced to settle all unfavourable outstanding contracts
or the amount that would be received if forced to settle all
favourable contracts at year end. The fair value represents a
point-in-time estimate that may not be relevant in predicting the
company’s future earnings or cash flows.
(d) Cash and cash equivalents
Cash and cash equivalents consists of cash in bank and short-
term investments with original maturities on acquisition of 90
days or less.
Annual Report 2001 30
(e) Receivables
Receivables are reduced by provisions for anticipated book
returns which are determined by reference to past experience
and expectations.
(f) Inventories
Inventories are valued at the lower of cost and net realizable
value.
(g) Property, plant and equipment
These assets are recorded at cost and depreciated over their
estimated useful lives. The rates and methods used for the major
depreciable assets are:
Buildings:
• straight-line over 25 years or 5% diminishing balance
Leasehold Improvements:
• straight-line over the life of the lease
Machinery and Equipment:
• straight-line over 10 to 20 years or 20% diminishing balance.
(h) Investment in associated business
The company’s 37% interest in ITI Education Corporation (“ITI”),
which was written off in 2001, was accounted for using the
equity method.
(i) Goodwill
Goodwill is amortized on a straight-line basis primarily over a
period of 40 years from the date of acquisition of operations.
The company assesses whether there has been an other than
temporary decline in the carrying value of goodwill by determining
whether the unamortized goodwill balance can be recovered
based on the undiscounted future cash flows of the operation.
(j) Other assets
The cost of a distribution services agreement is amortized on a
straight-line basis over the 10-year term of the agreement.
Interactive media investments are accounted for by the cost
method. Gains or losses on the disposal of these investments
are included in Interactive media operating profit.
(k) Employee future benefits
Details with respect to accounting for employee future benefits
are as follows:
(cid:1)
(cid:1)
(cid:1)
The cost and obligations of pensions and post employment
benefits earned by employees are actuarially determined
using the projected benefit method prorated on service and
management's best estimate of assumptions of future
investment returns for funded plans, salary changes,
retirement ages of employees and expected health care
costs.
For the purpose of calculating the expected return on plan
assets, those assets are valued at fair value.
The discount rate used for determining the benefit obligation
is the current interest rate at the balance sheet date on high
quality fixed income investments with maturities that match
the expected maturity of the obligations.
Torstar Corporation
(cid:1)
(cid:1)
Past service costs resulting from plan amendments are
amortized on a straight-line basis over the average
remaining service period of employees active at the date
of amendment.
The excess of the net actuarial gain (loss) over 10% of the
greater of the benefit obligation and the fair value of plan
assets is amortized over the average remaining service
period of active employees. The average remaining service
period of the active employees covered by the plans ranges
from 13 to 18 years.
Company pension contributions in excess of the amounts
expensed in the statements of income are recorded as accrued
benefit assets in other assets in the balance sheet. Liabilities
related to unfunded post employment benefits and an executive
retirement plan are included in other long-term liabilities.
3. Property, plant and equipment
2001
Land
Buildings and
leasehold improvements
Machinery and equipment
Total
2000
Land
Buildings and
leasehold improvements
Machinery and equipment
Total
Cost
Accumulated
Depreciation
Net
$11,333
$11,333
208,858
641,944
126,812
$82,046
272,282
369,662
$862,135 $451,708 $410,427
$11,333
$11,333
210,623
604,389
136,389
$74,234
277,658
326,731
$826,345 $400,965 $425,380
(l) Employee share purchase plans
Amounts paid by employees to purchase shares under an
executive share option plan (note 8(a)(iii)) and an employee
share purchase plan (note 8(b)) are credited to share capital.
No compensation expense is recognized for these plans when
stock or stock options are issued to employees.
4. Investment in associated business
The company’s investment in ITI was written off during 2001 as a
result of ITI’s declaration of bankruptcy in August 2001. The $29.3
million write-off has been included in unusual items (note 14). The
Statement of Income for 2001 includes a loss of $8.0 million which
represents the company’s share of losses for the first seven months
of the year.
(m)Income taxes
The company follows the liability method of income tax
allocation.
5. Other assets
(n) Revenue recognition
Circulation and advertising revenue is recognized when the
publication is delivered. Revenue from the sale of books is
recognized when they are shipped and title has transferred, net
of provisions for estimated returns and direct marketing bad
debts which are primarily based on historic performance.
(o) Use of estimates
The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting year. Actual results could differ
from those estimates.
