ANNUAL REPORT
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OPERATING RESULTS ($000)
2011
2010
Operating revenue
EBITDA (1)
Operating profit
Net income
Cash from operating activities
EBITDA – Percentage of revenue
Operating profit –
percentage of revenue
$1,548,757
$1,483,768
242,249
189,673
218,141
114,955
15.6%
250,333
186,193
210,729
157,654
16.9%
12.2%
12.5%
Cash from operating activities –
percentage of average shareholders’ equity
17.8%
31.2%
PER CLASS A AND CLASS B SHARES
Net income
Dividends
$2.74
$0.47
$2.65
$0.37
Price range (high/low)
$15.25/7.55
$13.23/5.92
FINANCIAL POSITION ($000)
Long-term debt
Equity
$196,191
$706,264
$404,586
$584,560
The Annual Meeting of shareholders will be held Wednesday, May 9, 2012 at Le Méridien King Edward Hotel,
37 King Street East, Toronto beginning at 10 a.m. It will also be webcast live on the Internet.
OPERATING REVENUE ($MILLIONS)(2)
OPERATING PROFIT ($MILLIONS) (2)
07
08
09
10
11
1,547
1,534
1,451
1,484
1,548
07
08
09
10
11
163
118
95
186
190
INCOME (LOSS) FROM CONTINUING
OPERATIONS PER SHARE (2)
EBITDA ($MILLIONS) (1) (2)
1.29
0.45
07
08
09
10
11
2.65
2.74
07
08
09
10
11
225
213
192
250
242
(2.01)
(1) Consolidated operating profit, as presented on the consolidated statements of income, which is before charges for interest and taxes adjusted for depreciation and
amortization of intangible assets. It also excludes restructuring and other charges. Please see “Non-IFRS Measures” on page 7.
(2) 2010 is restated to an IFRS basis. 2007-2009 are based on Canadian GAAP and are not restated to IFRS.
This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario).
We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, plans, objectives,
expectations, anticipations, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 7.
under the heading “Forward-Looking Statements”.
(cid:55)(cid:50)(cid:53)(cid:54)(cid:55)(cid:36)(cid:53)(cid:3)(cid:38)(cid:50)(cid:53)(cid:51)(cid:50)(cid:53)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:3)(cid:36)(cid:49)(cid:49)(cid:56)(cid:36)(cid:47)(cid:3)(cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55)(cid:3) (cid:3) (cid:3) (cid:21)
(cid:21)(cid:19)(cid:20)(cid:20)(cid:66)(cid:55)(cid:50)(cid:53)(cid:54)(cid:55)(cid:36)(cid:53)(cid:3)(cid:36)(cid:53)(cid:17)(cid:76)(cid:81)(cid:71)(cid:71)(cid:3)(cid:3)(cid:3)(cid:21)
(cid:20)(cid:21)(cid:16)(cid:19)(cid:22)(cid:16)(cid:20)(cid:24)(cid:3)(cid:3)(cid:3)(cid:22)(cid:29)(cid:24)(cid:28)(cid:3)(cid:51)(cid:48)
M e s sag e f r O M t h e C h a i r
John honderich
Chair, Board of Directors
In spite of strong digital and economic headwinds, Torstar broke through to register another stellar year in 2011.
While overall earnings (EBITDA) were off slightly from previous year, the company made significant investments across
the board that we believe have strengthened both our financial position and our ability to compete in the future. With
a very solid balance sheet and limited long-term debt, the Board of Directors approved more than $100 million in new
investments. They include increasing our ownership in the Metro newspaper operations (Free Daily News Group) to 90
per cent and creating new Metro papers in Winnipeg and London, establishing new community papers in Brantford,
North Bay, Kitchener and London, purchasing the Smith Falls-based Performance Printing Limited, creating a new
entertainment weekly in Toronto called The Grid, and purchasing approximately 25 per cent of Blue Ant Media Inc, a
new independent media company.
When considered together, these investments constitute a significant expansion of our footprint, particularly in Ontario,
our primary area of operation. Also, with our cross-country network of Metro newspapers, Torstar now has control of a
national platform that positions us well for the future.
On the digital side, Harlequin has been undergoing a dramatic transformation as sales shifted to digital books, which
leapfrogged ahead at a strong rate. The team at Harlequin has done an outstanding job managing this transformation.
Indeed, Harlequin registered its best year ever, leaving aside the impact of foreign exchange. On the newspaper side,
investment in new digital opportunities continues apace with digital media revenues now accounting for more than 11
per cent of total media revenues, an increase of 22.8 per cent year over year.
One of Torstar’s greatest strengths is the quality of the members of our executive team who bring a superb mix of
experience, dedication and commitment to the company. President and Chief Executive Officer David Holland and Chief
Financial Officer and Executive Vice-President Lorenzo DeMarchi have expertly steered Torstar through this difficult
year, continuing their pattern of innovative leadership and collaboration. Harlequin Publisher and Chief Executive Officer
Donna Hayes continues to excel at the highest level, reaffirming her position as one of the world’s great book publishers.
John Cruickshank, Publisher of the Toronto Star and President of the Star Media Group, forged ahead with his dynamic
transformation at the Toronto Star, leading it to new heights of editorial excellence. Ian Oliver, President of Metroland
Media Group, had an outstanding year as the principal architect of his group enlarging its Ontario footprint. Finally,
Torstar Digital President Tomer Strolight continued to play a critical role at the core of Torstar’s digital strategy, moving
forward with innovative thinking.
As usual, a huge part of Torstar’s success in 2011 was the quality of performance and leadership exhibited throughout
the company. In tough times, individual employees are often called upon to excel and 2011 was no exception. Time
and again, they were more than up to the challenge. In an era of economic challenge, it was necessary to take steps to
restructure our businesses that inevitably led to some painful decisions on staffing. We salute those who have departed,
knowing their contributions will not be forgotten.
2011 also saw the return of Neil Clark, former Senior Vice-President Strategic Planning at the Toronto Star, to the Torstar
Board of Directors. Mr. Clark has previously served on the Board. Throughout the year, the company has been extremely
well served by the Board and I would like to express my personal appreciation for their wisdom, sagacity and good
humour.
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tO Ou r s h a r e hO l D e r s
David holland
President and Chief Executive Officer
Torstar delivered a very solid performance in 2011, with good operating
results for the company as a whole, major accomplishments in our book
publishing and Canadian Media operations that contributed directly to
strategic progress, and a significant strengthening of the company’s financial
position.
strengths and capabilities. Across these operations, we have powerful brands,
access to significant print and digital audiences, a content development
capability, a distribution capability, promotional power and very committed,
talented and passionate employees. The Media division had revenues of $1.1
billion in the year.
Operating results
Despite the challenging economic environment, 2011 proved to be a good
year for Torstar. We believe the strategic moves we made both in investing in
organic growth initiatives within our business and in acquisitions increases
the diversity of our revenue base and will serve Torstar well as we move
forward.
Torstar earned EBITDA of $242 million, a slight decrease from the $250
million earned in 2010. The decline included $6 million from the negative
impact of foreign exchange due to the strengthening of the Canadian dollar.
Total revenues were $1.55 billion, up from $1.48 billion the prior year. The
growth in total revenue was driven by media segment revenues, which
were up $74 million in 2011. However, EBITDA of $172 million in the media
segment was down $5 million. Harlequin EBITDA was $86 million, down $2
million from prior year including the decline of $6 million from the impact
of foreign exchange which was offset in part by growth in the underlying
operating results. Significantly, Harlequin posted its fifth consecutive year of
profit growth, adjusting for the impact of the strengthening Canadian dollar
during that period.
One of the key reasons for our overall financial strength has been our focus
on debt reduction. We closed 2011 and move forward into 2012 in a strong
financial position, with net borrowings of $153 million. That was down $215
million from $368 million at December 31, 2010. The reduction is the result
of the receipt of the remainder of Torstar’s cash proceeds from the sale of its
20-per-cent share in CTVglobemedia Inc. and management’s ongoing focus
on the generation of free cash flow.
Harlequin enjoyed another noteworthy year in 2011, delivering record
high earnings adjusted for the effects of foreign exchange. Harlequin’s
management team continued to adapt very successfully to the shift to digital
reading, with total revenue reaching $459 million. Excluding the impact of
foreign exchange and acquisitions, the revenue was down slightly from 2010
with digital revenue growth not offsetting declines in print revenue in the
overseas markets that were in part affected by fragile economic conditions.
Harlequin continues to evolve its business successfully, focusing on providing
great reading entertainment to women around the world in an increasingly
digital environment. In 2011, Harlequin renegotiated contracts with all top
authors, enjoyed a record-breaking year for bestsellers, with seven Number
1 bestsellers in the United States, further developed its non-fiction and
teen programs and digitized more than 5,200 new and older titles. In 2011,
Harlequin.com received an average of approximately 6.5 million page views a
month and an average of about 301,000 unique visitors a month, consistent
with 2010 levels. An additional 1.3 million page views a month were received
on Harlequin’s digital book store, similar to 2010 activity.
Harlequin, a world-class book publisher, continues to be an outstanding
Canadian success story.
In the Canadian Media division in 2011, we remained committed to striving
for excellence in delivering the many valuable services we provide to our
customers while at the same time investing in and working towards achieving
the necessary transformation to the business models of the future. This
required an equal emphasis on growing the revenue base and a relentless
focus on efficiency and the cost of delivering services.
Our Canadian Media division is comprised of Metroland Media Group,
Star Media Group and Torstar Digital. Each of these operations has unique
Metroland Media Group is one of Canada’s leading community media
companies. Over the years, it has evolved into a diversified business, with a
core platform of three daily and more than 110 community newspapers, and
operations in flyer distribution, magazines, specialty publications, consumer
shows, commercial printing, teleshopping, product sales, directories and
numerous digital operations.
Considering the economic environment in Ontario, Metroland enjoyed a
solid year in 2011, with revenues up $41 million over the prior year to $582
million. Revenue growth included $45 million from higher product sales in
the TMGTV operations and digital revenue growth of $11 million. Offsetting
these increases were lower print revenues.
In October, Metroland acquired Performance Printing Limited of Smiths Falls,
Ontario, for $22.5 million. Performance Printing is a newspaper publisher and
flyer distributor in several eastern Ontario communities, including Kingston,
Belleville, Brockville, Smiths Falls and Ottawa, as well as a commercial
printer with operations in Smiths Falls. The acquisition allows Metroland
to extend its community newspaper and flyer distribution services to new
communities in eastern Ontario and also supports Metroland’s extension of
its growing suite of digital offerings.
Star Media Group, which includes the Toronto Star, Metro, Sing Tao Daily, The
Grid and many of our digital properties, performed well in 2011 considering
the challenging advertising environment that continued throughout the year,
benefiting from restructuring and cost controls which helped to overcome
lower-than-expected advertising results. Revenue grew by $33 million to
$507 million, compared to $474 million in 2010. EBITDA was $70 million in
2011, down $2 million from $72 million in 2010. Digital revenues were up $8
million, excluding acquisitions.
At the Toronto Star, our flagship newspaper, we continued to face advertising
revenue challenges. Toronto Star print advertising revenues were down 6.4%
in 2011, with declines across most categories. Fortunately, strong circulation
revenue at the Toronto Star, which was up 1.7% in 2011 from a combination of
price increases and ancillary products offered to our subscribers, mitigated
in part the advertising revenue decline.
Beyond the revenue picture, the Toronto Star and thestar.com enjoyed a good
year on several fronts, including maintaining print readership, growing digital
readership and expanding the audience of the Toronto Star throughout the
Greater Toronto Area. Importantly, the voice of the Toronto Star remains
very strong.
Star Media Group made progress in further diversifying its revenue base
in 2011. In October, Torstar announced it had increased its interest in the
English-language Metro newspaper operations (“Metro”) jointly owned in
Canada with Metro International S.A. to 90%. Metro’s operations are part
of Star Media Group. The aggregate consideration was $51.5 million. Metro
publishes free daily newspapers under the Metro trade mark in Toronto,
Vancouver, Ottawa, Calgary, Edmonton, Winnipeg and London, and pursuant
to a joint venture with Transcontinental Media G.P. in Halifax. We have been
very happy with the evolution of the Metro newspaper operation over the
past decade and were pleased to increase our interest to 90% in this growing
national franchise.
At Sing Tao, the Chinese language newspaper in which we hold an effective
50-per-cent interest, revenues were also up in the year with growth in both
newspapers and magazine revenues.
We are also thrilled that our newspapers, websites and journalists continued
to be recognized for their outstanding editorial efforts throughout the year.
In 2011, the Toronto Star won three National Newspaper Awards for reporting
and photography and captured the 2011 Canadian Journalism Foundation’s
Excellence in Journalism Award in the large or national category. It was
the first time in the history of the award that a news organization had
won the top prize for two consecutive years. Also, Metroland newspapers
earned 103 awards from the Ontario Community Newspaper Association
Better Newspaper Awards and 91 awards from the Suburban Newspaper
of America (SNA) Editorial Contest. Metroland led all companies with an
impressive 75 awards in the SNA Advertising and Promotions Contest. The
Grid, a weekly publication that was launched in the Toronto area in May,
was named one of the five best designed newspapers in the world by the
Society for News Design, an international non-profit design organization.
Torstar Digital showed positive revenue growth in 2011. Among its portfolio
of digital businesses, Workopolis, Canada’s foremost career website
which is owned jointly by Torstar and Square Victoria Digital Properties
(a subsidiary of Power Corporation), enjoyed double-digit revenue and
EBITDA growth in 2011 and continued to expand its leading audience
position. In 2011, Olive Media, a leading online advertising solutions
provider, continued to grow revenues. Also, WagJag, a digital marketing
platform that features deep discounts to Canadians on local products and
services, sold 2.2 million vouchers, a remarkable achievement given that
it has only been in operation within Torstar since 2010. This initiative in
group buying and the success enjoyed to date results from the powerful
collaboration of Torstar Digital and Metroland assisted by the promotional
support of the Toronto Star.
The goal of continuing to diversify our media asset base also benefitted
from the December, 2011 acquisition of an approximate 25-per-cent
interest in Blue Ant Media Inc., a newly established independent media
company led by media veteran, Michael MacMillan. Torstar’s investment in
Blue Ant Media will occur in two phases and will be $22.7 million. We view
the Blue Ant Media investment as strategic and see the potential in Michael
MacMillan’s vision for a new kind of media company in Canada. We are
very pleased to be involved.
Torstar also has a minority investment in Black Press, a company very well
led by David Black, which publishes more than 150 newspapers, including
weeklies, dailies and shoppers, in Canada and the U.S.
lOOKing fOrWarD
As in past years, Torstar’s businesses remain highly dependent on the
economy. This is especially true as it relates to advertising. The economic
recovery remains modest and fragile within Canada and globally.
We are confident we can meet the challenges that will confront us in 2012.
We entered the year with a stronger Canadian Media operations platform,
given the investments made in 2011. And Harlequin continues to adapt
successfully to the shift to digital consumption of reading entertainment.
This is an important period in Torstar’s evolution. Disruption is everywhere,
but out of disruption emerges opportunities. To compete effectively in an
increasingly competitive global environment, we must play to our strengths
and adapt and evolve as we have in the past.
A great strength for Torstar is the diversity of our operations, which has
served us well and translates into more than 100 respected brands,
which together create a uniquely diversified platform from which to build
for the future, from book publishing to daily newspapers, community
publications, digital, magazines, consumer shows, teleshopping and video
and directories.
In the midst of this era of rapid change, our goal at Torstar is to be a
progressive media organization that takes advantage both of the breadth
of the assets at our disposal and the depth and quality of talent throughout
our many businesses.
At Torstar, being a “progressive media company” means being an
organization that confronts reality, builds on its strengths, addresses its
weaknesses and embraces the future, anticipating opportunity. It means
being a company that can be patient when needed, but will act with speed
when desirable. It means being a company that encourages innovation in
all aspects of its operations and is disciplined and committed in following
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We are also thrilled that our newspapers, websites and journalists continued
to be recognized for their outstanding editorial efforts throughout the year.
In 2011, the Toronto Star won three National Newspaper Awards for reporting
and photography and captured the 2011 Canadian Journalism Foundation’s
Excellence in Journalism Award in the large or national category. It was
the first time in the history of the award that a news organization had
won the top prize for two consecutive years. Also, Metroland newspapers
earned 103 awards from the Ontario Community Newspaper Association
Better Newspaper Awards and 91 awards from the Suburban Newspaper
of America (SNA) Editorial Contest. Metroland led all companies with an
impressive 75 awards in the SNA Advertising and Promotions Contest. The
Grid, a weekly publication that was launched in the Toronto area in May,
was named one of the five best designed newspapers in the world by the
Society for News Design, an international non-profit design organization.
Torstar Digital showed positive revenue growth in 2011. Among its portfolio
of digital businesses, Workopolis, Canada’s foremost career website
which is owned jointly by Torstar and Square Victoria Digital Properties
(a subsidiary of Power Corporation), enjoyed double-digit revenue and
EBITDA growth in 2011 and continued to expand its leading audience
position. In 2011, Olive Media, a leading online advertising solutions
provider, continued to grow revenues. Also, WagJag, a digital marketing
platform that features deep discounts to Canadians on local products and
services, sold 2.2 million vouchers, a remarkable achievement given that
it has only been in operation within Torstar since 2010. This initiative in
group buying and the success enjoyed to date results from the powerful
collaboration of Torstar Digital and Metroland assisted by the promotional
support of the Toronto Star.
The goal of continuing to diversify our media asset base also benefitted
from the December, 2011 acquisition of an approximate 25-per-cent
interest in Blue Ant Media Inc, a newly established independent media
company led by media veteran, Michael MacMillan. Torstar’s investment in
Blue Ant Media will occur in two phases and will be $22.7 million. We view
the Blue Ant Media investment as strategic and see the potential in Michael
MacMillan’s vision for a new kind of media company in Canada. We are
very pleased to be involved.
Torstar also has a minority investment in Black Press, a company very well
led by David Black, which publishes more than 150 newspapers, including
weeklies, dailies and shoppers, in Canada and the U.S.
LOOKING FORWARD
As in past years, Torstar’s businesses remain highly dependent on the
economy. This is especially true as it relates to advertising. The economic
recovery remains modest and fragile within Canada and globally.
We are confident we can meet the challenges that will confront us in 2012.
We entered the year with a stronger Canadian Media operations platform,
given the investments made in 2011. And Harlequin continues to adapt
successfully to the shift to digital consumption of reading entertainment.
This is an important period in Torstar’s evolution. Disruption is everywhere,
but out of disruption emerges opportunities. To compete effectively in an
increasingly competitive global environment, we must play to our strengths
and adapt and evolve as we have in the past.
A great strength for Torstar is the diversity of our operations, which has
served us well and translates into more than 100 respected brands,
which together create a uniquely diversified platform from which to build
for the future, from book publishing to daily newspapers, community
publications, digital, magazines, consumer shows, teleshopping and video
and directories.
In the midst of this era of rapid change, our goal at Torstar is to be a
progressive media organization that takes advantage both of the breadth
of the assets at our disposal and the depth and quality of talent throughout
our many businesses.
At Torstar, being a “progressive media company” means being an
organization that confronts reality, builds on its strengths, addresses its
weaknesses and embraces the future, anticipating opportunity. It means
being a company that can be patient when needed, but will act with speed
when desirable. It means being a company that encourages innovation in
all aspects of its operations and is disciplined and committed in following
through to make the necessary investments to foster that innovation. It
means being a company that is focused on building value from within, not
one that relies solely on acquisitions to achieve growth over time.
Torstar is that kind of progressive media company.
I feel confident in our future because of the tremendous strengths we
have to draw upon, including our enduring brands in every area of our
business — brands that have earned credibility and trust, including having
one of the world’s leading book publishers in Harlequin, a business that
has consistently delivered for Torstar and its shareholders for more than
30 years; Canada’s leading daily newspaper and news-producing team at
the Toronto Star and thestar.com that is committed to serving audiences
across all platforms; Metroland Media, in which we have the country’s best,
most-innovative, solutions-oriented community newspaper organization;
and a large and talented group of digital business leaders across all our
divisions who have developed the capability and infrastructure required to
build successful digital businesses.
In short, our goal is to adapt, compete and build value in Torstar over
the long term. We will strive to do this by embracing our strengths as
an organization and seizing the opportunities ahead created by a media
landscape that will continue to shift.
OUR GREATEST STRENGTH – PEOPLE
Of course, getting to a brighter future will depend heavily on the quality of
our people at all levels of the organization. There has never been a time
when the quality of your employees mattered more. I am convinced that at
Torstar we have some of the top people in their chosen fields anywhere in
Canada and indeed, in some cases, anywhere in the world.
Guiding our talented and committed employees are outstanding
management teams led by terrific executives.
At Harlequin, Donna Hayes continues to build on her great track record and
show why she is one of the world’s top book publishing executives, leading
Harlequin so effectively during this critical transition into a more digital
book publishing world.
At Metroland Media Group, Ian Oliver is an experienced leader with an
exceptional record of innovation and growth in community-based media.
His successful completion of the acquisition in 2011 of Performance
Printing in eastern Ontario, which greatly expanded Metroland’s presence
in that part of the province, is a prime example of his vision and ability to
seize opportunities when they arise.
John Cruickshank, at Star Media Group, continues to providing outstanding
leadership as he successfully achieves the necessary transformation within
the largest daily newspaper in Canada while at the same time diversifying
the asset base of the group. This diversity was enhanced with the successful
move to increase our ownership interest in the Metro chain of free daily
newspapers.
Once again, Tomer Strolight at Torstar Digital has demonstrated his ability,
along with his team, to be at the forefront of innovative and effective
solutions for our customers. Most recently, in close collaboration with
Metroland, we have established a good position in group buying through
our Wagjag offering.
At Torstar corporate, we are privileged to have an experienced and talented
team whose members continue to make important contributions to the
company. These include Lorenzo DeMarchi, our Executive Vice-President
and Chief Financial Officer; Marie Beyette, our Senior Vice-President,
General Counsel and Corporate Secretary; Patricia Hewitt, our Senior
Vice-President Human Resources; Gail Martin, our Senior Vice-President
Finance; Pam Laycock, our Senior Vice-President Corporate Strategy; Todd
Smith, Treasurer and many others. I thank them for their support.
I would also like to thank John Honderich, our Chair, and all the members of
the Board of Directors for their advice and guidance and support. I deeply
appreciate their wise counsel.
When I look forward – seeing the quality of our 7,000 employees, the
diversity of our businesses, the wisdom and courage of our executives, our
ability to act quickly when needed and be patient when advantageous, and
our financial foundation – I do so with great confidence in our continued
success in the years ahead.
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f i n a nC i a l t a b l e O f C O n t e n ts
Management’s Discussion & Analysis
7
Management’s Statement of Responsibility
Independent Auditors’ Report to Shareholders
Consolidated Financial Statements
50
Corporate Information
48
49
119
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TORSTAR - Management’s Discussion and Analysis
For the year ended December 31, 2011
Dated: February 28, 2012
The following management’s discussion and analysis (“MD&A”) of Torstar Corporation’s (“Torstar” or “the Company")
operations and financial position is supplementary to, and should be read in conjunction with the audited consolidated financial
statements of Torstar Corporation for the year ended December 31, 2011.
Torstar reports its financial results under International Financial Reporting Standards (“IFRS”) in Canadian dollars. Per share
amounts are calculated using the weighted average number of shares outstanding for the applicable period.
Torstar’s 2010 financial results included in this MD&A have been restated to an IFRS basis.
Non-IFRS measures
In addition to operating profit, as presented in the consolidated statement of income, management uses EBITDA and operating
earnings as measures to assess the consolidated performance and the performance of the reporting units and business
segments.
EBITDA (earnings before interest, taxes, depreciation and amortization) is a measure that is also used by many of Torstar’s
shareholders, creditors, other stakeholders and analysts as a proxy for the amount of cash generated by Torstar’s operations
or by a reporting unit or business segment. EBITDA is not the actual cash provided by operating activities and is not a
recognized measure of financial performance under IFRS. Torstar calculates EBITDA as operating revenue less salaries and
benefits and other operating costs as presented on the consolidated statement of income. EBITDA excludes restructuring and
other charges. Torstar’s method of calculating EBITDA may differ from other companies and accordingly may not be
comparable to measures used by other companies.
Operating earnings is used by management to represent the results of ongoing operations and is not a recognized measure of
financial performance under IFRS. Torstar calculates operating earnings as operating revenue less other operating costs,
salaries and benefits and amortization and depreciation. Operating earnings excludes restructuring and other charges.
Torstar’s method of calculating operating earnings may differ from other companies and accordingly may not be comparable to
measures used by other companies.
Forward-looking statements
Certain statements in this MD&A and in the Company’s oral and written public communications may constitute forward-looking
statements that reflect management’s expectations regarding the Company’s future growth, financial performance and
business prospects and opportunities as of the date of this MD&A. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”,
“would”, “could”, “if”, “may” and similar expressions. All such statements are made pursuant to the “safe harbour” provisions of
applicable Canadian securities legislation. These statements reflect current expectations of management regarding future
events and operating performance, and speak only as of the date of this MD&A. In addition, forward-looking statements are
provided for the purpose of providing information about management’s current expectations and plans relating to the future.
Readers are cautioned that reliance on such information may not be appropriate for other purposes.
By their very nature, forward-looking statements require management to make assumptions and are subject to inherent risks
and uncertainties. There is a significant risk that predictions, forecasts, conclusions or projections will not prove to be
accurate, that management’s assumptions may not be accurate and that actual results, performance or achievements may
differ significantly from such predictions, forecasts, conclusions or projections expressed or implied by such forward-looking
statements. We caution readers not to place undue reliance on the forward-looking statements in this MD&A as a number of
factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks,
expectations, goals, estimates or intentions expressed in the forward-looking statements.
These factors include, but are not limited to:
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the Company’s ability to operate in highly competitive industries;
the Company’s ability to compete with other forms of media and media platforms;
general economic conditions in the principal markets in which the Company operates;
the Company’s ability to attract and retain advertisers;
the Company’s ability to attract and retain readers;
the Company’s ability to retain and grow its digital audience and profitably develop its digital businesses;
the trend towards digital books and the Company’s ability to distribute its books through the changing distribution
landscape;
the Company’s ability to accurately estimate the rate of book returns through the wholesale and retail channels;
the popularity of its authors and its ability to retain popular authors;
TORSTAR CORPORATION 2011 ANNUAL REPORT 7
TORSTAR - Management’s Discussion and Analysis
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
labour disruptions;
newsprint costs;
the Company’s ability to reduce costs;
foreign exchange fluctuations;
credit risk;
restrictions imposed by existing credit facilities, debt financing and availability of capital;
pension fund obligations;
results of impairment tests;
reliance on its printing operations;
reliance on technology and information systems;
risks related to business development;
interest rates;
availability of insurance;
litigation;
environmental, privacy, communications and e-commerce laws and other laws and regulations applicable generally to
our businesses;
dependence on key personnel;
loss of reputation;
product liability;
intellectual property rights;
control of the Company by the Voting Trust; and
uncertainties associated with critical accounting estimates.
We caution that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results. In
addition, a number of assumptions, including those assumptions specifically identified throughout this MD&A, were applied in
making the forward-looking statements set forth in this MD&A which the Company believes are reasonable as of the date of
this MD&A. Some of the key assumptions include, without limitation, assumptions regarding the performance of the North
American economy; tax laws in the countries in which we operate; continued availability of printing operations; continued
availability of financing on appropriate terms; exchange rates; market competition; rates of return and discount rates relating to
pension expense and pension plan obligations; royalty rates, expected future revenues, expected future cash flows and
discount rates relating to valuation of goodwill and intangible assets; and successful development of new products. There is a
risk that some or all of these assumptions may prove to be incorrect.
When relying on our forward-looking statements to make decisions with respect to the Company and its securities, investors
and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company does
not intend, and disclaims any obligation, to update any forward-looking statements, whether written or oral, or whether as a
result of new information or otherwise, except as may be required by law.
TORSTAR CORPORATION 2011 ANNUAL REPORT 8
TORSTAR - Management’s Discussion and Analysis
TABLE OF CONTENTS
OVERVIEW
OPERATING RESULTS – YEAR ENDED DECEMBER 31, 2011
OPERATING RESULTS – THREE MONTHS ENDED DECEMBER 31, 2011
OUTLOOK
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL INSTRUMENTS
EMPLOYEE FUTURE BENEFIT OBLIGATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
FUTURE CHANGES IN ACCOUNTING POLICIES
RISKS AND UNCERTAINTIES
ANNUAL INFORMATION – 3 YEAR SUMMARY
SUMMARY OF QUARTERLY RESULTS
REVISED QUARTERLY RESULTS
CONTROLS AND PROCEDURES
OTHER
TORSTAR CORPORATION 2011 ANNUAL REPORT 9
TORSTAR - Management’s Discussion and Analysis
OVERVIEW
Torstar Corporation is a broadly based media and book publishing company listed on the Toronto Stock
Exchange (TS.B). Torstar reports its operations in two segments: Media and Book Publishing. The Media
Segment publishes over 100 newspapers including the Toronto Star, Canada’s largest daily newspaper, The
Mississauga News, Oshawa This Week, The Hamilton Spectator and the Canadian, English-language Metro
newspapers. It also includes leading digital properties such as thestar.com, toronto.com, InsuranceHotline.com,
Wheels.ca, flyerland.ca, goldbook.ca, Workopolis, Olive Media, eyeReturn Marketing and wagjag.com. The Book
Publishing Segment represents Harlequin, a leading global publisher of books for women. Torstar also has
investments in Black Press Limited (“Black Press”), Blue Ant Media Inc. (“Blue Ant”) and Canadian Press
Enterprises Inc. (“Canadian Press”). Until April 1, 2011, Torstar also had an investment in CTV Inc. (“CTV”).
Media Segment
The Media Segment includes Star Media Group (“SMG”) and Metroland Media Group (“MMG”).
Star Media Group includes the Toronto Star, Canada’s largest daily newspaper which is read in print and online
(thestar.com) by more than 3 million readers every week. Online, thestar.com is one of the most-visited
newspaper websites in Canada. Star Media Group also includes Metro, a free daily newspaper that is published
in Toronto, Vancouver, Ottawa, Calgary, Edmonton, London and Winnipeg and, pursuant to a joint venture with
Transcontinental Media G.P., in Halifax. The Star Media Group has one press centre which primarily supports the
Toronto Star’s printing needs but is also engaged in commercial printing.
Star Media Group’s other operations include Torstar Syndication Services (which provides editorial content to
newspapers and other media), Wheels.ca, InsuranceHotline.com, toronto.com (an online destination for events
and attractions in the Greater Toronto Area), Olive Media (a leader in online advertising sales in Canada with the
ability to reach over 17 million unique Canadian visitors monthly on a portfolio of top-tier sites including
thestar.com, nytimes.com, CNET.com, cyberpresse.ca, and auFeminin.ca), eyeReturn Marketing (a leading
provider of online marketing services), wagjag.com (a daily deal website) and travelalerts.ca (an online publisher
of travel deals).
In addition to the above operations, Star Media Group also includes Torstar’s proportionate interests in Sing Tao
Daily, Workopolis and Tuango.ca. Sing Tao Daily publishes a Chinese language newspaper in Canada with
editions in Toronto, Vancouver and Calgary. It is also involved in printing, outdoor advertising, Chinese language
telephone directories, radio and weekly magazine publishing. Torstar jointly owns the Canadian operations of
Sing Tao Daily with Sing Tao Holdings Limited. Torstar owns 50% of Workopolis, Canada’s leading provider of
internet recruitment and job search solutions. Square Victoria Digital Properties (a subsidiary of Power
Corporation) is Torstar’s partner in Workopolis. Torstar owns 50% of Tuango.ca, a Quebec-based daily deal
website.
Metroland Media Group publishes in print and online more than 100 weekly community newspapers including The
Mississauga News and Oshawa This Week and three daily newspapers – The Hamilton Spectator, the Waterloo
Region Record and the Guelph Mercury. Its online properties include flyerland.ca, HomeFinder.ca,
gottarent.com, save.ca and a 50% interest in LeaseBusters.com. Metroland Media Group also participates in
Wheels.ca, InsuranceHotline.com and wagjag.com. Metroland Media Group publishes the Gold Book print and
online directories, a number of specialty publications and operates several consumer shows throughout Ontario.
Metroland Media Group also operates Torstar Media Group Television (“TMGTV” - a teleshopping channel and a
product sourcing and distribution business). Metroland Media Group has nine web press facilities which print the
Metroland newspapers but also engage in commercial printing.
Book Publishing Segment
The Book Publishing Segment reports the results of Harlequin, a leading global publisher of books for women.
Harlequin publishes books around the world in a variety of genres and formats, including digital. Harlequin sells
books under several imprints including Harlequin, MIRA, HQN, LUNA, Kimani Press and Carina Press.
Harlequin sells books through the retail channel, in stores and online, and directly to the consumer through its
direct mail businesses and from its internet sites (in North America – Harlequin.com). Harlequin’s publishing
operations are comprised of two divisions: North America and Overseas. In 2011 Harlequin published books in
34 languages in 114 international markets.
TORSTAR CORPORATION 2011 ANNUAL REPORT 10
TORSTAR - Management’s Discussion and Analysis
Associated Businesses
Torstar has a 19.35% equity investment in Black Press, an approximate 25% equity investment in Blue Ant, a
33.33% equity investment in Canadian Press and until January 2012, a 30% equity investment in Q-ponz Inc.
Black Press is a privately held company that publishes more than 150 newspapers (weeklies, dailies and
shoppers) in Canada and the U.S. and has 16 press centres in Western Canada, Washington State, Ohio and
Hawaii.
Blue Ant is an independent media company which holds a controlling interest in GlassBOX Television (operating
specialty channels Travel+Escape, Bite TV and AUX TV), a minority interest in Quarto Communications (publisher
of Cottage Life, Outdoor Canada, Explore and Canadian Home Workshop) and a minority interest in High Fidelity
HDTV (operating four premium high definition channels Oasis HD, eqhd, radX and HIFI). Torstar invested $16.9
million on December 21, 2011 and will invest a further $5.8 million simultaneously with the completion of the
acquisition by Blue Ant of 100% of High Fidelity TV (which is subject to approval by the Canadian Radio-television
and Telecommunications Commission “CRTC”).
Canadian Press operates The Canadian Press news agency. Torstar invested an initial $0.8 million in November
2010 and committed to invest an additional $0.5 million in 2011.
Q-ponz produces and delivers unaddressed co-op direct mail. Torstar sold its interest in Q-ponz in early 2012.
OPERATING RESULTS – YEAR ENDED DECEMBER 31, 2011
Overall Performance
The following table sets out the segmented results for the years ended December 31, 2011 and 2010.
(in $000’s)
Operating revenue
Media
$1,089,330
Publishing Corporate
$459,427
Total
$1,548,757
Media
$1,015,696
Publishing Corporate
$468,072
Total
$1,483,768
2011
Book
2010
Book
Salaries and benefits
Other operating costs
EBITDA
Amortization &
depreciation
Operating earnings
Restructuring and
other charges
Operating profit
(398,842)
(518,818)
171,670
(29,415)
142,255
(100,014)
(273,320)
86,093
($12,227)
(3,287)
(15,514)
(511,083)
(795,425)
242,249
(3,695)
82,398
(55)
(15,569)
(33,165)
209,084
(392,949)
(446,572)
176,175
(27,469)
148,706
(98,206)
(281,770)
88,096
($10,574)
(3,364)
(13,938)
(3,965)
84,131
(58)
(13,996)
(501,729)
(731,706)
250,333
(31,492)
218,841
(18,860)
$123,395
(551)
$81,847
($15,569)
(19,411)
$189,673
(29,536)
$119,170
(357)
$83,774
(2,755)
($16,751)
(32,648)
$186,193
Revenue
Total revenue was $1,548.8 million in 2011, up $65.0 million from $1,483.8 million in 2010. The increase included
an increase of $18.3 million from a change in reporting for Torstar’s share of Metro’s revenues, $24.7 million from
acquisitions and a $7.7 million decrease from the impact of foreign exchange. Excluding these items, total
revenue was up $29.7 million in 2011. Media Segment revenues, excluding the above items, were up $34.7
million in 2011 including $45.3 million of higher product sales in Metroland Media Group’s TMGTV operations and
$19.2 million of growth in digital revenues. Print advertising revenues were down in the year with softness in
national and retail categories. Digital revenues in the Media Segment were up 22.8% year over year. Book
Publishing Segment revenues, excluding the impact of foreign exchange and acquisitions, were down $5.1 million
in 2011 with digital revenue growth not offsetting declines in print revenue in the Overseas markets.
Salaries and benefits
Total salaries and benefits expense was up $9.4 million or 1.9% in 2011 as significant savings from restructuring
initiatives in the newspaper businesses in the Media Segment reduced the impact of acquisitions, increased
staffing in the Media Segment digital operations, regular wage increases and a $1.3 million expense in Corporate
from the mark-to-market adjustments of a share-based compensation hedging instrument.
TORSTAR CORPORATION 2011 ANNUAL REPORT 11
TORSTAR - Management’s Discussion and Analysis
Other operating costs
Total other operating costs were up $63.7 million or 8.7% in 2011. The increase included the impact of
acquisitions, higher product costs for the TMGTV product sales, market expansions and investment spending in
the digital operations. In the Media Segment, newsprint pricing was flat year over year while consumption was
down. The Book Publishing Segment had lower promotional spending and overhead costs in 2011.
EBITDA
EBITDA was $242.2 million in 2011, down $8.1 million from $250.3 million in 2010. Media Segment EBITDA was
down $4.5 million as higher costs more than offset revenue growth. Book Publishing Segment EBITDA was down
$2.0 million including a decline of $6.4 million from the impact of foreign exchange and a $0.7 million benefit from
acquisitions. Corporate expenses were up $1.6 million in 2011 as lower professional fees were more than offset
by higher compensation costs, including the mark-to-market adjustment of a share-based compensation hedging
instrument.
Amortization and depreciation
Amortization and depreciation expense was $1.7 million higher in 2011, primarily from the amortization of
intangible assets acquired through acquisitions in the Media Segment.
Operating earnings
Operating earnings were $209.1 million in 2011, down $9.7 million from $218.8 million in 2010.
