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OPERATING RESULTS ($000)
2014 (1)
2013 (1)
Operating revenue
$858,134
$935,773
Adjusted EBITDA (2)
92,070
Operating earnings (2)
61,396
Operating loss
Net income (loss)
Cash from operating activities
(44,185)
173,064
63,358
Adjusted EBITDA – Percentage of revenue (2)
10.7%
107,789
75,561
(34,703)
(27,413)
80,732
11.5%
Cash from operating activities –
percentage of average equity
PER CLASS A AND CLASS B SHARES
Net income (loss)
Dividends
7.6%
10.6%
$2.16
$0.5250
($0.35)
$0.5250
Price range (high/low)
$8.47/$4.96
$8.36/$5.20
FINANCIAL POSITION ($000)
Cash and cash equivalents and restricted cash,
net of bank overdraft
Long-term debt
Equity
$290,239
–
$17,410
$175,898
$869,720
$796,784
The Annual Meeting of shareholders will be held Wednesday, May 6, 2015 at St. James Cathedral Centre,
65 Church Street, Toronto, beginning at 10 a.m. It will also be webcast live on the Internet.
Operating revenue ($millions) (1, 3)
operating EARninGs ($millions) (1, 2, 3)
12
13
14
1,006
936
858
12
13
14
80
76
61
nET inComE (loss) PER sHARE (3)
ADJUsTED EBiTDA ($millions) (1, 2, 3)
(0.35)
12
13
14
1.03
2.16
12
13
14
112
108
92
(1) These figures have been restated to reflect the classification of Harlequin into discontinued operations.
(2) These are non-IFRS measures. Refer to page 34 for a reconciliation to operating profit (loss). Net debt is calculated as the sum of Long-term debt, Current portion of
long-term debt and Bank overdraft less Cash and cash equivalents.
(3) 2012 is restated for the impact of the adoption of IAS 19R, IFRS 11, IFRS 12 and IAS 28.
This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario).
We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, targets, outlooks,
expectations, goals, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 8.
under the heading “Forward-Looking Statements”.
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M e s s a g e f r oM t h e C h a i r
John Honderich
Chair, Board of Directors
2014 was a major year of financial transformation for Torstar as we charted a new path for the future.
The most significant development in this process was the decision to sell Harlequin to a division of HarperCollins Publishers
L.L.C., a subsidiary of News Corp., after four decades as a major division of this company. As one might expect, the decision was
not an easy one. With its preeminence as a publisher of books for women around the globe, Harlequin had provided a steady
stream of revenue and prestige to Torstar. Its excellent book publishing record combined with its dedicated and innovative staff
had made it the envy of the industry.
Yet, as we observed first hand, the book publishing industry has been undergoing transformational change with digital books,
mergers and the emergence of new competitors. In a very short period of time, the competitive dynamic changed dramatically.
Thus, when HarperCollins presented its unsolicited offer, we felt we had to consider it seriously. Ultimately, we decided the time
was appropriate to exit, a move that was unanimously approved by Torstar’s Board of Directors.
Over the decades, we have had the opportunity to work with hundreds of loyal and dedicated Harlequin employees. They
contributed immensely to the financial wellbeing of Torstar and we will be forever grateful for all their efforts. We wish Harlequin
well with its new owner.
With the proceeds from this transaction in combination with ongoing cost control and new ventures, Torstar ended the year debt
free, with total cash and cash equivalents and restricted cash of $290 million. At the end of the year, we were also able to report
that our contribution obligations under all our pension plans, which had soared dramatically for the past three years, would be
at traditional levels for the next three years. From this new financial position of strength, the Board and senior management are
committed to finding new investments that from an economic and strategic point of view will bolster Torstar down the road. This
process is already underway and should continue through 2015.
In this regard, Torstar benefits tremendously from the ongoing leadership and strategic thinking of both President and Chief
Executive Officer David Holland and Chief Financial Officer and Executive Vice-President Lorenzo DeMarchi. They demonstrated
exceptional leadership and commitment through the Harlequin sale process and continue to do so as we chart a new future. They
are also ably assisted by Ian Oliver, President of Metroland Media Group and John Cruickshank, Publisher of the Toronto Star and
President of Star Media Group.
Torstar also has the great advantage of an engaged and committed Board of Directors. Their diligence and support, as we have
forged through very tough economic times, has been nothing short of exceptional. 2014 also marked the last full year of service for
Joan Dea, now a resident of California. Joan’s affiliation with Torstar goes back to the mid-1990s when she served as a strategic
consultant for each of Torstar’s three main divisions. As a director, Joan contributed greatly and always brought her trademark
strategic perspective to our discussions.
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t o o U r s h a r e h o L D e r s
David Holland
President and Chief Executive Officer
Torstar’s evolution continued in 2014 with the very significant decision
to sell Harlequin to a division of HarperCollins Publishers L.L.C.,
a subsidiary of News Corp. After owning Harlequin for 40 years, we
determined that the value to a larger publisher exceeded our expectations
of the value of Harlequin within Torstar. We acted on this belief. We
wish the many talented and committed employees of Harlequin the
very best in the future. We believe the strengthening of our financial
position resulting from the sale will assist us in making the investments
necessary to successfully adapt in our media operations and invest
in new opportunities we believe are in the long-term interest of our
shareholders. We are in the midst of significant transition in a dynamic
environment and are very committed to our successful evolution.
in the Greater Toronto Area. In addition, thestar.com had 3.3 million
average monthly unique desktop visitors in 2014 and saw rapid growth
in mobile visitors.
During 2014, we made a strategic shift announcing that we would
discontinue use of a paywall at the Toronto Star’s website in 2015.
This decision was coupled with our plan to launch an innovative tablet
product for the Toronto Star in the fall of 2015. A similar tablet product
has been successfully launched in the Quebec market by La Presse. We
are very enthusiastic about the prospect of engaging audiences with
this product as part of our broader strategy to develop audiences across
multiple platforms.
Operating results
Affected by the continued pressures on print advertising, particularly at
our daily newspaper operations, segmented adjusted EBITDA of $102
million was down $15 million from $117 million in 2013. Segmented
revenue was $905 million, down 8% from $984 million in the prior year.
With the sale of Harlequin, Torstar retired its debt and is now in a
significant cash position. At December 31, 2014, Torstar had cash and
cash equivalents, including restricted cash, of $290 million compared to
its net debt position of $159 million at December 31, 2013. We continue
to carefully manage our pension plans and based on our most recent
valuations will benefit from lower levels of funding requirements over
the next three years compared to recent years. The solvency position of
the plans deteriorated in 2014 with the decline in interest rates, but over
the next three years even a modest increase in rates would improve the
condition of the plans.
Our media operations, comprised of Star Media Group and Metroland
Media Group, are focused on strengthening and enhancing our multi-
platform approach to news, information, advertising and marketing
solutions in the Greater Toronto Area, in communities throughout
Ontario and nationally in major cities from east to west in English
Canada.
Star Media Group, which includes the Toronto Star, Metro, our interest
in Sing Tao and a number of digital properties, continued to be affected
by declining print ad revenue. Multi-platform subscriber revenue was
relatively stable in the year. Adjusted EBITDA of $50 million was down
$10 million on a revenue decline of $54 million or 11%. Ongoing efforts
to reduce costs mitigated the impact of the revenue decline.
The Toronto Star, our flagship brand and publication, continued its
tradition of editorial excellence resulting in more than double the
average weekday print readership of the closest paid daily competitor
The Toronto Star, with its strength in the Greater Toronto Area, is
complemented geographically by Metro. The Metro print publication
is second only to the Toronto Star in average weekday readership in
the Greater Toronto Area. Metro also publishes daily print editions in
Vancouver, Calgary, Edmonton, Winnipeg, Ottawa and Halifax. We are
very committed to building the Metro franchise across Canada and are
taking the actions we believe are necessary to support our goal.
Metroland Media Group remains one of Canada’s premier community
media companies, publishing in print and digital in three daily and
more than 100 community newspapers across Ontario. Built from
the strength of the publishing foundation, the company also operates
a highly successful flyer distribution network, publishes numerous
magazines and operates a number of consumer shows. Metroland
Media’s mission to serve local communities was strengthened in 2014
through its increased commitment to reaching digital audiences and
providing digital services to its many customers.
Metroland Media delivered a solid earnings performance in 2014 and at
the same time continued to make investments in areas of the business
that are important to its future. These investments included digital
sales resources and training, geographic expansion and marketing.
Adjusted EBITDA in the year was $68 million, down $3 million from
prior year; revenue was down 5% to $484 million. A positive note was
that quarterly print advertising revenue trending improved throughout
the year with the fourth quarter revenue down just 2% from the fourth
quarter of 2013.
In 2014, Metroland Media continued to further develop its digital presence
in the many communities it serves. More editorial content, more videos,
new features and articles highlighting the businesses in Metroland’s
many regions resulted in significant increases in visits to Metroland’s
community digital properties. This rise in visits led to an increase in
digital advertising inventory and associated digital advertising revenue.
Digital revenues were also strengthened through online advertiser paid
content, particularly through the “In Your Neighbourhood” program,
by growth at Save.ca, its online flyer and coupon website, and at
Homefinder.ca, its online real estate website.
As in previous years, our newspapers and digital businesses were
recognized for their outstanding editorial, advertising and marketing
efforts.
The Toronto Star won the prestigious Michener Award in Public Service
Journalism for its extensive coverage of the activities and behaviour of
former Toronto Mayor Rob Ford that resulted in a police investigation
after which the mayor was stripped of all key powers. The Toronto
Star also won five National Newspaper Awards for projects, including
“Clothes on Your Back” about the international garment industry and
“Known to Police” about the practices of police carding. Metroland
newspapers won a total of 92 editorial awards presented by the Local
Media Association in 2014, which marked the second straight year that
Metroland has led all newspaper companies in North America in the
prestigious award contest. Among the winners was The Newmarket
Era, which captured the Newspaper of the Year award. This was the
second year in a row that a Metroland newspaper has captured this top
award. In addition, John Roe of the Waterloo Region Record captured
the National Newspaper Award for editorial writing.
Torstar also has a number of minority investments in associated
businesses, including an approximate 23-per-cent interest in Blue
Ant Media Inc., an independent media company led by media veteran
Michael MacMillan. We were pleased with Blue Ant’s performance in
2014 and remain confident in the company as it focuses on growth
opportunities moving forward.
Torstar also has a minority investment in Black Press, a company well
led by David Black that publishes more than 150 newspapers, including
weeklies, dailies and shoppers in Canada and the United States.
lOOKing FOrWarD
As in 2014, Torstar is likely to face challenging times as spending by
advertisers and reading habits of audiences continue to evolve. We
are confronting these challenges, are committed to the execution of
our strategy and are in the enviable position of having the resources
necessary to adapt successfully. Our strategy includes plans to further
develop and evolve Metroland Media’s position as a growing, premier
community-focused media and marketing solutions organization; to
evolve our multi-platform approach to audiences at Star Media Group
including, and in particular, the launch of the new tablet product for the
Toronto Star in the fall of 2015; to support the long-term growth of our
Metro franchises in major Canadian markets; and to continue to reduce
our cost base.
The Toronto Star announced in November, 2014, that it had reached
an agreement with La Presse to develop a new tablet product for
the Toronto Star. The product will be based on the La Presse+ news
platform technology and is expected to be launched in the fall of 2015.
This project is proving to be a catalyst for change as we further our
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in the Greater Toronto Area. In addition, thestar.com had 3.3 million
average monthly unique desktop visitors in 2014 and saw rapid growth
in mobile visitors.
During 2014, we made a strategic shift announcing that we would
discontinue use of a paywall at the Toronto Star’s website in 2015.
This decision was coupled with our plan to launch an innovative tablet
product for the Toronto Star in the fall of 2015. A similar tablet product
has been successfully launched in the Quebec market by La Presse. We
are very enthusiastic about the prospect of engaging audiences with
this product as part of our broader strategy to develop audiences across
multiple platforms.
The Toronto Star, with its strength in the Greater Toronto Area, is
complemented geographically by Metro. The Metro print publication
is second only to the Toronto Star in average weekday readership in
the Greater Toronto Area. Metro also publishes daily print editions in
Vancouver, Calgary, Edmonton, Winnipeg, Ottawa and Halifax. We are
very committed to building the Metro franchise across Canada and are
taking the actions we believe are necessary to support our goal.
Metroland Media Group remains one of Canada’s premier community
media companies, publishing in print and digital in three daily and
more than 100 community newspapers across Ontario. Built from
the strength of the publishing foundation, the company also operates
a highly successful flyer distribution network, publishes numerous
magazines and operates a number of consumer shows. Metroland
Media’s mission to serve local communities was strengthened in 2014
through its increased commitment to reaching digital audiences and
providing digital services to its many customers.
Metroland Media delivered a solid earnings performance in 2014 and at
the same time continued to make investments in areas of the business
that are important to its future. These investments included digital
sales resources and training, geographic expansion and marketing.
Adjusted EBITDA in the year was $68 million, down $3 million from
prior year; revenue was down 5% to $484 million. A positive note was
that quarterly print advertising revenue trending improved throughout
the year with the fourth quarter revenue down just 2% from the fourth
quarter of 2013.
In 2014, Metroland Media continued to further develop its digital presence
in the many communities it serves. More editorial content, more videos,
new features and articles highlighting the businesses in Metroland’s
many regions resulted in significant increases in visits to Metroland’s
community digital properties. This rise in visits led to an increase in
digital advertising inventory and associated digital advertising revenue.
Digital revenues were also strengthened through online advertiser paid
content, particularly through the “In Your Neighbourhood” program,
by growth at Save.ca, its online flyer and coupon website, and at
Homefinder.ca, its online real estate website.
commitment to serving our audiences and advertisers in innovative
ways in anticipation of an increasingly digital future.
As in previous years, our newspapers and digital businesses were
recognized for their outstanding editorial, advertising and marketing
efforts.
The Toronto Star won the prestigious Michener Award in Public Service
Journalism for its extensive coverage of the activities and behaviour of
former Toronto Mayor Rob Ford that resulted in a police investigation
after which the mayor was stripped of all key powers. The Toronto
Star also won five National Newspaper Awards for projects, including
“Clothes on Your Back” about the international garment industry and
“Known to Police” about the practices of police carding. Metroland
newspapers won a total of 92 editorial awards presented by the Local
Media Association in 2014, which marked the second straight year that
Metroland has led all newspaper companies in North America in the
prestigious award contest. Among the winners was The Newmarket
Era, which captured the Newspaper of the Year award. This was the
second year in a row that a Metroland newspaper has captured this top
award. In addition, John Roe of the Waterloo Region Record captured
the National Newspaper Award for editorial writing.
Torstar also has a number of minority investments in associated
businesses, including an approximate 23-per-cent interest in Blue
Ant Media Inc., an independent media company led by media veteran
Michael MacMillan. We were pleased with Blue Ant’s performance in
2014 and remain confident in the company as it focuses on growth
opportunities moving forward.
Torstar also has a minority investment in Black Press, a company well
led by David Black that publishes more than 150 newspapers, including
weeklies, dailies and shoppers in Canada and the United States.
lOOKing FOrWarD
As in 2014, Torstar is likely to face challenging times as spending by
advertisers and reading habits of audiences continue to evolve. We
are confronting these challenges, are committed to the execution of
our strategy and are in the enviable position of having the resources
necessary to adapt successfully. Our strategy includes plans to further
develop and evolve Metroland Media’s position as a growing, premier
community-focused media and marketing solutions organization; to
evolve our multi-platform approach to audiences at Star Media Group
including, and in particular, the launch of the new tablet product for the
Toronto Star in the fall of 2015; to support the long-term growth of our
Metro franchises in major Canadian markets; and to continue to reduce
our cost base.
The new tablet product is a key element of our multimedia evolution.
Our vision is to create a compelling edition of the Toronto Star that
reaches a significantly broader audience and engages them in new ways.
With the tablet product, we seek to dramatically change our storytelling
approach. Stories will be showcased in a more interactive way than
ever before, providing a deeper level of engagement and immersion as
compared to a desktop or mobile experience. While targeting a younger
audience, it will also complement the Toronto Star’s existing print,
desktop and mobile products.
With these major pillars firmly in place, namely the strength of our
financial position, Metroland’s deep connection to the communities it
serves, the Toronto Star’s evolving multi-platform strategy that focuses
on attracting younger audiences and Metro’s significant presence from
coast-to-coast, I am confident Torstar will successfully navigate these
times of change.
Our greatest strengtH – peOple
At Torstar, we are privileged to have talented and dedicated employees
across our operations. Given the rapid pace of change we are
experiencing in our industry, the quality of our committed employees
has never mattered more. Guiding these talented and committed
employees is an exceptional executive team.
At Metroland Media Group, Ian Oliver continues to demonstrate why
he is one of the most respected community newspaper executives in
North America. Drawing on his belief in the power of “connection to
community,” he is embracing change and acting decisively as he builds
the community media and marketing solutions organization of the
future.
At Star Media Group, John Cruickshank continues to provide
outstanding leadership through this period of significant transformation
at the Toronto Star, the largest daily newspaper in Canada, as it adapts
and seeks out opportunities to capitalize on its audience-focused and
multi-platform future. John’s leadership has been critical in building
organizational momentum behind the new tablet initiative.
At the corporate office, Lorenzo DeMarchi, our Executive Vice-President
and Chief Financial Officer, continues to provide outstanding financial
leadership so critical to navigating through this challenging period
I am also very fortunate to have the support and wise counsel of John
Honderich, our Chair, and all the members of the Board of Directors during
the year.
The Toronto Star announced in November, 2014, that it had reached
an agreement with La Presse to develop a new tablet product for
the Toronto Star. The product will be based on the La Presse+ news
platform technology and is expected to be launched in the fall of 2015.
This project is proving to be a catalyst for change as we further our
Most importantly, I would also like to acknowledge the support, hard
work and dedication of the more than 5,000 Torstar employees as we
continue to take the necessary, and often difficult, steps forward in
the evolution of Torstar. Because of their commitment and passion to
succeed, I remain fully confident in Torstar’s future for years to come.
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n Ot e s
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f i n a nC i aL t a bL e o f C o n t e n t s
Management’s Discussion & Analysis
Management’s Statement of Responsibility
Independent Auditors’ Report to Shareholders
Consolidated Financial Statements
Corporate Information
8
46
47
48
107
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TORSTAR - Management’s Discussion and Analysis
For the year ended December 31, 2014
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, 2014 (the “2014 Consolidated Financial
Statements”).
Torstar reports its financial results under International Financial Reporting Standards (“IFRS”) as set out in the CPA Canada
Standards and Guidance Collection. All financial information contained in this MD&A and in the 2014 Consolidated Financial
Statements has been prepared in accordance with IFRS, except for certain “Non-IFRS Measures” as described in Section 14
of this MD&A. Per share amounts are calculated using the weighted average number of shares outstanding for the applicable
period. In addition, during 2014, Torstar reclassified the manner in which certain items are categorized. The results for 2014
and 2013 have been restated on a comparative basis to reflect these changes.
This MD&A is dated March 3, 2015 and all amounts are in Canadian dollars unless otherwise noted.
Additional information relating to Torstar, including its Annual Information Form, is available on the Torstar website at
www.torstar.com and on SEDAR at www.sedar.com.
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. This MD&A includes, among others, forward-looking statements
regarding Torstar’s strategic initiatives in Section 1 of this MD&A, expectations regarding forecasted revenues, future
corporate expenses and expected taxes payable in Section 3 of this MD&A, expected savings including savings from
restructuring initiatives in Sections 3, 4 and 5 of this MD&A, Torstar’s outlook for 2015 and expected capital expenditures and
pension funding in Section 5 of this MD&A, expectations regarding cash flows, forecasted financing requirements and
expected timing of the launch of the Toronto Star’s tablet product in Section 6 of this MD&A, expectations regarding the costs,
obligations, contributions, return on plan assets, discount rates, required funding and other expectations related to employee
future benefit obligations in Section 8 of this MD&A, expectations described in connection with critical accounting policies,
estimates and judgements in Section 9 of this MD&A, expectations regarding recent accounting pronouncements in Section 10
of this MD&A and expectations regarding risks and uncertainties in Section 16 of this MD&A. 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. Torstar cautions 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:
•
•
•
•
•
•
•
•
•
•
•
the Company’s ability to operate in highly competitive industries;
the Company’s ability to compete with digital media, other newspapers and other forms of media;
the Company’s ability to respond to the shift to digital media and the shift by advertisers to other digital platforms;
the Company’s ability to attract, grow and retain its digital audience and profitably develop its digital platforms;
the Company’s ability to attract and retain advertisers;
the Company’s ability to maintain adequate circulation/subscription levels;
the Company’s ability to attract and retain readers;
the Company’s ability to integrate the technology associated with new digital platforms, including the Toronto Star’s
new digital tablet product;
general economic conditions and customer prospects in the principal markets in which the Company operates;
the Company’s ability to reduce costs;
loss of reputation;
TORSTAR CORPORATION 2014 ANNUAL REPORT 8
TORSTAR - Management’s Discussion and Analysis
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
dependence on third party suppliers and service providers;
reliance on technology and information systems;
the Company’s ability to execute appropriate strategic growth initiatives;
unexpected costs or liabilities related to acquisitions and dispositions;
changes in employee future benefit obligations;
labour disruptions;
newsprint costs;
reliance on its printing operations;
litigation;
privacy, anti-spam, communications, e-commerce and environmental laws, health and safety regulations and other
laws and regulations applicable generally to the Company’s businesses;
availability of insurance;
dependence on key personnel;
intellectual property rights;
credit risk;
product revenue and product liability;
changes in deposit interest rates;
foreign exchange fluctuations and foreign operations;
income tax and other taxes;
results of impairment tests and uncertainties associated with critical accounting estimates; and
control of the Company by the Voting Trust;
Torstar cautions that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect Torstar’s
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 economies; tax laws; continued availability of printing operations; availability of financing on appropriate terms;
exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan
obligations; expected future revenues; expected future liabilities; expected future cash flows and discount rates relating to
valuation of goodwill and intangible assets; and successful development and launch of new products including the Toronto
Star digital tablet edition. 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 2014 ANNUAL REPORT 9
TORSTAR - Management’s Discussion and Analysis
Section
Page
Management’s Discussion and Analysis – Contents
1
2
3
4
5
6
7
8
9
Overview and Strategic Initiatives
A summary of Torstar’s business and strategic initiatives
Highlights
Highlights for 2014 compared to 2013
Annual Operating Results
A discussion of Torstar’s operating results for 2014 and 2013
Fourth Quarter Operating Results
A discussion of Torstar’s fourth quarter operating results
Outlook
The outlook for Torstar’s business in 2015
Liquidity and Capital Resources
A discussion of Torstar’s cash flow, liquidity, credit facilities and other disclosures
Financial Instruments
A summary of Torstar’s financial instruments
Employee Future Benefit Obligations
A summary of Torstar’s employee future benefit obligations
Critical Accounting Policies and Estimates
A description of accounting estimates and judgements that are critical to determining
Torstar’s financial results, and changes to accounting policies
10 Recent Accounting Pronouncements
A discussion of recent IFRS developments that will affect Torstar
11
Controls and Procedures
A discussion of Torstar’s disclosure controls and internal controls over financial
reporting
12 Selected Annual Information
A summary of selected annual financial information for 2014, 2013 and 2012
13 Summary of Quarterly Results
A summary view of Torstar’s quarterly financial performance
14
15
Reconciliation and Definition of Non-IFRS Measures
A description and reconciliation of certain non-IFRS and additional IFRS measures
used by management
Enterprise Risk Management,
Enterprise risks and uncertainties facing Torstar and how Torstar manages these
risks
16 Risk Management, Risks and Uncertainties
Risks and uncertainties facing Torstar
11
12
13
19
23
23
25
26
28
31
31
32
33
33
36
36
TORSTAR CORPORATION 2014 ANNUAL REPORT 10
TORSTAR - Management’s Discussion and Analysis
1. Overview and Strategic Initiatives
A summary of Torstar’s business and strategy
Overview of Torstar’s Business
Torstar Corporation is a broadly based Canadian media company listed on the Toronto Stock Exchange
(Symbol:TS.B). Torstar has two reportable operating segments: Metroland Media Group (“MMG”) and Star Media
Group (“SMG”).
Metroland Media Group publishes The Hamilton Spectator, the Waterloo Region Record, and the Guelph Mercury
and more than 100 weekly community newspapers and has a number of specialty publications, directories,
consumer shows and distribution operations, digital properties (including goldbook.ca, save.ca, travelalerts.ca,
and wagjag.com (“WagJag”)) and product sales.
Star Media Group includes the daily Toronto Star newspaper and thestar.com. The Star Media Group also
includes Free Daily News Group Inc. (“Metro English Canada”), which publishes the English-language Metro free
daily newspapers in several of Canada’s largest cities, and through a joint venture arrangement, Star Media
Group owns an interest in the Chinese-language Sing Tao Daily and its related publications in Toronto,
Vancouver and Calgary. Star Media Group also includes wheels.ca, toronto.com, several other specialty
publications and magazines and distribution services, eyeReturn Marketing Inc. (“eyeReturn Marketing”) and
Torstar’s interests in workopolis.com and Olive Media.
Previously, Torstar also owned Harlequin Enterprises Limited (“Harlequin”), a leading global publisher of books for
women. On August 1, 2014, Torstar sold all of the shares of Harlequin to a division of HarperCollins Publishers
L.L.C., a subsidiary of News Corp., for a purchase price of $455 million. Torstar’s investment in Harlequin
previously represented the Book Publishing Segment. During 2014, this was reclassified as Assets Held for Sale
and Discontinued Operations and all comparative figures below have been restated to reflect this change, unless
otherwise noted. Refer to Section 3 – Operating Results below and Note 24 of Torstar’s 2014 Consolidated
Financial Statements for further information.
Torstar also has several investments in Associated Businesses. At December 31, 2014, Torstar had a 19.4%
equity investment in Black Press Ltd. (“Black Press”), a 23.1% equity investment in Blue Ant Media Inc. (“Blue
Ant”), a 33.3% equity investment in Canadian Press Enterprises Inc. (“Canadian Press”) and a 16.1% equity
investment in Shop.ca Network Inc. (“Shop.ca”). Until it sold its interest on October 16, 2014, Torstar also had a
38.2% interest in Tuango Inc. (“Tuango”).
Black Press is a privately held company that publishes more than 150 titles in print and online in Canada and the
U.S. and has operations in British Columbia, Alberta, Washington State, California, Hawaii and Ohio.
Blue Ant is an independent media company which currently owns and operates 11 media brands including
Cottage Life, Travel+Escape, Smithsonian Channel Canada, Love Nature and AUX. Blue Ant creates and
distributes content ranging from music to travel, style to nature, engaging fans across television, digital,
magazines and live events. In 2014, Torstar invested an additional $3.5 million in Blue Ant as part of a larger
round of financing.
Canadian Press operates The Canadian Press news agency. During 2014, Torstar invested an additional $0.4
million in Canadian Press.
Shop.ca is an online e-commerce marketplace aimed at Canadian shoppers. During 2014, Torstar invested an
additional $1.0 million in Shop.ca as part of a broader financing.
Competitive Landscape and Strategic Initiatives
Over the last several years, the media landscape, and the newspaper industry in particular, has continued to
experience significant changes. These changes include a structural shift in advertising spending from various
traditional media including newspapers, to digital media, significantly increased availability of advertising
impressions on digital platforms, an increasing percentage of consumer time spent with new digital and mobile
platforms and fragmentation of audiences across an increasing array of digital media options. Within this evolving
TORSTAR CORPORATION 2014 ANNUAL REPORT 11
TORSTAR - Management’s Discussion and Analysis
landscape, Torstar is embracing the multi-platform environment in which it operates and is striving to adapt and
strengthen its position through the following strategic initiatives:
• Continuing to optimize print revenues and reduce costs while continuing to invest in those areas of
highest value to Torstar’s print customers;
• Advancing the digital evolution of Torstar’s businesses including a successful launch of the Toronto
Star’s new tablet product;
• Continuing to support the growth of the Metro publications across Canada;
• Successfully evolving Metroland Media Group into the community media and marketing solutions
organization of the future; and
• Optimally employ capital resulting from the sale of Harlequin.
.