2. Receivables
The provisions for anticipated book returns deducted from
receivables at December 31, 2001 amounted to $117 million
(December 31, 2000 - $119 million).
Accrued benefit assets
Interactive media investments
Distribution Services Agreement
Other
6. Long-term debt
Commercial paper:
Cdn. dollar denominated
U.S. dollar denominated
Medium Term Notes:
Cdn. dollar denominated
U.S. dollar denominated
Less current portion of
long-term debt
2001
$70,981
13,081
10,630
1,179
$95,871
2000
$71,088
28,372
12,756
1,250
$113,466
2001
2000
$241,444
$241,444
185,000
138,285
323,285
564,729
$49,012
130,203
179,215
285,000
130,262
415,262
594,477
(55,881)
$508,848
(100,000)
$494,477
(a) Bank debt
(i) On January 31, 2002, the company entered into long-term
credit facilities comprising a $200 million, five-year revolving
loan and a $250 million, 364-day revolving loan. The $250
million loan can be extended for up to four additional 364-
day terms with the lenders’ consent or can be converted to
Annual Report 2001 31
Torstar Corporation
a 364-day term loan at the company’s option. Amounts may
be drawn in Canadian or U.S. dollars.
(ii) Amounts borrowed under the bank credit facilities would
primarily be in the form of bankers’ acceptances at varying
interest rates and would normally mature over periods of 30
to 90 days. The interest rate spread above the bankers’
acceptance rate if in Canadian dollars, or LIBOR rate if in
U.S. dollars, is currently 0.8% and varies based on the
company’s long-term credit rating.
(iii) The unused facilities are designated as standby lines in
support of the commercial paper program.
(b) Commercial paper
(i) A facility exists for the company to issue short-term notes in
the form of commercial paper. These notes may be issued
in Canadian or U.S. dollars to an authorized aggregate
principal amount of Canadian $550 million outstanding at
any one time. While the terms of the individual notes are
less than one year, they have been classified as long-term
as it is intended that the commercial paper program will be
an ongoing source of financing and up to $450 million of
the outstanding notes could be replaced at any time by bank
debt as noted in (a)(iii) above.
(ii) The average rate on Canadian dollar commercial paper
outstanding at December 31, 2001 was 2.7% (December
31, 2000 – 5.9%).
(iii) There was no U.S. dollar commercial paper outstanding at
December 31, 2001. Commercial paper outstanding at
December 31, 2000 included U.S. dollar borrowings of $87
million. The average rate on U.S. dollar commercial paper
outstanding at December 31, 2000 was 6.9%.
(c) Medium Term Notes
(i) On May 27, 1997, the company issued Canadian $50
million 6.2% notes maturing May 27, 2002. The company
has entered into swap agreements, effectively converting
this debt into a floating rate $35.1 million U.S. dollar
obligation based on 90 day LIBOR pricing less 0.06%.
(ii) On May 22, 1998, the company issued Canadian $75
million 5.7% notes maturing December 1, 2003. The
company has entered into a swap agreement, effectively
converting this debt into a floating rate $51.7 million U.S.
dollar obligation based on 90 day LIBOR pricing plus 0.15%.
(iii) On February 9, 1999, the company issued Canadian $75
million 5.6% notes maturing February 9, 2004. The
company has entered into a swap agreement, effectively
converting this obligation into a floating rate debt based on
90 day bankers’ acceptance rates plus 0.32%.
(iv) On July 27, 1999, the company issued Canadian $75
million 5.95% notes maturing July 27, 2004. The company
has entered into a swap agreement, effectively converting
this debt into a floating rate debt based on 90 day bankers’
acceptance rates plus 0.27%.
(v) On January 17, 2000, the company issued Canadian $35
million of floating rate notes maturing January 17, 2003.
Interest is based on 90 day bankers’ acceptance rates plus
0.30%. Interest is paid quarterly.
(vi) During 2001, $100 million of Canadian dollar denominated
notes matured.
entered into, payments are due either quarterly or semi-
annually.
(viii)The swap agreements noted above mature on the due dates
of the respective notes.
(ix) The effective interest rate on the Canadian dollar
denominated obligations at December 31, 2001 was 2.8%
(December 31, 2000 – 6.3%). The effective interest rate at
December 31, 2001 was 2.2% (December 31, 2000 –
7.1%) on the Canadian dollar debt which has been
effectively converted to U.S. dollar denominated obligations.