Restructuring and other charges
Restructuring and other charges of $19.4 million were recorded in 2011. This included $15.6 million for
restructuring initiatives in the Media Segment and $0.6 million in the Book Publishing Segment. It also included a
$3.2 million provision for rented space that the Media Segment vacated as reduced staff counts allowed for space
consolidation. The provision represents the discounted shortfall between the remaining obligation under the
existing leases and the amounts to be received through sublease arrangements. The annual cost savings from
the space consolidation are approximately $1.3 million a year with $0.3 million realized in the fourth quarter of
2011.
The 2011 restructuring initiatives in the Media Segment are expected to result in annualized net labour savings of
approximately $9.4 million and a reduction of approximately 150 positions. $1.5 million of the savings were
realized in 2011. The 2011 restructuring initiatives in the Book Publishing Segment are expected to result in
annualized savings of approximately $0.5 million and a reduction of 5 positions. $0.2 million of the savings was
realized in the fourth quarter of 2011.
Restructuring and other charges of $32.6 million were recorded in 2010 including $28.2 million of restructuring
provisions in the Media Segment, $2.8 million of costs related to Torstar’s bid to purchase the newspaper and
digital businesses of Canwest Limited Partnership and its related entities, a $1.2 million adjustment to a provision
for litigation in the Media Segment and $0.4 million related to transaction costs from Harlequin’s acquisition of the
other half of the German publishing business.
TORSTAR CORPORATION 2011 ANNUAL REPORT 12
TORSTAR - Management’s Discussion and Analysis
The Media Segment has undertaken several restructuring initiatives between 2009 and 2011 in order to reduce
ongoing operating costs. The following chart provides a summary of the realized and expected net savings
(including rent savings) by year:
(in $000’s)
Realized net savings in:
2009
2010
2011
Expected net savings in:
2012
2013
Annualized net savings
2009
Year of initiative
2010
2011
Total
$12,700
10,200
600
$23,500
$4,700
11,200
2,800
2,100
$20,800
$1,800
8,300
600
$10,700
$12,700
14,900
13,600
11,100
2,700
$55,000
Operating profit
Operating profit was $189.7 million in 2011, up $3.5 million from $186.2 million in 2010.
Interest and financing costs
Interest and financing costs were $16.6 million in 2011, down $7.5 million from $24.1 million in 2010.
(in $000’s)
Interest expense (net)
Swap settlement charge
Interest accretion costs
Interest and financing costs
2011
$10,168
3,794
2,667
$16,629
2010
$23,342
793
$24,135
2011 interest expense was $10.2 million, down $13.1 million from $23.3 million in 2010. The lower expense
reflects the significantly lower level of average net debt outstanding in the last three quarters of 2011 and lower
effective interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash
equivalents) was $171.5 million in 2011, down $289.2 million from $460.7 million in 2010. Torstar’s effective
interest rate on long-term debt was 3.9% in 2011 and 4.9% in 2010. Net debt was $153.3 million at December
31, 2011, down $215.3 million from $368.6 million at December 31, 2010.
In 2011, Torstar also incurred a $3.8 million charge related to the settlement of Canadian dollar debt interest rate
swaps. In 2006, in connection with the investment in CTV, Torstar had entered into interest rate swap
agreements to fix the rate of interest on $250 million of Canadian dollar borrowings at 4.3% (plus the applicable
interest rate spread based on Torstar’s long-term credit rating) through September 2011. The five-year swap
arrangements required a resetting of pricing and debt instruments every ninety days with a reset date occurring in
March 2011. In anticipation of the receipt of the funds from the completion of the CTV sale, the swap
arrangements were not reset in March and Torstar settled the swaps.
Interest accretion costs related to contingent consideration estimates, long-term restructuring provisions and
deferred acquisition payments were $2.7 million in 2011 and $0.8 million in 2010.
Adjustment to contingent consideration
In 2011, adjustments to contingent consideration estimates resulted in income of $0.6 million. Estimates of the
fair value of contingent consideration are recorded on the date of the related acquisition and are revised in future
periods as changes in the estimated payments occur.
Foreign exchange
The non-cash foreign exchange gain or loss reported in the consolidated statement of income primarily relates to
the translation of U.S. dollar denominated assets and liabilities held by Torstar’s Canadian operations into
Canadian dollars. It does not include the translation of foreign currency (including U.S. dollars) denominated
TORSTAR CORPORATION 2011 ANNUAL REPORT 13
TORSTAR - Management’s Discussion and Analysis
assets and liabilities of Torstar’s foreign operations or the translation of U.S. dollar debt that has been designated
as a hedge against those net U.S. dollar denominated assets. The foreign exchange on the translation of those
foreign-currency denominated assets and liabilities and the related hedge-designated debt into Canadian dollars
is reported through other comprehensive income. The amount of the non-cash foreign exchange gain or loss in
any year will vary depending on the movement in the relative value of the Canadian dollar and on whether
Torstar’s Canadian operations have a net asset or net liability position in U.S. dollars.
Torstar reported a non-cash foreign exchange loss of $3.5 million in 2011 as a result of the Canadian dollar being
weaker at the end of the year compared with the beginning and with Torstar’s Canadian operations being in a net
liability position in U.S. dollars for most of the year. In 2010, Torstar’s Canadian operations were in a net liability
position in U.S. dollars, but the Canadian dollar was stronger at the end of the year compared with the beginning
resulting in a non-cash foreign exchange gain of $4.8 million.
Torstar’s net liability position in U.S. dollars was larger in 2010 as Torstar had not designated any of its U.S. dollar
debt as a hedge against its net investment in U.S. dollar denominated operations thereby increasing the net
liability position in U.S. dollars. Effective January 1, 2011, Torstar has designated $80.0 million of its U.S. dollar
denominated debt as a hedge against its net investment in the Book Publishing businesses that have the U.S.
dollar as their functional currency. This reduces Torstar’s net liability position in U.S. dollars.
Loss of associated businesses
Loss of associated businesses was $2.2 million in 2011 and $28.3 million in 2010.
Torstar recorded a loss of $1.6 million in 2011 as its share of Canadian Press’s results through the third quarter of
2011 when Torstar’s carrying value was reduced to nil. Torstar will begin again to report its share of Canadian
Press’s results once the unrecognized losses ($3.9 million as of December 31, 2011) have been offset by net
income, other comprehensive income or additional investments are made.
Torstar recorded a loss of $0.5 million in 2011 and $0.4 million in 2010 as its share of Q-ponz’s results.
Torstar ceased to equity account for its investment in CTV on September 10, 2010 and subsequently sold its
investment on April 1, 2011. Torstar has not recorded any amounts related to CTV in the loss of associated
businesses in 2011. Torstar’s share of CTV’s net loss was $28.0 million in 2010, representing CTV’s results
through September 10, 2010.
Torstar has not recorded its share of Black Press’ results in either 2011 or 2010 as Torstar’s carrying value in
Black Press was previously reduced to nil. Torstar’s share of Black Press’s net income would have been $3.3
million in 2011 up from $0.1 million in 2010. $2.3 million of the improvement related to impairment losses
recorded by Black Press in 2010. Torstar will begin again to report its share of Black Press’s results once the
unrecognized losses ($0.3 million as of December 31, 2011) have been offset by net income or other
comprehensive income.
Blue Ant has an August fiscal year end and therefore does not have coterminous quarter-ends with Torstar.
Torstar will start recording its share of Blue Ant’s results in fiscal 2012 with the first quarter including Blue Ant’s
results for their quarter ended February 29, 2012.
Other income
Under IFRS, when a business combination is achieved in stages, the acquirer is required to remeasure its
previously held interest in the acquiree to the acquisition date fair value and recognize the resulting gain or loss, if
any, in profit or loss. This remeasurement resulted in other income of $19.1 million in 2011 related to Torstar’s
increased ownership of Metro and save.ca and $3.5 million in 2010 from Harlequin’s acquisition of the other half
of the German publishing business. (See the Revised quarterly results section of this MD&A for additional
information.)
Gain on sale of assets
Torstar recognized a gain on sale of assets of $4.1 million in 2010. This included $1.3 million on the sale of a
small piece of excess land in Vaughan and $2.8 million realized on the formation of a joint venture with Rogers
TORSTAR CORPORATION 2011 ANNUAL REPORT 14
TORSTAR - Management’s Discussion and Analysis
Media to manage and further develop the Total Online Publishing Solutions (“TOPS”) system. The TOPS system
is a content management system for internet media publishers that was developed by Torstar.
CTV Inc. – gain on sale/remeasurement
In 2011, Torstar recorded a gain of $74.6 million on the sale of its interest in CTV. The transaction closed on April
1, 2011 and Torstar received cash proceeds of $291.6 million. Torstar entered into the agreements to sell its
interest in CTV in September 2010, with the sale subject to customary approvals and closing conditions, including
approval by the CRTC. Effective with the signing of the agreements, Torstar recorded a $115.5 million
remeasurement gain as the investment was reclassified as available-for-sale and remeasured at estimated fair
value. (See the Revised quarterly results section of this MD&A for additional information.)
Investment write-down
In 2011, Torstar management determined that there had been an other than temporary decline in the value of the
investment in Q-ponz. A $0.5 million write-down was recorded in 2011, reducing the carrying value to nil. In early
2012, the Company sold its interest in Q-ponz to the controlling shareholder for nominal consideration. During
2010, Torstar recognized an investment write-down of $0.8 million related to two small portfolio investments.
Income and other taxes
There were several items in Torstar’s net income before taxes in 2011 and 2010 that were not tax-affected and
therefore had an impact on Torstar’s effective tax rate in both years. This included the 2011 gain on the sale of
CTV, the 2011 remeasurement gain on the Metro and save.ca transactions, the 2010 loss of associated
businesses related to CTV, the 2010 remeasurement gain on Torstar’s investment in CTV and the 2010
remeasurement gain on Harlequin’s German transaction. In addition, Torstar recorded $10.0 million in 2011 and
$3.0 million in 2010 as a tax benefit from the recognition of tax losses that had previously not been recognized.
Excluding the impact of these items in both years, Torstar’s effective tax rate was 31.6% in 2011 and 31.2% in
2010. The Canadian statutory rate was lower in 2011, although Torstar only realized a portion of the benefit as a
large proportion of its income is taxed in foreign jurisdictions where tax rates remain unchanged. The effective tax
rate was lower in 2010 primarily due to capital gains that were tax-affected at 50% of the statutory rate.
Net income attributable to equity shareholders
Torstar reported net income attributable to equity shareholders of $217.7 million or $2.74 per share in 2011 up
$7.8 million or $0.09 per share from $209.9 million or $2.65 per share in 2010. Excluding the impact of CTV in
both years, Torstar would have reported net income attributable to equity shareholders of $143.1 million or $1.80
per share in 2011 up $20.7 million or $0.26 per share from $122.4 million or $1.54 per share in 2010.
The average number of Class A voting shares and Class B non-voting shares outstanding was 79.4 million in
2011 up slightly from 79.1 million in 2010.
TORSTAR CORPORATION 2011 ANNUAL REPORT 15
TORSTAR - Management’s Discussion and Analysis
The following chart provides a continuity of earnings per share from 2010 to 2011:
Net income attributable to equity shareholders per share 2010
(cid:120) CTV - loss from associated businesses (2010)
(cid:120) CTV - remeasurement gain (2010)
Adjusted net income attributable to equity shareholders per share 2010
Changes
(cid:120) Operations
(cid:120) Restructuring and other charges
(cid:120) Settlement of interest rate swap contracts
(cid:120) Non-cash foreign exchange
(cid:120) Adjustment to contingent consideration
(cid:120) Other income (remeasurement gains on step acquisitions)
(cid:120) Gain on sale of assets (2010)
Pre CTV gain net income attributable to equity shareholders per share
(cid:120) CTV – gain on sale (2011)
Net income attributable to equity shareholders per share 2011
$2.65
0.35
(1.46)
1.54
1.80
0.94
$2.74
0.06
0.12
(0.03)
(0.06)
0.01
0.20
(0.04)
Segment Operating Results – Media
The following table sets out operating earnings for the Media Segment for the years ended December 31, 2011
and 2010.
(in $000’s)
Operating revenue
MMG
$582,378
2011
SMG
$506,952
Total
MMG
$1,089,330 $541,735
2010
SMG
$473,961
Total
$1,015,696
Salaries and benefits
Other operating costs
EBITDA
Amortization &
depreciation
Operating earnings
(227,321)
(253,153)
101,904
(171,521)
(265,665)
69,766
(398,842)
(518,818)
171,670
(224,090)
(213,547)
104,098
(168,859)
(233,025)
72,077
(392,949)
(446,572)
176,175
(11,249)
$90,655
(18,166)
$51,600
(29,415)
$142,255
(10,124)
$93,974
(17,345)
$54,732
(27,469)
$148,706
Total revenue of the Media Segment was $1,089.3 million in 2011, up $73.6 million from $1,015.7 million in 2010.
The revenue growth included $18.3 million from a change in the reporting for Torstar’s share of Metro’s results
and $20.6 million from acquisitions. Significant acquisitions in 2011 were Performance Printing, Starmail
Distributors, Tuango.ca and the incremental ownership of the Metro newspapers. Excluding these items, Media
Segment revenue was up $34.7 million in 2011 including $45.3 million of higher product sales in Metroland Media
Group’s TMGTV operations and $19.2 million of growth in digital revenues. Print advertising revenues were down
in the year with softness in national and retail categories as print advertising continued to be impacted by weak
economic conditions. Digital revenue was 11.2% of Media Segment revenue in 2011, up from 9.8% in 2010.
At the end of 2010, the jointly-owned Metro operations met certain milestones that resulted in a change in how
Torstar reports its share of the results effective with the first quarter of 2011. The change results in a higher
amount of revenue and expenses being reported by Torstar but with no change in operating earnings. The
impact on the Media Segment of the change in reporting was an increase of $18.3 million to both revenue and
expenses in 2011.
The Media Segment expenses were up $78.1 million in 2011 including $5.9 million of higher salaries and benefits
and $72.2 million of other operating costs. The increase included higher product sales costs, the change in
reporting for Metro, increased expenses related to the acquisitions, market expansions and the continued
TORSTAR CORPORATION 2011 ANNUAL REPORT 16
TORSTAR - Management’s Discussion and Analysis
investment in the digital businesses. Offsetting a portion of these higher costs was $13.6 million of net savings
from restructuring initiatives. Newsprint pricing was flat year over year.
Media Segment EBITDA was $171.7 million in 2011, down $4.5 million from $176.2 million in 2010. Media
Segment operating earnings were $142.3 million in 2011, down $6.4 million from $148.7 million in 2010.
Metroland Media Group
Metroland Media Group revenues were $582.4 million in 2011 up $40.7 million from $541.7 million in 2010,
including a $10.8 million increase from acquisitions. Excluding acquisitions, revenues were up $29.9 million in the
year. Revenue growth included $45.3 million from higher product sales in the TMGTV operations and digital
revenue growth of $11.0 million. Offsetting these increases were lower print revenues. Both the community and
daily newspapers experienced print advertising revenue declines across most categories.
Metroland Media Group expenses were up $42.8 million in 2011, including $3.2 million of higher salaries and
benefits and $39.6 million of higher other operating costs. Total expenses were higher in 2011 from a
combination of higher product costs in the TMGTV operation, acquisitions, market expansions and investment in
the digital operations partially offset by net savings of $3.8 million from restructuring initiatives.
Metroland Media Group’s EBITDA was $101.9 million in 2011 down $2.2 million from $104.1 million in 2010.
Metroland Media Group’s operating earnings were $90.7 million in 2011 down $3.3 million from $94.0 million in
2010.
Star Media Group
Star Media Group revenues were $507.0 million in 2011, up $33.0 million from $474.0 million in 2010. Excluding
the increase of $18.3 million from the change in reporting for Metro and $9.8 million from acquisitions, revenues
were up $4.9 million in 2011.
Toronto Star print advertising revenues were down 6.4% in 2011 with declines across most categories. National
and multi-market retail categories were significant contributors to the decline. Circulation revenue was up 1.7% in
2011 from a combination of price increases and opt-in products. The Metro newspapers had significant revenue
growth in 2011, benefiting from improved national advertising as well as the expansion into London and Winnipeg.
Sing Tao revenues were also up in the year with growth in both newspapers and magazine revenues. Star Media
Group digital revenues were up $8.1 million in 2011, excluding acquisitions.
Star Media Group expenses were up $35.3 million in 2011 including $2.7 million of higher salaries and benefits
and $32.6 million of higher other operating costs. Total expenses were higher in 2011 from a combination of the
change in reporting for Metro, acquisitions, Metro’s market expansions and continued investment in staff and
marketing in the digital operations partially offset by $9.8 million of net savings from restructuring efforts.
Star Media Group EBITDA was $69.8 million in 2011, down $2.3 million from $72.1 million in 2010. Star Media
Group operating earnings were $51.6 million in 2011 down $3.1 million from $54.7 million in 2010.
Segment Operating Results – Book Publishing
The following tables set out a summary of operating earnings for the Book Publishing Segment and a continuity of
revenue and operating earnings, including the impact of foreign currency movements and foreign exchange
contracts, for the years ended December 31, 2011 and 2010.
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
EBITDA
Amortization & depreciation
Operating earnings
2011
$459,427
(100,014)
(273,320)
86,093
(3,695)
$82,398
2010
$468,072
(98,206)
(281,770)
88,096
(3,965)
$84,131
TORSTAR CORPORATION 2011 ANNUAL REPORT 17
TORSTAR - Management’s Discussion and Analysis
(in $000’s)
Reported revenue, prior year
Impact of currency movements and foreign exchange contracts
Change in underlying revenue
Reported revenue, current year
Reported operating earnings, prior year
Impact of currency movements and foreign exchange contracts
Change in underlying operating earnings
Reported operating earnings, current year
$468,072
(7,673)
(972)
$459,427
$84,131
(6,374)
4,641
$82,398
In 2011, Book Publishing revenues were down $5.1 million excluding the impact of foreign exchange and
acquisitions. North America revenues were up $1.4 million and Overseas revenues were down $6.5 million.
North American division revenues were up $1.4 million and operating earnings were up $5.0 million in 2011
excluding the impact of foreign exchange. Digital revenues were up $29.5 million reflecting the continued growth
of the digital book market. Sales of print books declined during the year. Retail print revenues were down $23.5
million with lower volumes from the shift in format from physical to digital books and lower positive adjustments to
prior year returns provisions in 2011. Direct-to-consumer revenues were down $4.6 million in the year. The
traditional direct mail business was down reflecting the ongoing trend in this channel.
Overseas division revenues were down $6.5 million and operating earnings were down $1.1 million in 2011
excluding the impact of foreign exchange and the benefit from the acquisition of the other half of the German
business at the beginning of the second quarter of 2010. The economic weakness in Europe had a negative
impact on Harlequin’s Overseas operations in 2011. Higher digital revenues, primarily in the U.K. and Japan,
were not sufficient to offset lower revenues in the retail print and the direct-to-consumer businesses. The revenue
decline was partially offset by lower promotional spending and overheads.
Global digital revenues were 15.5% of total revenue in 2011, up from 7.7% in 2010.
OPERATING RESULTS – THREE MONTHS ENDED DECEMBER 31, 2011
Overall Performance
The following table sets out the segmented results for the three months ended December 31, 2011 and 2010.
(in $000’s)
Operating revenue
Media
$307,281
Publishing Corporate
$118,055
Total
$425,336
Media
$297,560
Publishing Corporate
$119,970
Total
$417,530
2011
Book
2010
Book
Salaries and benefits
Other operating costs
EBITDA
Amortization &
depreciation
Operating earnings
Restructuring and
other charges
Operating profit
(104,414)
(139,307)
63,560
(8,305)
55,255
(25,382)
(71,443)
21,230
(884)
20,346
($2,889)
(713)
(3,602)
(132,685)
(211,463)
81,188
(10)
(3,612)
(9,199)
71,989
(13,550)
$41,705
(113)
$20,233
($3,612)
(13,663)
$58,326
(105,047)
(131,445)
61,068
(6,692)
54,376
(17,544)
$36,832
(26,125)
(75,954)
17,891
(962)
16,929
$16,929
($3,201)
(335)
(3,536)
(10)
(3,546)
24
($3,522)
(134,373)
(207,734)
75,423
(7,664)
67,759
(17,520)
$50,239
Revenue
Total revenue was $425.3 million in the fourth quarter of 2011, up $7.8 million from $417.5 million in the fourth
quarter of 2010. The increase included an increase of $5.7 million from a change in reporting for Torstar’s share
of Metro’s revenues, $15.1 million from acquisitions and a $0.3 million increase from the impact of foreign
exchange. Excluding these items, total revenue was down $13.3 million in the fourth quarter of 2011. Media
Segment revenues, excluding the above items, were down $11.1 million in the fourth quarter. Print advertising
TORSTAR CORPORATION 2011 ANNUAL REPORT 18
TORSTAR - Management’s Discussion and Analysis
declines more than offset $5.7 million of higher product sales in Metroland Media Group’s TMGTV operations and
$0.3 million of growth in digital revenues. Book Publishing Segment revenues, excluding the impact of foreign
exchange, were down $2.3 million in the fourth quarter of 2011 with digital revenue growth not offsetting declines
in the print businesses, particularly in the Overseas markets.
Salaries and benefits
Total salaries and benefits expense was down $1.7 million or 1.3% in the fourth quarter as savings in the
newspaper businesses in the Media Segment from restructuring initiatives more than offset the impact of
acquisitions, increased staffing in the Media Segment digital operations and regular wage increases.
Other operating costs
Total other operating costs were up $3.7 million or 1.8% in the fourth quarter of 2011. The increase included the
impact of acquisitions, higher product costs for the TMGTV product sales and market expansions. In the Media
Segment, newsprint pricing was flat year over year while consumption was down. The Book Publishing Segment
had lower promotional spending and overhead costs in the fourth quarter.
EBITDA
EBITDA was $81.2 million in the fourth quarter of 2011, up $5.8 million from $75.4 million in the fourth quarter of
2010. Media Segment EBITDA was up $2.5 million including the benefit of acquisitions. Book Publishing
Segment EBITDA was up $3.3 million including a decline of $0.7 million from the impact of foreign exchange.
Amortization and depreciation
Amortization and depreciation expense was $1.5 million higher in the fourth quarter of 2011, primarily from the
amortization of intangible assets acquired through acquisitions in the Media Segment.
Operating earnings
Operating earnings were $72.0 million in the fourth quarter of 2011, up $4.2 million from $67.8 million in the fourth
quarter of 2010.
Restructuring and other charges
Restructuring charges of $13.7 million and $17.5 million were recorded in the fourth quarter of 2011 and 2010
respectively. The Media Segment fourth quarter 2011 restructuring provisions of $13.6 million are expected to
result in annual net savings of $6.8 million and a reduction of approximately 110 positions.
Operating profit
Operating profit was $58.3 million in the fourth quarter of 2011, up $8.1 million from $50.2 million in the fourth
quarter of 2010.
Interest and financing costs
Interest and financing costs were $2.1 million in the fourth quarter of 2011, down $4.2 million from $6.3 million in
the fourth quarter of 2010.
(in $000’s)
Interest expense (net)
Interest accretion costs
Interest and financing costs
2011
$1,379
682
$2,061
2010
$6,024
304
$6,328
Interest expense was $1.4 million in the fourth quarter of 2011, down $4.6 million from $6.0 million in the fourth
quarter of 2010. The lower expense reflects the significantly lower level of average net debt outstanding in 2011
and lower effective interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash
equivalents) was $121.1 million in the fourth quarter of 2011, down $288.1 million from $409.2 million in the same
period last year. Torstar’s effective interest rate on long-term debt was 3.0% in the fourth quarter of 2011 and
5.4% in the fourth quarter of 2010.
TORSTAR CORPORATION 2011 ANNUAL REPORT 19
TORSTAR - Management’s Discussion and Analysis
Interest accretion costs related to contingent consideration estimates, long-term restructuring provisions and
deferred acquisition payments were $0.7 million in the fourth quarter of 2011 and $0.3 million in the fourth quarter
of 2010.
Foreign exchange
Torstar reported a non-cash foreign exchange loss of $0.5 million in the fourth quarter of 2011 compared with a
gain of $4.4 million in the same period last year.
Torstar’s Canadian operations were in a net asset position in U.S. dollars in the fourth quarter of 2011 and a net
liability position in the fourth quarter of 2010 and the Canadian dollar strengthened as at the end of the year
relative to the beginning of the fourth quarter in both years.
Torstar’s net liability position in U.S. dollars was larger in 2010 as Torstar had not designated any of its U.S. dollar
debt as a hedge against its net investment in U.S. dollar denominated operations thereby increasing the net
liability position in U.S. dollars. Effective January 1, 2011, Torstar has designated $80.0 million of its U.S. dollar
denominated debt as a hedge against its net investment in the Book Publishing businesses that have the U.S.
dollar as their functional currency. This reduces Torstar’s net liability position in U.S. dollars.
Loss of associated businesses
Loss of associated businesses was $0.4 million from Q-ponz in the fourth quarter of both 2011 and 2010.
Torstar did not record its share of Black Press’s or Canadian Press’s results in the fourth quarter of 2011 as
Torstar’s carrying value in both investments had previously been reduced to nil. Torstar’s share of Black Press’s
net income would have been $2.1 million in the fourth quarter of 2011 down slightly from $2.5 million in the fourth
quarter of 2010. Torstar’s share of Canadian Press’s results would have been a loss of $0.3 million in the fourth
quarter of 2011.
Blue Ant has an August fiscal year end and therefore does not have coterminous quarter-ends with Torstar.
Torstar will start recording its share of Blue Ant’s results in fiscal 2012 with the first quarter including Blue Ant’s
results for their quarter ended February 29, 2012.
Other income
Under IFRS, when a business combination is achieved in stages, the acquirer is required to remeasure its
previously held interest in the acquiree to the acquisition date fair value and recognize the resulting gain or loss, if
any, in profit or loss. This remeasurement resulted in other income of $19.0 million in the fourth quarter of 2011
related to Torstar’s increased ownership of Metro.
Gain on sale of assets
Torstar recognized a gain on sale of assets of $1.3 million in the fourth quarter of 2010 on the sale of a small
piece of excess land in Vaughan.
Investment write-down
In the fourth quarter of 2011, Torstar management determined that there had been an other than temporary
decline in the value of the investment in Q-ponz. A $0.5 million write-down was recorded, reducing the carrying
value to nil. In early 2012, the Company sold its interest in Q-ponz to the controlling shareholder for nominal
consideration. In the fourth quarter of 2010, Torstar recognized an investment write-down of $0.8 million related
to two small portfolio investments.
Income and other taxes
In the fourth quarter of 2011, the remeasurement gain on the Metro transaction was not tax-affected. In addition,
Torstar recorded $8.7 million in the fourth quarter of 2011 and $2.8 million in the fourth quarter of 2010 as a tax
benefit from the recognition of tax losses that had previously not been recognized.
Excluding the impact of these items in both years, Torstar’s effective tax rate was 32.7% in the fourth quarter of
2011 and 30.0% in the fourth quarter of 2010. The Canadian statutory rate was lower in 2011, although Torstar
only realized a portion of the benefit as a large proportion of its income is taxed in foreign jurisdictions where tax
TORSTAR CORPORATION 2011 ANNUAL REPORT 20
TORSTAR - Management’s Discussion and Analysis
rates remain unchanged. The higher effective rate in 2011 reflected the mix of income and the impact of capital
gains in 2010 that were tax-affected at 50% of the statutory rate.
Net income attributable to equity shareholders
Torstar reported net income attributable to equity shareholders of $64.3 million or $0.81 per share in the fourth
quarter of 2011 up $28.0 million or $0.35 per share from $36.3 million or $0.46 per share in the fourth quarter of
2010.
The average number of Class A voting shares and Class B non-voting shares outstanding was 79.5 million in the
fourth quarter of 2011 up slightly from 79.1 million in the fourth quarter of 2010.
The following chart provides a continuity of earnings per share from 2010 to 2011:
Net income attributable to equity shareholders per share 2010
Changes
(cid:120) Operations
(cid:120) Restructuring and other charges
(cid:120) Non-cash foreign exchange
(cid:120) Other income (remeasurement gain on step acquisitions)
(cid:120) Gain on sale of assets (2010)
Net income attributable to equity shareholders per share 2011
0.12
0.03
(0.03)
0.24
(0.01)
$0.46
$0.81
Segment Results – Media
The following table sets out operating earnings for the Media Segment for the three months ended December 31,
2011 and 2010.
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
EBITDA
Amortization & depreciation
Operating earnings
MMG
2011
SMG
Total
MMG
2010
SMG
Total
$162,319 $144,962 $307,281 $158,467 $139,093 $297,560
(62,060)
(68,348)
31,911
(3,289)
$28,622
(42,354)
(70,959)
31,649
(5,016)
$26,633
(104,414)
(139,307)
63,560
(8,305)
$55,255
(61,187)
(63,585)
33,695
(2,266)
$31,429
(43,860)
(67,860)
27,373
(4,426)
$22,947
(105,047)
(131,445)
61,068
(6,692)
$54,376
Total revenue of the Media Segment was $307.3 million in the fourth quarter of 2011, up $9.7 million from $297.6
million in the fourth quarter of 2010. The revenue growth included $5.7 million from a change in the reporting for
Torstar’s share of Metro’s results and $15.1 million from acquisitions. Significant acquisitions were Performance
Printing, Starmail Distributors, Tuango.ca and the incremental increase in ownership of the English-language
Metro newspapers in Canada. Excluding these items, Media Segment revenue was down $11.1 million in the
fourth quarter. Print advertising revenue declines more than offset $5.7 million of higher product sales in
Metroland Media Group’s TMGTV operations and $0.3 million of growth in digital revenues. Digital revenue was
10.6% of Media Segment revenues in the fourth quarter of 2011 and 10.4% in the fourth quarter of 2010.
At the end of 2010, the jointly-owned Metro operations met certain milestones that resulted in a change in how
Torstar reports its share of the results effective with the first quarter of 2011. The change results in a higher
amount of revenue and expenses being reported by Torstar but with no change in operating earnings. The
impact on the Media Segment of the change in reporting was an increase of $5.7 million to both revenue and
expenses in the fourth quarter of 2011.
The Media Segment expenses were up $7.2 million in the fourth quarter of 2011 including $7.8 million of higher
other operating costs partially offset by $0.6 million of lower salaries and benefits. Total expenses were higher in
the fourth quarter of 2011 from a combination of higher product costs in the TMGTV operation, the change in
TORSTAR CORPORATION 2011 ANNUAL REPORT 21
TORSTAR - Management’s Discussion and Analysis
reporting for Metro, acquisitions and market expansions partially offset by net savings of $3.1 million from
restructuring initiatives and lower year over year expenses related to growth initiatives in digital and other areas.
Newsprint pricing was flat year over year in the quarter.
Media Segment EBITDA was $63.6 million in the fourth quarter of 2011, up $2.5 million from $61.1 million in the
fourth quarter of 2010.
Metroland Media Group
Metroland Media Group revenues were $162.3 million in the fourth quarter of 2011 up $3.8 million from $158.5
million in the fourth quarter of 2010, including a $7.7 million increase from acquisitions. Excluding acquisitions,
revenues were down $3.9 million in the fourth quarter as $5.7 million of revenue growth from product sales in the
TMGTV operations and $1.1 million of digital revenue growth were more than offset by revenue declines in print
advertising and distributions. Both the community and daily newspapers experienced print advertising revenue
declines across most categories.
Metroland Media Group expenses were up $5.6 million in the fourth quarter of 2011, including $0.9 million of
higher salaries and benefits and $4.7 million of higher other operating costs. Total expenses were higher in the
fourth quarter of 2011 from a combination of higher product costs in the TMGTV operation, acquisitions and
market expansions partially offset by net savings of $1.0 million from restructuring initiatives.
Metroland Media Group’s EBITDA was $31.9 million in the fourth quarter of 2011 down $1.8 million from $33.7
million in the fourth quarter of 2010. Metroland Media Group’s operating earnings were $28.6 million in the fourth
quarter of 2011 down $2.8 million from $31.4 million in the same period last year.
Star Media Group
Star Media Group revenues were $145.0 million in the fourth quarter of 2011, up $5.9 million from $139.1 million
in the fourth quarter of 2010. Excluding the increase of $5.7 million from the change in reporting for Metro and
$7.4 million from acquisitions, revenues were down $7.2 million in the fourth quarter of 2011.
Toronto Star print advertising revenues were down 12.1% in the fourth quarter of 2011 with continued weakness
in the retail category and a decline in the national category, in particular the national financial category.
Circulation revenue was up 3.5% in the fourth quarter of 2011 from a combination of price increases and opt-in
products. The Metro newspapers had revenue growth in the fourth quarter of 2011, benefiting from improved
national advertising as well as the expansion into London and Winnipeg. Sing Tao revenues were up slightly in
the fourth quarter. Star Media Group digital revenues were down $0.8 million in the fourth quarter of 2011,
excluding acquisitions, with softness in national advertising impacting both thestar.com and Olive Media.
Star Media Group expenses were up $1.6 million in the fourth quarter of 2011 including $3.1 million of higher
other operating costs partially offset by $1.5 million of lower salaries and benefits. Total expenses were higher in
the fourth quarter of 2011 from a combination of the change in reporting for Metro, acquisitions, Metro’s market
expansions and investment in staff in the digital operations. These were partially offset by $2.1 million of net
savings from restructuring efforts and lower year over year marketing in the digital operations.
Star Media Group EBITDA was $31.6 million in the fourth quarter of 2011, up $4.2 million from $27.4 million in the
fourth quarter of 2010. Star Media Group operating earnings were $26.6 million in the fourth quarter of 2011 up
$3.7 million from $22.9 million in the fourth quarter of 2010.
TORSTAR CORPORATION 2011 ANNUAL REPORT 22
TORSTAR - Management’s Discussion and Analysis
Segment Results - Book Publishing
The following tables set out a summary of operating earnings for the Book Publishing Segment and a continuity of
revenue and operating earnings, including the impact of foreign currency movements and foreign exchange
contracts, for the three months ended December 31, 2011 and 2010.
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
EBITDA
Amortization & depreciation
Operating earnings
(in $000’s)
Reported revenue, fourth quarter prior year
Impact of currency movements and foreign exchange contracts
Change in underlying revenue
Reported revenue, fourth quarter current year
Reported operating earnings, fourth quarter prior year
Impact of currency movements and foreign exchange contracts
Change in underlying operating earnings
Reported operating earnings, fourth quarter current year
2011
$118,055
(25,382)
(71,443)
21,230
(884)
$20,346
2010
$119,970
(26,125)
(75,954)
17,891
(962)
$16,929
$119,970
343
(2,258)
$118,055
$16,929
(704)
4,121
$20,346
Book Publishing revenues were down $2.3 million in the fourth quarter excluding the impact of foreign exchange,
with North America down $0.3 million and Overseas down $2.0 million.
North American division revenues were down $0.3 million and operating earnings were up $3.1 million in the
fourth quarter of 2011 excluding the impact of foreign exchange. Digital revenues were up $7.0 million while
sales of print books declined during the quarter. Retail print revenues were down $6.2 million and direct-to-
consumer revenues were down $1.1 million. Higher North American operating earnings in the fourth quarter of
2011 included the benefit from lower costs including incentives and promotional spending as well as lower costs
associated with digital revenue.
Overseas division revenues were down $2.0 million and operating earnings were up $1.0 million in the fourth
quarter of 2011 excluding the impact of foreign exchange. Digital revenues continued to grow, primarily in the
U.K. and Japan, but were more than offset by lower retail print revenues across most markets. Lower overhead
costs and promotional spending contributed to the improvement in operating earnings.
Global digital revenues were 17.7% of total revenue in the fourth quarter of 2011, up from 9.5% in the same
period last year.
OUTLOOK
The 2012 revenue outlook for the Media Segment remains uncertain. Print advertising continues to be
challenged by economic uncertainty and shifts in spending by advertisers. The 2011 acquisitions are expected to
contribute revenue growth in 2012 while product sales at TMGTV are anticipated to be lower. Digital revenue
growth is expected to continue in 2012. Early indications in 2012 are that advertising revenues remain soft
although no clear trend has emerged. On the expense side, in addition to the increased costs from the 2011
acquisitions, the Media Segment is expected to have $1.0 million of higher registered defined benefit pension plan
expense along with general cost increases. The Media Segment is anticipated to realize $11.1 million of savings
in 2012 from restructuring initiatives undertaken through the end of 2011. Newsprint pricing is expected to be flat
year over year. Net investment spending associated with growth initiatives in 2012 is anticipated to be consistent
TORSTAR CORPORATION 2011 ANNUAL REPORT 23
TORSTAR - Management’s Discussion and Analysis
with 2011 levels. In addition, the more significant acquisitions completed in 2011 are expected to contribute
approximately $10.0 million in incremental EBITDA in 2012.
Harlequin had a very strong 2011 but going into 2012 Harlequin continues to face uncertainty around the
relationship between digital revenue growth and retail print revenue declines. Early indications are that the pace
of digital revenue growth in North America has moderated in 2012. It is, however, unclear whether this
moderated growth will slow the decline in retail print sales. Revenues in Harlequin’s Overseas division are also
expected to continue to be challenged by the weak European economies in 2012. In addition, in 2012 Harlequin
will have higher author royalties related to digital revenue. Given these factors, it is anticipated that, excluding the
impact of foreign exchange, it will be difficult for Harlequin to match the very good results experienced in 2011. If
the Canadian dollar remains at its current levels relative to the U.S. dollar and overseas currencies, Harlequin
anticipates a year over year negative foreign exchange impact of approximately $1.1 million, including the impact
of the U.S. dollar hedges currently in place.
From a cash flow perspective, in 2012, Torstar anticipates spending in the range of $65.0 - $70.0 million for the
required funding of registered defined benefit pension plans, $35.0 million for additions to property, plant,
equipment and intangible assets and $14.7 million for payments related to prior year acquisitions and investment
commitments.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Torstar’s uses the cash generated by its operations to fund capital expenditures, distributions to shareholders,
acquisitions and debt repayment. Long-term debt is used to supplement funds from operations as required,
generally for capital expenditures or acquisitions.
It is expected that future cash flows from operating activities, combined with the long-term debt facility will be
adequate to cover forecasted financing requirements in the short term and long term.