2. Highlights
Highlights for 2014 compared to 2013
(in $000’s, except per share
amounts)
2014
2013
Favourable
(Unfavourable)
Favourable
(Unfavourable)
$904,618
$984,047
($79,429)
Segmented revenues1,2
Adjusted EBITDA1,2
Operating profit (loss)1,2
Net income (loss) from continuing
operations
Per Share
Net income from discontinued
operations
Per Share-Basic & Diluted
Net income (loss) attributable to equity
shareholders
Per Share-Basic
Per Share-Diluted
101,672
(52,370)
(49,598)
($0.62)
222,662
$2.78
172,685
$2.16
$2.15
117,174
(37,713)
(58,046)
($0.73)
30,633
$0.38
(27,984)
($0.35)
($0.35)
(15,502)
(14,657)
8,448
$0.11
192,029
$2.40
200,669
$2.51
$2.50
($0.04)
(8.1%)
(13.2%)
(38.9%)
14.6%
15.1%
NM
NM
NM
NM
NM
(6.5%)
Adjusted Earnings Per Share2
1 Includes proportionately consolidated share of joint venture operations,
2These are Non-IFRS or additional IFRS measures, refer to Section 14 of this MD&A
NM - Figure not meaningful
$0.58
$0.62
• Highlights:
• The sale of Harlequin closed on August 1, 2014 for net accounting proceeds of $442.2 million, resulting in
a pre-tax accounting gain of $224.6 million.
• Generated $43.3 million of free cash flow (excludes dividends) including significant funding of pension
and restructuring obligations.
• Ended 2014 with total cash and cash equivalents and restricted cash of $290.2 million after retiring all
outstanding debt.
• Net income attributable to equity shareholders was $172.7 million ($2.16 per share) in 2014 up $200.7
million ($2.51 per share) from a loss of $28.0 million ($0.35 per share) in 2013.
• Total segmented revenue was $904.6 million in 2014, down $79.4 million (8.1%) from $984.0 million in
2013.
TORSTAR CORPORATION 2014 ANNUAL REPORT 12
TORSTAR - Management’s Discussion and Analysis
• Segmented adjusted EBITDA was $101.7 million in 2014, down $15.5 million (13.2%) from $117.2 million
in 2013.
• Segmented operating profit (loss) was a loss of $52.4 million in 2014, an increase of $14.7 million from a
loss of $37.7 million in 2013. The segmented operating losses for 2014 and 2013 include non-cash
charges primarily recorded in the third quarters of 2014 and 2013 for impairment of assets totalling $97.9
million and $86.1 million respectively.
• Net loss from continuing operations was $49.6 million ($0.62 per share) in 2014, an improvement of $8.4
million ($0.11 per share) from $58.0 million ($0.73 per share) in 2013.
• Adjusted earnings per share was $0.58 in 2014, down $0.04 from $0.62 in 2013.
The following chart provides a continuity of earnings per share for the year ended December 31, 2013 to the year
ended December 31, 2014:
Interest and financing costs
Earnings per share from continuing operations attributable to equity
shareholders in 2013
Changes
• Operations
•
• Associated businesses
• Restructuring and other charges*
•
Impairment of assets*
• Non-cash foreign exchange*
• Other income (expense) *
• Change in deferred taxes*
Earnings per share from continuing operations attributable to equity
shareholders in 2014
Earnings per share from discontinued operations attributable to
equity shareholders in 2014
Earnings per share attributable to equity shareholders in 2014
Earnings Per Share
Adjusted Earnings Per Share
($0.73)
$0.62
(0.13)
0.11
(0.02)
(0.13)
0.11
(0.02)
0.10
(0.15)
(0.06)
0.04
0.22
($0.62)
$2.78
$2.16
$0.58
$0.58
* Items are excluded from definition of adjusted earnings per share. Refer to Section 14 for a reconciliation of earnings per share to adjusted
earnings per share
3. Annual Operating Results
A discussion of Torstar’s operating results for 2014 and 2013
Unless otherwise noted, the following is a discussion of Torstar’s 2014 operating results relative to the
comparable periods in 2013. Effective 2014, Torstar disaggregated the former Media Segment and has now
disclosed Metroland Media Group and Star Media Group as separate reportable operating segments for segment
reporting purposes. All comparative information has been restated to reflect this change.
Overall Performance
Torstar has two reportable operating segments to which Corporate costs have not been allocated. Management
of the segments are accountable for the revenues, adjusted EBITDA, operating earnings and operating profit of
the segments which include their proportionately consolidated share of joint venture operations.
When reported in the consolidated statement of income, joint ventures are accounted for using the equity method
and accordingly the net income of joint ventures is included in “Income (loss) from joint ventures”. The following
tables set out the segmented results which include Torstar’s proportionate share of joint venture results for the
years ended December 31, 2014 and December 31, 2013 and provide a reconciliation to the consolidated
statement of income.
TORSTAR CORPORATION 2014 ANNUAL REPORT 13
TORSTAR - Management’s Discussion and Analysis
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
MMG
$484,225
(219,340)
(196,866)
68,019
(14,644)
53,375
(6,937)
(329)
$46,109
MMG
$509,862
(229,554)
(209,435)
70,873
(15,221)
55,652
(14,034)
(12,802)
$28,816
2014
Corporate
($11,136)
(4,760)
(15,896)
(57)
(15,953)
($15,953)
2013
Corporate
($10,743)
(2,860)
(13,603)
(40)
(13,643)
($13,643)
Total
Segmented*
$904,618
(380,171)
(422,775)
101,672
(33,401)
68,271
(22,706)
(97,935)
($52,370)
Total
Segmented*
$984,047
(409,041)
(457,832)
117,174
(34,964)
82,210
(33,829)
(86,094)
($37,713)
Adjustments
&
Eliminations
for Joint
Ventures
Total Per
Consolidated
Statement of
Income
($46,484)
18,627
18,255
(9,602)
2,727
(6,875)
60
15,000
$8,185
$858,134
(361,544)
(404,520)
92,070
(30,674)
61,396
(22,646)
(82,935)
($44,185)
Adjustments
&
Eliminations
for Joint
Ventures
Total Per
Consolidated
Statement of
Income
($48,274)
20,056
18,833
(9,385)
2,736
(6,649)
659
9,000
$3,010
$935,773
(388,985)
(438,999)
107,789
(32,228)
75,561
(33,170)
(77,094)
($34,703)
SMG
$420,393
(149,695)
(221,149)
49,549
(18,700)
30,849
(15,769)
(97,606)
($82,526)
SMG
$474,185
(168,744)
(245,537)
59,904
(19,703)
40,201
(19,795)
(73,292)
($52,886)
* Includes proportionately consolidated share of joint venture operations
**These are Non-IFRS or additional IFRS measures, refer to Section 14 of this MD&A
Revenue
Segmented revenue was down $79.4 million or 8.1% inclusive of a $5.3 million decrease in product sales and
TMGTV revenue at Metroland Media Group. Segmented revenues, excluding the impact of TMGTV revenue and
product sales at Metroland Media Group, were down $74.1 million or 7.5% in 2014. This decline was primarily the
result of lower print advertising revenues which continued to be under pressure in 2014. However, multi-platform
subscriber revenues and flyer distribution revenues, were relatively stable in the year. At Metroland Media Group,
while print advertising revenues declined, the rate of decline slowed relative to 2013. In addition, in the latter part
of the year, the rate of decline slowed relative to earlier in 2014. At the Star Media Group, revenue declined as a
result of pressures on national advertising as well as the closure of print operations in three of Metro’s smaller
regions. Star Media Group revenues for 2014 were also believed by management to be negatively affected by
the transition of advertising sales for the Toronto Star to Metro which occurred in the first quarter of 2014.
2014 segmented revenues were generated as follows: $556.7 million (61.5%) from print and digital advertising,
$147.2 million (16.3%) from flyer distribution, $135.8 million (15.0%) from circulation/subscribers and $64.9 million
(7.2%) from other activities including printing. 2013 segmented revenues were generated as follows: $631.0
million (64.1%) from print and digital advertising, $149.0 million (15.2%) from flyer distribution, $136.9 million
(13.9%) from circulation/subscribers and $67.1 million (6.8%) from other activities including printing.
Digital revenue in 2014 was flat relative to 2013 as a result of revenue growth at eyeReturn Marketing, the
Metroland community websites and save.ca, partially offset by lower revenues at Olive Media, WagJag and
Workopolis. Digital revenues were 12.8% of total segment revenues in 2014 compared to 11.8% in 2013.
TORSTAR CORPORATION 2014 ANNUAL REPORT 14
TORSTAR - Management’s Discussion and Analysis
Adjusted EBITDA
Segmented adjusted EBITDA was $101.7 million in 2014, down $15.5 million or 13.2% from $117.2 million in
2013 reflecting declines in print advertising revenues which were only partially offset by cost reductions and
improved digital profitability. In 2014, Metroland Media Group and Star Media Group combined adjusted EBITDA
decreased by $13.2 million and Corporate expenses increased by $2.3 million.
Overall costs at Metroland Media Group and Star Media Group decreased by $66.2 million in 2014, resulting from
a $29.3 million or 7.3% decrease in salary and benefit costs and a $36.9 million or 8.1% decrease in other
operating costs. The decrease in salary and benefit costs included the benefit of lower pension costs and savings
of $29.1 million from restructuring initiatives which were partially offset by general wage increases. The decrease
in other operating costs reflects the impact of cost reduction initiatives as well as lower newsprint price and
consumption largely due to print advertising revenue declines. The increase in Corporate expenses in 2014 was
the result of consulting costs which are currently not expected to be recurring.
Amortization and depreciation
Total segmented amortization and depreciation decreased $1.6 million or 4.5% in 2014, reflecting lower property,
plant and equipment and intangible assets in the Metroland Media Group and Star Media Group, relative to 2013.
Operating earnings
Segmented operating earnings were $68.3 million in 2014, down $13.9 million or 17.0% from $82.2 million in
2013.
Restructuring and other charges
Total segmented restructuring and other charges were $22.7 million in 2014. The 2014 restructuring initiatives
are expected to result in annualized net labour savings of approximately $23.0 million and a reduction of
approximately 265 positions. Of the expected savings, $8.1 million was realized in 2014. Total segmented
restructuring and other charges of $33.8 million were recorded in 2013.
Torstar has undertaken several restructuring initiatives over the last few years in order to reduce ongoing
operating costs. The following chart provides a year-over-year summary of the realized and expected net savings
(including rent savings) by year:
(in $000’s)
Realized net savings in:
2012
2013
2014
Expected net savings in:
2015
2016
2017
Annualized net savings
2012
$6,000
11,500
Year of Initiative
2013
2014
$13,800
21,000
1,800
$8,100
9,800
2,600
2,500
$23,000
$17,500
$36,600
Total
$6,000
25,300
29,100
11,600
2,600
2,500
$77,100
Impairment of assets
During 2014, Torstar incurred charges related to asset impairment of property, plant and equipment, goodwill and
intangible assets and investments in joint ventures totalling $97.9 million. During 2013, Torstar incurred charges
related to asset impairment totalling $86.1 million related to certain property, plant and equipment, goodwill and
intangible assets and investments in joint ventures. These charges have no impact on cash flows.
During the third quarters of 2014 and 2013, Torstar conducted impairment tests on the carrying value of intangible
assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. In carrying out this
testing during the third quarter of 2014, it was determined that the carrying amount of goodwill in the Star Media
Group of cash generating units (“CGUs”) exceeded the value in use and Torstar recorded an impairment charge
of $82.0 million for goodwill in the Star Media Group of CGUs. This impairment was the result of lower forecasted
revenues reflecting continued shifts in spending by advertisers. Torstar also recorded a $15.0 million impairment
TORSTAR CORPORATION 2014 ANNUAL REPORT 15
TORSTAR - Management’s Discussion and Analysis
charge in respect of its joint venture investment in Workopolis during the third quarter of 2014, resulting from
lower forecasted revenues attributable to an increase in competition in the online recruitment and job search
markets and prevailing economic conditions.
In the third quarter of 2013, it was determined that the carrying amount of certain intangible assets within the
Metroland Media Group CGU and goodwill in the Star Media Group of CGUs exceeded the value in use.
Accordingly, Torstar recorded impairment of $12.5 million for intangible assets and leasehold improvements in the
Metroland Media Group CGU and $64.0 million for goodwill in the Star Media Group of CGUs. These
impairments were also the result of lower forecasted revenues reflecting shifts in spending by advertisers.
Certain of the impairment charges related to intangible assets within the Metroland Media Group CGU were also
the result of internal reorganization, realignment and integration of certain digital businesses which occurred
during the third quarter of 2013. As a result of factors noted above, Torstar also recorded a $9.0 million
impairment charge in respect of its Sing Tao Daily joint venture investment in the third quarter of 2013.
Operating profit (loss)
Segmented operating loss was $52.4 million in 2014, an increase of $14.7 million from a loss of $37.7 million in
2013 and includes non-cash impairment charges of $97.9 million and $86.1 million in 2014 and 2013 respectively.
Interest and financing costs
Interest and financing costs were $4.3 million in 2014 down $11.8 million from 2013. The lower interest and
financing costs in 2014 reflect a combination of a $7.4 million decrease in financing costs related to employee
benefit plans as well as a $2.9 million decrease in interest on debt, as all amounts outstanding under previous
debt facilities were repaid during the third quarter of 2014 using proceeds from the sale of Harlequin. In addition,
2014 includes $1.4 million of interest earned on cash and cash equivalents during the third and fourth quarters of
2014.
Foreign exchange
Non-cash foreign exchange losses were $7.7 million in 2014 compared to a loss of $1.2 million in 2013.
In order to offset the foreign exchange rate risk from Harlequin’s net U.S. dollar denominated assets, Torstar
historically maintained a certain level of U.S. dollar denominated debt and had previously designated $80.0 million
of U.S. debt as a hedge of its U.S. dollar denominated net investment in Harlequin. Upon the sale of Harlequin
and subsequent repayment of debt, Torstar realized $5.8 million of accumulated foreign exchange losses related
to extinguishing this hedge. A portion of the foreign exchange losses for 2014 also relate to the weakening of the
Canadian dollar relative to the U.S. dollar prior to the closing of the sale of Harlequin and subsequent repayment
of U.S. dollar denominated debt.
In 2013, Torstar reported a non-cash foreign exchange loss of $1.2 million 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.
Income (loss) from joint ventures
Loss from joint ventures was $9.2 million in 2014 compared to a loss of $3.7 million in 2013. Although income
from joint ventures was slightly higher in 2014 relative to 2013, there were impairment charges of $15.0 million
recorded in 2014 related to Torstar’s joint venture investment in Workopolis compared to impairment charges of
$9.0 recorded in 2013 related to Torstar’s joint venture investment in Sing Tao Daily, as discussed above.
Income (loss) of associated businesses
Income of associated businesses was $0.2 million in 2014 compared to $2.3 million in 2013. 2014 included
income of $4.0 million from Black Press and income of $0.4 million from Tuango, partially offset by a loss of $3.5
million from Shop.ca and a loss of $0.7 million from Blue Ant. Income of associated businesses in 2013 included
income of $5.5 million from Black Press and income of $0.7 million from Tuango, partially offset by a loss of $3.1
million from Shop.ca, a loss of $0.4 million related to Canadian Press, a loss of $0.2 million from Blue Ant and a
loss of $0.2 million from other investments.
TORSTAR CORPORATION 2014 ANNUAL REPORT 16
TORSTAR - Management’s Discussion and Analysis
Torstar’s share of Black Press’ net income was $4.0 million in 2014 ($5.5 million in 2013), representing Black
Press’ results through November 30, 2014. Black Press has a February fiscal year end and therefore does not
have coterminous quarter-ends with Torstar.
Torstar’s share of Tuango’s net income was $0.4 million in 2014 compared to $0.7 million in 2013. On October
16, 2014, Torstar sold its interest in Tuango for proceeds of $7.6 million and recognized a gain of $4.5 million in
other income (expense).
Torstar’s share of the Shop.ca net loss was $3.5 million in 2014 compared to $3.1 million in 2013.
Torstar did not record any income or loss during 2014 in respect of its investment in Canadian Press as the
carrying value had previously been reduced to $nil. In 2013, Torstar recorded a loss of $0.4 million in Canadian
Press in respect of its additional investment commitment. Torstar will begin to report its share of Canadian Press’
results once the unrecognized losses, including Other Comprehensive Income (“OCI”) losses ($4.0 million as of
December 31, 2014 and $nil as of December 31, 2013) have been offset by net income, OCI or as additional
investments are made. In 2014, Torstar’s share of Canadian Press’ net loss would have been $0.3 million ($0.5
million loss in 2013).
Other income (expense)
Other income was $3.8 million in 2014 compared to $0.5 million in 2013. Other income for 2014 includes the
above noted $4.5 million gain on sale of Tuango, a $1.1 million gain related to the early settlement of the existing
put and call arrangements with Metro International S.A. (“MISA”) and a $0.7 million gain on the sale of an
available-for-sale investment.
In March 2014, Torstar and MISA agreed to an early settlement of the existing put and call arrangements between
them with regards to the remaining 10% interest in Metro English Canada (previously owned by MISA). The
agreed upon price for the early settlement was $10.1 million. The existing put and call arrangements were both
exercisable at the same fixed price of $11.2 million beginning in October 2014. Accordingly, Torstar recorded a
gain of $1.1 million on the transaction.
These gains were partially offset by a $2.8 million charge related to the de-recognition of interest rate swaps
which were previously designated as cash flow hedges. These swaps were no longer designated as effective
hedges on June 30, 2014 in connection with the sale of Harlequin and the net fair value of negative $2.7 million
was reclassified into other expense in the second quarter. These swaps were extinguished in the third quarter at
an incremental cost of approximately $0.1 million.
Other income (expense) for 2013 primarily reflected reductions in contingent consideration related to acquisitions
prior to 2013 and investment write-downs.
Income and other taxes
Torstar recorded tax recoveries of $11.7 million in 2014, compared to a tax provision of $5.2 million in 2013. The
tax recoveries in 2014 are primarily attributable to a deferred tax benefit associated with the recognition of certain
previously unrecognized loss carryforwards and certain tax and accounting base differences in connection with
the sale of Harlequin and the recognition of a deferred tax benefit associated with the donation of the Toronto
Star’s photo archive to the Toronto Public Library during 2014.
Net income (loss) from continuing operations
Net loss from continuing operations was $49.6 million ($0.62 per share) in 2014, an improvement of $8.4 million
($0.11 per share) from $58.0 million ($0.73 per share) in 2013.
Gain on sale and discontinued operations
On August 1, 2014 Torstar sold all of the shares of Harlequin to a division of HarperCollins Publishers L.L.C., a
subsidiary of News Corp., for a purchase price of $455.0 million. Net accounting proceeds were approximately
$442.2 million ($22.8 million of which is being held in escrow) and reflect the purchase price plus adjustments for
working capital and other related items. The sale of Harlequin resulted in a pre-tax accounting gain of $224.6
TORSTAR CORPORATION 2014 ANNUAL REPORT 17
TORSTAR - Management’s Discussion and Analysis
million, net of transaction costs. Inclusive of the use of tax assets, cash taxes payable on the gain are currently
expected to be approximately $4.5 million.
Effective the second quarter of 2014, Harlequin was reclassified as Assets Held for Sale and Discontinued
Operations. Upon the closing of the sale in the third quarter of 2014, the net assets of Harlequin were no longer
included in Assets Held for Sale.
Discontinued operations for 2014 include Harlequin’s results through to July 31, 2014. Revenues from
discontinued operations were $213.2 million in 2014. Revenues from discontinued operations were $373.0 million
in 2013.
Net Income from discontinued operations and gain on sale was $222.7 million for 2014 and include a pre-tax gain
of $224.6 million related to the sale of Harlequin. Net income from discontinued operations was $30.6 million in
2013. Refer to Note 24 of Torstar’s 2014 Consolidated Financial Statements for further information.
Net income (loss) attributable to equity shareholders
Net income attributable to equity shareholders was $172.7 million ($2.16 per share) in 2014 up $200.7 million
($2.51 per share) from a loss of $28.0 million ($0.35 per share) in 2013.
Segment Operating Results – Metroland Media Group
Metroland Media Group revenues were down $25.6 million or 5.0% inclusive of a $5.3 million decrease in revenue
from Metroland Media Group’s TMGTV, primarily resulting from lower product sales. Excluding the decrease in
TMGTV revenue, Metroland Media Group revenues were down $20.3 million or 4.0%. The revenue decrease
primarily reflects print advertising revenue declines at the newspapers of 7.6% which represents an easing over
the rate of decline in 2013 of 10.4%. In addition, this trend generally improved in the latter part of 2014 relative to
early in the year. Flyer distribution revenues were down 1.2% in 2014.
Metroland Media Group’s digital revenue increased slightly by 0.6% in 2014 and included revenue growth in the
community websites, save.ca and other properties, partially offset by revenue declines at WagJag and at
goldbook.com. The rate at which digital revenue increased also improved in the latter part of the year, relative to
early in the year.
Metroland Media Group adjusted EBITDA was $68.0 million in 2014, down $2.9 million or 4.0% from $70.9 million
in 2013 as the negative impact of revenue declines, investments in digital initiatives and general wage increases
more than offset the positive impact of cost savings from restructuring, improved digital revenues, decreased
costs at TMGTV, lower pension costs, and lower newsprint consumption and price. Metroland Media Group’s
costs decreased by $22.8 million or 5.2% in 2014 and included $15.8 million of savings from restructuring
initiatives. Profitability in the Metroland Media Group digital properties continued to improve in 2014. Operating
earnings were $53.4 million in 2014 down $2.3 million or 4.1% from 2013.
Segment Operating Results – Star Media Group
Star Media Group revenues were down $53.8 million or 11.3% from 2013. Print advertising revenues at the
Toronto Star were down 21.9% in 2014 reflecting pressure on national advertising revenues while multi-platform
subscriber revenues decreased by 1.2% in the year. At the Metro newspapers, revenues were down relative to
the prior year reflecting lower advertising revenues, which on a geographic basis was largely concentrated in
Metro’s Ontario publications. Similar to the Toronto Star, Metro also experienced significant pressures on national
advertising revenues during 2014. Metro’s 2014 revenues were also affected by the closure of print operations in
three of Metro’s smaller regions early in the third quarter.
Star Media Group revenues for 2014 were also believed by management, to be negatively affected by the
transition of advertising sales for the Toronto Star to Metro which occurred in the first quarter of 2014.
Digital revenue from properties in the Star Media Group decreased 1.1% in 2014 reflecting lower revenues at
Olive Media and Workopolis, partially offset by revenue growth at eyeReturn Marketing.
TORSTAR CORPORATION 2014 ANNUAL REPORT 18
TORSTAR - Management’s Discussion and Analysis
Star Media Group adjusted EBITDA was $49.5 million in 2014, down $10.4 million from $59.9 million in 2013 as
revenue declines more than offset cost reductions. Star Media Group’s costs decreased by $43.4 million or
10.5% in 2014, which included $13.3 million of savings from restructuring initiatives as well as lower pension
costs, and the impact of lower newsprint price and consumption partially offset by the impact of general wage
increases. Star Media Group operating earnings were $30.8 million in 2014, down $9.4 million or 23.3% from
2013.
4. Fourth Quarter Operating Results
A discussion of Torstar’s fourth quarter operating results
Unless otherwise noted, the following is a discussion of Torstar’s fourth quarter 2014 operating results relative to
the fourth quarter of 2013. During 2014, Torstar disaggregated the former Media Segment and has now disclosed
Metroland Media Group and Star Media Group as separate reportable operating segments for segment reporting
purposes. All comparative information has been restated to reflect this change.
Overall Performance
The following table sets out the segmented results for the three months ended December 31, 2014 and 2013.
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
MMG
$130,788
(56,996)
(51,828)
21,964
(3,516)
18,448
(551)
(63)
$17,834
MMG
$134,618
(57,873)
(53,250)
23,495
(3,689)
19,806
(6,754)
$13,052
Fourth Quarter 2014
Corporate
($2,796)
(1,451)
(4,247)
(12)
(4,259)
SMG
$114,079
(36,763)
(56,398)
20,918
(4,222)
16,696
(10,327)
$6,369
($4,259)
Fourth Quarter 2013
Total
Segmented*
$244,867
(96,555)
(109,677)
38,635
(7,750)
30,885
(10,878)
(63)
$19,944
SMG
$136,831
(40,197)
(65,137)
31,497
(5,173)
26,324
(9,758)
(266)
$16,300
Corporate
($2,643)
(673)
(3,316)
(10)
(3,326)
($3,326)
Total
Segmented*
$271,449
(100,713)
(119,060)
51,676
(8,872)
42,804
(16,512)
(266)
$26,026
Adjustments
&
Eliminations
for Joint
Ventures
Total Per
Consolidated
Statement of
Income
($11,433)
4,756
4,496
(2,181)
669
(1,512)
8
($1,504)
$233,434
(91,799)
(105,181)
36,454
(7,081)
29,373
(10,870)
(63)
$18,440
Adjustments
&
Eliminations
for Joint
Ventures
Total Per
Consolidated
Statement of
Income
($12,034)
4,599
4,604
(2,831)
693
(2,138)
389
($1,749)
$259,415
(96,114)
(114,456)
48,845
(8,179)
40,666
(16,123)
(266)
$24,277
* Includes proportionately consolidated share of joint venture operations
**These are Non-IFRS or additional IFRS measures, refer to Section 14 of this MD&A
Revenue
Segmented revenue was down $26.6 million or 9.8% in the fourth quarter of 2014. As with previous quarters, the
fourth quarter declines primarily reflected lower print advertising revenues which continued to be under pressure.
At Metroland Media Group, similar to the second and third quarters of 2014, the rate of print advertising revenue
TORSTAR CORPORATION 2014 ANNUAL REPORT 19
TORSTAR - Management’s Discussion and Analysis
decline slowed relative to earlier in the year with the decline of 2.0% in the fourth quarter representing the lowest
quarterly decline in more than eight quarters. At the Star Media Group, revenue declines in the fourth quarter
reflected continued pressure on national advertising revenues and the closure of print operations in three of
Metro’s smaller regions. As compared with the fourth quarter of 2013, multi-platform subscriber revenues
decreased by 5.5% in the fourth quarter of 2014, due in part, to a one-time favourable adjustment included in
multi-platform subscriber revenues in the fourth quarter of 2013 at the Toronto Star.
Digital revenues were down by 2.9% in the fourth quarter of 2014. This decline was primarily the result of lower
revenues at Olive Media and Workopolis largely offset by growth in other digital properties including eyeReturn
Marketing, Metroland digital services and community websites, save.ca and WagJag. Digital revenues were
13.1% of total segmented revenues in the fourth quarter of 2014 up from 12.0% in the fourth quarter of 2013.
Adjusted EBITDA
Segmented adjusted EBITDA was $38.6 million in the fourth quarter of 2014, down $13.1 million from the fourth
quarter of 2013 reflecting declines in print advertising revenues which were only partially offset by cost reductions.
During the fourth quarter, Metroland Media Group and Star Media Group combined adjusted EBITDA decreased
a combined $12.1 million and Corporate expenses increased by $1.0 million. Overall costs at Metroland Media
Group and Star Media Group decreased by $14.5 million in the fourth quarter of 2014 including $5.7 million of
savings from restructuring initiatives, as well as lower pension costs and the impact of lower newsprint price and
consumption.
Profitability in the digital properties decreased in the fourth quarter of 2014 as a result of lower profitability at Olive
Media, Workopolis and thestar.com. Fourth quarter profitability for the thestar.com was negatively affected by
investment spending associated with digital initiatives. These declines were partially offset by continued improved
profitability at digital properties including Metroland Media Group’s digital services, WagJag and save.ca.
Amortization and depreciation
Segmented amortization and depreciation expense was $7.8 million in the fourth quarter of 2014, a $1.1 million
decrease from the fourth quarter of 2013.
Operating earnings
Segmented operating earnings were $30.9 million in the fourth quarter of 2014, down $11.9 million relative to the
fourth quarter of 2013.
Restructuring and other charges
Total segmented restructuring and other charges of $10.9 million and $16.5 million were recorded in the fourth
quarters of 2014 and 2013 respectively. Fourth quarter 2014 restructuring provisions are expected to result in
annualized net savings of $7.8 million and a reduction of approximately 70 positions. None of the savings
associated with these initiatives were realized in the fourth quarter of 2014.