(d) The fair values of the various long-term debt instruments exceed
their related carrying values by $3.6 million at December 31,
2001. The fair value of the interest rate component in the above
described swap agreements was $10.5 million, favourable at
December 31, 2001.
(e) Subsequent to year end, the company entered into interest rate
swap agreements which fix the interest rate during 2002 on
$86 million of U.S. dollar denominated debt at 2.3% and on
$185 million of Canadian dollar denominated debt at 2.6%.
(f) The company is exposed to credit related losses in the event of
non-performance by counterparties to the interest rate and
currency swap instruments, but it does not anticipate any
counterparties to fail to meet their obligations given their high
credit ratings. The company has a policy of only accepting major
financial institutions as counterparties.
(g) Estimated principal repayments as of December 31, 2001 for
the next five years are:
2002
2003
2004
2005
2006
$55,881
117,404
191,444
–
–
(h) Interest expense includes interest on long-term debt of
$29,517 (2000 - $42,083).
(i)
Interest of $32,070 was paid during the year (2000 -
$41,487).
7. Other liabilities
Post employment benefits
Employees’ shares subscribed
2001
$69,122
7,004
$76,126
2000
$71,102
7,533
$78,635
8. Share capital
(a) Rights attaching to the company’s share capital:
(i) Class A (voting) and Class B (non-voting) shares
Class A and Class B shareholders may elect to receive
dividends in cash or stock dividends in the form of Class B
shares. Class A shares are convertible at any time at the
option of the holder into Class B shares.
(ii) Voting provisions
(vii) In each of (i) – (iv), interest on the medium term notes is
paid semi-annually and where swap agreements have been
Class B shares are non-voting unless eight consecutive
quarterly dividends have not been paid.
Annual Report 2001 32
Torstar Corporation
(iii) Share option plan
Eligible senior executives and non-executive directors may
be granted options to purchase Class B shares at an option
price which shall not be less than the closing market price
of the shares on the last trading day before the grant. The
maximum number of shares that may be issued under the
share option plan is 8,500,000 shares. The term of the
options shall not exceed ten years from the date the option
is granted. Up to 25% of an option grant may be exercised
twelve months after the date granted, and a further 25%
after each subsequent anniversary.
(iv) Restrictions on transfer
Registration of the transfer of any of the company’s shares
may be refused if such transfer could jeopardize either the
ability of the company to engage in broadcasting or its
status as a Canadian newspaper publisher.
(b) Under the company’s employee share purchase plan,
employees may subscribe for Class B shares to be paid for
through payroll deductions over two-year periods at a purchase
price which is the lower of the market price on the entry date or
the market price at the end of the payment period. The value of
the shares that an employee may subscribe for is restricted to a
maximum of 20% of salary at the beginning of the two year
period. As at December 31, outstanding employee subscriptions
were as follows:
2001
2000
Maturing
Subscription price
Number of shares
2002
$17.26
2002
$17.26
194,885 197,332 209,943 234,536
2003
$18.45
2001
$16.60
Options Exercisable
Range of
exercise price
$10.19-11.50
$15.75-18.05
$18.50-21.90
$25.00-26.75
$10.19-26.75
Number exercisable
December 31, 2001
245,700
1,627,800
104,000
625,750
2,603,250
Weighted average
exercise price
$11.12
$16.94
$20.30
$25.04
$18.48
It is the intention of the company, subject to shareholder
approval at the company’s 2002 annual meeting, to increase
the maximum number of shares that may be issued under the
share option plan by an additional 2,000,000 shares and to
grant 1,589,168 share options at an exercise price of $22.20
per share.
(d) Under a normal course issuer bid, the company repurchased
during 2000 222,900 Class B shares for cancellation at an
average price of $15.98 per share for a total consideration of
$3,562,000. Retained earnings were reduced by $2,601,000
for the cost of the shares in excess of their stated value. There
was no issuer bid during 2001.