In 2011, $115.0 million of cash was generated by operations, $137.4 million was provided by investing activities
and $245.6 million was used for financing activities. Cash and cash equivalents net of bank overdraft increased
by $6.9 million in the year from $36.0 million to $42.9 million.
In the fourth quarter of 2011, $46.3 million of cash was generated by operations, $101.7 million was used for
investing activities and $53.0 million was generated by financing activities. Cash and cash equivalents net of
bank overdraft decreased by $4.2 million in the quarter from $47.1 million to $42.9 million.
Operating Activities
Operating activities provided cash of $115.0 million in 2011, down $42.7 million from $157.7 million in 2010. The
lower amount in 2011 reflected higher funding of employee future benefits and a larger increase in non-cash
working capital as compared to the same period last year.
Non-cash working capital increased $18.1 million in 2011 from the payment of final 2010 income taxes and a net
decrease in current provision balances. $21.6 million was paid against restructuring provisions during 2011.
Non-cash working capital increased $5.7 million in 2010. This resulted from higher accounts receivable
(improved revenues year over year) offset by higher income taxes payable (timing of installments) and higher
accounts payable. $22.1 million was paid against restructuring provisions during 2010.
Cash provided by operating activities was $46.3 million in the fourth quarter of 2011 including a $7.6 million
increase in non-cash working capital. In the fourth quarter of 2010, cash provided by operating activities was
$58.4 million including a $7.1 million decrease in non-cash working capital. The swing in non-cash working
capital year over year was primarily due to a smaller increase in accounts payable in the fourth quarter of 2011
compared to the same period last year. $4.3 million was paid against restructuring provisions in the fourth quarter
of 2011 and $5.2 million in the fourth quarter of 2010.
TORSTAR CORPORATION 2011 ANNUAL REPORT 24
TORSTAR - Management’s Discussion and Analysis
Investing Activities
Cash of $137.4 million was provided by investing activities during 2011 and $12.1 million in 2010.
Cash of $291.6 million was received in 2011 as proceeds on the sale of Torstar’s interest in CTV. Cash received
in 2010 included a $40.0 million return of capital by CTV, $6.2 million on the collection of a mortgage receivable
on the sale of excess land in Vaughan during 2008, $3.0 million on the formation of a joint venture with Rogers
Media to manage and further develop the TOPS system and $1.3 million on the sale of a small piece of excess
land in Vaughan.
In 2011, Torstar used cash of $101.8 million for acquisitions and investments. This included $48.4 million for the
fourth quarter increased ownership in Metro, $42.4 million for several acquisitions in the Media Segment, $6.9
million for the deferred payments related to Harlequin’s 2010 acquisition of full ownership of its German publishing
business, $3.5 million for deferred and contingent consideration payments in respect of prior year acquisitions in
the Media Segment, and $0.6 million for portfolio investments. The other Media Segment acquisitions included
Performance Printing, Starmail Distributors, Autocatch.com, Brant News and the remaining 50% of save.ca. The
Metro transaction also included a call option liability of $10.8 million related to call and put options that were
entered into with regards to the minority interest held by Metro International. The other Media Segment
acquisitions included $2.5 million of current payables for deferred purchase payments and an estimate of $1.1
million for contingent consideration.
In 2010, Torstar used cash of $11.4 million for acquisitions and investments. This included $2.4 million for the
first of three payments related to Harlequin’s acquisition of full ownership of its German publishing business, $3.5
million for deferred purchase and performance payments in respect of prior year acquisitions in the Media
Segment and $5.5 million for several acquisitions within the Media Segment. The Media Segment acquisitions
included the remaining ownership of Travelwire Inc., wagjag.com and several other smaller businesses.
Cash used for investments in associated businesses was $17.3 million in 2011 and $0.8 million in 2010. The
2011 investments included $16.9 million in Blue Ant and $0.3 million in Canadian Press. The 2010 investment
was in Canadian Press.
Additions to property, plant and equipment and intangible assets were $35.0 million in 2011, up $8.0 million from
$27.0 million in 2010. The 2011 additions included investment in technology, software, and leasehold
improvements across the Media Segment reflecting process improvements, website development and office
space consolidation. It also included the completion of the 2010 investment in Harlequin’s distribution centre in
New York State.
Cash used by investing activities in the fourth quarter of 2011 was $101.7 million including $75.7 million for
acquisitions, $17.3 million for investments in associated businesses and $8.7 million for additions to property,
plant and equipment and intangible assets. In 2010, cash of $27.5 million was provided by investing activities
including the $40.0 million return of capital from CTV and $1.3 million from the sale of assets, offset by $11.8
million spent on additions to property, plant and equipment and intangible assets, $1.6 million spent on
acquisitions and investments and $0.8 million for investments in associated businesses.
2012 capital expenditures
Capital expenditures in 2012 are expected to be approximately $35.0 million consistent with the $35.0 million
spent in 2011. The 2012 capital expenditures are anticipated to include continued investment in technology and
software in the Media Segment in addition to general capital maintenance spending.
Financing Activities
Cash of $245.6 million was used in financing activities during 2011, including $209.8 million for the repayment of
long-term debt and $36.9 million for cash dividends paid to shareholders. In the fourth quarter of 2011, cash of
$53.0 million was provided by financing activities including $63.1 million of increased long-term debt borrowing
less $9.9 million for cash dividends paid to shareholders.
Cash of $170.0 million was used in financing activities during 2010, including $142.3 million for the repayment of
long-term debt and $29.0 million for cash dividends paid to shareholders. In the fourth quarter of 2010, cash of
TORSTAR CORPORATION 2011 ANNUAL REPORT 25
TORSTAR - Management’s Discussion and Analysis
$79.8 million was used in financing activities including $73.0 million for the repayment of long-term debt and $7.2
million for cash dividends paid to shareholders.
Net Debt
Net debt was $153.3 million at December 31, 2011, down $215.3 million from $368.6 million at December 31,
2010. The $215.3 million included $209.8 million of long-term debt repayments, a decrease of $7.4 million from
changes in cash and bank overdraft balances and an increase of $1.9 million from the impact of foreign
exchange.
Long-term Debt
At December 31, 2011, Torstar had $196.2 million of debt outstanding under its long-term bank credit facility. The
debt has been classified as current on the December 31, 2011 consolidated statement of financial position as the
renewal of the facility was not effective until January 4, 2012. The debt consisted of U.S. dollar bankers’
acceptances of $88.2 million and Canadian dollar bankers’ acceptances of $108.0 million.
Credit facility in place at December 31, 2011
As of December 31, 2011, Torstar’s long-term bank credit facility consisted of a $275 million revolving term loan
(reduced from $425 million in April 2011 at Torstar’s request) that matured in January 2012. Prior to April 2011,
the long-term bank credit facilities also included a revolving operating loan of $175 million, which was cancelled in
April 2011 at Torstar’s request. Amounts may be drawn under the facility in either Canadian or U.S. dollars.
The interest rate spread above the bankers’ acceptance rate if in Canadian dollars, or the LIBOR rate if in U.S.
dollars, varied based on Torstar’s long-term credit rating for borrowings under the revolving term loan (range of
0.4% to 1.5%). During 2011, the interest rate spread was 0.6% on the revolving term loan. Prior to April 2011,
the interest rate spread on borrowings under the revolving operation loan was 2.25% and varied based on
Torstar’s net debt to operating cash flow ratio (range of 2.0% to 3.8%).
Credit facility effective January 4, 2012
Torstar’s renewed long-term bank credit facility (effective January 4, 2012) consists of a $150 million revolving
facility (“Tranche A”) that will mature on January 4, 2016 and a $200 million revolving facility (“Tranche B”) that
will mature on January 4, 2014. Both Tranches provide for annual 364-day extensions upon the mutual
agreement of Torstar and the lenders.
Amounts may be drawn under the renewed facility in either Canadian or U.S. dollars. The interest rate spread
above the bankers’ acceptance rate if in Canadian dollars, or the LIBOR rate if in U.S. dollars, varies based on
Torstar’s net debt to operating cash flow ratio for borrowings under either Tranche (range of 1.4% to 2.5%).
Effective January 2012, the interest rate spread is 1.5%.
Torstar borrows under the bank credit facility primarily in the form of bankers’ acceptances. The bankers’
acceptances normally mature over periods of 30 to 180 days but as they are issued under the long-term credit
facility, their classification is consistent with the facility. Bankers’ acceptances are generally issued for a term of
less than six months in order to provide for flexibility in borrowing and to benefit from short term interest rates.
However, the bankers’ acceptances program has been and is intended to continue to be an ongoing source of
financing for Torstar. Recognizing this intent, to the extent that the long-term bank credit facility has sufficient
credit available that it could be used to replace the outstanding bankers’ acceptances, the bankers’ acceptances
will be classified as long-term debt on Torstar’s balance sheet effective with the first quarter of 2012 (once the
renewed facility is effective).
Torstar has a policy of maintaining a sufficient level of U.S. dollar denominated debt in order to provide a hedge
against its U.S. dollar assets. It is expected that the level of U.S. dollar debt will remain relatively constant during
2012.
Torstar’s long-term bank credit facility also acts as a standby line in support of letters of credit. At December 31,
2011, a total of $224.1 million was drawn under the facility, including a $25.2 million letter of credit relating to an
executive retirement plan. As of December 31, 2011, Torstar had approximately $50.9 million of available credit.
TORSTAR CORPORATION 2011 ANNUAL REPORT 26
TORSTAR - Management’s Discussion and Analysis
The available credit increased by $75 million on January 4, 2012 effective with the renewal of the long-term bank
credit facility.
Contractual Obligations
Torstar has the following significant contractual obligations (in $000’s1):
Nature of the
Obligation
Office leases
Services
Acquisitions
Investment
Equipment leases
Subtotal
Foreign currency forward
contracts:
- payments
- receipts
- net
US $ Interest rate swaps
Long-term debt
Total
Total
$131,901
17,181
21,464
5,765
2,010
178,321
88,835
(89,721)
(886)
11,339
196,191
$384,965
Less than 1
Year (2012)
$19,341
5,321
8,915
5,765
793
40,135
1 – 3 Years
2013–2014
$36,128
7,919
12,126
4 – 5 Years
2015–2016
$32,686
3,338
167
953
57,126
257
36,448
After 5
Years
2017 +
$43,746
603
256
7
44,612
53,240
(53,724)
(484)
3,382
$43,033
35,595
(35,997)
(402)
6,764
46,191
$109,679
1,193
150,000
$187,641
$44,612
1 All foreign denominated obligations were translated at the December 31, 2011 spot rates.
Office leases include the offices at One Yonge Street in Toronto for Torstar and the Toronto Star, Harlequin’s
Toronto head office and the Waterloo Region Record in Kitchener. The One Yonge Street and Kitchener leases
extend until the year 2020. Harlequin’s lease will expire in 2018. Equipment leases include office equipment and
company vehicles.
The services include distribution contracts for some of the Star Media Group properties and Harlequin’s U.K.
operations and Star Media Group sponsorship commitments. The acquisition obligations relate to the 2009
purchases of gottarent.com and Attitude Digitale, the 2010 purchase of wagjag.com, the 2011 purchases of
Autocatch.com, Foodscrooge and the Kit as well as the call option liability for Metro. The investment obligation is
the additional investment in Blue Ant that Torstar will make following the completion of the acquisition by Blue Ant
of 100% of High Fidelity TV (which is subject to approval by the CRTC).
The foreign currency forward contracts are the U.S. dollar contracts that Torstar uses to manage the exchange
risk in Harlequin’s U.S. operations. The interest rate swaps are used to manage the risk on variable interest rate
debt. More details on these are provided in the Financial Instruments section that follows.
The long-term debt repayment timing reflects the renewal of Torstar’s credit facility in January 2012.
Torstar has a guarantee outstanding in relation to an operating lease for a warehouse in New Hampshire that was
entered into by one of the businesses in its former Children’s Supplementary Education Publishing Segment.
Lease payments are under U.S. $1.0 million per year and the lease runs through December 2018. The
warehouse has been subleased, on identical terms and conditions, to the purchaser of that business. The
sublease is secured by a U.S. $0.7 million letter of credit.
Funding of Post Employment Benefits
Actuarial reports for the most significant group of Torstar’s registered defined benefit pension plans (in terms of
assets and obligations) were completed as of December 31, 2010. Based on these reports, Torstar’s 2011
funding obligation for its registered defined benefit pension plans was $46.4 million. Torstar will be required to
prepare another set of actuarial reports as of December 31, 2011 to determine the 2012 funding requirements.
TORSTAR CORPORATION 2011 ANNUAL REPORT 27
TORSTAR - Management’s Discussion and Analysis
Based on current market conditions, Torstar has estimated that the required funding in 2012 for these pension
plans will be in the range of $65.0 - $70.0 million.
FINANCIAL INSTRUMENTS
Foreign Exchange
Harlequin’s international operations provide Torstar with approximately 28% of its operating revenues. As a
result, fluctuations in exchange rates can have a significant impact on Torstar’s reported profitability. Torstar’s
most significant exposure is to the movements in the U.S.$/Cdn.$ exchange rate. To manage this exchange risk
in its operating results, Torstar’s practice is to enter into forward foreign exchange contracts to hedge a portion of
its U.S. dollar revenues.
In 2011, Torstar sold U.S. $35.5 million under forward foreign exchange contracts at an average exchange rate of
$1.07. In 2010, U.S. $51.6 million was sold at an average exchange rate of $1.16. The settlement of these
contracts resulted in a foreign exchange gain of $2.6 million in 2011 and $7.1 million in 2010. Torstar has entered
into forward foreign exchange contracts to sell $52.4 million U.S. dollars during 2012 at an average rate of $1.03,
$30.0 million U.S. dollars in 2013 at an average rate of $1.02 and $5.0 million U.S. dollars in 2014 at an average
rate of $1.05. These 2012, 2013 and 2014 forward foreign exchange contracts had a $0.4 million favourable fair
value at December 31, 2011. These U.S. dollar contracts are designated as revenue hedges for accounting
purposes and any resulting gains or losses are recognized in Book Publishing Segment revenues as realized.
The counterparties to the foreign currency contracts are all major financial institutions with high credit ratings.
Further details are contained in Note 13 of the consolidated financial statements.
Torstar is also exposed to foreign exchange fluctuations on the translation of foreign currency denominated
assets and liabilities. Foreign exchange gains or losses on the translation of foreign currency (primarily U.S.
dollar) denominated assets and liabilities held by Torstar’s Canadian operations are reported in the consolidated
statement of income. Foreign exchange gains or losses on the translation of foreign currency (including U.S.
dollars) denominated assets and liabilities of Torstar’s foreign operations are reported through other
comprehensive income.
In order to offset the exchange risk on its balance sheet from U.S. dollar denominated assets, Torstar maintains a
certain level of U.S. dollar denominated debt. As most of the foreign exchange gains or losses on those U.S.
dollar denominated assets is reported through other comprehensive income, Torstar, effective January 1, 2011,
has designated $80.0 million of its U.S. dollar denominated debt as a hedge against its net investment in the Book
Publishing businesses that have the U.S. dollar as their functional currency. The foreign exchange gain or loss
on the translation of U.S. dollar denominated debt in excess of $80.0 million is reported in the consolidated
statement of income.
Interest Rates
Torstar has long-term debt in the form of bankers’ acceptances issued under the long-term bank credit facility.
Torstar issues debt in both Canadian and U.S. dollars. Torstar issues bankers’ acceptances at floating rates.
Torstar’s general practice has been to have approximately one half of its debt at floating interest rates but the
exact split will vary from time to time. As at December 31, 2011, approximately 40% of Torstar’s long-term debt
was at fixed interest rates as a result of the use of interest rate swap agreements.
In 2006, Torstar entered into interest rate swap agreements to fix the rate of interest on $250 million of Canadian
dollar borrowings at 4.3% (plus the applicable interest rate spread based on Torstar’s long-term credit rating)
through September 2011. These swap agreements were settled at a cost of $3.8 million in the first quarter of
2011 in anticipation of the April 2011 receipt of the funds from the completion of the CTV sale.
In 2008, Torstar entered into interest rate swap agreements that fix the interest rate on U.S. $80 million of
borrowings at approximately 4.2% (plus the applicable interest rate spread based on Torstar’s long-term credit
rating) for seven years ending May 2015. These swap agreements, which have been designated as cash flow
hedges, had a fair value of $8.8 million unfavourable to Torstar at December 31, 2011.
TORSTAR CORPORATION 2011 ANNUAL REPORT 28
TORSTAR - Management’s Discussion and Analysis
Torstar mitigates its exposure to credit related losses in the event of non-performance by counterparties to the
interest rate swaps by accepting only major financial institutions with high credit ratings as counterparties. Further
details are contained in Note 12 of the consolidated financial statements.
EMPLOYEE FUTURE BENEFIT OBLIGATIONS
Torstar has several registered defined benefit pension plans which provide pension benefits to its employees in
Canada and the U.S. and an unregistered, unfunded defined benefit pension plan that provides pension benefits
to eligible senior management executives of Torstar. In addition, Torstar has capital accumulation (defined
contribution) plans in Canada, the U.S. and certain of Harlequin’s overseas operations. Torstar also has a post
employment benefits plan that provides health and life insurance benefits to certain grandfathered employees,
primarily in the newspaper operations.
Torstar had the following defined benefit net obligations as at December 31:
($000’s)
Registered pension plans
Unregistered pension plan
Post employment benefits plan
2011
$184,571
22,266
56,039
$262,876
Torstar recognized the following expense in net income related to the defined benefit obligations:
($000’s)
Registered pension plans
Unregistered pension plan
Post employment benefits plan
2011
$9,500
2,018
3,048
$14,566
2010
$133,194
23,158
51,416
$207,768
2010
$8,479
1,700
3,059
$13,238
Funding requirements are determined based on actuarial valuations that are completed at the frequency required
under the applicable (primarily Ontario provincial) pension legislation which can range from annually to once
every three years.
Actuarial reports for the most significant group of Torstar’s registered defined benefit pension plans (in terms of
assets and obligations) were completed as of December 31, 2010. Based on these reports, Torstar’s 2011
funding obligation for its registered defined benefit pension plans was $46.4 million, up significantly from $16.8
million in 2010. Torstar will be required to prepare another set of actuarial reports as of December 31, 2011 to
determine the 2012 funding requirements. Based on current market conditions, Torstar has estimated that the
required funding in 2012 for these pension plans will be in the range of $65.0 - $70.0 million.
The unregistered pension plan is unfunded but is supported by an outstanding letter of credit of $25.2 million as at
December 31, 2011. Torstar only funds the unregistered pension plan when a member of the plan has retired or
has left the company and is of retirement age. Payments of $2.4 million were made in 2011 and $0.4 million in
2010. The health and life insurance post employment benefits plan is being funded as payments are made on
behalf of the retirees. Payments of $2.3 million were made in both 2011 and 2010.
The cost and obligations of pensions and post employment benefits earned by employees is calculated annually
by independent actuaries using the projected unit credit method prorated on service and management’s best
estimate of assumptions for the discount rate used to measure obligations, the expected long-term rate of return
on pension plan assets for funded plans, salary increases, employee turnover, retirement ages of employees,
mortality rates and expected health care costs. The most significant assumptions are the discount rate and the
expected long-term rate of return on pension plan assets. On an interim basis, management estimates the
changes in the actuarial gains and losses. These estimates are adjusted to actual when the annual calculations
are completed by the independent actuaries.
TORSTAR CORPORATION 2011 ANNUAL REPORT 29
TORSTAR - Management’s Discussion and Analysis
The significant assumptions made by Torstar’s management in 2011 and 2010 were:
To determine the benefit obligation at the end of the year:
Discount rate
Rate of future compensation increase
To determine the pension benefit expense for the year:
Discount rate
Rate of future compensation increase
Expected long-term rate of return on pension plan assets
2011
2010
4.3% - 4.4%
3.0% - 4.0%
4.7% - 5.1%
3.0% - 4.0%
4.7% - 5.1%
3.0% - 4.0%
6.75%
5.5% - 5.8%
3.0% - 4.0%
7.0%
To determine the pension benefit expense for the following year:
Discount rate
Rate of future compensation increase
Expected long-term rate of return on pension plan assets
2012
4.3% - 4.4%
3.0% - 4.0%
6.50%
The discount rates 4.3 % - 4.4% were the yields at December 31, 2011 on high quality Canadian corporate bonds
with maturities that match the expected maturity of the pension obligations (as prescribed by the Canadian
Institute of Chartered Accountants (“CICA”). The selection of a discount rate that was one percent higher (holding
all other assumptions constant) would have resulted in a decrease in the total pension plan obligation at
December 31, 2011 of $110.1 million and a decrease in the 2011 expense of $0.7 million. A discount rate that
was one percent lower would have increased the total pension plan obligation at December 31, 2011 by $125.8
million and decreased the 2011 expense by $0.1 million.
Management has estimated the expected long-term rate of return on pension plan assets to be 6.75% based on
the targeted mix of investments held by Torstar’s pension plans. The long-term rate of return includes
assumptions on inflation rates and expected real rates of return on cash, fixed income and equity investments.
These various expected rates of return were then weighted to reflect the targeted mix of investments held by
Torstar’s pension plans. Management feels that a long-term rate of return expectation of 6.75% is reasonable
and within the range used by other Canadian corporations. Holding all other assumptions constant, if the
expected long-term rate of return on pension plan assets had been one percent higher (lower) the 2011 pension
expense would have been approximately $7.1 million lower (higher).
Management has estimated the rate of future compensation increases to be between 3.0% and 4.0%. This rate
includes an anticipated level of inflationary increases as well as merit increases. Management has considered
both historical trends and expectations for the future. Recent compensation increases have been lower than this
range given current market conditions but management believes the range reflects an appropriate longer-term
view.
For the post employment benefits plan that provides health and life insurance benefits to certain grandfathered
employees, the key assumptions are the discount rate and the health care cost trends. The discount rate used is
the same as the prescribed rate for the defined benefit pension obligation. For health care costs, the estimated
trend was for an 8.0% increase for the 2011 expense. For 2012, health care costs are estimated to increase by
7.5% with a 0.5% decrease each year until 2017. If the estimated increase in health care costs was one percent
higher the obligation at December 31, 2011 would be approximately $2.0 million higher. If the estimated increase
in health care costs was one percent lower the obligation at December 31, 2011 would be approximately $1.7
million lower. The impact on the 2011 expense would have been less than $0.3 million.
Due to the extensive use of estimates in the benefit calculations, actuarial gains and losses arise over time as
discount rates change, when actual return performance differs from the estimated return and as other assumption
estimates change. The most significant actuarial gains and losses arise from differences in the actual returns
earned on pension plan assets as compared to the expected long-term returns and from the impact of changes in
TORSTAR CORPORATION 2011 ANNUAL REPORT 30
TORSTAR - Management’s Discussion and Analysis
the discount rates on the plan obligations. Torstar recognizes these actuarial gains and losses as realized
through other comprehensive income. Actuarial losses of $91.5 million were recognized through other
comprehensive income in 2011 and $27.8 million in 2010.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of Torstar’s consolidated financial statements in conformity with IFRS requires management to
make judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of revenues, expenses, assets, and liabilities and the disclosure of contingent liabilities, at the end of the
reporting period.
Management uses estimates when accounting for certain items such as revenues, allowance for doubtful
accounts, useful lives of capital assets, asset impairments, provisions, share-based compensation plans,
employee benefit plans, deferred income taxes and goodwill impairment. Estimates are also made by
management when recording the fair value of assets acquired and liabilities assumed in a business combination.
Estimates are based on a number of factors, including historical experience, current events and other
assumptions that management believes are reasonable under the circumstances. By their nature, these
estimates are subject to measurement uncertainty and actual results could differ. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period
in which the estimates are revised and in any future periods affected.
The more significant estimates and judgements made by management are described below.
Classification of investments as portfolio investments, associated businesses, joint ventures and subsidiaries
Classification of investments requires judgement on whether Torstar controls, has joint control or significant
influence over the strategic financial and operating decisions relating to the activity of the investee. Joint control
is the contractually agreed sharing of control over the financial and operating policy decisions of the investee. It
exists only when the decisions require the unanimous consent of the parties sharing control. Significant influence
is the power to participate in the financial and operating policy decisions of the investee but does not represent
control or joint control over those decisions. If an investor holds 20% or more of the voting power of the investee,
it is presumed that the investor has significant influence, unless it can be clearly demonstrated that this is not the
case. Conversely, if the investor holds less than 20% of the voting power of the investee, it is presumed that the
investor does not have significant influence, unless such influence can be clearly demonstrated.
In assessing the level of control or influence that Torstar has over an investment, management considers
ownership percentages, board representation as well as other relevant provisions in shareholder agreements.
Black Press has been classified as an associated business based on management’s judgement that Torstar has,
based on rights to board representation and other provisions in the shareholder agreement, significant influence
despite owning only 19.35% of the voting rights.
Book revenue provisions
Revenue from the sale of books is recorded net of provisions for estimated returns and direct-to-consumer bad
debts (book revenue provisions). Retail print books are sold with a right of return. The retail returns provision is
estimated based primarily on point-of-sale information, returns patterns and historical sales performance for the
type of book and the author. Direct-to-consumer books are shipped with no obligation to the customer who may
return the books or cancel their subscription at any time. The direct-to-consumer book revenue provision
recognizes that not all books shipped will be purchased by the customer. Direct-to-consumer book revenue
provisions are made at the time of shipment for the anticipated physical return of the books or a non-payment for
the shipment. The direct-to-consumer book revenue provisions are estimated based on historical payment rates
for the type of book as well as how long the customer has been a subscriber.
The impact of the variance between the original estimate for returns and direct-to-consumer bad debts and the
actual experience is reported in a period subsequent to the original sale. This can have either a positive (if the
actual experience is better than estimated) or negative (if the actual experience is worse) impact on reported
results. This subsequent impact has historically been more significant for the retail returns provisions than the
direct-to-consumer book revenue provisions.
TORSTAR CORPORATION 2011 ANNUAL REPORT 31
TORSTAR - Management’s Discussion and Analysis
At December 31, 2011, the book revenue provisions deducted from accounts receivable on the consolidated
balance sheets was $88.4 million ($109.0 million in 2010). A one percent change in the average net sale rate
used in calculating the global retail returns provision on sales from July to December 2011 would have resulted in
a $3.3 million change in reported 2011 revenue.
Employee benefits
The accrued benefit asset or liability and the related cost of defined benefit pension plans and other post
employment benefits earned by employees is determined each year by independent actuaries based on several
assumptions.
The actuarial valuation uses management’s assumptions for the discount rate, expected long-term rate of return
on pension plan assets, rate of compensation increase, trends in healthcare costs and expected average
remaining years of service of employees. Management applies judgement in the selection of these estimates,
based on regular reviews of historical investment returns, salary increases, health care costs and demographic
employee data. The most significant assumptions are the discount rate and the expected long-term rate of return
on pension plan assets.
The discount rate used to determine the present value of the future cash flows that are expected to be needed to
settle employee benefit obligations is based on the yield on long-term, high-quality corporate bonds, with
maturities matching the estimated cash flows from the benefit plan. A lower discount rate would result in a higher
employee benefit obligation.
The expected long-term rate of return is a weighted average of estimated long-term returns on each of the major
pension plan asset categories in the Company’s pension funds. A lower expected rate would result in a lower fair
value of the pension plan assets and a higher employee benefit obligation.
Management’s current estimates, along with a sensitivity analysis of changes in these estimates on both the
benefit obligation and the benefit expense are further discussed under “Employee Future Benefit Obligations” in
this MD&A and are disclosed in Note 17 of the consolidated financial statements.
Impairment of non-financial assets
At each reporting date, Torstar is required to assess its intangible assets and goodwill for potential indicators of
impairment such as an adverse change in business climate that may indicate that these assets may be impaired.
If any such indication exists, Torstar shall estimate the recoverable amount of the asset or cash-generating unit
and compare it to the carrying value. In addition, irrespective of whether there is any indication of impairment,
Torstar is required to test intangible assets with an indefinite useful life and goodwill for impairment at least
annually.
For intangible assets other than goodwill, Torstar is also required to assess at each reporting date whether there
is any indication that previously recognized impairment losses may no longer exist or may have decreased.
Torstar completes its annual testing during the fourth quarter each year.
The test for impairment for either an intangible asset or goodwill is to compare the recoverable amount of the
asset or cash-generating unit to the carrying value. The recoverable amount is the greater of fair value less costs
to sell and value in use. The recoverable amount is determined for an individual asset unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets (such as
goodwill). If this is the case, the recoverable amount is determined for the cash generating unit to which the asset
belongs.
In calculating the recoverable amount, management is required to make several assumptions including but not
limited to royalty rates, expected future revenues, expected future cash flows and discount rates. Torstar’s
assumptions are influenced by current market conditions and levels of competition both of which may affect
expected revenues. Expected cash flows may be further affected by changes in operating costs beyond what
Torstar is currently anticipating. Torstar has made certain assumptions for the discount and terminal growth rates
TORSTAR CORPORATION 2011 ANNUAL REPORT 32
TORSTAR - Management’s Discussion and Analysis
to reflect possible variations in the cash flows; however, the risk premiums expected by market participants
related to uncertainties about the industry, specific reporting units or specific intangible assets may differ or
change quickly depending on economic conditions and other events. Changes in any of these assumptions could
have a significant impact on the fair value of the reporting unit or the intangible asset and the results of the related
impairment testing.
Torstar has completed its annual impairment testing of goodwill and intangible assets for fiscal 2011 and 2010.
There was no impairment loss or reversals of impairment loss recorded as a result of the testing.
On January 1, 2010, on the transition to IFRS, the Company completed its impairment testing of goodwill and
non-amortizable intangible assets. There was no impairment loss required to be recorded on the transition date.
The Company also assessed for any indicators that previous impairment losses had decreased. As certain
businesses had improved results and outlook, $0.5 million of previously recorded impairment losses on non-
amortizable intangible assets was reversed.
Taxes
The Company is subject to income taxes in Canada and foreign jurisdictions. Significant judgement is required in
determining the world-wide provision for income taxes. During the ordinary course of business, there are many
transactions and calculations for which the ultimate tax determination is uncertain. Management uses judgement
in interpreting tax laws and determining the appropriate rates and amounts in recording current and deferred
taxes, giving consideration to timing and probability. Actual income taxes could significantly vary from these
estimates as a result of future events, including changes in income tax law or the outcome of reviews by tax
authorities and related appeals. To the extent that the final tax outcome is different from the amounts that were
initially recorded, such differences will impact the income tax provision in the period in which such determination
is made.
Deferred tax is provided using the liability method for temporary differences between the tax bases of assets and
liabilities and their carrying amount for financial reporting purposes. Deferred tax assets and liabilities are
measured using substantively enacted tax rates and laws at the reporting date that are expected to be in effect
when the temporary differences are expected to reverse.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits
and unused tax losses to the extent that it is probable that sufficient taxable profit will be available against which
they can be utilized. When assessing the probability of taxable profit being available, management primarily
considers prior years’ results, forecasted future results and non-recurring items. As such, the assessment of the
Company’s ability to utilize tax losses carried forward is to a large extent judgement-based. If the future taxable
results of the Company differ significantly from those expected, the Company would be required to increase or
decrease the carrying value of the deferred tax assets with a potentially material impact on the Company’s
consolidated statement of financial position and consolidated statement of comprehensive income. The carrying
amount of deferred tax assets is reassessed at each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to utilize all or part of the deferred tax assets.
Unrecognized deferred tax assets are reassessed at each reporting period and are recognized to the extent that it
is probable that there will be sufficient taxable profits to allow all or part of the asset to be recovered.
More information on Torstar’s income taxes is provided in Note 5 of the consolidated financial statements.
Fair value measurement of contingent consideration
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as
part of the business combination and is subsequently remeasured to fair value at each reporting date. The
determination of the fair value is primarily based on revenue levels estimated to be realized by the acquired
businesses for specified periods following the acquisition. The key assumptions take into consideration the
probability of meeting each performance target and the discount rate. Depending on the absolute amount of the
contingent consideration and the time until it becomes payable, the actual payment could differ significantly from
the original estimate.
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Provisions
Provisions are recognized when (i) the Company has a present legal or constructive obligation based on past
events; (ii) it is probable that an outflow of economic resources will be required to settle the obligation; and (iii) the
amount can be reasonably estimated. Provisions are measured at the present value of the estimated expenditure
expected to settle the obligation. This present value, if material, is determined using the current market
assessments of the time value of money and risks specific to the obligation. The obligation increases as a result
of the passage of time and this increase is recorded as interest expense.
FUTURE CHANGES IN ACCOUNTING POLICIES
In October 2010, the IASB amended IFRS 7 Financial Instruments: Disclosures to enhance the disclosure about
transfers of financial assets. This improvement is to assist users in understanding the possible effects of any risks
that remain in an entity after the asset has been transferred. In addition, if disproportionate amounts are
transferred close to the year-end, additional disclosures would be required. The effective date of the amendment
is for annual periods beginning on or after July 1, 2011. Torstar has determined that the adoption of this
amendment will not have a material impact on the consolidated financial statements.
In December 2010, the IASB amended IAS 12 Income Taxes for the recovery of underlying assets and the impact
on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be
through use or through sale when the asset is measured at fair value under IAS 40 Investment Property, by
adding the presumption that the recovery would normally be through sale. The amendment also incorporates the
remaining guidance in SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21 has
been withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1,
2012. Torstar has determined that the adoption of this amendment will not have a material impact on the
consolidated financial statements.
In November 2009, the IASB issued IFRS 9 Financial Instruments: Classification and Measurement, which covers
classification and measurement as the first part of its project to replace IAS 39. In October 2010, the Board also
incorporated new accounting requirements for liabilities. The standard introduces new requirements for
measurement and eliminates the current classification of loans and receivables, available-for-sale and held-to-
maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a
carryover of requirements from IAS 39. Torstar does not anticipate early adoption and will adopt the standard on
the effective date of January 1, 2015. Torstar is in the process of reviewing the standard to determine the impact
on the consolidated financial statements.
In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or after
January 1, 2013 with early adoption permitted. Torstar is in the process of reviewing the standards to determine
the impact on the consolidated financial statements:
(cid:120)
(cid:120)
(cid:120)
IFRS 10 Consolidated Financial Statements requires an entity to consolidate an investee when it is exposed,
or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. IFRS 10 supersedes SIC -12 Consolidations - Special Purpose
Entities and replaces parts of IAS 27 Consolidated and Separate Financial Statements.
IFRS 11 Joint Arrangements requires a venturer to classify its interest in a joint arrangement as a joint
operation or a joint venture. The standard eliminates the use of the proportionate consolidation method to
account for joint ventures. Joint ventures will be accounted for using the equity method of accounting while
for a joint operation, the venturer will recognize its share of the assets, liabilities, revenues and expenses of
the joint operation. IFRS 11 supersedes SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by
Venturers and IAS 31 Joint Ventures.
IFRS 12 Disclosure of Interests in Other Entities establishes disclosure requirements for interests in other
entities such as subsidiaries, joint arrangements, associates and unconsolidated structured entities. The
standard carries
introduces significant additional disclosure
requirements that address the nature of, and risks associated with, an entity’s interest in other entities. IFRS
forward existing disclosures and also
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12 replaces the previous requirements included in IAS 27 Consolidated and Separate Financial Statements,
IAS 31 Joint Ventures and IAS 28 Investments in Associates.
(cid:120)
IFRS 13 Fair Value Measurement is a comprehensive standard for fair value measurement and disclosure
requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about
fair value measurement.
(cid:120) As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 Separate Financial Statements
is limited to accounting for subsidiaries, jointly controlled entities and associates in separate financial
statements. Torstar does not present separate financial statements.
(cid:120) As a consequence of the new IFRS 11 and IFRS 12, IAS 28 Investments in Associates has been renamed
IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to
investments in joint ventures in addition to associates.
In June 2011, the IASB amended the following standards, which Torstar is in the process of reviewing to
determine the impact on the consolidated financial statements:
(cid:120) The IASB amended IAS 1 Presentation of Financial Statements by revising how certain items are presented
in other comprehensive income (“OCI”). Items within OCI that may be reclassified to profit and loss will be
separated from items that will not. The standard is effective for financial years beginning on or after July 1,
2012 with early adoption permitted. The amendment affects presentation only and has no impact on Torstar’s
financial position or performance.
(cid:120) The IASB made a number of amendments to IAS 19 Employee Benefits, which included eliminating the use of
the “corridor” approach and requiring remeasurements to be presented in OCI, past service costs to be
recognized immediately, whether vested or not as well as enhanced disclosures. The standard also requires
that the discount rate used to determine the defined benefit obligation should also be used to calculate the
expected return on plan assets by introducing a net interest approach, which replaces the expected return on
plan assets and interest costs on the defined benefit obligation, with a single net interest component
determined by multiplying the net defined benefit liability or asset by the discount rate used to determine the
defined benefit obligation. The standard is effective for financial years beginning on or after January 1, 2013
with early adoption permitted.
In December 2011, the IASB amended both IAS 32 Financial Instruments: Presentation and IFRS 7 Financial
Instruments: Disclosures by moving the disclosure requirements in IAS 32 to IFRS 7 and enhancing the
disclosures about offsetting financial assets and liabilities. The effective date of the amendments is January 1,
2015. Earlier adoption is permitted but must be applied together with IFRS 9.
RISKS AND UNCERTAINTIES
Torstar is subject to a number of risks and uncertainties, including those set forth below. A risk is the possibility that
an event might happen in the future that could have a negative effect on the financial condition, financial
performance or business of Torstar. The actual effect of any event on Torstar’s business could be materially
different from what is anticipated. This description of risks does not include all possible risks.
Media Segment – Revenue Risks
Revenue from Torstar’s Media Segment accounted for approximately 70% of Torstar’s consolidated operating
revenue in the year ended December 31, 2011. Revenue in the Media Segment is primarily dependent upon the
sale of advertising with some of the print products also generating circulation revenue. Advertising revenue
includes in-paper advertising, digital advertising, inserts/flyers and specialty publications.
Competition
Competition for advertising and circulation revenue comes from free and paid local, regional and national
newspapers, radio, broadcast and cable television, outdoor, direct mail, directories, websites, social media,
applications for mobile devices, other communications and advertising media and online advertising networks and
exchanges that operate in Torstar’s markets. The competition is generally based on audience levels, composition
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and demographics, price, service and advertising results. The extent and nature of such competition has
intensified over the past few years as a result of the continued development of digital media alternatives and the
fragmentation of audiences.