Operating profit
Segmented operating profit was $19.9 million in the fourth quarter of 2014, down $6.1 million from $26.0 million in
the fourth quarter of 2013.
Interest and financing costs (income)
Interest and financing income was $0.7 million in the fourth quarter of 2014 compared to interest and financing
expense of $4.0 million in the fourth quarter of 2013. Interest and financing income for the fourth quarter of 2014
primarily relates to $0.9 million of interest income earned on cash and cash equivalents, partially offset by
financing costs related to employee benefit plans and other interest expense.
Interest expense for 2013 included $2.2 million of financing costs related to employee benefit plans as well as
$1.9 million of interest on debt.
All amounts outstanding under previous debt facilities were repaid during the third quarter of 2014 using proceeds
from the sale of Harlequin.
TORSTAR CORPORATION 2014 ANNUAL REPORT 20
TORSTAR - Management’s Discussion and Analysis
Foreign exchange
Non-cash foreign exchange was a gain of $0.2 million in the fourth quarter of 2014 compared to a loss of $0.6
million in the fourth quarter of 2013. The gain in the fourth quarter of 2014 was the result of the Canadian dollar
being weaker at the end of the fourth quarter relative to the beginning of the quarter with Torstar’s operations
being in a net asset position in U.S. dollars for the quarter.
The loss in the fourth quarter of 2013 was the result of the Canadian dollar being weaker at the end of the quarter
relative to the beginning of the quarter with Torstar’s operations being in a net liability position in U.S. dollars for
the quarter.
Income (loss) from joint ventures
Income from joint ventures was $1.4 million in the fourth quarter of 2014 consistent with the fourth quarter of
2013.
Income (loss) of associated businesses
Income from associated businesses was $1.1 million in the fourth quarter of 2014 compared to a loss of $0.6
million in the fourth quarter of 2013. The fourth quarter of 2014 included income of $2.1 million from Black Press
and income of $0.2 million from Blue Ant, partially offset by a loss of $1.2 million from Shop.ca.
The fourth quarter of 2013 included income of $1.3 million from Black Press and income of $0.4 million from
Tuango, offset by a loss of $1.5 million from Shop.ca, a loss of $0.4 million from Canadian Press, a loss of $0.2
million from Blue Ant and a loss of $0.2 million related to other investments.
Other income (expense)
Other income was $5.3 million in the fourth quarter of 2014 compared to $0.1 million in the fourth quarter of 2013.
Other income for 2014 included the above noted $4.5 million gain on sale of Tuango and a $0.7 million gain on
the sale of an available-for-sale investment.
Income and other taxes
Torstar’s effective tax rate was 23.2% in the fourth quarter of 2014 compared to 23.6% in the fourth quarter of
2013.
Net income (loss) from continuing operations
Net income from continuing operations of $20.9 million ($0.26 per share) in the fourth quarter of 2014 was up $5.1
million ($0.06 per share) from $15.8 million ($0.20 per share) in the fourth quarter of 2013.
The average number of Class A voting shares and Class B non-voting shares outstanding was 80.2 million in the
fourth quarter of 2014, up from 79.9 million in the fourth quarter of 2013.
The following chart provides a continuity of earnings per share from the fourth quarter of 2013 to the fourth
quarter of 2014:
Interest and financing costs
Earnings per share from continuing operations attributable to equity
shareholders in 2013
Changes
• Operations
•
• Associated businesses
• Restructuring and other charges*
•
Impairment of assets*
• Non-cash foreign exchange*
• Other income (expense) *
Earnings per share attributable to equity shareholders in 2014
Earnings Per Share
Adjusted Earnings Per Share
$0.20
$0.34
(0.10)
0.04
0.02
(0.10)
0.04
0.02
0.02
0.01
0.01
0.06
$0.26
$0.30
* Items are excluded from definition of adjusted earnings per share. Refer to Section 14 for a reconciliation of earnings per share to adjusted
earnings per share
TORSTAR CORPORATION 2014 ANNUAL REPORT 21
TORSTAR - Management’s Discussion and Analysis
Discontinued operations
Revenue and net income from discontinued operations were $nil in the fourth quarter of 2014 as discontinued
operations previously included the operations of Harlequin which was sold in the third quarter of 2014. In 2013,
fourth quarter revenue and net income from discontinued operations were $89.0 million and $5.3 million
respectively.
Net income (loss) attributable to equity shareholders
Net income attributable to equity shareholders was $20.6 million ($0.26 per share) in the fourth quarter of 2014
consistent with the fourth quarter of 2013.
Segment Results – Metroland Media Group
Metroland Media Group revenues were down $3.8 million or 2.8% in the fourth quarter of 2014 inclusive of a $0.5
million decrease in product sales. Revenues, excluding the impact of product sales at Metroland Media Group,
were down $3.3 million or 2.4% in the fourth quarter. The revenue decrease reflects print advertising revenue
declines at the newspapers of 2.0% for the fourth quarter. Similar to the second and third quarters of 2014, the
rate of decline slowed relative to earlier in the year, with the fourth quarter of 2014 representing the lowest
quarterly decline in more than eight quarters. Flyer distribution revenues were down 3.1% in the fourth quarter of
2014 largely as a result of lower spending believed to be caused by the financial challenges of certain customers.
Metroland Media Group digital revenue increased 8.9% in the fourth quarter reflecting revenue growth for the third
consecutive quarter. This increase reflects revenue growth in digital services, the community websites, save.ca,
WagJag and other properties partially offset by a decline in goldbook.ca.
Metroland Media Group adjusted EBITDA was down $1.5 million or 6.5% in the fourth quarter as the negative
impact of revenue declines, investments in digital initiatives and general wage increases more than offset the
positive impact of cost savings from restructuring, improved digital revenues, decreased costs at TMGTV, lower
pension costs, and lower newsprint consumption and price. Metroland’s costs decreased by $2.3 million in the
fourth quarter, which included $3.1 million of savings from restructuring initiatives. Operating earnings were $18.4
million in the fourth quarter of 2014, down $1.4 million from the fourth quarter of 2013.
Segment Results – Star Media Group
Star Media Group revenues were $114.1 million in the fourth quarter of 2014, and were down $22.8 million or
16.6% from the fourth quarter of 2013. Print advertising revenues were down 26.9% at the Toronto Star and
reflected continued pressure on national advertising revenues. As compared with the fourth quarter of 2013, multi-
platform subscriber revenues at the Toronto Star decreased 6.3% in the fourth quarter of 2014, due in part, to a
one-time favourable adjustment included in multi-platform subscriber revenue in the fourth quarter of 2013. At the
Metro newspapers, revenues were down relative to the prior year’s fourth quarter reflecting the closure of print
operations in three of Metro’s smaller regions earlier in the year combined with lower advertising revenues, which
on a geographic basis were largely concentrated in Metro’s Ontario publications and which also continued to
reflect pressure on national advertising.
Digital revenue from properties in the Star Media Group decreased 7.9% in the fourth quarter of 2014 as a result
of lower revenues at Olive Media and Workopolis, partially offset by revenue growth at eyeReturn Marketing.
Star Media Group adjusted EBITDA was $20.9 million in the fourth quarter of 2014, down $10.6 million from the
fourth quarter of 2013 as lower revenues were only partially offset by cost reductions of $12.2 million. These cost
reductions included $2.6 million of cost savings from restructuring initiatives, lower pension costs, and the impact
of lower newsprint price and consumption. Operating earnings were $16.7 million in the fourth quarter of 2014,
down $9.6 million from the fourth quarter of 2013.
TORSTAR CORPORATION 2014 ANNUAL REPORT 22
TORSTAR - Management’s Discussion and Analysis
5. Outlook
The outlook for Torstar’s business in 2015
Metroland Media Group and Star Media Group are expected to continue to face challenges in 2015 as a result of
continued shifts in spending by advertisers. Early indications are that the trends experienced in 2014 at the Star
Media Group have continued early into 2015. While print advertising declines were more moderate at the
Metroland newspapers in 2014, it is difficult to predict if this trend will continue in 2015 given the continued
evolution of advertising markets, volatility in the economy and early indications. Flyer distribution revenues are
expected to remain relatively stable in 2015 excluding a moderately negative impact from the loss of certain
customers due to financial challenges. Multi-platform subscriber revenues have been relatively stable in 2014 but
will likely experience some degree of decline in 2015 arising from the decision to launch the Toronto Star’s new
tablet product and the elimination of the paywall part way through the year. Digital revenue is expected to grow in
2015.
In the area of operating costs, costs associated with the Toronto Star’s planned launch of the tablet product in
2015 are currently expected to be in the range of $8 to $9 million and are expected to increase throughout the
year and peak in the fourth quarter when the tablet is currently expected to launch. In addition, pension expenses
are expected to increase by approximately $3.5 million in 2015 ($2.1 million in Metroland Media Group and $1.4
million in the Star Media Group). While cost reduction has been and is expected to remain an important area of
focus in 2015, savings related to restructuring initiatives undertaken through the end of 2014 are expected to be
$11.6 million in 2015 ($3.3 million in Metroland Media Group and $8.3 million in the Star Media Group) down from
$29.1 million in 2014. In addition, in the first quarter of 2015 the Star Media Group will include an approximate
$5.0 to $7.0 million recovery of compensation expense related to the anticipated receipt of digital media tax
credits at the Toronto Star. Excluding the impact of launching the Toronto Star’s tablet product, full year net
investment spending associated with growth initiatives in 2015 are currently expected to be somewhat lower than
2014 levels.
Capital expenditures in 2015 are currently anticipated to be in the order of $30 to 35 million and are expected to
include approximately $13 to $15 million of capital spending related to the Toronto Star’s tablet product.
Lastly, based on the most recent actuarial valuations, Torstar currently anticipates that the required annual
funding for its registered defined benefit pension plans for 2015 through 2017 will be in the range of $18 million,
down from approximately $37 million in 2014.
6. Liquidity and Capital Resources
A discussion of Torstar’s cash flow, liquidity, credit facilities and other disclosures
Torstar uses the cash generated by its operations to fund capital expenditures, distributions to shareholders,
acquisitions and debt repayment. Historically, long-term debt has been used to supplement funds from
operations as required, generally for capital expenditures or acquisitions.
In connection with the sale of Harlequin, all amounts outstanding under previous debt facilities were repaid using
proceeds from the sale. It is expected that future cash flows from operating activities, combined with existing
cash and cash equivalents, will be adequate to cover forecasted financing requirements in the foreseeable future.
In 2014, $54.7 million of cash was generated by operating activities from continuing operations, $391.8 million
was generated by investing activities for continuing operations and $220.1 million was used in financing activities
from continuing operations. Total cash and cash equivalents and restricted cash was $290.2 million at the end of
2014.
In the fourth quarter of 2014, $29.7 million of cash was provided by operating activities from continuing
operations, $0.8 million was used in investing activities for continuing operations and $10.1 million was used in
financing activities from continuing operations.
TORSTAR CORPORATION 2014 ANNUAL REPORT 23
TORSTAR - Management’s Discussion and Analysis
Operating Activities
In 2014, operating activities from continuing operations provided cash of $54.7 million after (i) funding of $40.1
million in contributions to employee future benefit plans; and (ii) the use of $16.2 million allocated as restricted
cash being held as security for outstanding letters of credit partially offset by (iii) a $22.2 million decrease in non-
cash working capital. During 2013, cash of $39.9 million was provided by operating activities from continuing
operations after funding $60.7 million of contributions to employee future benefit plans partially offset by a $6.5
million decrease in non-cash working capital.
Operating activities from continuing operations provided cash of $29.7 million in the fourth quarter of 2014 after
funding of $11.6 million of contributions to employee future benefit plans and a $2.1 million increase in non-cash
working capital, partially offset by a $5.8 million increase in cash and cash equivalents resulting from a decrease
in cash held as collateral. The increase in non-cash working capital was primarily the result of increased accounts
receivable partially offset by an increase in accounts payable resulting from seasonality in the newspaper
businesses. During the fourth quarter of 2013, cash of $36.3 million was provided by operating activities from
continuing operations after funding $16.5 million of contributions to employee future benefit plans, partially offset
by a $13.0 million decrease in non-cash working capital.
Investing Activities
During 2014, $391.8 million was provided by investing activities from continuing operations. This included $442.2
million in net proceeds received on the sale of Harlequin partially offset by $22.8 million of restricted cash
reflecting funds held in escrow and $20.9 million for additions to property, plant and equipment and intangible
assets (excluding Torstar’s proportionate share of additions of its joint ventures), $4.9 million for additional
investments in associated businesses and $10.8 million for acquisitions and investments partially offset by $8.4
million of proceeds from the sale of assets. The 2014 investments in associated businesses included $3.5 million
in Blue Ant, $1.0 million in Shop.ca and $0.4 million in Canadian Press. Of the $10.8 million of cash used for
acquisitions and investments, $10.1 million was used for the March 31, 2014 purchase of the remaining 10% of
Metro English Canada. Proceeds from the sale of assets included $7.6 million of proceeds received on the sale of
Tuango. During 2013, $23.1 million was used in investing activities from continuing operations. This included
$17.6 million for additions to property, plant and equipment and intangible assets, $3.4 million of additional
investments in associated businesses and $2.4 million for acquisitions and investments.
During the fourth quarter of 2014, $0.8 million was used in investing activities from continuing operations. This
included $5.9 million for additions to property, plant and equipment and intangible assets and $3.5 million of
additional investment in associated businesses (Blue Ant), partially offset by proceeds on sale of assets of $8.4
million, $7.6 million of which were proceeds received on the sale of Tuango. During the fourth quarter of 2013,
$5.7 million was used in investing activities from continuing operations including $5.2 million for additions to
property, plant and equipment and $0.5 million of additional investment in associated businesses.
Financing Activities
In 2014, net cash of $220.1 million was used in financing activities from continuing operations with $179.7 million
used for the net repayment of debt and $41.4 million used for the payment of dividends. In 2013, net cash of
$50.2 million was used in financing activities from continuing operations with $41.5 million used for the payment of
dividends and $9.0 million used for the net repayment of long-term debt.
Net cash of $10.1 million was used in financing activities from continuing operations in the fourth quarter of 2014
including $10.3 million for the payment of dividends. In the fourth quarter of 2013, $32.5 million of cash was used
in financing activities from continuing operations including $10.3 million for the payment of dividends and $22.4
million for the repayment of debt.
TORSTAR CORPORATION 2014 ANNUAL REPORT 24
TORSTAR - Management’s Discussion and Analysis
Contractual Obligations
Torstar has the following significant contractual obligations (in $000’s):
(in $000’s1)
Nature of the Obligation
Office leases
Services
Total
Total
$68,708
11,029
$79,737
2015
$13,474
3,146
$16,620
2016–2017
$26,740
4,263
$31,003
2018–2019
$21,431
3,020
$24,451
2020 +
$7,063
600
$7,663
Office leases include the offices at One Yonge Street in Toronto for Torstar and the Toronto Star, Metro’s offices
in Toronto and the Waterloo Region Record office in Kitchener. These leases extend until the year 2020. The
services include software licences and distribution contracts for some of the Star Media Group properties and Star
Media Group sponsorship commitments.
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 irrevocable letter of credit by the sub-lessee.
Along with the other shareholders of Kanetix Ltd., Torstar has pledged its shares in Kanetix (a portfolio
investment); in support of the Kanetix credit facility.
In March 2015, Torstar signed definitive documents with La Presse Ltee in respect of a new tablet product for the
Toronto Star. This product is currently expected to launch in the fall of 2015.
Outstanding Share and Share Option Information
As at February 28, 2015 Torstar had 9,851,964 Class A voting shares and 70,422,663 Class B non-voting shares
outstanding. More information on Torstar’s share capital is provided in Note 20 of the 2014 Consolidated
Financial Statements.
As at February 28, 2015, Torstar had 5,982,597 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 21 of
the 2014 Consolidated Financial Statements.
7. Financial Instruments
A summary of Torstar’s financial instruments
Foreign Exchange
During 2014, Torstar realized a loss of $1.0 million in discontinued operations related to forward foreign exchange
contracts to sell $20.0 million U.S. dollars at an average rate of $1.05. Historically, these forward foreign
exchange contracts were designated as revenue hedges for accounting purposes with any resulting gains or
losses being recognized in Book Publishing revenues as realized. With the anticipated closing of the sale of
Harlequin, which previously represented the Book Publishing Segment, Harlequin’s results were reclassified as
discontinued operations effective the second quarter of 2014 and in July, 2014, Torstar terminated all outstanding
forward foreign exchange contracts for a payment of $0.4 million.
During 2013, Torstar realized a loss of $0.4 million on forward foreign exchange contracts to sell $50.0 million
U.S. dollars at an average rate of $1.02.
TORSTAR CORPORATION 2014 ANNUAL REPORT 25
TORSTAR - Management’s Discussion and Analysis
8. Employee Future Benefit Obligations
A summary of Torstar’s employee future benefit obligations
Torstar has several registered defined benefit pension plans which provide pension benefits to its employees, 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.
Torstar also has a post-employment benefit plan that provides health and life insurance benefits to certain
grandfathered employees, primarily in the newspaper operations.
Prior to the sale of Harlequin in the third quarter of 2014, Torstar also had a registered defined benefit pension
plan which provided pension benefits to Harlequin’s employees primarily in Canada and the U.S. In addition,
Harlequin had capital accumulation (defined contribution) plans in Canada, the U.S. and certain of Harlequin’s
overseas operations.
Torstar had the following employee future benefit assets (obligations) as at December 31:
($000’s)
Registered pension plans
Unregistered/unfunded pension plans
Post employment benefit plan
*Includes amounts associated with Harlequin plans
2014
($11,687)
(16,783)
(47,602)
($76,072)
2013*
$30,965
(26,283)
(42,791)
($38,109)
At December 31, 2014, Torstar’s net deficit related to its defined benefit pension plans was $11.7 million, an
unfavourable movement of $13.6 million from a net surplus of $1.9 million at September 30, 2014 and an
unfavourable movement of $50.4 million from a net surplus of $38.8 million at December 31, 2013 (excluding
those plans related to Harlequin), reflecting decreased long-term interest rates partially offset by asset returns and
contributions.
Torstar recognized the following expense in operating earnings related to the defined benefit obligations:
($000’s)
Registered pension plans
Unregistered/unfunded pension plans
Post employment benefits plan
2014
$12,498
632
300
$13,430
2013
$19,269
519
359
$20,147
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 salary increases, employee turnover, retirement ages of employees, mortality rates
and expected health care costs. 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.
The significant assumptions made by Torstar’s management in 2014 and 2013 were:
To determine the net benefit obligation at the end of the year:
Discount rate
Rate of future compensation increase
To determine benefit expense:
Discount rate
Rate of future compensation increase
To determine the pension benefit expense for the following year:
Discount rate
Rate of future compensation increase
2014
2013
3.5% - 3.9%
2.25% - 2.75%
4.2% - 4.7%
2.5% - 3.0%
3.4% - 3.9%
2.5% - 3.0%
4.2% - 4.7%
2.5% - 3.0%
2015
3.5% - 3.9%
2.25% - 2.75%
TORSTAR CORPORATION 2014 ANNUAL REPORT 26
TORSTAR - Management’s Discussion and Analysis
The discount rates 3.5% - 3.9% were the yields at December 31, 2014 on high quality Canadian corporate bonds
with maturities that match the expected maturity of the pension obligations. The selection of a discount rate that
was one percent higher (holding all other assumptions constant) would have resulted in a decrease in the value of
the net pension plan obligation at December 31, 2014 of $117.6 million. A discount rate that was one percent
lower would have increased the value of the net pension plan obligation at December 31, 2014 by $134.7 million.
Management has estimated the rate of future compensation increases to be between 2.25% and 2.75%. 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 health care cost trends. The discount rate used is the
same as the prescribed rate for the defined benefit pension obligation. If the estimated discount rate were one
percent higher, the obligation at December 31, 2014 would be approximately $5.5 million higher. If the estimated
discount rate were one percent lower, the obligation at December 31, 2014 would be approximately $8.5 million
lower. For health care costs, the estimated trend was for a 4.4% increase for the 2014 expense. For 2015,
health care costs are estimated to increase by 4.6% with an incremental 0.2% increase each year until 2017. If
the estimated increase in health care costs were one percent higher, the obligation at December 31, 2014 would
be approximately $1.4 million higher. If the estimated increase in health care costs were one percent lower, the
obligation at December 31, 2014 would be approximately $1.2 million lower.
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 returns and as other
assumptions change. The most significant actuarial gains and losses arise from changes in the discount rate
used to value the pension plan obligations as well as differences in the actual and estimated returns earned on
pension plan assets. Torstar recognizes these actuarial gains and losses as realized, through OCI. Actuarial
losses from continuing operations of $83.6 million were recognized through OCI in 2014 and actuarial gains of
$166.4 million were recognized through OCI in 2013.
Ontario pension plan regulations require that the funded status of registered pension plans be determined no less
frequently than every three years through an actuarial solvency report. Any incremental solvency deficits
determined by such reports must be funded over a five-year period. As all of Torstar’s Canadian pension plans
are registered in Ontario, solvency valuations are a key determinant of ongoing defined benefit pension
contribution requirements.
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, 2013 and form the basis on which required funding is
set for 2015 through 2017. Based on these valuations, Torstar expects the required funding for its registered
defined benefit plans for the next three years to be in the range of $18 million per year including the use of
prepaid solvency contributions which at December 31, 2014 totalled approximately $34 million. Torstar’s funding
for its defined benefit pension plans was $37.4 million in 2014.
Based on these valuations, Torstar had an estimated solvency deficit of $51.7 million. Based on the December
31, 2013 solvency report, a 100 basis point change in the discount rate used to calculate solvency liabilities would
result in a change in liabilities of approximately $119 million. Given the change in the discount rate, combined
with asset returns from December 31, 2013 through to December 31, 2014, Torstar estimates that the solvency
deficit for these plans at December 31, 2014 was approximately $136.4 million.
TORSTAR CORPORATION 2014 ANNUAL REPORT 27
TORSTAR - Management’s Discussion and Analysis
9. Critical Accounting Policies and Estimates
A description of accounting estimates that are critical to determining Torstar’s financial results, and changes to
accounting policies
Accounting Policies
The accounting policies used in the preparation of the 2014 Consolidated Financial Statements are outlined in
Note 2 of the 2014 Consolidated Financial Statements for the year ended December 31, 2014. Effective January
1, 2014, Torstar applied IAS 32 Financial Instruments: Presentation, IAS 36 Impairment of Assets and IFRIC 21
Levies for the first time.
IAS 32 Financial Instruments: Presentation - In December 2011, the IASB amended IAS 32 to clarify certain
requirements for offsetting financial assets and liabilities. The amendment addresses the meaning and application
of the concepts of legally enforceable right of set-off and simultaneous realization and settlement. Application of
this amendment affected presentation and disclosures but did not have an impact on financial results.
IAS 36 Impairment of Assets - In May 2013, the IASB amended IAS 36 to reduce the circumstances in which the
recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required,
and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or
reversals) where the recoverable amount (based on fair value less costs of disposal) is determined using a
present value technique. The application of this amendment affected disclosures but did not impact the financial
results in 2014.
IFRIC 21 Levies - IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a
government, identifying the obligating event as the activity that triggers the payment of the levy in accordance with
the relevant legislation. If an obligation is triggered by reaching a minimum threshold, the liability is recognized
when the minimum threshold is reached but if the obligating event occurs over a period of time, the liability is
recognized progressively. The adoption of this guidance did not have an impact on financial results.
Accounting Estimates
The preparation of Torstar’s 2014 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 assumptions made by management are described below:
Employee Future Benefits
The accrued net 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 rate of compensation increase, employee turnover,
retirement ages, mortality rates, 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
TORSTAR CORPORATION 2014 ANNUAL REPORT 28
TORSTAR - Management’s Discussion and Analysis
salary increases, health care costs and demographic employee data. The most significant assumption is the
discount rate.
The discount rate used to determine the present value of the net defined benefit obligation 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.
Management’s current estimates, along with a sensitivity analysis are further discussed under “Employee Future
Benefit Obligations” in this MD&A and are disclosed in Note 19 of the 2014 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 estimates the recoverable amount of the asset, CGU or group of CGUs and
compares 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 CGU 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 CGU 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
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.
Taxes
Torstar is subject to income taxes in Canada and in certain foreign jurisdictions. Significant judgement is required
in determining the 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 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
TORSTAR CORPORATION 2014 ANNUAL REPORT 29
TORSTAR - Management’s Discussion and Analysis
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
Torstar’s ability to utilize tax losses carried forward is to a large extent judgement-based. If the future taxable
results of Torstar differ significantly from those expected, Torstar would be required to increase or decrease the
carrying value of the deferred tax assets with a potentially material impact in Torstar’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 14 of the 2014 Consolidated Financial
Statements.
Significant 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 and Shop.ca have been classified as associated businesses based on management’s judgement that
Torstar has, based on rights to board representation and other provisions in the respective shareholder
agreements, significant influence despite owning less than 20% of the voting rights throughout 2014 and 2013.
Classification of assets and liabilities as held for sale and discontinued operations
Classification of assets or a disposal group as held for sale and discontinued operations requires judgement on
whether the carrying amount will be recovered principally through a sale transaction, rather than through
continuing use, and if the sale is highly probable.
Torstar classified its investment in Harlequin as Assets held for sale and Discontinued operations effective April 1,
2014 based on an agreement signed on May 1, 2014 in respect of the sale of Harlequin. Upon the closing of the
sale on August 1, 2014, the net assets of Harlequin were no longer included as Assets held for sale.
Classification of cash equivalents
Classification of cash equivalents requires judgement on whether short-term investments are easily convertible
into cash. Short-term investments with maturities on acquisition of 90 days or less are presumed to be cash
equivalents due to the short holding period of the investment. Torstar has classified its short-term investments
with original maturities on acquisition of over 90 days but less than 365 days as cash equivalents based on
management’s judgement that the short-term investments are liquid as Torstar has a contractual right to convert
them into cash with 30 days’ notice.
Determination of operating segments, reportable segments and CGUs
Effective 2014, Torstar has disaggregated the former Media Segment and has now disclosed Metroland Media
Group and Star Media Group as separate reportable operating segments for segment reporting purposes.
“Corporate” is the provision of corporate services and administrative support. Each of the Star Media Group and
Metroland Media Group include CGUs which have been grouped together for purposes of reviewing performance
and impairment testing. Torstar’s chief operating decision-maker monitors the operating results of the operating
TORSTAR CORPORATION 2014 ANNUAL REPORT 30
TORSTAR - Management’s Discussion and Analysis
units separately for the purpose of assessing performance. Segment performance is evaluated based on
operating profit which corresponds to operating profit as measured in the consolidated financial statements except
that it includes the proportionately consolidated share of joint venture operations. Decisions regarding resource
allocation are made at the reportable segment level.
10. Recent Accounting Pronouncements
A discussion of recent IFRS developments that will affect Torstar
The International Accounting Standards Board (“IASB”) continues to issue new and revised IFRS. A listing of the
changes in IFRS is included in Note 2(u) in Torstar’s December 31, 2014 Consolidated Financial Statements.
Effective January 1, 2015, Torstar will adopt the changes to IAS 19 Employee Benefits. The adoption of this
amendment will not have any impact on Torstar’s financial results.
In addition, the following new standards or amendments to accounting standards will be effective for Torstar
subsequent to 2015:
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 which specifies how and when an entity will recognize revenue as well as
requiring such entities to provide users of financial statements with more informative, relevant disclosures. The
standard provides a single, principles based five-step model to be applied to all contracts with customers. Torstar
does not anticipate early adoption and plans to adopt the standard on its effective date of January 1, 2017.
Torstar is in the process of reviewing the standard to determine the impact on the consolidated financial
statements.
IFRS 9 Financial Instruments
In July 2014, the IASB issued a finalized version of IFRS 9 which contains accounting requirements for financial
instruments replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains
requirements in the following areas: Classification and Measurement; Impairment; Hedge Accounting; and
Derecognition. Torstar does not anticipate early adoption and plans to adopt the standard on its effective date of
January 1, 2018. Torstar is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.
11. Controls and Procedures
A discussion of Torstar’s disclosure controls and internal controls over financial reporting
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, 2014, 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, 2014, Torstar’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 IFRS, and that receipts and expenditures are being made only in accordance with
TORSTAR CORPORATION 2014 ANNUAL REPORT 31
TORSTAR - Management’s Discussion and Analysis
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 2013 Committee of Sponsoring Organizations
of the Treadway Commission (COSO) framework, and based on that assessment concluded that internal controls
over financial reporting were effective as at December 31, 2014.