(e) Summary of changes in the company’s share capital:
Class A (voting) and Class B (non-voting) shares
Class A shares
The only changes in the Class A shares were the conversion to
Class B shares of 5,662 shares (with a stated value of $2,000)
in 2001 and 31,475 shares (with a stated value of $8,000) in
2000. Total Class A shares outstanding at December 31 were:
(c) A summary of changes in the share option plan is as follows:
2000
2001
Weighted average
exercise price
Class B Shares
January 1, 2000
Granted
Exercised
Cancelled
December 31, 2000
Granted
Exercised
Cancelled
December 31, 2001
Shares
3,365,464
1,505,600
(384,100)
(131,500)
4,355,464
2,059,999
(147,950)
(120,264)
6,147,249
18.44
15.76
13.30
18.73
17.96
19.93
14.98
19.89
18.65
As at December 31, 2001 outstanding options were as follows:
Options Outstanding
Range
of
exercise
price
$10.19-11.50
$15.75-18.05
$18.50-21.90
$25.00-26.75
$10.19-26.75
Number
outstanding
December 31,
Weighted
average
remaining
2001 contractual life
3.2 years
6.3 years
8.7 years
5.1 years
6.8 years
245,700
3,090,882
2,021,667
789,000
6,147,249
Weighted
average
exercise
price
$11.12
$16.78
$19.93
$25.05
$18.65
Shares
9,963,497
9,957,835
Amount
$2,707
$2,705
Shares
64,705,978
31,475
129,771
384,100
(222,900)
11,882
1,125
65,041,431
5,662
200,402
147,950
76,254
2,550
65,474,249
Amount
$278,949
8
2,255
5,108
(961)
230
20
285,609
2
3,329
2,217
1,463
46
$292,666
January 1, 2000
Converted from Class A
Issued under Employee
Share Purchase Plan
Share options exercised
Purchased for cancellation
Stock dividends issued
Other
December 31, 2000
Converted from Class A
Issued under Employee
Share Purchase Plan
Share options exercised
Stock dividends issued
Other
December 31, 2001
Totals
The total Class A and Class B shares outstanding at December
31 were:
2000
2001
Shares
75,004,928
75,432,084
Amount
$288,316
$295,371
Annual Report 2001 33
Torstar Corporation
An unlimited number of Class B shares is authorized. While the
number of authorized Class A shares is unlimited, the issuance
of further Class A shares may, under certain circumstances,
require unanimous board approval.
(f) Earnings and operating cash flow per share
Basic per share amounts have been determined by dividing
income (loss) or operating cash flow, as applicable, by the
weighted average number of Class A and Class B shares
outstanding during the year.
In 2001, the company has retroactively adopted the
recommendations of The Canadian Institute of Chartered
Accountants with respect to earnings per share. The
recommendations require the application of the treasury stock
method for the calculation of the dilutive effect of stock options
and other dilutive securities. In calculating diluted per share
amounts under the treasury stock method, the numerator
remains unchanged from the basic per share calculation as the
assumed exercise of the company’s stock options and employee
share purchase plan does not result in an adjustment to
income. The reconciliation of the denominator in calculating
diluted per share amounts is as follows:
(thousands of shares)
2001
2000
Weighted average number of
shares outstanding, basic
Effect of dilutive securities
• stock options
• employee share purchase plan
Weighted average number
of shares outstanding, diluted
75,292
74,695
500
26
523
51
75,818
75,269
9. Income and other taxes
A reconciliation of income taxes at the average statutory tax rate to
the actual income taxes for continuing operations is as follows:
2001
2000
$43,875
$154,578
($18,300)
($68,000)
7,600
13,400
Income before taxes
Provision for income taxes based on
Canadian statutory rate of 41.8%
(2000 – 44.0%)
(Increase) decrease in taxes
resulting from:
Foreign income taxed at lower rates
Manufacturing and processing
profits allowance
Large Corporations tax and other taxes
Future taxes resulting from changes in
statutory tax or income inclusion rates
Non-taxable portion of capital
transactions
Benefit of capital losses not previously
recognized
Non-deductible expenses
Effective income tax rate
Significant components of the provision for income taxes
attributable to continuing operations are as follows:
Current tax provision
Future tax recovery
Total tax provision
2001
2000
$37,676
(22,776)
$14,900
$55,331
(8,131)
$47,200
Future income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the company's future
income tax assets and liabilities as of December 31, 2001, are as
follows:
Current future income tax assets:
Receivables
Restructuring provisions
Other
Non-current future income tax assets:
Tax losses carried forward
Pensions
Other
Non-current future income tax liabilities:
Property, plant and equipment
Pensions
Other
2001
2000
$20,290
2,796
3,126
$26,212
$83,858
2,643
4,762
$91,263
$35,514
4,637
1,498
$41,649
$20,623
9,360
2,664
$32,647
$70,444
4,546
5,762
$80,752
$58,166
5,056
1,925
$65,147
At December 31, 2001, the company had net operating loss
carryforwards of approximately U.S. $35 million for income tax
purposes that expire in 2021, for which no future tax asset has
been recognized.
