2015
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OPERATING RESULTS ($000)
2015
2014 (1)
Operating revenue
$786,631
$858,134
Adjusted EBITDA (2)
51,412
Operating earnings (2)
21,235
Operating loss
Net income (loss)
Cash from operating activities
(354,069)
(404,837)
38,050
Adjusted EBITDA – Percentage of revenue (2)
6.5%
92,070
61,396
(44,185)
173,064
63,358
10.7%
Cash from operating activities –
percentage of average equity
PER CLASS A AND CLASS B SHARES
Net income (loss)
Dividends
5.9%
7.6%
($5.02)
$0.5250
$2.16
$0.5250
Price range (high/low)
$7.50/$2.55
$8.47/$4.96
FINANCIAL POSITION ($000)
Cash and cash equivalents and restricted cash
$73,076
$290,239
Equity
$419,737
$869,720
The Annual Meeting of shareholders will be held Wednesday, May 4, 2016 at The Toronto Star Building,
3rd Floor Auditorium, One Yonge Street, Toronto, beginning at 10 a.m. It will also be webcast live on the Internet.
Operating revenue ($millions) (1)
operating EARninGs ($millions) (1, 2)
13
14
15
936
858
787
13
14
15
21
76
61
nET inComE (loss) PER sHARE
ADJUsTED EBiTDA ($millions) (1, 2)
(0.35)
13
14
15
(5.02)
2.16
13
14
15
108
92
51
(1) These figures reflect the classification of Harlequin into discontinued operations.
(2) These are non-IFRS measures. These along with other Non-IFRS measures appear in the President’s message. Refer to page 38 for a reconciliation of IFRS measures
(excluding VerticalScope’s adjusted EBITDA to operating profit (loss)), VerticalScope’s Adjusted EBITDA has been calculated as total revenue, less salaries and benefits
and operating costs, as presented on VerticalScope’s consolidated statement of income, and excludes amortization, depreciation, and interest expense. It also excludes
transaction related costs associated with Torstar’s investment as well as certain tax credits. Adjusted EBITDA is not the actual cash provided by VerticalScope’s operating
activities and is not a recognized measure of financial performance under IFRS. Adjusted EBITDA does not have any standardized meaning under IFRS and accordingly may
not be comparable to measures used by other companies, including how Torstar presents its own Adjusted EBITDA.
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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(1) These figures reflect the classification of Harlequin into discontinued operations.
(2) These are non-IFRS measures. Refer to page 38 for a reconciliation to operating profit (loss).
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”.
M e s s a g e f r oM t h e C h a i r
John Honderich
Chair, Board of Directors
2015 was a year of reinvestment and innovation for Torstar as the company charted a new course for sustainability over the
years ahead.
The first significant development came with the purchase of a 56-per-cent interest in VerticalScope Holdings Inc., a digital
media company that owns and operates more than 600 consumer enthusiast websites across North America. Torstar made
the investment using a portion of the proceeds from its sale of Harlequin the year before to Harper Collins Publishers. With a
proven record already of profitability and growth, VerticalScope is seen as an engine of growth for Torstar with the potential
to expand even more.
The second major development was the introduction by the Toronto Star of Toronto Star Touch, an innovative and fully
interactive news app designed for tablets that revolutionizes how readers get their news. Styled after the highly successful app
already in use by Montreal’s La Presse, Toronto Star Touch was rated one of the best apps of 2015 by Apple.
On the editorial side, both the Toronto Star and Metroland newspapers continued their traditions of high quality of editorial
content, innovative story-telling and ground-breaking investigations. The Toronto Star maintained its lead as this country’s
most-read print newspaper.
During the year the company also took some major steps to reduce costs as the relentless pressure of the internet combined
with falling newspaper advertising revenues continued to buffet the company. Among these were decisions announced in early
2016 to close the Vaughan Press Centre, shut down the print version of the Guelph Mercury and reduce staff levels across both
newspaper groups. Torstar has benefited tremendously by the dedication and effort of its employees and we wish particularly
to thank those who served and are no longer with us. Their efforts will not be forgotten.
The company has also been served tremendously by the senior executive team that has diligently and wisely directed the
reinvestment and innovation strategy. Leading the team is President and Chief Executive Officer David Holland, very ably
assisted by Chief Financial Officer and Executive Vice-President Lorenzo DeMarchi. Both, along with Senior Vice-President
Strategy and Digital Ventures Chris Goodridge, were instrumental in the VerticalScope selection and eventual purchase.
Also providing strategic and operation expertise in 2015 were Ian Oliver, President of Metroland Media Group and John
Cruickshank, Publisher of the Toronto Star and President of Star Media Group, who has announced he will be stepping down
in May, 2016. Ever since John took over as Publisher in 2009 he has led the Toronto Star to new editorial heights. At the same
time, he has wisely and innovatively guided Star Media Group through one of the most tumultuous periods in its history. We
owe him a great deal.
Finally, Torstar has the good fortune to have a totally engaged, strategic and responsive Board of Directors. The directors’
combined knowledge and perspective were called upon repeatedly as we charted a new path. We were also pleased to
announce the appointment of Daryl Aitken as a new director. With her marketing, advertising and digital experience, she brings
unique skills to the Board.
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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
There has never been a time of such rapid change and evolution in the
media industry as we are experiencing today. And in this fast-changing
era, Torstar is in the midst of a meaningful transition, taking the steps
necessary to position ourselves for a more digital future. We do not expect
this transition to be easy, but we do believe it will ultimately be proved
worthwhile.
providing a deeper level of engagement and immersion as compared
to a desktop experience. As part of Star Media Group’s broader multi-
platform strategy, this initiative is proving to be a tremendous catalyst
for change within the organization as we develop our screen-based story-
telling capability, furthering our commitment to serving our audiences
and advertisers in innovative ways.
Over the past 21 months, Torstar’s asset base has been repositioned
significantly. In August 2014, we closed the sale of Harlequin Enterprises
Limited for $455 million. We came to a view that the value of Harlequin to
a larger publisher exceeded the value of Harlequin within Torstar. We acted
on our conviction. For the year following the sale, we assessed a number of
options to employ the financial capacity created from this transaction. We
were delighted on July 29, 2015 to announce our acquisition of a 56-per-
cent interest in VerticalScope Holdings Inc., a digital media company
that has expertise in programmatic advertising and owns and operates
more than 600 consumer enthusiast online forums and premium content
sites across North America. At $180 million, VerticalScope represents a
very significant investment for Torstar. The company is vertically focused
and its sites attract more than 80 million monthly unique visitors across
desktop, mobile and tablet platforms. Through its network of user forums
and premium content sites, the company offers advertisers across
North America access to large audiences in popular verticals, including
automotive, powersports, outdoors, home and health.
VerticalScope is a Canadian success story, with a proven track record of
growth and profitability over the past five years and is well positioned to
build on that record. We are very pleased to partner with Rob Laidlaw, the
company’s talented founder and CEO, as the company pursues its next
stage of growth. The company should continue to benefit from the shifts
occurring in advertising spending, including the growth in advertising in
areas such as social media, programmatic and mobile. The company’s
commitment and expertise in the development of audience has been a
critical element in the success it has enjoyed and its platform supports the
daily interaction of millions of registered users. This investment fulfilled
our objective of allocating significant capital to a high-growth opportunity.
We are also pleased that the investment results in exposure to the U.S.
economy, introducing geographic diversification to our earnings base.
Our commitment to transformation goes beyond the repositioning of our
asset base and also extends throughout our operations.
At Star Media Group, evidence of this commitment was the launch of
Toronto Star Touch in September 2015. Toronto Star Touch is an innovative
tablet offering based on a product that has been successfully launched
in the Quebec market by La Presse. Our vision is to create a compelling
edition of the Toronto Star that reaches a broader audience and engages
them in new ways. We are dramatically changing our storytelling approach
and showcasing stories in a more interactive way than ever before,
In our Metroland Media Group operation, we have a meaningful
connection to the communities we serve through publishing and delivery
of community newspapers to households throughout Ontario. We are
gaining momentum in building deeper digital connections to audience
and advertisers in these communities. We are committed to building
across print and digital platforms and evolving into the community media
and marketing solutions organization of the future.
Operating reSuLtS
Affected by the continued pressures on print advertising, particularly
national, and the start-up investment in Toronto Star Touch, segment
adjusted EBITDA was $67 million, down $35 million compared to the
prior year. In our first five months of ownership, we are very pleased with
VerticalScope’s performance. Its adjusted EBITDA grew by more than
20% versus prior year.
Torstar closed the year in a solid financial position. At December 31, 2015,
Torstar had cash and cash equivalents, including restricted cash, of $73
million.
We continue to carefully manage our pension plans and our funding
requirements are locked in through the fall of 2017. On a solvency basis,
our deficit position improved slightly through 2015. We are taking a
cautious approach to asset mix, with only 27% of the asset base in the
equity market. An increase in rates to more normal levels would have a
positive effect on the condition of the plans.
Our operations are comprised of Star Media Group, Metroland Media
Group and Digital Ventures. With the acquisition of VerticalScope in
the third quarter of 2015, we created a Digital Ventures segment which
includes our 56-per-cent interest in VerticalScope, eyeReturn and our
50-per-cent interest in Workopolis.
Across our media operations, Star Media Group and Metroland Media
Group, we 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.
At Star Media Group, adjusted EBITDA of $18 million was down $27
million; revenue was down 11% to $344 million. Approximately half of
the decline in EBITDA was attributable to the start-up investment in
Toronto Star Touch. The remaining half was attributable to declining
print advertising revenues. The revenue decline was mitigated in part
by ongoing efforts to reduce costs. Toronto Star subscriber revenues
continue to remain relatively stable.
The Toronto Star, our flagship publication, enjoyed successes on a number
of fronts. In addition to launching Toronto Star Touch, the Toronto Star
continued its tradition of editorial excellence in the print edition and
maintained a lead of more than twice as many weekday readers as its
closest paid daily competitor in the Greater Toronto Area. In addition,
thestar.com had 2.9 million average monthly unique desktop visitors and
an increasingly important growth in mobile and tablet audience.
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
committed to building value in the Metro franchise.
Metroland Media Group is a leading community media company with a
long tradition of offering great services to its customers and of striving to
make a difference in communities it serves. Metroland Media publishes
in print and digital in two daily papers and more than 100 community
newspapers across Ontario and operates successful flyer distribution
networks, magazines, consumer shows and numerous digital operations.
At Metroland Media Group, adjusted EBITDA in the year was $49 million,
down $19 million from prior year; revenue was down 8% to $447 million.
Print advertising revenues were down 10% in the year.
As in previous years, our newspapers and digital businesses were
recognized for outstanding editorial, advertising and marketing efforts.
Both the Toronto Star and The Hamilton Spectator won two National
Newspaper Awards, considered among the most prestigious media
honours in the country. Toronto Star journalist Vinay Menon won in the
Arts and Entertainment category and the team of Paul Hunter, Jim Rankin,
Steve Russell and Jim Coyle were honoured in the Sports category.
The Hamilton Spectator’s Teri Pecoskie won in the Multimedia Feature
category and Jon Wells won in the Investigative category.
In addition, Metroland community newspapers won 86 editorial awards
presented in 2015 by the Local Media Association (LMA). This was the
third straight year that Metroland has topped all newspaper companies in
North America in this important award contest. Metroland also won the
most awards in the LMA’s Best in Digital Contest, with durhamregion.com
earning first-place awards in the Best Community Website category and
the Best Use of Social Media category.
The newly created Digital Ventures segment made a meaningful
contribution in 2015. The results benefited from the part-year inclusion
of VerticalScope in 2015. Segmented adjusted EBITDA was $11 million,
up $7 million versus prior year. This increase over prior year is wholly
attributable to VerticalScope as the inclusion of its results offset declining
results in the other operations within the segment.
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million; revenue was down 11% to $344 million. Approximately half of
the decline in EBITDA was attributable to the start-up investment in
Toronto Star Touch. The remaining half was attributable to declining
print advertising revenues. The revenue decline was mitigated in part
by ongoing efforts to reduce costs. Toronto Star subscriber revenues
continue to remain relatively stable.
Torstar also has a number of minority investments in associated
businesses, including an approximate 21-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 progress in 2015 and remain
confident in the company as it focuses on global growth opportunities
moving forward.
The Toronto Star, our flagship publication, enjoyed successes on a number
of fronts. In addition to launching Toronto Star Touch, the Toronto Star
continued its tradition of editorial excellence in the print edition and
maintained a lead of more than twice as many weekday readers as its
closest paid daily competitor in the Greater Toronto Area. In addition,
thestar.com had 2.9 million average monthly unique desktop visitors and
an increasingly important growth in mobile and tablet audience.
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
committed to building value in the Metro franchise.
Metroland Media Group is a leading community media company with a
long tradition of offering great services to its customers and of striving to
make a difference in communities it serves. Metroland Media publishes
in print and digital in two daily papers and more than 100 community
newspapers across Ontario and operates successful flyer distribution
networks, magazines, consumer shows and numerous digital operations.
At Metroland Media Group, adjusted EBITDA in the year was $49 million,
down $19 million from prior year; revenue was down 8% to $447 million.
Print advertising revenues were down 10% in the year.
As in previous years, our newspapers and digital businesses were
recognized for outstanding editorial, advertising and marketing efforts.
Both the Toronto Star and The Hamilton Spectator won two National
Newspaper Awards, considered among the most prestigious media
honours in the country. Toronto Star journalist Vinay Menon won in the
Arts and Entertainment category and the team of Paul Hunter, Jim Rankin,
Steve Russell and Jim Coyle were honoured in the Sports category.
The Hamilton Spectator’s Teri Pecoskie won in the Multimedia Feature
category and Jon Wells won in the Investigative category.
In addition, Metroland community newspapers won 86 editorial awards
presented in 2015 by the Local Media Association (LMA). This was the
third straight year that Metroland has topped all newspaper companies in
North America in this important award contest. Metroland also won the
most awards in the LMA’s Best in Digital Contest, with durhamregion.com
earning first-place awards in the Best Community Website category and
the Best Use of Social Media category.
The newly created Digital Ventures segment made a meaningful
contribution in 2015. The results benefited from the part-year inclusion
of VerticalScope in 2015. Segmented adjusted EBITDA was $11 million,
up $7 million versus prior year. This increase over prior year is wholly
attributable to VerticalScope as the inclusion of its results offset declining
results in the other operations within the segment.
LOOKing FOrWarD
We operate in turbulent economic times and within an industry that will
continue to be affected by structural shifts. Within this evolving landscape,
we are embracing the multi-platform media environment in which we
operate. We are striving to adapt and are demonstrating our willingness
to take bold but measured steps to enhance value over the long term.
We are focused on our strategic priorities:
• Achieving further digital evolution of our asset base through re-
investment in and support of VerticalScope’s growth;
• Continuing to build digital capabilities and grow digital revenue within
our wholly-owned operations;
• Continuing to optimize print revenues and reduce costs, including
outsourcing of Toronto Star printing and investing and delivering in
those areas of highest value to our print customers;
• Continuing to exploit Metro’s unique strengths to build value in the
franchise;
• Successfully evolving Metroland Media Group into the community-
focused print and digital media and marketing solutions organization
of the future, with particular emphasis on growing the local revenue
base across platforms.
Our greateSt StrengtH – peOpLe
We have many strengths across our operations, but no strength is greater
or more critical than the talented, committed and passionate people at all
levels of our company.
Guiding these employees is a very talented executive team including Ian
Oliver at Metroland Media, Chris Goodridge at Digital Ventures, and in
the Corporate office Lorenzo DeMarchi, our Executive Vice-President and
Chief Financial Officer. We also benefit from the leadership of Rob Laidlaw,
the founder and CEO at VerticalScope. In addition, we have benefited
from the leadership over the past seven years of John Cruickshank, the
Publisher of the Toronto Star and President of Star Media Group, who
has announced he will be stepping down from his positions in May 2016.
John’s leadership and strategic thinking in all aspects of the business
have had a significant positive impact on Torstar. Again and again he
made the tough and innovative decisions necessary to move the Toronto
Star forward in these challenging times.
I was 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.
Finally, I would like to recognize our 4,600 employees and their passion to
succeed. Their determination to weather the current challenges and build
Torstar for the future is a tremendous advantage.
providing a deeper level of engagement and immersion as compared
to a desktop experience. As part of Star Media Group’s broader multi-
platform strategy, this initiative is proving to be a tremendous catalyst
for change within the organization as we develop our screen-based story-
telling capability, furthering our commitment to serving our audiences
and advertisers in innovative ways.
In our Metroland Media Group operation, we have a meaningful
connection to the communities we serve through publishing and delivery
of community newspapers to households throughout Ontario. We are
gaining momentum in building deeper digital connections to audience
and advertisers in these communities. We are committed to building
across print and digital platforms and evolving into the community media
and marketing solutions organization of the future.
Operating reSuLtS
Affected by the continued pressures on print advertising, particularly
national, and the start-up investment in Toronto Star Touch, segment
adjusted EBITDA was $67 million, down $35 million compared to the
prior year. In our first five months of ownership, we are very pleased with
VerticalScope’s performance. Its adjusted EBITDA grew by more than
20% versus prior year.
Torstar closed the year in a solid financial position. At December 31, 2015,
Torstar had cash and cash equivalents, including restricted cash, of $73
million.
We continue to carefully manage our pension plans and our funding
requirements are locked in through the fall of 2017. On a solvency basis,
our deficit position improved slightly through 2015. We are taking a
cautious approach to asset mix, with only 27% of the asset base in the
equity market. An increase in rates to more normal levels would have a
positive effect on the condition of the plans.
Our operations are comprised of Star Media Group, Metroland Media
Group and Digital Ventures. With the acquisition of VerticalScope in
the third quarter of 2015, we created a Digital Ventures segment which
includes our 56-per-cent interest in VerticalScope, eyeReturn and our
50-per-cent interest in Workopolis.
Across our media operations, Star Media Group and Metroland Media
Group, we 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.
At Star Media Group, adjusted EBITDA of $18 million was down $27
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ta bL e o f C o n t e n t s
Management’s Discussion & Analysis
2015
Management’s Statement of Responsibility
Independent Auditors’ Report to Shareholders
Consolidated Financial Statements
Board of Directors
Corporate Information
7
52
53
54
112
115
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M a n ag eM e n t’S D i S C u S S i O n a n D a n aLYS i S
2015
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TORSTAR - Management's Discussion and Analysis
For the year ended December 31, 2015
The following management’s discussion and analysis (“MD&A”) of Torstar Corporation’s (“Torstar”, "we", "our" 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, 2015 (the “2015 Consolidated Financial Statements”).
We report our 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 2015 Consolidated Financial Statements has been
prepared in accordance with IFRS, except for certain “Non-IFRS Measures” as described in Section 15 of this MD&A. Per share amounts
are calculated using the weighted average number of shares outstanding for the applicable period. In addition, during 2015, we reclassified
the manner in which certain items are categorized. The results for 2015 and 2014 have been restated on a comparative basis to reflect
these changes.
This MD&A is dated March 1, 2016 and all amounts are in Canadian dollars unless otherwise noted.
Additional information relating to Torstar, including our Annual Information Form, is available on our 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”, “estimate”, “intend”, “would”, “could”, “if”, “may” and similar
expressions. This MD&A includes, among others, forward-looking statements regarding estimates of anticipated cost savings in Section
1 of this MD&A, expectations described in connection with highlights from 2015 in Section 2 of this MD&A, estimates and expectations
relating to contingent liabilities, impairment of assets and amortization expense in Section 3 of this MD&A, Torstar's expectations regarding
expected savings including savings from restructuring initiatives in Sections 3, 4 and 5 of this MD&A, Torstar's outlook for 2016 including
anticipated revenue trends and operating costs (including newsprint costs), expected costs related to Toronto Star Touch, amortization
and depreciation and pension plan funding obligations and expenses in Section 5 of this MD&A, Torstar’s expected capital expenditures
and investment spending in Section 5 of this MD&A, anticipated future dividend payments in Sections 2 and 5 of this MD&A, expectations
regarding cash flows and forecasted cash requirements 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 and 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 17 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. We caution readers not to
place undue reliance on the forward-looking statements in this MD&A as a number of factors could cause actual future results, conditions,
actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-
looking statements.
These factors include, but are not limited to:
-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 and traffic;
-the Company’s ability to integrate the technology associated with new digital platforms;
-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;
-dependence on third party suppliers and service providers;
-reliance on technology and information systems and risks of security breaches;
-changes in employee future benefit obligations;
TORSTAR CORPORATION 2015 ANNUAL REPORT 8
TORSTAR - Management's Discussion and Analysis
-the Company’s ability to execute appropriate strategic growth initiatives including acquisitions;
-unexpected costs or liabilities related to acquisitions and dispositions;
-investments in other businesses;
-labour disruptions;
-newsprint costs;
-reliance on 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;
-foreign exchange fluctuations and foreign operations;
-availability of insurance;
-dependence on key personnel;
-intellectual property rights;
-credit risk;
-availability of capital and restrictions imposed by credit facilities;
-income tax and other taxes;
-results of impairment tests and uncertainties associated with critical accounting estimates
-holding company structure;
-dividend policy; 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. There is a risk that some or all of these assumptions may prove to be incorrect. There is no assurance regarding the
amount and timing of future dividends. 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 2015 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 our business and strategic initiatives
Highlights
Highlights for 2015 compared to 2014
Annual Operating Results
A discussion of our operating results for 2015 and 2014
Fourth Quarter Operating Results
A discussion of our fourth quarter operating results
Outlook
The outlook for our business in 2016
Liquidity and Capital Resources
A discussion of our cash flow, liquidity, credit facilities and other disclosures
Financial Instruments
A summary of our financial instruments
Employee Benefit Obligations
A summary of our employee benefit obligations
Critical Accounting Policies and Estimates
A description of accounting estimates and judgements that are critical to determining our
financial results, and changes to accounting policies
A discussion of our disclosure controls and internal controls over financial reporting
A discussion of recent IFRS developments that will affect our business
10 Recent Accounting Pronouncements
11 Controls and Procedures
12 Selected Annual Information
13 Summary of Quarterly Results
14 Restated 2015 First and Second Quarter Segmented Information
A summary view of our quarterly financial performance
Restated 2015 first and second quarter information
A summary of selected annual financial information for 2015, 2014 and 2013
15
Reconciliation and Definition of Non-IFRS Measures
A description and reconciliation of certain non-IFRS and additional IFRS measures used by
management
Enterprise risks and uncertainties Torstar is facing and how we manage these risks
16 Enterprise Risk Management
17 Risks and Uncertainties
Risks and uncertainties facing our business
11
12
14
21
27
27
29
30
31
34
35
36
37
37
38
40
41
TORSTAR CORPORATION 2015 ANNUAL REPORT 10
TORSTAR - Management's Discussion and Analysis
1. Overview
A summary of our business and strategic initiatives
Torstar is a broadly based Canadian media company listed on the Toronto Stock Exchange (Symbol:TS.B). Torstar has
three reportable operating segments: Metroland Media Group (“MMG”), Star Media Group (“SMG”) and Digital Ventures.