Changes in Internal Control over Financial Reporting
There have been no changes in Torstar’s internal controls over financial reporting that occurred during the three
months ended December 31, 2014, that have materially affected, or are reasonably likely to materially affect,
Torstar’s internal controls over financial reporting.
12. Selected Annual Information
A summary of selected annual financial information for 2014, 2013 and 2012
(in $000’s – except per share amounts)
2014
2013
2012
Segmented Revenue*
Revenue*
Net income (loss) from continuing operations
Per Class A voting and Class B non-voting share -
Basic
Net income (loss)
Net income (loss) attributable to equity shareholders
Per Class A voting and Class B non-voting share
Basic
Diluted
Average number of shares outstanding during the year (in 000’s)
Basic
Diluted
Cash dividends per Class A voting and Class B non-
voting share
Total assets
Total long-term debt
$904,618
$858,134
($49,598)
($0.62)
$173,064
$172,685
$2.16
$2.15
80,078
80,254
$0.525
$1,143,521
$Nil
$984,047
$935,773
($58,046)
($0.73)
($27,413)
($27,984)
($0.35)
($0.35)
79,840
79,840
$0.525
$1,348,712
$175,898
$1,059,261
$1,005,971
$33,685
$0.42
$82,933
$82,344
$1.03
$1.03
79,671
79,946
$0.5188
$1,443,888
$178,027
*These figures have been restated for the classification of Harlequin (Book Publishing Segment) as Held for Sale/Discontinued Operations.
Refer to Note 24 of Torstar’s 2014 Consolidated Financial Statements for further information.
Revenue has declined in 2014 and 2013 reflecting a structural shift within the advertising industry from print
media to digital media. Digital revenues were flat in 2014 and down slightly in 2013 reflecting further shifts within
the digital industries in which Torstar operates.
Over the three year period, significant labour cost savings have been realized in the newspaper operations 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.
TORSTAR CORPORATION 2014 ANNUAL REPORT 32
TORSTAR - Management’s Discussion and Analysis
Total assets have declined slightly over the three year period reflecting total impairment charges of $97.9 million
and $86.1 million recorded in 2014 and 2013 respectively. All amounts outstanding under previous debt facilities
were repaid during 2014 using proceeds from the sale of Harlequin.
13. Summary of Quarterly Results
A summary view of Torstar’s quarterly financial performance
The following table presents selected financial information for each of the eight most recently completed quarters:
(in $000’s - except
per share amounts)
Revenue*
Net Income (loss) from
continuing operations
Per Class A voting
and Class B non-
voting share -
Basic and Diluted
Net Income
attributable to equity
shareholders
Per Class A voting
and Class B non-
voting share
Basic
Diluted
Dec 31,
2014
$233,434
Sept 30,
2014
$199,925
June 30,
2014
$225,591
March 31,
2014
$199,184
Dec 31,
2013
$259,415
Sept 30,
2013
$215,678
June 30,
2013
$243,558
March 31,
2013
$217,122
Quarter Ended
$20,887
($86,998)
$18,104
($1,591)
$15,841
($80,220)
$12,552
($6,219)
$0.26
($1.08)
$0.23
($0.02)
$0.20
($1.01)
$0.16
($0.08)
$20,556
$125,343
$19,682
$7,104
$20,637
($70,800)
$18,006
$4,173
$0.26
$0.26
$1.57
$1.56
$0.25
$0.25
$0.09
$0.09
$0.26
$0.26
($0.89)
($0.89)
$0.23
$0.23
$0.05
$0.05
*These figures have been restated for the classification of Harlequin (Book Publishing Segment) as Held for Sale/Discontinued Operations.
Refer to Note 24 of Torstar’s 2014 Consolidated Financial Statements for further information.
The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in Star Media
Group and Metroland Media Group. The second and fourth quarters are generally the strongest with the first and
third quarter being the softest.
Restructuring and other charges have also affected the level of net income for several quarters. Reported on a
segmented basis, restructuring and other charges were $3.6 million, $4.4 million, $3.9 million and $10.9 million in
the first, second, third and fourth quarters of 2014, respectively and $5.7 million, $6.1 million, $5.3 million and
$16.1 million in the first, second, third and fourth quarters of 2013, respectively. Additionally, losses on
impairment of assets (reported on a segmented basis) of $0.3 million, $0.3 million, $97.3 million and $0.1 million
were recorded in the first, second, third and fourth quarters of 2014 and $0.4 million, $85.5 million and $0.3 million
were recorded in the second, third and fourth quarters of 2013, respectively.
In addition, the third quarter of 2014 included a $224.6 million pre-tax gain on the sale of Harlequin.
14. Reconciliation and Definition of Non-IFRS Measures
A description and reconciliation of certain non-IFRS and additional IFRS measures used by management
In addition to operating profit, an additional IFRS measure, as presented in the consolidated statement of income,
management uses the following non-IFRS measures: segmented revenue, adjusted EBITDA (and where
applicable segmented adjusted EBITDA), operating earnings (and where applicable segmented operating
earnings), adjusted earnings per share and free cash flow, as measures to assess the consolidated performance
and the performance of the reporting units and business segments.
TORSTAR CORPORATION 2014 ANNUAL REPORT 33
TORSTAR - Management’s Discussion and Analysis
Segmented revenue
Segmented revenue is calculated in the same manner as Operating revenue in the Consolidated Financial
Statements, except that it is calculated using total segment results prior to the elimination of proportionately
consolidated results for joint ventures.
Adjusted EBITDA/Segmented Adjusted EBITDA
Management believes that adjusted EBITDA is an important proxy for the amount of cash generated by Torstar’s
ongoing operations (or by a reporting unit or business segment) to generate liquidity to fund future capital needs
and management uses this metric for this purpose. Adjusted EBITDA is not the actual cash provided by operating
activities and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted
EBITDA as operating revenue, less salaries and benefits and other operating costs, as presented on the
consolidated statement of income, and excludes restructuring and other charges and impairment of assets.
Restructuring and other charges and impairment of assets are eliminated as these activities are not related to
ongoing operations as of the end of the period. The exclusion of impairment of assets also eliminates the non-
cash impact. Adjusted EBITDA is also used by investors and analysts for valuation purposes. The intent of
adjusted EBITDA is to provide additional useful information to investors and analysts and financial statement
readers and the measure does not have any standardized meaning under IFRS and accordingly may not be
comparable to measures used by other companies (including calculating EBITDA on an adjusted basis to exclude
restructuring and other charges and impairment of assets). Segmented adjusted EBITDA is calculated in the
same manner described above, except that it is calculated using total segment results prior to the elimination of
proportionately consolidated results for joint ventures.
Operating earnings/Segmented operating earnings
Operating earnings is used by management to represent the results of ongoing operations inclusive of
amortization and depreciation. It is not a recognized measure of financial performance under IFRS. Torstar
calculates operating earnings as operating revenue less salaries and benefits and other operating costs and
amortization and depreciation. Operating earnings excludes restructuring and other charges and impairment of
assets. Restructuring and other charges and impairment of assets are eliminated as these activities are not
related to ongoing operations as of the end of the period. Torstar’s method of calculating operating earnings
(including calculating operating earnings on an adjusted basis to exclude restructuring and other charges and
impairment of assets) may differ from other companies and accordingly may not be comparable to measures
used by other companies. Segmented operating earnings is calculated in the same manner described above,
except that it is calculated using total segment results prior to the elimination of proportionately consolidated
results for joint ventures.
The following is a reconciliation of adjusted EBITDA and operating earnings (and segmented adjusted
EBITDA/segmented operating earnings – as applicable) with operating profit (segmented operating profit – as
applicable). Adjusted EBITDA, segmented adjusted EBITDA, operating earnings and segmented operating
earnings are regularly reported to the chief operating decision maker and corresponds to the definition used in
Torstar’s historical discussions.
Operating profit (loss)
Add: Restructuring and other charges
Add: Impairment of assets
Operating earnings
Add: Amortization and depreciation
Adjusted EBITDA
Segmented
Per Consolidated Statement of
Income
Fourth Quarter
2014
Year Ended
Dec. 31 2014
Fourth Quarter
2014
$19,944
10,878
63
$30,885
7,750
$38,635
($52,370)
22,706
97,935
$68,271
33,401
$101,672
$18,440
10,870
63
$29,373
7,081
$36,454
Year Ended
Dec. 31 2014
($44,185)
22,646
82,935
$61,396
30,674
$92,070
TORSTAR CORPORATION 2014 ANNUAL REPORT 34
TORSTAR - Management’s Discussion and Analysis
Operating profit (loss)
Add: Restructuring and other charges
Add: Impairment of assets
Operating earnings
Add: Amortization and depreciation
Adjusted EBITDA
Segmented
Per Consolidated Statement of
Income
Fourth Quarter
2013
Year Ended
Dec. 31 2013
Fourth Quarter
2013
$26,026
16,512
266
$42,804
8,872
$51,676
($37,713)
33,829
86,094
$82,210
34,964
$117,174
$24,277
16,123
266
$40,666
8,179
$48,845
Year Ended
Dec. 31 2013
($34,703)
33,170
77,094
$75,561
32,228
$107,789
Adjusted earnings per share
Adjusted earnings per share is used by management to represent the per share earnings of results of ongoing
operations and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted
earnings per share as earnings per share from continuing operations less the per share effect of restructuring and
other charges, impairment of assets, non-cash foreign exchange, other income (expense) and change in deferred
taxes. Torstar’s method of calculating adjusted earnings per share may differ from other companies and
accordingly may not be comparable to measures used by other companies. The following is a reconciliation of
adjusted earnings per share to earnings per share.
Restructuring and other charges
Impairment of assets
Non-cash foreign exchange
Adjusted earnings per share
•
•
•
• Other income (expense)
•
Change in deferred taxes
Earnings per share from continuing operations
Fourth Quarter
2014
2013
Year Ended December 31
2013
2014
$0.30
(0.10)
0.06
$0.26
$0.34
(0.14)
$0.20
$0.58
(0.20)
(1.21)
(0.07)
0.04
0.24
($0.62)
$0.62
(0.30)
(1.04)
(0.01)
($0.73)
Operating profit/Segmented operating profit
Operating profit is an additional IFRS measure used by management to represent the results of operations
inclusive of impairments and restructuring and other charges and appears in Torstar’s consolidated statement of
income. Segmented operating profit is calculated in the same manner described above, except that it is calculated
using total segment results prior to the elimination of proportionately consolidated results for joint ventures.
Free cash flow
Free cash flow is used by management to represent cash flow generated by the ongoing operations of the
business including investing activities. It is not a recognized measure of financial performance under IFRS.
Torstar calculates free cash flow as the sum of cash flow from operating activities from continuing operations and
cash flow from investing activities from continuing operations excluding movements in current and non-current
restricted cash and the net proceeds from the sale of Harlequin. Torstar’s method of calculating free cash flow
may differ from other companies and accordingly may not be comparable to measures used by other companies.
The following is a reconciliation of free cash flow to the increase in cash.
Free cash flow
Add: Proceeds on sale of Harlequin
Add: Cash provided by operating activities of discontinued operations
Less: Increase in restricted cash (current)
Less: Increase in restricted cash (non-current)
Less: Cash used in investing activities of discontinued operations
Less: Cash used in financing activities
Increase in cash
2014
$43,258
442,207
8,635
(16,150)
(22,750)
(1,609)
(220,065)
$233,526
2013
$16,745
-
40,863
-
-
(5,596)
(50,230)
$1,782
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15. Enterprise Risk Management
Enterprise risks and uncertainties facing Torstar and how Torstar manages these risks
Definition of Business Risk
Torstar defines business risk as the degree of exposure associated with the achievement of key strategic,
financial, organizational and process objectives in relation to the effectiveness and efficiency of operations, the
reliability and integrity of financial reporting, compliance with laws, regulations, policies, procedures and contracts
and safeguarding of assets within an ethical organizational culture.
Torstar’s enterprise risks are largely derived from its business environment and are fundamentally linked to
Torstar’s strategies and business objectives. Torstar strives to proactively mitigate its risk exposures through
performance planning, effective business operational management and risk response strategies which can
include mitigating, transferring, retaining and/or avoiding risks. Torstar strives to avoid taking on undue risk
exposures whenever possible and ensure alignment of exposures with business strategies, objectives, values and
risk tolerances.
Section 16 summarizes the principal risks and uncertainties that could affect Torstar’s future business results.
Torstar’s Risk and Control Assessment Process
In 2014, Torstar used a multi-level enterprise risk and control assessment process that incorporated the insight of
employees throughout the Corporation.
At a high level, Torstar performed an assessment of key business and strategic risks in order to capture changing
business risks, monitor key risk mitigation activities and provide ongoing updates and assurance to the Audit
Committee. This assessment consisted of interviews with senior managers. Additionally, Torstar’s assessment
process incorporated input from internal and external audit and from management’s internal control over financial
reporting compliance activities and its respective risk assessments, as well as input and from other relevant
internal and external compliance and audit processes. Key enterprise risks were identified, defined and prioritized,
and risks were classified into discrete risk categories.
Lastly, Torstar conducted detailed risk assessments through various compliance activities and risk management
initiatives (e.g. health and safety, network and IT vulnerability, fraud and ethics assessments and environmental
assessments). The results of these multiple risk assessments were evaluated, prioritized, updated and integrated
into the key risk profile during the year.
Board risk governance and oversight
In carrying out the above noted process, Torstar also ensured that the key risks identified in the key risk matrix
were assigned for oversight by the Board, or one or more Board committees, as outlined in the Board’s terms of
reference and Board Committee mandates.
16. Risks and Uncertainties
Risks and uncertainties facing Torstar
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.
Revenue Risks
Revenue is primarily dependent upon the sale of advertising and to a lesser extent, the distribution of inserts and
flyers and the generation of circulation/subscription revenue. Advertising revenue includes in-paper advertising,
digital advertising and specialty publications.
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Competition and Digital Shift
There has been a continuing structural shift within the advertising industry from print to digital advertising and as a
result, digital media generates significant competition for advertising. This shift has and will continue to negatively
impact print advertising revenue and appears to be permanent. Competition also comes from a variety of other
sources such as free and paid local, regional and national newspapers, radio, broadcast and cable television,
magazines, outdoor, direct marketing, flyers, directories, and other communications and advertising media.
Digital competition is not limited to platforms that provide news and news aggregation. Competitors include
providers of search engine marketing, display advertising, digital classifieds, digital directories, social media, mobile
advertising and video advertising. In addition, online advertising networks, exchanges, real-time bidding and
programmatic buying channels that allow advertisers to target audiences are also playing a more significant role in
the advertising industry. Torstar’s existing and potential future digital competitors 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. The extent and nature of competition has intensified over the past few years as a result
of the rapid and continued development of digital media alternatives which has resulted in the fragmentation of
audiences, shifting audience preferences and consumer demand moving in unanticipated directions. In addition,
advertisers have increased access to data and greater ability to reach customers directly with new digital
technologies, which may contribute to reduced spending on external advertising. Torstar may not be able to
successfully adapt to these rapid changes and increasing number of digital media options or to distinguish its
products and services from those of its competitors.
In response to this shift to digital media, Torstar has been investing significant time and resources in its digital
platforms to evolve its existing products and develop new products, including mobile platforms, video and the
development of a new tablet product for the Toronto Star which is expected to launch in the fall of 2015. The new
tablet product will be based on technology and services provided by third parties and there is a risk that the
Toronto Star and the third parties will be unable to successfully integrate the technology and services into its
platform. There is also a risk that Torstar will be unable to successfully attract or retain users and advertisers with
its existing or new digital platforms, including the new tablet product. Thus far, digital advertising revenues have
not offset a significant portion of lost print advertising revenue and Torstar may not be successful in replacing these
revenues in the future. In addition, some of Torstar’s digital platforms are in an early stage of development and
may not achieve profitability.
There has been and continues to be consolidation in Canadian media, and competitors are increasingly larger and
have interests in multiple forms of media and may be more successful in attracting advertising revenue.
Content and Readership
Advertisers often base their decisions about where to advertise on readership and circulation data. Print
readership levels, in addition to generating circulation/subscription revenues, have traditionally been an important
factor in the ability of a newspaper to generate advertising revenues. General trends affecting the newspaper
industry, including changes in everyday lifestyle and technology have meant that people, and particularly younger
audiences are devoting less time to reading print newspapers than they once did. If these or other trends
continue to result in declining print circulation, circulation revenues and the ability to increase or maintain
advertising rates may be adversely affected. While digital readership appears to be an important factor in the
ability of a newspaper
impact on print
circulation/subscription volumes and revenues and also on readership. The Toronto Star currently has a pay
model for digital readership, however it has recently announced that it intends to remove the paywall in 2015 and
Torstar does not anticipate generating significant revenues from paid digital subscriptions.
to generate advertising revenue,
it may have a negative
Torstar’s reputation for quality journalism and content is an important factor in maintaining readership levels. Torstar
strives to provide content across numerous platforms that is perceived as reliable, relevant and entertaining by
readers and advertisers. Public preferences and tastes, general economic conditions, the availability of alternative
sources of content and the newsworthiness of current events, 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/subscription revenue.
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With the increase in alternative digital content providers and digital platforms, Torstar faces the risk that it may not
be able to sufficiently attract and retain a base of frequent and engaged visitors to its digital platforms. If usage is
insufficient, Torstar may not be able to create enough advertiser interest in its digital platforms. Torstar may incur
additional costs to attract readers and increase its platform usage and may not be able to recover these costs
through advertising revenues. In addition, certain new and evolving content delivery platforms may present more
limited opportunities for advertising.
Economic Conditions and Customer Prospects
Advertising revenue in Torstar’s newspapers and digital platforms is dependent on the prospects of its advertising
customers, which can be affected by a variety of factors, including prevailing economic conditions and the level of
consumer confidence. Adverse economic conditions generally, and economic weakness and uncertainty in the
regions in which Torstar operates specifically, have had and may continue to have a negative impact on the
advertising industry and on Torstar’s operations. Certain of Torstar’s local and national advertisers operate in
industries that are sensitive to adverse economic conditions, including car manufacturers and dealers, home
builders, financial services, telecommunications, travel, department and grocery stores and other retailers and a
downturn that impacts any of these industries could also have an adverse impact on Torstar’s revenue. In
addition, a change in an advertiser’s individual business, prospects or competitive position could alter their spending
priorities and impact their advertising budgets, which could have an adverse effect on Torstar’s revenue.
Cost Structure
Torstar’s businesses are characterized by a relatively high fixed cost structure and accordingly, a change in revenue
could have a disproportionate effect on Torstar’s financial performance. Over the last several years, Torstar has
reduced costs in a number of ways including by reducing staff and outsourcing certain services. It will be
increasingly difficult to continue to reduce costs from current levels. Torstar’s ability to achieve cost savings may be
impacted by the level of unionization at its newspaper operations, existing third-party suppliers and service
providers and Torstar’s ability to outsource additional components of its business operations in the future (see
“Dependence on Third-Party Suppliers and Service Providers” below). In addition, reductions in staff and cost
control measures may impact Torstar’s ability to attract and retain key employees (see “Dependence on Key
Personnel” below).
Loss of Reputation
Torstar, its customers, shareholders and employees place considerable reliance on the good reputation of Torstar,
including its significant businesses and brands and Torstar’s ability to maintain its existing customer relationships
and generate new customers depends greatly on this reputation. The Toronto Star’s reputation for high-quality
journalism and content makes this brand a key asset and its continued success depends in part on Torstar’s
ongoing ability to preserve and leverage the value of this brand, Metroland Media Group’s brands and other brands.
In addition, as Torstar outsources services and develops brand extensions, it may work with third party service
providers or vendors whose actions could impact its reputation and the value of Torstar’s brands. The loss or
tarnishing of the reputation of Torstar through negative publicity or otherwise, whether true or not, could have an
adverse impact on its business, operations or financial condition.
Dependence on Third-Party Suppliers and Service Providers
Torstar relies on third-party suppliers and service providers for certain key services including product distribution,
call center services, certain information technology functions and certain page production, printing, advertising
production and sales, and content supply requirements. Torstar may outsource additional components of its
business operations in the future. Torstar’s business or operations could be interrupted or otherwise adversely
impacted by its third-party suppliers and service providers experiencing business difficulties or interruptions, the
suppliers or service providers being unable to provide services as anticipated or by Torstar being unable to
integrate or effectively utilize the services of the third-party suppliers and service providers.
Reliance on Technology and Information Systems
Torstar places considerable reliance upon technology and information systems, including those of third party service
providers, throughout its operations, including for digital platforms, content delivery, payment processing, email,
back-office support and other functions. Torstar’s businesses also collect, use and store sensitive data, including
intellectual property, employee information and business information (including internal information and information
from customers, suppliers and business partners). Despite Torstar’s security measures and those of its third-party
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service providers, Torstar’s systems and those of its service providers may be vulnerable to interruption, damage
or failure from loss of power, hacking or other unauthorized access, viruses, worms or other destructive or
disruptive software, process breakdowns, human error, denial of service attacks, advanced persistent threats,
malicious social engineering or other similar events. Businesses in general have recently seen a rise in
cyberattacks (including by state-sponsored and criminal organizations and other individuals and groups) and as a
result risks associated with these kinds of attacks continue to increase. While Torstar has implemented controls
and taken other preventative actions to protect Torstar’s systems against attacks, Torstar can give no assurance
that these controls and preventative actions will be effective or that the systems of its service providers will be
adequately protected. The occurrence of any of these events could have an adverse effect on Torstar’s operations
and revenues, including through a disruption of Torstar’s services or disclosure of personal or confidential
information, which could harm Torstar’s reputation, require Torstar to expend resources to remedy such a breach
or defend against further attacks or subject Torstar to liability under privacy or other applicable laws. In addition,
protecting against these events is costly and requires ongoing monitoring and updating as technologies change.
Strategic Growth Initiatives, Acquisitions and Dispositions
Strategic Growth
Torstar’s growth, and its ability to successfully deploy capital is dependent on its ability to identify, develop and
execute appropriate strategic growth initiatives, which may involve organic growth and growth through acquisition
or investment. There is no guarantee that any such opportunities will be available for Torstar or that they will be
available at an appropriate price. The implementation of Torstar’s strategic initiatives is subject to the risks
affecting its business generally, the risks associated with identifying and implementing new strategies and the
risks associated with acquisitions or investments. Strategic initiatives may not successfully generate revenues or
improve operating profit and, if they do, it may take longer or cost more than anticipated. In addition, there is no
assurance that the implementation or integration of any strategic initiative will be successful.
Unexpected Costs or Liabilities Related to Acquisitions and Dispositions
From time to time, Torstar may make acquisitions or sell certain investments or subsidiaries and these
transactions may affect Torstar’s costs, revenues, profitability and financial position. Transaction agreements may
provide for certain post-closing adjustments and indemnities or the assumption of certain liabilities and Torstar
may be subject to unexpected costs or liabilities in connection with such transactions. For example, Torstar may
have, or may be required to provide representations, warranties and/or indemnities to third party purchasers
which may expose Torstar to costs or liabilities for breaches of representations and warranties or indemnity
claims as a result of unexpected or unknown matters.
Employee Future Benefits
Relative to its size, and when compared to other companies, Torstar has large pension liabilities, funding
requirements and costs. The funded status of Torstar’s defined benefit pension plans and its contribution
obligations may be impacted by many factors, including changes to pension laws and regulation, changes to
benefits provided to plan participants, changes to actuarial assumptions and methods, changes in participant
demographics, mortality and plan experience and changes to the discount rate used to measure Torstar’s
contribution obligations and the rate of return on plan assets. Changes to any of the foregoing factors could
produce further underfunding in Torstar’s defined benefit pension plans as well as increases to the net pension
cost in subsequent financial years that could require increased funding contributions to those plans, which could
have an adverse effect on Torstar’s cash flows, liquidity and financial condition.
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, 2013. While the required funding
resulting from these reports should not change until 2018 there is no guarantee that the funding requirements
beyond 2017 will not increase.
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 and a
post-employment benefits plan that provides health and life insurance benefits to certain grandfathered
employees, primarily in the newspaper operations. These plans are being funded as payments are made. The
liabilities associated with these plans may be affected by several factors, including changes to benefits provided
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to plan participants, changes to actuarial assumptions and methods, changes in participant demographics and
plan experience, and the discount rate used to assess plan obligations.
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 Toronto Star has approximately 700 staff covered by four collective agreements. The largest agreement
covers approximately 425 employees at One Yonge Street, Toronto. This collective agreement will expire at the
end of December 2016. There are three agreements covering approximately 275 employees at the Toronto
Star’s Vaughan Press Centre. One agreement covering approximately 15 employees will expire in December
2016 and another agreement covering approximately 235 employees will expire in December 2019. One other
agreement, covering approximately 25 employees expired in December 2014 and contract negotiations are
ongoing.
Sing Tao has two collective agreements covering approximately 125 employees that will expire in December
2015. Metro’s Toronto operations have a collective agreement covering approximately 65 employees that will
expire in early March of 2016.
Metroland Media Group has a total of 20 collective agreements covering approximately 695 employees. There
are ten collective agreements covering approximately 260 employees within the community newspapers. Two
agreements covering approximately 25 employees will expire in August 2015. Three agreements covering
approximately 45 employees will expire in November 2016 and two agreements covering approximately 140
employees will expire in December 2016. Three agreements covering approximately 50 employees expired in
December 2014 and negotiations are expected to commence shortly.
At the Metroland Media Group daily newspapers, there are ten agreements covering approximately 435
employees. Two agreements covering approximately 150 employees at the Hamilton Spectator will expire at the
end of December 2015. Two agreements covering approximately 80 employees at the Hamilton Spectator will
expire in May 2016 and one agreement covering approximately 10 employees at the Guelph Mercury will expire in
May 2017. One agreement covering approximately 85 employees at the Hamilton Spectator and four agreements
covering approximately 110 employees at the Waterloo Region Record expired in December 2014 and
negotiations are expected to commence shortly.
Newsprint Costs
Newsprint is the single largest raw material expense for Torstar’s newspaper operations and represents
approximately 5% of total operating costs for 2014. Newsprint is priced as a commodity with the price varying
widely from time to time.
Torstar could face a risk in supply of newsprint and/or increased prices as a result of a reduction in the number of
suppliers (due to financial instability, restructuring or consolidation) or as a result of mill closures and/or changes
in grades and types of newsprint supplied. Volatility in the price of newsprint may also be caused by other factors
influencing supplier profitability including increased raw material and energy costs. Torstar primarily sources
newsprint from three main suppliers. Pursuant to arrangements with its suppliers, Torstar has negotiated a
pricing band for the majority of its newsprint requirements for 2015 and 2016 at prices similar to those realized in
2014. 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
an adverse effect on Torstar’s financial performance.
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
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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.
Litigation
Torstar is involved in various legal actions, 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 which
are related to the publication of its editorial and other 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 negative 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.
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.
E-Commerce, Privacy and Confidential Information
Laws relating to privacy, anti-spam, communications, data protection, e-commerce, direct marketing and digital
advertising and use of public records have become more prevalent in recent years. Legislation and regulations,
including changes to the manner in which such legislation and regulations are interpreted by courts in Canada and
other jurisdictions, may impose limits on the collection and use of certain kinds of information and the distribution of
certain communications. 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 communications and computer programs, cyber-crime and access could adversely impact Torstar’s
businesses.
In connection with many of its businesses, Torstar routinely obtains personal and confidential information from its
customers. The potential misuse or dissemination of such information could violate applicable laws, cause damage
to Torstar’s relationships with its customers and could result in legal actions. See also the risks and uncertainties
described above related to “Reliance on Technology and Information Systems”.
Environmental and Health and Safety
Torstar is subject to a variety of environmental, health and safety 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 and employee health and safety. Environmental, health and
safety laws and regulations have become increasingly stringent, and such laws and regulations are expected to
continue to change. While Torstar has an environmental policy, an environmental committee and health and safety
policies and committees in place to assist in monitoring compliance with applicable legislation, there can be no
assurance that all applicable liabilities have been identified or that expenditures will not be required to meet future
legislation. Compliance with existing and new environmental, health and safety laws and regulations may subject
Torstar to unexpected costs and a failure to comply with present or future laws or regulations could result in fines,
civil or criminal sanctions, third-party claims or other costs, including costs or expenses required to modify existing
business processes.