Websites, applications for mobile devices, social networking tools and other digital platforms that distribute news and
other content continue to gain popularity. This shift by distributors and end users of content to digital technologies
may accelerate due to economic conditions and a desire for lower-cost alternatives. As a result, audience attention
may decline and advertising spending may continue to shift from traditional media forms to digital media. Torstar
expects that advertisers will continue to allocate greater portions of their budgets to digital media. This shift has
intensified competition for advertising in traditional media and has contributed to and may continue to contribute to a
decline in print advertising revenue.
In response to this shift to digital media, Torstar has been making significant investments in its digital businesses
over the past several years.
The digital businesses in Torstar’s Media Segment operate in a rapidly evolving and highly dynamic competitive
environment. Rapid changes in technology can result in consumer demand moving in unanticipated directions.
The increasing number of digital media options available on the internet, through mobile devices and through
social networking tools is significantly expanding consumer choice and shifting audience preferences.
Torstar’s existing and potential future competitors in the digital businesses range from start up operations with low
cost structures to global players that may have access to greater operational, financial and other resources than
Torstar. In order to succeed, Torstar will need to be able to successfully exploit new and existing technologies,
distinguish its products and services from those of its competitors and continue to develop or adapt to new
distribution methods that provide competitive user experiences.
Economic conditions
Advertising revenue in Torstar’s newspapers and digital properties is affected by a variety of factors, including
prevailing economic conditions and the level of consumer confidence. Adverse economic conditions generally, and
downturns in the Ontario economy specifically, have a negative impact on the advertising industry and on Torstar’s
operations. Local downturns in the general economic environment may cause Torstar’s customers to reduce the
amounts they spend on advertising which could result in a decrease in demand for advertising and lower advertising
rates.
Torstar’s advertising revenue is also dependent on the prospects of its advertising customers. A significant portion
of Torstar’s advertising revenue is derived from retail, real estate and automotive sector advertisers. Weakness in
these sectors has had, and may continue to have, an adverse impact on Torstar’s advertising revenues.
Content and readership
Print readership levels, in addition to generating circulation revenue, have traditionally been an important factor in
the ability of a newspaper to generate advertising revenues. Changes in everyday lifestyle and technology have
meant that people are choosing not to devote as much time to reading print newspapers as they once did.
Offsetting this decline in print readership is an increase in online readership. While online readership appears to
be an important factor in the ability of a newspaper to generate advertising revenue, it may have a negative
impact on print circulation volumes and revenues and also on readership.
Torstar has not committed to a pay model for its online readership. Torstar’s ability to build a paid subscriber base
for its digital news content will depend on market acceptance, consumer habits, the timely development of an
adequate online infrastructure, practices of delivery platforms and other factors. Torstar also faces the risk that
although implementing a pay model could increase revenue, it could also reduce online readership levels and page
views and have a negative impact on advertising revenues.
Torstar’s reputation for quality journalism and content is an important factor in maintaining readership levels. Torstar
strives to provide content in print and online that is perceived as reliable, relevant and entertaining by readers and
advertisers. Public preferences and tastes, general economic conditions, the newsworthiness of current events and
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the availability of alternative sources of content, among other intangible factors, may also contribute to the fluctuation
in readership levels, and accordingly, limit the ability of Torstar to generate advertising and circulation revenue.
With the increase in alternative digital content providers, Torstar faces the risk that it may not be able to increase
its online traffic sufficiently and retain a base of frequent visitors to its websites and applications. If traffic levels
decline or stagnate, Torstar may not be able to create sufficient advertiser interest in its digital businesses and to
maintain or increase the advertising rates of its advertising inventory.
Maintenance of satisfactory circulation, readership and online traffic levels attractive to advertisers cannot be
guaranteed.
Product Revenue
TMGTV’s product business is dependent on Torstar’s ability to continue to source and market products that have
consumer appeal. There is no guarantee that Torstar will be able to do so.
Book Publishing Segment – Revenue Risks
Revenue from Torstar’s Book Publishing Segment accounted for approximately 30% of Torstar’s consolidated
operating revenue in the year ended December 31, 2011. Book Publishing revenue is generated from Harlequin.
Harlequin sells books through the retail channel, in stores and online, and directly to the consumer through its
direct mail businesses and from its internet sites (in North America – Harlequin.com).
Competition
Harlequin competes not only with other book publishers but also with other providers of entertainment including
television, music, movies, games and magazines. These global markets are very competitive and this is not
expected to change in the future. More recently, online retailers have also entered into the book publishing
business creating additional competition.
Economic conditions
Historically, Harlequin’s book publishing revenue has not been as sensitive to economic conditions as has
advertising revenue for the Media Segment. While consumers generally reduce spending during economic
downturns, book sales have tended to be relatively more stable. There is no assurance that this will continue to be
the case in the future.
Harlequin has also benefited from geographic diversification to lessen the impact of changes in the general
economic performance in any one individual country, although it does have significant exposure to the economic
conditions in the U.S. market. In 2011, 5% of Harlequin’s revenues were derived from Canada, 49% from the U.S.,
and 46% from all other markets (the largest of which were Japan, Germany, the U.K., Nordic, Australia and France).
Authors
Harlequin’s single title revenues are dependent on the popularity of its authors. Harlequin enters into contracts
with authors for the right to publish an author’s book or a certain number of books. There is no guarantee that an
author will enter into a new contract for future books and from time to time a popular author will decide to publish
future books with another publisher. There is also no guarantee that an author will continue to be popular with
readers or that future titles will be successful. In addition, as the digital book market grows, it is increasingly
possible for authors to self-publish.
Price
In recent years, the book publishing industry, in particular in North America, has seen increased price competition
among book retailers in both printed and digital formats, including self-publishing. Harlequin primarily publishes
paperback books which, to date, have not experienced the same pricing pressures as hardcover books, however,
there is no guarantee that this will continue.
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Digital market
As a result of the increasing popularity of digital formats, a number of digital-only publishers and other digital
distribution models have emerged. These new competitors have very low cost structures and may be able to
attract quality authors and take market share from the traditional publishers, including Harlequin.
Within the global digital marketplace there is the risk that online retailer control could become increasingly
concentrated. In the U.S. market, over 80% of Harlequin’s 2011 digital sales were with two online retailers. The
impact of such concentration is currently uncertain but it could have a negative impact on Harlequin’s sales
volumes, pricing and costs.
The low cost of digitization has also led to a proliferation in the number of digital titles available and increased
competition. While Harlequin has been digitizing its backlist for a number of years and now has more than 14,000
digital titles available for sale, there is no assurance that the company will be able to successfully compete
against new or potential competitors.
Retail print market
The significant growth of the digital book market has resulted in a contraction of the retail print market particularly,
to date, in North America. Distribution for the retail print market is also relatively concentrated with a small
number of wholesalers and retailers in any market. These factors increase the risk of bankruptcy of a major retail
customer or a wholesaler which could disrupt the distribution channels, increase competition for shelf-space
and/or increase costs.
Books sold through the retail print channel are sold to wholesalers and retailers with a right of return leaving the
ultimate sales risk with Harlequin. In order to reflect the ability of the retailers to return books that they do not
sell, a provision for returns is made when revenue is recognized. (See additional information in the Critical
Accounting Policies and Estimates section of this MD&A.) The provision is adjusted as actual returns are
received over time. The difference between the initial estimate of returns and the actual returns realized has an
impact on Harlequin’s results during subsequent periods as the returns are received. This impact could be
significant.
Direct-to-consumer market
A key revenue risk for Harlequin’s direct-to-consumer business is being able to maintain its customer base, both
by retaining existing customers and acquiring new ones. A significant source of new customers has historically
been through direct mail offers. For more than a decade the direct marketing industry has faced considerable
challenges from a lack of available mailing lists, regulation and competitive pressure from alternate channels.
This has made the acquisition of new customers through direct mail offers difficult. Harlequin has responded to
these challenges in a number of ways including new, innovative offers and the use of its internet site,
Harlequin.com, to attract new customers. Despite this, the customer base has declined over time and is expected
to continue to do so in the future.
Labour Disruptions
Torstar has a number of collective agreements at its newspaper operations that have historically tied annual wage
increases to the cost of living. The newspapers face the risk associated with future labour negotiations and the
potential for business interruption should a strike, lockout or other labour disruption occur. Such a disruption may
lead to lost revenues and could have an adverse effect on Torstar’s business. The level of unionization at the
newspaper operations could impact the ability of Torstar to respond quickly to downturns in the economy that
negatively impact revenue.
The Toronto Star has approximately 795 staff covered by four collective agreements. The largest agreement
covers approximately 445 employees at One Yonge Street, Toronto. This collective agreement will expire at the
end of December 2012. There are three agreements covering approximately 350 employees at the Toronto
Star’s Vaughan Press Center. One agreement covering approximately 310 employees will expire in December
2014. Two other agreements, covering approximately 40 employees expired at the end of December 2011 and
negotiations have started.
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Sing Tao has two collective agreements covering approximately 125 employees that will expire at the end of
2012. Metro’s Toronto operations have a collective agreement covering approximately 65 employees that will
expire in March of 2013.
Metroland Media Group has a total of 21 collective agreements covering approximately 775 employees. There
are 11 collective agreements covering approximately 320 employees within the community newspapers. Two
agreements covering approximately 20 employees expired at the end of December 2011. Negotiations are not
yet scheduled. Two agreements covering approximately 30 employees will expire in August 2012, six
agreements covering approximately 240 employees will expire in December 2013 and one covering
approximately 30 employees will expire in December 2014.
At the Metroland Media Group daily newspapers, there are ten agreements covering approximately 455
employees. Four agreements covering approximately 145 employees at the Waterloo Region Record expired at
the end of 2010, two agreements covering approximately 75 employees at the Hamilton Spectator expired in May
2011, one agreement covering approximately 10 employees at the Guelph Mercury expired in May 2011 and one
agreement covering approximately 75 employees at the Hamilton Spectator expired at the end of December
2011. Negotiations have begun for all of these agreements. The remaining two agreements covering
approximately 150 employees at the Hamilton Spectator will expire at the end of 2012.
The Book Publishing Segment does not have any collective agreements in place.
Newsprint Costs
Newsprint is the single largest raw material expense for Torstar’s Media Segment and, after salaries and benefits
expense, represents the most significant operating cost for this Segment. Newsprint is priced as a commodity with
the price varying widely from time to time. In 2011, the price that Torstar paid for newsprint was on average equal
to the price paid in 2010. Torstar’s newspapers consume approximately 110,000 tonnes of newsprint each year.
The pulp and paper industry has faced difficulties over the past few years with some newsprint suppliers
experiencing financial instability. Should there be a reduction in the number of suppliers, Torstar could face a risk
in supply of newsprint and/or increased prices. Torstar primarily sources newsprint from two main suppliers, one
of whom is currently restructuring under creditor protection. Pursuant to arrangements with these two suppliers,
Torstar has fixed the price of the majority of its newsprint requirements for 2012 at prices that are similar to those
realized in 2011. There can be no assurance that Torstar will be able to extend these arrangements in future
years or that Torstar’s newspapers will not be exposed in the future to volatile or increased newsprint costs which
could have a adverse effect on Torstar’s financial performance.
Cost Structure
The newspaper business is characterized by a relatively high fixed cost structure. As a result it may be very difficult
to significantly reduce costs in a period of declining revenues. Accordingly, a relatively small change in revenue
could have a disproportionate effect on Torstar’s results from operations.
Foreign Exchange
As an international publisher, approximately 95% of Harlequin’s revenues (approximately 28% of Torstar’s
operating revenues) are earned in currencies other than the Canadian dollar. As a result, Harlequin’s revenues
and operating earnings are affected by changes in foreign exchange rates relative to the Canadian dollar. The
most significant risk is from changes in the U.S.$/Cdn.$ exchange rate. Harlequin also has exposure to many
other currencies, the most significant of which are the Euro, Yen and British Pound.
To offset some of this exposure, Torstar regularly enters into forward foreign exchange contracts to sell U.S.
dollars. From time to time, Torstar may also enter into forward foreign exchange contracts to hedge other
currencies (Euro, Yen, and British Pound). (See additional information on foreign exchange risks in the Financial
Instruments section of this MD&A and in Note 13 to Torstar’s consolidated financial statements.)
Credit Risk
In the normal course of business, Torstar is exposed to credit risk from its accounts receivable from customers.
The carrying amount for accounts receivable are net of applicable book revenue provisions and allowances for
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TORSTAR - Management’s Discussion and Analysis
doubtful accounts. The allowances for doubtful accounts are estimated based on past experience, specific risks
associated with the customer and other relevant information.
Under a billing and collection agreement with a third party, the Book Publishing Segment has a net receivable of
$29.1 million (U.S. $28.6 million) at December 31, 2011 related to its U.S. sales. To date, the credit risk
associated with this balance has been mitigated by the financial stability and payment history of the third party.
Restrictions Imposed by Existing Credit Facilities, Debt Financing and Availability of Capital
The agreements governing certain indebtedness of Torstar impose a number of restrictions on Torstar. These
include restriction on the payment of dividends other than on a basis consistent with Torstar’s current dividend
policy (which does not include extraordinary dividends). The agreements also require compliance with certain
financial covenants in order for Torstar’s debt to remain outstanding and impose restrictions on Torstar in
circumstances where Torstar is in default pursuant to its credit facilities. These covenants include the
requirement not to exceed a maximum level of debt compared to cash flow and a minimum interest coverage test.
In addition, Torstar cannot experience a material adverse change in its business. Failure to comply with these
restrictions and financial covenants could trigger early payment obligations and could have a material adverse
effect on Torstar. A full description of these restrictions and financial covenants can be found in the original loan
agreement and recent amendments thereto filed on www.sedar.com.
Pension Fund Obligations
Relative to its size, and when compared to other companies, Torstar has large pension liabilities, funding
requirements and costs. In an effort to manage ongoing pension costs and funding requirements, management has
purposefully chosen investments which will not always change in value in a similar manner as pension liabilities in
periods of changing long-term interest rates. Similarly, pension fund returns will not always meet the assumptions
used for valuation purposes. This may be particularly true in times of poor economic performance. This investment
policy introduces a significant level of volatility into Torstar’s future pension funding requirements and the funded
status of its pension plans.
At December 31, 2011 Torstar had a net liability of $184.6 million for its registered defined benefit pension plans.
The most significant group of Torstar’s registered defined benefit pension plans (in terms of assets and
obligations) completed the preparation of actuarial reports as of December 31, 2010 during 2011. The result of
the reports was that Torstar’s funding for these registered defined benefit pension plans was $46.4 million in
2011. Torstar will be required to prepare another set of actuarial reports as of December 31, 2011 and the results
of those reports will determine the funding required for 2012. Based on current market conditions Torstar
anticipates that the required funding in 2012 will be in the range of $65.0 - $70.0 million.
In addition to the registered defined benefit pension plans, Torstar also has an unregistered, unfunded defined
benefit pension plan that provides pension benefits to eligible senior management executives of Torstar (liability
of $22.3 million at December 31, 2011) and a post employment benefits plan that provides health and life
insurance benefits to certain grandfathered employees, primarily in the newspaper operations (liability of $56.0
million at December 31, 2011). These plans are being funded as payments are made.
Impairment Tests
Under IFRS, Torstar must regularly test the carrying value of its long-lived assets, intangible assets and goodwill for
impairment in value. When an impairment test results in an asset or goodwill devaluation, it is recorded as a non-
cash charge that reduces Torstar’s reported earnings.
Reliance on Printing Operations
The newspaper operations of Torstar place considerable reliance on the functioning of its printing operations for the
printing of their various publications, with particular emphasis placed on the Toronto Star’s Vaughan Press Centre,
which primarily supports the Toronto Star’s printing needs. In the event that any of the print facilities experiences a
shutdown or disruption, Torstar will attempt to mitigate potential damage by shifting the printing to its remaining
facilities or outsourcing such work to a third party commercial printer. However, given Torstar’s reliance on such
facilities, such a shutdown or disruption could result in Torstar being unable to print some publications, and
consequently could have an adverse effect.
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Torstar also relies on the adequacy of third-party printing arrangements for its book publishing operations in North
America and worldwide. In the event any existing arrangements change or cease to be available, Torstar would
attempt to mitigate the situation by using an alternative supplier or printing location. However, there can be no
assurance that such an event would not have an adverse effect on Torstar.
Reliance on Technology and Information Systems
Torstar places considerable reliance upon information technology systems including those of third party service
providers. In the event that these systems are subject to disruptions or failures resulting from system failures, loss of
power, viruses, unauthorized access, human error, acts of sabotage or other similar events, it could have an
adverse effect on Torstar’s operations and revenues.
The media industry has experienced and is continuing to experience rapid and significant technological changes.
In order to be able to compete, Torstar needs to be able to manage the changes in new technologies and be able
to acquire, develop or integrate them. Torstar’s ability to successfully manage the implementation of new
technologies could have an adverse effect on Torstar’s ability to successfully compete in the future.
Business Development and Acquisition Integration
Torstar has in the past, and may in the future, seek to make opportunistic or strategic acquisitions to expand its
existing businesses or to participate in a new business. There is no guarantee that any such opportunities will be
available for Torstar or that they will be available at an appropriate price. In addition, Torstar may not be
successful in integrating new businesses, could incur unforeseen costs in connection with the expansion or
acquisition of a business or may not fully realize anticipated synergies, any of which could have an adverse effect
on financial performance.
Interest Rates
Torstar has long-term debt in the form of bankers’ acceptances issued under its long-term debt facility. This long-
term debt is issued at market rates plus a spread specific to Torstar. In addition to the exposure to changes in
Torstar’s credit rating or businesses that would impact the specific spread, Torstar is exposed to fluctuations in
interest rates on its bankers’ acceptances that are issued at floating rates. Torstar manages this risk through the
use of interest rate swap contracts to fix the interest rate on a portion of its outstanding debt. Torstar remains
exposed to fluctuations in interest rates on the balance of its outstanding debt.
Availability of Insurance
Torstar has property and casualty insurance and directors’ and officers’ liability insurance in place to address certain
material insurable risks. Torstar believes that such insurance coverage is similar to that which would be maintained
by prudent owners of similar businesses and assets and that the coverage limits, exclusions and deductibles that
are in effect are reasonable given the cost of procuring insurance. However, there is no assurance that such
insurance will continue to be available on an economically feasible basis, that all events that could give rise to a loss
or liability are insurable, or that the level of insurance coverage will be sufficient to cover each and every material
loss or claim that may occur involving Torstar’s operations or assets.
Litigation
Torstar is involved in various legal actions, primarily in the Media Segment, which arise in the ordinary course of
business. These actions include the litigation as described under the heading “Legal Proceedings” in Torstar’s most
recent Annual Information Form. In particular, given the nature of Torstar’s businesses, Torstar has had, and may
have, litigation claims filed related to the publication of its editorial content, copyright or trademark infringement,
privacy, personal injury, product liability, breach of contract, unfair competition or other legal claims. Although
Torstar maintains insurance for many of these types of claims, there can be no assurance that insurance will be
available for all such claims. In addition, there can be no assurance as to the outcome of any future litigation,
proceedings or investigations or that the outcome will not be adverse to Torstar nor have a material impact on
Torstar’s results. In addition, Torstar could incur significant costs in investigating and defending such claims,
even if ultimately found not to be liable.
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Government Regulations
General
Torstar’s businesses are subject to a variety of laws and regulations, including laws applicable generally to
business and environmental, privacy, communications and e-commerce laws. Torstar may also be notified from
time to time of additional laws and regulations which governmental organizations or others may claim should be
applicable to certain of its businesses. If Torstar is required to alter its business practices as a result of any laws
and regulations, revenue could decrease, costs could increase and/or certain of Torstar’s businesses could
otherwise be harmed. In addition, the costs and expenses associated with defending any actions related to such
additional laws and regulations and any payments of related penalties, judgements or settlements could adversely
impact certain of Torstar’s businesses.
Environmental
Torstar is subject to a variety of environmental laws concerning, among other things, emissions to the air, water and
sewer discharges, handling and disposal of wastes, recycling, the use of recycled materials, or otherwise relating to
the protection of the environment. There have been considerable changes to environmental laws and regulations in
recent years, and such laws and regulations are expected to continue to change. Compliance with new
environmental laws and regulations may subject Torstar to significant costs and a failure to comply with present or
future laws or regulations could have an adverse effect on Torstar. While Torstar does have an environmental policy
and environmental committee in place to assist in monitoring compliance with environmental legislation, there can
be no assurance that all environmental liabilities have been identified or that expenditures will not be required to
meet future legislation.
E-Commerce, Privacy and Confidential Information
Laws relating to privacy, communications, data protection, e-commerce, direct marketing and digital advertising and
use of public records have become more prevalent in recent years. Existing and proposed legislation and
regulations, including changes to the manner in which such legislation and regulations are interpreted by courts in
Canada, the United States and other jurisdictions, may impose limits on the collection and use of certain kinds of
information. In addition, the costs of compliance and/or non-compliance with industry or legislative initiatives to
address consumer protection concerns or other related issues such as copyright infringement, unsolicited
commercial e-mail, cyber-crime and access could adversely impact certain of Torstar’s businesses.
Torstar obtains and uses customers’ confidential information primarily through its sales processes. The potential
dissemination of such information to the wrong individuals could cause damage to Torstar’s relationships with its
customers and could result in legal actions.
Dependence on Key Personnel
Torstar is dependent to a large extent upon the continued services of its senior management team and other key
employees including editorial, technical and sales personnel. There is intense competition for qualified managers
and skilled employees and Torstar’s failure to recruit, train and retain such employees could have an adverse effect
on its business, financial condition or operating results.
Loss of Reputation
Torstar, its customers, shareholders and employees place considerable reliance on Torstar’s good reputation.
Torstar’s ability to maintain its existing customer relationships and generate new customers depends greatly on the
quality of its services, brand reputation and business continuity. The loss or tarnishing of the reputation of Torstar or
any of its significant businesses through negative publicity or otherwise, whether true or not, could have an adverse
impact on the business, operations or financial condition of Torstar.
Product Liability
Torstar may be exposed to potential liability in connection with the sale and promotion of products (including claims
from purchasers, distributors, regulators and law enforcement) which could include claims for personal injury,
wrongful death, damage to personal property, claims relating to misrepresentation of product features and benefits
or violation of applicable laws. Although Torstar maintains insurance for many of these types of claims, there can be
no assurance that insurance will be available for all such claims. In addition, there can be no assurance as to the
outcome of any future litigation, proceedings or investigations or that the outcome will not be adverse to Torstar
TORSTAR CORPORATION 2011 ANNUAL REPORT 42
TORSTAR - Management’s Discussion and Analysis
nor have a material impact on Torstar’s results. In addition, Torstar could incur significant costs in investigating
and defending such claims, even if ultimately found not to be liable.
Intellectual Property Rights
Torstar places considerable importance on the protection of its intellectual property rights. On occasion, third parties
may contest or infringe upon these rights and Torstar will endeavour to take appropriate action to address such
matters. There can be no assurance that Torstar’s actions will be adequate to prevent the infringement of Torstar’s
intellectual property rights, or protect Torstar against claims of infringement by third parties.
Control of Torstar by the Voting Trust
More than 98% of Torstar’s Class A shares are held in a Voting Trust pursuant to a Voting Trust Agreement, which
joins together seven groups of shareholders. Under the Voting Trust Agreement, each shareholder group is entitled
to appoint a Voting Trustee. The Voting Trustees exercise various powers and rights, including among others the
right to vote in the manner as determined by a majority of the Voting Trustees, all of the Class A shares of Torstar
held by the members of the Voting Trust. The Class A shares are the only class of issued shares carrying the right
to vote in all circumstances. Accordingly, the Voting Trust, through a single ballot, effectively elects the Torstar
Board of Directors and controls the vote on any matters submitted to a vote of shareholders of Torstar.
ANNUAL INFORMATION – 3 YEAR SUMMARY
The following table presents selected key information for the past three years:
(in $000’s – except for per share amounts)
2011
2010
20091
Revenue
Net income
Net income attributable to equity
shareholders
$1,548,757
$218,141
$1,483,768
$210,729
$1,451,259
$35,645
$217,721
$209,910
$35,645
Net income attributable to equity shareholders per Class A
voting and Class B non-voting share
Basic
Diluted
$2.74
$2.72
Average number of shares outstanding during the year (in 000’s)
Basic
Diluted
79,400
79,949
$2.65
$2.64
79,074
79,637
$0.45
$0.45
78,964
78,989
Cash dividends per Class A voting and
Class B non-voting share
$0.4675
$0.37
$0.37
Total assets
Total long-term debt
$1,484,767
$196,191
$1,536,385
$404,586
$1,638,442
552,976
1 The 2009 results have not been restated to IFRS and are as originally reported under Canadian generally accepted accounting principles.
Revenue has been relatively stable over the three year period. Digital revenues have grown over the three year
period in both the Media and Book Publishing Segments. Print advertising in the Media Segment improved in
2010 over 2009 but then declined in 2011. Book Publishing revenues were negatively impacted by $33.2 million
in 2010 and $7.7 million in 2011 from the impact of foreign exchange.
Over the three year period, significant labour cost savings have been realized in the Media Segment from
restructuring initiatives. The provisions for the costs of these restructuring initiatives have had a negative impact
on net income, generally in a period in advance of the cost savings being realized.
As the 2009 results have not been restated to IFRS, 2009 net income is not directly comparable to 2010. Under
IFRS, expenses for employee future benefits and amortization and depreciation are significantly lower which
TORSTAR CORPORATION 2011 ANNUAL REPORT 43
TORSTAR - Management’s Discussion and Analysis
results in part of the year over year change. 2010 net income included a remeasurement gain of $115.5 million
related to Torstar’s investment in CTV and $3.5 million related to the acquisition of the remaining half of
Harlequin’s German publishing business that it had not previously held.
Net income in 2011 was positively impacted by a $74.6 million gain on the sale of Torstar’s interest in CTV and a
$19.0 million remeasurement gain related to Torstar’s previously-held interest in Metro. 2011 also benefited from
lower restructuring and other charges, lower interest and financing costs and a lower loss from associated
businesses.
Total assets have been relatively stable over the three year period while long-term debt has been reduced by
$356.8 million with cash from operations and the proceeds from the sale of Torstar’s investment in CTV.
SUMMARY OF QUARTERLY RESULTS
The following table presents selected financial information for each of the eight most recently completed quarters:
(in $000’s – except for
per share amounts)
Revenue
Net income
Net income attributable
to equity shareholders
Dec 31
Sept 30
June 30
March 31
2011 Quarter Ended
$425,336
$64,572
$378,677
$25,279
$393,322
$112,902
$351,422
$15,388
$64,283
$25,239
$112,727
$15,472
Net income attributable to equity shareholders per
Class A voting and Class B non-voting share
Basic
Diluted
$0.81
$0.81
$0.32
$0.32
$1.42
$1.41
$0.20
$0.19
(in $000’s – except for
per share amounts)
Revenue
Net income
Net income attributable
to equity shareholders
Dec 31
Sept 30
June 30
March 31
2010 Quarter Ended
$417,530
$36,633
$353,710
$130,219
$377,561
$27,325
$334,967
$16,552
$36,299
$130,081
$27,069
$16,461
Net income attributable to equity shareholders per
Class A voting and Class B non-voting share
Basic
Diluted
$0.46
$0.45
$1.64
$1.63
$0.34
$0.34
$0.21
$0.21
The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in the Media
Segment. The fourth and second quarters are generally the strongest for the media businesses with the third
quarter being the softest. Book Publishing Segment revenues will vary each quarter depending on the publishing
schedule and the impact of foreign exchange rates.
The second quarter of 2011 included the $74.6 million gain on the sale of Torstar’s interest in CTV and the fourth
quarter included the $19.0 million remeasurement gain related to Torstar’s previously-held interest in Metro. The
second, third and fourth quarters of 2011 also benefited from lower interest and financing costs from the
significantly lower debt levels. The third quarter of 2010 included the $115.5 million remeasurement gain related
to Torstar’s interest in CTV.
Restructuring and other charges have impacted the level of net income in several quarters. In 2011, the first,
second, third and fourth quarters had restructuring and other charges of $0.4 million, $3.4 million, $2.0 million and
TORSTAR CORPORATION 2011 ANNUAL REPORT 44
TORSTAR - Management’s Discussion and Analysis
$13.7 million respectively. In 2010, the first, second, third and fourth quarters had restructuring and other charges
of $8.5 million, $4.1 million, $2.5 million and $17.5 million respectively.
REVISED QUARTERLY RESULTS
During the process of completing the annual 2011 consolidated financial statements, Torstar determined that two
adjustments were required to be made to the previously disclosed financial information for 2010 prepared in
accordance with IFRS 1 and IAS 34. One of those adjustments also caused an adjustment to the previously
disclosed 2011 quarterly financial results.
There was no operating profit, income tax or cash impact related to either of these adjustments. There was no
impact on the 2010 audited financial statements issued under Canadian generally accepted accounting principles.
In the second quarter of 2010, Torstar completed the acquisition of the remaining half of Harlequin’s German
publishing business that it had not previously held. This transaction is treated as a step-acquisition under IFRS
which required a remeasurement to the acquisition date fair value of the previously held interest. This resulted in
a remeasurement gain of $3.5 million in the second quarter of 2010. There was no impact in any other quarter of
2010 or in 2011.
In the third quarter of 2010, Torstar entered into agreements to sell its interest in CTV. In the previously disclosed
financial results for 2010 prepared in accordance with IFRS, Torstar classified the investment as held-for-sale and
continued to record it at the carrying value that it had immediately prior to entering into the agreements to sell.
Torstar has now determined that the investment should have been classified as an available-for-sale financial
asset which, upon reclassification, should be adjusted to its fair value with the remeasurement gain reported
through net income. Torstar has estimated the fair value of the investment to be $257.0 million in September
2010 which resulted in a remeasurement gain of $115.5 million in the third quarter of 2010. The change in
carrying value in 2010 caused a reduction of $115.5 million in the gain that was previously reported on the sale of
CTV in the second quarter of 2011. The revised second quarter 2011 gain is $74.6 million. The total gain
recorded on the sale of CTV remains at $190.1 million
The following charts provide the revised IFRS consolidated net income by quarter for both 2011 and 2010.
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Amortization & depreciation
Restructuring and other charges
Operating profit
Interest and financing costs
Adjustment to contingent
consideration
Foreign exchange
Loss of associated businesses
Other income
CTV Inc. – gain on sale
Investment write-down
Income before taxes
Income and other taxes
Net income
Attributable to:
Equity shareholders
Minority interests
First Quarter
$351,422
Second
Quarter
$393,322
Third Quarter
$378,677
Fourth Quarter
$425,336
Full Year
$1,548,757
2011
(122,240)
(187,503)
(7,780)
(401)
33,498
(10,715)
768
(563)
22,988
(7,600)
$15,388
$15,472
($84)
(128,545)
(199,086)
(7,686)
(3,386)
54,619
(2,039)
856
(624)
74,590
127,402
(14,500)
$112,902
$112,727
$175
(127,613)
(197,373)
(8,500)
(1,961)
43,230
(1,814)
701
(4,585)
(582)
29
36,979
(11,700)
$25,279
$25,239
$40
(132,685)
(211,463)
(9,199)
(13,663)
58,326
(2,061)
(71)
(516)
(388)
19,026
(544)
73,772
(9,200)
$64,572
$64,283
$289
(511,083)
(795,425)
(33,165)
(19,411)
189,673
(16,629)
630
(3,477)
(2,157)
19,055
74,590
(544)
261,141
(43,000)
$218,141
$217,721
$420
TORSTAR CORPORATION 2011 ANNUAL REPORT 45
TORSTAR - Management’s Discussion and Analysis
(in $000’s)
Operating revenue
First Quarter
$334,967
Second
Quarter
$377,561
Third Quarter
$353,710
Fourth Quarter
$417,530
Full Year
$1,483,768
2010
Salaries and benefits
Other operating costs
Amortization & depreciation
Restructuring and other charges
Operating profit
Interest and financing costs
Foreign exchange
Loss of associated businesses
Other income
Gain on sale of assets
CTV Inc. – gain on remeasurement
Investment write-down
Income before taxes
Income and other taxes
Net income
Attributable to:
Equity shareholders
Minority interests
(119,422)
(166,583)
(8,389)
(8,475)
32,098
(4,309)
2,820
(4,557)
26,052
(9,500)
$16,552
$16,461
$91
(124,961)
(181,791)
(7,884)
(4,128)
58,797
(6,636)
(5,798)
(7,099)
3,461
42,725
(15,400)
$27,325
$27,069
$256
(122,973)
(175,598)
(7,555)
(2,525)
45,059
(6,862)
3,402
(16,242)
2,829
115,533
143,719
(13,500)
$130,219
$130,081
$138
(134,373)
(207,734)
(7,664)
(17,520)
50,239
(6,328)
4,381
(445)
1,259
(773)
48,333
(11,700)
$36,633
$36,299
$334
(501,729)
(731,706)
(31,492)
(32,648)
186,193
(24,135)
4,805
(28,343)
3,461
4,088
115,533
(773)
260,829
(50,100)
$210,729
$209,910
$819
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by Torstar in
reports filed with securities regulatory authorities is recorded, processed, summarized and reported on a timely
basis, and is accumulated and communicated to Torstar’s management, including the CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
As at December 31, 2011, under the supervision of, and with the participation of the CEO and CFO, Torstar’s
management evaluated the effectiveness of the design and operation of its disclosure controls and procedures.
Based on this evaluation, Torstar’s CEO and CFO have concluded that, as at December 31, 2011, the Company’s
disclosure controls and procedures were effective.
Internal Controls over Financial Reporting
Torstar’s management is responsible for establishing and maintaining adequate internal controls over financial
reporting. These controls include policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Torstar; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with International Financial Reporting Standards, and that receipts and expenditures
are being made only in accordance with authorizations of management and directors of Torstar; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
Torstar’s assets that could have a material effect on the financial statements.
All control systems contain inherent limitations, no matter how well designed. As a result, Torstar’s management
acknowledges that its internal controls over financial reporting will not prevent or detect all misstatements due to
error or fraud. In addition, management’s evaluation of controls can provide only reasonable, not absolute,
assurance that all control issues that may result in material misstatements, if any, have been detected.
Management, under the supervision of, and with the participation of the CEO and CFO, assessed the
effectiveness of internal controls over financial reporting, using the Committee of Sponsoring Organizations of the
TORSTAR CORPORATION 2011 ANNUAL REPORT 46
TORSTAR - Management’s Discussion and Analysis
Treadway Commission (COSO) framework, and based on that assessment concluded that internal controls over
financial reporting were effective as at December 31, 2011.
Changes in Internal Control over Financial Reporting
There have been no changes in Torstar’s internal controls over financial reporting that occurred during the fourth
quarter of 2011, the most recent interim period, that have materially affected, or are reasonably likely to materially
affect, Torstar’s internal controls over financial reporting.
OTHER
As at February 15, 2012, Torstar had 9,868,706 Class A voting shares and 69,654,523 Class B non-voting shares
outstanding. More information on Torstar’s share capital is provided in Note 18 of the consolidated financial
statements.
As at February 15, 2012, Torstar had 4,531,339 options to purchase Class B non-voting shares outstanding to
executives and non-executive directors. More information on Torstar’s stock option plan is provided in Note 19 of
the consolidated financial statements.
Additional information relating to Torstar including its Annual Information Form is available on SEDAR at
www.sedar.com.
TORSTAR CORPORATION 2011 ANNUAL REPORT 47
TORSTAR - Consolidated Financial Statements
MANAGEMENT’S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for preparation of the consolidated financial statements, notes hereto and other
financial information contained in this annual report. The consolidated financial statements have been prepared
in conformity with International Financial Reporting Standards using the best estimates and judgements of
management, where appropriate. Information presented elsewhere in this annual report is consistent with that in
the consolidated 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 P. Holland
President and Chief Executive Officer
February 28, 2012
Lorenzo DeMarchi
Executive Vice-President and Chief Financial Officer
TORSTAR CORPORATION 2011 ANNUAL REPORT 48
TORSTAR - Consolidated Financial Statements
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Torstar Corporation
We have audited the accompanying consolidated financial statements of Torstar Corporation, which comprise the
consolidated statements of financial position as at December 31, 2011 and 2010 and January 1, 2010, and the
consolidated statements of income, comprehensive income, changes in equity and cash flows for the years ended
December 31, 2011 and 2010, and a summary of significant accounting policies and other explanatory
information.
Management's responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Torstar Corporation as at December 31, 2011 and 2010 and January 1, 2010 and its financial performance and its
cash flows for the years ended December 31, 2011 and 2010 in accordance with International Financial Reporting
Standards.