In connection with the acquisition of 56% of VerticalScope Holdings Inc. (“VerticalScope”) during the third quarter of 2015,
we have realigned our operating segments such that digital businesses outside of the historical newspaper operations are
managed together as one operating segment.
Metroland Media Group publishes The Hamilton Spectator and the Waterloo Region Record daily newspapers and more
than 100 weekly community newspapers and has a number of specialty publications, directories, consumer shows,
distribution operations and digital properties (including homefinder.ca, save.ca, travelalerts.ca, wagjag.com (“WagJag”) and
the regional online sites, such as durhamregion.ca).
Star Media Group includes the daily Toronto Star newspaper, Toronto Star Touch and thestar.com. Star Media Group also
includes Free Daily News Group Inc. (“Metro”), 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 and other specialty publications and magazines and distribution services and our interest in Olive
Media. Olive Media ceased operations effective January 1, 2016.
Digital Ventures includes eyeReturn Marketing Inc. (“eyeReturn”) and our joint venture interest in Workopolis as well as our
56% interest in VerticalScope, which as a result of certain terms in the applicable shareholders’ agreement is classified as
an associated business rather than a consolidated subsidiary or joint venture. VerticalScope is a Toronto-based vertically
focused digital media company with expertise in programmatic advertising and which has more than 150 employees and
services the North American market through its network of user forums and premium content sites offering advertisers
access to large audiences in popular verticals including automotive, powersports, outdoors, home and health.
We also have several other investments in Associated Businesses, which at December 31, 2015 included a 19% equity
investment in Black Press Ltd. (“Black Press”), a 23% equity investment in Blue Ant Media Inc. (“Blue Ant”), a 33% equity
investment in Canadian Press Enterprises Inc. (“Canadian Press”) and a 15% equity investment in Shop.ca Network Inc.
(“Shop.ca”).
Blue Ant is a media company founded in 2011 that creates and distributes video content across a range of traditional and
new media platforms in 'enthusiast categories' such as Outdoor Life, Nature and Science, Style and Do-It-Yourself ("DIY"),
Music and Gaming.
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, California, Hawaii and Ohio.
Canadian Press operates The Canadian Press news agency.
Shop.ca is an online e-commerce marketplace aimed at Canadian shoppers.
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. Having completed the sale of Harlequin Enterprises Limited (collectively with its
subsidiaries, "Harlequin") in 2014 and having made a significant investment in a high growth business opportunity in
VerticalScope in 2015, we are continuing to transform the composition of Torstar. Within this evolving landscape, we are
TORSTAR CORPORATION 2015 ANNUAL REPORT 11
TORSTAR - Management's Discussion and Analysis
embracing the multi-platform environment in which we operate and we are striving to adapt and strengthen our position
through the following strategic initiatives:
• Continuing to advance digitally across our businesses;
• Continuing to optimize print revenues and reduce costs, including anticipated cost savings associated with outsourcing
printing of the Toronto Star initiated in early 2016, while investing and delivering in those areas of highest value to our
print customers;
• Continuing to evolve the Metro publications across Canada;
• Successfully evolving Metroland Media Group into the community focused print and digital media and marketing solutions
organization of the future by building on the foundation of tight connections with our local communities; and
• Achieve further digital evolution of our asset base through reinvestment in and support of VerticalScope.
2. Highlights
Highlights for 2015 compared to 2014
(in $000’s, except per share amounts)
2015
2014
Favourable
(Unfavourable)
Net income (loss) from continuing operations
Per Share
Net income (loss) from discontinued operations
Per Share
Net income (loss) attributable to equity shareholders
Per Share (Basic)
Adjusted Earnings (loss) Per Share2
Operating profit (loss)1,2
Adjusted EBITDA1,2
($399,837)
($4.96)
(5,000)
($0.06)
(403,966)
($5.02)
($0.10)
(403,079)
66,823
Revenues1,2
843,640
1 Includes proportionately consolidated share of joint ventures and VerticalScope's operations.
2These are Non-IFRS or additional IFRS measures, refer to Section 15 of this MD&A.
Highlights:
($49,598)
($0.62)
222,662
$2.78
172,685
$2.16
$0.58
(52,370)
101,672
904,618
($350,239)
($4.34)
(227,662)
($2.84)
(576,651)
($7.18)
($0.68)
(350,709)
(34,849)
(60,978)
• On July 28, 2015 we purchased a 56% interest in VerticalScope, a vertically focused digital media company which
operates across North America, for a net investment of approximately $180 million, including transaction costs.
VerticalScope's revenue increased 20.9% from July 29, 2015 through December 31, 2015 as compared with the
comparable period in 2014.
• During the period from July 29, 2015 through December 31, 2015 VerticalScope made acquisitions totalling U.S.
$25.1 million of which U.S. $10.6 million was financed from VerticalScope’s operating cash flow and U.S. $14.5
million was financed through an increase in VerticalScope's debt.
• On September 15, 2015 the Toronto Star launched Toronto Star Touch, its innovative new tablet app. The app is
free to consumers and is available for iOS on the Apple App Store and for Android on the Google Play Store. While
audience size has been lower than we initially anticipated, we are making steady progress in building readership.
Daily audience engagement metrics are strong and advertiser response has been very positive.
TORSTAR CORPORATION 2015 ANNUAL REPORT 12
TORSTAR - Management's Discussion and Analysis
• Subsequent to the end of 2015, we announced the transition of printing of the Toronto Star to Transcontinental
Printing which is expected to commence in July 2016. Also in connection with this decision, we have commenced
exploration of the sale of the existing printing facility and land in Vaughan.
• Ended 2015 with total cash and cash equivalents and restricted cash of $73.1 million. Subsequent to the end of
the year, $22.8 million of restricted cash was released from the Harlequin escrow.
• Our net loss from continuing operations was $399.8 million ($4.96 per share) in 2015 and $49.6 million ($0.62 per
share) in 2014. Our net loss in 2015 included $361.1 million of non-cash impairment charges and $77.5 million of
non-cash amortization and depreciation.
• Our net loss attributable to equity shareholders was $404.0 million ($5.02 per share) in 2015 compared to net
income attributable to equity shareholders of $172.7 million ($2.16 per share) in 2014. Our net income in 2014
included a $224.6 million pre-tax gain on the sale of Harlequin.
• Adjusted loss per share was $0.10 in 2015, down $0.68 from adjusted earnings per share of $0.58 in 2014. Adjusted
loss per share included a $0.39 per share effect of amortization of intangible assets, primarily associated with the
investment in VerticalScope.
•
In 2015, our segmented operating loss was $403.1 million which included $361.1 million of non-cash impairment
charges and $77.5 million of non-cash amortization and depreciation.
• Our segmented adjusted EBITDA was $66.8 million in 2015, down $34.9 million from $101.7 million in 2014.
• Segmented revenue was $843.6 million in 2015, down $61.0 million (6.7%) from $904.6 million in 2014.
•
In 2015, we announced our intention to reduce the dividend to 26 cents per share annually effective the first quarter
of 2016.
The following chart provides a continuity of earnings per share from the year ended December 31, 2014 to the year ended
December 31, 2015:
Earnings Per Share
Adjusted Earnings Per
Share
Earnings (loss) per share from continuing operations attributable to equity
shareholders in 2014
Changes
• Adjusted EBITDA*
• Amortization and Depreciation*
• Operating earnings*
• Restructuring and other charges**
• Impairment of assets**
• Operating profit(loss)
•
Interest and financing costs
• Non-cash foreign exchange**
• Other income (expense) **
• Change in deferred taxes**
Earnings (loss) per share from continuing operations attributable to equity
shareholders in 2015
Earnings (loss) per share from discontinued operations attributable to equity
shareholders in 2015
Earnings (loss) per share attributable to equity shareholders in 2015
($0.62)
(0.31)
(0.39)
(0.70)
(0.08)
(3.30)
(4.08)
0.02
0.06
(0.06)
(0.28)
($4.96)
($0.06)
($5.02)
$0.58
(0.31)
(0.39)
(0.70)
(0.70)
0.02
($0.10)
($0.10)
*Includes proportionately consolidated share of joint ventures and VerticalScope's operations. These are Non-IFRS or additional IFRS measures, refer to
Section 15 of this MD&A.
** Items are excluded from definition of adjusted earnings (loss) per share. Refer to Section 15 for a reconciliation of earnings per share to adjusted
earnings per share.
TORSTAR CORPORATION 2015 ANNUAL REPORT 13
TORSTAR - Management's Discussion and Analysis
3. Annual Operating Results
A discussion of our operating results for 2015 and 2014
Unless otherwise noted, the following is a discussion of our 2015 operating results relative to 2014. In connection with
our acquisition of 56% of VerticalScope during the third quarter of 2015, we have realigned our operating segments such
that digital businesses outside the traditional newspaper operations are managed as part of the Digital Ventures segment
and accordingly, we now have three reportable operating segments for segment reporting purposes: MMG, SMG and
Digital Ventures. All comparative information has been restated to reflect this change. In addition, the paywall at thestar.com
was eliminated effective April 1, 2015. Revenues associated with the paywall were not material and have been excluded
from both the current and prior periods for comparison purposes in the discussions of digital and subscriber revenues
below.
Overall Performance
As noted above, we have three 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 including our proportionate share of joint venture operations as well as our 56% interest
in VerticalScope. When reported in the consolidated statement of income, joint ventures and our 56% investment in
VerticalScope (which, pursuant to certain terms in the shareholders agreement, is classified as an Associated Business
rather than a consolidated subsidiary or joint venture), are accounted for using the equity method. The net income is
included in “Income (loss) from joint ventures” and “Income (loss) from associated businesses”, as applicable. We own
a significantly higher percentage of VerticalScope relative to our other Associated Businesses.
The following tables set out our segmented results which include our proportionate share of results from VerticalScope
and our joint ventures for the years ended December 31, 2015 and December 31, 2014 and provide a reconciliation to
the consolidated statement of income.
2015
MMG
SMG
Digital
Ventures
Corporate
Total
Segmented*
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
Restructuring and other charges
Impairment of assets
$447,064
$343,555
$53,021
(208,431)
(189,755)
48,878
(14,055)
34,823
(19,777)
(265,936)
(127,092)
(198,057)
18,406
(14,991)
3,415
(10,634)
(79,145)
(18,867)
(23,160)
10,994
(48,428)
(37,434)
(899)
(16,000)
($9,044)
(2,411)
(11,455)
(37)
(11,492)
$843,640
(363,434)
(413,383)
66,823
(77,511)
(10,688)
(31,310)
(361,081)
Operating profit (loss)**
($250,890)
($86,364)
($54,333)
($11,492)
($403,079)
Loss from continuing operations
Loss from discontinued operations
Net loss
TORSTAR CORPORATION 2015 ANNUAL REPORT 14
($57,009)
21,610
19,988
(15,411)
47,334
31,923
1,087
16,000
$49,010
$786,631
(341,824)
(393,395)
51,412
(30,177)
21,235
(30,223)
(345,081)
($354,069)
($399,837)
($5,000)
($404,837)
TORSTAR - Management's Discussion and Analysis
2014
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
Restructuring and other charges
Impairment of assets
Operating profit (loss)**
Loss from continuing operations
Net income from discontinued
operations
Net income
Digital
Ventures
Corporate
Total
Segmented*
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
MMG
SMG
$484,225
$384,873
(219,340)
(196,866)
68,019
(14,644)
53,375
(6,937)
(329)
(134,620)
(204,457)
45,796
(15,337)
30,459
(15,709)
(82,606)
($11,136)
(4,760)
(15,896)
(57)
(15,953)
$35,520
(15,075)
(16,692)
3,753
(3,363)
390
(60)
(15,000)
$904,618
(380,171)
(422,775)
101,672
(33,401)
68,271
(22,706)
(97,935)
$46,109
($67,856)
($14,670)
($15,953)
($52,370)
($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)
($49,598)
$222,662
$173,064
1
Reflects eliminations of our proportionate share of joint ventures and our 56% interest in VerticalScope
*Includes our proportionately consolidated share of joint venture operations and VerticalScope
**These are non-IFRS or additional IFRS measures, refer to Section 15 of this MD&A
Revenue
Segmented revenue was down $61.0 million or 6.7%. This decline was largely the result of declines in print advertising
revenues and flyer distribution revenues and a modest 2.5% decline in subscriber revenues. These declines were partially
offset by a $15.1 million increase in revenue associated with the investment in VerticalScope on July 28, 2015. Revenue
excluding our proportionate share of revenue from joint ventures and our 56% interest in VerticalScope (“operating
revenue”) was down $71.5 million or 8.3%.
Digital revenue across all segments increased 13.6% in 2015, largely resulting from the investment in VerticalScope on
July 28, 2015 as well as from revenue growth at eyeReturn, thestar.com and in local digital advertising at Metroland Media
Group. These increases were partially offset by lower revenues in 2015 at Workopolis, Olive Media, WagJag and Save.ca.
Digital revenues were 14.9% of total segment revenues in 2015 compared to 12.2% in 2014.
The following charts provide a breakdown of total segmented operating revenue for 2015 and 2014:
Year ended
December 31, 2015
Print advertising
Digital advertising
Distribution
Subscriber
Other
Total
Year ended
December 31, 2014
Print advertising
Digital advertising
Distribution
Subscriber
Other
Total
MMG
SMG
$
%
$
$200.3
44.8%
$180.8
37.7
136.5
28.4
44.2
8.4%
30.5%
6.4%
9.9%
35.2
10.1
100.5
17.0
%
52.7%
10.2%
2.9%
29.2%
5.0%
Digital Ventures
$
%
$53.0
100.0%
Total
$
$381.1
125.9
146.5
128.9
61.2
%
45.2%
14.9%
17.4%
15.3%
7.2%
$447.1
100.0%
$343.6
100.0%
$53.0
100.0%
$843.6
100.0%
MMG
SMG
Digital Ventures
Total
$
%
$
%
$
%
$221.8
45.8%
$213.9
55.6%
38.3
147.2
29.5
47.5
7.9%
30.4%
6.1%
9.8%
36.7
10.3
105.7
18.3
9.5%
2.7%
27.5%
4.7%
$35.5
100.0%
$
$435.7
110.6
157.4
135.2
65.8
%
48.2%
12.2%
17.4%
14.9%
7.3%
$484.2
100.0%
$384.9
100.0%
$35.5
100.0%
$904.6
100.0%
TORSTAR CORPORATION 2015 ANNUAL REPORT 15
TORSTAR - Management's Discussion and Analysis
Salaries and benefits
Our segmented salaries and benefits costs were down $16.8 million or 4.4% in 2015 reflecting the benefit of $21.5 million
in savings from restructuring initiatives and a $7.1 million digital media tax credit (as this represents recoveries of previously
incurred salary and benefits costs), partially offset by: (i) the inclusion of our proportionate share of salaries and benefit
costs of VerticalScope after July 28, 2015; (ii) increased staffing costs associated with Toronto Star Touch; and (iii) general
wage increases.
Other operating costs
Segmented other operating costs primarily consist of circulation/flyer distribution costs, newsprint costs and other
production costs which represented 39.0%, 13.4% and 11.6% respectively of segmented other operating costs in 2015.
Segmented other operating costs were down $9.4 million (2.2%) as a result of lower print volumes, the impact of lower
newsprint price, lower corporate costs and other cost reductions and were partially offset by increased costs related to
Toronto Star Touch as well as our proportionate share of VerticalScope’s other operating costs after July 28, 2015.
Adjusted EBITDA
Our segmented adjusted EBITDA was $66.8 million in 2015, down $34.9 million from 2014 reflecting the above noted
revenue declines and $14.0 million of net investment spending in Toronto Star Touch which were only partially offset by
$21.5 million of savings from restructuring initiatives, the impact of our investment in VerticalScope, the benefit of $7.1
million in digital media tax credits, $4.4 million in lower Corporate costs and other cost reductions.
Amortization and depreciation
Total segmented amortization and depreciation increased $44.1 million in 2015, all of which was the result of amortization
of intangible assets associated with our investment in VerticalScope. Please see the discussion of our investment in
VerticalScope for further information.
Operating earnings (loss)
Segmented operating loss was $10.7 million in 2015, compared to segmented operating earnings of $68.3 million in 2014.
The loss in 2015 included the impact of $44.1 million of additional amortization expense associated with our investment
in VerticalScope.
Restructuring and other charges
Total segmented restructuring and other charges were $31.3 million in 2015 and largely related to ongoing efforts to
reduce costs as well as a charge related to Metroland Media Group’s decision to phase out product sales. The 2015
restructuring initiatives are expected to result in annualized net labour savings of approximately $30.0 million and a
reduction of approximately 395 positions. Of the expected savings, $10.0 million was realized in 2015. Total segmented
restructuring and other charges of $22.7 million were recorded in 2014.
Over the last few years we have undertaken several restructuring initiatives in order to reduce our ongoing operating
costs. At December 31, 2015, our liability for payments in respect of these restructuring initiatives was $33.3 million. The
following chart provides a year-over-year summary of the realized and expected net savings by year:
(in $000’s)
Realized net savings in:
2013
2014
2015
Expected net savings in:
2016
2017
Annualized net savings
Year of Initiative
2013
2014
2015
Total
$13,800
21,000
1,800
$36,600
9,700
10,000
2,600
2,500
$14,800
19,900
100
$30,000
$13,800
21,000
21,500
22,500
2,600
$81,400
Impairment of assets
During 2015, we incurred non-cash charges related to asset impairment of our property, plant and equipment, intangible
assets, goodwill and investments in joint ventures totalling $361.1 million. During 2014, we incurred charges related to
asset impairment of property, plant and equipment, goodwill and investments in joint ventures totalling $97.9 million.
These charges have no impact on cash flows.
TORSTAR CORPORATION 2015 ANNUAL REPORT 16
TORSTAR - Management's Discussion and Analysis
During the third quarters of 2015 and 2014, we conducted impairment tests on the carrying value of intangible assets and
goodwill. In carrying out this testing in 2015, we determined that the carrying amount of goodwill in the Metroland Media
Group of Cash Generating Units ("CGUs") exceeded the value in use ("VIU") and we recorded an impairment charge of
$135.0 million for goodwill and a charge of $0.4 million for intangible assets in the Metroland Media Group of CGUs. This
impairment was the result of lower revenue projections reflecting current economic conditions coupled with lower
forecasted longer term revenues resulting from continued shifts in spending by advertisers. We also recorded a $12.0
million impairment charge in respect of our joint venture investment in Workopolis during the third quarter of 2015 resulting
from lower forecasted revenues attributable to continued increases in competition in the online recruitment and job search
markets as well as prevailing economic conditions.
The change in the market capitalization of the Company in the fourth quarter of 2015 was, we believe, primarily the result
of a significant change in the risk premiums expected by market participants resulting from uncertainties about the traditional
newspaper industry. These uncertainties include continued volatility and longer term visibility in print advertising markets,
rapidly changing digital advertising markets and evolving general economic uncertainty. As a result of this change, in
connection with our impairment test on December 31, 2015, we determined that the carrying amount of goodwill in the
Metroland Media Group of CGUs and the Star Media Group of CGUs exceeded their fair value less cost to sell ("FVLCS")
and accordingly, we recorded impairment charges of $130.6 million in respect of goodwill in the Metroland Media Group
of CGUs and $70.8 million in respect of goodwill and $8.0 million in respect of intangible assets in the Star Media Group
of CGUs. In the fourth quarter of 2015 we also recorded a further impairment charge of $4.0 million related to our joint
venture investment in Workopolis resulting from a further downward revision in longer term forecasted revenues reflecting
the prevailing business environment. Please refer to the discussion of Critical Accounting Policies and Estimates in Section
9 of this MD&A for further discussion.
In carrying out our impairment testing during the third quarter of 2014, we determined that the carrying amount of goodwill
in the Star Media Group of CGUs exceeded the value in use and we 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. We also recorded a $15.0 million impairment charge in respect of our joint venture
investment in Workopolis during the third quarter of 2014 reflecting the above noted factors.
Operating profit (loss)
In 2015, our segmented operating loss was $403.1 million compared to $52.4 million in 2014. Our 2015 segmented
operating loss included $361.1 million of non-cash impairment charges and $77.5 million of non-cash amortization and
depreciation.
Our operating loss excluding our proportionate share of operating profit (loss) from VerticalScope and our joint ventures
(“operating profit (loss)”) increased $309.9 million in 2015 compared to 2014.
Interest and financing costs
Interest and financing costs decreased $2.3 million in 2015 reflecting a $4.9 million decrease in interest on debt and a
$0.5 million increase in interest earned on cash and cash equivalents. This was partially offset by a $2.7 million increase
in financing costs related to employee benefit plans.
Foreign exchange
Non-cash foreign exchange losses were $1.0 million in 2015 compared to losses of $7.7 million in 2014. The loss in 2015
included $1.7 million of foreign exchange losses associated with the ineffective portion (for accounting purposes) of the
hedge of the net investment in VerticalScope, which is discussed further in Section 7 of this MD&A, partially offset by $0.7
million of foreign exchange gains associated with the Canadian dollar being weaker at the end of the year relative to the
beginning of the year with our operations being in a net asset position in U.S. dollars for the year.
Upon the sale of Harlequin in 2014, we realized $5.8 million of accumulated foreign exchange losses related to extinguishing
a hedge of our U.S. dollar denominated net investment hedge in Harlequin. 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.