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Availability of Insurance
Torstar has insurance, including media liability, property and casualty and directors’ and officers’ liability insurance,
in place to address certain material insurable risks. Such insurance is subject to certain coverage limits, exclusions
and deductibles that Torstar believes are reasonable given the cost of procuring insurance. 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, that amounts owing from insurers will be collected or that the insurance
coverage will be sufficient to cover each and every material loss or claim that may occur involving Torstar’s
operations or assets.
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, digital, sales and technical 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.
Intellectual Property Rights
Torstar places considerable importance on the protection of its intellectual property rights. Torstar’s businesses
generate a significant volume of content every day, including text, photographs, images, graphics and interactive
content such as third-party posts and links. On occasion, third parties may infringe upon Torstar’s rights and
changes and advancements in technology and the wide dissemination of content have made the enforcement of
intellectual property rights more challenging. In addition, third parties may contest Torstar’s intellectual property
rights and while Torstar has taken steps to ensure that procedures are in place to clear rights and vet content, there
remains a risk that some of the content generated may be defamatory or infringing. 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 by third parties. If third parties were to contest the validity or scope of Torstar’s intellectual
property rights or to allege violation of their rights, such challenges could result in the limitation or loss of intellectual
property rights and other damages and regardless of their validity, such claims could cause Torstar to incur
significant costs in investigating and defending such claims and have a negative impact on Torstar’s results. See
also the risks and uncertainties described above related to “Litigation”.
Credit Risk
Credit risk is the risk of financial loss to Torstar if a customer or counterparty to a financial asset fails to meet its
contractual obligations. In the normal course of business, Torstar is exposed to credit risk for accounts receivable
from its customers and counterparties holding cash and cash equivalents and restricted cash.
While Torstar applies a prudent approach to the granting of credit to customers, the collectability of accounts
receivable could deteriorate to a greater extent than provided for in Torstar’s 2014 Consolidated Financial
Statements. Accounts receivable are carried at net realizable value and the allowance for doubtful accounts has
been determined based on several factors, including the aging of accounts receivable, evaluation of significant
individual credit risk accounts and historical experience. If such collectability estimates prove inaccurate, adverse
adjustments to future operating results could occur and could be material.
In addition, a large portion of Torstar’s cash and cash equivalents and restricted cash are held with one major
Canadian bank. While Torstar regularly reviews the financial condition of this counterparty, a failure of this
counterparty could materially adversely affect Torstar’s business and consolidated financial condition.
Product Revenue and Product Liability
Metroland Media Group’s product business has been diminishing over the past few years and this trend may
continue in the future. 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 or sufficient 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 negative impact on Torstar’s results. In addition, Torstar could
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incur significant costs in investigating and defending such claims, even if ultimately found not to be liable. See
also the risks and uncertainties described above related to “Litigation”.
Deposit Interest Rates
Some of Torstar’s cash and cash equivalents and restricted cash are invested in interest bearing instruments in
which Torstar is exposed to fluctuations in market interest rates. A decline in prevailing market interest rates
could result in a decrease in the amount of interest Torstar earns on these instruments.
Foreign Exchange Fluctuations and Foreign Operations
Torstar’s revenues, expenses and monetary assets and liabilities denominated in currencies other than the
Canadian dollar will give rise to a foreign currency gain or loss reflected in earnings. Over the past year, the
Canadian currency has become increasingly volatile and may retain the same or higher levels of volatility in the
coming years, to the extent that this continues, such volatility may be reflected in Torstar’s operating results in the
form of additional costs and reduced revenues.
Income Tax and Other Taxes
Torstar collects, pays and accrues income and other taxes. Torstar has also recorded significant amounts of
deferred income tax liabilities and current income tax expense, and calculated these amounts based on
substantively enacted income tax rates in effect at the relevant time. A legislative change in these rates could
have a material impact on the amounts recorded and payable in the future.
Torstar has also recorded the benefit of income and other tax positions based on estimates, using accounting
principles that recognize the benefit of income tax positions when it is more likely than not that the ultimate
determination of the tax treatment of a position will result in the related benefit being realized. The assessment of
the likelihood and amount of income tax benefits, as well as the timing of realization of such amounts, can
materially affect the determination of net income or cash flows.
While Torstar believes that it has paid and provided for adequate amounts of tax, significant judgement is required
in interpreting tax legislation and regulations in relation to Torstar. Torstar’s tax filings are subject to audit by the
relevant government revenue authorities and the results of the government audit could materially change the
amount of Torstar’s actual income tax expense, income taxes payable or receivable, other taxes payable or
receivable and deferred income tax assets or liabilities and could, in certain circumstances, result in an
assessment of interest and penalties.
Impairment
Economic, market, legal, regulatory, competitive, customer, contractual and other factors may affect the value of
Torstar’s long-lived assets, intangible assets and goodwill. If any of these factors impair the value of these assets,
IFRS requires Torstar to reduce their carrying value and recognize an impairment charge. This would reduce
Torstar’s reported assets and earnings in the year the impairment charge is recognized.
In addition, Torstar holds investments in businesses that it does not hold a controlling interest in and Torstar does
not exercise control over the management, strategic direction or daily operations of these businesses. A change
in the outlook of these businesses could require Torstar to record its share of any asset or goodwill impairment
recorded by these businesses and could require Torstar to take a charge to earnings in order to reduce its
carrying value.
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.
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Consolidated Financial Statements – Contents
Management’s Report on Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Statement of Financial Position
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
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71
72
74
75
76
76
77
78
81
85
86
87
87
94
95
98
98
99
101
102
102
103
103
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
March 3, 2015
Lorenzo DeMarchi
Executive Vice-President and Chief Financial Officer
TORSTAR CORPORATION 2014 ANNUAL REPORT 46
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 statement of financial position as at December 31, 2014 and 2013, and the consolidated statements
of income, comprehensive income, changes in equity and cash flows for the years then ended, 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, 2014 and 2013 and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada
March 3, 2015
TORSTAR CORPORATION 2014 ANNUAL REPORT 47
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Financial Position
(Thousands of Canadian Dollars)
As at
December 31 2014
As at
December 31 2013
Assets
Current:
Cash and cash equivalents
Restricted cash (note 5)
Receivables (note 15)
Inventories (note 6)
Prepaid expenses and other current assets
Prepaid and recoverable income taxes
Total current assets
Restricted cash (note 5)
Investments in joint ventures (note 7)
Investments in associated businesses (note 8)
Property, plant and equipment (note 9)
Intangible assets (note 10)
Goodwill (note 11)
Other assets (note 13)
Employee benefits (note 19)
Deferred income tax assets (note 14)
Total assets
Liabilities and Equity
Current:
Bank overdraft
Accounts payable and accrued liabilities
Derivative financial instruments (note 15)
Provisions (note 17)
Income tax payable
Total current liabilities
Long-term debt (note 15)
Derivative financial instruments (note 15)
Provisions (note 17)
Other liabilities (note 18)
Employee benefits (note 19)
Deferred income tax liabilities (note 14)
Equity:
Share capital (note 20)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (note 22)
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
Paul Weiss
Director
$251,339
16,150
162,843
9,309
6,645
2,044
448,330
22,750
54,531
39,960
125,057
61,610
344,417
9,497
9,243
28,126
$1,143,521
$115,717
22,583
11,708
150,008
16,774
9,996
85,315
11,708
400,577
18,708
447,725
21
867,031
2,689
869,720
$1,143,521
$19,151
261,485
29,368
47,872
3,765
361,641
80,901
40,215
150,665
73,942
533,982
11,465
44,532
51,369
$1,348,712
$1,741
202,888
911
20,807
9,810
236,157
175,898
4,125
16,251
12,425
82,641
24,431
398,605
17,383
385,589
(7,603)
793,974
2,810
796,784
$1,348,712
TORSTAR CORPORATION 2014 ANNUAL REPORT 48
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Income
(Thousands of Canadian Dollars except per share amounts)
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation (notes 9 and 10)
Restructuring and other charges (note 17)
Impairment of assets (note 12)
Operating loss
Interest and financing costs (note 15(c))
Foreign exchange
Loss from joint ventures (note 7)
Income of associated businesses (note 8)
Other income (expense) (note 23)
Income and other taxes recovery (expense) (note 14)
Net loss from continuing operations
Gain on sale and income from discontinued operations (note 24)
Net income (loss)
Attributable to:
Equity shareholders
Minority interests
Net income (loss) attributable to equity shareholders per
Class A (voting) and Class B (non-voting) share (note 20(c)):
Basic:
From continuing operations
From discontinued operations
Diluted:
From continuing operations
From discontinued operations
Year ended December 31
2014
2013
Restated*
$858,134
$935,773
(361,544)
(404,520)
(30,674)
(22,646)
(82,935)
(44,185)
(4,253)
(7,656)
(9,152)
194
3,754
(61,298)
11,700
(49,598)
222,662
$173,064
$172,685
$379
(388,985)
(438,999)
(32,228)
(33,170)
(77,094)
(34,703)
(16,060)
(1,186)
(3,733)
2,345
491
(52,846)
(5,200)
(58,046)
30,633
($27,413)
($27,984)
$571
($0.62)
$2.78
$2.16
($0.62)
$2.77
$2.15
($0.73)
$0.38
($0.35)
($0.73)
$0.38
($0.35)
(see accompanying notes)
* The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 ANNUAL REPORT 49
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Comprehensive Income
(Thousands of Canadian Dollars)
Net income (loss)
Other comprehensive income (loss) that are or may be reclassified
subsequently to net income (loss):
Unrealized foreign currency translation adjustment (no income tax effect)
Unrealized foreign currency translation adjustment for associated
businesses (no income tax effect) (note 8)
Net movement on available-for-sale financial assets (no income tax effect)
Net movement on cash flow hedges
Income tax effect
Realized loss on cash flow hedges transferred to net income
Income tax effect
Unrealized loss on hedge of net investment (no income tax effect)
Realized loss on hedge of net investment transferred to net income (no
income tax effect)
Other comprehensive income (loss) that will not be reclassified to net
income (loss) in subsequent periods:
Actuarial gain (loss) on employee benefits (note 19)
Income tax effect
Actuarial gain (loss) on employee benefits for associated businesses (no
income tax effect) (note 8)
Year ended December 31
2014
2013
Restated*
$173,064
($27,413)
(14)
125
4,125
(1,096)
5,520
8,660
(83,596)
21,400
(365)
(62,561)
42
24
6
2,893
(700)
(5,496)
(3,231)
166,410
(42,200)
1,512
125,722
Other comprehensive income (loss) from continuing operations, net of tax
($53,901)
$122,491
Other comprehensive income (loss) from discontinued operations
Income tax effect
Other comprehensive income (loss) from discontinued operations, net of
tax (note 24)
Total other comprehensive income (loss), net of tax
Comprehensive income, net of tax
Attributable to:
Equity shareholders
Minority interests
(9,133)
2,158
($6,975)
($60,876)
$112,188
$111,809
$379
22,863
(4,800)
$18,063
$140,554
$113,141
$112,570
$571
(see accompanying notes)
* The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 ANNUAL REPORT 50
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
income (loss)
Total
attributable to
equity
shareholders
Minority
interests
Total
equity
At December 31, 2012
$397,425
$16,057
$317,033
($9,699)
$720,816
$2,864
$723,680
Net income (loss)
Other comprehensive
income
Total comprehensive
income
Dividends (note 20)
Issue of share capital –
other (note 20)
Share-based
compensation expense
Distribution
(27,984)
138,458
110,474
(41,918)
2,096
2,096
(27,984)
571
(27,413)
140,554
140,554
112,570
571
113,141
(41,461)
(41,461)
723
1,326
723
1,326
(625)
(625)
457
723
1,326
At December 31, 2013
$398,605
$17,383
$385,589
($7,603)
$793,974
$2,810
$796,784
Net income
Other comprehensive
income (loss)
Total comprehensive
income
Dividends (note 20)
Exercise of share options
(note 20)
Issue of share capital –
other (note 20)
Share-based
compensation expense
Distribution
At December 31, 2014
(see accompanying notes)
172,685
(68,500)
104,185
(42,049)
7,624
7,624
172,685
379
173,064
(60,876)
(60,876)
111,809
379
112,188
(41,400)
(41,400)
612
602
1,434
612
602
1,434
(500)
(500)
649
721
602
(109)
1,434
$400,577
$18,708
$447,725
$21
$867,031
$2,689
$869,720
TORSTAR CORPORATION 2014 ANNUAL REPORT 51
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Cash Flows
(Thousands of Canadian Dollars)
Year ended December 31
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase in cash
Effect of exchange rate changes from discontinued operations
Cash, beginning of year
Cash, end of year
Operating activities:
Net loss from continuing operations
Amortization and depreciation (notes 9 and 10)
Deferred income taxes (note 14)
Loss from joint ventures (note 7)
Distributions from joint ventures (note 7)
Income of associated businesses (note 8)
Dividend from associated businesses (note 8)
Impairment of assets (note 12)
Non-cash employee benefit expense (note 19)
Employee benefits funding (note 19)
Other (note 26)
Restricted cash (note 5)
Decrease in non-cash working capital
Cash provided by operating activities of continuing operations
Cash provided by operating activities of discontinued operations (note 24)
Cash provided by operating activities
Investing activities:
Additions to property, plant and equipment and intangible assets (notes 9 and 10)
Investment in associated businesses
Acquisitions and portfolio investments (note 25)
Net proceeds from the sale of Harlequin (note 24)
Restricted cash (notes 5 and 24)
Proceeds from sale of assets (note 23)
Other
Cash provided by (used in) investing activities of continuing operations
Cash used in investing activities of discontinued operations (note 24)
Cash provided by (used in) investing activities
Financing activities:
Repayment of bankers’ acceptances
Issuance of bankers’ acceptances
Dividends paid
Exercise of share options
Other
Cash used in financing activities
Cash represented by:
Attributed to continuing operations:
Cash
Cash equivalents – short-term deposits
Attributed to discontinued operations:
Cash equivalents – short-term deposits
Bank overdraft
Net cash, end of year
2014
$63,358
390,233
(220,065)
233,526
403
17,410
$251,339
($49,598)
30,674
(12,400)
9,152
9,250
(194)
1,222
82,935
13,840
(40,134)
3,883
48,630
(16,150)
22,243
54,723
8,635
$63,358
($20,947)
(4,906)
(10,759)
442,207
(22,750)
8,375
622
391,842
(1,609)
$390,233
($190,923)
11,199
(41,400)
612
447
($220,065)
$33,063
218,276
$251,339
$251,339
2013
Restated*
$80,732
(28,720)
(50,230)
1,782
568
15,060
$17,410
($58,046)
32,228
5,000
3,733
5,735
(2,345)
954
77,094
28,278
(60,714)
1,498
33,415
6,454
39,869
40,863
$80,732
($17,582)
(3,485)
(2,435)
378
(23,124)
(5,596)
($28,720)
($22,416)
13,428
(41,461)
219
($50,230)
$26,542
$26,542
$2,940
(12,072)
($9,132)
$17,410
(see accompanying notes)
* The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 ANNUAL REPORT 52
TORSTAR - Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2014 and 2013
(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 registered office is located at One Yonge Street, Toronto,
Canada. The principal activities of the Company and its subsidiaries are described in Note 3.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The
policies applied in these consolidated financial statements are based on IFRS policies effective as of
December 31, 2014. These consolidated financial statements have been authorized for issue in accordance
with a resolution from the Board of Directors on March 3, 2015.
On May 1, 2014, the Company entered into an agreement to sell all of the shares of Harlequin Enterprises
Limited (“Harlequin”) to a division of HarperCollins Publishers L.L.C., a subsidiary of News Corp. for a
purchase price of $455 million. The sale closed on August 1, 2014. The Company’s investment in Harlequin
previously represented the Book Publishing Segment. Effective April 1, 2014, this investment was
reclassified as Assets held for sale and Discontinued operations. Upon the closing of the sale, the net assets
of Harlequin have been derecognized from Assets held for sale. The 2013 comparative interim and annual
consolidated statements of income, comprehensive income and cash flows have been restated to reflect the
classification of Harlequin into discontinued operations. All other notes to the consolidated financial
statements primarily include amounts for continuing operations, unless otherwise indicated. Additional
disclosures are provided in Note 24.
In addition, during 2014, the Company disaggregated the former Media Segment and has now disclosed
Metroland Media Group (“MMG”) and Star Media Group (“SMG”) as separate reportable operating segments
for segment reporting purposes as a result of emerging divergence in revenue trends. The comparative
information contained herein has also been restated to reflect this change. Additional disclosures are
provided in Note 3.
Comparative figures for previous periods have been restated to conform to the current year presentation.
(b) Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for
certain financial instruments that are measured at fair value as described in the accounting policies.
(c) Principles of consolidation
The consolidated financial statements of the Company include the accounts of Torstar Corporation and all its
subsidiaries over which it has control. The Company controls an investee when the Company is exposed to,
or has rights to, variable returns from its relationship with the investee and has the ability to affect those
returns through its power over the investee. The Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an investee are sufficient to give it power. These
facts and circumstances include: the size of the Company’s holding of voting rights relative to the size and
dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote
holders or other parties; and rights arising from other contractual arrangements. The financial statements of
subsidiaries are included in the consolidated financial statements from the date control commences and are
deconsolidated on the date when control ceases.
TORSTAR CORPORATION 2014 ANNUAL REPORT 53
TORSTAR - Consolidated Financial Statements
Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders
of the Company and to the minority interests, even if this results in the minority interests having a deficit
balance.
Intra-group balances and transactions are eliminated on consolidation. Unrealized gains arising from
transactions with equity-accounted investees are eliminated against the investment to the extent of the
Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains,
but only to the extent that there is no evidence of impairment.
(d) Non-current assets held for sale and discontinued operations
The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will
be recovered principally through a sale rather than through continuing use. Such non-current assets and
disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value
less costs to sell.
The criteria for held for sale classification is regarded as met only when the sale is highly probable and the
asset or disposal group is available for immediate sale in its present condition. Actions required to complete
the sale should indicate that it is unlikely that significant changes to the sale will be made or that the sale will
be withdrawn. Additionally, the sale should be expected within one year from the date of the classification.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as
held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the
consolidated statement of financial position.
A disposal group qualifies as a discontinued operation if it is:
• A component of the Company that is a cash generating unit (“CGU”) or a group of CGUs;
• Classified as held for sale or already disposed in such a way; or
• A major line of business or major geographical area.
Discontinued operations are excluded from the results of continuing operations and are presented as a single
amount, net of tax, as income from discontinued operations in the consolidated statement of income.
(e) Investments in joint ventures and associated businesses
A joint venture is a type of joint arrangement in which the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
An associate is an entity in which the Company has significant influence. 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.
The considerations made in determining joint control or significant influence are similar to those necessary to
determine control over subsidiaries.
Investments in joint ventures and associates are accounted for using the equity method, whereby the
investment is carried in the consolidated statement of financial position at cost plus post-acquisition changes
in the Company’s share of the net assets of the investment. Goodwill relating to the joint venture or associate
is included in the carrying amount of the investment and is neither amortized nor individually tested for
impairment. When the Company’s share of losses of a joint venture or associate exceeds the Company’s
carrying value of the investment, the Company discontinues recognizing its share of further losses. Additional
losses are recognized only to the extent that the Company has incurred legal or constructive obligations or
made payments on behalf of the joint venture or associate.
The consolidated statement of income reflects the Company’s share of the results of operations of the joint
venture or associate. Where there has been a change recognized directly in the OCI of the joint venture or
TORSTAR CORPORATION 2014 ANNUAL REPORT 54
TORSTAR - Consolidated Financial Statements
associate, the Company recognizes its share of any changes and discloses this, when applicable, in OCI.
When there has been a change recognized directly in the equity of the joint venture or associate, the
Company recognizes, when applicable, its share of any changes in the statement of changes in equity.
The financial statements of the joint venture or associate are prepared for the same reporting period as the
Company except when the joint venture or associate does not have coterminous year-end and quarter-ends
with the Company, in which case the most recent period-end available in a quarter is used. When necessary,
adjustments are made to bring the accounting policies of the joint venture or associate in line with those of the
Company.
After the initial application of the equity method, the Company determines at each reporting date whether
there is any objective evidence that the investment in the joint venture or associate is impaired and
consequently whether it is necessary to recognize an impairment loss with respect to the Company’s
investment. If this is the case, the Company calculates the amount of impairment as the difference between
the recoverable amount of the investment and its carrying value and recognizes the impairment in the
consolidated statement of income.
Upon loss of significant influence over an associate, the Company measures and recognizes any retained
investment at its fair value. Upon loss of joint control over a joint venture, the Company considers whether it
has significant influence, in which case the retained investment is accounted for as an associate using the
equity method, otherwise the Company measures and recognizes any retained investment as a portfolio
investment at its fair value. Any difference between the carrying amount of the investment and the fair value
of the retained investment or proceeds from disposal of the investment is recognized in profit or loss.
(f) Foreign currency translation
The Company’s consolidated financial statements are presented in Canadian dollars, which is 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 currency 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 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 OCI. Upon reduction of the Company’s
investment in a foreign subsidiary due to a sale or liquidation, the proportionate amount of AOCI is recognized
in income.
(g) Financial instruments
Financial assets and liabilities
The Company classifies its financial assets and liabilities into the following categories:
• Financial instruments at fair value through profit or loss
• Loans and receivables
• Financial assets classified as available-for-sale (“AFS”)
TORSTAR CORPORATION 2014 ANNUAL REPORT 55
TORSTAR - Consolidated Financial Statements
• Other financial liabilities
The Company has not classified any financial instruments as held-to-maturity. 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 are recognized on the trade date – the date on which the Company becomes a party to
the contractual provisions of the instrument.
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 that
are not designated as hedging instruments in hedge relationships.
Financial instruments 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 are classified as
current assets in the consolidated statement of financial position and include current receivables, cash and
cash equivalents. 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 estimated bad debt provisions which are determined by reference to past experience and
expectations. Cash and cash equivalents consist of cash in bank and highly liquid short-term investments.
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.
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. Long
term debt instruments are initially measured at fair value, which is the consideration received, net of
transaction costs incurred. Transaction costs related to 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. Any 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, cancelled or expires.
TORSTAR CORPORATION 2014 ANNUAL REPORT 56
TORSTAR - Consolidated Financial Statements
Derivative instruments and hedging
In the normal course of business, the Company uses derivative financial instruments to manage 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 in the consolidated statement of financial position at fair value. The treatment of
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 were designated as hedges against future intercompany Book
Publishing revenues. Gains and losses on these instruments were accounted for as a component of the
related hedged transaction. Gains and losses on foreign exchange contracts which do not qualify for hedge
accounting were reported in the consolidated statement of income.
Interest rate swap contracts were designated as hedges against interest expense. Payments and receipts
under interest rate swap contracts were recognized as adjustments to interest expense on an accrual basis.
Any resulting carrying amounts were included in the consolidated statement of financial position.
The Company uses derivative instruments to manage its exposure to 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 in the
consolidated statement of financial position at the fair value of these derivative instruments at each reporting
date.
The treatment of 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. Documentation includes a description of the hedging
instrument, the hedged item, the risk being hedged, the Company’s risk management objective and strategy
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.
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 attributable to the hedged
risk.
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Cash flow hedges
These are hedges of highly probable forecast transactions and previously included the floating to fixed
interest rate swap agreements and certain 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, which previously represented
Harlequin’s 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 a portion 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 quoted in active markets is determined using quoted prices where they represent 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. 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 fair value measurements according to a three-level hierarchy. The hierarchy
prioritizes the inputs used in 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 the Company to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value.
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
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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 derivative instruments to manage its exposure
associated with changes in the fair value of its DSU plans and the cost of its RSU plan, and previously
included foreign exchange forward contracts and interest rate swaps. The fair value of the derivative
instruments used to manage 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 foreign exchange forward contracts was classified within Level 2 as it was based on foreign
currency rates quoted by banks and was the difference between the forward exchange rate and the contract
rate.
The Company determined 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 was deemed to be hedge ineffectiveness and
was recorded in the consolidated statement of income. The fair value for the interest rate swaps was based
on forward yield curves which were observable inputs provided by banks and available in other public data
sources, and were classified within Level 2.
The fair value of portfolio investments that have quoted market prices is classified within Level 1 except when
the securities are not actively traded and thus classified within Level 2. The fair value of portfolio investments
that do not have quoted market prices is determined when possible using a valuation technique that
maximizes the use of observable market inputs, and is classified within Level 3.
(h) Inventories
Inventories are valued at the lower of cost and net realizable value. 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. Raw materials are valued at purchase cost on a first in, first out basis. The cost
of finished goods and work in progress includes raw materials, translation and printing and production costs.
Provisions are made for slow moving and obsolete inventory. If the carrying value exceeds the net realizable
amount, a writedown is recognized. The writedown may be reversed in a subsequent period if the
circumstances causing it no longer exist.
(i) Prepaid expenses and other current assets
Prepaid expenses and other current assets included Harlequin’s advance royalty payments to authors which
were deferred until the related works were published and were reduced by estimated provisions for advances
that may exceed royalties earned.
(j) Property, plant and equipment
Property, plant and equipment are stated at cost or at fair value as deemed cost, net of accumulated
depreciation and any accumulated impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. 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:
• Buildings
- Structural
- Components
20 – 60 years
5 – 30 years
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• Machinery and Equipment
- Machinery and Equipment
- Furniture and Fixtures
• Leasehold Improvements
3 – 40 years
5 – 10 years
Term of the lease plus renewal periods, when renewal is
reasonably assured
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.
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.
(k) 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 which 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:
•
•
•
Software
Customer relationships and other
Franchise agreements
3 – 10 years
2 – 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.
(l) Borrowing costs
Borrowing costs consist of interest and other costs that the Company 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.
(m) 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 in the
consolidated statement of income.
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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 Company’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 Company 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
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 business 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.
(n) Impairment of non-financial assets
Property, plant and equipment and intangible assets are tested for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Additionally, intangible assets with an
indefinite useful life are subject to an annual impairment test. For the purpose of measuring recoverable
values, assets are grouped at the lowest levels for which there are separately identifiable cash flows (a CGU).
The recoverable value is the higher of an asset’s fair value less costs to sell and value in use (which is the
present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is
recognized for the value by which the asset’s carrying value exceeds its recoverable value.
Goodwill is reviewed for impairment annually or at any time if an indicator of impairment exists. Goodwill
acquired through a business combination is allocated to each CGU or group of CGUs that is expected to
benefit from the related business combination. For internal management purposes, goodwill is monitored at
the operating segment level which represents a group of CGUs. Goodwill is not amortized.
The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when
events or circumstances warrant such consideration.
The test for impairment for either an intangible asset or goodwill is to compare the recoverable value of the
asset, CGU or group of CGUs to the carrying value. The recoverable value 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 value is determined for the group of
CGUs to which the asset belongs.
The Company generally uses the value in use calculation to determine the recoverable value 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 perpetual growth rate. The key assumptions in the value in use calculations are:
• Earnings before interest, taxes, depreciation and amortization, restructuring and other charges, and
impairment of assets (“Adjusted 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.
• Adjusted 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 CGU or group of CGUs operates. The
projections are based on the most recent financial budgets, forecasts and three year strategic plans
approved by the Company’s Board of Directors and management forecasts beyond that period.
In calculating the value in use, the Company uses a discount rate in order to establish a range of values
for each CGU or group of CGUs. The discount rate applied to each calculation is a pre-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.
•
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• 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.
(o) 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 is recognized as the publications are delivered over the term of the subscription.
Other revenue is recognized when the related service or product has been delivered. Amounts received in
advance are included in the consolidated statement of financial position in accounts payable and accrued
liabilities until the revenue is recognized in accordance with the policies noted above.
Revenue from the sale of books was recognized for the retail print distribution channel based on the book’s
publication date (books were shipped prior to the publication date so that they were in stores by the
publication date) and for all other distribution channels when title had transferred to the buyer. Book
publishing revenue was recorded net of provisions for estimated returns and direct-to-consumer bad debts
(“book revenue provisions”). Retail print books were sold with a right of return. The retail returns provision
was 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 were shipped with no obligation to the
customer who could return the books or cancel their subscription at any time. The direct-to-consumer book
revenue provision recognized that not all books shipped would be purchased by the customer. Book revenue
provisions were 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 were estimated based on
historical payment rates for the type of book as well as how long the customer had been a subscriber. Book
publishing revenue attributable to the customer loyalty points program was deferred at the date of the initial
sale and was recognized as revenue when the Company fulfilled its obligations.