10. Acquisitions
The company completed a number of acquisitions during 2001 and
2000. The consideration for each acquisition was cash. Each
acquisition was accounted for under the purchase method. The
acquisitions for continuing operations are as follows:
Company/
Business
Date
Purchase
Price
Goodwill
500
(3,000)
2,700
(3,400)
2001
Newspapers
4,500
1,800
Interactive media
Community
Newspapers
Various
Various
Various
(4,400)
3,100
(1,800)
($14,900)
34.0%
4,500
(1,300)
($47,200)
30.5%
2000
Newspapers
Interactive media
Community
Newspapers
Various
Various
Various
$5,630
11,430
$17,060
$5,058
4,644
$9,702
$10,369
26,099
$8,779
7,108
$36,468 $15,887
A tax recovery of $1.6 million has been recognized with respect to
the amortization of goodwill (2000 - $1.7 million). Income taxes of
$56.9 million were paid during the year (2000 - $53.7 million).
The 1999 acquisition of Curiosity Kits Inc. includes a potential
earnout payment to a maximum of U.S. $6.0 million based on
future growth expectations up to and including 2004.
Annual Report 2001 34
Torstar Corporation
11. Employee future benefits
The company maintains a number of defined benefit plans which provide pension benefits to its employees in Canada, the United
States and the United Kingdom. The company also maintains defined contribution plans in the United States and in certain overseas
operations of Harlequin. Post employment benefits other than pensions are also available to employees, primarily in the Canadian
newspaper operations, which provide for various health and life insurance benefits.
Information concerning the company's post employment benefit plans as at December 31 is as follows:
Pension Plans
Post Employment Benefit Plans
2001
2000
2001
2000
(thousands of dollars)
Accrued benefit obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial (gains) losses
Participant contributions
Past service costs
Foreign exchange
Corporate restructuring giving rise to:
Settlements
Special termination benefits
Curtailments
Plan amendments
Balance, end of year
Plans’ assets
Fair value, beginning of year
Return on plan assets
Benefits paid
Contributions to plan
Foreign exchange
Corporate restructuring giving rise to:
Settlements
Fair value, end of year
Funded status – surplus (deficit)
Unamortized amounts
Accrued benefit asset (liability)
Significant assumptions used
Discount rate
Expected long-term rate of return
on plan assets
Rate of compensation increase
Average remaining service period
of active employees
Net benefit expense for the year
Current service cost
Interest cost
Expected return on plan assets
Past service costs
Settlement loss
Special termination benefit
Net benefit expense
$402,378
6,818
28,723
(24,105)
10,881
7,115
$41,521
453
2,942
(1,574)
2,451
$40,601
374
2,905
(1,310)
(1,049)
$431,810
$45,793
$41,521
$437,841
44,302
(24,105)
20,069
$478,107
$46,297
(3,533)
$42,764
($45,793)
1,402
($44,391)
($41,521)
(1,049)
($42,570)
7%
6.5%
13 to 18 years
13 to 19 years
7%
2.5 to 4%
$6,818
28,723
(30,386)
N/A
N/A
N/A
$453
2,942
7%
NA
NA
NA
$374
2,905
$5,155
$3,395
$3,279
$431,810
7,737
29,354
(35,159)
32,520
7,289
1,524
1,435
(10,102)
2,779
(295)
217
$469,109
$478,107
4,532
(35,159)
18,507
1,193
(10,643)
$456,537
($12,572)
52,913
$40,341
6.5%
7%
4%
$7,737
29,354
(32,739)
1,524
1,655
2,779
$10,310
With respect to the post employment benefit plans, a 7% annual rate of growth in the per capita cost of covered health care benefits
was assumed for 2001 (2000 – 8%). The rate of growth is assumed to decrease by 1% per annum until 2003.
The company has outstanding letters of credit of $22.5 million at December 31, 2001 supporting an unfunded executive
retirement plan.
Annual Report 2001 35
Torstar Corporation
12. Forward foreign exchange contracts and options
The company has made arrangements through forward foreign
exchange contracts and various option contracts to allow it to
convert into Canadian dollars a portion of its expected future U.S.
dollar cash flows. Details of these exchange and option contracts
are listed below. The forward foreign exchange contracts and
options establish a rate of exchange of Canadian dollar per U.S.
dollar of $1.55 for U.S. $70 million in 2002 and a minimum rate
of $1.56 for 2003 and 2004. In 2001, the average exchange rate
applicable to U.S. dollar cash flows of the company was $1.54.