Income (loss) from joint ventures
Loss from joint ventures was $14.2 million in 2015 and $9.2 million in 2014. These losses primarily reflect non-cash
impairment charges of $16.0 million recorded in 2015 and $15.0 million recorded in 2014 related to our joint venture
investment in Workopolis, as discussed above. Excluding the impact of these charges, income from joint ventures was
TORSTAR CORPORATION 2015 ANNUAL REPORT 17
TORSTAR - Management's Discussion and Analysis
$1.8 million in 2015 and $5.8 million in 2014 largely reflecting lower adjusted EBITDA and restructuring charges at
Workopolis.
Income (loss) from associated businesses
Loss from associated businesses was $29.0 million in 2015 compared to income of $0.2 million in 2014. The 2015 loss
included income of $3.0 million from Black Press offset by a loss of $3.0 million from Shop.ca, a loss of $1.9 million from
Blue Ant and a loss of $27.0 million from VerticalScope. The 2015 loss from VerticalScope included $44.2 million of
amortization and depreciation expense. The 2014 income from associated businesses included income of $4.0 million
from Black Press and income of $0.4 million from Tuango Inc. ("Tuango") partially offset by losses of $3.5 million from
Shop.ca and $0.7 million from Blue Ant.
Our share of Black Press’ net income was $3.0 million in 2015 ($4.0 million in 2014), representing Black Press’ results
through November 30, 2015. Black Press has a February fiscal year end and therefore does not have coterminous quarter-
ends with us.
Our share of Tuango’s net income was $nil in 2015 and $0.4 million in 2014 as we sold our interest in Tuango on October
16, 2014 for proceeds of $7.6 million and recognized a gain of $4.5 million in other income (expense).
Our share of the Shop.ca net loss was $3.0 million in 2015 compared to $3.5 million in 2014.
We did not record any income or loss during 2015 or 2014 in respect of our investment in Canadian Press as the carrying
value had previously been reduced to $nil. We will begin to report our share of Canadian Press’ results once the
unrecognized losses, including Other Comprehensive Income (“OCI”) losses ($3.1 million as of December 31, 2015 and
$4.0 million as of December 31, 2014) have been offset by net income, OCI or as additional investments are made. In
2015, our share of Canadian Press’ net income would have been $0.5 million ($0.3 million loss in 2014).
Investment in VerticalScope
On July 28, 2015, we acquired a 56% interest in VerticalScope. The total purchase price including transaction costs was
$202.1 million. On October 22, 2015, we received a $22.1 million distribution from VerticalScope, as anticipated at the
time of the closing, reducing our original investment to approximately $180 million, including transaction costs. Pursuant
to certain terms in the shareholders agreement, the investment is accounted for as an associated business using the
equity method, rather than a subsidiary or joint venture. The results of VerticalScope are reported as part of our Digital
Ventures Segment in our segmented reporting.
In connection with the investment in VerticalScope, and consistent with the general methodology VerticalScope uses
when making its acquisitions, we allocated the difference between the fair value of the purchase price paid and the book
value of the net assets of VerticalScope to customer relationships, technology, domain names, acquired content and
goodwill. The amortization periods for these intangible assets generally range from 5-10 years, with the exception of
acquired content which, consistent with VerticalScope’s accounting policy, is amortized over one year. Given the relatively
large value allocated to acquired content (U.S. $60.6 million) and the one year amortization period associated with it, we
expect larger amortization charges related to these intangible assets to continue through the end of July 2016.
Our 56% share of VerticalScope's 2015 net loss included $44.2 million in respect of amortization and depreciation expense.
This included amortization of fair value differences of intangible assets identified when we made our investment in
VerticalScope as well as the amortization of fair value differences which VerticalScope has identified on acquisitions it
has made subsequent to July 29, 2015.
During the period from July 29, 2015 through December 31, 2015 VerticalScope made acquisitions totalling U.S. $25.1
million of which U.S. $10.6 million was financed from VerticalScope’s operating cash flow and U.S. $14.5 million was
financed through an increase in VerticalScope's debt. VerticalScope's debt, net of cash on hand, was U.S. $78.9 million
at December 31, 2015.
Other income (expense)
Other expense was $1.8 million in 2015 compared to other income of $3.8 million in 2014. Other expense in 2015 included
a partial write-down totalling $2.3 million on one of our portfolio investments. This was partially offset by a $0.2 million
gain on the sale of an associated business and $0.3 million of other income.
Other income (expense) for 2014 included a $4.5 million gain on the sale of Tuango, a $1.1 million gain on the early
settlement agreement with Metro International S.A. for the remaining 10% of Metro, and a $0.7 million gain on the sale
TORSTAR CORPORATION 2015 ANNUAL REPORT 18
TORSTAR - Management's Discussion and Analysis
of an available-for-sale investment. 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 and which were extinguished in 2014.
Income and other taxes
We recorded an income tax recovery of $2.3 million in 2015 reflecting the non-deductibility of non-cash impairment charges
and losses from associated businesses for tax purposes.
We recorded an income tax recovery of $11.7 million in 2014. The effective tax rate in 2014 was 19.1% which includes
the impact of impairment charges not deductible for tax purposes offset by the recognition of previously unrecognized
loss carryforwards, certain tax and accounting base differences in connection with the sale of Harlequin and the donation
of the Toronto Star’s photo archive to the Toronto Public Library during 2014.
Net loss from continuing operations
Our net loss from continuing operations was $399.8 million ($4.96 per share) in 2015, compared to a loss of $49.6 million
($0.62 per share) in 2014. Our loss in 2015 included $361.1 million of non-cash impairment charges and $77.5 million
of amortization and depreciation expense.
Income (loss) from discontinued operations
On August 1, 2014 we 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, subject to certain adjustments for working capital and other related
items. 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. In connection with the sale of Harlequin, we indemnified the Purchaser for costs and fees related
to certain matters including certain tax and pre-existing litigation matters and recorded a contingent liability in respect of
these matters based on the estimated exposure. The loss from discontinued operations of $5.0 million for 2015 includes
adjustments made related to the appreciation of the U.S. dollar relative to the Canadian dollar in respect of these provisions
as well as revised estimates of the amounts of these provisions in respect of taxes, insurance reserves and legal and
other costs. Net income from discontinued operations was $222.7 million in 2014, reflecting Harlequin's net income as
well as the gain on sale. Refer to Note 24 of our Consolidated Financial Statements for further information.
Net income (loss) attributable to equity shareholders
Our net loss attributable to equity shareholders was $404.0 million ($5.02 per share) in 2015 compared to net income
attributable to equity shareholders of $172.7 million ($2.16 per share) in 2014. Net income attributable to equity
shareholders in 2014 included a $224.6 million pre-tax gain on the sale of Harlequin.
Segment Operating Results – Metroland Media Group
Revenues
Metroland Media Group revenues were down $37.1 million or 7.7% in 2015. National advertising revenues, on a combined
print and digital basis, were down 18.5% in 2015 while local advertising revenues, on a combined print and digital basis,
were down a more moderate 5.9%. Local advertising trends improved in the second half of the year. Flyer distribution
revenues were down 7.3% in the year, primarily as a result of closures of a few large retail customers. Excluding the
impact of these closures, flyer distribution revenue was down modestly (2.3%) in 2015.
Metroland Media Group’s total digital revenues were down 3.1% in 2015 primarily reflecting continued lower revenues at
WagJag and Gold Book which were largely offset by strong growth in local digital advertising revenue.
Salaries and benefits costs
Metroland Media Group’s salaries and benefits costs were down $10.9 million or 5.0% in 2015 as the impact of $11.1
million of cost savings from restructuring as well as lower commission costs were partially offset by general wage increases
and increased pension costs.
Other operating costs
Metroland Media Group’s other operating costs were down $7.1 million or 3.6% in 2015, as lower circulation and flyer
distribution costs, lower newsprint consumption and price, and other cost reductions were partially offset by spending on
investments in digital initiatives.
TORSTAR CORPORATION 2015 ANNUAL REPORT 19
TORSTAR - Management's Discussion and Analysis
Adjusted EBITDA
Metroland Media Group adjusted EBITDA was down $19.1 million in 2015 primarily reflecting the above noted revenue
declines which were only partially offset by the impact of cost reductions.
Operating profit (loss)
Metroland Media Group operating loss was $250.9 million in 2015, compared to operating profit of $46.1 million in 2014.
Our loss in 2015 included $265.9 million of non-cash impairment charges and $19.8 million of restructuring and other
charges.
Segment Operating Results – Star Media Group
Revenues
Star Media Group revenues were down $41.3 million or 10.7% in 2015 largely as a result of 14.9% decrease in print
advertising revenues. While print advertising revenues continued to decline in 2015, the rate of decline improved over
the rate of decline of 18.8% experienced in 2014. This was largely the result of a moderation in the rate of decline in
national advertising as well as a moderation in the rate of decline in regional advertising at Metro. Metro's regional
advertising revenue in markets outside of Toronto was up 8.9% in 2015. In addition, subscriber revenues at the Toronto
Star remained relatively stable declining 2.2% in 2015. Star Media Group revenues in 2015 were also negatively affected
by the closure of operations in three of Metro’s smaller regions in the third quarter of 2014.
Star Media Group’s digital revenues were down 3.8% in 2015, with a 13.1% increase in revenue at thestar.com offset
entirely by lower revenues at Olive Media. Effective January 1, 2016, the Olive Media partnership ceased operations and
the Toronto Star assumed responsibility for its digital advertising sales previously handled by Olive Media.
Salaries and benefits costs
Star Media Group’s salaries and benefits costs were down $7.5 million or 5.6% in 2015 as the impact of $10.3 million in
savings from restructuring initiatives and $7.1 million of digital media tax credits were largely offset by increased staffing
costs associated with Toronto Star Touch, general wage increases and increased pension costs.
Other operating costs
Star Media Group’s other operating costs were down $6.4 million or 3.1% in 2015 as lower circulation and distribution
costs, lower newsprint consumption and price and other cost reductions were partially offset by the impact of costs
associated with Toronto Star Touch.
Adjusted EBITDA
Star Media Group adjusted EBITDA was $18.4 million, down $27.4 million from 2014 as a result of the above noted
revenue declines and a $14.0 million net investment spending in Toronto Star Touch, which were only partially offset by
the impact of cost reductions and the benefit of $7.1 million of digital media tax credits.
Operating profit (loss)
Star Media Group operating loss was $86.4 million in 2015, which included $79.1 million of non-cash impairment charges.
Star Media Group's operating loss reflected lower adjusted EBITDA partially offset by lower restructuring and non-cash
impairment charges.
Segment Operating Results – Digital Ventures
Revenues
Digital Ventures revenues were up $17.5 million or 49.3%, in 2015, $15.1 million of which was the result of the inclusion
of revenues resulting from the investment in VerticalScope on July 28, 2015. Within VerticalScope, their U.S. dollar
denominated revenue from July 29, 2015 to December 31, 2015 grew 20.9% relative to the comparable period of 2014,
resulting from a combination of acquisitions and organic revenue growth. This increase reflected strong revenue growth
in direct sales and affiliate revenue relative to the comparable period in 2014. The increase in revenue in the Digital
Ventures segment in 2015 also reflected revenue growth of 38.3% at eyeReturn and lower revenues at Workopolis relative
to 2014.
During the period from July 29, 2015 through December 31, 2015 VerticalScope made acquisitions totalling U.S. $25.1
million of which U.S. $10.6 million was financed from VerticalScope’s operating cash flow and U.S. $14.5 million was
financed through an increase in debt.
TORSTAR CORPORATION 2015 ANNUAL REPORT 20
TORSTAR - Management's Discussion and Analysis
Salaries and benefits costs
Digital Ventures’ salaries and benefits costs were up $3.8 million or 25.2% in 2015 and included VerticalScope's salary
and benefit costs from July 29, 2015 through December 31, 2015. Salaries and benefits costs at eyeReturn and Workopolis
in 2015 were similar to last year and included $0.1 million of savings from restructuring initiatives at Workopolis. Within
VerticalScope, their U.S. dollar denominated salary and benefits costs increased in the period from July 29, 2015 through
December 31, 2015 relative to the comparable period in 2014 reflecting additional staffing required to support revenue
growth and the absence of tax credits recorded in 2014.
Other operating costs
Digital Ventures' other operating costs were up $6.5 million or 38.9% in 2015 resulting from: (i) higher network fees at
eyeReturn associated with increased revenues and a lower Canadian dollar relative to the U.S. dollar; and (ii) the inclusion
of VerticalScope's other operating costs; partially offset by (iii) cost reduction initiatives at Workopolis. Within VerticalScope,
their U.S. dollar denominated other operating costs increased in the period from July 29, 2015 through December 31,
2015 relative to the comparable period in 2014 reflecting growth in the underlying business experienced during this period.
Adjusted EBITDA
Digital Ventures' adjusted EBITDA was $11.0 million in 2015, up $7.2 million from 2014 largely as a result of the investment
in VerticalScope on July 28, 2015. Excluding the impact of certain tax credits recorded in the fourth quarter of 2014, and
transaction related costs related to the investment in VerticalScope by Torstar, VerticalScope's U.S. dollar denominated
adjusted EBITDA from July 29, 2015 through December 31, 2015 increased 32.1% in 2015 relative to the comparable
period in 2014.
Operating profit (loss)
Digital Ventures' operating loss was $54.3 million in 2015, compared to an operating loss of $14.7 million in 2014, resulting
from a $7.2 million improvement in adjusted EBITDA which was entirely offset by $45.1 million of increased amortization
and depreciation expense, (almost entirely related to the VerticalScope acquisition), a $1.0 million increase in non-cash
impairment charges and $0.8 million of increased restructuring costs.
4. Fourth Quarter Operating Results
A discussion of our fourth quarter operating results
Unless otherwise noted, the following is a discussion of our fourth quarter 2015 operating results relative to the fourth
quarter of 2014. In connection with the acquisition of 56% of VerticalScope during the third quarter of 2015, we have
realigned our operating segments such that digital businesses outside the traditional newspaper operations are managed
as part of the Digital Ventures segment and accordingly, we now have three reportable operating segments for segment
reporting purposes: MMG, SMG and Digital Ventures. All comparative information has been restated to reflect this change.
In addition, the paywall at thestar.com was eliminated effective April 1, 2015. Revenues associated with the paywall were
not material and were excluded from both the current and prior periods for comparison purposes in the discussions of
digital and subscriber revenues below.
Overall Performance
The following tables set out our segmented results which include our proportionate share of results from VerticalScope
and our joint ventures for the three months ended December 31, 2015 and December 31, 2014 and provide a reconciliation
to the consolidated statement of income.
TORSTAR CORPORATION 2015 ANNUAL REPORT 21
TORSTAR - Management's Discussion and Analysis
Fourth Quarter 2015
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
Restructuring and other charges
Impairment of assets
Operating profit (loss)**
Loss from continuing operations
Discontinued operations
Net loss
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
Restructuring and other charges
Impairment of assets
Operating profit (loss)**
Income from continuing operations
Net income from discontinued
operations
Net income
Digital
Ventures
Corporate
Total
Segmented*
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
MMG
$120,399
(52,777)
(49,345)
18,277
(3,624)
14,653
(3,958)
(130,569)
SMG
$92,890
(33,691)
(56,572)
2,627
(5,333)
(2,706)
(2,730)
(78,752)
$19,740
(6,230)
(7,551)
5,959
(28,258)
(22,299)
(808)
(4,000)
($1,641)
(380)
(2,021)
(5)
(2,026)
$233,029
(94,339)
(113,848)
24,842
(37,220)
(12,378)
(7,496)
(213,321)
($19,280)
6,833
5,789
(6,658)
27,911
21,253
841
4,000
($119,874)
($84,188)
($27,107)
($2,026)
($233,195)
$26,094
$213,749
(87,506)
(108,059)
18,184
(9,309)
8,875
(6,655)
(209,321)
($207,101)
($233,413)
($1,100)
($234,513)
Fourth Quarter 2014
Digital
Ventures
Corporate
Total
Segmented*
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
MMG
SMG
$130,788
$104,116
(56,996)
(51,828)
21,964
(3,516)
18,448
(551)
(63)
(32,834)
(50,894)
20,388
(3,337)
17,051
(10,319)
$9,963
(3,929)
(5,504)
530
(885)
(355)
(8)
($2,796)
(1,451)
(4,247)
(12)
(4,259)
$17,834
$6,732
($363)
($4,259)
$244,867
(96,555)
(109,677)
38,635
(7,750)
30,885
(10,878)
(63)
$19,944
($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
$20,887
$20,887
1
Reflects eliminations of our proportionate share of joint ventures and our 56% interest in VerticalScope
*Includes our proportionately consolidated share of joint venture operations and VerticalScope
**These are non-IFRS or additional IFRS measures, refer to Section 15 of this MD&A.
Revenue
Segmented revenue was down $11.9 million or 4.9%. The fourth quarter decline primarily reflected lower print advertising
revenues combined with more moderate declines in distribution revenues and a modest 2.6% decrease in subscriber
revenue. These declines were partially offset by a $9.3 million increase in revenue associated with the investment in
VerticalScope. Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56%
interest in VerticalScope) was down $19.7 million or 8.4%.
Digital revenue across all segments increased 27.3% in the fourth quarter 2015, largely resulting from the investment in
VerticalScope as well as from revenue growth at eyeReturn, thestar.com and in local digital advertising at Metroland Media
Group. These increases were partially offset by lower revenues in 2015 at Workopolis, Save.ca, WagJag and Olive Media.
Digital revenues were 17.5% of total segment revenues in the fourth quarter of 2015 compared to 13.1% in the fourth
quarter of 2014.
Salaries and benefits
Our segmented salaries and benefits costs decreased $2.3 million or 2.4% in the fourth quarter of 2015 reflecting the
benefit of $5.8 million in savings from restructuring initiatives, partially offset by: (i) the inclusion of our proportionate share
of salaries and benefit costs of VerticalScope; (ii) increased staffing costs associated with Toronto Star Touch; and (iii)
general wage increases.
TORSTAR CORPORATION 2015 ANNUAL REPORT 22
TORSTAR - Management's Discussion and Analysis
Other operating costs
Segmented other operating costs primarily consist of circulation/flyer distribution costs, newsprint costs and other
production costs which represented 38.4%, 13.4% and 12.1% respectively of segmented other operating costs in the
fourth quarter of 2015. Segmented other operating costs were up $4.1 million or 3.7% as a result of lower print volumes,
the impact of lower newsprint price, lower corporate costs and other cost reductions offset by increased costs related to
Toronto Star Touch, as well as our proportionate share of VerticalScope’s other operating costs.
Adjusted EBITDA
Our segmented adjusted EBITDA was $24.8 million in the fourth quarter of 2015, down $13.8 million from the fourth
quarter of 2014 reflecting the above noted revenue declines and $9.6 million of net investment spending in Toronto Star
Touch which were only partially offset by $5.8 million of savings from restructuring initiatives, the impact of our investment
in VerticalScope, $2.2 million in lower Corporate costs and other cost reductions.
Amortization and depreciation
Total segmented amortization and depreciation increased $29.4 million in the fourth quarter of 2015 substantially all of
which was the result of additional amortization associated with our investment in VerticalScope.
Operating earnings
Segmented operating loss was $12.4 million in the fourth quarter of 2015 down $43.3 million from operating earnings of
$30.9 million in the fourth quarter of 2014. The fourth quarter of 2015 included the impact of $26.9 million of additional
amortization associated with our investment in VerticalScope.
Restructuring and other charges
Total segmented restructuring and other charges were $7.5 million in the fourth quarter of 2015 and $10.9 million in the
comparable period of 2014. Restructuring provisions in the fourth quarter of 2015 are expected to result in annualized
net savings of $6.3 million and a reduction of approximately 90 positions. $0.7 million of the savings associated with these
initiatives were realized in the fourth quarter of 2015.
Impairment of assets
During the fourth quarter of 2015, we incurred non-cash charges related to asset impairment of goodwill and investments
in joint ventures totalling $213.3 million (2014 - $0.1 million). $201.4 million of these charges were in respect of goodwill
($130.6 million in the Metroland Media Group of CGUs and $70.8 million in respect of the Star Media Group of CGUs),
$8.0 million was in respect of intangible assets in the Star Media Group of CGUs and $4.0 million in respect of our joint
venture investment in Workopolis. These charges had no impact on cash flows and are discussed further in the discussion
of annual operating results in Section 3 of this MD&A.
Operating profit (loss)
In the fourth quarter of 2015 our segmented operating loss was $233.2 million compared to operating profit of $19.9 million
in the fourth quarter of 2014. Our loss in the fourth quarter included $213.3 million of in non-cash impairment charges
and $37.2 million of amortization and depreciation expense.
Our operating loss, excluding our proportionate share of operating profit (loss) from our joint ventures and our investment
in VerticalScope increased $225.5 million in the fourth quarter of 2015.
Income (loss) from joint ventures
Loss from joint ventures was $4.4 million in the fourth quarter of 2015 compared to income of $1.4 million in the fourth
quarter of 2014. The loss in the fourth quarter of 2015 included a non-cash impairment charge of $4.0 million related to
our joint venture investment in Workopolis, as discussed further in the discussion of annual operating results in Section
3 of this MD&A.
Income (loss) from associated businesses
Loss from associated businesses was $17.9 million in the fourth quarter of 2015 compared to income of $1.1 million in
the fourth quarter of 2014. The 2015 fourth quarter included income of $0.9 million from Black Press offset by a loss of
$1.3 million from Blue Ant, a loss of $0.7 million from Shop.ca, and a loss of $16.6 million from VerticalScope. The fourth
quarter loss from VerticalScope included $26.9 million of amortization expense. 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 23
TORSTAR - Management's Discussion and Analysis
Investment in VerticalScope
During 2015, we acquired a 56% interest in VerticalScope. The total purchase price including transaction costs was $202.1
million. On October 22, 2015, we received a $22.1 million distribution from VerticalScope, as anticipated at the time of
the closing, reducing our original investment to approximately $180 million, including transaction costs. In connection with
the investment in VerticalScope, during the fourth quarter of 2015 we recorded $26.9 million of additional amortization
and depreciation expense. Further details of our accounting for this investment is included in Section 3 of this MD&A and
further details of the operating results for this investment during the fourth quarter of 2015 are outlined in our discussion
of the operating results for the Digital Ventures segment below.