(p) 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:
• The net asset or net liability recognized in 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. The
service 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 salary increases, retirement ages of employees and
expected health care costs.
• 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.
• Net interest is determined by multiplying the net defined benefit liability or asset by the discount rate used
to determine the defined benefit obligation (at the beginning of the year) and is included in Interest and
financing costs in the consolidated statement of income.
• Past service costs are recognized immediately in the consolidated statement of income.
• Current service costs, past service costs, special termination benefits, curtailment gains or losses and
administration costs are recognized in the consolidated statement of income and are included in Salaries
and benefits or Restructuring and other charges, as applicable.
• Changes in 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. 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.
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• For the funded plans, the value of any minimum funding requirements (as determined by applicable
pension legislation) is recognized to the extent that the amounts are considered recoverable.
Recoverability is limited to the extent to which the Company can reduce the future contributions to the
plan.
Company contributions to capital accumulation plans are expensed as incurred.
Termination benefits are expensed at the earlier of the time at which the Company can no longer withdraw the
offer of those benefits and the time at which the Company recognizes costs for a restructuring. Benefits
which are not expected to be settled wholly within twelve months from the end of the reporting period are
discounted.
(q) Share-based compensation plans
The Company has a share option plan, an employee share purchase plan (“ESPP”), two DSU plans and an
RSU plan.
Share option plan and ESPP
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.
Share options vest, and are expensed, over four years from the date of grant.
Under the Company’s ESPP, 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.
The fair value of share options granted and 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. Forfeitures are estimated on the grant date and are revised as the actual
forfeitures differ from estimates.
The fair value of share options granted and ESPP subscriptions 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 as 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.
DSUs
Eligible executives may elect to receive certain cash incentive compensation in the form of DSUs. Each DSU
is equal in value to one Class B non-voting share of the Company and 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. DSUs also accrue dividend equivalents payable in additional units in an amount equal to
dividends paid on Class B non-voting shares of the Company.
The Company has also adopted a DSU plan for non-employee directors. Each non-employee director
receives an award of DSUs 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, DSUs, or a combination thereof, receives the cash portion of his or her annual Board retainer in the
form of DSUs. Any non-employee director may also 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.
Compensation expense is recorded in the year DSUs are granted 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
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whereupon the executive or director is entitled to receive the fair market value of the equivalent number of
Class B non-voting shares, net of withholdings, in cash. Outstanding DSUs are recorded as long-term
liabilities.
RSUs
Eligible 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. 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.
(r) 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 income tax
Deferred income 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 income 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 income 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 income 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 income 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.
(s) 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.
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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.
(t) 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, 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 assumptions made by management are described below:
Employee benefits
The valuation by independent actuaries uses management’s assumptions for rate of compensation increase,
trends in healthcare costs, employee turnover and expected mortality. However, the most significant
assumption is the discount rate which is used to determine the present value of the future cash flows that are
expected to be required to settle employee benefit obligations. The discount rate is based on the market yield
on long-term high-quality corporate bonds with maturities matching the estimated cash flows from the benefit
plan at the time of estimation. A lower discount rate would result in a higher employee benefit obligation.
Further details about the assumptions used are provided in Note 19.
Impairment of non-financial assets
The Company tests goodwill and indefinite life intangible assets for impairment annually, or more frequently if
there are indicators that impairment may have arisen. Impairment exists when the carrying value of an asset,
CGU or group of CGUs 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, CGUs and groups of CGUs are provided in
Note 12.
Taxes
The Company is subject to income taxes in Canada, and the discontinued operations were also subject to
income taxes in 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 income 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
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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 income 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 income 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 income 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 income tax assets. Unrecognized deferred income 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 14.
Book revenue provisions
Book revenue provisions were estimated based on the following key inputs and assumptions: 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 had 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 was recorded in the period when the data became available.
Significant judgements made by management are described below:
Classification of investments as subsidiaries, joint ventures, associated businesses and portfolio investments
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.
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. 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.
The Company has classified its investments in Black Press Ltd. and Shop.ca Network Inc. as associated
businesses based on management’s judgement that the Company has significant influence, based on rights
to board representation and other provisions in the respective shareholders’ agreements.
Classification of assets and liabilities as held for sale and discontinued operations
Classification of assets or a disposal group as held for sale and discontinued operations requires judgement
on whether the carrying amount will be recovered principally through a sale transaction rather than through
continuing use and if the sale is highly probable.
The Company classified its investment in Harlequin as Assets held for sale and Discontinued operations
effective April 1, 2014 based on an agreement signed on May 1, 2014 in respect of the sale of Harlequin.
Upon the closing of the sale on August 1, 2014, the net assets of Harlequin were derecognized from Assets
held for sale.
TORSTAR CORPORATION 2014 ANNUAL REPORT 66
TORSTAR - Consolidated Financial Statements
Classification of cash equivalents
Classification of cash equivalents requires judgement on whether the short-term investments are easily
convertible into cash. Short-term investments with maturities on acquisition of 90 days or less are presumed
to be cash equivalents due to the short holding period of the investment. The Company has classified its
short-term investments with original maturities on acquisition of over 90 days but less than 365 days as cash
equivalents based on management’s judgement that the short-term investments are liquid as the Company
has a contractual right to convert them into cash upon 30 days notice.
Determination of operating segments, reportable segments and CGUs
The Company has two reportable operating segments: MMG and SMG. “Corporate” is the provision of
corporate services and administrative support. These operating segments were disaggregated from the
former Media Segment for segment reporting purposes as a result of emerging divergence in revenue trends.
The Company’s chief operating decision-maker (“CODM”) monitors the operating results of the operating
segments for the purpose of assessing performance. Segment performance is evaluated based on operating
profit which corresponds to operating profit as measured in the consolidated financial statements except that
it includes the proportionately consolidated share of joint venture operations. Decisions regarding resource
allocation are made at the reportable operating segment level.
(u) Changes in accounting policies
Policies adopted in 2014:
The Company adopted new standards and interpretations effective January 1, 2014. The nature and the
impact of each new standard/amendment which affect the Company are described below:
IAS 32 Financial Instruments: Presentation
The amendments to IAS 32 clarified certain requirements for offsetting financial assets and liabilities. The
amendments require disclosure of information about recognized financial instruments subject to enforceable
master netting arrangements even if they are not set off, to allow financial statement users to evaluate the
effect or potential effect of netting arrangements. The amendment affects presentation and disclosures but
did not have an impact on financial results.
IAS 36 Impairment of Assets
The amendments to IAS 36 reduced the circumstances in which the recoverable amount of assets or cash
generating units is required to be disclosed, clarified the disclosures required and introduced an explicit
requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable
amount (based on fair value less costs of disposal) is determined using a present value technique. This
amendment affects disclosures but did not have an impact on financial results.
IFRIC 21 Levies
IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government, identifying
the obligating event as the activity that triggers the payment of the levy in accordance with the relevant
legislation. If an obligation is triggered by reaching a minimum threshold, the liability is recognized when the
minimum threshold is reached but if the obligating event occurs over a period of time, the liability is
recognized progressively. The adoption of this guidance did not have an impact on financial results.
Several other new standards and amendments apply for the first time in 2014. However, they do not impact
the interim or annual consolidated financial statements of the Company. The Company has not early adopted
any other standard, interpretation or amendment that has been issued but is not yet effective.
TORSTAR CORPORATION 2014 ANNUAL REPORT 67
TORSTAR - Consolidated Financial Statements
Future changes in accounting standards:
The following changes in accounting standards will be adopted by the Company on the effective date of
January 1, 2015:
IAS 19 Employee Benefits
In November 2013, the IASB amended IAS 19 to clarify the requirements that relate to how contributions from
employees or third parties that are linked to service should be attributed to periods of service. The
amendment will not have any impact on financial results.
The following new standards or amendments to accounting standards will be effective for the Company
subsequent to 2015:
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 which specifies how and when an entity will recognize revenue as well
as requiring such entities to provide users of financial statements with more informative, relevant disclosures.
The standard provides a single, principles based five-step model to be applied to all contracts with customers.
The Company does not anticipate early adoption and plans to adopt the standard on its effective date of
January 1, 2017. The Company is in the process of reviewing the standard to determine the impact on the
consolidated financial statements.
IFRS 9 Financial Instruments
In July 2014, the IASB issued a finalized version of IFRS 9 which contains accounting requirements for
financial instruments replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard
contains requirements in the following areas: Classification and Measurement; Impairment; Hedge
Accounting; and Derecognition. The Company does not anticipate early adoption and plans to adopt the
standard on its effective date of January 1, 2018. The Company is in the process of reviewing the standard to
determine the impact on the consolidated financial statements.
TORSTAR CORPORATION 2014 ANNUAL REPORT 68
TORSTAR - Consolidated Financial Statements
3. SEGMENTED INFORMATION
The Company has identified two reportable operating segments: MMG and SMG to which Corporate costs have
not been allocated. Management of each segment is accountable for the revenues and segment operating profit
or loss which includes the proportionately consolidated share of joint venture operations.
Segment profit or loss has been defined as segmented operating profit or loss which corresponds to operating
profit or loss as presented in the consolidated statement of income but includes the proportionately consolidated
share of joint venture operations. 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. Also, assets and
liabilities are not provided to the CODM at the operating segment level. These items are therefore not allocated
to the operating segments.
MMG publishes The Hamilton Spectator, the Waterloo Region Record, the Guelph Mercury, more than 100
weekly community newspapers and has a number of specialty publications, directories, consumer shows and
distribution operations, digital properties (including goldbook.ca, save.ca, travelalerts.ca, and wagjag.com
(“WagJag”)) and product sales.
SMG includes the daily Toronto Star newspaper and thestar.com as well as Free Daily News Group Inc. (“Metro
English Canada”), which publishes the Metro free daily commuter papers in several of Canada’s largest cities;
and through a joint venture arrangement, SMG owns an interest in the Chinese-language Sing Tao Daily and its
related publications in Toronto, Vancouver and Calgary. SMG also includes wheels.ca, toronto.com, several
specialty publications and magazines and distribution services, eyeReturn Marketing Inc. and the Company’s
interests in workopolis.com (“Workopolis”) and Olive Media.
The Company also has investments in Black Press Ltd. (“Black Press”); Blue Ant Media Inc. (“Blue Ant”);
Canadian Press Enterprises Inc. (“Canadian Press”) and Shop.ca Network Inc. (“Shop.ca”), which the Company
presents as associated businesses. The Company also had a 38.2% equity investment in Tuango Inc. (“Tuango”)
until October 16, 2014.
Year ended December 31, 2014
MMG
SMG
Corporate
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
Operating Revenue
$484,225 $420,393
$904,618
($46,484)
$858,134
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
Reportable segment operating profit
(219,340)
(196,866)
(14,644)
(6,937)
(329)
(149,695)
(221,149)
(18,700)
(15,769)
(97,606)
($11,136)
(4,760)
(57)
(380,171)
(422,775)
(33,401)
(22,706)
(97,935)
18,627
18,255
2,727
60
15,000
(loss)
$46,109
($82,526)
($15,953)
($52,370)
$8,185
Interest and financing costs
Foreign exchange
Loss from joint ventures
Income of associated businesses
Other income
Loss before taxes from continuing
operations
(361,544)
(404,520)
(30,674)
(22,646)
(82,935)
($44,185)
(4,253)
(7,656)
(9,152)
194
3,754
($61,298)
TORSTAR CORPORATION 2014 ANNUAL REPORT 69
TORSTAR - Consolidated Financial Statements
Year ended December 31, 2013
MMG
SMG
Corporate
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
Operating Revenue
$509,862 $474,185
$984,047
($48,274)
$935,773
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
(229,554)
(209,435)
(15,221)
(14,034)
(12,802)
(168,744)
(245,537)
(19,703)
(19,795)
(73,292)
($10,743)
(2,860)
(40)
(409,041)
(457,832)
(34,964)
(33,829)
(86,094)
$28,816
($52,886)
($13,643)
($37,713)
Reportable segment operating loss
Interest and financing costs
Foreign exchange
Loss from joint ventures
Income of associated businesses
Other income
Loss before taxes from continuing
operations
20,056
18,833
2,736
659
9,000
$3,010
(388,985)
(438,999)
(32,228)
(33,170)
(77,094)
($34,703)
(16,060)
(1,186)
(3,733)
2,345
491
($52,846)
¹ Adjustments and eliminations represent the elimination of the proportionately consolidated results of, and transactions with
joint ventures.
Geographical information
The Company operates in the following main geographical areas:
Canada
United States
Other³
Total
Revenue¹
Year ended December 31
2014
2013
$853,032
$926,028
3,436
5,919
1,666
3,826
$858,134
$935,773
Non-current assets²
As at December 31
2014
$531,084
$531,084
2013
$640,826
78,189
39,574
$758,589
¹ Revenue is allocated based on the country in which the order is received.
² Non-current assets include property, plant and equipment; intangible assets and goodwill.
³ Principally – Japan, Germany, United Kingdom, Australia, Sweden and France.
4.
INVESTMENTS IN SUBSIDIARIES
The Company’s material subsidiaries are: Toronto Star Newspapers Limited and Metroland Media Group Ltd.,
which are Ontario corporations and Metro English Canada, which is a New Brunswick corporation. The Company
has 100% voting and equity securities interest in each of these corporations.
On March 28, 2014, the Company increased its interest in Metro English Canada to 100%, by acquiring the
remaining 10% interest previously owned by Metro International S.A. (“MISA”), as disclosed in Note 23.
The Company also has a 75% interest in the Olive Media partnership. The 25% interest that the Company does
not own is reflected in Minority interests.
Prior to August 1, 2014, the Company also had a 100% voting and equity securities interest in Harlequin which
was sold as detailed in Note 24.
The principal activities of these subsidiaries are described in Note 3.
TORSTAR CORPORATION 2014 ANNUAL REPORT 70
TORSTAR - Consolidated Financial Statements
5. RESTRICTED CASH
The Company has restricted cash totalling $38.9 million comprised of $16.1 million held as collateral for
outstanding standby letters of credit and $22.8 million held in an escrow account related to the sale of Harlequin
as described in Note 24.
The outstanding letters of credit include $15.6 million in respect of an unfunded executive retirement plan liability
as indicated in Note 19.
6.
INVENTORIES
Finished goods
Work in progress
Raw materials
December 31,
2014
$4,048
105
5,156
$9,309
December 31,
2013
$11,892
8,676
8,800
$29,368
During the year ended December 31, 2014, the Company expensed $56.7 million of inventory costs (2013 –
$71.0 million) and recorded an inventory write-down of $nil (2013 – $0.4 million).
7.
INVESTMENTS IN JOINT VENTURES
The Company’s joint ventures are primarily in the SMG Segment and include investments in Workopolis (50%)
and Sing Tao Daily (approximately 50%). Effective April 1, 2014, pursuant to the Company entering into an
agreement for the sale of Harlequin, the amounts related to the Book Publishing Segment joint venture operations
were reclassified to Assets held for sale. The sale transaction closed on August 1, 2014 as indicated in Note 24.
The table below provides a continuity of Investments in joint ventures:
Balance, beginning of year
Reclassified to Assets held for sale
Loss from joint ventures
Distribution from joint ventures
Investment and other
Net change related to Investments in joint ventures of
discontinued operations
Balance, end of year
Year ended December 31
2014
$80,901
(7,968)
72,933
(9,152)
(9,250)
$54,531
2013
$91,258
91,258
(3,733)
(5,735)
87
(976)
$80,901
TORSTAR CORPORATION 2014 ANNUAL REPORT 71
TORSTAR - Consolidated Financial Statements
(i) Statement of Financial Position
Cash and cash equivalents
Other current assets
Total current assets
Property, plant & equipment
Goodwill on joint ventures
Intangible assets
Other non-current assets
Total assets
Bank overdraft
Other current liabilities
Total current liabilities
Other non-current liabilities
Total equity
Total liabilities and equity
As at December 31, 2014
SMG
Segment
$8,331
8,153
16,484
6,244
23,419
18,950
SMG
Segment
$6,825
12,811
19,636
6,351
38,419
19,478
$65,097
$83,884
As at December 31, 2013
Book Publishing
Segment
$4,606
4,475
9,081
149
4,739
277
74
$14,320
Total Segments
$11,431
17,286
28,717
6,500
43,158
19,755
74
$98,204
$9,333
9,333
1,233
54,531
$65,097
$10,432
10,432
519
72,933
$83,884
$4
5,851
5,855
497
7,968
$14,320
$4
16,283
16,287
1,016
80,901
$98,204
(ii) Statement of Income and Comprehensive Income
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets (note 12)
Operating loss
Interest and financing costs
Foreign exchange
Other income
Income and other taxes
Net loss and Comprehensive loss from continuing operations
Year ended December 31
2014
$46,740
2013
$48,510
(18,627)
(18,511)
(2,727)
(60)
(15,000)
(8,185)
2
24
207
(7,952)
(1,200)
($9,152)
(20,056)
(19,069)
(2,736)
(659)
(9,000)
(3,010)
2
(8)
197
(2,819)
(914)
($3,733)
8.
INVESTMENTS IN ASSOCIATED BUSINESSES
As of December 31, 2014, the Company’s Investments in associated businesses include a 19.4% equity interest
in Black Press; a 23.1% equity investment in Blue Ant; a 33.3% equity interest in Canadian Press and a 16.1%
equity investment in Shop.ca. The Company also had a 38.2% equity investment in Tuango until October 16,
2014.
TORSTAR CORPORATION 2014 ANNUAL REPORT 72
TORSTAR - Consolidated Financial Statements
The table below provides a continuity of Investments in associated businesses:
Balance, beginning of year
Investments made during the year
Investment in Shop.ca in exchange for Media inventory provided
Sale of investment in Tuango
Dividends received
Income of associated businesses
OCI – Actuarial gain (loss) on employee benefits
OCI – Foreign currency translation adjustment
Balance, end of year
Black Press
Year ended December 31
2014
2013
$40,215
4,489
(3,476)
(1,222)
194
(365)
125
$32,921
3,402
965
(954)
2,345
1,512
24
$39,960
$40,215
Black Press is a privately held company that publishes more than 150 titles in print and online in Canada and the
U.S. and has operations in British Columbia, Alberta, Washington State, California, Hawaii and Ohio.
For the year ended December 31, 2014, the Company’s share of Black Press’ net income was $4.0 million and
other comprehensive loss of $0.2 million (2013 – net income of $5.5 million and OCI of $1.5 million).
Blue Ant
Blue Ant is an independent media company which currently owns and operates 11 media brands including
Cottage Life, Travel+Escape, Smithsonian Channel Canada, Love Nature and AUX. Blue Ant creates and
distributes content ranging from music to travel, style to nature, engaging fans across television, digital,
magazines and live events. During 2014, the Company invested an additional $3.5 million in Blue Ant (2013 –
$2.5 million). The Company’s equity interest at December 31, 2014 was 23.1% (December 31, 2013 – 23.3%).
The Company’s share of Blue Ant’s net loss in 2014 was $0.7 million (2013 – $0.2 million).
Canadian Press
Canadian Press operates The Canadian Press news agency.
The Company’s carrying value in Canadian Press was previously reduced to nil. In 2013, the Company recorded
a loss of $0.4 million for its additional investment commitment, which was disbursed in 2014. The Company will
begin to report its share of Canadian Press’s results once the unrecognized losses ($4.0 million as of December
31, 2014 and nil as of December 31, 2013) have been offset by net income, other comprehensive income or
additional investments are made. For the year ended December 31, 2014, the Company would have reported
loss of $0.3 million and other comprehensive loss of $3.7 million from Canadian Press (2013 – income of $0.5
million and other comprehensive income of $5.9 million).
Shop.ca
Shop.ca is an online e-commerce marketplace aimed at Canadian shoppers. During 2014, the Company
invested an additional $1.0 million in Shop.ca. As at December 31, 2014, the Company’s equity interest in
Shop.ca was 16.1% (December 31, 2013 – 19.1%).
For the year ended December 31, 2014, the Company’s share of Shop.ca’s net loss was $3.5 million (2013 – $3.1
million).
TORSTAR CORPORATION 2014 ANNUAL REPORT 73
TORSTAR - Consolidated Financial Statements
Tuango
Tuango is a Quebec-based daily deal business. On October 16, 2014, the Company sold its 38.2% interest for
proceeds of $7.6 million and recorded a gain of $4.5 million as indicated in Note 23. For the year ended
December 31, 2014, the Company’s share of Tuango’s net income was $0.4 million (2013 – $0.7 million).
Other
The Company has investments in other associated businesses for which a loss of less than $0.1 million was
recorded for the year ended December 31, 2014 (2013 – loss of $0.2 million).
9. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at December 31, 2012
Additions
Disposals
Net change related to Property, plant and
equipment of discontinued operations
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions
Disposals
Balance at December 31, 2014
Depreciation and impairment
Balance at December 31, 2012
Additions
Impairments (note 12)
Disposals
Net change related to Property, plant and
equipment of discontinued operations
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions
Impairments (note 12)
Disposals
Balance at December 31, 2014
Net book value
At December 31, 2012
At December 31, 2013
At December 31, 2014
Building and
leasehold
improvements
Machinery
and
equipment
$139,407
1,249
(288)
1,896
142,264
(17,381)
124,883
2,712
(2,864)
$124,731
$57,622
6,493
159
(288)
542
64,528
(13,284)
51,244
6,348
237
(2,750)
$55,079
$81,785
$77,736
$69,652
$201,169
5,540
(6,508)
1,103
201,304
(32,711)
168,593
5,353
(16,668)
$157,278
$126,426
12,140
169
(6,496)
1,655
133,894
(24,959)
108,935
11,541
523
(16,428)
$104,571
$74,743
$67,410
$52,707
Land
$5,344
175
5,519
(2,706)
2,813
(115)
$2,698
$5,344
$5,519
$2,698
Total
$345,920
6,789
(6,796)
3,174
349,087
(52,798)
296,289
8,065
(19,647)
$284,707
$184,048
18,633
328
(6,784)
2,197
198,422
(38,243)
160,179
17,889
760
(19,178)
$159,650
$161,872
$150,665
$125,057
TORSTAR CORPORATION 2014 ANNUAL REPORT 74
TORSTAR - Consolidated Financial Statements
10. INTANGIBLE ASSETS
Cost
Balance at December 31, 2012
Acquisitions – business combinations
Additions – internally developed
Additions – purchased
Disposals
Net change related to Intangible assets of
discontinued operations
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions – internally developed
Additions – purchased
Reclassifications¹
Disposals
Balance at December 31, 2014
Amortization and impairment
Balance at December 31, 2012
Amortization
Impairments (note 12)
Disposals
Net change related to Intangible assets of
discontinued operations
Balance at December 31, 2013
Reclassified to Assets held for sale
Amortization
Impairments (note 12)
Reclassifications¹
Disposals
Balance at December 31, 2014
Net book value
At December 31, 2012
At December 31, 2013
At December 31, 2014
Indefinite life
Software
$26,405
$81,195
Finite life
Other
$39,142
46
4,374
6,419
(5,400)
2,421
89,009
(22,562)
66,447
4,381
5,370
(2,420)
$73,778
$47,509
9,104
156
(5,338)
847
52,278
(17,031)
35,247
10,556
175
(2,342)
$43,636
$33,686
$36,731
$30,142
654
27,059
(6,333)
20,726
3,105¹
14,583
$38,414
$1,633
9,276
10,909
10,909
$10,909
$24,772
$16,150
$27,505
(310)
80
38,958
(1,325)
37,633
26
(20,000)
$17,659
$10,125
4,491
3,334
(310)
257
17,897
(1,013)
16,884
2,229
(5,417)
$13,696
$29,017
$21,061
$3,963
Total
Total
$120,337
46
4,374
6,419
(5,710)
2,501
127,967
(23,887)
104,080
4,381
5,396
(20,000)
(2,420)
$91,437
$57,634
13,595
3,490
(5,648)
1,104
70,175
(18,044)
52,131
12,785
175
(5,417)
(2,342)
$57,332
$62,703
$57,792
$34,105
$146,742
46
4,374
6,419
(5,710)
3,155
155,026
(30,220)
124,806
4,381
8,501
(5,417)
(2,420)
$129,851
$59,267
13,595
12,766
(5,648)
1,104
81,084
(18,044)
63,040
12,785
175
(5,417)
(2,342)
$68,241
$87,475
$73,942
$61,610
¹ Metro Trademark acquisition
In October 2011, the Company had entered into a franchise agreement with MISA for which it paid $20.0 million which was
recorded as an intangible asset with a finite useful life to be amortized over the ten-year period of the agreement. In August
2014, the Company terminated the franchise agreement with MISA and on the same date, the Company acquired the Metro
trademark for use in Canada for an additional payment of $3.1 million. The carrying value of the trademark is $17.7 million
comprising the $3.1 million additional payment and the unamortized balance of $14.6 million. The previous amortizable
franchise agreement has been derecognized and has been replaced by a trademark asset with an indefinite useful life.
Intangible assets with an indefinite useful life have been allocated to the following groups of CGUs:
Metroland Media Group
Star Media Group
Harlequin
Total
December 31,
2014
$8,317
19,188
$27,505
December 31,
2013
$8,317
1,500
6,333
$16,150
TORSTAR CORPORATION 2014 ANNUAL REPORT 75
TORSTAR - Consolidated Financial Statements
11. GOODWILL
Balance, beginning of year
Reclassified to Assets held for sale
Impairments (note 12)
Net change related to Goodwill of discontinued operations
Balance, end of year
2014
$533,982
(107,565)
426,417
(82,000)
$344,417
2013
$596,703
596,703
(64,000)
1,279
$533,982
Goodwill acquired in a business combination is allocated to a CGU or groups of CGUs which are expected to
benefit from the synergies of the combination. For internal management purposes, certain CGUs have been
grouped together as goodwill is monitored at the operating segment level.
Goodwill has been allocated to the following groups of CGUs:
Metroland Media Group
Star Media Group
Harlequin
Total
12. IMPAIRMENT OF ASSETS
December 31,
2014
$265,529
78,888
$344,417
December 31,
2013
$258,175
168,242
107,565
$533,982
The Company incurred impairment losses as indicated in the chart below:
Property, plant and equipment (note 9)
Intangible assets (note 10)
Goodwill (note 11)
Investments in joint ventures (note 7)
Impairment Testing
2014
$760
175
82,000
82,935
15,000
$97,935
2013
$328
12,766
64,000
77,094
9,000
$86,094
During the third quarter of 2014, the Company conducted an impairment test on the carrying value of intangible
assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. In carrying out this
testing, it was determined that the carrying amount of goodwill in the Star Media Group of CGUs exceeded the
value in use and the Company recorded an impairment charge of $82.0 million for goodwill in the Star Media
Group of CGUs. This impairment was the result of lower forecasted revenues reflecting continued shifts in
spending by advertisers. The Company also recorded a $15.0 million impairment charge in respect of its joint
venture investment in Workopolis during the third quarter of 2014. This resulted from lower forecasted revenues
attributable to an increase in competition in the online recruitment and job search markets.
The Company performed its annual impairment test in the fourth quarter of 2014. No further impairments were
identified as a result of this test. In its assessment of the recoverable amounts of the Star Media Group of CGUs,
the Company performed a sensitivity analysis of the discount rates. A 0.5% increase in the discount rate and a
0.5% decrease in the perpetual growth rate would have an impact of approximately $5.9 million and $3.7 million
respectively.
TORSTAR CORPORATION 2014 ANNUAL REPORT 76
TORSTAR - Consolidated Financial Statements
2013
In 2013, as a result of the internal reorganization, realignment and integration of certain digital businesses within
the MMG and SMG Segments during 2013, the Company recorded impairments of $2.8 million consisting of $0.2
million for leaseholds, $1.3 million for indefinite-life intangible assets and $1.3 million with respect to finite-life
intangible assets in the Metroland Media Group of CGUs. Impairment charges of $0.6 million were also recorded
during 2013 associated with restructuring activities consisting of $0.2 million for machinery and equipment in the
MMG Segment, and $0.4 million for finite-life intangible assets in the SMG Segment.