Toronto, Canada
February 28, 2012
Ernst & Young LLP
Chartered Accountants
Licensed Public Accountants
TORSTAR CORPORATION 2011 ANNUAL REPORT 49
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Financial Position
(Thousands of Canadian Dollars)
Assets
Current:
Cash and cash equivalents
Receivables (note 13)
Inventories (note 4)
Derivative financial instruments (note 13)
Prepaid expenses and other current assets
Prepaid and recoverable income taxes
Total current assets
Property, plant and equipment (note 6)
Investment in associated businesses (note 7)
Derivative financial instruments (note 13)
Intangible assets (note 8)
Goodwill (note 9)
Other assets (note 11)
Deferred income tax assets (note 5)
Investment in CTV Inc. (note 7)
Total assets
Liabilities and Equity
Current:
Bank overdraft
Current portion of long-term debt (note 12)
Accounts payable and accrued liabilities
Derivative financial instruments (note 13)
Provisions (note 15)
Income tax payable
Total current liabilities
Long-term debt (note 12)
Derivative financial instruments (note 13)
Provisions (note 15)
Other liabilities (note 16)
Employee benefits (note 17)
Deferred income tax liabilities (note 5)
Equity:
Share capital (note 18)
Contributed surplus
Retained earnings
Accumulated other comprehensive loss (note 20)
Total equity attributable to equity shareholders
Minority interests
Total equity
Total liabilities and equity
(see accompanying notes)
ON BEHALF OF THE BOARD
John Honderich
Director
As at
December 31
2011
As at
December 31
2010
As at
January 01
2010
$50,588
278,010
36,995
367
47,063
2,451
415,474
177,245
16,935
107,845
665,029
1,798
100,441
$42,991
266,436
34,294
3,354
49,439
3,013
399,527
171,543
2,201
64,293
595,899
1,118
84,804
217,000
$39,158
250,289
33,953
6,067
48,913
2,997
381,377
177,493
170,783
1,471
54,094
580,302
2,089
84,950
$1,484,767
$1,536,385
$1,452,559
$7,661
196,191
210,567
22,599
17,398
454,416
8,761
16,906
27,900
262,876
7,644
395,334
14,828
301,863
(8,286)
703,739
2,525
706,264
$6,958
$2,052
212,293
4,947
21,170
33,239
278,607
404,586
7,647
20,923
21,967
207,768
10,327
392,816
13,235
189,586
(13,202)
582,435
2,125
584,560
194,348
27,966
19,172
243,538
551,240
16,633
2,095
17,548
186,952
8,267
391,626
12,182
33,702
(12,530)
424,980
1,306
426,286
$1,484,767
$1,536,385
$1,452,559
Paul Weiss
Director
TORSTAR CORPORATION 2011 ANNUAL REPORT 50
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Income
(Thousands of Canadian Dollars except per share amounts)
Year ended December 31
2011
2010
Operating revenue
$1,548,757
$1,483,768
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges (note 15)
Operating profit
Interest and financing costs (note 12(d))
Adjustment to contingent consideration (note 15)
Foreign exchange
Loss of associated businesses (note 7)
Other income (note 21)
Gain on sale of assets (note 22)
CTV Inc. – gain on sale/remeasurement (note 7)
Investment write-down (note 23)
Income and other taxes (note 5)
Net income
Attributable to:
Equity shareholders
Minority interests
(511,083)
(795,425)
(33,165)
(19,411)
189,673
(16,629)
630
(3,477)
(2,157)
19,055
74,590
(544)
261,141
(43,000)
$218,141
$217,721
$420
(501,729)
(731,706)
(31,492)
(32,648)
186,193
(24,135)
4,805
(28,343)
3,461
4,088
115,533
(773)
260,829
(50,100)
$210,729
$209,910
$819
Net income attributable to equity shareholders per Class A
(voting) and Class B (non-voting) share (note 18(b)):
Basic
Diluted
(see accompanying notes)
$2.74
$2.72
$2.65
$2.64
TORSTAR CORPORATION 2011 ANNUAL REPORT 51
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Comprehensive Income
(Thousands of Canadian Dollars)
Net income
Other comprehensive income (loss):
Year ended December 31
2011
2010
$218,141
$210,729
Unrealized foreign currency translation adjustment (no income
tax effect)
6,041
(6,332)
Net movement on available-for-sale financial assets (no income
tax effect)
Net movement on cash flow hedges
Income tax effect
Net movement on cash flow hedges for associated businesses
(no income tax effect)
Loss on cash flow hedges for associated businesses
recognized in net income upon sale of investment (no income
tax effect)
Unrealized loss on hedge of net investment
Income tax effect
Actuarial losses on employee benefits
Income tax effect
Actuarial losses on employee benefits for associated
businesses (no income tax effect)
(29)
846
(400)
(1,792)
250
(91,509)
23,200
240
1,325
(469)
2,042
2,522
(27,796)
7,115
(4,086)
Other comprehensive loss, net of tax
(63,393)
(25,439)
Comprehensive income, net of tax
$154,748
$185,290
Attributable to:
Equity shareholders
Minority interests
(see accompanying notes)
$154,328
$420
$184,471
$819
TORSTAR CORPORATION 2011 ANNUAL REPORT 52
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Changes in Equity
(Thousands of Canadian Dollars)
Share
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
loss
Total
attributable to
equity
shareholders
Minority
interests
Total
equity
At January 1, 2010
$391,626
$12,182
$33,702
($12,530)
$424,980
$1,306
$426,286
Net income
Other comprehensive loss
Total comprehensive
income (loss)
Dividends (note 18)
Issue of share capital –
other (note 18)
Share-based
compensation expense
277
913
1,053
209,910
(24,767)
185,143
(29,259)
(672)
(672)
209,910
(25,439)
819
210,729
(25,439)
184,471
819
185,290
(28,982)
(28,982)
913
1,053
913
1,053
At December 31, 2010
$392,816
$13,235
$189,586
($13,202)
$582,435
$2,125
$584,560
Net income
Other comprehensive
income (loss)
Total comprehensive
income
Dividends (note 18)
Exercise of share options
(note 18)
Issue of share capital –
other (note 18)
Share-based
compensation expense
Acquisition of non-
controlling interest
273
376
1,869
(52)
1,645
217,721
217,721
420
218,141
(68,309)
4,916
(63,393)
(63,393)
149,412
4,916
154,328
420
154,748
(37,135)
(36,862)
(36,862)
324
1,869
1,645
324
1,869
1,645
(20)
(20)
At December 31, 2011
$395,334
$14,828
$301,863
($8,286)
$703,739
$2,525
$706,264
(see accompanying notes)
TORSTAR CORPORATION 2011 ANNUAL REPORT 53
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Cash Flows
(Thousands of Canadian Dollars)
Year ended December 31
2011
2010
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase (decrease) in cash
Effect of exchange rate changes
Cash, beginning of year
Cash, end of year
Operating activities:
Net income
Amortization and depreciation (notes 6 and 8)
Deferred income taxes (note 5)
Loss of associated businesses (note 7)
CTV Inc. – gain on sale/remeasurement (note 7)
Investment write-down (note 23)
Non-cash employee benefit expense (note 17)
Employee benefits funding (note 17)
Other (note 24)
Increase in non-cash working capital
Cash provided by operating activities
Investing activities:
Additions to property, plant and equipment and intangible
assets
CTV Inc. – proceeds/return of capital (note 7)
Investment in associated businesses (note 7)
Acquisitions and investments (note 21)
Proceeds from mortgage receivable (note 22)
Proceeds from sale of assets (note 22)
Other
Cash provided by investing activities
Financing activities:
Issuance of bankers’ acceptances
Repayment of bankers’ acceptances
Repayment of medium term notes
Dividends paid
Exercise of share options
Other
Cash used in financing activities
Cash represented by:
Cash
Cash equivalents – short-term deposits
Cash and cash equivalents
Bank overdraft
(see accompanying notes)
$114,955
137,428
(245,582)
6,801
93
36,033
$42,927
$218,141
33,165
4,300
2,157
(74,590)
544
14,566
(51,167)
(14,024)
133,092
(18,137)
$114,955
($35,046)
291,590
(17,268)
(101,793)
(55)
$137,428
$71,630
(281,430)
(36,862)
324
756
($245,582)
$42,733
7,855
50,588
(7,661)
$42,927
$157,654
12,056
(170,029)
(319)
(754)
37,106
$36,033
$210,729
31,492
5,660
28,343
(115,533)
773
13,238
(19,535)
8,186
163,353
(5,699)
$157,654
($26,973)
40,000
(750)
(11,398)
6,215
4,344
618
$12,056
$39,620
(106,918)
(75,000)
(28,982)
1,251
($170,029)
$33,040
9,951
42,991
(6,958)
$36,033
TORSTAR CORPORATION 2011 ANNUAL REPORT 54
TORSTAR - Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands of Canadian dollars except per share amounts)
1. CORPORATE INFORMATION
Torstar Corporation is incorporated under the laws of Ontario, Canada and its Class B (non-voting) shares are
publicly traded on the Toronto Stock Exchange. The consolidated financial statements for the year ended
December 31, 2011 include the accounts of the Company and all its subsidiaries and joint ventures. The
registered office is located at One Yonge Street, Toronto, Canada. The principal activities of the Company and its
subsidiaries are described in Note 28.
2. STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These consolidated
financial statements have been prepared using the accounting policies in Note 3. These consolidated financial
statements are the first the Company has prepared under IFRS and include a Transition section which describes
differences in certain accounting policies and methods between previously applied Canadian generally accepted
accounting principles (“Canadian GAAP”) and IFRS, and the changes from reported to restated results for the
year ended December 31, 2010.
These consolidated financial statements have been authorized for issue in accordance with a resolution from the
Board of Directors on February 28, 2012.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the
Company’s functional currency. Each entity consolidated by the Company determines its own functional
currency based on the primary economic environment in which the entity operates.
Transactions in foreign currencies are initially recorded by the entities in their respective functional currencies
on the date of the transaction. Monetary assets and liabilities denominated in currencies other than the
entity’s functional currency are translated at the rates as at the date of the consolidated statement of financial
position (period end rates). Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation of monetary assets and liabilities not denominated in the functional
currency of an entity are recognized in foreign exchange in the consolidated statement of income, except for
qualifying cash flow and net investment hedges for which these exchange differences are deferred in
accumulated other comprehensive income (“AOCI”) within equity. These deferred foreign exchange gains and
losses are carried forward to be recognized in income in the same period as the corresponding gains or
losses associated with the hedged item. Non-monetary assets and liabilities are translated into functional
currencies at historical exchange rates.
Assets and liabilities of entities with functional currencies other than Canadian dollars are translated at the
period end rates of exchange, and items of income and expense are translated into Canadian dollars at the
rates prevailing on the dates of the transactions, or average rates of exchange where these approximate
actual rates. The resulting translation adjustments are included in other comprehensive income (“OCI”). Upon
reduction of the Company’s investment in the foreign subsidiary due to a sale or liquidation, the proportionate
amount of AOCI is recognized in income.
TORSTAR CORPORATION 2011 ANNUAL REPORT 55
TORSTAR - Consolidated Financial Statements
(b) Financial instruments
Financial assets and liabilities
The Company classifies its financial assets and liabilities into the following categories:
•
•
•
•
Financial assets at fair value through profit or loss
Loans and receivables
Financial assets classified as available-for-sale (“AFS”)
Other financial liabilities
The Company has not classified any financial instruments under the held-to-maturity category. Appropriate
classification of financial assets and liabilities is determined at the time of initial recognition or when
reclassified on the consolidated statement of financial position.
Financial instruments classified as at fair value through profit or loss and financial assets classified as AFS
are recognized on trade date, which is the date that the Company commits to purchase or sell the asset.
Financial assets and liabilities at fair value through profit or loss
The Company classifies certain financial assets and liabilities as either held for trading or designated at fair
value through profit or loss. Assets and liabilities in this category include derivative financial instruments
entered into by the Company that are not designated as hedging instruments in hedge relationships.
Financial assets and liabilities at fair value through profit or loss are carried at fair value. Related realized and
unrealized gains and losses are included in the consolidated statement of income.
Loans and receivables
Loans and receivables include originated and purchased non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Assets in this category include current
receivables and cash and cash equivalents and are classified as current assets on the consolidated
statement of financial position. Non-current receivables are classified as other assets.
Loans and receivables are initially recognized at fair value plus transaction costs. They are subsequently
measured at amortized cost using the effective interest method less any impairment. Receivables are
reduced by book revenue provisions and estimated bad debt provisions which are determined by reference to
past experience and expectations. Cash and cash equivalents consist of cash in bank and short-term
investments with maturities on acquisition of 90 days or less.
Financial assets classified as AFS
Financial assets that are not classified as at fair value through profit or loss or as loans and receivables are
classified as AFS. A financial asset classified as AFS is initially recognized at its fair value plus transaction
costs that are directly attributable to the acquisition of the financial asset. Financial assets classified as AFS
are carried at fair value with the changes in fair value reported as unrealized gains or losses on AFS assets
within OCI, unless the asset is subject to a fair value hedge, in which case changes in fair value resulting from
the risk being hedged are recorded in the consolidated statement of income.
Financial assets classified as AFS are assessed for impairment at each reporting date and the Company
recognizes any impairment in the consolidated statement of income.
TORSTAR CORPORATION 2011 ANNUAL REPORT 56
TORSTAR - Consolidated Financial Statements
Other financial liabilities
Other financial liabilities are measured at amortized cost using the effective interest rate method. Other
financial liabilities include accounts payable and accrued liabilities and the long-term debt instruments. The
long term debt instruments are initially measured at fair value, which is the consideration received, net of
transaction costs incurred. Transaction costs related to the long term debt instruments are included in the
value of the instruments and amortized using the effective interest rate method.
Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or when
the Company has transferred its rights to receive cash flows from the asset. The unrealized gains and losses
recorded in AOCI are transferred to the consolidated statement of income on disposal of an AFS asset.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expires.
Derivative instruments and hedging
In the normal course of business, the Company uses derivative financial instruments to manage some of its
risks related to foreign currency exchange rate fluctuations, interest rates and share-based compensation
liability and expense. Derivative transactions are governed by a uniform set of policies and procedures
covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored
based on changes in interest and foreign currency exchange rates and their impact on the market value of
derivatives. Credit risk on derivatives arises from the potential for counterparties to default on their
contractual obligations to the Company. The Company limits its credit risk by dealing with counterparties that
are considered to be of high credit quality. The Company does not enter into derivative transactions for
trading or speculative purposes.
All derivatives, including derivatives designated as hedges for accounting purposes and embedded
derivatives, are recorded on the consolidated statement of financial position at fair value. The accounting for
the changes in the fair value of derivatives depends on whether or not they are designated as hedges for
accounting purposes.
Foreign exchange contracts to sell U.S. dollars have been designated as hedges against future intercompany
Book Publishing revenues. Gains and losses on these instruments are accounted for as a component of the
related hedged transaction. Gains and losses on foreign exchange contracts which do not qualify for hedge
accounting are reported in the consolidated statement of income.
Interest rate swap contracts have been designated as hedges against interest expense. 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 on the consolidated statement of financial position.
The Company has derivative instruments to manage its exposure associated with changes in the fair value of
its deferred share unit (“DSU”) plans and the cost of its restricted share unit (“RSU”) plan. These instruments
are settled quarterly and changes in the fair value of these instruments are recorded as compensation
expense. The change in the Company’s share price between the settlement date and the reporting date is
included on the consolidated statement of financial position at the fair value of these derivative instruments at
each reporting date.
The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and
the resulting designation. In order for a derivative to qualify for hedge accounting, the derivative must be
formally designated as a fair value, cash flow or net investment hedge by documenting the relationship
between the derivative and the hedged item. The documentation includes a description of the hedging
instrument, the hedged item, the risk being hedged, the Company’s risk management objective and strategy
TORSTAR CORPORATION 2011 ANNUAL REPORT 57
TORSTAR - Consolidated Financial Statements
for undertaking the hedge, the method for assessing the effectiveness of the hedge and the method for
measuring hedge ineffectiveness. Additionally, the hedge relationship must be expected to be highly effective
at offsetting changes in either the fair value or cash flows of the hedged item at both the inception of the
hedge and on an ongoing basis. The Company assesses the ongoing effectiveness of its hedges at each
reporting date.
The amounts in AOCI are recycled to the consolidated statement of income in the period when the hedged
item will affect profit and loss (for instance, when the forecast sale that is hedged takes place). If a hedging
instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
unrealized cumulative gain or loss remains in AOCI and is recognized when the forecast transaction is
ultimately recognized in the consolidated statement of income. If a forecast transaction is no longer expected
to occur, the unrealized cumulative gain or loss that was reported in AOCI is recognized in the consolidated
statement of income.
Fair value hedges
These are hedges of the fair value of recognized assets, liabilities or a firm commitment. Changes in the fair
value of derivatives that are designated as fair value hedges are recorded in the consolidated statement of
income together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk.
Cash flow hedges
These are hedges of highly probable forecast transactions such as the floating to fixed interest rate swap
agreements and foreign exchange forward contracts. The effective portion of changes in the fair value of
derivatives that are designated as a cash flow hedge is recognized in OCI. The gain or loss relating to the
ineffective portion is recognized in the consolidated statement of income.
Net investment hedges
These are hedges of the Company’s net investment in its foreign operations. The effective portion of the
change in the fair value of the hedging instrument is recorded directly in OCI. The ineffective portion is
recognized in the consolidated statement of income in the period in which the change occurs. Upon the sale
or liquidation of the foreign operations, the amounts deferred in AOCI are recognized in the consolidated
statement of income.
Embedded derivatives
An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host
contract, with the effect that some of the cash flows of the combined instrument vary in a way similar to a
stand-alone derivative. If certain conditions are met, an embedded derivative is separated from the host
contract and accounted for as a derivative in the consolidated statement of financial position, at its fair value.
Any future changes in the fair value are recorded in the consolidated statement of income.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments, while providing effective economic hedges, are not designated as hedges for
accounting purposes. Changes in the fair value of any derivatives that are not designated as hedges for
accounting purposes are recognized in the consolidated statement of income.
Determination of fair value
Fair value is defined as the price at which an asset or liability could be exchanged in a current transaction
between knowledgeable, willing parties, other than in a forced or liquidation sale. The fair value of
instruments that are quoted in active markets is determined using the quoted prices where they represent
TORSTAR CORPORATION 2011 ANNUAL REPORT 58
TORSTAR - Consolidated Financial Statements
those at which regularly and recently occurring transactions take place. The Company uses valuation
techniques to establish the fair value of instruments where prices quoted in active markets are not available.
Therefore, where possible, parameter inputs to the valuation techniques are based on observable data
derived from prices of relevant instruments traded in an active market. These valuation techniques involve
some level of management estimation and judgement, the degree of which will depend on the price
transparency for the instrument or market and the instrument’s complexity.
The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy
prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value
measurement based on the lowest level input significant to the fair value measurement in its entirety. The
three levels of the fair value hierarchy are defined as follows:
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active
markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Significant unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value.
The fair values of cash and cash equivalents and bank overdraft are classified within Level 1 because they
are based on quoted prices for identical assets in active markets.
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 the reporting date. The fair value represents a point-in-
time estimate that may not be relevant in predicting the Company’s future earnings or cash flows.
The Company’s derivative financial instruments include foreign exchange forward contracts, interest rate
swaps and derivative instruments to manage its exposure associated with changes in the fair value of its DSU
plans and the cost of its RSU plan. The fair value of foreign exchange forward contracts is classified within
Level 2 as it is based on foreign currency rates quoted by banks and is the difference between the forward
exchange rate and the contract rate.
The Company determines the fair value for interest rate swaps as the net discounted future cash flows using
the implied zero-coupon forward swap yield curve. The change in the difference between the discounted
cash flow streams for the hedged item and the hedging item is deemed to be hedge ineffectiveness and
recorded in the consolidated statement of income. The fair value for the interest rate swaps is based on
forward yield curves which are observable inputs provided by banks and available in other public data
sources, and are classified within Level 2.
The fair value of the derivative instruments managing the Company’s exposure under the DSU and RSU
plans is classified within Level 2 and is based on the movement in the Company’s share price between the
quarterly settlement date and the reporting date which are observable inputs.
The fair value of portfolio investments measured at fair value is classified within Level 2 because even though
the securities are listed, they are not actively traded.
(c) Inventories
Inventories are stated at the lower of cost and net realizable value. The cost of finished goods and work in
progress includes raw materials, translation and printing and production costs. Raw materials are valued at
purchase cost on a first in, first out basis. Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Provisions are made for slow moving and obsolete inventory. Reversals of previous write-downs to net
realizable value are recorded when there is a subsequent increase in the value of the inventory.
TORSTAR CORPORATION 2011 ANNUAL REPORT 59
TORSTAR - Consolidated Financial Statements
(d) Prepaid expenses and other current assets
Prepaid expenses and other current assets include advance royalty payments to authors which are deferred
until the related works are published and are reduced by estimated provisions for advances that may exceed
royalties earned.
(e) Property, plant and equipment
These assets are recorded at cost net of accumulated depreciation and any accumulated impairment losses,
and depreciated over their estimated useful lives. When significant parts of property, plant and equipment are
required to be replaced in intervals, the Company recognizes such parts as individual assets with specific
useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is
recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognized in the consolidated statement of income as
incurred.
Depreciation is calculated using the straight-line basis over the estimated useful life of the asset as follows:
(cid:120) Buildings
- Structural
- Components
(cid:120) Machinery and Equipment
- Machinery and Equipment
- Furniture and Fixtures
(cid:120) Leasehold Improvements
35 – 60 years
15 – 25 years
20 – 40 years
5 – 15 years
Term of the lease plus renewal periods, when renewal is
reasonably assured
An item of property, plant and equipment and any significant part initially recognized is derecognized upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset is included in the consolidated statement of income when the asset is
derecognized.
The useful lives and methods of depreciation and the assets’ residual values are reviewed at least annually,
and the depreciation charge is adjusted prospectively, if appropriate.
(f) Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part
of the cost of the asset. All other borrowing costs are expensed in the period they are incurred.
(g) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the
amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic circumstances
and pertinent conditions at the acquisition date. If the business combination is achieved in stages, the
acquisition date fair value of the acquirer’s previously held equity or jointly controlled interest in the acquiree is
remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be
transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the
fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in
TORSTAR CORPORATION 2011 ANNUAL REPORT 60
TORSTAR - Consolidated Financial Statements
accordance with IAS 39, Financial Instruments: Recognition and Measurement, either in the consolidated
statement of income or as a change to OCI.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the
net identifiable assets of the acquired subsidiary at the date of acquisition. If this consideration is lower than
the fair value of the net assets acquired, the difference is recognized in the consolidated statement of income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
(h) Intangible assets
Intangible assets are recognized separately from goodwill when they are separable or arise from contractual
or other legal rights and their fair value can be measured reliably. The useful lives of intangible assets are
assessed as either finite or indefinite.
Intangible assets that have a finite useful life are amortized over the useful economic life of the asset and are
stated at cost less accumulated amortization and any accumulated impairment losses. The amortization
period and the amortization method for an intangible asset with a finite useful life are reviewed at least
annually. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits is accounted for by changing the amortization period or method, as appropriate, and adjusted
prospectively.
Amortization is calculated using the straight-line basis over the estimated useful life of the asset as follows:
(cid:120)
(cid:120)
(cid:120)
Software
Customer relationships and other
Franchise agreements
3 – 10 years
4 – 10 years
10 years
Intangible assets with indefinite useful lives are not amortized. These include newspaper mastheads and
trade and domain names. The assessment of indefinite life is reviewed at each reporting date to determine
whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite
is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statement
of income when the asset is derecognized.
(i)
Impairment of non-financial assets
At each reporting date, the Company assesses its non-financial assets, including property, plant and
equipment, goodwill and intangible assets, for potential indicators of impairment, such as an adverse change
in business climate that may indicate that these assets may be impaired. In addition, indefinite life intangible
assets and goodwill are tested for impairment annually in the fourth quarter. Goodwill is allocated to a cash
generating unit (“CGU”) or group of CGUs for the purpose of impairment testing based on the level at which
management monitors it, which is not larger than an operating segment.
For the annual impairment testing or if any impairment indicator exists, the Company estimates the asset’s,
CGU’s or group of CGUs’ recoverable amount. The determination of the recoverable amount in the
impairment assessment requires estimates based on quoted market prices, prices of comparable businesses,
present value or other valuation techniques, or a combination thereof, necessitating management to make
subjective judgements and assumptions.
The Company records impairment losses on its non-financial assets when the Company believes that their
carrying value may not be recoverable. If the recoverable amount of an asset is less than its carrying amount,
the carrying amount of the asset is reduced to the recoverable amount and the reduction is recorded in
Restructuring and other charges.
If the recoverable amount of a CGU or group of CGUs is less than its carrying amount, an impairment loss is
recognized. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to
the CGU or group of CGUs and then to the other assets of the CGU or group of CGUs pro rata on the basis of
TORSTAR CORPORATION 2011 ANNUAL REPORT 61
TORSTAR - Consolidated Financial Statements
the carrying amount of each asset in the CGU or group of CGUs. Individual assets in the group cannot be
written down below their fair value.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer exist or may have decreased. If the
reasons for impairment no longer apply, impairment losses are reversed up to a maximum of the carrying
amount of the respective asset if the impairment loss had not been recognized.
(j)
Investments in associated businesses
An associate is an entity in which the Company has significant influence. Investments in associates are
accounted for using the equity method. Under the equity method, the investment in the associate is carried on
the consolidated statement of financial position at cost plus post acquisition changes in the Company’s share
of the net assets of the associate. Goodwill on the acquisition of the associates is included in the cost of the
investments and is neither amortized nor tested for impairment.
The consolidated statement of income reflects the share of the results of operations of the associate. Where
there has been a change recognized directly in the OCI of the associate, the Company recognizes its share of
any changes and discloses this, when applicable, in OCI. Unrealized gains and losses resulting from
transactions between the Company and the associate are eliminated to the extent of the interest in the
associate.
After the application of the equity method, the Company determines at each reporting date whether there is
any objective evidence that the investment in the associate is impaired and consequently whether it is
necessary to recognize an impairment loss on the Company’s investment in its associate. If this is the case,
the Company calculates the amount of impairment as the difference between the recoverable amount of the
associate and its carrying value and recognizes the amount in the consolidated statement of income.
Upon loss of significant influence over the associate, the Company measures and recognizes any retaining
investment at its fair value. Any difference between the carrying amount of the associate upon loss of
significant influence and the fair value of the retained investment and proceeds from disposal is recognized in
profit or loss.
(k) Revenue recognition
Advertising revenue is recognized when publications are delivered or advertisements are placed on the
Company’s digital platforms. Newspaper circulation revenue is recognized when the publication is delivered.
Subscription revenue for newspapers is recognized as the publications are delivered over the term of the
subscription.
Revenue from the sale of books is recognized for the retail print distribution channel based on the book’s
publication date (books are shipped prior to the publication date so that they are in stores by the publication
date) and for all other distribution channels when title has transferred to the buyer. Book publishing revenue
is recorded net of provisions for estimated returns and direct-to-consumer bad debts (“book revenue
provisions”). Retail print books are sold with a right of return. The retail returns provision is estimated based
primarily on point-of-sale information, returns patterns and historical sales performance for the type of book
and the author. Direct-to-consumer books are shipped with no obligation to the customer who may return the
books or cancel their subscription at any time. The direct-to-consumer book revenue provision recognizes
that not all books shipped will be purchased by the customer. Book revenue provisions are made at the time
of shipment for the anticipated physical return of the books or a non-payment for the shipment. The direct-to-
consumer book revenue provisions are estimated based on historical payment rates for the type of book as
well as how long the customer has been a subscriber. Book publishing revenue attributable to the customer
loyalty points program that is deferred at the date of the initial sale is recognized as revenue when the
Company fulfills its obligations.
Other revenue is recognized when the related service or product has been delivered. Amounts received in
advance are included on the consolidated statement of financial position in accounts payable and accrued
liabilities until the revenue is recognized in accordance with the policies noted above.
TORSTAR CORPORATION 2011 ANNUAL REPORT 62
TORSTAR - Consolidated Financial Statements
(l) Employee benefits
The Company maintains both defined benefit and capital accumulation (defined contribution) employee
benefit plans. Details with respect to accounting for defined benefit employee future benefit plans are as
follows:
(cid:120) The cost and obligations of pensions and post employment benefits earned by employees is calculated
annually by independent actuaries using the projected unit credit method prorated on service and
management's best estimate of assumptions of future investment returns for funded plans, salary
increases, retirement ages of employees and expected health care costs. On an interim basis,
management estimates the changes in the actuarial gains and losses. These estimates are adjusted
when the annual valuation or estimate is completed by the independent actuaries.
(cid:120) For the purpose of calculating the expected return on plan assets, those assets are valued at fair value.
Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available
to the creditors of the Company, nor can they be paid directly to the Company without regulatory
approval.
(cid:120) The present value of the defined benefit obligation is determined by discounting estimated future cash
flows using the current interest rate at the reporting date on high quality fixed income investments with
maturities that match the expected maturity of the obligations.
(cid:120) The vested portion of past service cost arising from plan amendments is recognized in the consolidated
statement of income. The unvested portion is recognized as an expense on a straight-line basis over the
average remaining period until the benefits become vested.
(cid:120) The changes in the actuarial gains and losses that arise in calculating the present value of the defined
benefit obligation and the fair value of plan assets are recognized in OCI in the period in which they arise
and charged or credited to retained earnings.
(cid:120) The asset or liability that is recognized on the consolidated statement of financial position is the present
value of the defined benefit obligation at the reporting date less the fair value of the plan assets and
unrecognized past service costs. For the funded plans, the value of any minimum funding requirements
(as determined by the applicable pension legislation) is recognized to the extent that the amounts are
considered recoverable. Recoverability is primarily based on the extent to which the Company can
reduce the future contributions to the plan.
Company contributions to capital accumulation plans are expensed as incurred.
(m) Share-based compensation plans
The Company has a share option plan, an employee share purchase plan (“ESPP”), two DSU plans and an
RSU plan.
The fair value of the share options granted and the ESPP subscriptions are measured using the Black-
Scholes pricing model. For share options, the model considers each tranche with graded vesting features as
a separate share option grant. The forfeitures for the share options and the ESPP subscriptions are
estimated on the grant date and revised as the actual forfeitures differ from estimates.
This fair value is recognized as compensation expense over the vesting and subscription periods with a
related credit to contributed surplus. The contributed surplus balance is reduced as options are exercised and
when the ESPP matures through a credit to share capital. The consideration paid by option holders and the
ESPP subscribers is credited to share capital when the options are exercised or when the plan matures.
Eligible executives and non-employee directors may receive or elect to receive DSUs equivalent in value to
Class B non-voting shares of the Company. Compensation expense is recorded in the year of granting of the
DSUs and changes in the fair value of outstanding DSUs, including deemed dividend equivalents, are
recorded as an expense in the period that they occur. DSUs can only be redeemed once the executive or
director is no longer employed with the Company. Outstanding DSUs are recorded as long-term liabilities.
TORSTAR CORPORATION 2011 ANNUAL REPORT 63
TORSTAR - Consolidated Financial Statements
Eligible executives may be granted RSU awards equivalent in value to Class B non-voting shares of the
Company. RSUs vest after three years and are settled in cash. RSUs are accrued over the three-year
vesting period as compensation expense and a related liability. Forfeitures are estimated on the grant date
and revised if the actual forfeitures differ from the estimates. The liability is recorded at fair value at each
reporting date. Accrued RSUs are recorded as long-term liabilities, except for the portion that will vest within
twelve months which is recorded as a current liability.
(n) Taxes
Tax expense comprises current and deferred tax. Tax expense is recognized in the consolidated statement
of income, unless it relates to items recognized outside the consolidated statement of income. Tax expense
relating to items recognized outside of the consolidated statement of income is recognized in correlation to
the underlying transaction in either OCI or equity.
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted at the reporting date.
Deferred tax
Deferred tax is provided using the liability method for temporary differences between the tax bases of assets
and liabilities and their carrying amount for financial reporting purposes. Deferred tax assets and liabilities are
measured using substantively enacted tax rates and laws at the reporting date that are expected to be in
effect when the temporary differences are expected to reverse.
Deferred taxes are recognized for taxable temporary differences arising on investments in subsidiaries,
associates and joint ventures except where the reversal of the temporary difference can be controlled and it is
probable that the difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are
not recognized for temporary differences that arise on initial recognition of assets and liabilities other than in a
business combination.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax
credits and unused tax losses to the extent that it is probable that sufficient taxable profit will be available
against which they can be utilized.
(o) Provisions
Provisions are recognized if the Company has a present legal or constructive obligation as a result of past
events, if it is probable that an outflow of resources will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation as of the date of the consolidated statement of financial position, taking into account the risks and
uncertainties surrounding the obligation.
Provisions are discounted and measured at the present value of the expenditure expected to be required to
settle the obligation, using a pre-tax rate that reflects the current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognized as interest expense.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party (for example, because the obligation is covered by an insurance policy), an asset is recognized if it
is virtually certain that reimbursement will be received.
TORSTAR CORPORATION 2011 ANNUAL REPORT 64
TORSTAR - Consolidated Financial Statements
(p) Subsidiaries
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in
the consolidated financial statements from the date control commences to the date that control ceases.
(q) Joint ventures
Joint ventures are entities where the Company has contractual arrangements with other venturer(s) that
establish joint control over the economic activities of the entity. The Company recognizes its interests in joint
ventures using the proportionate consolidation method. The Company combines its proportionate share of
each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its
consolidated financial statements. Unrealized gains and losses resulting from transactions between the
Company and the joint ventures are eliminated to the extent of the interest in the joint ventures.
(r) Transactions eliminated on consolidation
Intra-group balances and transactions are eliminated on consolidation. Unrealized gains arising from
transactions with equity-accounted associates are eliminated against the investment to the extent of the
Company’s interest in the associate. Unrealized losses are eliminated in the same way as unrealized gains,
but only to the extent that there is no evidence of impairment.
(s) Use of estimates and judgements
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of revenues, expenses, assets, and liabilities and the disclosure of
contingent liabilities, at the end of the reporting period.
Management uses estimates when accounting for certain items such as revenues, allowance for doubtful
accounts, useful lives of long-lived assets, asset impairments, provisions, share-based compensation plans,
employee benefit plans, deferred income taxes and goodwill impairment. Estimates are also made by
management when recording the fair value of assets acquired and liabilities assumed in a business
combination.
Estimates are based on a number of factors, including historical experience, current events and other
assumptions that management believes are reasonable under the circumstances. By their nature, these
estimates are subject to measurement uncertainty and actual results could differ. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods affected.
The more significant estimates and judgements made by management are described below:
Classification of investments as portfolio investments, associated businesses, joint ventures and subsidiaries
Classification of investments requires judgement on whether the Company controls, has joint control or
significant influence over the strategic financial and operating decisions relating to the activity of the investee.
Joint control is the contractually agreed sharing of control over the financial and operating policy decisions of
the investee. It exists only when the decisions require the unanimous consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee
but does not represent control or joint control over those decisions. If an investor holds 20% or more of the
voting power of the investee, it is presumed that the investor has significant influence, unless it can be clearly
demonstrated that this is not the case. Conversely, if the investor holds less than 20% of the voting power of
the investee, it is presumed that the investor does not have significant influence, unless such influence can be
clearly demonstrated.
In assessing the level of control or influence that the Company has over an investment, management
considers ownership percentages, board representation as well as other relevant provisions in shareholder
agreements.
TORSTAR CORPORATION 2011 ANNUAL REPORT 65
TORSTAR - Consolidated Financial Statements
Black Press has been classified as an associated business based on management’s judgement that the
Company has, based on rights to board representation and other provisions in the shareholder agreement,
significant influence despite owning only 19.35% of the voting rights.
Book revenue provisions
Revenue from the sale of books is recorded net of provisions for returns and direct-to-consumer bad debts.
The provisions are estimated based on point-of-sale information, returns patterns, historical sales
performance for the type of book and author, historical payment rates for the type of book and the length of
time the customer has been a member of the direct-to-consumer program. The variance between the original
estimate for returns and direct-to-consumer bad debts, and the actual experience is recorded in the period
when the data becomes available.
Employee benefits
The accrued benefit asset or liability and the related cost of defined benefit pension plans and other post-
employment benefits earned by employees is determined each year by independent actuaries based on
several assumptions.
The actuarial valuation uses management’s assumptions for the discount rate used to measure obligations,
expected long-term rate of return on pension plan assets, rate of compensation increase, trends in healthcare
costs, employee turnover and expected mortality. The most significant assumptions are the discount rate and
the expected long-term rate of return on pension plan assets.
The discount rate, used to determine the present value of the future cash flows that are expected to be
needed to settle employee benefit obligations, is based on the yield on long-term high-quality corporate bonds
with maturities matching the estimated cash flows from the benefit plan. A lower discount rate would result in
a higher employee benefit obligation.
The expected long-term rate of return is a weighted average of estimated long-term returns on each of the
major plan asset categories in the Company’s pension funds. A lower expected rate would result in a lower
fair value of the plan assets and a higher employee net benefit obligation. Further details about the
assumptions used are provided in Note 17.
Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to
sell calculation is based on available data from binding sales transactions in arm’s length transactions of
similar assets or observable market prices less incremental costs for disposing of the asset. The value in use
calculation is based on a discounted cash flow model. The key estimates and assumptions used in the
discounted cash flow model are cash flow growth rates for the projection period and in perpetuity for the
calculation of the terminal value and discount rates. More details on the key assumptions used by the
Company to assess its assets and cash generating units are provided in note 10.
Taxes
The Company is subject to income taxes in Canada and foreign jurisdictions. Significant judgement is
required in determining the world-wide provision for income taxes. In the ordinary course of business, there
are many transactions and calculations for which the ultimate tax determination is uncertain. Management
uses judgement in interpreting tax laws and determining the appropriate rates and amounts in recording
current and deferred taxes, giving consideration to timing and probability. Actual income taxes could
significantly vary from these estimates as a result of future events, including changes in income tax law or the
outcome of reviews by tax authorities and related appeals. To the extent that the final tax outcome is different
from the amounts that were initially recorded, such differences will impact the income tax provision in the
period in which such determination is made.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax
credits and unused tax losses to the extent that it is probable that sufficient taxable profit will be available
TORSTAR CORPORATION 2011 ANNUAL REPORT 66
TORSTAR - Consolidated Financial Statements
against which they can be utilized. When assessing the probability of taxable profit being available,
management primarily considers prior years’ results, forecasted future results and non-recurring items. As
such, the assessment of the Company’s ability to utilize tax losses carried forward is to a large extent
judgement-based. If the future taxable results of the Company differ significantly from those expected, the
Company would be required to increase or decrease the carrying value of the deferred tax assets with a
potentially material impact on the Company’s consolidated statement of financial position and consolidated
statement of comprehensive income. The carrying amount of deferred tax assets is reassessed at each
reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be
available to utilize all or part of the deferred tax assets. Unrecognized deferred tax assets are reassessed at
each reporting period and are recognized to the extent that it is probable that there will be sufficient taxable
profits to allow all or part of the asset to be recovered.
Further details on taxes are disclosed in Note 5.
Fair value of financial instruments
When the fair value of financial assets and financial liabilities recorded in the consolidated statement of
financial position cannot be derived from active markets, their fair value is determined using valuation
techniques including the discounted cash flow model. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair
values. The judgements include considerations such as liquidity risk, credit risk and volatility. Changes in the
assumptions about these factors could affect the reported fair value of financial instruments.