(a) Forward foreign exchange contracts
The company has entered into forward foreign exchange
contracts to sell U.S. dollars which will fix the exchange rate for
operations as follows:
2001
2000
Additional information related to the discontinued operations is as
follows:
Statements of Income
Operating revenue
Results of discontinued operations
prior to measurement date
(including tax of $600)
Net loss from discontinued operations
(net of tax of $9,000)
(2000 - $10,800)
Loss from discontinued operations
2001
2000
$88,724
$153,193
($1,334)
($90,000)
($90,000)
(46,256)
($47,590)
No interest expense has been allocated to discontinued operations.
2001
2000
2001
2002
U.S.$
Rate
$70,000
$1.55
U.S.$
$27,000
$35,000
Rate
$1.52
$1.51
(b) Foreign exchange options
The company has entered into various option contracts which,
net of costs, will ensure a rate of exchange in the range as
follows:
2001
2000
Balance Sheet
Current assets
Property, plant and equipment
Goodwill and other assets
Current liabilities
Future income taxes and other
2001
2003
2004
U.S.$
Rate
U.S.$
Rate
$43,000 $1.50 – 1.61
$70,000 $1.56 – 1.67
$70,000 $1.56 – 1.66
Statements of Cash Flow
Cash was provided by (used in)
Operating activities
Investing activities
$90,206
23,465
126,939
$240,610
$48,540
16,757
$65,297
($41,292)
117,766
$76,474
($9,301)
(23,162)
($32,463)
The contracts related to 2003 and 2004 were entered into
subsequent to year end.
13. Discontinued operations
In late 2000, the company announced its intention to sell the
education operations – Frank Schaffer Publications Inc., Tom Snyder
Productions Inc. and Delta Education Inc. – of its Children's
Supplementary Education Publishing ("CSEP") division. Accordingly,
the results from these operations have been presented as
discontinued operations. The company has retained the consumer-
oriented assets of the CSEP division including Curiosity Kits Inc. and
Brighter Vision Learning Adventures. These businesses and their
results have been included in the Book Publishing segment. The
sale of the discontinued businesses was completed during 2001.
Due to a downturn in market conditions, the proceeds on the sale
were lower than anticipated. As a result, a further loss of $99
million ($90 million after tax) was recorded during 2001.
14. Unusual Items
Details of unusual items in 2001 and 2000 are as follows:
Write-off of investment in ITI
Strike costs
Restructuring provisions
Pension cost
Gain on sale of land and building
2001
2000
($29,300)
(24,600)
(13,000)
(4,200)
($71,100)
($30,400)
28,800
($1,600)
The strike costs include the costs associated with the settled strikes
at The Toronto Star and Sing Tao. The restructuring provisions are
primarily related to the newspaper segment in 2001 and 2000, of
which $13 million is included in accounts payable and accrued
liabilities at December 31, 2001 (December 31, 2000 - $30
million). The defined benefit pension plan in the U.K. is in the
process of being wound up, and the pension cost reflects the final
settlement of outstanding pension obligations.
15. Comparative financial statements
The comparative financial statements have been reclassified from
statements previously presented to conform to the presentation of
the 2001 financial statements.
Annual Report 2001 36
Torstar Corporation
16. Segmented information
Management has determined that the company operates three
business segments:
Newspapers - Publishing of daily newspapers including The Toronto
Star, The Hamilton Spectator and The Record and community
newspapers including Metroland’s publications.
Book Publishing - Publishing of women’s fiction and creation and
selling of activity based products for women and children
(distributed through retail outlets and by direct mail);
Interactive Media – Interactive media businesses of the
Newspapers and Book publishing operations, Toronto Star
Television and investments in Interactive media companies.
Segment profit or loss has been defined as operating profit
which corresponds to operating profit as presented in the
Consolidated Statements of Income. No interest, foreign
exchange, goodwill amortization or income taxes are allocated
to business or geographic segments.