During the third quarter of 2013, the Company conducted an impairment test on the carrying value of intangible
assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. In carrying out this
testing, it was determined that the carrying amount of certain intangible assets within the Metroland Media Group
of CGUs and the carrying value of the Star Media Group of CGUs exceeded the value in use. Accordingly, the
Company recorded impairments of $9.7 million comprising $7.9 million for indefinite-life intangible assets and $1.8
million for finite-life intangible assets in the Metroland Media Group of CGUs, and $64.0 million for goodwill in the
Star Media Group of CGUs. These impairments were the result of lower forecasted revenues reflecting shifts in
spending by advertisers. In its assessment of the recoverable amounts of the Star Media Group of CGUs, the
Company performed a sensitivity analysis of the discount rates. A 0.5% increase in the discount rate and a 0.5%
decrease in the perpetual growth rate would have an impact of approximately $6.2 million and $2.3 million
respectively.
As a result of the impairment test and factors noted above, the Company also recorded an impairment of $9.0
million in respect of its joint venture investment in Sing Tao Daily.
These impairments had no effect on the Company’s operations or cash flows. There were no other impairments
or reversals of impairments recorded as a result of the testing.
The after-tax discount and perpetual growth rates used by the Company for the purpose of impairment testing for
each of the groups of CGUs in the following periods were:
Metroland Media Group
Star Media Group
Harlequin
2014
2013
Discount
12.1%
12.5% – 13.9%
n/a
Growth
0.0%
0.0% – 3.0%
n/a
Discount
12.1% – 12.7%
12.5% – 14.5%
11.6% – 12.2%
Growth
0.0%
0.0% – 1.5%
1.0%
These after-tax rates correspond to pre-tax rates in an estimated range of 16% – 18% for 2014 and 2013.
In its assessment of the recoverable amounts of the groups of CGUs, the Company performed a sensitivity
analysis of the discount and perpetual growth rates. The results of the sensitivity analysis show that a reasonable
change to key assumptions would not result in an impairment loss to other groups of CGUs for which no
impairment loss was required.
13. OTHER ASSETS
Portfolio investments
ESPP receivable
Long-term receivables
Other
December 31,
2014
$7,372
266
1,859
$9,497
December 31,
2013
$6,568
350
3,020
1,527
$11,465
TORSTAR CORPORATION 2014 ANNUAL REPORT 77
TORSTAR - Consolidated Financial Statements
14. 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 (recovery) in the consolidated statement
of income
Deferred income tax expense (recovery) in OCI
Income tax expense (recovery) in OCI
Total income tax expense (recovery)
Year ended December 31
2014
2013
$800
(100)
700
1,900
(14,700)
400
(12,400)
($11,700)
(20,304)
(20,304)
($32,004)
$3,700
(3,500)
200
3,400
1,600
5,000
$5,200
42,900
42,900
$48,100
Income taxes of $5.7 million were paid and refunds of $2.8 million were received during the year from continuing
operations (2013 – $1.2 million paid and refunds of $8.5 million received).
Reconciliation of effective tax rate
The combined Canadian federal and provincial statutory rate was 26.5% in 2014 (2013 – 26.5%).
Year ended December 31
2014
2013
Loss before taxes from continuing operations
($61,298)
($52,846)
Provision for income taxes based on Canadian statutory rate of
26.5% (2013 – 26.5%)
Increase (decrease) in taxes resulting from:
Loss of joint ventures and associated businesses not recognized
Non-deductible impairment charges
Prior years’ losses not previously recognized
Excess tax basis over carrying value in investments
Foreign losses not recognized
Non-taxable portion of capital gains
Non-deductible expenses and other permanent differences
Donation of Canadian cultural property
Effect of lower provincial tax rates
Income tax expense (recovery) in the consolidated statement
of income
Effective income tax rate
($16,200)
($14,000)
2,600
21,700
(6,800)
(7,900)
700
900
(200)
(6,000)
(500)
($11,700)
19.1%
1,300
18,300
300
100
(500)
(300)
$5,200
(9.8%)
TORSTAR CORPORATION 2014 ANNUAL REPORT 78
TORSTAR - Consolidated Financial Statements
There were a number of special factors that affected the income tax expense (recovery) from continuing
operations that are not expected to recur. In 2014, the Company recognized losses on impairment of assets of
$82.9 million (2013 – $77.1 million), a substantial portion of which was not deductible for tax purposes.
In 2014, the Company recognized a $6.8 million deferred income tax recovery for capital losses carried forward
from prior years that can be used to reduce the gain realized on the sale of Harlequin, which has been reported in
the Gain on sale and income from discontinued operations. The Company also recognized a $7.9 million
deferred income tax asset for the difference between the tax basis and carrying value of investments that it
expects to realize in the future and carry back to offset the capital gain on the sale of Harlequin.
In June 2014, the Company made a gift of the complete Toronto Star photo archive containing more than one
million vintage photographs from approximately 1900 to 2000 to the Toronto Public Library. An application has
been made to the Canadian Cultural Property Export Review Board to treat this gift as a donation of Canadian
cultural property and to determine its value. The Company has reported an estimated income tax recovery of
$6.0 million in respect of this donation. The estimated recovery will be adjusted based on the final determination
of value.
Excluding the impact of the impairment losses and the recognition of tax recoveries from prior years’ net capital
loss carry forwards, the excess of the tax basis over the carrying value of investments, and the donation of
Canadian cultural property, the Company’s effective tax rate in 2014 would have been 43.0% (2013 – 30.1%).
The Company also recognized income tax expense of $22.6 million in reporting the net income from discontinued
operations, including $17.0 million from the sale of Harlequin (2013 – income tax expense in discontinued
operations of $14.6 million).
Deferred income tax assets and liabilities
Net deferred income tax assets
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred income tax assets and liabilities as at December 31, 2014 and December
31, 2013 are as follows:
Provisions for returns and doubtful accounts
Property, plant & equipment
Intangible assets
Financial instruments
Provision for employee benefit obligations
Share-based payment transactions
Tax losses carried forward
Other
Net deferred income tax assets
Recognized in
net income
from continuing
operations
($498)
1,117
404
(6,352)
546
7,095
10,088
December 31,
2013
$10,166
(7,974)
(10,796)
1,370
11,159
1,269
30,469
(8,725)
Recognized in
OCI from
continuing
operations
($1,096)
21,400
Reclassified
to Assets
held
for sale
($8,148)
(306)
2,983
(274)
(6,257)
(46)
(30,794)
(382)
December 31,
2014
$1,520
(7,163)
(7,409)
19,950
1,769
6,770
981
$26,938
$12,400
$20,304
($43,224)
$16,418
As reported in the consolidated
statement of financial position
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax assets
$51,369
(24,431)
$26,938
$28,126
(11,708)
$16,418
TORSTAR CORPORATION 2014 ANNUAL REPORT 79
TORSTAR - Consolidated Financial Statements
Recognized in
net income
from
continuing
operations
Recognized
in OCI from
continuing
operations
Recognized in
net income and
OCI from
discontinued
operations
December 31,
2012
Foreign
exchange
& other
December 31,
2013
$10,293
(8,280)
(12,186)
1,470
67,068
1,583
30,081
(7,657)
$160
616
1,893
(8,072)
(285)
1,073
(385)
($700)
(42,200)
($667)
(332)
(364)
600
(5,882)
(29)
(2,389)
(137)
$380
22
(139)
245
1,704
(546)
$10,166
(7,974)
(10,796)
1,370
11,159
1,269
30,469
(8,725)
$82,372
($5,000)
($42,900)
($9,200)
$1,666
$26,938
$89,965
(7,593)
$82,372
$51,369
(24,431)
$26,938
Provisions for returns and doubtful
accounts
Property, plant & equipment
Intangible assets
Financial instruments
Provision for employee benefit
obligations
Share-based payment transactions
Tax losses carried forward
Other
Net deferred income tax assets
As reported in the consolidated
statement of financial position
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax assets
Tax losses carried forward
The Company has tax losses available to be carried forward and has recognized a deferred income tax asset in
respect of these losses to the extent that it is probable that they will be utilized before they expire.
At December 31, 2014, the Company had Canadian non-capital losses available for carry forward in continuing
operations of approximately $25.9 million that will expire between 2028 and 2034 for which it is has recognized a
deferred income tax asset of $6.8 million. The Company also recognized a benefit of $6.8 million for capital
losses carried forward of $51.4 million that were used to reduce the capital gain recognized on the sale of
Harlequin. This capital loss arose from the sale of the Company’s 20% interest in CTV Inc. in 2011. Prior to
2014, no deferred tax asset had been recognized in respect of the capital losses carried forward.
At December 31, 2013, the Company had Canadian non-capital losses available for carry forward of
approximately $25.1 million in continuing operations that will expire between 2028 and 2033 for which it had
recognized a deferred income tax asset of $6.5 million. The Company had U.S. net operating losses in
discontinued operations of approximately U.S. $122.8 million that were to expire between 2019 and 2031. A
deferred income tax asset of $24.0 million had been recognized on a portion of these losses. The Company had
other foreign operating losses in the discontinued operations of approximately $3.2 million for which no deferred
tax assets had been recognized. These deferred tax assets for U.S. and other foreign tax losses carried forward
were reclassified to Assets held for sale.
Investments in subsidiaries, associates and joint ventures
As at December 31, 2014, the excess of the tax basis over the carrying value of investments in subsidiaries,
associates and joint ventures for which a deferred income tax asset has not been recognized was $44.7 million.
At December 31, 2013, the excess of the tax basis over the carrying value of investments in subsidiaries,
associates and joint ventures including discontinued operations for which a deferred income tax asset had not
been recognized was $87.7 million.
TORSTAR CORPORATION 2014 ANNUAL REPORT 80
TORSTAR - Consolidated Financial Statements
15. FINANCIAL INSTRUMENTS
(a) 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
Restricted cash (current)
Restricted cash (non-current)
Trade accounts receivable
Other receivables
Receivables
Long-term receivables
December 31,
2014
December 31,
2013
$251,339
16,150
22,750
153,048
9,795
162,843
$19,151
254,223
7,262
261,485
3,020¹
Available-for-sale, measured at fair value:
Portfolio investments
7,372¹
6,568¹
Derivatives designated as effective hedges, measured at fair value:
Foreign currency forward contracts
Interest rate swaps – cash flow hedges
Other financial liabilities, measured at amortized cost:
Bank overdraft
Long-term debt
Accounts payable and accrued liabilities
Provisions (current)
Provisions (non-current)
(911)
(4,125)
(1,741)
(175,898)
(202,888)
(20,807)
(16,251)
(115,717)
(22,583)
(16,774)
¹ These amounts are included in Other assets in the consolidated statement of financial position.
The fair value of financial assets and liabilities by level of hierarchy was as follows:
Measured at fair value:
Portfolio investments
Derivative financial instruments:
Foreign currency forward contracts
Interest rate swaps – cash flow hedges
Disclosed at fair value:
Long-term debt
Call option liability
At December 31, 2014
At December 31, 2013
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$7,372
$6,568
($911)
(4,125)
(175,898)
(11,083)
TORSTAR CORPORATION 2014 ANNUAL REPORT 81
TORSTAR - Consolidated Financial Statements
Changes in the fair value of Level 3 financial instruments were as follows:
Balance, beginning of year
Additions
Disposals
Net gains (losses) included in net income
Exchange differences and OCI
Balance, end of year
(b) Long-term debt
Year ended December 31
2014
$6,568
680
(11)
135
$7,372
2013
$6,899
357
(200)
(562)
74
$6,568
As at December 31, 2014, the Company had no long-term debt (December 31, 2013 – $175.9 million consisting
of $68.7 million in Cdn. dollar denominated bankers’ acceptances and $107.2 million in U.S. dollar denominated
bankers’ acceptances).
(i)
In August 2014, the Company terminated its long-term credit facilities after applying a portion of the proceeds
received from the sale of Harlequin to extinguish the debt. Prior to August 2014, the Company had long-term
credit facilities with a limit of $350 million, which were subject to financial tests and other covenants with
which the Company was in compliance at December 31, 2013.
(ii) The average interest rate on Canadian dollar bank borrowings outstanding at December 31, 2013 was 2.7%.
(iii) In May 2008, the Company entered into two interest rate swap agreements that fixed the interest rate on U.S.
$80 million of borrowings at approximately 4.2% for seven years ending May 2015. These swaps were
designated as cash flow hedges until June 30, 2014 when the Company derecognized the hedges in
connection with the expected sale of Harlequin. In July 2014, the Company extinguished the swaps at a cost
of $2.8 million which has been recorded in Other income (expense) in the consolidated statement of income
(Note 23).
(iv) Bank debt outstanding at December 31, 2013 included U.S. dollar borrowings of U.S. $101.0 million at an
average interest rate of 1.7%. Including the effect of the interest rate swap noted in 15(b)(iii) above, the
effective interest rate at December 31, 2013 was 4.9%.
(c) Interest and financing costs:
Interest on long-term debt
Interest received on short-term investments
Interest accretion costs
Interest – other
Net financing expense relating to employee benefit plans
Year ended December 31
2014
$4,908
(1,394)
310
19
410
$4,253
2013
$7,810
494
(13)
7,769
$16,060
(d) Interest paid during the year ended December 31, 2014 was $5.0 million (2013 – $7.8 million). Interest
received during the year ended December 31, 2014 was $1.4 million (2013 – nil).
(e) Risk management
The Company is exposed to various risks related to its financial assets and liabilities, which include liquidity risk,
credit risk and market risk. These risk exposures are managed on an ongoing basis.
TORSTAR CORPORATION 2014 ANNUAL REPORT 82
TORSTAR - Consolidated Financial Statements
(i) 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 by maintaining sufficient balances in cash and cash
equivalents. At December 31, 2014, the Company had $251.3 million in cash and cash equivalents. Prior to the
receipt of the proceeds from the sale of Harlequin, the Company managed liquidity risk primarily by maintaining
sufficient unused capacity within its long-term credit facilities. At December 31, 2013, the unused capacity net of
letters of credit was approximately $145.0 million.
The maturity profile of the Company’s financial liabilities, based on contractual undiscounted payments, is as
follows:
Accounts payable and
accrued liabilities
Provisions
Total
(ii) Credit risk
2015
2016
2017
2018
2019
2020+
Total
$115,717
22,583
$6,154
$4,977
$2,608
$865
$3,292
$115,717
40,479
$138,300
$6,154
$4,977
$2,608
$865
$3,292
$156,196
In the normal course of business, the Company is exposed to credit risk from its accounts receivable from
customers. The carrying amounts of accounts receivable are net of allowances for doubtful accounts and prior to
the sale of Harlequin, applicable book revenue provisions. Allowances for doubtful accounts are estimated based
on past experience, specific risks associated with the customer and other relevant information.
The Company is exposed to credit risk relating to concentration of cash and cash equivalents. As at December
31, 2014, 87% of the Company’s cash and cash equivalents were held with one Canadian Schedule 1 chartered
financial institution. The Company believes that the credit risk associated with this balance is mitigated by the
financial stability and high credit rating of the financial institution.
The Company is also exposed to credit related losses in the event of non-performance by counterparties to
derivative instruments. Given their high credit ratings, the Company does not anticipate any counterparties failing
to meet their obligations. The Company has a policy, approved by the Board of Directors, of only contracting with
major financial institutions as counterparties.
The maximum exposure to credit risk is the carrying value of the financial assets.
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,
2014
December 31,
2013
$70,016
77,183
11,757
278
159,234
(6,186)
$153,048
$205,488
103,618
21,495
441
331,042
(69,234)
(7,585)
$254,223
TORSTAR CORPORATION 2014 ANNUAL REPORT 83
TORSTAR - Consolidated Financial Statements
The continuity of the allowance for doubtful accounts is as follows:
Balance, beginning of year
Reclassified to Assets held for sale
Utilized
Income statement movements
Net change related to Allowance for doubtful accounts of
discontinued operations
Balance, end of year
(iii) Market risk
Year ended December 31
2014
($7,585)
167
(7,418)
5,946
(4,714)
($6,186)
2013
($7,353)
(7,353)
3,004
(3,166)
(70)
($7,585)
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 was previously exposed to foreign currency risk through Harlequin’s international operations. The
most significant foreign currency exposure was to movements in the U.S. dollar/Cdn. dollar exchange rate. To
manage this exchange risk in its operating results, the Company’s practice was to enter into forward foreign
exchange contracts to hedge a portion of its U.S dollar revenues as detailed below.
The Company entered into forward foreign exchange contracts to allow it to convert a portion of its expected
future U.S. dollar revenue into Canadian dollars, which were designated as cash flow hedges. At December 31,
2013, the forward foreign exchange contracts established a rate of exchange of Canadian dollar per U.S. dollar of
$1.05 for U.S. $40.0 million in 2014 and $1.07 for U.S. $20.0 million in 2015. At June 30, 2014, the Company
derecognized the outstanding contracts as hedges in connection with the expected sale of Harlequin. In July
2014, the Company paid $0.4 million to extinguish the outstanding contracts, which was recorded in discontinued
operations (At December 31, 2013 – the net fair value of these contracts was $0.9 million unfavourable).
In the past, the Company also entered into forward foreign exchange contracts to hedge other currencies (Yen,
Euro, Pound Sterling) realized in Harlequin’s overseas operations. At December 31, 2013, the Company had
forward foreign exchange contracts (which were not designated as cash flow hedges) to convert €8.0 million of its
expected future cash flows in 2014 into Canadian dollars at a rate of exchange of Canadian dollar per Euro of
$1.47. In July 2014, the Company closed the outstanding contracts realizing a gain of $0.1 million, which was
recorded in discontinued operations (At December 31, 2013, the net fair value of these contracts was
approximately nil).
Prior to the sale of Harlequin in August 2014, the Company maintained a certain level of U.S. dollar denominated
debt as indicated in 15(b)(iv) above in order to offset the exchange risk on its consolidated statement of financial
position from net U.S. dollar denominated assets. The Company had 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 were transferred to OCI
to offset any gains or losses on translation of the net investments in subsidiaries with the U.S. dollar as their
functional currency.
With the closing of the sale of Harlequin on August 1, 2014, the Company derecognized the hedge and
transferred the related accumulated loss balance in OCI of $5.8 million into net income.
TORSTAR CORPORATION 2014 ANNUAL REPORT 84
TORSTAR - Consolidated Financial Statements
b.
Interest rate risk
The Company’s interest rate risk arose from borrowings issued at variable rates which exposed the Company to
cash flow interest rate risk. The Company managed this risk through the use of interest rate swap contracts to fix
the interest rate on a portion of the debt as detailed in 15(b)(iii) above.
The Company is currently exposed to interest rate risk on its cash equivalents. An assumed decrease of 1% in
the Company’s short-term investment rates during the year ended December 31, 2014 would have decreased net
income by $0.8 million (2013 – nil), with an equal but opposite effect for an assumed increase of 1% in short-term
investment rates.
16. 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.
Prior to the sale of Harlequin on August 1, 2014, the Company defined capital as total equity, long-term debt and
bank overdraft net of cash and cash equivalents. Capital under management at December 31, 2013 was $955.3
million. After the sale of Harlequin and with the repayment of all outstanding long-term debt, capital under
management is equivalent to total equity, which was $869.7 million at December 31, 2014.
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 is not subject to any external capital requirements.
TORSTAR CORPORATION 2014 ANNUAL REPORT 85
TORSTAR - Consolidated Financial Statements
17. PROVISIONS
Restructuring
Legal
Contingent
consideration
Other
Total
Balance at January 1, 2013
Provisions made during the year
Reversals of provisions during the year
Adjustment to contingent consideration
Provisions paid during the year
Interest accretion
Net change related to Provisions of
discontinued operations
Balance at December 31, 2013
Reclassified to Liabilities associated
with assets held for sale
Provisions made during the year
Reversals of provisions during the year
Adjustment to contingent consideration
Provisions paid during the year
Interest accretion
Balance at December 31, 2014
Current
Non-current
Balance at December 31, 2013:
Current
Non-current
Balance at January 1, 2013:
Current
Non-current
Restructuring
$26,859
34,986
(1,816)
(24,072)
304
389
36,650
(974)
35,676
24,087
(1,487)
(27,735)
277
$30,818
$14,051
$16,767
$20,535
$16,115
$13,295
$13,564
$150
100
250
(150)
100
40
(40)
(100)
$3,359
45
(979)
(2,077)
59
(50)
357
357
(274)
(14)
$69
$62
$7
$250
$150
$221
$136
$2,304
$1,055
$30,368
35,131
(1,816)
(979)
(26,149)
363
339
37,257
(1,124)
36,133
32,877
(1,527)
(274)
(28,129)
277
$39,357
$22,583
$16,774
$21,006
$16,251
$15,749
$14,619
$8,750
(280)
$8,470
$8,470
During the year ended December 31, 2014, the Company recorded restructuring and other charges of $22.6
million, which included restructuring provisions of $22.6 million and other charges of approximately $0.1 million.
Restructuring provisions of $6.9 million were recorded in the MMG Segment and $15.7 million in the SMG
Segment primarily for staff reductions. Other charges of approximately $0.1 million were recorded in respect of
litigation expenses in the MMG Segment.
In 2013, the Company recorded restructuring provisions of $33.2 million, consisting of $11.9 million in the MMG
Segment and $21.3 million in the SMG Segment for staff reductions.
The non-current restructuring provisions are expected to be paid out through 2029.
Legal
The Company is involved in various legal actions, 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.
TORSTAR CORPORATION 2014 ANNUAL REPORT 86
TORSTAR - Consolidated Financial Statements
Contingent consideration
The contingent consideration provision is an estimate of the fair value of contingent consideration for acquisitions,
which are primarily based on revenue and earnings levels estimated to be realized by the acquired businesses for
specified periods following the acquisition.
Other
In connection with the sale of Harlequin, the Company indemnified the Purchaser for costs and fees related to
certain matters including certain tax and pre-existing litigation matters. The Company has assessed the fees that
it may incur as well as the probability of occurrence of any losses in respect of these matters, and estimated the
exposure under these indemnities. The total contingent liability recorded in respect of these matters was $8.8
million and this amount has been included in the determination of the gain on sale of Harlequin.
18. OTHER LIABILITIES
Employees’ shares subscribed (note 21(b))
RSU Plan (note 21(c))
DSU Plan (note 21(e))
Other employment benefits
Lease inducements
Other
19. EMPLOYEE FUTURE BENEFITS
December 31,
2014
December 31,
2013
$1,860
1,867
3,617
1,626
1,026
$9,996
$2,248
1,196
2,867
2,749
1,322
2,043
$12,425
The Company maintains a number of defined benefit plans which provide pension benefits to its employees in the
Province of Ontario. The Ontario registered pension plans are regulated by the Financial Services Commission of
Ontario. Pension benefits are calculated based on a combination of years of service and compensation levels.
The contributions for the most significant plans are based on career average earnings with a base year upgrade.
Pensionable earnings for years of service prior to the base year are calculated using the base year earnings. The
current base year for Canadian plans is 2005. None of the plans include mandatory indexing provisions. The
assets of the funded plans are held by third party trustees. Funding for the plans is comprised of employer and
employee contributions. The determination of the minimum level of Company contributions is calculated using
actuarial valuations that are prepared by independent actuaries based on the provisions in each plan and
legislative regulations. The obligations for unfunded plans are paid when the obligation falls due. All defined
benefit pension plans are closed to new members.
The Company also maintains capital accumulation plans in Canada. Employee contributions are matched by the
Company according to plan formulae and the contributions are held and managed by third party providers. The
Company has no further payment obligations once the matching contributions have been paid.
Post employment benefits other than pensions provide for various health and life insurance benefits to employees
in the newspaper operations hired prior to August 23, 2000. The annual costs are calculated by independent
actuaries and are based on historical and projected usage patterns and costs.
Governance of the above plans is the Company’s responsibility. The Pension Committee of the Company’s
Board of Directors provides oversight of the registered pension plans and capital accumulation plans in Canada.
Information concerning the Company’s post employment benefit plans is as follows:
TORSTAR CORPORATION 2014 ANNUAL REPORT 87
TORSTAR - Consolidated Financial Statements
Net defined benefit plan obligations
Changes to the net defined benefit obligation (asset) were as follows:
At December 31, 2012
Expense recognized in
statement of income:
Salaries and benefits
Restructuring and other
charges
Interest and financing costs
Amounts recognized in OCI
Contributions to plan
Net change related to
Employee benefits of
discontinued operations
At December 31, 2013
Reclassified to Liabilities
associated with assets held
for sale
Liability transferred from
discontinued operations
Expense recognized in
statement of income:
Salaries and benefits
Interest and financing costs
Amounts recognized in OCI
Contributions to plan
At December 31, 2014
Pension plans
Funded
Canada
United States
$169,104
$12,321
Unfunded1
$26,456
Post
employment
benefit plans
$47,553
Total1
$255,434
19,269
744
5,425
25,438
(161,640)
(56,973)
(13,237)
(37,308)
(1,449)
(38,757)
12,498
(2,156)
10,342
77,534
(37,432)
$11,687
(5,978)
6,343
(6,343)
519
359
20,147
526
1,045
(644)
(1,310)
736
26,283
(12,439)
13,844
611
632
601
1,233
1,129
(34)
$16,783
(382)
1,818
1,795
(4,126)
(2,431)
42,791
42,791
300
1,965
2,265
4,933
(2,387)
$47,602
362
7,769
28,278
(166,410)
(60,714)
(18,479)
38,109
(20,231)
17,878
611
13,430
410
13,840
83,596
(39,853)
$76,072
1 As at December 31, 2014, the unfunded pension plan includes an executive retirement plan liability of $16.8 million
(December 31, 2013 – $24.7 million) which is supported by an outstanding letter of credit of $15.6 million (December 31,
2013 – $26.8 million).