Fair value measurement of contingent consideration
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date
as part of the business combination and is subsequently remeasured to fair value at each reporting date. The
determination of the fair value is primarily based on revenue levels estimated to be realized by the acquired
businesses for specified periods following the acquisition. The key assumptions take into consideration the
probability of meeting each performance target and the discount rate. Depending on the absolute amount of
the contingent consideration and the time until it becomes payable, the actual payment could differ
significantly from the original estimate.
Provisions
Provisions are based to a significant extent on management estimates with regard to their amount and
probability of occurrence. Assessments of whether there is a present obligation; whether an outflow of
resources is probable and whether it is possible to reliably estimate the amount of the obligation, require
management to exercise judgement. In some situations, external advice may be obtained to assist with the
estimates. Future information could change the estimates and thus impact the Company’s financial position
and results of operations.
(t) Upcoming changes in accounting policies
IFRS 7 Financial Instruments: Disclosures
In October 2010, the IASB amended IFRS 7 to enhance the disclosure about transfers of financial assets.
This improvement is to assist users in understanding the possible effects of any risks that remain in an entity
after the asset has been transferred. In addition, if disproportionate amounts are transferred close to the year-
end, additional disclosures would be required. The effective date of the amendment is for annual periods
beginning on or after July 1, 2011. The Company has determined that the adoption of this amendment will
not have a material impact on the consolidated financial statements.
IAS 12 Income Taxes
In December 2010, the IASB amended IAS 12 for the recovery of underlying assets and the impact on
deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be
through use or through sale when the asset is measured at fair value under IAS 40 Investment Property, by
TORSTAR CORPORATION 2011 ANNUAL REPORT 67
TORSTAR - Consolidated Financial Statements
adding the presumption that the recovery would normally be through sale. The amendment also incorporates
the remaining guidance in SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21
has been withdrawn. The effective date of the amendment is for annual periods beginning on or after January
1, 2012. The Company has determined that the adoption of this amendment will not have a material impact
on the consolidated financial statements.
IFRS 9 Financial Instruments: Classification and Measurement
In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of
its project to replace IAS 39. In October 2010, the Board also incorporated new accounting requirements for
liabilities. The standard introduces new requirements for measurement and eliminates the current
classification of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are
new requirements for the accounting of financial liabilities as well as a carryover of requirements from IAS 39.
The Company does not anticipate early adoption and will adopt the standard on the effective date of January
1, 2015. The Company is in the process of reviewing the standard to determine the impact on the
consolidated financial statements.
In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or
after January 1, 2013 with early adoption permitted. The Company is in the process of reviewing the
standards below to determine the impact on the consolidated financial statements:
IFRS 10 Consolidated Financial Statements
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the
investee. IFRS 10 supersedes SIC -12 Consolidations - Special Purpose Entities and replaces parts of IAS
27 Consolidated and Separate Financial Statements.
IFRS 11 Joint Arrangements
IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint operation or a joint venture.
The standard eliminates the use of the proportionate consolidation method to account for joint ventures. Joint
ventures will be accounted for using the equity method of accounting while for a joint operation, the venturer
will recognize its share of the assets, liabilities, revenues and expenses of the joint operation. IFRS 11
supersedes SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and IAS 31 Joint
Ventures.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint
arrangements, associates and unconsolidated structured entities. The standard carries forward existing
disclosures and also introduces significant additional disclosure requirements that address the nature of, and
risks associated with, an entity’s interest in other entities. IFRS 12 replaces the previous requirements
included in IAS 27 Consolidated and Separate Financial Statements; IAS 31 Joint Ventures and IAS 28
Investment in Associates.
IFRS 13 Fair Value Measurement
IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across
all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement.
IAS 27 Separate Financial Statements
As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for
subsidiaries, jointly controlled entities and associates in separate financial statements. The Company does
not present separate financial statements.
TORSTAR CORPORATION 2011 ANNUAL REPORT 68
TORSTAR - Consolidated Financial Statements
IAS 28 Investments in Associates and Joint Ventures
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in
Associates and Joint Ventures, and describes the application of the equity method to investments in joint
ventures in addition to associates.
In June 2011, the IASB amended the following standards, which the Company is in the process of reviewing
to determine the impact on the consolidated financial statements:
IAS 1 Presentation of Financial Statements
The IASB amended IAS 1 by revising how certain items are presented in other comprehensive income
(“OCI”). Items within OCI that may be reclassified to profit and loss will be separated from items that will not.
The standard is effective for financial years beginning on or after July 1, 2012 with early adoption permitted.
The amendment affects presentation only and has no impact on the Company’s financial position or
performance.
IAS 19 Employee Benefits
The IASB made a number of amendments to IAS 19, which included eliminating the use of the “corridor”
approach and requiring remeasurements to be presented in OCI; past service costs to be recognized
immediately, whether vested or not as well as enhanced disclosures. The standard also requires that the
discount rate used to determine the defined benefit obligation should also be used to calculate the expected
return on plan assets by introducing a net interest approach, which replaces the expected return on plan
assets and interest costs on the defined benefit obligation, with a single net interest component determined by
multiplying the net defined benefit liability or asset by the discount rate used to determine the defined benefit
obligation. The standard is effective for financial years beginning on or after January 1, 2013 with early
adoption permitted.
In December 2011, the IASB amended both IAS 32 Financial Instruments: Presentation and IFRS 7 Financial
Instruments: Disclosures by moving the disclosure requirements in IAS 32 to IFRS 7 and enhancing the
disclosures about offsetting financial assets and liabilities. The effective date of the amendments is January
1, 2015. Earlier adoption is permitted but must be applied together with IFRS 9.
4.
INVENTORIES
Finished goods
Work in progress
Raw materials
December 31,
2011
$9,399
9,873
17,723
$36,995
December 31,
2010
$10,681
11,013
12,600
$34,294
January 1,
2010
$11,164
11,292
11,497
$33,953
The Company has expensed inventory costs of $215.2 million for the year ended December 31, 2011 (2010 -
$204.1 million). The Company recorded an inventory write-down of $3.7 million for the year ended December 31,
2011 (2010 - $3.4 million).
TORSTAR CORPORATION 2011 ANNUAL REPORT 69
TORSTAR - Consolidated Financial Statements
5.
INCOME TAXES
Income tax expense is made up of the following:
Current income tax expense (recovery):
Current year
Adjustment for prior years
Deferred income tax expense (recovery):
Origination and reversal of temporary differences
Recognition of previously unrecognized tax losses
Adjustment for prior years
Income tax expense in the consolidated statement of income
Current income tax recovery in OCI
Deferred income tax recovery in OCI
Income tax recovery in OCI
Total income taxes
Year ended December 31
2010
2011
$39,200
(500)
38,700
14,500
(10,000)
(200)
4,300
$43,000
(250)
(22,800)
(23,050)
$44,940
(500)
44,440
9,160
(3,000)
(500)
5,660
$50,100
(6,646)
(6,646)
$19,950
$43,454
Income taxes of $58.5 million were paid and refunds of $2.4 million were received during the year (2010 - $30.3
million paid and refunds of $2.4 million received).
Reconciliation of effective tax rate
The combined Canadian federal and provincial statutory rate was 28.25% in 2011 (31% in 2010), and will be
further reduced in stages to 25% by 2014.
Income before taxes
Provision for income taxes based on Canadian statutory rate
of 28.25% (2010: 31%)
Increase (decrease) in taxes resulting from:
Gain on sale/remeasurement of CTV Inc. not recognized
Loss of associated businesses not recognized
Gain on remeasurement not recognized
Prior years’ losses not previously recognized
Effect of higher foreign tax rates
Foreign losses not recognized
Non-taxable portion of capital (gains) losses
Non-deductible expenses
Other
Income tax expense
Effective income tax rate
Year ended December 31
2010
2011
$261,141
$260,829
$73,800
$80,800
(21,100)
800
(5,400)
(10,000)
3,900
100
2,200
(1,300)
$43,000
16.5%
(35,800)
8,800
(1,100)
(3,000)
1,200
300
(1,600)
1,800
(1,300)
$50,100
19.2%
The Company sold its 20% interest in CTV Inc. in April 2011 and recognized a gain of $74.6 million which was not
subject to tax, as the Company had previously written down the cost of the investment below its tax basis. In
TORSTAR CORPORATION 2011 ANNUAL REPORT 70
TORSTAR - Consolidated Financial Statements
September 2010, the Company had recognized a gain on remeasurement of its investment in CTV Inc. of $115.5
million which was also not subject to tax.
The Company realized a capital loss for tax purposes of $45.6 million on the disposition in April 2011. No tax
benefit has been recognized for $44.4 million of the capital loss.
Deferred tax assets and liabilities
Net deferred tax assets
Deferred 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 deferred income tax assets and liabilities as at December 31, 2011 and December 31, 2010 are
as follows:
December 31,
2010
Recognized
in net
income
Recognized
in OCI
Acquired in
business
combinations
Foreign
exchange
& other
December 31,
2011
$12,456
($1,845)
$76
$231
$10,918
(8,054)
(9,098)
2,470
621
(866)
($400)
(1,282)
(1,268)
61
(53)
(8,654)
(11,285)
2,070
54,835
(9,830)
23,200
72
68,277
1,938
22,286
(2,356)
$74,477
(331)
8,488
(537)
($4,300)
783
275
($1,416)
657
268
$1,236
$22,800
$84,804
(10,327)
$74,477
1,607
32,214
(2,350)
$92,797
$100,441
(7,644)
$92,797
Book revenue provisions
Property, plant &
equipment
Intangible assets
Financial instruments
Provision for employee
benefit obligations
Share-based payment
transactions
Tax loss carry forwards
Other
Net deferred tax assets
As reported in the
consolidated statement
of financial position
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
TORSTAR CORPORATION 2011 ANNUAL REPORT 71
TORSTAR - Consolidated Financial Statements
January 1,
2010
Recognized
in net income
Recognized
in OCI
Acquired in
business
combinations
Foreign
exchange
& other
December 31,
2010
Book revenue provisions
Property, plant &
equipment
Intangible assets
Financial instruments
Provision for employee
benefit obligations
Share-based payment
transactions
Tax loss carry forwards
Other
Net deferred tax assets
As reported in the
consolidated statement
of financial position
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Tax loss carryforwards
$13,860
($1,152)
(6,034)
(7,342)
2,939
(2,000)
(104)
50,096
(2,342)
1,197
25,307
(3,340)
$76,683
741
(1,849)
1,046
($5,660)
$84,950
(8,267)
$76,683
($252)
$12,456
($1,604)
(20)
(48)
(8,054)
(9,098)
2,470
(34)
54,835
($469)
7,115
$6,646
(306)
($1,910)
(1,172)
244
($1,282)
1,938
22,286
(2,356)
$74,477
$84,804
(10,327)
$74,477
The Company has tax loss carryforward balances and has recognized a deferred tax asset in respect of these
losses to the extent that it is probable that they will be utilized before they expire.
The Company has capital loss carryforwards in Canada of $47.9 million (2010 – $3.5 million) that can be carried
forward indefinitely and applied to only offset capital gains. No deferred tax asset has been recognized in respect
of the capital loss as there is no current intent to dispose of capital properties.
The U.S. subsidiaries have combined net operating loss carryforwards of U.S. $133.9 million (2010 – U.S. $148.4
million). These tax losses arose in prior years from the operation and disposition of businesses that are no longer
carried on by the Company. The current U.S. business has no relation to the former business operations, and
has a history of profits. A deferred tax asset has been recognized for a portion of the U.S. tax loss carryforward
based upon expectations of future operating profits for the current operations, as determined by reference to
historic operating results and forecasts.
TORSTAR CORPORATION 2011 ANNUAL REPORT 72
TORSTAR - Consolidated Financial Statements
The tax loss carryforward balance at December 31, 2011, the portion of the loss recognized in the deferred tax
assets, and year of expiry are summarized as follows:
As at December 31, 2011:
Canada – net operating losses
Canada – capital losses
U.S. – net operating losses
Other foreign losses
As at December 31, 2010:
Canada – net operating losses
Canada – capital losses
U.S. – net operating losses
Other foreign losses
As at January 1, 2010:
Canada – net operating losses
Canada – capital losses
U.S. – net operating losses
Other foreign losses
Tax loss carryforward
Local
currency
Canadian
dollars
Portion
recognized in
deferred tax
assets
$21,600
$47,900
U.S. $133,900
$7,400
$3,500
U.S. $148,400
$11,900
$3,400
U.S. $157,300
$21,600
$47,900
$136,100
$1,700
$7,400
$3,500
$147,600
$3,900
$11,900
$3,400
$164,700
$4,200
$21,600
$79,400
$400
$5,500
$60,000
$2,700
$10,800
$69,700
Expiry
2025 to 2031
No expiry
2019 to 2029
Various
2025 to 2030
No expiry
2019 to 2029
Various
2025 to 2028
No expiry
2019 to 2029
Various
Investments in subsidiaries, associates and joint ventures
The excess of the tax basis over the carrying value of investments in subsidiaries, associates and joint ventures
for which a deferred tax asset has not been recognized, is $192.4 million as at December 31, 2011 (2010 –
$271.0 million).
TORSTAR CORPORATION 2011 ANNUAL REPORT 73
TORSTAR - Consolidated Financial Statements
6. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at January 1, 2010
Acquisitions – business combinations
Additions
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2010
Acquisitions – business combinations
Additions
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2011
Depreciation and impairment
Balance at January 1, 2010
Additions
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2010
Additions
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2011
Net book value
At January 1, 2010
At December 31, 2010
At December 31, 2011
Building and
leasehold
improvements
Machinery
and
equipment
Land
$6,836
$135,397
(85)
(132)
6,619
175
56
$6,850
$6,836
$6,619
$6,850
4,633
(3,499)
384
(563)
136,352
1,274
6,462
(1,678)
390
274
$143,074
$43,529
7,050
(3,316)
9
(433)
46,839
8,011
(1,674)
(315)
199
$53,060
$91,868
$89,513
$90,014
$207,019
33
11,672
(12,140)
(2,082)
(1,253)
203,249
7,266
12,028
(15,440)
528
482
$208,113
$128,230
14,759
(11,970)
(2,242)
(939)
127,838
13,754
(15,348)
1,174
314
$127,732
$78,789
$75,411
$80,381
Total
$349,252
33
16,305
(15,724)
(1,698)
(1,948)
346,220
8,715
18,490
(17,118)
918
812
$358,037
$171,759
21,809
(15,286)
(2,233)
(1,372)
174,677
21,765
(17,022)
859
513
$180,792
$177,493
$171,543
$177,245
7.
INVESTMENT IN ASSOCIATED BUSINESSES
The Company’s Investment in associated businesses includes a 19.35% equity interest in Black Press Ltd.
(“Black Press”), a 25% equity investment in Blue Ant Media Inc. (“Blue Ant”), a 33.33% equity interest in Canadian
Press Enterprises Inc. (“Canadian Press”), and a 30% equity interest in Q-ponz Inc. (“Q-ponz”). The Company’s
20% equity interest in CTV Inc. (“CTV”) was also classified as an investment in associated businesses until
September 10, 2010 when it was classified as AFS.
Black Press
Black Press is a privately held company that publishes more than 150 newspapers (weeklies, dailies and
shoppers) in Canada and the U.S. and has 16 press centres in Western Canada, Washington State, Ohio and
Hawaii. The Company has not recorded its share of Black Press’ results in either 2011 or 2010 as the Company’s
carrying value in Black Press was previously reduced to nil. The Company will report its share of Black Press’s
results once the unrecognized losses ($0.3 million as of December 31, 2011) have been offset by net income or
other comprehensive income.
TORSTAR CORPORATION 2011 ANNUAL REPORT 74
TORSTAR - Consolidated Financial Statements
Blue Ant
Blue Ant is an independent media company which holds a controlling interest in GlassBOX Television (operating
specialty channels Travel+Escape, Bite TV and Aux TV), a minority interest in Quarto Communications (publisher
of Cottage Life, Outdoor Canada, Explore and Canadian Home Workshop) and a minority interest in High Fidelity
TV (operating four premium high definition channels Oasis HD, eqhd, radX and HIFI).
The Company invested $16.9 million on December 21, 2011 and will invest a further $5.8 million simultaneously
with the completion of the acquisition by Blue Ant of 100% of High Fidelity TV (which is subject to approval by the
Canadian Radio-television and Telecommunications Commission).
Blue Ant has an August fiscal year end and therefore does not have coterminous quarter-ends with the Company.
The Company will start recording its share of Blue Ant’s results in fiscal 2012 with the first quarter including Blue
Ant’s results for their quarter ended February 29, 2012.
Canadian Press
Canadian Press operates The Canadian Press news agency. The Company invested an initial $0.8 million on
November 15, 2010 and committed to invest an additional $0.5 million in 2011.
The Company has recorded its share of Canadian Press’s results through the third quarter of 2011 when the
Company’s carrying value was reduced to nil. The Company will report its share of Canadian Press’s results
once the unrecognized losses ($3.9 million as of December 31, 2011) have been offset by net income, other
comprehensive income or additional investments are made.
Q-ponz
Q-ponz produces and delivers unaddressed co-op direct mail. The Company has recorded its share of Q-ponz’s
results through the fourth quarter of 2011.
During the fourth quarter, the Company completed an assessment of the value of its investment in Q-ponz to
determine if there has been an other than temporary decline in the value relative to its carrying value. The
Company determined that there had been a decline in the value. A $0.5 million write-down was recorded,
reducing the carrying value to nil. In early 2012, the Company sold its interest in Q-ponz to the controlling
shareholder for nominal consideration.
CTV
On September 10, 2010, the Company entered into agreements to sell its interest in CTV for aggregate cash
proceeds of approximately $345 million. On December 31, 2010, the Company received $40 million in connection
with CTV’s sale of The Globe and Mail.
Effective with the signing of the agreements, the Company’s investment in CTV was reclassified as AFS and
remeasured to estimated fair value of $257.0 million resulting in a gain of $115.5 million which was not subject to
tax, as the Company had previously written down the cost of the investment below its tax basis. With the change
in classification, the Company ceased to equity account for CTV results as of September 10, 2010. The
Company’s share of CTV’s net loss was $28.0 million in 2010, representing CTV’s results through September 10,
2010. The remeasured value of $257.0 million was reduced by the $40.0 million received on December 31, 2010
resulting in a remeasured value as of December 31, 2010 of $217.0 million.
On April 1, 2011, the Company completed the sale of its interest in CTV to BCE Inc. for proceeds of $291.6
million. At that point, the unrealized gain recorded in OCI during 2011, totalling $74.6 million, was reclassified to
the consolidated statement of income. This gain of $74.6 million was also not subject to tax.
TORSTAR CORPORATION 2011 ANNUAL REPORT 75
TORSTAR - Consolidated Financial Statements
The following is a continuity of Investment in associated businesses:
Balance, beginning of year
Loss of associated businesses
Write-down of investment in Q-ponz
Actuarial losses on employee benefits for associated businesses
Change in investees’ AOCI
Reclassification of CTV to AFS financial asset
Investment in Canadian Press
Investment in Blue Ant
Balance, end of year
8.
INTANGIBLE ASSETS
Year ended December 31
2010
2011
$2,201
(2,157)
(544)
500
16,935
$16,935
$170,783
(28,343)
(4,086)
4,564
(141,467)
750
$2,201
Cost
Balance at January 1, 2010
Acquisitions – business combinations
Additions – internally developed
Additions – purchased
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2010
Acquisitions – business combinations
Additions – internally developed
Additions – purchased
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2011
Amortization and impairment
Balance at January 1, 2010
Amortization
Impairment loss
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2010
Amortization
Disposals
Reclassifications
Foreign exchange
Balance at December 31, 2011
Net book value
At January 1, 2010
At December 31, 2010
At December 31, 2011
Indefinite
life
$25,132
6,842
44
32,018
9,856
12
8
$41,894
$1,633
90
1,723
$1,723
$23,499
$30,295
$40,171
Software
Finite life
Other
Total
Total
$65,816
413
4,195
6,473
(4,363)
1,581
(241)
73,874
61
3,135
13,409
(10,798)
288
99
$80,068
$49,333
6,401
(4,363)
2,250
(182)
53,439
7,277
(10,707)
184
83
$50,276
$16,483
$20,435
$29,792
$19,943
2,704
21
22,668
28,455
(752)
(9)
(3)
$50,359
$85,759
3,117
4,195
6,473
(4,363)
1,581
(220)
96,542
28,516
3,135
13,409
(11,550)
279
96
$130,427
$5,831
3,282
$55,164
9,683
(4,363)
2,250
(190)
62,544
11,400
(11,459)
184
84
$62,753
(8)
9,105
4,123
(752)
1
$12,477
$110,891
9,959
4,195
6,473
(4,363)
1,581
(176)
128,560
38,372
3,135
13,421
(11,550)
279
104
$172,321
$56,797
9,683
90
(4,363)
2,250
(190)
64,267
11,400
(11,459)
184
84
$64,476
$14,112
$13,563
$37,882
$30,595
$33,998
$67,674
$54,094
$64,293
$107,845
TORSTAR CORPORATION 2011 ANNUAL REPORT 76
TORSTAR - Consolidated Financial Statements
9. GOODWILL
Cost and net book value:
Balance at January 1, 2010
Acquisitions – business combinations
Foreign exchange and other
Balance at December 31, 2010
Acquisitions – business combinations
Foreign exchange and other
Balance at December 31, 2011
Goodwill
$580,302
15,793
(196)
595,899
68,998
132
$665,029
Goodwill acquired in a business combination is allocated to a CGU or groups of CGUs that are expected to
benefit from the synergies of the combination. Each CGU or group of CGU to which goodwill is allocated is the
lowest level at which the goodwill is monitored for internal management purposes but is not larger than an
operating segment.
Goodwill has been allocated to the following groups of CGUs:
Harlequin
Metroland Media Group
Star Media Group
Toronto Star Group
Metro
Others
Total
10. IMPAIRMENT TESTING
December 31,
2011
$111,151
258,826
December 31,
2010
$111,123
240,681
141,191
75,851
78,010
$665,029
140,948
25,765
77,382
$595,899
January 1,
2010
$103,628
239,644
140,948
25,765
70,317
$580,302
The test for impairment for either an intangible asset or goodwill is to compare the recoverable amount of the
asset, CGU or group of CGUs to the carrying value. The recoverable amount is the greater of fair value less
costs to sell and value in use. The recoverable amount is determined for an individual asset unless the asset
does not generate cash inflows that are largely independent of those from other assets or groups of assets (such
as goodwill). If this is the case, the recoverable amount is determined for the cash generating unit to which the
asset belongs.
The Company generally uses the value in use calculation to determine the recoverable amount but in certain
circumstances may use fair value less costs to sell. The value in use calculation uses cash flow projections for a
five year period and a terminal value. The terminal value is the value attributed to the cash flow beyond the
projected period using a perpetuity growth rate. The key assumptions in the value in use calculations are EBITDA
growth rates (for periods within the cash flow projections and in perpetuity for the calculation of the terminal
value), future levels of maintenance expenditures on capital and discount rates:
(cid:131) EBITDA growth rates and future levels of capital expenditures are based on management’s best estimates
considering historical and expected operating plans, strategic plans, economic conditions and the general
outlook for the industry and markets in which the cash-generating unit operates. The projections are based
on the most recent financial budgets and three year strategic plans approved by the Company’s Board of
Directors and management forecast beyond that period.
(cid:131) The discount rate applied to each calculation is an after-tax rate that reflects an optimal debt-to-equity ratio
and considers the risk free rate, market equity risk premium, size premium and the risks specific to each CGU
or group of CGUs cash flow projections.
In calculating the value in use, the Company uses a range of discount rates in order to establish a range of
values for each CGU or group of CGUs.
(cid:131)
TORSTAR CORPORATION 2011 ANNUAL REPORT 77
TORSTAR - Consolidated Financial Statements
(cid:131) The perpetuity growth rate is based on management’s best estimates considering the industry, operating
income trends and growth prospects for that specific CGU or group of CGUs.
The after-tax discount and perpetual growth rates used by the Company for the purpose of impairment testing for
each of the following CGU or group of CGUs in the following periods were:
Harlequin
Metroland Media Group
Toronto Star Group
Metro
Others
Fiscal 2011
Fiscal 2010
January 1, 2010
Discount
8.5% - 10.4%
8.7% - 10.6%
8.5% - 9.4%
n/a
9.8% - 14.7%
Growth
1.0%
0.0%
0.0%
Discount
8.5% - 10.4%
8.6% - 10.5%
8.7% - 9.6%
10.0% - 11.1%
1.0% - 3.0% 10.0% - 15.5%
Growth
1.0%
1.0%
1.0%
2.0%
1.5% - 4.0%
Discount
9.1% - 11.1%
9.3% - 11.4%
9.1% - 10.1%
10.5% - 11.6%
10.5% - 16.3%
Growth
1.0%
1.0%
1.0%
2.0%
1.5% - 4.0%
These after-tax rates correspond to pre-tax rates in an estimated range of 11% - 23% for fiscal 2011; 11% - 21%
for fiscal 2010 and 12% - 22% on January 1, 2010.
For the fiscal 2011 impairment testing, Metro was assessed for impairment based on the transaction value
whereby the Company increased its ownership in Metro to 90%.
On January 1, 2010, on the transition to IFRS, the Company completed its impairment testing of goodwill and
indefinite-life intangible assets. There was no impairment loss required to be recorded on the transition date. The
Company also assessed for any indicators that previous impairment losses had decreased. As certain
businesses had improved results and outlook, $0.5 million of previously recorded impairment losses on non-
amortizable intangible assets was reversed.
The Company has completed its annual impairment testing of goodwill and intangible assets for fiscal 2011 and
2010. There was no impairment loss or reversals of impairment loss recorded as a result of the testing.
11. OTHER ASSETS
Portfolio investments
ESPP receivable
Employee benefit asset (note 17)
Other long term receivables
12. LONG-TERM DEBT
Bankers’ acceptances:
Cdn. dollar denominated
U.S. dollar denominated
Medium term notes:
Cdn. dollar denominated
Fair value hedge
Current
Long-term
December 31,
2011
$774
431
593
$1,798
December 31,
2010
$203
469
446
$1,118
January 1,
2010
$883
312
371
523
$2,089
December 31,
2011
December 31,
2010
January 1,
2010
$108,020
88,171
$196,191
$320,998
83,588
$404,586
$196,191
$404,586
$196,191
$381,819
92,951
$474,770
$75,000
1,470
76,470
$551,240
$404,586
$551,240
TORSTAR CORPORATION 2011 ANNUAL REPORT 78
TORSTAR - Consolidated Financial Statements
(a) Bank debt
i.
In January 2012, the Company renewed its long-term credit facilities with its bankers, which consists of a
$150 million revolving facility maturing January 2016 (“Tranche A”) and a $200 million revolving facility
maturing in January 2014 (“Tranche B”). Either or both tranches can be extended with the consent of all
parties for additional 364-day periods. Prior to January 2012, the Company had long-term credit facilities
with its bankers consisting of a $275 million revolving term loan (reduced from $425 million in April 2011
at the Company’s request). The term loan matured in January 2012 and was classified as current at
December 31, 2011. Prior to April 2011, the long-term credit facilities also included a revolving operating
loan of $175 million, which was cancelled in April 2011 at the Company’s request.
ii. The credit facilities may be drawn in Canadian or U.S. dollars and are subject to financial tests and other
covenants with which the Company was in compliance at December 31, 2011. Amounts borrowed under
the bank credit facilities are primarily in the form of bankers’ acceptance (or an equivalent) at varying
interest rates and normally mature over periods of 30 to 180 days. Effective January 2012, the interest
rate spread above the bankers’ acceptance rate if in Canadian dollars, or the LIBOR rate if in U.S. dollars,
varies based on the Company’s net debt to operating cash flow ratio (range of 1.4% to 2.5%) for
borrowings under either tranche (January 2011 – 0.6% for borrowings under the revolving term loan,
varied based on the Company’s long-term credit rating spread and 2.25% on new borrowings under the
revolving operating loan, varied based on the Company’s net debt to operating cash flow ratio (range of
2.0% to 3.8%)). Effective January 2012, the interest rate spread is 1.5%. The interest rate spread at
December 31, 2011 was 0.6% (December 31, 2010 – blended rate of 1.6%).
iii.
In September 2006, the Company entered into interest rate swap agreements for five years through
September 2011, with major Canadian chartered banks that fixed the interest rate on $250 million of
Canadian dollar borrowings. As a result, the Company paid quarterly a fixed rate of 4.3% per annum
(plus the interest rate spread referred to in 12(a)(ii)) and received quarterly floating rate payments based
on 90 day bankers’ acceptance rates. These swap contracts were designated as cash flow hedges until
the Company extinguished these swap agreements in March 2011 and paid $3.8 million, which has been
included in interest and financing costs.
iv. The average rate on Canadian dollar bank borrowings outstanding at December 31, 2011 was 1.8%
(December 31, 2010 – 2.7%; 5.3% including the effect of the interest rate swap noted in 12(a)(iii)).
v.
In May 2008, the Company entered into two interest rate swap agreements that fix the interest rate on
U.S. $80 million of borrowings at approximately 4.2% (plus the interest rate spread referred to in 12(a)(ii))
for seven years ending May 2015. These swaps have been designated as cash flow hedges. The fair
value of the U.S. interest rate swap arrangements at December 31, 2011 was $8.8 million unfavourable
(December 31, 2010 – $7.6 million unfavourable).
vi. Bank debt outstanding at December 31, 2011 included U.S. dollar borrowings of U.S. $87.0 million
(December 31, 2010 – U.S. $84.2 million) at an average rate of 0.7% (December 31, 2010 – 1.9%).
Including the effect of the interest rate swap noted in 12(a)(v), the effective rate was 4.6% at December
31, 2011 (December 31, 2010 – 5.8%).
(b) The Company is exposed to credit related losses in the event of non-performance by counterparties to the
above described derivative 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 contracting with major financial
institutions, as approved by the Board of Directors, as counterparties.
(c) Loans under the long term credit facilities may only be made provided there has been no development
materially adversely affecting the business or financial condition or position of the Company and its
subsidiaries considered on a consolidated basis. There were no such developments as at December 31,
2011.
TORSTAR CORPORATION 2011 ANNUAL REPORT 79
TORSTAR - Consolidated Financial Statements
(d) Interest and financing costs for the year ended December 31, 2011 consists of interest on long-term debt of
$14.1 million, including the $3.8 million paid to extinguish the swap agreements in 12(a)(iii), (2010 – $23.8
million); interest accretion costs of $2.7 million (2010 – $0.8 million) offset by interest income of $0.2 million
(2010 - $0.5 million).
(e) Interest paid during the year ended December 31, 2011 (including the $3.8 million paid to extinguish the swap
agreements in 12(a)(iii)) was $14.2 million (2010 – $24.0 million).
13. FINANCIAL INSTRUMENTS
Fair value of financial instruments
The carrying values of the Company’s financial instruments approximate their fair values unless otherwise noted.
Financial assets:
Loans and receivables, measured at amortized cost:
Cash and cash equivalents
Trade accounts receivable
Other receivables
Receivables
Available-for-sale, measured at fair value:
Portfolio investments¹
Investment in CTV Inc.
Derivatives designated as effective hedges, measured at fair value:
Foreign currency forward contracts
Interest rate swaps – cash flow hedges (current)
Interest rate swaps – cash flow hedges (non-current)
Interest rate swaps – fair value hedges (non-current)
Derivatives
Other (non-current)
Other (non-current)
Other financial liabilities, measured at amortized cost:
Bank overdraft
Current portion of long-term debt
Long term debt
Accounts payable and accrued liabilities
Deferred payments on acquisitions¹
Call option liability¹
Provisions (current)
Provisions (non-current)
¹ These amounts are included in Other assets or Other liabilities
Risk management
December 31,
2011
December 31,
2010
January 1,
2010
$50,588
$42,991
$39,158
271,784
6,226
278,010
256,922
9,514
266,436
236,081
14,208
250,289
774
367
(8,761)
203
217,000
883
3,354
(4,947)
(7,647)
6,067
(16,632)
1,470
1
(1)
7,661
196,191
210,567
10,821
22,599
16,906
6,958
2,052
404,586
212,293
3,984
551,240
194,348
3,667
21,170
20,923
27,966
2,095
The Company is exposed to various risks related to its financial assets and liabilities. These risk exposures are
managed on an ongoing basis.
TORSTAR CORPORATION 2011 ANNUAL REPORT 80
TORSTAR - Consolidated Financial Statements
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due or at a
reasonable cost. The Company manages liquidity risk primarily by maintaining sufficient unused capacity within its
long term credit facilities. The unused capacity at December 31, 2011 was approximately $51 million (December
31, 2010 - $173 million). The credit facilities matured in January 2012 and the Company has renegotiated the
renewal of the facilities as disclosed in note 12(a)(i). If the renewal of the credit facilities had been in place at
December 31, 2011, the unused capacity would have been $126 million.
The maturity profile of the Company’s financial liabilities, based on contractual undiscounted payments, is as
follows:
2012
2013
2014
2015
2016
2017+
Total
Foreign currency hedges¹
Outflows
Inflows
U.S. $ Interest rate swaps
Bank overdraft
Accounts payable and
accrued liabilities1
Call option liability
Provisions1
Long term debt1,2
$53,240
(53,724)
(484)
3,382
7,661
210,567
22,880
196,191
$30,510
(30,728)
(218)
3,382
$5,085
(5,269)
(184)
3,382
$1,193
6,359
11,184
2,136
3,652
$2,228
$4,457
$88,835
(89,721)
(886)
11,339
7,661
210,567
11,184
41,712
196,191
Total
$440,197
$9,523
$16,518
$4,845
$2,228
$4,457
$477,768
1 All foreign currency denominated amounts have been translated at the December 31, 2011 spot rates.
2 The long-term credit facilities were renewed in January 2012 as indicated in note 12(a)(i).
Credit risk
In the normal course of business, the Company is exposed to credit risk from its accounts receivable from
customers. The carrying amounts for accounts receivable are net of applicable book revenue provisions and
allowances for doubtful accounts. The allowances for doubtful accounts are estimated based on past experience,
specific risks associated with the customer and other relevant information. Under a billing and collection
agreement with a third party, the Book Publishing Segment has a net receivable of $29.1 million (U.S. $28.6
million) at December 31, 2011 (December 31, 2010 - $30.4 million (U.S. $30.5 million)). The Company believes
that the credit risk associated with this balance is mitigated by the financial stability and payment history of the
third party.
The Company is also exposed to credit-related losses in the event of non-performance by counterparties to
derivative instruments. The Company manages its counterparty risk by only contracting with major financial
institutions with high credit ratings, as approved by the Board of Directors, as counterparties.
The maximum exposure to credit risk is the carrying value of these financial assets.
TORSTAR CORPORATION 2011 ANNUAL REPORT 81
TORSTAR - Consolidated Financial Statements
The following table sets out the ageing of the trade receivables:
Gross accounts receivable:
Current
Up to three months past due date
Three to twelve months past due date
Impaired
Book revenue provisions
Allowances for doubtful accounts
December 31,
2011
December 31,
2010
January 1,
2010
$251,802
102,317
12,535
613
367,267
(88,362)
(7,121)
$271,784
$263,614
99,828
10,028
285
373,755
(108,992)
(7,841)
$256,922
$251,315
88,969
7,571
347,855
(103,287)
(8,487)
$236,081
The continuity of the allowance for doubtful accounts is as follows:
Balance, beginning of year
Utilized
Income statement movements
Exchange differences and other
Balance, end of year
Market risk
Year ended December 31
2010
($8,487)
4,686
(4,070)
30
($7,841)
2011
($7,841)
3,800
(2,805)
(275)
($7,121)
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect
the Company’s income or the value of its financial instruments.
a) Foreign currency risk
The Company is exposed to foreign currency risk through Harlequin’s international operations. The most
significant foreign currency exposure is to movements in the U.S. dollar/Cdn. dollar exchange rate. To
manage this exchange risk in its operating results, the Company’s practice is to enter into forward foreign
exchange contracts to hedge a portion of its U.S dollar revenues as detailed below. A $0.05 higher (lower)
average U.S. dollar/Cdn. dollar exchange rate during the year ended December 31, 2011 would have
increased (decreased) net income by approximately $1.5 million (2010 – $0.7 million).
The Company has entered into forward foreign exchange contracts to allow it to convert a portion of its
expected future U.S. dollar revenue into Canadian dollars. The forward foreign exchange contracts establish
a rate of exchange of Canadian dollar per U.S. dollar of $1.03 for U.S. $52.4 million in 2012, $1.02 for U.S.
$30.0 million in 2013 and $1.05 for U.S. $5.0 million in 2014 (December 31, 2010 – $1.07 for U.S. $35.5
million in 2011 and $1.07 for U.S. $19.0 million in 2012). These forward foreign exchange contracts have
been designated as cash flow hedges and the net fair value of these contracts was $0.4 million favourable at
December 31, 2011 (December 31, 2010 – $3.4 million favourable).
Forward foreign exchange contracts settled in 2011 established a rate of exchange of Canadian dollar per
U.S. dollar of $1.07 for U.S. $35.5 million (2010 - $1.16 for U.S. $51.6 million).
In order to offset the exchange risk on its consolidated statement of financial position from net U.S. dollar
denominated assets, the Company maintains a certain level of U.S. dollar denominated debt as indicated in
Note 12(a)(v). Effective January 1, 2011, the Company designated $80 million of its U.S. dollar debt as a
hedge of its U.S. dollar denominated net investment in subsidiaries with the U.S. dollar as their functional
currency. Gains or losses on the translation of the designated hedge amount are transferred to OCI to offset
TORSTAR CORPORATION 2011 ANNUAL REPORT 82
TORSTAR - Consolidated Financial Statements
any gains or losses on translation of the net investments in subsidiaries with the U.S. dollar as their functional
currency. There was no hedge ineffectiveness in the year ended December 31, 2011.
From time to time, the Company may also enter into forward foreign exchange contracts to hedge other
currencies (Yen, Euro, Pound Sterling) realized in Harlequin’s overseas operations.
b)
Interest rate risk
The Company’s interest rate risk arises from borrowings issued at variable rates which expose the Company
to cash flow interest rate risk. The Company manages this risk through the use of interest rate swap
contracts to fix the interest rate on a portion of the debt as detailed in Note 12.