Other income (expense)
Other expense was $2.0 million in the fourth quarter of 2015 compared to other income of $5.3 million in the fourth quarter
of 2014. Other expense in the fourth quarter of 2015 included a partial write-down totalling $2.3 million on one of our
portfolio investments. This was partially offset by a $0.2 million gain on the sale of an asset and $0.1 million of other
income. Other income in the fourth quarter of 2014 included a $4.5 million gain on the sale of Tuango and a $0.7 million
gain on the sale of an available-for-sale investment.
Income and other taxes
We recorded a tax recovery of $0.6 million in the fourth quarter of 2015. This compares to an income tax provision of $6.3
million in the fourth quarter of 2014. The income tax recovery recorded in the fourth quarter of 2015 reflects the non-
deductibility of non-cash impairment charges and losses from associated businesses for tax purposes.
Net loss from continuing operations
Our net loss from continuing operations was $233.4 million ($2.90 per share) in the fourth quarter of 2015. This compares
to net income of $20.9 million ($0.26 per share) in the fourth quarter of 2014. The fourth quarter of 2015 included $213.3
million of non-cash impairment charges and $37.2 million of amortization and depreciation.
The following chart provides a continuity of earnings per share from the fourth quarter of 2014 to the fourth quarter of
2015:
Earnings Per Share
Adjusted Earnings Per Share
Earnings per share from continuing operations attributable to equity
shareholders in 2014
Changes
Adjusted EBITDA*
Amortization and depreciation*
Operating earnings*
Restructuring and other charges**
Impairment of assets**
Operating profit (loss)
Interest and financing costs
Other income (expense)**
Change in deferred taxes **
Earnings (loss) per share from continuing operations attributable to
equity shareholders in 2015
Earnings (loss) per share from discontinued operations attributable to
equity shareholders in 2015
Earnings (loss) per share attributable to equity shareholders in 2015
$0.26
(0.06)
(0.32)
(0.38)
0.04
(2.71)
(3.05)
(0.02)
(0.07)
(0.02)
($2.90)
($0.01)
($2.91)
$0.30
(0.06)
(0.32)
(0.38)
(0.38)
(0.02)
($0.10)
($0.10)
*Includes proportionately consolidated share of joint ventures and VerticalScope's operations. These are Non-IFRS or additional IFRS measures, refer
to Section 15
** Items are excluded from definition of adjusted earnings per share. Refer to Section 15 for a reconciliation of earnings per share to adjusted earnings
per share.
Income (loss) from discontinued operations
The loss from discontinued operations of $1.1 million in the fourth quarter of 2015 relates to adjustments made to provisions
for indemnities associated with the sale of Harlequin in 2014. These adjustments reflect the appreciation of the U.S.
dollar relative to the Canadian dollar, as well as revised estimates of the amounts of these provisions in respect of taxes,
and legal and other costs.
TORSTAR CORPORATION 2015 ANNUAL REPORT 24
TORSTAR - Management's Discussion and Analysis
Net income (loss) attributable to equity shareholders
Our net loss attributable to equity shareholders was $234.8 million ($2.91 per share) in the fourth quarter of 2015 compared
to net income attributable to equity shareholders of $20.6 million ($0.26 per share) in the fourth quarter of 2014. The
fourth quarter of 2015 included $213.3 million of non-cash impairment charges and $37.2 million of amortization and
depreciation.
Segment Operating Results – Metroland Media Group
Revenues
Metroland Media Group revenues were down $10.4 million or 8.0% in the fourth quarter of 2015. National advertising
revenues, on a combined print and digital basis, were down 28.1% in 2015 while local advertising revenues, on a combined
print and digital basis, were down a more moderate 5.8%. Local advertising trends improved in the second half of the
year. Flyer distribution revenues were down 4.5% in the quarter, primarily as a result of closures of a few large retail
customers. Excluding the impact of these closures, flyer distribution revenue was flat relative to the prior year in the fourth
quarter of 2015.
Metroland Media Group’s total digital revenues were down 6.8% in the fourth quarter of 2015 primarily reflecting continued
lower revenues at WagJag and Gold Book which were partially offset by strong growth in local digital advertising revenue.
Salaries and benefits costs
Metroland Media Group’s salaries and benefits costs were down $4.2 million or 7.4% in the fourth quarter of 2015 as the
impact of $4.1 million of cost savings from restructuring as well as lower commission costs were partially offset by general
wage increases and increased pension costs.
Other operating costs
Metroland Media Group’s other operating costs were down $2.5 million or 4.8% in the fourth quarter of 2015, as a result
of lower circulation and flyer distribution costs, lower newsprint consumption and price, and other cost reductions.
Adjusted EBITDA
Metroland Media Group adjusted EBITDA was down $3.7 million in the fourth quarter of 2015 primarily reflecting the above
noted revenue declines which were only partially offset by the impact of cost reductions.
Operating profit (loss)
Metroland Media Group operating loss was $119.9 million in the fourth quarter of 2015. This compares to operating profit
of $17.8 million in the fourth quarter of 2014. The loss in 2015 included $130.6 million of non-cash charges for impairment
of assets, $3.4 million of additional restructuring and other charges as well as $3.7 million of lower adjusted EBITDA.
Segment Operating Results – Star Media Group
Revenues
Star Media Group revenues were down $11.2 million or 10.8% in the fourth quarter of 2015 largely as a result of a 15.5%
decrease in print advertising revenues resulting from weakness in national advertising revenues and a moderation in the
rate of decline in regional print advertising at Metro. This was combined with growth at the thestar.com and the launch of
Toronto Star Touch. Metro's regional advertising revenue in markets outside of Toronto was up 7.7% in the fourth quarter
of 2015. In addition, subscriber revenues at the Toronto Star remained relatively stable, declining 1.7% in the fourth quarter
of 2015.
Star Media Group’s digital revenues were down 2.5% in the fourth quarter of 2015, with a 15.6% increase in revenue at
thestar.com and revenue from Toronto Star Touch offset entirely by lower revenues at Olive Media. Effective January 1,
2016, the Olive Media partnership ceased operations and the Toronto Star assumed responsibility for its digital advertising
sales previously handled by Olive Media.
Salaries and benefits costs
Star Media Group’s salaries and benefits costs increased $0.9 million (2.7%) in the fourth quarter of 2015 as the impact
of $1.6 million in savings from restructuring initiatives was entirely offset by increased staffing costs associated with Toronto
Star Touch, general wage increases and increased pension costs.
TORSTAR CORPORATION 2015 ANNUAL REPORT 25
TORSTAR - Management's Discussion and Analysis
Other operating costs
Star Media Group’s other operating costs were up $5.7 million or 11.2% in the fourth quarter of 2015 as lower circulation
and distribution costs, lower newsprint consumption and price and other cost reductions were offset by the impact of costs
associated with Toronto Star Touch.
Adjusted EBITDA
Star Media Group adjusted EBITDA was $2.6 million in the fourth quarter of 2015, down $17.8 million from the fourth
quarter of 2014, as a result of the above noted revenue declines and a $9.6 million net investment spending in Toronto
Star Touch, which were only partially offset by the impact of cost reductions.
Operating profit (loss)
Star Media Group operating loss was $84.2 million in the fourth quarter of 2015, compared to operating profit of $6.7
million in the fourth quarter of 2014. This change was the result of $78.8 million of increased non-cash impairment
charges combined with $17.8 million of lower adjusted EBITDA.
Segment Operating Results – Digital Ventures
Revenues
Digital Ventures revenues increased $9.7 million (97.4%) in the fourth quarter of 2015, $9.3 million of which was the result
of the inclusion of revenues resulting from the investment in VerticalScope. Within VerticalScope, their U.S. dollar
denominated revenue in the fourth quarter grew 22.7% relative to the fourth quarter of 2014, resulting from a combination
of acquisitions and organic revenue growth. This increase reflected strong revenue growth in direct sales and affiliate
revenue as compared with the comparable period in 2014. The increase in revenue in the Digital Ventures segment in
the fourth quarter of 2015 also reflected revenue growth of 27.7% at eyeReturn and lower revenues at Workopolis relative
to the fourth quarter of 2014.
Salaries and benefits costs
Digital Ventures’ salaries and benefits costs were up $2.3 million or 58.5% in the fourth quarter of 2015 and included
VerticalScope's salary and benefit costs. Salaries and benefits costs at eyeReturn and Workopolis were lower by $0.3
million or 7.6% in the fourth quarter of 2015 and included the benefit of $0.1 million of savings from restructuring initiatives
at Workopolis. Within VerticalScope, their U.S. dollar denominated salary and benefits costs increased in the fourth
quarter of 2015 relative to the fourth quarter of 2014 reflecting additional staffing required to support revenue growth and
the absence of tax credits recorded in the fourth quarter of 2014.
Other operating costs
Digital Ventures' other operating costs were up $2.1 million or 38.2% in the fourth quarter of 2015 resulting from (i) the
inclusion of VerticalScope's other operating costs and (ii) higher network fees at eyeReturn associated with increased
revenues and a lower Canadian dollar relative to the U.S. dollar, partially offset by cost reduction initiatives at Workopolis.
Within VerticalScope, their U.S. dollar denominated other operating costs increased in the fourth quarter of 2015 reflecting
growth in the underlying business.
Adjusted EBITDA
Digital Ventures adjusted EBITDA was $6.0 million in the fourth quarter of 2015, up $5.5 million from $0.5 million in the
fourth quarter of 2014 largely as a result of the investment in VerticalScope. Excluding the impact of certain tax credits
recorded in the fourth quarter of 2014, and transaction related costs related to the investment in VerticalScope by Torstar,
VerticalScope's U.S. dollar denominated fourth quarter adjusted EBITDA increased 22.4% in the fourth quarter of 2015
relative to the fourth quarter of 2014.
Operating profit (loss)
Digital Ventures' operating loss was $27.1 million in the fourth quarter of 2015, compared to an operating loss of $0.4
million in the fourth quarter of 2014 as a result of a $5.5 million improvement in adjusted EBITDA which was entirely offset
by $27.4 million of increased amortization and depreciation expense, a $4.0 million increase in non-cash impairment
charges and $0.8 million of increased restructuring costs.
TORSTAR CORPORATION 2015 ANNUAL REPORT 26
TORSTAR - Management's Discussion and Analysis
5. Outlook
The outlook for our business in 2016
Metroland Media Group and Star Media Group are expected to continue to face challenges in 2016 as a result of continued
shifts in spending by advertisers. While print advertising declines were more moderate at both the Metroland Media Group
newspapers and Star Media Group newspapers in 2015, it is difficult to predict if this trend will continue in 2016 given the
continued evolution of advertising markets and volatility in the economy. Flyer distribution revenues are expected to continue
to be negatively affected by the 2015 closure of a few large retail customers through the end of the first quarter of 2016.
Beyond the first quarter, flyer distribution revenue is expected to be relatively stable in the balance of 2016. Subscriber
revenues declined moderately in 2015 and this trend is expected to continue in 2016. At Metroland Media Group and Star
Media Group, digital revenue is expected to grow in 2016 as a result of revenues from Toronto Star Touch, growth at
thestar.com as well as growth in local digital advertising at Metroland Media Group. Within the Digital Ventures segment,
the trends in revenue growth from a combination of acquisitions and organic revenue growth at VerticalScope and organic
revenue growth which eyeReturn experienced in 2015 have continued early into 2016 and are expected to continue through
the balance of 2016.
Cost reduction remains an important area of focus for us in 2016. Savings related to restructuring initiatives undertaken
through the end of 2015 are expected to be $22.5 million in 2016 ($10.8 million in Metroland Media Group, $10.2 million in
the Star Media Group and $1.5 million in Digital Ventures), as well as an expected $4.0 million of cost savings ($10.0 million
on an annual basis) associated with the transition of printing the Toronto Star to Transcontinental Printing which is currently
expected to occur in July 2016. We expect that the combined severance provision and various other transition costs
associated with this decision, which will be recorded as a restructuring charge in the first quarter of 2016, will be in the range
of approximately $22 million. Also, in connection with this decision, we have commenced exploration of the sale of the
existing printing facility and land in Vaughan. Expenses related to our registered defined benefit pension plans are currently
expected to decrease by approximately $2.5 million in 2016. While newsprint pricing is currently expected to increase in
2016, we expect that any impact of price increases will be more than offset by lower consumption in the year.
The Toronto Star launched Toronto Star Touch in September 2015. The full year net investment spending for Toronto Star
Touch was $14.0 million, on a pre-tax basis, including significant marketing costs associated with the launch. 2016 is expected
to represent another significant year of investment in establishing Toronto Star Touch with an expected net investment
spending of approximately $10 million in 2016. Excluding Toronto Star Touch, net investment spending associated with
other growth initiatives in 2016 is currently expected to be very modest, similar to 2015 levels.
We anticipate our 56% share of VerticalScope's non-cash amortization charges, including those related to intangible assets
identified at the time of our investment (refer to discussion of Investment in VerticalScope in Section 3 of this MD&A), to be
approximately U.S. $20.0 million each quarter for each of the first and second quarters of 2016, U.S. $9.2 million in the third
quarter of 2016 and U.S. $4.1 million in the fourth quarter of 2016. This excludes any additional amortization charges related
to acquisitions which VerticalScope may make in 2016.
From a cash flow perspective, in 2016, we anticipate required funding of our registered defined benefit pension plans to
remain at approximately $18 million, which is approximately $2.5 million in excess of the amount expected to be expensed
in the statement of income. Capital expenditures for 2016 are currently anticipated to be in the order of $19 million including
accommodating the outsourcing of the printing of the Toronto Star.
In 2015, we announced our intention to reduce the dividend, if, as and when declared, to 26 cents per share annually
effective the first quarter of 2016.
6. Liquidity and Capital Resources
A discussion of our cash flow, liquidity, credit facilities and other disclosures
We use cash and cash equivalents on hand and the cash generated by our operations to fund working capital, capital
expenditures, distributions to shareholders, and acquisitions. Based on our current and anticipated level of operations, it is
expected that our future cash flows from operating activities, combined with existing cash and cash equivalents, will be
adequate to cover forecasted cash requirements through the end of 2017. Beyond 2017, our cash requirements could
TORSTAR CORPORATION 2015 ANNUAL REPORT 27
TORSTAR - Management's Discussion and Analysis
increase significantly, including in respect of our defined benefit pension plans. Funding for these plans may change as a
result of an increase in the minimum required funding and we may need to take additional measures to increase our liquidity
and capital resources, including obtaining additional debt or equity financing.
In 2015, we generated $38.1 million of cash from operating activities and we used $213.5 million and $40.7 million of cash
in investing activities and financing activities respectively.
In the fourth quarter of 2015, we generated $16.2 million of cash from operating activities, we generated $14.1 million of
cash from investing activities and we used $10.3 million in financing activities.
At December 31, 2015 we had $37.9 million of restricted cash, comprised of $15.2 million held as collateral for outstanding
standby letters of credit (substantially all of which is in respect of a standby letter of credit supporting an unfunded executive
retirement plan liability) and $22.8 million which was held in escrow in respect of the sale of Harlequin. The $22.8 million
escrow related to the sale of Harlequin was released on February 1, 2016.
Operating Activities
In 2015, we generated $38.1 million of cash from operating activities. Cash provided by operating activities included $20.4
million of contributions to our employee future benefit plans and a $12.0 million decrease in non-cash working capital. During
2014, we generated $54.7 million of cash from operating activities from continuing operations which included funding of
$39.9 million of contributions to our employee future benefit plans, a $16.2 million increase in restricted cash and a $22.2
million decrease in non-cash working capital.
In the fourth quarter of 2015, we generated $16.2 million of cash from operating activities which included $5.9 million of
contributions to our employee future benefit plans, a $2.5 million decrease in restricted cash and a $5.9 million decrease
in non-cash working capital. During the fourth quarter of 2014 we generated cash of $29.7 million of cash from operating
activities from continuing operations which included $11.6 million of contributions to our employee future benefit plans, a
$2.1 million increase in non-cash working capital and a decrease of $5.8 million in restricted cash.
Investing Activities
During 2015, we used $213.5 million of cash in investing activities. This included a $180.0 million investment in VerticalScope
(net of a $22.1 million distribution received in the fourth quarter of 2015, which was anticipated at the time of the initial
investment), a $1.5 million investment in Nest Wealth Asset Management Inc., an associated business, $30.6 million for
additions to property, plant and equipment and intangible assets (excluding Torstar’s proportionate share of additions related
to our joint ventures and our 56% interest in VerticalScope) and $2.1 million for acquisitions and portfolio investments.
Portfolio investments included an investment in CanadaStays.com. Additions to intangible assets included $10.7 million of
additions related to Toronto Star Touch.
During 2014, we generated $391.8 million of cash from investing activities from continuing operations. This included $442.2
million in net proceeds received on the sale of Harlequin and $8.4 million of proceeds received on the sale of assets, partially
offset by: (i) a $22.8 million increase in restricted cash (reflecting funds held in escrow); (ii) $20.9 million of additions to
property, plant and equipment and intangible assets; (iii) $4.9 million for additional investments in associated businesses;
and (iv) $10.8 million for acquisitions and investments.
During the fourth quarter of 2015 we generated $14.1 million of cash from investing activities. This included a $22.1 million
distribution from VerticalScope, as anticipated at the time of the initial investment, partially offset by $6.6 million of additions
to property, plant and equipment and intangible assets and $1.5 million of investments in associated businesses which
represented the payment of costs associated with our investment in VerticalScope in the third quarter of 2015. During the
fourth quarter of 2014 we used $0.8 million of cash 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.
Financing Activities
In 2015 we used cash of $40.7 million in financing activities which was primarily used for the payment of dividends. In 2014
net cash of $220.1 million was used in financing activities from continuing operations with $41.4 million used for the payment
of dividends, and $179.7 million used for the net payment of debt.
TORSTAR CORPORATION 2015 ANNUAL REPORT 28
TORSTAR - Management's Discussion and Analysis
We used cash of $10.3 million and $10.1 million for financing activities in the fourth quarters of 2015 and 2014 respectively
which was primarily used in the payment of dividends.
Contractual Obligations and Other
As at December 31, 2015, we had the following significant contractual obligations which were not included in our liabilities
in the Statement of Financial Position.
(In 000's)
Nature of the Obligation
Office leases
Services
Total
Receivable from office sub-leases
Total
$54,864
70,204
$125,068
($10,478)
2016
$14,917
14,782
$29,699
($2,925)
2017 - 2018
$23,650
38,407
$62,057
($5,060)
2019 - 2020
$16,062
15,060
$31,122
($2,493)
2021+
$235
1,955
$2,190
In 2015, we received cash proceeds of $7.1 million in digital media tax credits, net of expenses, in respect of claims filed
for the year ended December 31, 2010. While we have filed additional claims in respect of these credits, there is uncertainty
with regard to timing and amounts (if any) that may ultimately be received under this program.
Outstanding Share and Share Option Information
As at February 26, 2016, we had 9,838,455 Class A voting shares and 70,708,213 Class B non-voting shares outstanding.
As at December 31, 2015 we had 9,839,355 Class A voting shares and 70,707,063 Class B non-voting shares outstanding.
More information on our share capital is provided in Note 20 of the Consolidated Financial Statements.
As at February 26, 2016, we had 6,848,162 (December 31, 2015 - 5,543,589) options to purchase Class B non-voting
shares outstanding to executives. More information on Torstar’s share option plan is provided in Note 21 of the Consolidated
Financial Statements.
7. Financial Instruments
A summary of our financial instruments
Foreign Exchange
In order to offset the foreign exchange risk associated with the investment in VerticalScope in July 2015, we entered into a
hedge of the net investment using 90 day rolling forward foreign exchange contracts, which established a rate of exchange
of Canadian dollar per U.S. dollar of $1.30 for U.S. $153.8 million as of the date of the investment. At December 31, 2015,
we had forward foreign exchange contracts in place, which established a rate of exchange of Canadian dollar per U.S. dollar
of $1.34 for U.S. $137.0 million. These forward foreign exchange contracts have been designated as a hedge of the net
investment in VerticalScope. Gains or losses on the translation of the effective portion of these designated hedges are
transferred (on a net of tax basis) to Other Comprehensive Income (“OCI”) to offset any gains or losses on translation of
the net investment. Losses totalling $1.7 million on the translation of the ineffective portion of these designated hedges (for
accounting purposes) were included in net income in 2015.
In February 2016, we extinguished $68.0 million of U.S. rolling forward contracts we had in place in respect of the hedge
of the net investment in VerticalScope and simultaneously entered into a $68.0 million zero cost collar arrangement with a
range of Canadian $1.46 to Canadian $1.26 for U.S. $1.00.
During 2014, we realized a loss of $1.0 million in discontinued operations related to forward foreign exchange contracts to
sell U.S. $20.0 million 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, we
terminated all outstanding forward foreign exchange contracts for a payment of $0.4 million.
TORSTAR CORPORATION 2015 ANNUAL REPORT 29
TORSTAR - Management's Discussion and Analysis
8. Employee Benefit Obligations
A summary of our employee benefit obligations
We have several registered defined benefit pension plans which provide pension benefits to our employees, and an
unregistered, unfunded defined benefit pension plan that provides pension benefits to eligible senior management executives
of Torstar. In addition, we have capital accumulation (defined contribution) plans. We also have a post-employment benefit
plan that provides health and life insurance benefits to certain grandfathered employees, primarily in the newspaper
operations.
We 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
2015
($11,426)
(21,238)
(47,875)
($80,539)
2014
($11,687)
(16,783)
(47,602)
($76,072)
At December 31, 2015, our net deficit related to our defined benefit pension plans was $11.4 million, a favourable movement
of $5.3 million from a net deficit of $16.7 million at September 30, 2015 and a favourable movement of $0.3 million from a
net deficit of $11.7 million at December 31, 2014.
We recognized the following expense in operating profit related to the defined benefit obligations:
($000’s)
Registered pension plans
Unregistered/unfunded pension plans
Post employment benefits plan
2015
$17,452
537
364
$18,353
2014
$12,498
632
300
$13,430
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 management in 2015 and 2014 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
2015
2014
3.1% to 3.9%
2.0% to 2.5%
3.5% - 3.9%
2.25% - 2.75%
4.2% - 4.7%
2.5% - 3.0%
3.5% to 3.9%
2.25% to 2.75%
2016
3.1% to 3.9%
2.0% to 2.5%
The discount rates 3.1% - 3.9% were the yields at December 31, 2015 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, 2015 of $116.6 million. A discount rate that was one percent lower would have increased the
value of the net pension plan obligation at December 31, 2015 by $133.6 million.