Summary of Business and Geographic Segments of the Company:
Business Segments
Newspapers
Book publishing
Interactive media
Segment Totals
Corporate
Operating Revenue
2001
2000
Depreciation and Amortization
Operating Profit
2001
2000
2001
2000
$799,962
582,573
40,128
1,422,663
$843,066
579,169
22,839
1,445,074
$57,829
13,323
5,108
76,260
114
$57,131
13,097
4,061
74,289
779
$64,395
107,536
(17,432)
154,499
(10,773)
$111,815
102,300
(5,455)
208,660
(9,804)
Consolidated
$1,422,663
$1,445,074
$76,374
$75,068
$143,726
$198,856
Newspapers
Book publishing
Interactive media
Segment Totals
Corporate
Identifiable Assets
Additions to Capital Assets
and Goodwill
2001
2000
2001
2000
$926,067
488,063
32,798
1,446,928
43,226
$966,132
416,162
53,967
1,436,261
49,802
$34,031
8,069
4,770
46,870
95
$46,965
$54,552
6,131
9,087
69,770
3,933
$73,703
Investment in associated business
Discontinued operations
Consolidated
29,091
240,610
$1,755,764
$1,490,154
Geographic Segments
2001
2000
2001
2000
Operating Revenue
Capital Assets
and Goodwill
Canada
United States
Other (a)
Segment Totals
$848,329
378,544
195,790
$1,422,663
$879,670
368,324
197,080
$1,445,074
$744,159
96,225
27,768
$868,152
$766,658
98,389
30,070
$895,117
(a) Principally – United Kingdom, Japan, Germany, Australia, Italy and France.
Annual Report 2001 37
Torstar Corporation
Annual Operating Highlights Continuing Operations
2001
2000
1999
1998
1997
1996
1995
Operating revenue (thousands of dollars)
Newspapers
Book publishing
Interactive media
Total
Operating Profit & Income from
continuing operations (thousands of dollars)
Newspapers
Book publishing
Interactive media
Corporate
Operating profit
Interest expense
Foreign exchange
Unusual items
Income before taxes
Income and other taxes
Income before earnings (losses) of
associated businesses
(Losses) earnings of associated businesses
Income from continuing operations before
amortization of goodwill
Amortization of goodwill (net of tax)
Income from continuing operations
$799,962
582,573
40,128
$512,437
509,897
108
$1,422,663 $1,445,074 $1,351,376 $1,190,313 $1,094,119 $1,022,442
$639,565
545,247
5,501
$597,254
495,961
904
$765,717
577,013
8,646
$843,066
579,169
22,839
$479,069
485,392
$964,461
$64,395
107,536
(17,432)
(10,773)
143,726
(29,143)
392
(71,100)
43,875
(14,900)
$111,815
102,300
(5,455)
(9,804)
198,856
(41,283)
(1,395)
(1,600)
154,578
(47,200)
$107,836
88,207
(4,009)
(6,708)
185,326
(32,170)
55
153,211
(52,900)
$85,128
92,850
(1,581)
(5,962)
170,435
(17,051)
324
(11,500)
142,208
(49,400)
$90,796
85,614
(9,663)
(6,696)
160,051
(19,733)
1,379
$44,791
86,129
(8,137)
(7,767)
115,016
(16,650)
826
$15,854
81,963
(4,743)
(7,711)
85,363
(16,547)
275
141,697
(47,200)
99,192
(32,500)
69,091
(23,400)
28,975
(8,022)
107,378
(6,202)
100,311
(5,516)
92,808
145
94,497
358
66,692
(3,171)
45,691
(5,700)
20,953
(17,973)
$2,980
101,176
(17,461)
$83,715
94,795
(13,975)
$80,820
92,953
(7,744)
$85,209
94,855
(7,726)
$87,129
63,521
(7,984)
$55,537
39,991
(7,972)
$32,019
Operating cash flow
$109,333
$165,598
$152,416
$145,836
$152,641
$116,764
$84,202
Average number of shares outstanding
(thousands)
75,292
74,695
74,667
75,926
78,088
79,464
80,678
Per share Data
Income from continuing operations
Operating cash flow per share
Dividends — Class A and Class B shares
Rate of Return on Revenue
Operating profit
Income before (losses) earnings of
associated businesses
Return on equity
Operating cash flow as a percentage of
$0.04
$1.45
$0.58
$1.12
$2.22
$0.58
$1.08
$2.04
$0.58
$1.12
$1.92
$0.565
$1.12
$1.95
$0.52
$0.70
$1.47
$0.45
$0.40
$1.04
$0.42
10.1%
13.8%
13.7%
14.3%
14.6%
11.3%
8.9%
2.0%
7.4%
7.4%
7.8%
8.6%
6.5%
4.7%
average shareholders’ equity
18.3%
24.6%
22.9%
20.4%
22.5%
20.4%
14.7%
Financial position
Total Assets
Long-term debt
Shareholders’ equity
Property, plant and equipment (net)
Annual Report 2001 38
$1,490,154 $1,755,764 $1,726,402 $1,380,907 $1,370,490 $1,322,763 $1,149,839
333,050
572,707
434,434
321,813
573,853
408,797
197,322
785,461
390,312
649,712
684,188
440,673
355,829
647,055
389,832
508,848
534,398
410,427
494,477
660,001
425,380
Corporate Information
Board of Directors
John R. Evans
Chairman
Torstar Corporation
Director since 1984
Catherine Atkinson Murray
President
Atkinson Charitable Foundation
Director since 1976
David A. Galloway
President &
Chief Executive Officer
Torstar Corporation
Director since 1988
Martin P. Connell
Private Investor
Director since 1990
Campbell R. Harvey
Professor of Finance
Duke University
Director since 1992
Paul G.S. Cantor
Managing Director
Canadian Operations
Russell Reynolds Associates Co.