An assumed increase of 1% in the Company’s short term borrowing rates during the year ended December
31, 2011 would have decreased net income by $0.9 million (2010 – $1.0 million), with an equal but opposite
effect for an assumed decrease of 1% in short term borrowing rates.
14. CAPITAL MANAGEMENT
The Company’s capital management objectives are to maintain financial flexibility in order to preserve its capacity
to meet its financial commitments, to pay dividends and to meet its potential obligations resulting from internal
growth and acquisitions.
The Company defines capital as:
(cid:120) Total equity
(cid:120) Long term debt
(cid:120) Bank overdraft net of cash and cash equivalents
Total managed capital was as follows:
Total equity
Long term debt (including current portion)
Bank overdraft
Cash and cash equivalents
December 31,
2011
$706,264
196,191
7,661
(50,588)
$859,528
December 31,
2010
$584,560
404,586
6,958
(42,991)
$953,113
January 1,
2010
$426,286
551,240
2,052
(39,158)
$940,420
The Company manages its capital structure in accordance with changes in economic conditions. In order to
maintain or adjust its capital structure, subject to capital market conditions, the Company may elect to adjust the
amount of debt outstanding, adjust the amount of dividends paid to shareholders, return capital to its
shareholders, repurchase its shares in the marketplace or issue new shares.
The Company is currently meeting all its financial commitments. The Company’s credit facilities are subject to
financial tests and other covenants with which it was in compliance at December 31, 2011.
There have been no changes in the Company’s approach to capital management during the year.
The Company is not subject to any external capital requirements.
15. PROVISIONS
Restructuring
During the year ended December 31, 2011, the Company recorded restructuring and other charges of $19.4
million, of which $18.8 million was recorded in the Media Segment and $0.6 million in the Book Publishing
Segment.
TORSTAR CORPORATION 2011 ANNUAL REPORT 83
TORSTAR - Consolidated Financial Statements
The Media Segment restructuring provisions include $15.6 million relating to staff reductions and a $3.2 million
charge for rented spaces that were vacated as reduced staff counts allowed for space consolidation. The $3.2
million charge represents the discounted shortfall between the remaining obligation under the existing leases and
the amounts to be received through sublease arrangements. The non-current restructuring provisions are
expected to be paid out from 2012 through 2028 within the Media Segment.
The $0.6 million recorded in the Book Publishing Segment relate to staff reductions in the North American Retail
business and are all classified as current provisions.
During the year ended December 31, 2010, the Company recorded restructuring and other charges of $32.6
million. This included restructuring provisions of $28.2 million related to staff reductions in the Media Segment,
and other charges of $4.4 million.
The other charges of $4.4 million included $2.8 million related to transaction costs for the Company’s bid to
purchase the newspaper and digital businesses of Canwest Limited Partnership and its related entities; a $1.2
million adjustment to a provision for litigation in the Media Segment and $0.4 million related to transaction costs
from Harlequin’s acquisition of the other half of the German publishing business.
Legal
The Company is involved in various legal actions, primarily in the Media Segment, which arise in the ordinary
course of business. While the final outcome of these matters cannot be predicted with certainty, any additional
liability that may arise from such contingencies is not expected to have a material adverse effect on the financial
position or results of operations of the Company.
Contingent consideration
The contingent consideration provision is an estimate of the fair value of contingent consideration for acquisitions
within the Media Segment, which are primarily based on revenue levels estimated to be realized by the acquired
businesses for specified periods following the acquisition.
Balance at January 1, 2010
Provisions made during the year
Reversals of provisions during the year
Foreign exchange
Provisions paid during the year
Interest accretion
Balance at December 31, 2010
Provisions made during the year
Reversals of provisions during the year
Adjustment to contingent consideration
Foreign exchange
Provisions paid during the year
Interest accretion
Balance at December 31, 2011
Current
Non-current
Balance at December 31, 2010:
Current
Non-current
Balance at January 1, 2010:
Current
Non-current
Restructuring
Legal
Contingent
consideration
$26,327
29,121
(925)
(22,136)
32,387
19,794
(383)
3
(21,622)
1,338
$31,517
$15,725
$15,792
$18,094
$14,293
$1,639
1,279
(100)
(79)
(179)
2,560
(427)
2
(1,795)
$340
$340
$2,560
$26,327
$1,639
$2,095
5,522
(840)
369
7,146
1,087
(630)
(823)
868
$7,648
$6,534
$1,114
$516
$6,630
$2,095
Total
$30,061
35,922
(1,025)
(79)
(23,155)
369
42,093
20,881
(810)
(630)
5
(24,240)
2,206
$39,505
$22,599
$16,906
$21,170
$20,923
$27,966
$2,095
TORSTAR CORPORATION 2011 ANNUAL REPORT 84
TORSTAR - Consolidated Financial Statements
16. OTHER LIABILITIES
Employees’ shares subscribed (note 19(b))
RSU Plan (note 19(c))
DSU Plan (note 19(e))
Deferred payments on acquisitions
Call option liability
Lease inducements
Other
December 31,
2011
$3,617
1,597
2,655
10,821
2,075
7,135
$27,900
December 31,
2010
$3,830
3,037
3,210
3,984
2,234
5,672
$21,967
January 1,
2010
$3,537
1,283
2,263
3,667
2,393
4,405
$17,548
17. EMPLOYEE FUTURE BENEFITS
The Company maintains a number of defined benefit plans which provide pension benefits to its employees in
Canada and the United States. Pension benefits are calculated based on a combination of years of service and
compensation levels. The Company also maintains capital accumulation plans in Canada, the United States and
in certain overseas operations of Harlequin. Post employment benefits other than pensions which provide for
various health and life insurance benefits are also available primarily to employees in the newspaper operations
hired prior to August 23, 2000.
Information concerning the Company’s post employment benefit plans is as follows:
Net defined benefit plan obligations
Changes to the net defined benefit obligation were as follows:
January 1, 2010
Expense recognized in
statement of income
Amounts recognized in OCI
Contributions to plan
Foreign exchange
December 31, 2010
Expense recognized in
statement of income
Amounts recognized in OCI
Contributions to plan
Foreign exchange
December 31, 2011
Pension plans
Funded
Canada
$112,882
United States
$6,280
Unfunded2
$20,465
Post
employment
benefit plans
$46,954
6,861
20,812
(16,253)
$124,302
8,324
85,258
(45,146)
$172,738
1,618
1,851
(545)
(312)
$8,892
1,176
2,838
(1,273)
200
$11,833
1,700
1,411
(418)
3,059
3,722
(2,319)
$23,158
$51,416
2,018
(470)
(2,440)
3,048
3,883
(2,308)
$22,266
$56,039
Total1
$186,581
13,238
27,796
(19,535)
(312)
$207,768
14,566
91,509
(51,167)
200
$262,876
1 At December 31, 2010 and 2011 the entire net defined benefit obligation is reflected in Employee benefits liabilities. At
January 1, 2010 the net defined benefit obligation is recorded as $371 in Other assets and $186,952 in Employee benefits
liabilities.
2 The unfunded pension plan is an executive retirement plan which is supported by an outstanding letter of credit of $25.2
million as at December 31, 2011 (December 31, 2010 - $21.9 million).
TORSTAR CORPORATION 2011 ANNUAL REPORT 85
TORSTAR - Consolidated Financial Statements
A summary of the components of the net defined benefit obligation as at December 31, 2011 and 2010 is as
follows:
2011
Defined benefit obligations
Fair value of plan assets
Net defined benefit obligation
Pension plans
Funded
Canada
$881,845
(709,107)
$172,738
United States
$25,186
(13,353)
$11,833
Post
employment
benefit plans
$56,039
Unfunded
$22,266
$22,266
$56,039
2010
Pension plans
Funded
Defined benefit obligations
Fair value of plan assets
Funded status - deficit
Minimum funding liability1
Net defined benefit obligation
Canada
$778,462
(694,354)
84,108
40,194
$124,302
United States
$20,623
(11,731)
8,892
Post
employment
benefit plans
$51,416
Unfunded
$23,158
23,158
51,416
$8,892
$23,158
$51,416
Total
$985,336
(722,460)
$262,876
Total
$873,659
(706,085)
167,574
40,194
$207,768
1 The minimum funding liability represents additional legislated funding requirements and the limits on the amount of assets
that can be recognized related to this funding. There is no minimum funding liability outstanding at December 31, 2011.
The following table provides a summary of changes in the defined benefit obligation and the fair value of plan
assets during 2011 and 2010:
2011
Accrued benefit obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial losses (gain)
Participant contributions
Foreign exchange
Balance, end of year
Plans’ assets
Fair value, beginning of year
Expected return on plan assets
Actuarial losses
Benefits paid
Employer contributions
Participant contributions
Foreign exchange
Fair value, end of year
Funded status – deficit
Pension plans
Funded
Canada
United States
Unfunded
Post
employment
benefit plans
$778,462
16,062
39,657
(43,923)
86,235
5,352
$881,845
$694,354
47,395
(39,217)
(43,923)
45,146
5,352
$709,107
$172,738
$20,623
960
1,089
(353)
2,402
465
$25,186
$11,731
873
(436)
(353)
1,273
265
$13,353
$11,833
$23,158
906
1,112
(2,440)
(470)
$51,416
474
2,574
(2,308)
3,883
$22,266
$56,039
($2,440)
2,440
($2,308)
2,308
$22,266
$56,039
Total
$873,659
18,402
44,432
(49,024)
92,050
5,352
465
$985,336
$706,085
48,268
(39,653)
(49,024)
51,167
5,352
265
$722,460
$262,876
TORSTAR CORPORATION 2011 ANNUAL REPORT 86
TORSTAR - Consolidated Financial Statements
2010
Accrued benefit obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial losses
Participant contributions
Prior service costs
Foreign exchange
Balance, end of year
Plans’ assets
Fair value, beginning of year
Expected return on plan assets
Actuarial gains
Benefits paid
Employer contributions
Participant contributions
Foreign exchange
Fair value, end of year
Funded status – deficit
Pension plans
Funded
Canada
United States
Unfunded
Post
employment
benefit plans
$695,858
11,558
40,172
(42,626)
67,372
6,128
$778,462
$650,533
44,869
19,197
(42,626)
16,253
6,128
$694,354
$84,108
$17,160
800
982
(306)
2,272
568
(853)
$20,623
$10,880
732
421
(306)
545
(541)
$11,731
$8,892
$20,465
548
1,152
(418)
1,411
$46,954
390
2,669
(2,319)
3,722
$23,158
$51,416
($418)
418
($2,319)
2,319
$23,158
$51,416
Total
$780,437
13,296
44,975
(45,669)
74,777
6,128
568
(853)
$873,659
$661,413
45,601
19,618
(45,669)
19,535
6,128
(541)
$706,085
$167,574
Net benefit expense for defined benefit plans included in salaries and benefits in the 2011 and 2010 consolidated
statement of income is as follows:
2011
Current service cost
Interest cost on benefit
obligation
Expected return on plan
assets
Net benefit expense
2010
Current service cost
Interest cost on benefit
obligation
Expected return on plan
assets
Prior service costs
Net benefit expense
Pension plans
Funded
Canada
$16,062
United States
$960
Unfunded
$906
39,657
1,089
1,112
Post
employment
benefit plans
$474
2,574
(47,395)
$8,324
(873)
$1,176
$2,018
$3,048
Pension plans
Funded
Canada
$11,558
United States
$800
Unfunded
$548
40,172
982
1,152
Post
employment
benefit plans
$390
2,669
(44,869)
$6,861
(732)
568
$1,618
$1,700
$3,059
Total
$18,402
44,432
(48,268)
$14,566
Total
$13,296
44,975
(45,601)
568
$13,238
TORSTAR CORPORATION 2011 ANNUAL REPORT 87
TORSTAR - Consolidated Financial Statements
Amounts recognized in the 2011 and 2010 consolidated statement of comprehensive income (before tax):
2011
Actuarial (losses) gain
Change in minimum funding
liability
Amounts recognized in OCI
2010
Actuarial losses
Change in minimum funding
liability
Amounts recognized in OCI
Pension plans
Funded
Canada
($125,452)
United States
($2,838)
Unfunded
$470
Post
employment
benefit plans
($3,883)
40,194
($85,258)
($2,838)
$470
($3,883)
Pension plans
Funded
Canada
($48,175)
United States
($1,851)
Unfunded
($1,411)
Post
employment
benefit plans
($3,722)
27,363
($20,812)
($1,851)
($1,411)
($3,722)
Total
($131,703)
40,194
($91,509)
Total
($55,159)
27,363
($27,796)
Post employment benefit
plans
Significant assumptions used
To determine benefit obligation at end of year:
Discount rate
Rate of future compensation increase
Pension plans
2011
2010
4.3% to 4.4% 4.7% to 5.1%
3.0% to 4.0% 3.0% to 4.0%
2011
4.4%
N/A
To determine benefit expense:
Discount rate
4.7% to 5.1 % 5.5% to 5.8%
5.1%
Expected long-term rate of return on plan
assets
6.75%
7.0%
Rate of future compensation increase
3.0% to 4.0% 3.0% to 4.0%
Health care cost trend rates at end of year:
Initial rate
Ultimate rate
Year ultimate rate reached
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
8.0%
5.0%
2017
2010
5.1%
N/A
5.8%
N/A
N/A
8.5%
5.0%
2017
The effect of a one percent increase or decrease in significant assumptions used for the Company’s pension and
post employment benefit plans would result in an increase (decrease) in the net benefit expense and accrued
benefit obligation at December 31, 2011.
Pension plans:
Discount rate
Expected long-term rate of return on
plan assets
Rate of compensation increase
Post employment benefit plans:
Discount rate
Per capita cost of health care
Net benefit expense
Accrued benefit obligation
1% Increase
1% Decrease
1% Increase
1% Decrease
(744)
(7,146)
683
98
103
(80)
(110,082)
125,766
7,146
(663)
(134)
(90)
9,601
(5,720)
1,953
(9,329)
6,922
(1,703)
TORSTAR CORPORATION 2011 ANNUAL REPORT 88
TORSTAR - Consolidated Financial Statements
Pension plan assets, measured as at December 31, 2011 and 2010 are as follows:
Equity investments
Fixed income investments
Total
2011
51%
49%
100%
2010
61%
39%
100%
The estimate for the expected long-term rate of return in plan assets is calculated based on the Company’s
targeted investment portfolio mix of 55% equity investment and 45% fixed income investment (December 31,
2010 – 60% and 40% respectively). In determining the expected rate of return, the Company considers historical
returns and input from investment advisors and actuaries.
Based on actuarial reports that were completed as of December 31, 2010, Torstar’s 2011 funding obligation for its
registered pension plans was $46 million. The Company will be required to prepare another set of actuarial
reports as of December 31, 2011 to determine its final 2012 funding requirements. Preliminary calculations
estimate that funding requirements will be in the range of $65 – $70 million.
Capital accumulation plans
The total amount expensed for capital accumulation plans in 2011 was $3.1 million (2010 - $2.7 million).
18. SHARE CAPITAL
(a) Rights attaching to the Company’s share capital:
(i) Class A (voting) and Class B (non-voting) shares, no par value
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
Class B shares are non-voting unless the Company has failed to pay the full quarterly preferential
dividend (7.5 cents per annum) on the Class B non-voting shares in each of eight consecutive quarters.
(iii) 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 or periodical publisher.
TORSTAR CORPORATION 2011 ANNUAL REPORT 89
TORSTAR - Consolidated Financial Statements
(b) Summary of changes in the Company’s share capital:
Class A shares (voting)
Balance, beginning of year
Converted to Class B
Balance, end of year
Class B shares (non-voting)
Balance, beginning of year
Converted from Class A
Dividend reinvestment plan
Issued under ESPP
Share option plan
Other
Balance, end of year
Year ended December 31
2011
2010
Shares
Amount
Shares
Amount
9,873,337
(4,631)
9,868,706
$2,682
(1)
$2,681
9,875,407
(2,070)
9,873,337
$2,683
(1)
$2,682
69,244,753
4,631
24,624
334,997
43,818
1,450
69,654,273
$390,134
1
273
1,853
376
16
$392,653
69,129,929
2,070
27,960
83,194
$388,943
1
277
896
1,600
69,244,753
17
$390,134
Total Class A and Class B shares
79,522,979
$395,334
79,118,090
$392,816
An unlimited number of Class B shares is authorized. While the number of Class A shares is unlimited, the
issuance of further Class A shares, may under certain circumstances, require unanimous board approval.
(c) Earnings per share
Basic earnings per share amounts have been determined by dividing net income attributable to equity
shareholders by the weighted average number of Class A and Class B shares outstanding during the year.
The treasury stock method is used for the calculation of the dilutive effect of share 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 share options
and ESPP 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)
Weighted average number of shares outstanding, basic
Effect of dilutive securities
- share options
- ESPP
Weighted average number of shares outstanding, diluted
Year ended December 31
2010
79,074
2011
79,400
536
13
79,949
411
152
79,637
Outstanding stock options totaling 2,651,922 (2010 – 2,754,743), which are out of the money have been
excluded from the above calculation of dilutive securities.
TORSTAR CORPORATION 2011 ANNUAL REPORT 90
TORSTAR - Consolidated Financial Statements
(d) Dividends
The following dividends were declared and distributed by the Company per Class A (voting) share and Class
B (non-voting) share:
First quarter ended March 31: 9.25 cents (2010 - 9.25 cents)
Second quarter ended June 30: 12.5 cents (2010 - 9.25 cents)
Third quarter ended September 30: 12.5 cents (2010 - 9.25 cents)
Fourth quarter ended December 31: 12.5 cents (2010 - 9.25 cents)
Total dividends
19. SHARE-BASED COMPENSATION PLANS
(a) Share option plan
Year ended December 31
2010
2011
$7,308
$7,320
7,316
9,937
7,317
9,939
7,318
9,939
$29,259
$37,135
Eligible senior executives may be granted options to purchase Class B non-voting 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.
Prior to 2003, non-executive directors were also eligible to be granted options.
The maximum number of shares that may be issued under the share option plan is 12,500,000 and the
number of shares reserved for issuance to insiders (together with shares issuable to insiders under all other
share compensation arrangements) cannot exceed 10% of the outstanding Class A and Class B 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. Options to purchase 9,784,433 shares have been granted (net of options cancelled) as of
December 31, 2011 (2010 – 9,894,036).
A summary of changes in the share option plan is as follows:
January 1, 2010
Granted
Forfeited or expired
December 31, 2010
Granted
Exercised
Forfeited or expired
December 31, 2011
Share options
3,487,880
854,678
(193,481)
4,149,077
488,813
(43,818)
(598,416)
3,995,656
Weighted average
exercise price
$20.10
$6.33
($21.79)
$17.19
$12.21
($7.40)
($21.04)
$16.11
The weighted average share price at the times when the options were exercised was $13.64.
As at December 31, 2011, outstanding share options were as follows:
Range of exercise price
$5.75 – 8.37
$12.21 – 19.61
$21.85 – 22.20
$25.50 – 29.01
$5.75 – 29.01
Share options
outstanding
1,343,734
1,019,013
1,121,822
511,087
3,995,656
Weighted average
remaining contractual life
7.6 Years
7.5 Years
1.6 Years
1.5 Years
6.3 Years
Weighted average
exercise price
$7.03
$15.84
$22.12
$27.32
$16.11
TORSTAR CORPORATION 2011 ANNUAL REPORT 91
TORSTAR - Consolidated Financial Statements
Range of exercise price
$5.75 – 8.37
$12.21 – 19.61
$21.85 – 22.20
$25.50 – 29.01
$5.75 – 29.01
Share options
exercisable
436,945
461,984
1,121,822
511,087
2,531,838
Weighted average
exercise price
$7.35
$19.22
$22.12
$27.32
$20.09
In estimating the fair value and the compensation expense for share options granted in 2007 to 2011 (which
will vest and be expensed over four years from the date of grant), the Company uses the Black-Scholes
options pricing model. Volatility is calculated using the logarithmic share price returns approach based on
historical Company share prices. The fair value of the options on the date of grant and the assumptions used
are as follows:
2011
2010
Fair Value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
$3.49 – $3.61 $1.03 – $1.17
2.4% – 2.7% 2.8% – 3.1%
3.0%
5.9%
35.4 – 41.1% 30.1 – 34.5%
5 – 7
5 – 7
2009
$1.19
2.2%
4.4%
24.3%
6
2008
$2.24
4.1%
3.9%
15.1%
6
2007
$2.56
4.0%
3.8%
16.3%
6
Subsequent to year-end, 656,233 share options were granted at an exercise price of $8.28 per share.
(b) ESPP
Under the Company’s employee share purchase plans, employees may subscribe for Class B non-voting
shares of the Company 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:
Maturing in
Subscription price at entry date
Number of shares
2012
$10.74
163,339
2013
$12.53
148,690
2011
$5.52
340,417
2012
$10.74
181,642
2011
2010
The Company uses the Black-Scholes options pricing model to estimate the fair value of the employee
subscriptions under the ESPP. The fair value of the subscriptions on the subscription date and the
assumptions used are as follows:
Maturing in
Fair Value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
2013
$2.30
1.5%
4.0%
39.0%
2
2012
$3.13
1.5%
3.5%
59.6%
2
2011
$0.93
1.2%
4.4%
37.8%
2
2010
$1.25
3.0%
3.9%
17.0%
2
TORSTAR CORPORATION 2011 ANNUAL REPORT 92
TORSTAR - Consolidated Financial Statements
(c) RSU plan
Eligible senior executives may be granted RSU awards equivalent in value to Class B non-voting shares of
the Company as part of their long-term incentive compensation. RSU’s vest after three years and are settled
in cash. RSUs are accrued over the three-year vesting period as compensation expense and a related
liability.
A summary of changes in the RSU plan is as follows:
January 1, 2010
Vested and paid
Granted
December 31, 2010
Vested and paid
Granted
Forfeited
December 31, 2011
Units
473,274
(96,573)
250,551
627,252
(113,368)
146,341
(2,918)
657,307
As at December 31, 2011, 455,005 units have been accrued at a value of $3.8 million of which 262,053 units
have been accrued in Accounts payable and accrued liabilities at a value of $2.2 million while 192,952 units
have been accrued in Other liabilities at a value of $1.6 million (2010 – 361,960 units accrued at a value of
$4.4 million of which 113,368 units have been accrued in Accounts payable and accrued liabilities at a value
of $1.4 million while 248,592 units have been accrued in Other liabilities at a value of $3.0 million).
The Company has entered into a derivative instrument in order to lock in the expense for 521,194 RSUs.
Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of
changes in the value of the RSUs that have been accrued. As the RSUs are accrued over the three-year
period until the RSUs vest, there will not be an exact offset each period.
(d) The Company has recognized in 2011 compensation expense totaling $3.4 million (2010 - $2.2 million) for the
share options granted in 2008 to 2011, RSUs granted in 2009 to 2011 and the ESPP originating in 2009 to
2011.
(e) DSU plan
Eligible executives may elect to receive certain cash incentive compensation in the form of DSU units. Each
unit is equal in value to one Class B non-voting share of the Company. The units are issued on the basis of
the closing market price per share of Class B non-voting shares of the Company on the Toronto Stock
Exchange on the date of issue. The units also accrue dividend equivalents payable in additional units in an
amount equal to dividends paid on Class B non-voting shares of the Company. DSU units mature upon
termination of employment, whereupon an executive is entitled to receive the fair market value of the
equivalent number of Class B non-voting shares, net of withholdings, in cash.
The Company has also adopted a DSU plan for non-employee directors. Each non-employee director
receives an award of DSU units as part of his or her annual Board retainer. In addition, a non-employee
director holding less than the minimum shareholding requirement of Class B non-voting shares, Class A
voting shares, DSU units, or a combination thereof, receives the cash portion of his or her annual Board
retainer in the form of DSU units. Any non-employee director may elect to participate in the DSU plan in
respect of part or all of his or her retainer and attendance fees. The terms of the director DSU plan are
substantially the same as the executive DSU plan.
As at December 31, 2011, 320,605 units were outstanding at a value of $2.7 million (2010 – 262,868 units at
a value of $3.2 million).
The Company has entered into a derivative instrument in order to offset its exposure to 298,600 units.
Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of
changes in the value of the outstanding deferred share units.
TORSTAR CORPORATION 2011 ANNUAL REPORT 93
TORSTAR - Consolidated Financial Statements
20. ACCUMULATED OTHER COMPREHENSIVE LOSS (NET OF TAX)
Foreign
currency
translation
adjustment
($6,332)
($6,332)¹
6,041
($291)¹
Cash flow
hedges
($7,626)
856
($6,770)²
446
($6,324)²
Available-
for-sale
securities
($340)
240
($100)¹
(29)
($129)¹
Net
investment
hedge
($1,542)
($1,542)³
CTV’s cash
flow hedges
($4,564)
4,564
Total
($12,530)
(672)
($13,202)
4,916
($8,286)
As at January 1, 2010
OCI
As at December 31, 2010
OCI
As at December 31, 2011
1Net of deferred income tax asset of $nil (2010 – $nil).
²Net of deferred income tax asset of $2,070 (2010 – $2,470).
³Net of current income tax benefit of $250.
21. ACQUISITIONS AND INVESTMENTS
During the year ended December 31, 2011, the Company completed acquisitions and investments in its Media
Segment with a total purchase price of $124.4 million, including $0.6 million for portfolio investments. The
purchase price included $91.3 million of cash; $2.1 million of deferred purchase payments; $10.8 million for a call
option liability; a $1.1 million estimate of the fair value of contingent consideration and gains on remeasurement
for step acquisitions of $19.1 million. The contingent consideration related to two of the Media Segment
acquisitions. Both contingent consideration calculations are based on profit levels realized by the acquired
businesses up to five years following the acquisition and are payable by the Company between 2013 and 2017.
In addition, the Company also made payments of $9.6 million for deferred purchase payments and $0.8 million of
contingent consideration in respect of prior year acquisitions. The deferred purchase payments included $6.9
million in respect of the Book Publishing Segment’s prior year acquisition of the remaining 50% of its German
publishing business, Cora Verlag from Axel Springer Verlag, its joint venture partner in Germany since 1976. The
remaining $2.7 million deferred purchase payments were in the Media Segment for eyeReturn Marketing and
Gottarent. The $0.8 million contingent consideration was also paid in the Media Segment.
Total cash used for acquisitions and investments during the year was $101.8 million, as indicated in the chart
below.
The Media Segment acquisitions included Autocatch.com (a web-based classified advertising solution for vehicle
dealers and sellers) on February 15, 2011; Brant News (a community newspaper publishing and flyer distribution
business operating in the Brantford area) on April 15, 2011; exercising the option to purchase an additional
16.67% of Tuango (a Quebec-based daily deal business) on April 18, 2011, bringing the Company’s interest to
50%; Starmail Distributors (a distribution business operating in London, Ontario) on June 1, 2011; the remaining
50% of save.ca (an online coupon website providing consumers with savings on leading packaged goods brands)
on June 16, 2011; The Kit (a digital beauty magazine) on July 28, 2011; Foodscrooge (an online group buying site
focused on heavily discounted food offerings) on September 28, 2011; an additional 40% interest in Free Daily
News Group (publishes the Metro newspapers in Toronto, Vancouver, Ottawa, Calgary, Edmonton, London,
Winnipeg and Halifax, “Metro”) on October 14, 2011 bringing the Company’s interest to 90% and Performance
Printing Limited (a newspaper publisher and flyer distributor in several Eastern Ontario communities with a
commercial printing operation in Smith Falls) on October 17, 2011.
The acquisition of the additional interest in Metro and save.ca were step acquisitions in which the Company
obtained control of both entities. The Company remeasured its previously held interest to the acquisition dates’
fair values of $58.0 million and $4.7 million for Metro and save.ca respectively, resulting in a gain on
remeasurement of $19.1 million which has been recorded as other income on the consolidated statement of
income.
TORSTAR CORPORATION 2011 ANNUAL REPORT 94
TORSTAR - Consolidated Financial Statements
As part of the Metro transaction, the Company and Metro International S.A. entered into put and call
arrangements with regards to the 10% of Metro that remains owned by Metro International S.A.. The put and call
are both exerciseable at the same fixed price starting in October 2014. The Company has recorded a call option
liability of $10.8 million as part of the business combination.
The Media Segment acquisitions were accounted for by the purchase method. The amount of goodwill that is
deductible for tax purposes is $8.4 million. Goodwill recognized on the acquisitions comprises integration with
existing web-based products; market reputation; access to existing network of carriers and existing readership.
The Starmail acquisition facilitated the launch of a community newspaper in the London, Ontario region.
These acquisitions contributed $20.6 million of revenue and $2.4 million of operating profit in the Media Segment
in 2011. If the acquisitions had occurred on January 1, 2011, the Company’s consolidated revenues and
operating profit would have been $1,594.6 million and $192.9 million respectively.
The portfolio investments of $0.6 million included $0.5 million in Social Game Universe (a Toronto-based
developer and publisher of social games) on April 21, 2011. These investments have been classified as available
for sale.
The fair value of the assets acquired and liabilities assumed from the acquisitions completed are as follows:
Year ended December 31, 2011
Assets:
Property, plant and equipment (note 6)
Indefinite-life intangible assets (note 8)
Finite-life intangible assets (note 8)
Goodwill (note 9)
Deferred tax assets
Non-cash working capital
Liabilities:
Other liabilities
Deferred tax liabilities
Minority interests
Total purchase price
Gain on remeasurement for step acquisitions
Deferred payments (Accounts payable)
Call option liability
Contingent consideration
Cash consideration paid
Deferred payments on prior acquisitions
Contingent consideration on prior acquisitions
Investments
Media Segment
Others
Total
Metro
$353
20,047
49,986
492
7,293
20
78,191
(19,026)
59,165
(10,789)
48,376
48,376
$8,362
9,856
8,469
19,012
350
3,134
(1,352)
(2,258)
45,573
(29)
45,544
(2,080)
(1,087)
42,377
2,667
823
45,867
600
$8,715
9,856
28,516
68,998
842
10,427
(1,352)
(2,258)
20
123,764
(19,055)
104,709
(2,080)
(10,789)
(1,087)
90,753
2,667
823
94,243
600
Book
Publishing
Segment
$6,950
6,950
Total
$8,715
9,856
28,516
68,998
842
10,427
(1,352)
(2,258)
20
123,764
(19,055)
104,709
(2,080)
(10,789)
(1,087)
90,753
9,617
823
101,193
600
Total cash used in acquisitions and investments $48,376
$46,467
$94,843
$6,950
$101,793
In 2010, the Company completed acquisitions with a total purchase price of $22.8 million. The purchase price
included $7.9 million of cash; $5.7 million of deferred purchase payments; a $5.5 million estimate of the fair value
of contingent consideration and a gain on remeasurement of $3.7 million. In 2010, the Company also made
payments of $2.7 million for deferred purchase payments and $0.8 million of contingent consideration in respect
of prior year acquisitions. Total cash used in 2010 for acquisitions and investments was $11.4 million.
TORSTAR CORPORATION 2011 ANNUAL REPORT 95
TORSTAR - Consolidated Financial Statements
The total purchase price for Harlequin’s acquisition of the remaining 50% of its German publishing business, Cora
Verlag from Axel Springer Verlag, its joint venture partner in Germany since 1976 was $11.6 million (including a
$3.5 million gain on the remeasurement of the previously held 50% interest to the acquisition date fair value of
$5.3 million). $2.4 million was paid in 2010 while the remaining $5.7 million, the discounted value of the deferred
purchase price, was paid in 2011. This acquisition was completed on April 1, 2010 and has been accounted for
by the purchase method, with the final allocation in the chart below. The amount of goodwill that is deductible for
tax purposes is $5.0 million. This acquisition contributed $12.9 million of revenue and $1.0 million of operating
profit in the Book Publishing Segment in 2010.
The Media Segment acquisitions included the remaining 86% ownership interest in Travelwire Inc. (a business
that provides travel deals through its email newsletter) on September 10, 2010; WagJag (a business that allows
local businesses to access new customers featuring one deal per day) on June 4, 2010 and several other smaller
businesses. The total purchase price for these acquisitions was $11.0 million, including $5.5 million of cash and a
$5.5 million estimate of the fair value of contingent consideration. The contingent consideration related to two of
the Media Segment acquisitions. Both contingent consideration calculations are based on revenue levels realized
by the acquired businesses in the two years following the acquisition and is payable by the Company in 2011 and
2012.
The Media Segment acquisitions were accounted for by the purchase method, with the final allocation in the chart
below. The amount of goodwill that is deductible for tax purposes is $0.9 million. These acquisitions, combined
with a significant investment in marketing, contributed $3.6 million of revenue and decreased operating profit by
$4.1 million in the Media Segment in 2010.
If all the acquisitions had occurred on January 1, 2010, the Company’s consolidated revenues and operating profit
would have been $1,490.5 million and $203.9 million respectively.
Year ended December 31, 2010
Assets:
Property, plant and equipment (note 6)
Indefinite-life intangible assets (note 8)
Finite-life intangible assets (note 8)
Goodwill (note 9)
Other assets
Liabilities:
Non-cash working capital
Other liabilities
Deferred tax liabilities
Total purchase price
Gain on remeasurement for step acquisitions
Deferred payments:
Accounts payable
Other liabilities
Contingent consideration
Cash consideration paid
Deferred payments on prior acquisitions
Contingent consideration on prior acquisitions
Media
Segment
Book
Publishing
Segment
$15
5,542
624
7,692
(733)
(564)
(1,012)
11,564
(3,461)
8,103
(2,976)
(2,718)
2,409
$18
1,300
2,493
8,101
(312)
298
(898)
11,000
11,000
(5,522)
5,478
2,667
844
Total
$33
6,842
3,117
15,793
(312)
(435)
(564)
(1,910)
22,564
(3,461)
19,103
(2,976)
(2,718)
(5,522)
7,887
2,667
844
Total cash used in acquisitions and investments
$8,989
$2,409
$11,398
TORSTAR CORPORATION 2011 ANNUAL REPORT 96
TORSTAR - Consolidated Financial Statements
22. GAIN ON SALE OF ASSETS
During 2010, the Company recognized gains of $4.1 million from the sale of assets. A gain of $2.8 million ($3.0
million cash proceeds) was recorded on the formation of a joint venture to manage and further develop the Total
Online Publishing Solutions system. The Company also sold some excess land in Vaughan and realized a gain
of $1.3 million from the net cash proceeds of $1.3 million.
In addition, the Company received the outstanding $6.2 million proceeds from the mortgage receivable on the
sale of excess land in Vaughan during 2008.
23. INVESTMENT WRITE-DOWN
The Company has recorded the following investment write-down:
(cid:3)
Write-down of investment in Q-ponz Inc.
Write-down of investment in Multimedia Nova Corporation
Write-down of investment in LocalPoint Media
Year ended December 31
2011
($544)
2010
($544)
($258)
(515)
($773)
24. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Share-based compensation plans
Foreign exchange
Restructuring provisions
Gain on remeasurement for step acquisitions
Interest accretion
Adjustment to contingent consideration
Other
Year ended December 31
2011
($350)
3,477
82
(19,055)
2,667
(630)
(215)
($14,024)
2010
$3,754
(4,805)
14,293
(3,461)
793
(2,388)
$8,186
25. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed sub-lease payments to a third party of approximately U.S. $1 million for each of
the next 7 years. In addition, the Company has the following significant contractual obligations:
Nature of the Obligation
Office leases
Services
Acquisitions
Investment
Equipment leases
Total
$131,901
17,181
21,464
5,765
2,010
2012
$19,341
5,321
8,915
5,765
793
2013 - 2014
$36,128
7,919
12,126
2015 - 2016
$32,686
3,338
167
2017+
$43,746
603
256
953
257
7
Total
$178,321
$40,135
$57,126
$36,448
$44,612
TORSTAR CORPORATION 2011 ANNUAL REPORT 97
TORSTAR - Consolidated Financial Statements
26. RELATED PARTY TRANSACTIONS
The aggregate amounts of the compensation for the Company’s key management (including directors) are set out
below:
Salaries and benefits
Post-employment benefits
Share based payments
Other long-term benefits
Total
Year ended December 31
2010
2011
$8,891
$8,603
3,649
2,247
2,021
2,996
1,239
986
$14,832
$15,800
The following summarizes the sales to, purchases from and amounts owed to and by the Company’s joint
ventures and associates:
Joint Ventures
2011
2010
Associates
2011
2010
Sales to
Purchases from Amounts owed by Amounts owed to
$3,180
3,593
55
$1,152
1,303
3,461
3,322
$823
790
$368
398
230
300
Sales to and purchases of goods and services from related parties were made at market prices. No provisions
have been made for doubtful debts in respect of amounts owed by related parties.
27. JOINT VENTURES
The Company proportionately consolidates its interest in joint ventures. The significant joint ventures in the Media
Segment include Workopolis (50%) and Sing Tao Daily (approximately 50%). Prior to October 14, 2011, Free
Daily News Group (publishes the Metro newspapers in Toronto, Vancouver, Ottawa, Calgary, Edmonton, London,
Winnipeg and Halifax) was also a joint venture. Harlequin also conducts some of its business overseas with joint
venture partners, the most significant of which are in France (50%) and Italy (50%). The Company’s
proportionate share of revenue from these businesses is $140.4 million (2010 – $125.0 million) and operating
profit is $18.4 million (2010 – $19.4 million).
Outlined below is summarized financial information for the Company’s proportionate share included in the
consolidated statement of financial position:
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Other assets
Current liabilities
Other liabilities
December 31,
2011
$31,228
6,970
28,846
58,419
195
19,007
3,073
December 31,
2010
$44,211
6,005
30,780
84,184
178
22,690
3,860
January 1,
2010
$38,404
8,857
26,671
84,184
1,499
20,022
3,710
TORSTAR CORPORATION 2011 ANNUAL REPORT 98
TORSTAR - Consolidated Financial Statements
28. SEGMENTED INFORMATION
The Company has two reportable segments: Media and Book Publishing.
The Media Segment publishes over 100 newspapers including the Toronto Star, Canada’s largest daily
newspaper, The Mississauga News, Oshawa This Week and The Hamilton Spectator. It also includes digital
properties such as thestar.com, toronto.com, InsuranceHotline.com, Wheels.ca, flyerland.ca, goldbook.ca,
Workopolis, Olive Media, eyeReturn Marketing and wagjag.com. The Media Segment derives its revenues from
advertising, circulation, distribution, third-party printing and other.