TORSTAR CORPORATION 2015 ANNUAL REPORT 30
TORSTAR - Management's Discussion and Analysis
Management has estimated the rate of future compensation increases to be between 2.0% and 2.5%. 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, 2015 would be approximately $5.1 million lower. If the estimated discount rate were one percent lower, the
obligation at December 31, 2015 would be approximately $6.3 million higher. For health care costs, the estimated trend
was for a 4.6% increase for the 2015 expense. For 2016, health care costs are estimated to increase by 4.8% with an
incremental 0.2% increase in 2017. If the estimated increase in health care costs were one percent higher, the obligation
at December 31, 2015 would be approximately $1.3 million higher. If the estimated increase in health care costs were one
percent lower, the obligation at December 31, 2015 would be approximately $1.1 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. We recognize these actuarial
gains and losses as realized, through OCI. Actuarial losses of $3.4 million were recognized through OCI in 2015 and actuarial
losses from continuing operations of $83.6 million were recognized through OCI in 2014.
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 normally be funded over a five-year period. As all of our pension plans are registered in Ontario, solvency valuations
are a key determinant of ongoing defined benefit pension contribution requirements.
Actuarial reports for our most significant group of 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 annual funding was set for 2015 through
2017. Based on these valuations, we expect the required annual funding for our registered defined benefit plans for 2016
and 2017 to be in the range of $18 million. Funding for our defined benefit pension plans was $18.0 million in 2015.
Based on the December 31, 2013 solvency report, we had an estimated solvency deficit of $45.3 million at December 31,
2013. This report also indicated that 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, 2015, we estimate that the solvency deficit for these plans at
December 31, 2015 was approximately $129 million.
9. Critical Accounting Policies and Estimates
A description of accounting estimates and judgements that are critical to determining our financial results, and changes
to accounting policies
Accounting Policies
The accounting policies used in the preparation of the 2015 Consolidated Financial Statements are outlined in Note 2 of
the 2015 Consolidated Financial Statements for the year ended December 31, 2015. Effective January 1, 2015, Torstar
applied the amendments to IAS 19 Employee Benefits for the first time.
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. Application
of this amendment did not have an impact on our financial results.
Accounting Estimates and Judgements
The preparation of our 2015 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 31
TORSTAR - Management's Discussion and Analysis
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:
Impairment of non-financial assets
At each reporting date, we are required to assess our investments, intangible assets, property, plant and equipment 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, we estimate the recoverable amount of the asset, CGU or group of
CGUs and compare it to the carrying value. In addition, irrespective of whether there is any indication of impairment, we
are required to test intangible assets with an indefinite useful life and goodwill for impairment at least annually. We complete
our annual testing during the fourth quarter of each year.
For intangible assets other than goodwill, we are 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.
The test for impairment for property, plant and equipment, intangible assets 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 ("FVLCS"),
and VIU. 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.
Historically we have used a VIU calculation as our measure of the recoverable amount of a CGU with a reconciliation to
the market capitalization of Torstar. Given the change in the market capitalization of Torstar in the fourth quarter of 2015,
which we believe was primarily the result of a significant change in the risk premiums expected by market participants related
to longer term uncertainties about the industry, we determined that the FVLCS, was a more reliable and appropriate
methodology in this case due to increased measurement uncertainties involved with the VIU approach. Further, we also
completed a corresponding reconciliation to the market capitalization for purposes of the impairment test as at December
31, 2015.
We have computed the fair value less cost to sell of the Metroland Media Group of CGUs and the Star Media Group of
CGUs using a forward EBITDA multiple that requires market participant assumptions about future cash flows and forward
multiples. In calculating the recoverable amount, under either a VIU or FVLCS methodology, management is required to
make several assumptions, including, but not limited to, expected future revenues, expected future cash flows, forward
multiples and discount rates. Our 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 we are currently anticipating. We have also made certain assumptions for the forward multiples, discount and terminal
growth rates to reflect possible variations in the cash flows. However, the risk premiums expected by market participants,
as reflected in forward multiples, related to uncertainties about the industry, specific reporting units or specific intangible
assets may differ or change quickly, as it has in the fourth quarter of 2015, depending on economic conditions and other
events. Changes in any of these assumptions may have a significant impact on the fair value of the investment, CGU or
group of CGUs or intangible assets and the results of the related impairment testing. Refer to Note 12 of our Consolidated
Financial Statements for the year ended December 31, 2015 for further details about the methods and assumptions used
in estimating the recoverable amount.
As at December 31, 2015 the carrying value of investments, intangible assets, property, plant & equipment and goodwill
represented 34%, 10%, 17% and 1% respectively of total assets and each reporting segment had investments, intangible
assets and property, plant and equipment with carrying values subject to these estimates. As at December 31, 2014 the
carrying value of investments, intangible assets, property, plant and equipment and goodwill represented 8%, 5%, 11% and
TORSTAR CORPORATION 2015 ANNUAL REPORT 32
TORSTAR - Management's Discussion and Analysis
30% respectively of total assets. These values, for the applicable segments, are outlined in the notes to the consolidated
financial statements for the year ended December 31, 2015. Additionally, as a result of the market capitalization of the
Company in the fourth quarter of 2015,which we believe was primarily due to a rapid and significant shift in the risk premiums
expected by market participants which we believed are primarily related to longer term uncertainties about the traditional
newspaper industry and rapid shifts in the print and digital advertising markets, we have recorded impairment charges (on
a segmented basis), related to goodwill, intangible assets and investments totaling $361.1 million in 2015, $97.9 million in
2014 and $86.1 million in 2013. These charges impact net income but have no effect on cash flow. Refer to the discussion
of "Impairment of assets" in the Annual Operating Results (Section 3) for further detail surrounding the impairment of asset
charges recorded during 2015.
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 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 2015 Consolidated Financial Statements.
Taxes
We are 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 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 our ability to utilize tax losses carried forward
is to a large extent judgement-based. If our future taxable results differ significantly from those expected, we would be
required to increase or decrease the carrying value of the deferred tax assets with a potentially material impact in our
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 our income taxes is provided in Note 14 of the 2015 Consolidated Financial Statements.
Significant judgements made by management are described below.
TORSTAR CORPORATION 2015 ANNUAL REPORT 33
TORSTAR - Management's Discussion and Analysis
Classification of investments as portfolio investments, associated businesses, joint ventures and subsidiaries
Classification of investments requires judgement on whether we control, have 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 we have 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 we have, 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 2015 and 2014. Similarly, VerticalScope has been classified as an associated
business, rather than a consolidated subsidiary or joint venture, based on management’s judgement that we have, based
on provisions in the shareholder agreements, significant influence despite owning 56% of the voting rights.
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. We classified our 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. We have classified our 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 we have a contractual right to convert them into cash with 30 days’ notice.
Determination of operating segments, reportable segments and CGUs
In connection with the acquisition of 56% of VerticalScope during the third quarter of 2015, we have realigned our operating
segments such that digital businesses outside the traditional newspaper operations are managed as part of the Digital
Ventures segment and accordingly, we now have three reportable operating segments for segment reporting purposes.
“Corporate” is the provision of corporate services and administrative support. Each of the Star Media Group, Metroland
Media Group and Digital Ventures segments include CGUs which have been grouped together for purposes of reviewing
performance and impairment testing. Our chief operating decision-maker monitors the operating results of the operating
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 our business
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(t) in our Consolidated Financial Statements. The following new standards or amendments to
accounting standards, which will be effective subsequent to 2016, are expected to have a material impact on the interim or
annual consolidated financial statements:
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. We do not anticipate early adoption
TORSTAR CORPORATION 2015 ANNUAL REPORT 34
TORSTAR - Management's Discussion and Analysis
and we plan to adopt the standard on its effective date of January 1, 2018. We are 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. We do not anticipate early
adoption and we plan to adopt the standard on its effective date of January 1, 2018. We are in the process of reviewing the
standard to determine the impact on the consolidated financial statements.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 which supersedes IAS 17 Leases and related interpretations. The new standard
provides a single lessee accounting model which eliminates the distinction between operating and finance leases, by requiring
lessees to recognize assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12
months or less. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is
retained. We do not anticipate early adoption and we plan to adopt the standard on its effective date of January 1, 2019.
We are in the process of reviewing the standard to determine the impact on the consolidated financial statements.
11. Controls and Procedures
A discussion of our 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, 2015, under the supervision of, and with the participation of the CEO and CFO, we evaluated the
effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO
and CFO have concluded that, as at December 31, 2015, our disclosure controls and procedures were effective.
Internal Controls over Financial Reporting
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 authorizations of management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our 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, management acknowledges that
our 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, 2015.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the three months ended
December 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting.
TORSTAR CORPORATION 2015 ANNUAL REPORT 35
TORSTAR - Management's Discussion and Analysis
12. Selected Annual Information
A summary of selected annual financial information for 2015, 2014 and 2013
(in $000’s - except per share amounts)
Revenue
Segmented Revenue *
Net loss from continuing operations
Per Class A voting and Class B non-voting share - Basic and
Diluted
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
2015
$786,631
$843,640
($399,837)
($4.96)
(404,837)
(403,966)
($5.02)
($5.02)
80,400
80,400
$0.5250
$696,416
$—
2014
$858,134
$904,618
($49,598)
($0.62)
173,064
172,685
$2.16
$2.15
80,078
80,254
$0.5250
$1,143,521
$—
2013
$935,773
$984,047
($58,046)
($0.73)
(27,413)
(27,984)
($0.35)
($0.35)
79,840
79,840
$0.5250
$1,348,712
$175,898
*Includes proportionately consolidated share of joint venture operations and VerticalScope This is a non-IFRS or additional IFRS measures, refer to Section
15 of this MD&A.
Revenue has declined each year reflecting a structural shift within the advertising industry from print media to digital media.
Digital revenues increased 13.6% in 2015 and were flat in 2014. The increase in 2015 was primarily related to the investment
in VerticalScope.
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.
In addition, 2014 included a $224.6 million pre-tax gain on the sale of Harlequin, while 2015 included additional charges of
$5.0 million related to provisions for indemnities in respect of the sale of Harlequin.
Total assets have declined over the three year period reflecting total impairment charges of $361.1 million in 2015, $97.9
million in 2014 and $86.1 million in 2013. All amounts outstanding under previous debt facilities were repaid during 2014
using proceeds from the sale of Harlequin.
TORSTAR CORPORATION 2015 ANNUAL REPORT 36
TORSTAR - Management's Discussion and Analysis
13. Summary of Quarterly Results
A summary view of our 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 -
Dec 31,
2015
$213,749
Sept 30,
2015
$185,386
June 30,
2015
$206,327
Mar 31,
2015
$181,169
Dec 31,
2014
$233,434
Sept 30,
2014
$199,925
June 30,
2014
$225,591
Mar 31,
2014
$199,184
Quarter Ended
($233,413)
($164,834)
($1,131)
($459)
$20,887
($86,998)
$18,104
($1,591)
Basic and Diluted
($2.90)
($2.04)
($0.01)
($0.01)
$0.26
($1.08)
$0.23
($0.02)
Net Income (loss) attributable to
equity shareholders
Per Class A voting and Class B non-
voting share
($234,817)
($164,337)
($1,118)
($3,694)
$20,556
$125,343
$19,682
$7,104
Basic
Diluted
($2.91)
($2.91)
($2.05)
($2.05)
($0.01)
($0.01)
($0.05)
($0.05)
$0.26
$0.26
$1.57
$1.56
$0.25
$0.25
$0.09
$0.09
*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 2015 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 quarters 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 $3.8 million, $15.9 million, $4.2 million and $7.5 million in the first, second, third
and fourth quarters of 2015 and $3.6 million, $4.4 million, $3.9 million and $10.9 million in the first, second, third and fourth
quarters of 2014, respectively. Additionally, losses on impairment of assets (reported on a segmented basis) of $147.8 million
and $213.3 million were recorded in the third and fourth quarters of 2015, respectively and $0.3 million, $0.3 million, $97.3
million and $0.1 million in the first, second, third and fourth quarters of 2014, respectively.
In addition, the third quarter of 2014 included a $224.6 million pre-tax gain on the sale of Harlequin, while the first, third and
fourth quarters of 2015 included additional pre-tax charges of $4.0 million, $0.5 million and $1.3 million related to provisions
for indemnities in respect of the sale of Harlequin.
14. Restated 2015 First and Second Quarter Segmented Information
Restated 2015 first and second quarter information
In connection with the acquisition of 56% of VerticalScope during the third quarter of 2015, we realigned our operating
segments such that digital businesses outside of the historical newspaper operations are managed as one operating
segment. Previously reported segment information for the first and second quarters of 2015 has been restated as follows:
TORSTAR CORPORATION 2015 ANNUAL REPORT 37
TORSTAR - Management's Discussion and Analysis
First Quarter 2015
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
MMG
$100,882
(50,883)
(44,495)
5,504
(3,404)
2,100
SMG
$82,998
(27,624)
(46,009)
9,365
(3,144)
6,221
Restructuring and other charges
(1,565)
(2,176)
Digital
Ventures
Corporate
Total
Segmented*
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
$8,426
(3,914)
(4,531)
(19)
(887)
(906)
(11)
$192,306
($11,137)
$181,169
($2,962)
(689)
(3,651)
(11)
(3,662)
(85,383)
(95,724)
11,199
(7,446)
3,753
4,605
4,328
(2,204)
672
(1,532)
(80,778)
(91,396)
8,995
(6,774)
2,221
(3,752)
11
(3,741)
Impairment of assets
Operating profit (loss)**
Loss from continuing operations
Loss from discontinued operations
Net loss
$535
$4,045
($917)
($3,662)
$1
($1,521)
($1,520)
($459)
($3,500)
($3,959)
Second Quarter 2015
Digital
Ventures
Corporate
Total
Segmented*
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings (loss)**
MMG
$119,089
(53,752)
(49,335)
16,002
(3,453)
12,549
SMG
$88,124
(33,384)
(47,257)
7,483
(3,095)
4,388
Restructuring and other charges
(13,782)
(1,997)
$9,718
(3,769)
(5,212)
737
(966)
(229)
(80)
($2,689)
(698)
(3,387)
(10)
(3,397)
$216,931
(93,594)
(102,502)
20,835
(7,524)
13,311
Adjustments
&
Eliminations1
Total Per
Consolidated
Statement of Income
($10,604)
$206,327
4,447
4,403
(1,754)
721
(1,033)
(89,147)
(98,099)
19,081
(6,803)
12,278
(15,859)
235
(15,624)
Impairment of assets
Operating profit (loss)**
Loss from continuing operations
Loss from discontinued operations
Net loss
($1,233)
$2,391
($309)
($3,397)
($2,548)
($798)
($3,346)
($1,131)
($1,131)
1 Reflects eliminations of our proportionate share of joint ventures and our 56% interest in VerticalScope
*Includes proportionately consolidated share of joint venture operations and VerticalScope
**These are non-IFRS or additional IFRS measures, refer to Section 15 of this MD&A
15. 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) and adjusted
earnings per share, as measures to assess the consolidated performance and the performance of the reporting units and
business segments.
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 which includes our proportionately consolidated share of revenues
from joint ventures and our 56% interest in VerticalScope. Management of each segment is accountable for the revenues,
including the proportionately consolidated share of revenues from joint venture operations. We believe that segmented
revenue is a useful measure for investors as it is a measure of the revenues for which management of each segment is
TORSTAR CORPORATION 2015 ANNUAL REPORT 38
TORSTAR - Management's Discussion and Analysis
accountable. The intent of segmented revenue is to provide additional useful information to investors, analysts and readers
of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not
be comparable to measures used by other companies.
Adjusted EBITDA/Segmented Adjusted EBITDA
Management believes that adjusted EBITDA is an important proxy for the amount of cash generated by our ongoing operations
(or by a reporting unit or business segment) to generate liquidity to fund future capital needs and we use 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. We calculate adjusted EBITDA as operating revenue, less salaries and benefits and other
operating costs, as presented on the consolidated statement of income, and exclude 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, analysts and readers of our financial statements. 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 including proportionately consolidated results for joint ventures and our 56% interest in
VerticalScope for which management is accountable.
Operating earnings/Segmented operating earnings
Operating earnings is used by management to represent the results of ongoing operations inclusive of amortization and
depreciation. We use operating earnings as a measure of the amount of income generated by our ongoing operations (or
by a reporting unit or business segment) after giving effect to amortization and depreciation. We believe this metric is also
useful for investors for this purpose. We calculate 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. Our 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. The intent of operating
earnings is to provide additional useful information to investors, analysts and readers of our financial statements. The
measure does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under
IFRS, 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 including
proportionately consolidated operating earnings for joint ventures and our 56% interest in VerticalScope for which
management is accountable.
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 correspond to the definitions used in our 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
2015
Fourth Quarter
2014
Fourth Quarter
2015
Fourth Quarter
2014
($233,195)
7,496
213,321
($12,378)
37,220
$24,842
$19,944
10,878
63
$30,885
7,750
$38,635
($207,101)
6,655
209,321
$8,875
9,309
$18,184
$18,440
10,870
63
$29,373
7,081
$36,454
TORSTAR CORPORATION 2015 ANNUAL REPORT 39
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
Twelve months
ended
December 31, 2015
Twelve months
ended
December 31, 2014
Twelve months
ended
December 31, 2015
Twelve months
ended
December 31, 2014
($403,079)
31,310
361,081
($10,688)
77,511
$66,823
($52,370)
22,706
97,935
$68,271
33,401
$101,672
($354,069)
30,223
345,081
$21,235
30,177
$51,412
($44,185)
22,646
82,935
$61,396
30,674
$92,070
Adjusted earnings per share
Adjusted earnings per share is used by management to represent the per share earnings of results of our ongoing operations
(or by a reporting unit or business segment) and is not a recognized measure of financial performance under IFRS. We
believe this metric is also useful for investors for this purpose. We calculate 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. 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.
Non-cash foreign exchange, other income (expense) and changes in deferred taxes are eliminated as these are not related
to routine operating activities. The intent of presenting adjusted earnings per share is to provide additional useful information
to investors, analysts and readers of our financial statements. Our 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 measure
does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under IFRS,
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.
Adjusted earnings (loss) per share
• Restructuring and other charges
•
Impairment of assets
• Non-cash foreign exchange
• Other income (expense)
• Change in deferred taxes
Earnings (loss) per share from continuing operations
Fourth Quarter
Twelve months ended December 31
2015
2014
2015
2014
($0.10)
(0.08)
(2.67)
(0.02)
(0.03)
0.00
($2.90)
$0.30
(0.10)
0.00
0.00
0.06
0.00
$0.26
($0.10)
(0.29)
(4.53)
(0.02)
(0.02)
0.00
($4.96)
$0.58
(0.20)
(1.21)
(0.07)
0.04
0.24
($0.62)
Operating profit/Segmented operating profit
Operating profit is an additional IFRS measure. Management uses operating profit to measure the results of operations
inclusive of impairments and restructuring and other charges. Operating profit appears in our consolidated statement of
income. We believe that operating profit provides additional useful information to investors, analysts and readers of our
financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be
comparable to measures used by other companies. Our method of calculating operating profit may differ from other
companies and accordingly may not be comparable to measures used by other companies. Segmented operating profit is
calculated in the same manner described above, except that it is calculated using total segment results including
proportionately consolidated results for joint ventures and our 56% interest in VerticalScope for which management is
accountable.
16. Enterprise Risk Management
Enterprise risks and uncertainties Torstar is facing and how we manage these risks
Definition of Business Risk
We define 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 CORPORATION 2015 ANNUAL REPORT 40
TORSTAR - Management's Discussion and Analysis
Our enterprise risks are largely derived from our business environment and are fundamentally linked to our strategies and
business objectives. We strive to proactively mitigate our risk exposures through performance planning, effective business
operational management and risk response strategies which can include mitigating, transferring, retaining and/or avoiding
risks. We also strive to avoid taking on undue risk exposures whenever possible and ensure alignment of exposures with
business strategies, objectives, values and risk tolerances.
Section 17 summarizes the principal risks and uncertainties that could affect our future business results.
Torstar’s Risk and Control Assessment Process
In 2015, we used a multi-level enterprise risk and control assessment process that incorporated the insight of employees
throughout the organization.
At a high level, throughout the year, we 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 included interviews with senior managers. Additionally, our assessment process incorporated
input from internal and external audit, internal control over financial reporting compliance activities and risk assessment
activities, as well as input 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, we 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, we 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.
17. Risks and Uncertainties
Risks and uncertainties facing our business
We are 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 our financial condition, financial performance or our business.
The actual effect of any event on our business could be materially different from what is anticipated. The risks described
below impact some or all of our businesses, including our investment in VerticalScope. This description of risks does not
include all possible risks.
Revenue Risks
Our 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.
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 but are not
limited to 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. Our platforms and sites, including those of VerticalScope, face competition for users, readers and
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advertisers. Our 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 us. The extent and nature
of competition has intensified over the past several years as a result of the rapid and continued development of digital media
alternatives, and this has resulted in the fragmentation of audiences. We expect intense competition to continue. Advertisers
also 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. We may not be able to successfully adapt to these rapid changes
and increasing number of digital media options, to respond as quickly to new or emerging technologies and changes in
consumer behavior as our competitors, or to distinguish our products and services from those of our competitors.
In response to this shift to digital media, we have been investing significant time and resources in our digital platforms to
evolve our existing products and develop new products, including mobile platforms, video and other evolving content delivery
platforms. There is a risk that we will be unable to successfully attract or retain users and advertisers with our existing or
new digital platforms. Revenue generated by our advertising offerings will depend, to a large extent, on their perceived
effectiveness and the continued growth in digital advertising. Thus far, digital advertising revenues have not offset a significant
portion of lost print advertising revenue and we may not be successful in replacing print revenue declines in the future. In
addition, some of our digital platforms are in an early stage of development or implementation and may not achieve profitability.
We also use third party platforms to distribute some of our content and advertising. These third parties may discontinue or
modify their platforms which could restrict access to our content, result in the loss of a direct relationship with consumers,
and impact our ability to generate revenue through these platforms.