Director since 1993
Edward L. Donegan
Partner
Blake, Cassels & Graydon
Director since 1993
David W. Lay
Corporate Director
Director since 1993
Ruth Anne Winter
Associate Broker, Royal Lepage
Director since 1995
Lance R. Primis
Managing Partner
Lance R. Primis & Partners LLC
Director since 1997
Officers
David A. Galloway
President &
Chief Executive Officer
Robert J. Steacy
Vice-President of
Finance
J. Robert S. Prichard
Chief Operating Officer & President
Torstar Media Group
Karen Hanna
Vice-President
Human Resources Strategy
Nelson Thall
Media Scientist
Director since 1998
Christina A. Gold
Chairman &
Chief Executive Officer
Excel Communications Inc.
Director since 1998
A. Michael Spence
Partner
Oak Hill Venture Partners
Director since 1999
J. Murray Cockburn
Retired Executive
Vice-President Torstar
Corporation
Director since 2001
D. Todd Smith
Treasurer
Gail Martin
Director of Finance
Marie E. Beyette
Director of Legal Services
& Secretary
Corporate Office
Transfer Agent & Registrar
One Yonge Street
Toronto, Ontario, Canada M5E 1P9
Telephone: (416) 869-4010
Fax: (416) 869-4183
e-mail: torstar@torstar.ca
Website: www.torstar.com/corporate
CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5C 2W9
AnswerLine (416) 643-5500
www.cibcmellon.com
inquiries@cibcmellon.com
Torstar Class B shares are traded
on the Toronto Stock Exchange
under the symbol TS.B
Annual Report 2001 39
Operating Companies –
Products and Ser vices
Torstar Daily Newspapers
The Toronto Star
The Hamilton Spectator
The Record
Guelph Mercury
The Cambridge Reporter
Community Newspapers
Metroland Printing, Publishing & Distributing
is Ontario's leading publisher of community
newspapers, publishing 68 newspapers with
114 editions. The larger publications include:
Ajax News Advertiser
Aurora/Newmarket Era-Banner
Brampton Guardian
Burlington Post
Etobicoke Guardian
Mississauga News
Oakville Beaver
Oshawa This Week
Richmond Hill Liberal
Scarborough Mirror
Business Ventures
MetroToday
Sing Tao
Interactive Media
Harlequin Enterprises
thestar.com
workopolis.com
toronto.com
waymoresports.com
newinhomes.com
tmgtv.ca
Toronto Star Television
Harlequin is a leading publisher
of women’s fiction.
Harlequin Mills & Boon U.K.
Harlequin Australia
Harlequin Holland
Harlequin Japan
Harlequin Scandinavia
Harlequin Spain
Harlequin Poland
Joint Ventures:
Harlequin Germany
Harlequin France
Harlequin Italy
Harlequin Greece
Harlequin Hungary
Interactive Media:
eHarlequin.com
Annual Report 2001 40
Project Direction Catherine Yates Creative Director Lorne Silver Art Director Joan Blastorah Graphic Design Jose Luis Monzon Production Darlene Dewell Printing Resolution Group
Photography Richard Lautens, Keith Beaty and David Cooper
A Caring Company
Torstar is proud of its record of
supporting charitable organizations,
donating $1 million in 2001. The
Imagine logo identifies Torstar as a
caring company which has donated
more than 1% of pre-tax profit to charity.