The Book Publishing Segment represents Harlequin, a global publisher of books for women. Harlequin publishes
books around the world in a variety of genres and formats, including digital. Harlequin sells books through the
retail channel, in stores and online, and directly to the consumer through its direct mail business and from its
internet sites. Harlequin derives its revenue from the publishing and distribution of books in both hard copy and
digital formats.
The Company also has investments in Black Press, Blue Ant, Canadian Press and Q-ponz, which the Company
presents as associated businesses.
Segment profit or loss has been defined as operating profit which corresponds to operating profit as presented in
the consolidated statement of income. All other income and expense items are managed on a Company basis
and are not provided to the chief operating decision-maker (“CODM”) at the operating segment level. Assets and
liabilities are also not provided to the CODM at the operating segment level. These items are therefore not
allocated to the operating segments.
Year ended December 31, 2011
Operating Revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Media
$1,089,330
Book
Publishing
$459,427
Total
segments
$1,548,757
Corporate
Consolidated
$1,548,757
(398,842)
(518,818)
(29,415)
(18,860)
(100,014)
(273,320)
(3,695)
(551)
(498,856)
(792,138)
(33,110)
(19,411)
($12,227)
(3,287)
(55)
(511,083)
(795,425)
(33,165)
(19,411)
Reportable segment operating profit
$123,395
$81,847
$205,242
($15,569)
$189,673
Interest and financing costs
Adjustment to contingent consideration
Foreign exchange
Loss of associated businesses
Other income
CTV Inc. – gain on sale
Investment write-down
Income before taxes
(16,629)
630
(3,477)
(2,157)
19,055
74,590
(544)
$261,141
TORSTAR CORPORATION 2011 ANNUAL REPORT 99
TORSTAR - Consolidated Financial Statements
Year ended December 31, 2010
Operating Revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Media
$1,015,696
(392,949)
(446,572)
(27,469)
(29,536)
Book
Publishing
$468,072
Total
segments
$1,483,768
Corporate
Consolidated
$1,483,768
(98,206)
(281,770)
(3,965)
(357)
(491,155)
(728,342)
(31,434)
(29,893)
($10,574)
(3,364)
(58)
(2,755)
(501,729)
(731,706)
(31,492)
(32,648)
Reportable segment operating profit
$119,170
$83,774
$202,944
($16,751)
$186,193
(24,135)
4,805
(28,343)
3,461
4,088
115,533
(773)
$260,829
Interest and financing costs
Foreign exchange
Loss of associated businesses
Other income
Gain on sale of assets
CTV Inc. – gain on remeasurement
Investment write-down
Income before taxes
Geographical information
Revenue is allocated based on the country in which the order is received.
The Company operates in the following main geographical areas:
Canada
United States
Other¹
Total
Revenue
Year ended December 31,
2011
$1,111,538
226,111
211,108
$1,548,757
2010
$1,024,696
249,084
209,988
$1,483,768
¹ Principally – United Kingdom, Japan, Germany, Australia, Sweden and France.
TORSTAR CORPORATION 2011 ANNUAL REPORT 100
TORSTAR - Consolidated Financial Statements
TRANSITION TO IFRS
In preparing its opening IFRS Consolidated Statement of Financial Position, the Company has adjusted amounts
previously reported that were prepared in accordance with Canadian GAAP. An explanation of how the transition
from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance is set out in
the following tables and the notes that accompany the tables. The transition adjustments did not have a material
impact on the Company’s cash flows.
During the process of completing the annual 2011 consolidated financial statements, the Company determined that
two adjustments were required to be made to the previously disclosed financial information for 2010 prepared in
accordance with IFRS 1 and IAS 34:
(cid:120)
(cid:120)
In the second quarter of 2010, the Company completed the acquisition of the remaining half of its German
publishing business that it had not previously held. This transaction is treated as a step-acquisition under IFRS
which required a remeasurement to the acquisition date fair value of the previously held interest. Further
details are provided in Note T24.
In the third quarter of 2010, the Company entered into agreements to sell its interest in CTV. In the previously
disclosed financial results for 2010 prepared in accordance with IFRS 1 and IAS 34, the Company had
classified the investment as held-for-sale and continued to record it at the carrying value that it had immediately
prior to entering into the agreements to sell. The Company has now determined that the investment should
have been classified as an AFS financial asset which, upon reclassification, should be adjusted to its fair value
through net income. Further details are provided in Note T13.
Transition elections
The Company has applied the following transition exemptions to full retrospective application to IFRS. The
Company’s transition date is January 1, 2010 (the “Transition Date”).
i. Business combinations
IFRS 1 provides the option to apply IFRS 3, Business Combinations retrospectively or prospectively from
the Transition Date.
The Company has elected not to apply IFRS 3 to acquisitions of subsidiaries or interests in associates or
joint ventures that occurred before the Transition Date. As a result of this election, the classification and
accounting treatment of business combinations prior to the Transition Date have not been restated.
ii. Employee benefits
IFRS 1 provides the option to retrospectively apply the corridor approach under IAS 19, Employee Benefits
for the recognition of actuarial gains and losses, or recognize all cumulative unamortized actuarial gains or
losses which had been deferred under Canadian GAAP in opening retained earnings.
For all of the Company’s defined benefit pension and other post-employment benefit plans, the Company
elected to recognize all cumulative unamortized actuarial gains or losses that existed at the Transition Date
in opening retained earnings.
iii. Deemed cost
IFRS 1 allows an option to elect to measure an item of property, plant and equipment at its fair value at the
date of transition.
The Company has elected to measure specific items of property, plant and equipment at their fair values at
the Transition Date.
TORSTAR CORPORATION 2011 ANNUAL REPORT 101
TORSTAR - Consolidated Financial Statements
iv. Foreign currency translation adjustments
In accordance with IFRS 1, the Company has elected to reset the cumulative translation gains or losses
from its foreign operations that existed at the Transition Date to zero and reversed the previously
recognized amounts in opening retained earnings.
v. Borrowing costs
IAS 23, Borrowing Costs requires an entity to capitalize the borrowing costs related to all qualifying assets.
Under this, the Company may elect to designate any date before January 1, 2009 or the date of the
transition (whichever is later) to capitalize borrowing costs.
The Company chose not to early adopt IAS 23 and therefore borrowing costs prior to the Transition Date
have not been capitalized.
vi. Share-based payment transactions
IFRS 1 allows first-time adopters to apply IFRS 2, Share-based Payments to equity instruments that were
granted after November 7, 2002 and that have vested before the Transition Date.
The Company has elected not to apply IFRS 2 to awards that vested prior to the Transition Date.
IFRS mandatory exceptions
i. Estimates
IFRS 1 requires that the Company’s estimates under IFRS at the date of transition to IFRS must be
consistent with estimates made at that date under Canadian GAAP (after adjustments to reflect any
difference in accounting policies), unless there is objective evidence that those estimates were in error.
The estimates previously made by the Company under Canadian GAAP were not revised for application of
IFRS except where necessary to reflect any difference in accounting policies.
ii. Hedge accounting
Hedge accounting may only be applied prospectively from the Transition Date to transactions that satisfy
the hedge accounting criteria as set out in IAS 39. Hedging relationships cannot be designated
retrospectively.
The Company has updated its hedge documents to incorporate the requirements of IAS 39 at the Transition
Date to ensure that the designated hedging relationships that existed under Canadian GAAP continue on
transition to IFRS.
TORSTAR CORPORATION 2011 ANNUAL REPORT 102
TORSTAR - Consolidated Financial Statements
Reconciliation of Consolidated Statement of Financial Position on the Transition Date
Assets
Current:
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments1
Prepaid expenses and other current assets
Prepaid and other recoverable income taxes
Deferred income tax assets2
Total current assets
Property, plant and equipment
Investment in associated businesses
Derivative financial instruments3
Intangible assets
Goodwill
Other assets
Deferred income tax assets2
Total assets
Liabilities and Equity
Current:
Bank overdraft
Accounts payable and accrued liabilities
Provisions
Income taxes payable
Total current liabilities
Long term debt
Derivative financial instruments4
Provisions
Other liabilities
Employee benefits4
Deferred income tax liabilities5
Equity:
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
Total equity attributable to equity shareholders
Minority interests
Total equity
Total liabilities and equity
Notes
T5
T4
T2
T6
T7,T8
T3
T1
T4
T9
T9
T5
T7
T7
T1
T4
T11
As reported
under
Canadian
GAAP as at
December 31,
2009
$39,238
247,239
33,953
6,067
51,501
2,997
19,540
400,535
251,817
178,828
1,471
51,619
581,842
138,637
33,693
$1,638,442
Adjustments
Reclass
($80)
3,050
($1,226)
(1,362)
(19,540)
(17,932)
(1,226)
(74,324)
(8,045)
1,708
(1,549)
(136,202)
31,717
($187,921)
767
9
(346)
19,540
$2,038
($26,036)
27,966
14
1,944
(1,736)
2,095
(1,571)
$2,052
218,971
19,158
240,181
552,976
16,633
17,640
69,135
62,897
391,626
11,901
292,306
(16,853)
678,980
$1,413
1,413
1,479
117,817
(54,630)
281
(258,604)
4,323
(254,000)
678,980
$1,638,442
(254,000)
($187,921)
1,306
1,306
$2,038
As reported
under IFRS
as at
January 1,
2010
$39,158
250,289
33,953
6,067
48,913
2,997
381,377
177,493
170,783
1,471
54,094
580,302
2,089
84,950
$1,452,559
$2,052
194,348
27,966
19,172
243,538
551,240
16,633
2,095
17,548
186,952
8,267
391,626
12,182
33,702
(12,530)
424,980
1,306
426,286
$1,452,559
1 Reported in receivables under Canadian GAAP December 31, 2009 consolidated financial statements
2 Canadian GAAP terminology was future income tax assets
3 Reported in other assets under Canadian GAAP December 31, 2009 consolidated financial statements
4 Reported in other liabilities under Canadian GAAP December 31, 2009 consolidated financial statements
5 Canadian GAAP terminology was future income tax liabilities(cid:3)
TORSTAR CORPORATION 2011 ANNUAL REPORT 103
TORSTAR - Consolidated Financial Statements
Reconciliation of Consolidated Statement of Changes in Equity on the Transition Date
Notes
Share
capital
Contributed
surplus
Retained
earnings
AOCI
Minority
interests
Total equity
Reported under Canadian
GAAP as at December 31,
2009
IFRS adjustments increase
(decrease):
Employee benefits
Property, plant and
equipment
Changes in functional
currencies
Foreign currency IFRS 1
adjustment
Income taxes
Share-based compensation
Revenue recognition
Prepaid expenses and other
current assets
Restructuring charges
Provisions
Impairments
Investment in associates
Minority interests
Reported under IFRS as at
January 1, 2010
T1
T2
T3
T3
T4
T10
T9
T5
T9
T9
T8
T6
T11
$391,626
$11,901
$292,306
($16,853)
$678,980
(2,741)
7,064
281
(254,019)
(73,240)
(7,064)
86,053
(189)
(1,147)
(1,226)
(864)
598
539
(8,045)
(254,019)
(73,240)
(2,741)
86,053
92
(1,147)
(1,226)
(864)
598
539
(8,045)
1,306
$1,306
$391,626
$12,182
$33,702
($12,530)
$1,306
$426,286
Reconciliation of AOCI (net of tax) on the Transition Date
Cash flow
hedges
Available-for-
sale securities
Associated
businesses’
cash flow
hedges
($7,626)1
($340)2
($4,564)2
Foreign
currency
translation
adjustment
($4,323)
(2,741)
7,064
Total
($16,853)
(2,741)
$7,064
($7,626)1
($340)2
($4,564)2
($12,530)
AOCI as reported under Canadian
GAAP as at December 31, 2009
Changes in functional currencies
Foreign currency IFRS 1
adjustment
AOCI as reported under IFRS as at
January 1, 2010
1 Net of deferred income tax benefit of $2,939
2 Net of deferred income tax benefit of $nil
TORSTAR CORPORATION 2011 ANNUAL REPORT 104
TORSTAR - Consolidated Financial Statements
Notes to the Transition Date reconciliation schedules:
T1. EMPLOYEE BENEFITS
Past service costs
Under Canadian GAAP, the Company expensed past service costs over the estimated average service life of
active employees remaining in the plan. Under IFRS, the Company is required to expense the cost of past
service benefits awarded to employees under post-employment benefit plans over the periods in which the
benefits vest. At the Transition Date, all the past service benefits had vested. Accordingly, the Company
recognized an amount of $26.0 million related to unrecognized prior service costs with respect to its pension
plans and post-employment benefit plans in opening retained earnings. This change was reflected as a
reduction of long-term assets of $18.8 million and an increase in the employee benefit liabilities of $7.2 million.
Actuarial gains and losses
As a result of applying the IFRS 1 exemption for unvested actuarial gains and losses, opening retained
earnings have been reduced by $160.4 million to recognize cumulative net actuarial gains and losses
accumulated as at the Transition Date. This change was reflected as a reduction of long-term assets of $117.4
million and an increase in the employee benefit liabilities of $43.1 million.
Minimum funding requirement obligations
The Company has recognized a liability of $67.6 million in the pension plans for future minimum funding
requirement obligations that exceed the future economic benefit that are estimated to be realizable for that
funding.
The total change in the opening retained earnings related to the above adjustments to the employee benefits is
$254.0 million.
As reported under Canadian GAAP as at December 31, 2009
Past service costs
Actuarial gains and losses
Minimum funding requirements (IFRIC 14)
As reported under IFRS as at January 1, 2010
Assets
$136,573
(18,836)
(117,366)
$371
Liabilities
$69,135
7,194
43,066
67,557
$186,952
T2. PROPERTY, PLANT AND EQUIPMENT
On transition to IFRS, the Company elected to measure specific items of property, plant and equipment at fair
value as deemed cost. The valuations of the items were conducted by independent qualified valuators at the
Transition Date. The effect of restating these items to fair value is a net decrease of $78.3 million to property,
plant and equipment, and opening retained earnings. At the Transition Date, property, plant and equipment
includes $89.7 million of assets reflected at fair value.
The depreciation policy for a portion of the plant and equipment was the declining balance method under
Canadian GAAP. Under IFRS, as a result of more detailed componentization and a corresponding change in
useful lives, the straight-line method was adopted. The impact of this change is an increase of $5.0 million to
property, plant and equipment and opening retained earnings.
In addition, changes in functional currencies decreased net property, plant and equipment by $1.0 million (see
Note T3).
TORSTAR CORPORATION 2011 ANNUAL REPORT 105
TORSTAR - Consolidated Financial Statements
Reconciliation of property, plant and equipment from Canadian GAAP to IFRS on the Transition Date:
Cost
As reported under Canadian GAAP as at
December 31, 2009
Election of fair market value as deemed cost
Change in the functional currency
As reported under IFRS as at January 1, 2010
Accumulated depreciation
As reported under Canadian GAAP as at
December 31, 2009
Change in depreciation method
Election of fair market value as deemed cost
Change in the functional currency
As reported under IFRS as at January 1, 2010
Net
As reported under Canadian GAAP as at
December 31, 2009
As reported under IFRS as at January 1, 2010
Land
$7,176
(340)
$6,836
Buildings and
leasehold
improvements
Machinery and
equipment
Total
$218,594
(81,554)
(1,643)
$135,397
$131,948
(87,193)
(1,226)
$43,529
$625,406
(413,995)
(4,392)
$207,019
$467,411
(5,012)
(330,064)
(4,105)
$128,230
$851,176
(495,549)
(6,375)
$349,252
$599,359
(5,012)
(417,257)
(5,331)
$171,759
$7,176
$6,836
$86,646
$91,868
$157,995
$78,789
$251,817
$177,493
T3. FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
Change in the functional currency
Under Canadian GAAP, there are various indicators to be considered in determining the appropriate functional
currency of a foreign operation and such indicators are similar to those under IFRS. When the assessment of
functional currency provides mixed indicators and the functional currency is not obvious, the IFRS standard
requires that priority be given to certain primary indicators that may lead to a different functional currency
determination under IFRS compared to Canadian GAAP.
As a result of the transition to IFRS, effective January 1, 2010, the Company determined that the U.S. dollar is
the functional currency of certain of its foreign subsidiaries. Prior to the Transition Date, these subsidiaries
were considered to be integrated foreign operations with the Canadian dollar as their functional currency. On
the Transition Date, the change in the functional currency decreased the opening retained earnings by $2.7
million; decreased goodwill by $1.6 million; property, plant and equipment by $1.0 million and intangible assets
by $0.1 million.
IFRS 1 exemption
In accordance with IFRS transitional provisions, the Company reset the cumulative translation adjustment
account to zero at the transition date to IFRS. AOCI has been increased and retained earnings have been
reduced by $7.1 million resulting in no net impact on shareholders’ equity.
The gain or loss on a subsequent disposal of any foreign operation will exclude the foreign currency translation
differences that arose before the Transition Date but will include subsequent foreign currency translation
differences.
TORSTAR CORPORATION 2011 ANNUAL REPORT 106
TORSTAR - Consolidated Financial Statements
T4. DEFERRED TAX ASSETS AND LIABILITIES
Provision for book returns and bad debts
Property, plant and equipment
Intangible assets
Financial instruments
Provision for employee benefit obligations
Share-based payment transactions
Tax loss carryforwards
Other
Total
Presented as:
Current deferred tax assets2
Non-current deferred tax assets
Non-current deferred tax liabilities
Total
As reported under
Canadian GAAP as
at December 31,
2009
$13,860
(25,206)
(7,636)
2,939
(16,039)
1,220
25,307
(4,109)
($9,664)
$19,540
33,693
(62,897)
($9,664)
Adjustments1
As reported
under IFRS as at
January 1, 2010
$19,172
294
66,135
(23)
769
$86,347
($19,540)
51,257
54,630
$86,347 3
$13,860
(6,034)
(7,342)
2,939
50,096
1,197
25,307
(3,340)
$76,683
$84,950
(8,267)
$76,683
1The tax adjustments are the tax impact of the changes in the related assets and liabilities
2Under IFRS, deferred taxes are either reported as non-current deferred tax assets or non-current deferred tax liabilities
3$0.3 million of the adjustments were not recorded through retained earnings
T5. PREPAID AND OTHER CURRENT ASSETS
On the Transition Date, assets that no longer met the definition of an asset under IFRS were derecognized.
Accordingly, the Company has identified $1.2 million related to prepaid commissions that no longer met the
definition of an asset under IFRS. At the Transition Date, the Company has decreased prepaid expenses by
$1.2 million.
On the Transition Date, $1.4 million of prepaid long-term debt transaction costs were reclassified from prepaid
and other current assets to long-term debt.
T6. INVESTMENT IN ASSOCIATES
With respect to the Company’s investment in CTV, at the Transition Date, the Company recorded adjustments
which reduced retained earnings and Investments in associated businesses by $8.0 million. The primary
adjustment related to employee benefits for $10.8 million. These adjustments are similar in nature to those
recorded by the Company as noted above in Note T1. The remaining favourable adjustment of $2.8 million
included a number of items, the most significant of which was a $2.4 million reduction in impairment provisions
for intangible assets as certain businesses had improved results and outlook.
T7. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
In a previous asset acquisition, a contingent payment was not recognized under Canadian GAAP since it was
generally recognized as part of the cost of the acquisition when the contingency was resolved and the
consideration was paid or became payable. Under IFRS, a contingent liability relating to a 2009 acquisition by
the Company has been recorded in the amount of $2.1 million. The impact of recognizing the contingent
consideration was an increase in other liabilities and in amortizable intangible assets of $2.1 million.
TORSTAR CORPORATION 2011 ANNUAL REPORT 107
TORSTAR - Consolidated Financial Statements
T8. IMPAIRMENT
On the Transition Date, the Company completed its required impairment testing of goodwill and non-
amortizable intangible assets. There was no impairment loss required to be recorded on the Transition Date.
The Company also assessed for any indicators that previous impairment losses had decreased. As certain
businesses had improved results and outlook, $0.5 million of previously recorded impairment losses on non-
amortizable intangible assets were reversed.
T9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES AND PROVISIONS
Revenue recognition
On the Transition Date, the Company recorded deferred revenue for the fair value of the Book Publishing
customer loyalty points program. The net impact of the change resulted in an increase to deferred revenue
included in accounts payable and accrued liabilities of $1.1 million.
Restructuring provisions
During the year ended December 31, 2009, the Company announced restructuring plans related to staff
reductions in the Media Segment. These voluntary termination plans were communicated to the affected
employees and this offer was outstanding as at December 31, 2009. Under Canadian GAAP, this restructuring
charge was not recorded for the year ended December 31, 2009 as the termination offer was outstanding.
Under IFRS, the Company was demonstrably committed to the plan and there was not a realistic possibility of
withdrawal therefore requiring recognition. Accordingly, the Company estimated the number of employees
expected to accept the offer and recorded a restructuring charge of $0.9 million as at the Transition Date.
Provisions and contingent liabilities
On transition, a review of the Company’s contingent liabilities including legal and other matters was conducted.
As a result of the review, the recorded obligation has been decreased by $0.6 million.
Under IFRS, provisions are reported separately from accounts payable and accrued liabilities. On the
Transition Date, total current provisions of $28.0 million were reclassified.
T10. SHARE-BASED COMPENSATION
On the Transition Date, the Company moved from straight-line to graded vesting as well as to using an
estimate of forfeiture for the recognition of share-based compensation expense. The graded vesting requires a
greater portion of expense to be recorded in the initial vesting periods compared to distributing the expense
equally over all vesting periods under the straight-line method. This change in the accounting policy reduced
opening retained earnings on Transition Date by $0.2 million, decreased other liabilities by $0.1 million and
increased contributed surplus by $0.3 million.
T11. MINORITY INTERESTS
The Company began to present the minority interest in Olive Media as part of the transition to IFRS. As a
result of this presentation change on the Transition Date, current assets have increased by $3.0 million,
current liabilities have increased by $1.9 million, deferred tax liabilities have decreased by $0.2 million and
shareholders’ equity has increased by $1.3 million.
TORSTAR CORPORATION 2011 ANNUAL REPORT 108
TORSTAR - Consolidated Financial Statements
Reconciliation of the Consolidated Statement of Financial Position as at December 31, 2010
Assets
Current:
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments1
Prepaid expenses and other current assets
Prepaid and other recoverable income taxes
Deferred income taxes assets2
Total current assets
Property, plant and equipment (net)
Investment in associated businesses
Intangible assets
Goodwill
Other assets
Deferred income tax assets2
Investment in CTV Inc.
Total assets
Liabilities and Equity
Current:
Bank overdraft
Accounts payable and accrued liabilities
Derivative financial instruments3
Provisions
Income taxes payable
Total current liabilities
Long term debt
Derivative financial instruments4
Provisions
Other liabilities
Employee benefits4
Deferred income tax liabilities5
Equity:
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
Total equity attributable to equity shareholders
Minority interests
Total equity
Total liabilities and equity
As reported
under Canadian
GAAP as at
December 31,
2010
Notes
Adjustments
Reclass
As reported
under IFRS
as at
December 31,
2010
$42,899
262,037
34,294
3,354
49,982
3,013
20,090
415,669
231,609
1,816
58,900
590,959
134,709
26,689
112,848
$92
4,399
($580)
37
(20,090)
(15,562)
179
566
9
(141)
20,090
(580)
(60,245)
385
4,827
4,931
(133,450)
38,025
104,152
$42,991
266,436
34,294
3,354
49,439
3,013
399,527
171,543
2,201
64,293
595,899
1,118
84,804
217,000
$1,573,199
($41,955)
$5,141
$1,536,385
$6,958
229,907
4,947
33,233
275,045
404,727
7,647
36,577
72,840
55,404
392,816
14,462
323,953
(10,272)
720,959
$739
($18,353)
21,170
6
2,823
(141)
20,923
(20,589)
739
5,979
134,928
(45,077)
(1,227)
(134,367)
(2,930)
(138,524)
720,959
(138,524)
2,125
2,125
$6,958
212,293
4,947
21,170
33,239
278,607
404,586
7,647
20,923
21,967
207,768
10,327
392,816
13,235
189,586
(13,202)
582,435
2,125
584,560
$1,573,199
($41,955)
$5,141
$1,536,385
T16
T12
T14
T15
T17
T16
T13
T9
T18
T18
T17
T16
T19
1 Reported under receivables under Canadian GAAP December 31, 2010 consolidated financial statements
2 Canadian GAAP terminology was future income tax assets
3 Reported under accounts payable and accrued liabilities under Canadian GAAP December 31, 2010 consolidated financial statements
4 Reported in other liabilities under Canadian GAAP December 31, 2010 consolidated financial statements
5 Canadian GAAP terminology was future income tax liabilities
TORSTAR CORPORATION 2011 ANNUAL REPORT 109
TORSTAR - Consolidated Financial Statements
Reconciliation of Consolidated Statement of Income for the year ended December 31, 2010
Notes
T19
T20
T21
T22
T23
T24
T13
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Operating profit
Interest and finance charges
Foreign exchange
Loss of associated businesses
Other income
Gain on sale of assets
CTV Inc. – gain on remeasurement
Investment write-down
Income before taxes
Income and other taxes
Net income
Attributable to:
Equity shareholders
Minority interests
Net Income attributable to equity
shareholders per Class A (voting)
and Class B share (non-voting):
Basic
Diluted
As reported under
Canadian GAAP for the
year ended
December 31, 20101
$1,479,588
(514,632)
(731,378)
(46,246)
(33,455)
153,877
(23,766)
(1,942)
(29,478)
4,088
(773)
102,006
(41,100)
$60,906
$60,906
$0.77
$0.76
Adjustments
$4,180
12,903
(328)
14,754
807
32,316
(369)
6,747
1,135
3,461
115,533
158,823
(9,000)
$149,823
1
Reclassified to conform to the presentation of the consolidated statement of income under IFRS
As reported under
IFRS for the year
ended
December 31, 2010
$1,483,768
(501,729)
(731,706)
(31,492)
(32,648)
186,193
(24,135)
4,805
(28,343)
3,461
4,088
115,533
(773)
260,829
(50,100)
$210,729
$209,910
$819
$2.65
$2.64
TORSTAR CORPORATION 2011 ANNUAL REPORT 110
TORSTAR - Consolidated Financial Statements
Reconciliation of Consolidated Statement of Comprehensive Income for the year ended December 31, 2010
As reported under
Canadian GAAP
for the year ended
December 31,
20101
Notes
Adjustments
As reported
under IFRS for
the year ended
December 31,
2010
Net income
$60,906
$149,823
$210,729
Other comprehensive income (loss), net of tax:
Unrealized foreign currency translation adjustment (no
income tax effect)
T23
921
(7,253)
(6,332)
Net movement on available-for-sale financial assets
(no income tax effect)
Net movement on cash flow hedges
Income tax effect
Net movement on cash flow hedges for associated
businesses (no income tax effect)
Transfer of unrealized loss on cash flow hedges for
associated business to the investment carrying
value upon the loss of significant influence (no
income tax effect)
Actuarial losses on employee benefits
Income tax effect
T25
Actuarial losses on employee benefits of associated
T13
businesses (no income tax effect)
Other comprehensive income (loss)
Comprehensive income
Attributable to:
Equity shareholders
Minority interests
240
1,325
(469)
2,042
2,522
240
1,325
(469)
2,042
(27,796)
7,115
2,522
(27,796)
7,115
(4,086)
(4,086)
6,581
(32,020)
(25,439)
$67,487
$117,803
$185,290
$67,487
$184,471
$819
1
Reclassified to conform to the presentation of the consolidated statement of comprehensive income under IFRS
Reconciliation of AOCI (net of tax) on December 31, 2010
AOCI as reported under
Canadian GAAP as at
December 31, 2010
Changes in functional
currencies
Foreign currency IFRS 1
adjustment
AOCI as reported under
IFRS as at
December 31, 2010
Foreign currency
translation
adjustment
Cash flow
hedges
Available-for- sale
securities
Total
($3,402)1
($6,770)2
($100)1
($10,272)
(9,994)
7,064
(9,994)
7,064
($6,332)1
($6,770)2
($100)1
($13,202)
1 Net of deferred income tax benefit of $nil
2 Net of deferred income tax benefit of $2,470
TORSTAR CORPORATION 2011 ANNUAL REPORT 111
TORSTAR - Consolidated Financial Statements
Reconciliation of Consolidated Statement of Changes in Equity as at December 31, 2010
Notes
Share
capital
Contributed
surplus
Retained
earnings
AOCI
Minority
interests
Total
equity
Reported under Canadian
GAAP as at
December 31, 2010
IFRS adjustments increase
(decrease):
Employee benefits
Property, plant and
equipment
Changes in functional
currencies
Foreign currency IFRS 1
adjustment
Income taxes
Share-based
compensation
Revenue recognition
Prepaid expenses and
other current assets
Provisions
Impairments
Investment in associates
Actuarial loss
Business combinations
Other income
Minority interests
Reported under IFRS as at
December 31, 2010
T1, T17
T12, T21
T23
T3
T16
T13
T17
T24
T19
$392,816
$14,462
$323,953
($10,272)
$720,959
(240,884)
(58,709)
6,873
(9,994)
7,064
(1,227)
(7,064)
83,979
1,544
(1,229)
(580)
953
939
104,537
(27,796)
(591)
3,661
(240,884)
(58,709)
(3,121)
83,979
317
(1,229)
(580)
953
939
104,537
(27,796)
(591)
3,661
2,125
$2,125
$392,816
$13,235
$189,586
($13,202)
$2,125
$584,560
Notes to the December 31, 2010 reconciliation schedules:
T12. PROPERTY, PLANT AND EQUIPMENT
The net value of property, plant and equipment has decreased by $60.2 million at December 31, 2010
primarily as a result of the transition adjustment of $74.3 million (Note T2), and the related lower depreciation
during 2010.
T13. INVESTMENT IN CTV INC.
The increase in the carrying value of $104.2 million included the recognition of a gain of $115.5 million
resulting from remeasurement to the estimated fair value of the investment which arose from the pending sale
of the investment (as described in Note 7 – Investment in Associated Businesses). The gain is reflected as an
adjustment to net income and was not subject to tax. Under Canadian GAAP the AFS investment was carried
at cost as the investment does not have a quoted market price in an active market whereas IFRS requires an
estimate of the fair value when the investment became an AFS financial asset. In addition, the carrying value
was decreased by $11.4 million due to the transition adjustment of $8.0 million (Note T6) and also included the
recognition in 2010 of actuarial losses related to employee benefit plans of $4.5 million and a decrease in
losses recognized of $1.1 million while CTV Inc. was an associated business.
TORSTAR CORPORATION 2011 ANNUAL REPORT 112
TORSTAR - Consolidated Financial Statements
T14. INTANGIBLE ASSETS
The adjustment to Intangible assets was an increase of $4.8 million. This included a $2.8 million increase in
non-amortizable intangible assets related to the remeasurement of the previously held 50% joint venture
interest in the Company’s German publishing business, a $0.9 million increase due to reversals of previously
recorded impairments ($0.5 million non-amortizable assets, $0.4 million amortizable assets) and a $1.2 million
increase related to the recognition of contingent consideration ($0.5 million non-amortizable assets, $0.7 million
amortizable assets).
T15. GOODWILL
Goodwill increased by $4.9 million at December 31, 2010 under IFRS due to the $5.0 million increase from the
purchase price allocation of contingent consideration that was recorded under IFRS in 2010, an increase of
$1.6 million related to the remeasurement of the previously held 50% joint venture interest in the Company’s
German publishing business, partially offset by the decrease from the transition adjustment of a $1.6 million
related to functional currency changes (Note T3).
T16. DEFERRED TAX ASSETS AND LIABILITIES
Provision for book returns and bad debts
Property, plant and equipment
Intangible assets
Financial instruments
Provision for employee benefit obligations
Share-based payment transactions
Tax loss carryforwards
Other
Total
Presented as:
Current deferred tax assets2
Non-current deferred tax assets
Non-current deferred tax liabilities
Total
As reported under
Canadian GAAP as at
December 31, 2010
$12,456
(22,961)
(8,258)
2,470
(13,876)
2,017
22,286
(2,759)
($8,625)
$20,090
26,689
(55,404)
($8,625)
Adjustments1
$14,907
(840)
68,711
(79)
403
$83,102
($20,090)
58,115
45,077
$83,102 3
As reported under
IFRS as at
December 31, 2010
$12,456
(8,054)
(9,098)
2,470
54,835
1,938
22,286
(2,356)
$74,477
$84,804
(10,327)
$74,477
1The tax adjustments are the tax impact of the changes in the related assets and liabilities
2Under IFRS, deferred taxes are either reported as non-current deferred tax assets or non-current deferred tax liabilities
3This amount plus $0.2 million was recorded through retained earnings
T17. EMPLOYEE BENEFITS
The change in employee benefits was due to transition adjustments (Note T1) and the related reduction in
pension expense in 2010. Actuarial losses recognized during 2010 of $27.8 million included $55.2 million of
actuarial losses offset by a $27.4 million reduction in the minimum funding requirement obligation.
T18. OTHER LIABILITIES AND PROVISIONS
Other liabilities increased by $6.0 million as a result of recording the contingent purchase price payments
under IFRS for acquisitions. The amount has been reclassified to Provisions to conform to reporting changes
described in Note T9.
TORSTAR CORPORATION 2011 ANNUAL REPORT 113
TORSTAR - Consolidated Financial Statements
T19. MINORITY INTERESTS
The Company began to present the minority interest in Olive Media as part of the transition to IFRS. As a
result of this presentation change on December 31, 2010, current assets have increased by $4.5 million, long-
term assets have increased by $0.8 million, current liabilities have increased by $2.8 million, long-term
liabilities have increased by $0.3 million, and shareholders’ equity has increased by $2.2 million. For the full
year, the change in presentation increased revenue by $4.3 million, operating profit by $0.9 million and net
income by $0.8 million.
T20. SALARIES AND BENEFITS
Salaries and benefits for the year ended December 31, 2010 were $12.9 million lower under IFRS than they
were under Canadian GAAP. This decrease included $13.1 million from the changes in employee benefits
(Note T1) and $1.7 million from the changes in share-based compensation (Note T10), partially offset by
higher expenses from the presentation change for minority interests (Note T19).
T21. AMORTIZATION AND DEPRECIATION
Amortization and depreciation expense for the year ended December 31, 2010 was $14.8 million lower under
IFRS than it was under Canadian GAAP. This is primarily the result of the changes made to the property,
plant and equipment balances on the Transition date (Note T2).
T22. RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges for the year ended December 31, 2010 were $0.8 million lower under IFRS
than they were under Canadian GAAP. This included a $0.9 million decrease from the timing of restructuring
provisions (Note T9), a $0.4 million decrease from the reversal of an impairment loss related to intangible
assets, a $0.4 million increase on the expensing of acquisition costs related to the Company’s acquisition of
the remaining 50% of its German publishing business and a $0.1 million increase in provisions.
T23. FOREIGN EXCHANGE
As the result of the change in functional currencies (Note T3), the foreign exchange on the translation of a
significant portion of the Company’s U.S. dollar denominated assets is recorded through OCI under IFRS
rather than through net income under Canadian GAAP.
T24. OTHER INCOME
As a result of the Company’s April 2010 purchase of the remaining 50% interest in the German publishing
business that it did not own, a gain on remeasurement of $3.5 million (Other income) was recorded for the
previously held 50% interest in the joint venture and deferred income tax recovery of $0.2 million. Under IFRS,
when control is obtained over previously held equity interests, this interest should be revalued and any resulting
gain or loss is recognized in profit or loss. Canadian GAAP treated each stage of an acquisition separately and
there was no revaluation of the previously held interest.
T25. EMPLOYEE BENEFITS – ACTUARIAL GAINS AND LOSSES
The Company has chosen to recognize actuarial gains and losses related to its employee benefit plans
through OCI. The amount recognized each period is not retained in AOCI but goes directly to retained
earnings.
TORSTAR CORPORATION 2011 ANNUAL REPORT 114
N OT E S
t o r s t a r c o r p o r a t i o n 2 0 1 0 a n n u a l r e p o r t
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Board of Directors
John A. Honderich
Chair, Torstar Corporation
Former Publisher, Toronto Star
Director since 2004
Campbell R. Harvey
Professor of International Business,
Duke University
Director since 1992
Martin E. Thall
President and Chief Executive Officer
Thall Group of Companies
Director since 2002
Donald Babick
Past President, Southam Publications
Corporate Director
Director since 2004
Elaine B. Berger
Corporate Director
Director since 2006
Daniel A. Jauernig
President and Chief Executive Officer
Classified Ventures, LLC
Director since 2009
Joan T. Dea
Managing Director
Beckwith Investments
Director since 2009
TORSTAR CORPORATION 2011 ANNUAL REPORT 116
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Board of Directors
Alnasir Samji
President, Alderidge Consulting
Director since 2009
David P. Holland
President and Chief Executive Officer
Torstar Corporation
Director since 2009
Paul R. Weiss
Corporate Director
Director since 2009
Phyllis Yaffe
Corporate Director
Director since 2009
Linda Hughes
Chancellor, University of Alberta
Former Publisher, Edmonton Journal
Director since 2010
B. Neil Clark
Corporate Director
Director since 2011
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CORPORATE OFFICE
TRANSFER AGENT & REGISTRAR
CIBC Mellon Trust Company
c/o Canadian Stock Transfer Company Inc.
P.O. Box 700
Postal Station B
Montreal, QC
H3B 3K3
AnswerLine (416) 682-3680 or
1-800-387-0825
(toll-free in North America)
www.canstockta.com
inquiries@canstockta.com
Torstar Class B non-voting shares are traded
on the Toronto Stock Exchange under the
symbol TS.B
One Yonge Street
Toronto, Ontario
Canada
M5E 1E6
Telephone: (416) 869-4010
Fax: (416) 869-4183
e-mail: torstar@torstar.ca
Website: www.torstar.com
OFFICERS OF TORSTAR
JoHn a. HonDericH
Chair
DaViD p. HollanD
President and Chief
Executive Officer
lorenZo DeMarcHi
Executive Vice-President
and Chief Financial Officer
Marie e. BeYette
Senior Vice-President,
General Counsel and
Corporate Secretary
patricia HeWitt
Senior Vice-President
Human Resources
Gail Martin
Senior Vice-President Finance
D. toDD sMitH
Treasurer
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