In addition, our success on mobile platforms depends upon the ability to provide advertising for most mobile connected
devices, as well as the major operating systems that run on them. The design of mobile devices and operating systems is
controlled by third parties with whom we do not have any formal relationships. These parties frequently introduce new
devices, and from time to time they may introduce new operating systems or modify existing ones. Network carriers may
also impact the ability to access specified content on mobile devices. If our solutions were unable to work on these devices,
our ability to generate revenue could be significantly harmed.
Finally, the use of technology to restrict or block the targeting or display of advertising by device manufacturers, network
carriers or consumers could increase, and this may have an adverse impact on our ability to provide advertising inventory
and attract advertisers to our platforms.
There has been and continues to be consolidation in Canadian media. In addition, the shift to digital media has resulted in
additional competition from new local and global competitors. Competitors are increasingly larger, may have interests in
multiple forms of media and may be more successful in attracting advertising revenue.
Content, Audience 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 and as a result print newspaper readership is aging. If these or other trends
continue to result in declining print circulation, circulation revenues and the ability to maintain advertising rates may be
adversely affected. While digital readership appears to be an important factor in the ability of a newspaper to generate
digital advertising revenue, it may have a negative impact on print circulation/subscription volumes and revenues and also
on readership.
Our reputation for quality journalism and content is an important factor in maintaining readership levels. We strive 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 and platforms for content and
the newsworthiness of current events, among other intangible factors, may also contribute to the fluctuation in readership
levels, and accordingly, limit our ability to generate advertising and circulation/subscription revenue.
Digital readership and traffic levels are a key driver of how digital advertisers base their decisions about where to advertise
digitally. In order to be successful, we need to generate traffic on our digital platforms that is valuable to advertisers. With
the increase in alternative digital content providers and digital platforms, we face the risk that we may not be able to sufficiently
attract and retain a base of frequent and engaged visitors to our digital platforms. This is particularly important for certain
of our platforms, including those of VerticalScope, that rely on user generated content and forum discussions. If usage is
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insufficient or if we do not meet advertisers’ expectations by delivering quality traffic, we may not be able to create enough
advertiser interest in our digital platforms, or our advertising partners may pay less or cease doing business with us altogether.
We may incur additional costs to attract readers and increase our platform usage and we 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.
The reputation of our digital platforms is an important factor in growing and maintaining traffic and generating advertising
revenue. Advertisers’ perceptions of the attractiveness of the content on our digital platforms, including in some cases user
generated content and forum discussions, will impact our ability to generate advertising revenue. Public preferences and
tastes, general economic conditions, the availability of alternative sources of and platforms for content and forum discussions
may also contribute to the fluctuation in traffic levels, and accordingly, limit our ability to generate advertising revenue. To
some degree, our traffic levels are dependent on internet search engines and our ability to influence search engine rankings
as we depend in part on various internet search engines to direct traffic to our platforms and properties. Our ability to influence
search engine rankings of platforms and properties through search engine optimization efforts is limited. Changes by internet
search engines in their algorithms could cause us to receive less user traffic.
Economic Conditions and Customer Prospects
Advertising revenue in our newspapers and digital platforms is dependent on the prospects of our 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 we operate
specifically, have had and may continue to have a negative impact on the advertising industry and on our operations. Certain
of our local and national advertisers operate in industries that are sensitive to adverse economic conditions and are subject
to increasing competition, 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 our revenue.
Cost Structure
Our Metroland Media Group and Star Media Group segments are characterized by a relatively high fixed cost structure and
accordingly, a change in revenue could have a disproportionately negative effect on our financial performance. Over the
last several years, we have reduced costs in a number of ways including by reducing staff and outsourcing certain services.
It is becoming increasingly difficult to continue to reduce costs from current levels. Our ability to achieve cost savings may
be impacted by the level of unionization at our newspaper operations, existing third-party suppliers and service providers
and our ability to outsource additional components of our 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 our
ability to attract and retain key employees (see “Dependence on Key Personnel” below).
Loss of Reputation
Our customers, shareholders and employees place considerable reliance on our good reputation, including our significant
businesses and brands and our ability to maintain our 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 our ongoing ability to preserve and leverage the value of this brand.
Our ability to preserve and leverage the value of Metroland Media Group’s brands, VerticalScope’s brands and other brands
is also important to our success. In addition, as we outsource services and develop brand extensions, we may work with
third party service providers or vendors whose actions could impact our reputation and the value of our brands. The loss
or tarnishing of our reputation through negative publicity or otherwise, whether true or not, could have an adverse impact
on our business, operations or financial condition.
Dependence on Third-Party Suppliers and Service Providers
We rely on third-party suppliers and service providers for certain key services including distribution, call center services,
certain information technology functions and digital publishing platforms, including cloud computing and storage and certain
page production, printing, advertising production and sales, content delivery and content supply requirements. We have
announced our plan to transition printing of the Toronto Star to Transcontinental during 2016. In addition, we may outsource
additional components of our business operations in the future. Our business or operations could be interrupted or otherwise
adversely impacted by our third-party suppliers and service providers experiencing business difficulties or interruptions, the
suppliers or service providers being unable or unwilling to provide services as anticipated or by our being unable to transition
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to, integrate with or effectively utilize the services of the third-party suppliers and service providers. In such event, we may
be unable to find alternate service providers in a timely and efficient manner and on acceptable terms, if at all.
Reliance on Technology and Information Systems and Risk of Security Breaches
We place considerable reliance upon technology and information systems, including those of third party service providers,
throughout our operations, including for digital platforms, content delivery, payment processing, email, back-office support,
software provision and other functions. Our businesses also collect, use and store sensitive data, including intellectual
property, employee information, business information and personal information (including internal information and
information from customers, users of our digital platforms or services, suppliers and business partners). The continuing,
uninterrupted and secure performance of our systems is critical to our businesses. Despite our security measures and
those of our third-party service providers, our systems and those of our 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. This could compromise our systems and the information we store could be accessed,
publicly disclosed, lost or stolen.
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
we have implemented controls and taken other preventative actions to protect our systems against attacks, we 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 our operations and revenues, including through a
disruption of our services or disclosure of personal or confidential information, which could harm our reputation, require us
to expend resources to remedy such a breach or defend against further attacks, subject us to liability under privacy or other
applicable laws or divert management’s attention and resources. In addition, protecting against these events is costly and
requires ongoing monitoring and updating as technologies change. The techniques used to obtain unauthorized access,
disable or degrade service or sabotage systems change frequently and are becoming more sophisticated, and consequently
we and our service providers may be unable to anticipate, prevent, identify or adequately remediate such incidents. Our
general liability insurance may not cover these risks and consequently we could be required to expend significant resources
in connection with any costs, liabilities or losses that may be incurred.
Employee Future Benefits
Relative to our size, and when compared to other companies, we have large pension liabilities, funding requirements and
costs. The funded status of our defined benefit pension plans and our contribution obligations may be impacted by many
factors, including changes to pension laws, regulations and interpretations thereof, changes to benefits provided to plan
participants, changes to actuarial assumptions and methods, changes in participant demographics, mortality, plan
experience, changes to the discount rate used to determine our contribution obligations and the rate of return on plan assets.
Changes to any of the foregoing factors could produce further underfunding in our 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 our cash flows, liquidity and financial condition.
The most significant group of our 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, we also have an unregistered, unfunded defined benefit pension
plan that provides pension benefits to eligible senior management executives and a post-employment benefits plan that
provides health and life insurance benefits to certain grandfathered employees. 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 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.
Ontario has recently introduced the Ontario Retirement Pension Plan (“ORPP”) which is currently expected to come into
effect in 2018. If implemented in its current form, this plan may result in increased employee future benefit costs and funding.
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Strategic Initiatives, Acquisitions and Dispositions
Our growth, including growth of our investment in VerticalScope, is dependent on the ability to identify, develop and execute
appropriate strategic initiatives, which may involve organic growth, growth through acquisition or investment. Acquisitions
and investments involve numerous risks, such as: difficulties in integrating operations, technologies, products and personnel;
diversion of financial and management resources from existing operations; operating under commercial agreements entered
into by an acquisition target; risks of entering new markets; potential loss of key employees; and inability to generate sufficient
revenue to offset acquisition or investment costs.
There is no guarantee that any such opportunities will be available to us or that they will be available at an appropriate price.
The implementation of our strategic initiatives is subject to the risks affecting our businesses generally, the risks associated
with identifying and implementing new strategies and the risks associated with acquisitions, investments or expansions.
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, acquisition or expansion will be successful.
Unexpected Costs or Liabilities Related to Acquisitions and Dispositions
From time to time, we may make acquisitions or sell certain investments, subsidiaries, real property and other assets and
these transactions may affect our costs, revenues, profitability and financial position. Transaction agreements may provide
for certain post-closing adjustments and indemnities or the assumption of certain liabilities and we may be subject to
unexpected costs or liabilities in connection with such transactions. For example, we may have, or may be required to
provide representations, warranties and/or indemnities to third party purchasers which may expose us to costs or liabilities
for breaches of representations and warranties or indemnity claims including as a result of unexpected or unknown changes.
Investments in Other Businesses
We hold investments in businesses that we do not hold a controlling interest in and/or in which we do not exercise control
over the management, strategic direction or daily operations. A change in the outlook of these businesses could require us
to record our share of any asset or goodwill impairment recorded by these businesses and could require us to take a charge
to earnings in order to reduce its carrying value.
Labour Disruptions
We have a number of collective agreements at our 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 our 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.
The printing of the Toronto Star is expected to be transitioned to Transcontinental from the Vaughan Press Centre during
2016.
Sing Tao has two collective agreements covering approximately 125 employees that expired in December 2015 and contract
negotiations are ongoing. 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 625 employees. There are ten
collective agreements covering approximately 225 employees within the community newspapers. Two agreements covering
approximately 25 employees expired in August 2015 and negotiations are expected to commence shortly. Three agreements
covering approximately 40 employees will expire in November 2016 and two agreements covering approximately 115
employees will expire in December 2016 and three agreements covering approximately 45 employees will expire in December
2017.
At the Metroland Media Group daily newspapers, there are ten agreements covering approximately 400 employees. Two
agreements covering approximately 80 employees at the Hamilton Spectator will expire in May 2016 and one agreement
covering approximately 5 employees at the Guelph Mercury which ceased printing in January 2016. Four agreements
covering approximately 100 employees at the Waterloo Region Record and one agreement covering approximately 65
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TORSTAR - Management's Discussion and Analysis
employees at the Hamilton Spectator will expire in December 2017. Two agreements covering approximately 150 employees
at the Hamilton Spectator expired at the end of December 2015 and negotiations are expected to commence shortly.
Newsprint Costs
Newsprint is the single largest raw material expense for our newspaper operations and represents approximately 13% of
total operating costs for 2015. Newsprint is priced as a commodity with the price varying widely from time to time.
We 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. We primarily source newsprint from three main suppliers. For 2016,
we have fixed the cost of newsprint with our largest supplier and have negotiated a pricing band with our second largest
supplier. Newsprint prices are currently expected to be somewhat higher than what we experienced in 2015. There can be
no assurance that we will be able to extend these arrangements in future years or that we will not be exposed in the future
to volatile or increased newsprint costs which could have an adverse effect on our financial performance.
Reliance on Printing Operations
Our newspaper operations place considerable reliance on the functioning of our printing operations for the printing of our
various publications, with particular emphasis placed on the Toronto Star’s Vaughan Press Centre, which primarily supports
the Toronto Star’s printing needs. We have recently announced that we intend to transition printing of the Toronto Star in
2016 from this facility to Transcontinental and ultimate closure of this printing facility. In the event that any of our print
facilities or third party contracted print facilities experience a shutdown or disruption, including those related to the transition
of the printing of the Toronto Star, we and/or the third party printer will attempt to mitigate potential damage by shifting the
printing to our remaining facilities or outsourcing such work to a third party commercial printer. However, given our reliance
on such facilities, such a shutdown or disruption could result in being unable to print or distribute some publications, and
consequently could have an adverse effect.
Litigation
We are 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 our most recent Annual Information Form. In particular, given the
nature of our businesses, we have had, and may have, litigation claims filed which are related to the publication of our
editorial and other content, copyright or trademark infringement, privacy, electronic communications and anti-spam, personal
injury, product liability, breach of contract, unfair competition or other legal claims. We may also be exposed to potential
liability in connection with the sale and promotion of products through the product business that has been operated by
Metroland Media Group (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 we maintain 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 nor have a
negative impact on our results. In addition, we could incur significant costs in investigating and defending such claims,
even if ultimately found not to be liable.
Government Regulations
General
Our businesses are subject to a variety of laws and regulations, including laws applicable generally to business and
environmental, privacy, anti-spam, communications and e-commerce laws. We 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
our businesses. If we are required to alter our business practices as a result of any laws and regulations, revenue could
decrease, costs could increase and/or certain of our businesses could otherwise be harmed. In addition, the costs and
expenses associated with defending any actions related to such additional laws and regulations, the diversion of
management’s attention and resources and any payments of related penalties, judgements or settlements could adversely
impact certain of our 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
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the manner in which such legislation and regulations are interpreted and enforced by regulators and courts in Canada and
other jurisdictions, may impose limits on the collection and use of certain kinds of information, including without limitation
online and mobile analytics, profiling data, geo-location data and data collected in the course of online behavioural advertising,
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, invasion of privacy, privacy breaches and breach notification, cyber-
crime and access could adversely impact our businesses.
In connection with many of our businesses, we routinely obtain personal and confidential information relating to our customers
and users of our digital platforms or services, which may include potentially sensitive personal information. Our practices
involving collection, use, disclosure and retention of personal information continue to evolve in light of changes in information
technology and analytics technology and services. The potential misuse or inadvertent or unauthorized dissemination of
such information could violate applicable laws, cause damage to our relationships with our customers or others, cause
damage to our brands and reputation, impair our ability to attract and retain our audiences, or result in legal or regulatory
actions. See also the risks and uncertainties described above related to “Reliance on Technology and Information Systems
and Risk of Security Breaches”.
Environmental and Health and Safety
We are 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 we have
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 additional expenditures will not be required to meet current or future legislation. Compliance with existing and new
environmental, health and safety laws and regulations may subject us 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.
Foreign Exchange Fluctuations and Foreign Operations
Our investment in VerticalScope is denominated in U.S. dollars, VerticalScope’s functional currency. To offset the exposure
to Torstar’s U.S. dollar investment in VerticalScope, we have entered into forward foreign exchange contracts to sell U.S.
dollars. As a result, our cash flows and operating results are affected by changes in the value of the Canadian dollar relative
to the U.S. dollar (See additional information on foreign exchange risks in the Financial Instruments section of this MD&A
and in Note 15 to our consolidated financial statements). In addition, predominantly all of VerticalScope’s revenues
(approximately 2% of Torstar’s 2015 segmented operating revenues) are earned in U.S. dollars. As a result, Torstar’s share
of VerticalScope’s revenues and operating earnings are affected by changes in the value of the Canadian dollar relative to
the U.S. dollar.
In addition, exclusive of our interest in VerticalScope, certain of our revenues, expenses and monetary assets and liabilities
are denominated in currencies other than the Canadian dollar, largely the U.S. dollar. To the extent that the value of the
Canadian dollar changes relative to the applicable foreign currencies, this will result in a foreign currency gain or loss
reflected in our 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 our operating results in
the form of additional costs and reduced revenues.
Availability of Insurance
We have 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 we believe 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 or
insured, that amounts owing from insurers will be collected or that the insurance coverage will be sufficient to cover every
material loss or claim that may occur involving our operations or assets.
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Dependence on Key Personnel
We are dependent to a large extent upon the continued services of our senior management team and other key employees
such as editorial, digital, sales and technical personnel, and including key employees of companies we invest in such as
VerticalScope. There is intense competition for qualified managers and skilled employees and our failure to recruit, train
and retain such employees could have an adverse effect on our business, financial condition or operating results.
Intellectual Property Rights
We place considerable importance on the protection of our intellectual property rights. Our 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 our 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 our intellectual property rights and there is a risk that some of the content we generate may be defamatory
or infringing, and that content generated by users of our platforms and services may be defamatory or infringing. There
can be no assurance that our actions will be adequate to prevent the infringement of our intellectual property rights, or
protect us against claims by third parties. If third parties were to contest the validity or scope of our 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 us to incur significant costs in investigating
and defending such claims and have a negative impact on our results. See also the risks and uncertainties described above
related to “Litigation”.
Credit Risk
Credit risk is the risk of our financial loss if a customer or counterparty to a financial asset fails to meet its contractual
obligations. In the normal course of business, we are exposed to credit risk for accounts receivable from our customers
and counterparties holding cash and cash equivalents, restricted cash and derivatives.
While we apply 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 our 2015 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.
Our cash and cash equivalents, restricted cash and derivative instruments are held with Canadian chartered banks. While
we regularly review the financial condition of these counterparties, a failure of a counterparty could adversely affect our
consolidated financial condition.
Availability of Capital and Restrictions Imposed by Credit Facilities
If internal funds are not available from our operations, we may be required to raise additional financing through public or
private equity or debt financings, or other arrangements with corporate sources or other sources of financing to fund
operations and meet our financial commitments. However, there is no assurance that additional funding, if required, will be
available to us in amounts or on terms acceptable to us, if at all.
We may from time to time, enter into agreements for additional financing, including agreements in respect of credit facilities.
Such agreements may impose a number of restrictions on us including but not limited to restrictions on certain distributions
as well as compliance with certain financial covenants and compliance with other affirmative and negative covenants. In
addition, the agreement governing certain indebtedness of VerticalScope imposes a number of restrictions and includes
restrictions on certain distributions. The agreement also requires compliance with certain financial covenants and compliance
with other affirmative and negative covenants. These restrictions may limit flexibility in planning for and reacting to business
or industry changes and strategic objectives and may make us more vulnerable to adverse economic and industry conditions.
Income Tax and Other Taxes
We collect, pay and accrue income and other taxes. We have 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.
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We have 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 we believe that we have paid and provided for adequate amounts of tax, significant judgement is required in interpreting
tax legislation and regulations in relation to our businesses. Our 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 our 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 our long-
lived assets, intangible assets, investments and goodwill. If any of these factors impair the value of these assets, IFRS
requires that we reduce their carrying value and recognize an impairment charge. This would reduce our reported assets
and earnings in the year the impairment charge is recognized.
Holding Company Structure
We have no material sources of income or assets, other than the interests that we hold in our subsidiaries, joint arrangements
and other entities. As a holding company, our ability to meet our financial obligations is dependent primarily upon the receipt
of cash dividends, interest and principal payments on intercompany advances, and other payments and distributions from
our subsidiaries, joint arrangements and other entities in which we have an interest together with proceeds we raise through
the issuance of equity and the incurrence of debt, and from proceeds received on the sale of assets. The payment of
dividends and other amounts by our subsidiaries, joint arrangements and other entities in which we have an interest may
be subject to statutory or contractual restrictions, are contingent upon the earnings of those entities and are subject to
various business and other considerations.
Dividends
Decisions on the declaration and payment of dividends are made on a quarterly basis by our Board of Directors based on
our overall financial performance and cash flow outlook. There is no guarantee that dividends will be declared or that we
will continue to make dividend payments at the current level.