A summary of the components of the net defined benefit obligation as at December 31, 2014 and 2013 is as
follows:
2014
Pension plans
Funded
Unfunded
Post employment
benefit plans
Defined benefit obligations
Fair value of plan assets
Net defined benefit obligation
Recorded in:
Assets
Liabilities
$930,398
(918,711)
$11,687
$9,243
20,930
$16,783
$47,602
$16,783
$47,602
$16,783
$47,602
Total
$994,783
(918,711)
$76,072
$9,243
85,315
TORSTAR CORPORATION 2014 ANNUAL REPORT 88
TORSTAR - Consolidated Financial Statements
2013
Defined benefit obligations
Fair value of plan assets
Funded status deficit (asset)
Minimum funding liability
Net defined benefit obligation
(asset)
Recorded in:
Assets
Liabilities
Pension plans
Funded
Canada
$859,832
(900,436)
(40,604)
3,296
United States
$27,509
(21,166)
6,343
Post
employment
benefit plans
$42,791
Unfunded
$26,283
26,283
42,791
Total
$956,415
(921,602)
34,813
3,296
($37,308)
$6,343
$26,283
$42,791
$38,109
$44,532
7,224
$6,343
$26,283
$42,791
$44,532
82,641
The following charts provide a summary of changes in the defined benefit obligation and the fair value of plan
assets during 2014 and 2013:
2014
Pension plans
Funded
Canada
United States
Unfunded
Post
employment
benefit plans
Total
Accrued benefit obligations:
Balance, beginning of year
Reclassified to Liabilities
associated with assets held for
sale
Liability transferred from
discontinued operations
Current service cost
Interest cost
Benefits paid
Remeasurement losses
Participant contributions
Past service cost
Balance, end of year
Plans’ assets:
Fair value, beginning of year
Reclassified to Liabilities
associated with assets held for
sale
Interest income included in net
interest expense
Remeasurement gains
Benefits paid
Employer contributions
Participant contributions
Administration costs
Fair value, end of year
Funded status – deficit
$859,832
$27,509
$26,283
$42,791
$956,415
(48,902)
810,930
(27,509)
(12,439)
13,844
11,773
37,625
(56,385)
122,483
3,920
52
$930,398
$900,436
$21,166
(21,166)
(47,453)
852,983
39,781
41,653
(56,385)
37,432
3,920
(673)
$918,711
$11,687
42,791
300
1,965
(2,387)
4,933
(88,850)
867,565
611
12,548
40,191
(58,806)
128,545
3,920
209
611
475
601
(34)
1,129
157
$16,783
$47,602
$994,783
$921,602
(68,619)
852,983
39,781
41,653
(58,806)
39,853
3,920
(673)
$918,711
($34)
34
($2,387)
2,387
$16,783
$47,602
$76,072
TORSTAR CORPORATION 2014 ANNUAL REPORT 89
TORSTAR - Consolidated Financial Statements
2013
Pension plans
Funded
Canada
United States
Unfunded
Post
employment
benefit plans
Accrued benefit obligations:
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Remeasurement gains
Participant contributions
Past service cost
Special termination benefits
Curtailment gain
Settlement loss
Net change related to Employee
benefits of discontinued
operations
Balance, end of year
Plans’ assets:
Fair value, beginning of year
Interest income included in net
interest expense
Remeasurement gains
Benefits paid
Employer contributions
Participant contributions
Administration costs
Net change related to Employee
benefits of discontinued
operations
Fair value, end of year
$954,239
17,677
34,724
(57,893)
(90,090)
4,447
97
1,026
(625)
343
$28,794
$26,456
519
526
(1,310)
(644)
$47,553
359
1,818
(2,431)
(4,126)
(382)
(4,113)
$859,832
(1,285)
$27,509
736
$26,283
$42,791
$785,135
$16,473
($1,310)
1,310
($2,431)
2,431
29,299
74,846
(57,893)
56,973
4,447
(1,495)
9,124
$900,436
4,693
$21,166
Total
$1,057,042
18,555
37,068
(61,634)
(94,860)
4,447
97
1,026
(1,007)
343
(4,662)
$956,415
$801,608
29,299
74,846
(61,634)
60,714
4,447
(1,495)
13,817
$921,602
Funded status – deficit (asset)
($40,604)
$6,343
$26,283
$42,791
$34,813
Net benefit expense for defined benefit plans recognized in the 2014 and 2013 consolidated statement of income
is as follows:
2014
Current service cost
Net interest expense (income)
Past service cost
Administration costs
Net benefit expense
Funded
$11,773
(2,156)
52
673
$10,342
Pension plans
Post employment
benefit plans
$300
1,965
Unfunded
$475
601
157
$1,233
$2,265
Total
$12,548
410
209
673
$13,840
TORSTAR CORPORATION 2014 ANNUAL REPORT 90
TORSTAR - Consolidated Financial Statements
2013
Pension plans
Funded
Current service cost
Net interest expense
Past service cost
Special termination benefits
Curtailment gain
Settlement loss
Administration costs
Net change related to Employee
benefits of discontinued
operations
Net benefit expense
United States
Unfunded
$519
526
Canada
$17,677
5,425
97
1,026
(625)
343
1,495
Post
employment
benefit plans
$359
1,818
(382)
2,536
$27,974
$1,645
$1,645
920
$1,965
$1,795
Total
$18,555
7,769
97
1,026
(1,007)
343
1,495
5,101
$33,379
Amounts recognized in the 2014 and 2013 consolidated statement of comprehensive income (before tax):
2014
Pension plans
Funded
Unfunded
Post employment
benefit plans
Total
Remeasurement gains (losses):
Actuarial gain (loss) from:
Financial assumptions
Demographic assumptions
Experience adjustment
Total actuarial losses
Return on plan assets excluding
amounts included in net
interest expense
Total remeasurement losses
Change in minimum funding
liability
Amounts recognized in OCI
($90,241)
(27,432)
(4,810)
(122,483)
41,653
(80,830)
3,296
($77,534)
($1,385)
256
(1,129)
($4,715)
(426)
208
(4,933)
(1,129)
(4,933)
($1,129)
($4,933)
($96,341)
(27,858)
(4,346)
(128,545)
41,653
(86,892)
3,296
($83,596)
TORSTAR CORPORATION 2014 ANNUAL REPORT 91
TORSTAR - Consolidated Financial Statements
2013
Pension plans
Funded
Canada
United States
Unfunded
Post
employment
benefit plans
Remeasurement gains (losses):
Actuarial gain (loss) from:
Financial assumptions
Demographic assumptions
Experience adjustment
Total actuarial gains
Return on plan assets excluding
amounts included in net
interest expense
Total remeasurement gains
Change in minimum funding
liability
Net change related to Employee
benefits of discontinued
operations
$94,759
(11,037)
6,368
90,090
74,846
164,936
(3,296)
11,107
Amounts recognized in OCI
$172,747
$829
(303)
118
644
$4,283
(302)
145
4,126
644
4,126
Total
$99,871
(11,642)
6,631
94,860
74,846
169,706
(3,296)
18,136
$6,816
$6,816
213
$857
$4,126
$184,546
The significant assumptions used by the Company in 2014 and 2013 are noted below. Assumptions regarding
future mortality are based on actuarial advice in accordance with published mortality statistics and experience.
For the Canadian plans in 2014, the Company used the 2014 Private Sector Canadian Pensioners’ Mortality
Table projected generationally using scale B with a multiplier applied at December 31, 2014 (for the larger plans,
the multiplier ranged from 94% to 103%). For 2013, mortality was based on 95% of 1994 Uninsured Pensioner
projected generationally using scale AA at December 31, 2013.
To determine benefit obligation at end of year:
Discount rate
Rate of future compensation increase
3.5% to 3.9%
4.2% to 4.7%
2.25% to 2.75% 2.5% to 3.0%
Pension plans
2014
2013
Post employment benefit
plans
2014
3.9%
2013
4.7%
To determine benefit expense:
Discount rate
Rate of future compensation increase
Health care cost trend rates at end of year:
Initial rate
Ultimate rate
Year ultimate rate reached
Longevity for pensioners currently at age 65:
4.2% to 4.7%
2.5% to 3.0%
3.4% to 3.9%
2.5% to 3.0%
4.7%
3.9%
4.4%
5.0%
2017
4.2%
5.0%
2017
Male
Female
21.7 years
24.2 years
20.2 years
22.5 years
TORSTAR CORPORATION 2014 ANNUAL REPORT 92
TORSTAR - Consolidated Financial Statements
The effect of a one percent increase or decrease in significant financial assumptions used for the Company’s
pension and post employment benefit plans would result in an increase (decrease) in the accrued benefit
obligation:
December 31, 2014
December 31, 2013
1% increase
1% decrease
1% increase
1% decrease
Pension plans:
Discount rate
Rate of compensation increase
($117,577)
8,671
$134,666
(8,520)
($114,791)
9,904
$132,275
(9,647)
Post employment benefit plans:
Discount rate
Per capita cost of health care
(5,530)
1,418
6,852
(1,225)
(4,774)
1,160
5,879
(1,005)
For the significant pension plans, the impact of a change in longevity rates if members were one year younger
than their actual age would increase the net benefit obligation by 2.2% (December 31, 2013 – 2.1%).
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions
constant, which in practice is unlikely to occur as changes in some of the assumptions may be correlated. The
calculation of the sensitivities uses the same methods that were applied when calculating the net accrued benefit
obligation in the statement of financial position.
Pension plan assets for the Canadian plans, measured as at December 31, 2014 and 2013 are as follows:
Investments quoted in active markets:
Cash and cash equivalents
Equity investments
Canada
United States
Outside North America
Unquoted investments:
Fixed income
Government of Canada
Provinces of Canada
Canadian Corporations
Pooled funds
Equity – North America
Fixed Income – Canadian Corporations
2014
$31,761
127,446
131,684
79,080
84,442
309,634
64,278
4,033
86,353
$918,711
2013
$30,810
103,899
113,464
82,380
85,551
249,908
68,266
77,414
88,744
$900,436
Pension plan assets for the United States plan (maintained by Harlequin and not included in the 2014 amounts)
were invested in pooled U.S. equity and pooled U.S. fixed income investments with each representing 50% of the
portfolio as at December 31, 2013.
Through its defined benefit plans, the Company is exposed to a number of risks the most significant of which
include changes in long-term discount rates used to calculate plan liabilities, the rate of return on plan assets, and
changes in demographics, mortality and plan experience. These factors impact the potential for inadequate plan
funding, unfunded obligations and increases in contributions.
The Company periodically reviews its targeted investment portfolio mix. At December 31, 2014, the target
allocation mix was 37% equity securities and 63% fixed income securities for the Canadian plans.
The Company’s 2014 actual funding for its Canadian registered pension plans was approximately $37 million
(2013 – $57 million). The Company has prepared actuarial reports as of December 31, 2013 for its significant
TORSTAR CORPORATION 2014 ANNUAL REPORT 93
TORSTAR - Consolidated Financial Statements
plans. Estimated funding in 2015 will be approximately $18 million. The next required actuarial reports will be as
of December 31, 2016.
The weighted average duration of the defined benefit obligation is 13.5 years (2013 – 12.9 years). As at
December 31, 2014, the expected maturity profile of the undiscounted pension plan and post-employment
benefits is $48 million in the next year, $460 million in 2 to 10 years and $1,200 million in over 10 years
(December 31, 2013 – $50 million in the next year, $450 million in 2 to 10 years and $1,200 million in over 10
years for continuing operations).
Capital accumulation plans
The total amount expensed for capital accumulation plans in 2014 was $2.2 million (2013 – $1.8 million).
20. 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.
(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
2014
2013
Shares
Amount
Shares
Amount
9,853,814
(1,850)
9,851,964
$2,677
(1)
$2,676
9,861,554
(7,740)
9,853,814
$2,679
(2)
$2,677
70,064,699
1,850
97,859
91,230
97,938
1,725
70,355,301
$395,928
1
649
589
721
13
$397,901
69,882,308
7,740
71,571
101,030
2,050
70,064,699
$394,746
2
457
710
13
$395,928
Total Class A and Class B shares
80,207,265
$400,577
79,918,513
$398,605
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.
TORSTAR CORPORATION 2014 ANNUAL REPORT 94
TORSTAR - Consolidated Financial Statements
(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
2014
80,078
169
7
80,254
2013
79,840
79,840
Year ended December 31
Outstanding stock options totaling 3,044,705 (2013 – 4,267,450), which are anti-dilutive have been excluded
from the above calculation of dilutive securities.
(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: 13.125 cents (2013 – 13.125 cents)
Second quarter ended June 30: 13.125 cents (2013 – 13.125 cents)
Third quarter ended September 30: 13.125 cents (2013 – 13.125 cents)
Fourth quarter ended December 31: 13.125 cents (2013 – 13.125 cents)
Total dividends
Year ended December 31
2013
$10,466
10,482
10,484
10,486
$41,918
2014
$10,489
10,516
10,521
10,523
$42,049
21. SHARE-BASED COMPENSATION PLANS
(a) Share option plan
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. As of December 31, 2014, options to purchase 10,697,283 shares have been granted, net of
options cancelled (December 31, 2013 – 10,114,677).
TORSTAR CORPORATION 2014 ANNUAL REPORT 95
TORSTAR - Consolidated Financial Statements
A summary of changes in the share option plan is as follows:
Units outstanding, beginning of year
Granted
Exercised
Forfeited or expired
Units outstanding, end of year
2014
2013
Share options
4,267,450
1,066,416
(97,938)
(483,810)
4,752,118
Weighted
average
exercise price
$12.18
$5.85
($6.25)
($21.88)
$9.89
Share options
3,865,831
835,752
(434,133)
4,267,450
Weighted
average
exercise price
$14.12
$7.81
($21.11)
$12.18
The weighted average share price when the options were exercised during 2014 was $7.53.
As at December 31, 2014, outstanding share options were as follows:
Range of
exercise price
$5.75 – 8.37
$12.21 – 19.61
$21.85 – 29.01
$5.75 – 29.01
Share
options
outstanding
Weighted average
remaining
contractual life
Weighted
average
exercise price
Share
options
exercisable
Weighted
average exercise
price
3,523,922
817,780
410,416
4,752,118
7.1 years
4.4 years
0.5 years
6.6 years
$7.17
$15.52
$22.07
$9.89
1,752,333
718,569
410,416
2,881,318
$7.33
$15.97
$22.07
$11.58
The fair value of the share options on the date of grant and the key assumptions used are as follows:
Fair Value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected weighted average time until exercise (years)
2014
$1.14 – $1.23
1.9% – 2.2%
9.0%
38.8% – 41.2%
6
2013
$1.42 – $1.71
1.5% – 1.7%
6.7%
38.5% – 44.4%
6
In January 2015, 1,406,876 share options were granted at an exercise price of $6.52 per share.
(b) ESPP
As at December 31, outstanding employee subscriptions were as follows:
Maturing in
Subscription price at entry date
Number of shares
2014
2013
2015
$6.38
155,063
2016
$7.65
113,805
2014
$10.10
110,068
2015
$6.38
178,092
The fair value of the subscriptions on the subscription date and the key assumptions used are as follows:
Fair Value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
2014
$0.71
1.0%
8.2%
31.0%
2
2013
$0.55
1.0%
8.2%
28.0%
2
TORSTAR CORPORATION 2014 ANNUAL REPORT 96
TORSTAR - Consolidated Financial Statements
(c) RSU plan
A summary of changes in the RSU plan is as follows:
Units outstanding, beginning of year
Vested and paid
Granted
Forfeited
Units outstanding, end of year
2014
634,983
(146,805)
366,994
(27,236)
827,936
2013
575,204
(234,165)
316,336
(22,392)
634,983
As at December 31, 2014, 477,470 units have been accrued at a value of $3.1 million of which 191,181 units
have been accrued in Accounts payable and accrued liabilities at a value of $1.2 million and 286,289 units
have been accrued in Other liabilities at a value of $1.9 million (December 31, 2013 – 336,833 units had been
accrued at a value of $2.0 million of which 132,577 units were accrued in Accounts payable and accrued
liabilities at a value of $0.8 million and 204,256 units were accrued in Other liabilities at a value of $1.2
million).
The Company has entered into a derivative instrument in order to hedge the expense for 670,000 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 RSUs are accrued over the three-year vesting
period, there is not an exact offset each period.
In January 2015, 256,858 RSUs have been granted and 191,181 RSUs have vested and were paid.
(d) In 2014, the Company recognized share-based compensation expense totaling $2.2 million (2013 - $2.7
million).
(e) DSU plan
A summary of changes in the DSU plan is as follows:
Units outstanding, beginning of year
Granted
Directors’ mandatory retainer
Directors’ voluntary election
Dividends
Redemption
Units outstanding, end of year
2014
490,130
67,308
2,902
8,482
38,035
(51,981)
554,876
2013
399,890
53,404
6,273
11,371
36,395
(17,203)
490,130
As at December 31, 2014, the 554,876 units outstanding were valued at $3.6 million (December 31, 2013 –
490,130 units valued at $2.9 million).
The Company has entered into a derivative instrument in order to offset its exposure to 490,000 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 DSUs.
TORSTAR CORPORATION 2014 ANNUAL REPORT 97
TORSTAR - Consolidated Financial Statements
22. ACCUMULATED OTHER COMPREHENSIVE LOSS (NET OF TAX)
Foreign currency
translation
adjustment
As at January 1, 2013
OCI
As at December 31, 2013
Associated with assets held for sale
OCI
As at December 31, 2014
($5,393)
6,976
1,583¹
(1,673)
(90)
111
$21¹
1Net of deferred income tax asset of $nil (2013 – $nil)
²Net of deferred income tax asset (2013 – $1,370)
³Net of current income tax recovery (2013 – $nil)
23. OTHER INCOME (EXPENSE)
Cash flow
hedges
($4,276)
610
(3,666)²
637
(3,029)
3,029
Available-
for-sale
securities
Net
investment
hedge
($6)
6
($24)
(5,496)
(5,520)³
(5,520)
5,520
Total
($9,699)
2,096
(7,603)
(1,036)
(8,639)
8,660
$21
Gain on sale of Tuango
Gain on sale of available-for-sale investment
Gain on settlement of Metro call option liability
Loss on cancellation of interest rate swaps (note 15(b)(iii))
Adjustment to contingent consideration (note 17)
Investment write-down and loss
Other
Total
Gain on sale of Tuango
2013
Year ended December 31
2014
$4,463
736
1,051
(2,781)
274
$74
979
(562)
11
$3,754
$491
On October 16, 2014, the Company sold its 38.2% interest in Tuango for proceeds of $7.6 million and recorded a
gain of $4.5 million (including $0.3 million from the reversal of an expired option liability).
Gain on sale of available-for-sale investment
During 2014, the Company received proceeds of $0.7 million and recorded a gain of $0.7 million from the sale of
an available-for-sale equity investment (2013 – received proceeds of $0.3 million and recorded a gain of $0.1
million).
Metro call option liability
In March 2014, the Company and MISA agreed to an early settlement of the put and call arrangements between
them in connection with the remaining 10% interest in Metro English Canada, which was owned by MISA, at a
price of $10.1 million. The put and call arrangements were both exerciseable at the same fixed price of $11.2
million starting in October 2014. The Company recorded a gain of $1.1 million on the transaction.
TORSTAR CORPORATION 2014 ANNUAL REPORT 98
TORSTAR - Consolidated Financial Statements
24. GAIN ON SALE AND DISCONTINUED OPERATIONS
On May 1, 2014, the Company entered into an agreement to sell all of the shares of Harlequin (which previously
represented the Company’s Book Publishing Segment) to a division of HarperCollins Publishers L.L.C., a
subsidiary of News Corp. (the “Purchaser”). Effective April 1, 2014, Harlequin (including its respective interests in
joint ventures) was classified as Assets held for sale in the consolidated statement of financial position.
Harlequin’s operating results (for the seven months to July 31, 2014) are presented as a discontinued operation in
the consolidated statements of income, comprehensive income and cash flows and all comparative figures have
been restated to reflect this change.
On August 1, 2014, the Company sold all of the shares of Harlequin for a purchase price of $455 million subject to
certain adjustments for working capital and other related items. The Company received net proceeds of $442.2
million resulting in a pre-tax gain of $224.6 million for the year ended December 31, 2014. The proceeds included
restricted cash of $22.8 million which will be held in an escrow account for a period of eighteen months from the
date of sale to indemnify the Purchaser for any claims arising in accordance with the conditions specified in the
share purchase agreement.
Upon the closing of the sale, the net assets of Harlequin were derecognized from Assets held for sale and the
related gain on disposal was included in discontinued operations. Certain intercompany eliminations have been
reversed in the amounts presented in order to accurately represent the continuing and discontinued operations.
The detailed results of discontinued operations are presented below:
(i) Statement of Income
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Operating profit
Interest and financing costs
Foreign exchange
Income from joint ventures
Other expense
Gain on sale of Harlequin
Income before taxes from discontinued operations
Income and other taxes
Year ended December 31
2014
$213,198
(58,403)
(134,796)
(1,043)
(5)
18,951
(457)
4,090
639
(2,629)
20,594
224,618¹
245,212
(22,550)²
2013
$373,018
(91,312)
(227,595)
(4,038)
(4,049)
46,024
(1,400)
(320)
1,155
(226)
45,233
45,233
(14,600)
Net income from discontinued operations
$222,662
$30,633
Attributable to:
Equity shareholders
$222,662
$30,633
Net income from discontinued operations attributable to equity
shareholders per Class A (voting) and Class B (non-voting)
share (note 20(c)):
Basic and Diluted
$2.78
$0.38
¹ These amounts include transaction and other costs of $9.6 million related to the sale of Harlequin.
² Income taxes related to the sale of Harlequin of $17.0 million are included in these amounts. Deferred tax benefits totalling
$14.7 million not related to Harlequin have been used to offset this expense.
TORSTAR CORPORATION 2014 ANNUAL REPORT 99
TORSTAR - Consolidated Financial Statements
(ii) Statement of Comprehensive Income
Net income from discontinued operations
Other comprehensive income (loss) that are or may be reclassified
subsequently to net income (loss):
Year ended December 31
2014
2013
$222,662
$30,633
Realized foreign currency translation adjustment for joint ventures (no income
tax effect)
461
Unrealized foreign currency translation adjustment for joint ventures (no
income tax effect)
Realized foreign currency translation adjustment (no income tax effect)
(2,134)
Unrealized foreign currency translation adjustment (no income tax effect)
Net movement on cash flow hedges
Income tax effect
Loss on cash flow hedges transferred to net income
Income tax effect
Other comprehensive income (loss) that will not be reclassified to net income
(loss) in subsequent periods:
Actuarial gain (loss) on employee benefits
Income tax effect
Other comprehensive income (loss) from discontinued operations, net
of tax
911
(274)
(1,036)
(8,371)
2,432
(5,939)
($6,975)
Comprehensive income from discontinued operations, net of tax
$215,687
54
240
6,616
(2,183)
600
5,327
18,136
(5,400)
12,736
$18,063
$48,696
Attributable to:
Equity shareholders
$215,687
$48,696
TORSTAR CORPORATION 2014 ANNUAL REPORT 100
TORSTAR - Consolidated Financial Statements
(iii) Statement of Cash Flows
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase (decrease) in cash
Effect of exchange rate changes
Cash, beginning of period
Cash paid on closing
Cash, end of period
Operating activities:
Net income
Gain on disposal of Harlequin
Amortization and depreciation
Deferred income taxes
Loss (income) from joint ventures
Distributions from joint ventures
Non-cash employee benefit expense
Employee benefits funding
Other
Decrease in non-cash working capital
Cash provided by (used in) operating activities of discontinued operations
Investing activities:
Additions to property, plant and equipment and intangible assets
Acquisitions and investments
Other
Cash used in investing activities of discontinued operations
Financing activities:
Intercompany dividends paid
Intercompany
Cash provided by (used in) financing activities of discontinued operations
Cash of discontinued operations represented by:
Cash equivalents – short-term deposits
Bank overdraft
Cash, end of period
25. ACQUISITIONS AND INVESTMENTS
2014 Acquisitions
Year ended December 31
2014
2013
$8,635
(1,609)
21,311
28,337
403
(9,132)
19,608
(19,608)
$222,662
(207,618)
1,043
3,765
(639)
1,710
4,826
(15,255)
(5,301)
5,193
3,442
$8,635
($1,720)
111
($1,609)
($4,238)
25,549
$21,311
$40,863
(5,596)
(102,508)
(67,241)
568
57,541
(9,132)
($9,132)
$30,633
4,038
4,400
(1,155)
2,199
5,101
(6,518)
(2,115)
36,583
4,280
$40,863
($5,546)
(50)
($5,596)
($44,480)
(58,028)
($102,508)
$2,940
(12,072)
($9,132)
During the year ended December 31, 2014, the Company made deferred purchase payments of $10.1 million
related to the SMG Segment in respect of its prior acquisition of Metro English Canada. The Company also made
portfolio investments for cash of $0.7 million including an additional investment of $0.6 million in TeamSnap, Inc.
maintaining the Company’s interest at 7.2%.
Total cash used for acquisition and portfolio investments in 2014 was $10.8 million.
The fair value of assets acquired and liabilities assumed from the acquisition and investments completed are as
follows:
TORSTAR CORPORATION 2014 ANNUAL REPORT 101
TORSTAR - Consolidated Financial Statements
2014
SMG
Segment
SMG
Segment
2013
MMG
Segment
Assets:
Finite-life intangible assets (note 10)
Total purchase price
Contingent consideration
Cash consideration paid
Deferred payments on prior acquisitions (note 23)
Contingent consideration on prior acquisitions (note 17)
Investments
$10,065
14
10,079
680
$46
46
(45)
1
1
357
$2,077
2,077
Total
$46
46
(45)
1
2,077
2,078
357
Total cash used in acquisitions and investments
$10,759
$358
$2,077
$2,435
2013 Acquisitions
During the year ended December 31, 2013, the Company completed an acquisition in its SMG Segment with a
purchase price of approximately $0.1 million, which was the estimated fair value of contingent consideration. The
Company also made portfolio investments for cash of approximately $0.4 million which included an additional
investment of approximately $0.3 million in Kanetix Inc., bringing the Company’s interest to 11.7%.
In addition, the Company made payments of $2.1 million for contingent consideration in respect of prior year
acquisitions in the MMG Segment (WagJag and Foodscrooge).
Total cash used for acquisition and portfolio investments in 2013 was $2.4 million.
The acquisition made was in respect of Inside Queen’s Park (an electronic newsletter with a focus on Queen’s
Park) on December 31, 2013. This acquisition did not contribute any revenue or operating profit in the SMG
Segment in 2013. If the acquisition had occurred on January 1, 2013, the Company’s consolidated revenues and
operating loss would have been $936.1 million and $34.7 million respectively, for continuing operations.
26. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Year ended December 31
Share-based compensation plans
Foreign exchange
Restructuring provisions
Gain on sale of assets (note 23)
Gain on Metro call option liability (note 23)
Media inventory provided to Shop.ca (note 8)
Interest accretion (note 15(c))
Adjustment to contingent consideration (note 17)
Investment write-down and loss (note 23)
Other
2014
$2,674
7,656
641
(5,199)
(1,051)
310
(274)
(874)
$3,883
2013
$998
1,186
1,981
(74)
(965)
494
(979)
562
(1,705)
$1,498
27. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed sub-lease payments to a third party of approximately U.S. $1 million per year,
ending December 31, 2018. The sub-lease is collateralized by a U.S. $0.7 million irrevocable letter of credit
provided on behalf of the sub-lessee.
TORSTAR CORPORATION 2014 ANNUAL REPORT 102
TORSTAR - Consolidated Financial Statements
Along with the other shareholders of Kanetix Ltd., the Company has pledged its shares in Kanetix in support of
the Kanetix credit facility.
In addition, the Company has the following significant contractual obligations:
Nature of the Obligation
Office leases
Services
Total
Total
$68,708
11,029
$79,737
2015
2016 - 2017
2018 - 2019
$13,474
3,146
$16,620
$26,740
4,263
$31,003
$21,431
3,020
$24,451
2020+
$7,063
600
$7,663
Receivable from office sub-leases
($5,113)
($1,466)
($3,015)
($632)
28. RELATED PARTY TRANSACTIONS
The aggregate amounts of remuneration for the Company’s key management (including directors), recognized in
the consolidated statement of income and OCI, are set out below:
Salaries and benefits
Post-employment benefits
Share based payments
Other long-term benefits
Total
Year ended December 31
2014
$7,160
3,122
1,915
(112)
$12,085
2013
$6,291
(296)
2,513
(56)
$8,452
The following summarizes the sales to, purchases from and amounts owed to and by the Company’s joint
ventures and associates:
Joint Ventures
2014
2013
Associates
2014
2013
Sales to
Purchases from
Amounts owed by
Amounts owed to
$510
472
219
1,239
$237
306
8,731
9,123
$102
224
$8
18
1,105
1,044
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.
29. SUBSEQUENT EVENTS
Subsequent to December 31, 2014, the Company received certification from the Ontario Media Development
Corporation that digital media tax credits for the year ended December 31, 2010 were eligible to be claimed. The
claim, which will be subject to audit by the Canada Revenue Agency, primarily relates to the recovery of
previously recognized compensation expenses. As a result, the Company expects to record a recovery in
compensation expense in the range of $5 million to $7 million in 2015 related to this claim.
In March 2015, the Company signed definitive documents with La Presse Ltée in respect of a new tablet product
for the Toronto Star. This product is currently expected to launch in the fall of 2015.
TORSTAR CORPORATION 2014 ANNUAL REPORT 103
Board of directors
John A. Honderich
Chair, Torstar Corporation
Former Publisher, Toronto Star
Director since 2004
Campbell R. Harvey
Professor of Finance,
Duke University
Director since 1992
Martin E. Thall
President and Chief Executive Officer
Thall Group of Companies
Director since 2002
Elaine B. Berger
Corporate Director
Director since 2006
Daniel A. Jauernig
Executive Vice-President
Element Financial Corporation
Director since 2009
Joan T. Dea
Corporate Director
Director since 2009
TORSTAR CORPORATION 2014 ANNUAL REPORT 104
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Board of directors
Alnasir Samji
Managing Principal, 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 Emerita, University of Alberta
Former Publisher, Edmonton Journal
Director since 2010
Dorothy Strachan
Partner, Strachan-Tomlinson Inc.
Director since 2013
TORSTAR CORPORATION 2014 ANNUAL REPORT 104
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N OT E S
TORSTAR CORPORATION 2014 ANNUAL REPORT 106
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TRANSFER AGENT & REGISTRAR
CST Trust Company
P.O. Box 700
Postal Station B
Montreal, QC
H3B 3K3
AnswerLine (416) 682-3860 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
CORPORATE OFFICE
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
JENNIFER BARBER
Senior Vice-President
Finance
CHRIS GOODRIDGE
Senior Vice-President
Strategy and Digital Ventures
D. TODD SMITH
Treasurer
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TORSTAR CORPORATION 2014 ANNUAL REPORT PB