Control of Torstar by the Voting Trust
Almost 99% of our 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 49
C O N S O L I DAT E D F I N A N C I A L STAT E M E N TS
TORSTAR CORPORATION 2015 ANNUAL REPORT 50
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TORSTAR - Consolidated Financial Statements
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 (Loss)
Consolidated Statement of Comprehensive Income (Loss)
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the 2015 Consolidated Financial Statements:
Corporate Information
Significant Accounting Policies
Segmented Information
Investments In Subsidiaries
Restricted Cash
Inventories
Investments In Joint Ventures
Investments In Associated Businesses
Property, Plant And Equipment
Intangible Assets
Goodwill
Impairment Of Assets
Other Assets
Income Taxes
Financial Instruments
Capital Management
Provisions
Other Liabilities
Employee Benefits
Share Capital
Share-Based Compensation Plans
Accumulated Other Comprehensive Income
Other Income (Expense)
Discontinued Operations
Other Non-Cash Items Provided By (Used In) Operating Activities
Acquisitions And Portfolio Investments
Commitments And Contingencies
Related Party Transactions
Subsequent And Other Events
1
2
3
4
5
6
7
8
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TORSTAR CORPORATION 2015 ANNUAL REPORT 51
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 1, 2016
Lorenzo DeMarchi
Executive Vice-President and Chief Financial Officer
TORSTAR CORPORATION 2015 ANNUAL REPORT 52
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, 2015 and 2014, and the consolidated statements
of income (loss), comprehensive income (loss), 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, 2015 and 2014 and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada
March 1, 2016
TORSTAR CORPORATION 2015 ANNUAL REPORT 53
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Financial Position
(Thousands of Canadian Dollars)
As at
December 31, 2015
As at
December 31, 2014
Assets
Current:
Cash and cash equivalents
Restricted cash (note 5)
Receivables (note 15)
Inventories (note 6)
Prepaid expenses
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:
Accounts payable and accrued liabilities
Derivative financial instruments (note 15)
Provisions (note 17)
Income tax payable
Total current liabilities
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 deficit)
Accumulated other comprehensive income (note 22)
Total equity attributable to equity shareholders
Minority interests
Total equity
Total liabilities and equity
(see accompanying notes)
ON BEHALF OF THE BOARD
$35,141
37,935
144,997
6,231
5,944
5,780
236,028
32,861
202,203
117,793
67,821
8,133
9,422
6,922
15,233
$696,416
$122,296
6,543
29,021
5,943
163,803
13,228
9,872
87,461
2,315
402,500
19,858
(7,560)
3,121
417,919
1,818
419,737
$696,416
$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
John Honderich
Director
Paul Weiss
Director
TORSTAR CORPORATION 2015 ANNUAL REPORT 54
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Income (Loss)
(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)
Foreign exchange
Loss from joint ventures (note 7)
Income (loss) from associated businesses (note 8)
Other income (expense) (note 23)
Income and other taxes recovery (note 14)
Net loss from continuing operations
Income (loss) 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
(see accompanying notes)
Year ended December 31
2015
2014
$786,631
$858,134
(341,824)
(393,395)
(30,177)
(30,223)
(345,081)
(354,069)
(2,046)
(1,022)
(14,170)
(28,993)
(1,837)
(402,137)
2,300
(399,837)
(5,000)
($404,837)
($403,966)
($871)
($4.96)
($0.06)
($5.02)
($4.96)
($0.06)
($5.02)
(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
($0.62)
$2.78
$2.16
($0.62)
$2.77
$2.15
TORSTAR CORPORATION 2015 ANNUAL REPORT 55
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Comprehensive Income (Loss)
(Thousands of Canadian Dollars)
Year ended December 31
2015
($404,837)
2014
$173,064
Net income (loss)
Other comprehensive income (loss) (“OCI”) that are or may be
reclassified subsequently to net income (loss):
Unrealized foreign currency translation adjustment (“CTA”) (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)
Loss on cash flow hedges transferred to net income
Income tax effect
Unrealized loss on hedge of net investment
Income tax effect
Realized loss on hedge of net investment
Other comprehensive income (loss) (“OCI”) that will not be
reclassified subsequently to net income (loss):
Actuarial gain (loss) on employee benefits (note 19)
Income tax effect
Reduction in carrying amount of deferred income tax assets (note 14)
Actuarial gain (loss) on employee benefits for associated businesses
(no income tax effect) (note 8)
(19)
10,780
346
(9,307)
1,300
3,100
(3,417)
900
(6,000)
(588)
(9,105)
Other comprehensive loss from continuing operations, net of tax
($6,005)
Other comprehensive loss from discontinued operations
Income tax effect
Other comprehensive loss from discontinued operations, net of tax
(note 24)
Total other comprehensive loss, net of tax
($6,005)
($60,876)
Comprehensive income (loss), net of tax
Attributable to:
Equity shareholders
Minority interests
(see accompanying notes)
($410,842)
($409,971)
($871)
$112,188
$111,809
$379
TORSTAR CORPORATION 2015 ANNUAL REPORT 56
(14)
125
4,125
(1,096)
5,520
8,660
(83,596)
21,400
(365)
(62,561)
($53,901)
($9,133)
2,158
(6,975)
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Changes in Equity
(Thousands of Canadian Dollars)
Share
capital
Contributed
surplus
Retained
earnings
(accumulated
deficit)
Accumulated
other
comprehensive
income
(“AOCI”)
Total
attributable to
equity
shareholders
Minority
interests
Total equity
At December 31, 2013
$398,605
$17,383
$385,589
($7,603)
$793,974
$2,810
$796,784
Net income for the year
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
649
721
602
(109)
1,434
172,685
172,685
379
173,064
(68,500)
7,624
(60,876)
(60,876)
104,185
(42,049)
7,624
111,809
379
112,188
(41,400)
(41,400)
612
602
1,434
612
602
1,434
(500)
(500)
At December 31, 2014
$400,577
$18,708
$447,725
$21
$867,031
$2,689
$869,720
Net loss for the year
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Dividends (note 20)
Exercise of share options
(note 20)
Issue of share capital –
other (note 20)
Share-based
compensation expense
682
473
768
(79)
1,229
(403,966)
(403,966)
(871)
(404,837)
(9,105)
3,100
(6,005)
(6,005)
(413,071)
3,100
(409,971)
(871)
(410,842)
(42,214)
(41,532)
(41,532)
394
768
1,229
394
768
1,229
At December 31, 2015
$402,500
$19,858
($7,560)
$3,121
$417,919
$1,818
$419,737
(see accompanying notes)
TORSTAR CORPORATION 2015 ANNUAL REPORT 57
TORSTAR - Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Cash Flows
(Thousands of Canadian Dollars)
Year ended December 31
2014
2015
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase (decrease) 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)
Loss (income) from 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 25)
Decrease (increase) in restricted cash (notes 5 and 24)
Decrease in non-cash working capital
Cash provided by operating activities of continuing operations
Cash provided by operating activities of discontinued operations
Cash provided by operating activities
Investing activities:
Additions to property, plant and equipment and intangible assets (notes 9 and 10)
Investment in associated businesses (note 8)
Return of capital from associated business (note 8)
Acquisitions and portfolio investments (note 26)
Net proceeds from the sale of Harlequin (note 24)
Restricted cash (notes 5 and 24)
Proceeds from sale of assets
Other
Cash provided by (used) in investing activities of continuing operations
Cash used in investing activities of discontinued operations
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:
Cash
Cash equivalents – short-term deposits
Net cash, end of period
(see accompanying notes)
$38,050
(213,513)
(40,735)
(216,198)
251,339
$35,141
($399,837)
30,177
14,170
7,500
28,993
193
345,081
21,459
(20,409)
(2,249)
25,078
965
12,007
38,050
$38,050
($30,602)
(203,587)
22,094
(2,106)
411
277
(213,513)
($213,513)
($41,532)
394
403
($40,735)
$35,141
$35,141
$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
(39,853)
3,602
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
TORSTAR CORPORATION 2015 ANNUAL REPORT 58
TORSTAR - Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2015 and 2014
(Tabular amounts in thousands of Canadian dollars except per share amounts)
1. CORPORATE INFORMATION
Torstar Corporation (the "Company") 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, 2015. These
consolidated financial statements have been authorized for issue in accordance with a resolution from the Board of
Directors on March 1, 2016.
In connection with the acquisition of a 56% interest in VerticalScope Holdings Inc. ("VerticalScope") during the year
ended December 31, 2015, the Company has realigned its operating segments such that digital businesses outside
the traditional newspaper operations are managed as one operating segment. 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.
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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 59
TORSTAR - Consolidated Financial Statements
(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;
• A major line of business or major geographical area; or
• Classified as held for sale or already disposed in such a way.
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 (which includes acquisition-related fees) 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 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 60
TORSTAR - Consolidated Financial Statements
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”)
• 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 in 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 61
TORSTAR - Consolidated Financial Statements
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 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.
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
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TORSTAR - Consolidated Financial Statements
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 have been designated as hedges against the foreign currency
exposure on the net investment in VerticalScope. Gains and losses on these instruments, to the extent of hedge
effectiveness, are transferred to OCI to offset the gains and losses on translation of the net investment. The portion
of the hedge that is deemed ineffective is recorded in the consolidated statement of income.
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.
Cash flow hedges
These are hedges of highly probable forecast transactions. 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, currently VerticalScope. 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.
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TORSTAR - Consolidated Financial Statements
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 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 foreign exchange forward contracts
to hedge the foreign currency exposure on its net investment in VerticalScope. 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 the foreign exchange forward contracts is classified within Level 2 as it is based on foreign currency
rates quoted by banks and is the difference between the forward exchange rate and the contract rate.
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TORSTAR - Consolidated Financial Statements
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 classified within Level 3 and determined when possible using a valuation technique
that maximizes the use of observable market inputs and unobservable market inputs such as earnings multiples and
cash flow projections.
(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) 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
• Machinery and Equipment
Machinery and Equipment
Furniture and Fixtures
• Leasehold Improvements
25 – 60 years
10 – 35 years
3 – 40 years
3 – 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.
(j)
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
3 – 10 years
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TORSTAR - Consolidated Financial Statements
• Customer relationships and other
2 – 10 years
Intangible assets with indefinite useful lives are not amortized. These include newspaper mastheads and trade and
certain 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.
(k) 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.
(l) 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.
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.
(m) Impairment of non-financial assets
Property, plant and equipment, intangible assets and goodwill 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 and goodwill are subject to an annual impairment test. For the purpose of measuring recoverable amounts,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows (a CGU). The test
for impairment for property, plant and equipment, intangible assets 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
("FVLCS"), and value in use ("VIU"). An impairment loss is recognized for the amount by which the asset’s carrying
value exceeds its recoverable amount. In its assessment of the recoverable amounts of the group of CGUs at
December 31, 2015, the Company considered both the VIU and FVLCS approaches and concluded that due to
increased measurement uncertainties involved with the VIU approach, FVLCS was a more reliable and appropriate
methodology as at December 31, 2015 and accordingly, the Company calculated the recoverable amount using a
forward multiple of forecasted adjusted forward EBITDA.
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.
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TORSTAR - Consolidated Financial Statements
The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when events or
circumstances warrant such consideration.
The VIU 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 VIU 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, approved by the Company’s Board of Directors, three year strategic plans and
management forecasts beyond that period.
• In calculating the VIU, the Company uses a discount rate in order to establish 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.
• The perpetuity growth rate is based on management’s best estimates considering the industry, operating
income trends and growth prospects for that specific CGU or group of CGUs.
The FVLCS calculation uses projections for a one year period and a forward multiple. The key assumptions in the
fair value less cost to sell calculation are:
• Earnings before interest, taxes, depreciation and amortization, restructuring and other charges, and impairment
of assets (“Adjusted EBITDA”). The projections are based on the most recent financial budgets approved by the
Company’s Board of Directors.
• Forward multiples which are based on public market data including information from analysts covering the
Company as well as competitor data.
(n) Revenue recognition
The Company has a number of different revenue streams. Print and digital advertising revenue is primarily generated
through the provision of advertisements in print publications as well as on various digital platforms. Revenue from
circulation/subscribers is largely generated by home delivery subscriptions, single copy sales at newsstands and
vending machines, and the provision of digital format subscriptions. Distribution revenue is primarily generated from
the delivery of flyers to consumers on behalf of advertisers. Other revenues are generated from the provision of
commercial printing for external customers as well as the sale of various products.
Print advertising and distribution revenue
Revenue related to print advertising and flyer distribution is recognized when a print advertisement or flyer is included
in the newspaper and the newspapers are delivered to the reader.
Digital advertising revenue
The Company has a number of digital advertising revenue streams. The majority of the Company’s digital revenue
is recognized when advertisements are placed on digital platforms and to a lesser extent when a user clicks on an
advertisement, on a per click basis.
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TORSTAR - Consolidated Financial Statements
Circulation/subscription revenue
In respect of revenue from circulation/subscribers related to print newspapers, the Company recognizes revenue at
the time of delivery of the newspaper to the customer/subscriber. Revenue from single copy sales is recognized net
of a provision for returns based on historical rates of returns. In the case of revenue from subscribers revenue is
recognized proportionately over the term of the subscription.
Other revenue
Other revenue is recognized upon delivery to or at the time that goods are made available to the customer. For
example, when products are printed for external customers, revenue is recognized at the time that such materials
are made available to the customer. In the case of product sales, revenue is recognized per the terms of delivery.
(o) 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.
• 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.
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TORSTAR - Consolidated Financial Statements
(p) 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 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. With effect
from the 2015 fiscal year, subsequent RSU grants accrue dividend equivalents payable in additional units in an
amount equal to dividends paid on Class B non-voting shares of the Company. 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.
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TORSTAR - Consolidated Financial Statements
(q) 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.
(r) Provisions
Provisions are recognized if the Company has a present legal or constructive obligation as a result of past events,
if it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
as of the date of the consolidated statement of financial position, taking into account the risks and uncertainties
surrounding the obligation.
Provisions are discounted and measured at the present value of the expenditure expected to be required to settle
the obligation, using a pre-tax rate that reflects the current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest
expense.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party (for example, because the obligation is covered by an insurance policy), an asset is recognized if it is virtually
certain that reimbursement will be received.
(s) Use of estimates and judgements
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management
to make judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of revenues, expenses, assets, liabilities and the disclosure of contingent liabilities, at the end of the reporting
period.
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TORSTAR - Consolidated Financial Statements
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 ("FVLCS") and
its VIU. The FVLCS 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
VIU calculation is based on a discounted cash flow model. The key estimates and assumptions used in arriving at
the FVLCS and VIU are outlined in Note 2(m).
In calculating the recoverable amount, management is required to make several assumptions, including, but not
limited to, expected future revenues, expected future cash flows, forward multiples and discount rates. Management'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 is currently
anticipated. Management has also made certain assumptions for the forward multiples, discount and terminal growth
rates to reflect possible variations in the cash flows however, the risk premiums expected by market participants, as
reflected in forward multiples, 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 as they have in the three
months ended December 31, 2015. Changes in any of these assumptions may have a significant impact on the fair
value of the investment, CGU or group of CGUs or intangible assets and the results of the related impairment testing.
As at December 31, 2015, the carrying value of investments, intangible assets, property plant and equipment and
goodwill represented 34%, 10%, 17% and 1% respectively of total assets and each reporting segment had investments
and intangible assets with carrying values subject to these estimates. As at December 31, 2014, the carrying value
of investments, intangible assets, property, plant and equipment and goodwill represented 8%, 5%, 11% and 30%
respectively of total assets. Additionally, as a result of rapid and significant shifts in the print and digital advertising
markets, expected future revenues and cash flows have changed significantly. The Company has recorded
impairment charges, related to goodwill, intangible assets and investments totaling $361.1 million in the twelve
months ended December 31, 2015 ($97.9 million in the twelve months ended December 31, 2014). These charges
impact net income but have no effect on cash flows.
More details are provided in Note 12.
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TORSTAR - Consolidated Financial Statements
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 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.
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 investment in VerticalScope as an associated business (rather than being consolidated
subsidiary or classified as a joint venture) based on management’s judgement that the Company does not have
control but has significant influence, based on rights to board representation and other provisions in the shareholders’
agreements. 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 Enterprises Limited ("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 2015 ANNUAL REPORT 72
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 three reportable operating segments: Metroland Media Group ("MMG"), Star Media Group ("SMG")
and Digital Ventures. “Corporate” is the provision of corporate services and administrative support. In connection
with the acquisition of a 56% interest in VerticalScope in July 2015, the Company realigned its operating segments
such that digital businesses outside the traditional newspaper operations are managed as one operating segment
– Digital Ventures, which meets the quantitative threshold criteria and accordingly has become a separate reportable
segment.
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.
(t) Changes in accounting policies
Policies adopted in 2015:
The Company adopted new standards and interpretations effective January 1, 2015. The nature and the impact of
each new standard/amendment which affect the Company are described below:
IAS 19 Employee Benefits
The amendments to IAS 19 clarified 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 amendments did not have any impact on
financial results.
Several other new standards and amendments apply for the first time in 2015. 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.
Future changes in accounting standards:
There are several new standards and amendments to accounting standards which will be effective for the Company
subsequent to 2016, however, only the following new standards are expected to have a material impact on the interim
or annual consolidated financial statements of the Company:
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, 2018.
The Company is in the process of reviewing the standard to determine the impact on the consolidated financial
statements.
TORSTAR CORPORATION 2015 ANNUAL REPORT 73
TORSTAR - 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.
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 which supersedes IAS 17 Leases and related interpretations. The new
standard provides a single lessee accounting model which eliminates the distinction between operating and finance
leases, by requiring lesses to recognize assets and liabilities for all leases unless the underlying asset has a low
value or the lease term is 12 months or less. Lessor accounting remains largely unchanged and the distinction
between operating and finance leases is retained. The Company does not anticipate early adoption and plans to
adopt the standard on its effective date of January 1, 2019. The Company is in the process of reviewing the standard
to determine the impact on the consolidated financial statements.
3. SEGMENTED INFORMATION
In connection with the acquisition of a 56% interest in VerticalScope during the year ended December 31, 2015, the
Company has realigned its operating segments such that digital businesses outside the traditional newspaper
operations are managed as one operating segment which meets the quantitative threshold criteria and accordingly
has become a separate reportable segment. All previously reported segment information has been restated for prior
periods on a comparative basis.
The Company has identified three reportable segments: MMG, SMG and Digital Ventures 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 and in the case of the
Digital Ventures segment, the Company’s 56% interest in VerticalScope which, as a result of terms in the applicable
shareholder’s agreement, is classified as an associated business (rather than being a consolidated subsidiary or
classified as a joint venture). The Company owns a significantly higher percentage of VerticalScope relative to its
other associated businesses.
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 as well as the Company’s 56% interest in VerticalScope. All other income and expense
items are managed on a Company basis and are not provided to the 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 and the Waterloo Region Record daily newspapers and more than 100
weekly community newspapers and has a number of specialty publications, directories, consumer shows, distribution
operations and digital properties (including homefinder.ca, save.ca, travelalerts.ca, wagjag.com (“WagJag”) and the
regional online sites, such as durhamregion.ca).
SMG includes the daily Toronto Star newspaper, Toronto Star Touch and thestar.com, as well as Free Daily News
Group Inc. (“Metro”), which publishes the English-language 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,
other specialty publications and magazines and distribution services and the the Company's interest in Olive Media.
Olive Media ceased operations effective January 1, 2016.
TORSTAR CORPORATION 2015 ANNUAL REPORT 74
TORSTAR - Consolidated Financial Statements
Digital Ventures includes eyeReturn Marketing Inc., the Company’s 50% interest in workopolis.com (“Workopolis”)
and the Company's 56% interest in VerticalScope.
Year ended December 31, 2015
MMG
SMG
Digital
Ventures
Corporate
Total
Adjustments
and
Eliminations
¹
Per
Consolidated
Statement of
Income
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
$447,064
$343,555
$53,021
$843,640
($57,009)
$786,631
(208,431)
(127,092)
(189,755)
(198,057)
(14,055)
(19,777)
(265,936)
(14,991)
(10,634)
(79,145)
(18,867)
(23,160)
(48,428)
(899)
(16,000)
($9,044)
(363,434)
(2,411)
(413,383)
(37)
(77,511)
(31,310)
(361,081)
21,610
19,988
47,334
1,087
16,000
(341,824)
(393,395)
(30,177)
(30,223)
(345,081)
Reportable segment operating loss
($250,890)
($86,364)
($54,333)
($11,492)
($403,079)
$49,010
($354,069)
Interest and financing costs
Foreign exchange
Loss from joint ventures
Loss from associated businesses
Other expense
Loss before taxes from continuing
operations
(2,046)
(1,022)
(14,170)
(28,993)
(1,837)
($402,137)
Year ended December 31, 2014
MMG
SMG
Digital
Ventures
Corporate
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
$484,225
$384,873
$35,520
$904,618
($46,484)
$858,134
Operating revenue
Salaries and benefits
Other operating costs
(219,340)
(134,620)
(15,075)
($11,136)
(380,171)
(196,866)
(204,457)
(16,692)
(4,760)
(422,775)
Amortization and depreciation
Restructuring and other charges
Impairment of assets
(14,644)
(6,937)
(329)
(15,337)
(15,709)
(82,606)
(3,363)
(60)
(15,000)
(57)
(33,401)
(22,706)
(97,935)
18,627
18,255
2,727
60
15,000
(361,544)
(404,520)
(30,674)
(22,646)
(82,935)
Reportable segment operating profit
(loss)
Interest and financing costs
Foreign exchange
Loss from joint ventures
Income from associated businesses
Other income
Loss before taxes from continuing
operations
$46,109
($67,856)
($14,670)
($15,953)
($52,370)
$8,185
($44,185)
(4,253)
(7,656)
(9,152)
194
3,754
($61,298)
¹ Adjustments and eliminations represent the elimination of the proportionately consolidated results of, and transactions with, joint
ventures and VerticalScope.
The following charts provide a breakdown of total segmented operating revenue for the years ended December 31,
2015 and December 31, 2014.
TORSTAR CORPORATION 2015 ANNUAL REPORT 75
Year ended
December 31, 2015
Print advertising
Digital advertising
Distribution
Subscriber
Other
Total
Year ended
December 31, 2014
Distribution
Subscriber
Other
Total
TORSTAR - Consolidated Financial Statements
MMG
SMG
Digital Ventures
Total
$
%
$
$200,294
44.8%
$180,789
37,702
8.4%
136,465
30.5%
28,420
44,183
6.4%
9.9%
35,208
10,064
100,479
17,015
%
52.7%
10.2%
2.9%
29.2%
5.0%
$
%
$
$381,083
$53,021
100.0%
125,931
146,529
128,899
61,198
%
45.2%
14.9%
17.4%
15.3%
7.2%
$447,064
100.0%
$343,555
100.0%
$53,021
100.0%
$843,640
100.0%
MMG
SMG
Digital Ventures
Total
$
%
$
%
$
%
$
Print advertising
$221,756
45.8%
$213,894
55.6%
$435,650
Digital advertising
38,317
7.9%
147,150
30.4%
36,722
10,256
9.5%
2.7%
29,502
47,500
6.1%
9.8%
105,710
27.5%
18,291
4.7%
$35,520
100.0%
110,559
157,406
135,212
65,791
%
48.2%
12.2%
17.4%
14.9%
7.3%
$484,225
100.0%
$384,873
100.0%
$35,520
100.0%
$904,618
100.0%
Geographical information
The Company operates in the following main geographical areas:
Canada
United States
Other
Total
Revenue¹
Year ended December 31
Non-current assets²
As at December 31
2015
$781,036
4,132
1,463
2014
$852,203
4,265
1,666
2015
$193,747
2014
$531,084
$786,631
$858,134
$193,747
$531,084
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.
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, 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 to 100% by acquiring the remaining 10% interest
previously owned by Metro International S.A. (“MISA”), as disclosed in Note 26.
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. Effective January 1, 2016, Olive Media ceased operations and the Toronto Star
assumed responsibility for its digital advertising sales previously handled by Olive Media.
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 2015 ANNUAL REPORT 76
TORSTAR - Consolidated Financial Statements
5. RESTRICTED CASH
At December 31, 2015, the Company had restricted cash totalling $37.9 million (December 31, 2014 – $38.9 million)
comprised of $15.2 million (December 31, 2014 – $16.1 million) held as collateral for outstanding standby letters of
credit and $22.8 million (December 31, 2014 – $22.8 million) related to the sale of Harlequin in August 2014, which
was held in an escrow account until the end of the escrow term on February 1, 2016 when the funds were released
to the Company (Notes 24 and 29).
The outstanding letters of credit include $15.1 million (December 31, 2014 – $15.6 million) in respect of an unfunded
executive retirement plan liability (Note 19).
6. INVENTORIES
Finished goods
Work in progress
Raw materials
December 31, 2015
December 31, 2014
$1,178
129
4,924
$6,231
$4,048
105
5,156
$9,309
The Company expensed inventory costs of $50.4 million for the year ended December 31, 2015 (2014 – $56.7
million).
7. INVESTMENTS IN JOINT VENTURES
The Company’s joint ventures 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.
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
Distributions from joint ventures
Balance, end of year
Year ended December 31
2015
$54,531
54,531
(14,170)
(7,500)
$32,861
2014
$80,901
(7,968)
72,933
(9,152)
(9,250)
$54,531
TORSTAR CORPORATION 2015 ANNUAL REPORT 77
TORSTAR - Consolidated Financial Statements
Summarized Supplemental Financial Information
The following is summarized supplemental financial information based on the Company’s proportionate share of the
joint ventures:
(i)
Statement of Financial Position
Cash and cash equivalents
Other current assets
Total current assets
Total non-current assets
Total assets
Current liabilities
Other non-current liabilities
Total equity
Total liabilities and equity
(ii) Statements of Income and Comprehensive Income
As at
As at
December 31, 2015
$5,308
7,244
12,552
30,442
$42,994
$8,923
1,210
32,861
$42,994
December 31, 2014
$8,331
8,153
16,484
48,613
$65,097
$9,333
1,233
54,531
$65,097
Year ended December 31
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
2015
$42,020
(17,670)
(17,522)
(3,016)
(1,087)
(16,000)
(13,275)
(24)
(66)
(13,365)
(805)
Net loss and Comprehensive loss from continuing operations
($14,170)
2014
$46,740
(18,627)
(18,511)
(2,727)
(60)
(15,000)
(8,185)
2
24
207
(7,952)
(1,200)
($9,152)
8. INVESTMENTS IN ASSOCIATED BUSINESSES
As of December 31, 2015, the Company’s investments in associated businesses include a 19.4% equity interest in
Black Press Ltd. (“Black Press”); a 23.1% equity investment in Blue Ant Media Inc. (“Blue Ant”); a 33.3% equity
interest in Canadian Press Enterprises Inc. (“Canadian Press”); a 14.7% equity investment in Shop.ca Network Inc.
(“Shop.ca”) and a 56.4% equity investment in VerticalScope. The Company also had a 38.2% equity investment in
Tuango Inc. (“Tuango”) until October 16, 2014.
TORSTAR CORPORATION 2015 ANNUAL REPORT 78
TORSTAR - Consolidated Financial Statements
The table below provides a continuity of Investments in associated businesses:
Balance, beginning of year
Dividends received
Investments during the year
Sale of investment
Return of capital
Income (loss) of associated businesses
OCI – Actuarial gain (loss) on employee benefits
OCI – Foreign currency translation adjustment
Balance, end of year
The table below provides income and losses from associated businesses:
Year ended December 31
2015
$39,960
(193)
203,587
(256)
(22,094)
(28,993)
(588)
10,780
2014
$40,215
(1,222)
4,489
(3,476)
194
(365)
125
$202,203
$39,960
VerticalScope
Black Press
Blue Ant
Tuango
Shop.ca
Other
Total
Black Press
Net Income
OCI
2015
($26,950)
3,000
(1,859)
(3,025)
(159)
($28,993)
2014
$3,958
(746)
404
(3,448)
26
$194
2015
$9,985
207
2014
($240)
$10,192
($240)
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, California, Hawaii and Ohio. For the year ended
December 31, 2015, the Company’s share of Black Press’ net income was $3.0 million and other comprehensive
income of $0.2 million (2014 – net income of $4.0 million and other comprehensive loss of $0.2 million).
Blue Ant
Blue Ant is media company founded in 2011 that creates and distributes video content across a range of traditional
and new media platforms in 'enthusiast categories' such as Outdoor Life, Nature and Science, Style and Do-It-
Yourself ("DIY"), Music and Gaming. Subsequent to December 31, 2015, the Company invested an additional $0.5
million in Blue Ant and during 2014, the Company invested an additional $3.5 million in Blue Ant. The Company’s
equity interest at December 31, 2015 was 23.1% (December 31, 2014 – 23.1%). The Company’s share of Blue
Ant’s net loss in 2015 was $1.9 million (2014 – $0.7 million).
Canadian Press
Canadian Press operates The Canadian Press news agency. The Company’s carrying value in Canadian Press
was previously reduced to nil. The Company will begin to report its share of Canadian Press’ results once the
unrecognized losses ($3.1 million as of December 31, 2015) have been offset by net income, other comprehensive
income or additional investments are made. For the year ended December 31, 2015, the Company would have
reported income of $0.5 million and other comprehensive income of $0.4 million from Canadian Press (2014 – loss
of $0.3 million and other comprehensive loss of $3.7 million).
TORSTAR CORPORATION 2015 ANNUAL REPORT 79
TORSTAR - Consolidated Financial Statements
Shop.ca
Shop.ca is an online e-commerce marketplace aimed at Canadian shoppers. As at December 31, 2015, the
Company’s equity interest in Shop.ca was 14.7% (December 31, 2014 – 16.1%). For the year ended December 31,
2015, the Company’s share of Shop.ca’s net loss was $3.0 million (2014 – $3.5 million).
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.
Other
The Company has investments in other associated businesses for which a loss of $0.2 million was recorded for the
year ended December 31, 2015 (2014 – income of less than $0.1 million).
VerticalScope
VerticalScope is a Toronto-based vertically focused digital media company with expertise in programmatic advertising
which services the North American market through its network of user forums and premium content sites offering
advertisers access to large audiences in popular verticals including automotive, powersports, outdoors, home and
health.
On July 28, 2015, the Company acquired a 56.4% interest in VerticalScope. The total purchase price including
transaction costs was $202 million. Pursuant to certain terms in the shareholders agreement, the investment is
accounted for as an associated business using the equity method. On October 22, 2015, the company received a
return of capital of $22.1 million.
The following is summarized supplemental financial information for 100% of VerticalScope as at December 31, 2015,
including the Company’s fair value adjustments on acquisition of the investment:
(i)
Statement of Financial Position
Cash and cash equivalents
Other current assets
Total current assets
Total non-current assets
Total assets
Current portion long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Total equity
Total liabilities and equity
As at December 31, 2015
$10,716
15,109
25,825
445,129
$470,954
$6,193
6,892
13,085
113,676
56,786
287,407
$470,954
TORSTAR CORPORATION 2015 ANNUAL REPORT 80
TORSTAR - Consolidated Financial Statements
(ii) Statement of Income and Comprehensive Income
Operating revenue
Net loss
Other comprehensive income
Total comprehensive loss
Period from July 29, 2015 to
December 31, 2015
$26,896
($47,757)
17,694
($30,063)
Torstar’s comprehensive loss attributable to its interest in VerticalScope was $17.0 million for the period from July
29, 2015 through December 31, 2015.
9. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions
Disposals
Balance at December 31, 2014
Additions
Disposals
Foreign exchange
Building and
leasehold
improvements
Land
Machinery and
equipment
Total
$5,519
(2,706)
2,813
(115)
2,698
$142,264
$201,304
$349,087
(17,381)
124,883
2,712
(2,864)
124,731
1,563
(1,424)
(32,711)
168,593
5,353
(16,668)
157,278
8,695
(12,507)
5
(52,798)
296,289
8,065
(19,647)
284,707
10,258
(13,931)
5
Balance at December 31, 2015
$2,698
$124,870
$153,471
$281,039
Depreciation and impairment
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions
Impairments (note 12)
Disposals
Balance at December 31, 2014
Additions
Impairments (note 12)
Disposals
Foreign exchange
$64,528
(13,284)
51,244
6,348
237
(2,750)
55,079
6,331
297
(1,420)
$133,894
$198,422
(24,959)
108,935
11,541
523
(16,428)
104,571
10,762
93
(12,469)
2
(38,243)
160,179
17,889
760
(19,178)
159,650
17,093
390
(13,889)
2
Balance at December 31, 2015
$60,287
$102,959
$163,246
Net book value
At December 31, 2013
At December 31, 2014
At December 31, 2015 1
$5,519
$2,698
$2,698
$77,736
$69,652
$64,583
$67,410
$52,707
$50,512
$150,665
$125,057
$117,793
1 This amount includes $4.2 million asset held for sale, which was sold in February 2016 (Note 29).
TORSTAR CORPORATION 2015 ANNUAL REPORT 81
TORSTAR - Consolidated Financial Statements
10. INTANGIBLE ASSETS
Cost
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions - internally developed
Additions - purchased
Reclassifications
Disposals
Balance at December 31, 2014
Additions - internally developed 1
Additions - purchased ²
Disposals
Balance at December 31, 2015
Amortization and Impairment
Balance at December 31, 2013
Reclassified to Assets held for sale
Amortization
Impairments (note 12)
Reclassifications
Disposals
Balance at December 31, 2014
Amortization
Impairments (note 12)
Disposals
Indefinite
life
Finite life
Software
Other
Total
Total
$27,059
$89,009
$38,958
$127,967
$155,026
(6,333)
20,726
3,105
14,583
38,414
(22,562)
66,447
4,381
5,370
(2,420)
73,778
4,834
22,845
(6,643)
(1,325)
37,633
26
(20,000)
17,659
(23,887)
104,080
4,381
5,396
(20,000)
(2,420)
91,437
4,834
22,845
(30,220)
124,806
4,381
8,501
(5,417)
(2,420)
129,851
4,834
22,845
(3,555)
(10,198)
(10,198)
$38,414
$94,814
$14,104
$108,918
$147,332
$10,909
10,909
10,909
8,367
$52,278
(17,031)
35,247
10,556
175
(2,342)
43,636
12,230
$17,897
(1,013)
16,884
2,229
(5,417)
13,696
854
$70,175
(18,044)
$81,084
(18,044)
52,131
12,785
175
(5,417)
(2,342)
57,332
13,084
63,040
12,785
175
(5,417)
(2,342)
68,241
13,084
8,367
(6,626)
(3,555)
(10,181)
(10,181)
Balance at December 31, 2015
$19,276
$49,240
$10,995
$60,235
$79,511
Net book value
At December 31, 2013
At December 31, 2014
At December 31, 2015
$16,150
$27,505
$19,138
$36,731
$30,142
$45,574
$21,061
$3,963
$3,109
$57,792
$34,105
$48,683
$73,942
$61,610
$67,821
¹ This amount includes $2.8 million for software in development for which amortization has not commenced.
² Additions include amounts not yet paid at December 31, 2015 of $3.9 million in Accounts payable and accrued liabilities and
$3.4 million in Other liabilities.
TORSTAR CORPORATION 2015 ANNUAL REPORT 82
TORSTAR - Consolidated Financial Statements
11. GOODWILL
The following is a continuity of the Goodwill balance:
Balance, beginning of year
Reclassified to Assets held for sale
Acquisitions (note 26)
Impairment (note 12)
Balance, end of year
2015
$344,417
344,417
40
(336,324)
$8,133
2014
$533,982
(107,565)
426,417
(82,000)
$344,417
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 cash generating units (“CGU”):
Metroland Media Group
Star Media Group
Digital Ventures
Total
December 31, 2015
December 31, 2014
$8,133
$8,133
$265,529
70,755
8,133
$344,417
12. IMPAIRMENT OF ASSETS
The Company recorded the following impairment on its assets:
Property, plant and equipment (note 9)
Intangible assets (note 10)
Goodwill (note 11)
Investments in joint ventures (note 7)
Impairment Testing
Year ended December 31
2015
$390
8,367
336,324
345,081
16,000
$361,081
2014
$760
175
82,000
82,935
15,000
$97,935
During the three months ended September 30, 2015 and at October 1, 2015, the Company's annual impairment test
date, the Company conducted impairment tests on the carrying value of property, plant and equipment, 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 the Metroland Media Group of CGUs exceeded the recoverable amount
of $251.2 million, which was calculated using the VIU approach and the Company recorded an impairment charge
of $135.0 million for goodwill in the Metroland Media Group of CGUs. This impairment was the result of lower revenue
projections reflecting current economic conditions coupled with lower forecasted longer term revenues reflecting an
acceleration in the shift in spending by advertisers from print advertising to digital advertising.
TORSTAR CORPORATION 2015 ANNUAL REPORT 83
TORSTAR - Consolidated Financial Statements
The Company also recorded a $12.0 million impairment charge in respect of its joint venture investment in Workopolis
during the third quarter of 2015 resulting from lower forecasted revenues attributable to continued increases in
competition in the online recruitment and job search markets as well as prevailing economic conditions.
As a result of the significant change in the market capitalization of the Company during the three months ended
December 31, 2015, which was an indicator of impairment, the Company performed an additional impairment test
as at December 31, 2015. In doing so it was determined that the carrying amount of the Metroland Media Group of
CGUs and Star Media Group of CGUs exceeded their recoverable amounts. As a result the Company recorded a
charge of $130.6 million in respect of goodwill in the Metroland Media Group of CGUs, $70.8 million in respect of
goodwill and $8.0 million in respect of intangible assets in the Star Media Group of CGUs. In its assessment of the
recoverable amounts of the group of CGUs, the Company considered both the VIU and FVLCS approaches and
concluded that due to increased measurement uncertainties involved with the VIU approach, FVLCS was a more
reliable and appropriate methodology as at December 31, 2015 and accordingly, the Company calculated the
recoverable amount using a forward multiple of forecasted adjusted forward EBITDA. As the fair value, (as determined
using Level 3 of the fair value of the hierarchy – please refer to Note 2 (g) for further discussion) of the Metroland
Media Group of CGUs and Star Media Group of CGUs at December 31, 2015 were equal to their carrying value
after recording the above noted impairments, any change in the forward multiple or forecasted adjusted forward
EBITDA would impact the recoverable amount. A 5% decrease in the forward multiple and a 5% decrease in
forecasted adjusted EBITDA would decrease the recoverable amount by approximately $11.1 million and $8.8 million
respectively.
In carrying out this testing in the three months ended December 31, 2015, the Company also recorded a further
impairment charge of $4.0 million related to its joint venture investment in Workopolis resulting from a further
downward revision in longer term forecasted revenues reflecting the prevailing business environment.
During the three months ended September 30, 2014, the Company conducted impairment tests on the carrying value
of property, plant and equipment, 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 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 three months ended December 31, 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.
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 its annual impairment
testing for each of the groups of CGUs in the following periods were:
Metroland Media Group
Star Media Group
Digital Ventures
2015
Discount
11.7%
Growth
0.0%
2014
Discount
12.1%
Growth
0.0%
12.0% – 14.8%
0.0% – 0.9%
12.5% – 12.9%
0.0% – 1.5%
13.2%
3.0%
13.9%
3.0%
The discount rates for the Star Media Group include a range reflective of both the traditional newspaper operations
and the Toronto Star Touch. These after-tax rates correspond to pre-tax rates in an estimated range of 14% – 19%
for 2015 and 16 – 18% for 2014. The forward multiples used for performing the December 31, 2015 impairment test
were based on market data of recent transactions as well as analyst reports covering the Company.
TORSTAR CORPORATION 2015 ANNUAL REPORT 84
TORSTAR - Consolidated Financial Statements
13. OTHER ASSETS
Portfolio investments
ESPP receivable
Other
14. INCOME TAXES
Income tax expense is made up of the following:
December 31, 2015
December 31, 2014
$7,439
115
1,868
$9,422
$7,372
266
1,859
$9,497
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
Reduction in carrying amount of deferred income tax assets
Adjustment for prior years
Income tax recovery in the consolidated statement of income
Current income tax recovery in OCI
Deferred income tax expense (recovery) in OCI
Reduction in carrying amount of deferred income tax assets in OCI
Income tax expense (recovery) in OCI
Total income tax expense (recovery)
Year ended December 31
2015
2014
($2,200)
(100)
(2,300)
(28,000)
(400)
28,200
200
(2,300)
(600)
(1,600)
6,000
3,800
$1,500
$800
(100)
700
1,900
(14,700)
400
(12,400)
(11,700)
(20,304)
(20,304)
($32,004)
Income taxes of $7.1 million were paid and refunds of $0.4 million were received during the year from continuing
operations (2014 – $5.7 million paid and refunds of $2.8 million received).
Reconciliation of effective tax rate
The combined Canadian federal and provincial statutory rate was 26.5% in 2015 (2014 – 26.5%).
TORSTAR CORPORATION 2015 ANNUAL REPORT 85
TORSTAR - Consolidated Financial Statements
Loss before taxes from continuing operations
Provision for income taxes based on Canadian statutory rate of 26.5%
(2014 – 26.5%)
Increase (decrease) in taxes resulting from:
Loss of joint ventures and associated businesses not recognized
Non-deductible impairment charges
Reduction in carrying amount of deferred income tax assets
Prior years' losses not previously recognized
Excess tax basis over carrying value of investments
Losses not recognized
Non-taxable portion of capital losses
Non-deductible expenses and other permanent differences
Donation of Canadian cultural property
Effect of lower provincial tax rates
Year ended December 31
2015
($402,137)
($106,600)
10,300
62,100
28,200
(400)
300
800
1,900
1,100
2014
($61,298)
($16,200)
2,600
21,700
(6,800)
(7,900)
700
900
(200)
(6,000)
(500)
Income tax recovery in the consolidated statement of income
($2,300)
($11,700)
Effective income tax rate
0.6%
19.1%
2015
The Company recognized losses on impairment of assets of $345.1 million (2014 – $82.9 million), a significant portion
of which is not deductible for tax purposes. At December 31, 2015, the Company assessed the carrying amount of
the deferred income tax assets to determine if sufficient taxable profit will be available against which they can be
utilized. As a result of this assessment, the Company has reduced the carrying amount of the deferred income tax
assets by $34.2 million, of which $6.0 million was recorded in OCI.
Excluding the impact of non-deductible impairment charges, losses of joint ventures and associated businesses not
recognized and reduction in carrying amount of deferred income tax assets, the Company’s effective tax rate in 2015
would have been 7.8%.
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 was 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 reported an estimated income tax recovery of $6.0 million in respect of
this donation. As at December 31, 2015, the final value of the donation has yet to be determined and the estimated
tax recovery has not been adjusted pending confirmation of the 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%.
TORSTAR CORPORATION 2015 ANNUAL REPORT 86
TORSTAR - Consolidated Financial Statements
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.
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, 2015 and December 31, 2014 are
as follows:
Recognized
in net income
from
continuing
operations
Recognized
in OCI from
continuing
operations
Recognized
in net income
from
discontinued
operations
December 31,
2015
Provisions for returns and doubtful accounts
Property, plant & equipment
Intangible assets
Financial instruments
December 31,
2014
$1,520
(7,163)
(7,409)
($396)
2,524
1,150
200
Provision for employee benefit obligations
19,950
(16,611)
Share-based payment transactions
Tax losses carried forward
Provisions
Goodwill
Excess tax basis over carrying value of
investments
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
1,769
6,770
7,657
(16,266)
7,845
1,745
$16,418
$28,126
(11,708)
$16,418
(1,103)
(3,994)
222
17,364
(69)
713
$—
$700
(5,100)
$900
($4,400)
$900
$1,124
(4,639)
(6,259)
900
(1,761)
666
2,776
8,779
1,098
7,776
2,458
$12,918
$15,233
(2,315)
$12,918
TORSTAR CORPORATION 2015 ANNUAL REPORT 87
TORSTAR - Consolidated Financial Statements
Recognized
in net income
from
continuing
operations
December 31,
2013
Recognized
in OCI from
continuing
operations
Reclassified
to Assets
held
for sale
December 31,
2014
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
Provisions
Goodwill
Excess tax basis over carrying value of
investments
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
$10,166
(7,974)
(10,796)
1,370
11,159
1,269
30,469
7,214
(15,447)
(492)
$26,938
$51,369
(24,431)
$26,938
($498)
1,117
404
(6,352)
546
7,095
443
(819)
7,845
2,619
$12,400
($1,096)
21,400
($8,148)
(306)
2,983
(274)
(6,257)
(46)
(30,794)
$20,304
(382)
($43,224)
$1,520
(7,163)
(7,409)
19,950
1,769
6,770
7,657
(16,266)
7,845
1,745
$16,418
$28,126
(11,708)
$16,418
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, 2015, the Company had Canadian non-capital losses available for carry forward in continuing
operations of approximately $10.5 million (2014 – $25.9 million) that will expire between 2028 and 2035 for which it
is has recognized a deferred income tax asset of $2.8 million (2014 – $6.8 million). In 2014, 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.
Investments in subsidiaries, associates and joint ventures
As at December 31, 2015, 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 $516.3 million (2014 – $44.7
million).
TORSTAR CORPORATION 2015 ANNUAL REPORT 88
TORSTAR - Consolidated Financial Statements
15. FINANCIAL INSTRUMENTS
Fair value of financial instruments
The carrying values of the Company’s financial instruments approximate their fair values unless otherwise noted.
Financial assets:
Loans and receivables, measured at amortized cost:
Cash and cash equivalents
Restricted cash (current)
Restricted cash (non-current)
Trade accounts receivable
Other receivables
Receivables
Available-for-sale, measured at fair value:
Portfolio investments¹
Derivatives designated as effective hedges, measured at fair value:
Foreign currency forward contracts
Other financial liabilities, measured at amortized cost:
Accounts payable and accrued liabilities
Provisions (current)
Provisions (non-current)
December 31, 2015
December 31, 2014
$35,141
37,935
140,930
4,067
144,997
$251,339
16,150
22,750
153,048
9,795
162,843
7,439
7,372
(6,543)
(122,296)
(29,021)
(13,228)
(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:
At December 31, 2015
Level 2
Level 3
Level 1
At December 31, 2014
Level 2
Level 3
Level 1
Measured at fair value:
Portfolio investments
Derivative financial instruments:
- Foreign currency forward contracts
$7,439
$7,372
($6,543)
Changes in the fair value of Level 3 financial instruments were as follows:
Balance, beginning of year
Additions (note 26)
Disposals
Net losses included in net income (note 23)
Exchange differences and OCI
Balance, end of year
Year ended December 31
2015
$7,372
2,021
(2,300)
346
$7,439
2014
$6,568
680
(11)
135
$7,372
TORSTAR CORPORATION 2015 ANNUAL REPORT 89
TORSTAR - Consolidated Financial Statements
Interest and financing costs
Interest earned on short-term investments
Interest on long-term debt
Interest accretion costs
Interest – other
Net financial expense related to employee benefit plans
Year ended December 31
2015
$1,925
(802)
(63)
(3,106)
($2,046)
2014
$1,394
(4,908)
(310)
(19)
(410)
($4,253)
Interest paid during the year ended December 31, 2015 was $0.1 million (2014 – $5.0 million). Interest received
during the year ended December 31, 2015 was $1.9 million (2014 – $1.4 million).
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.
(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. As at December 31, 2015, the Company had $35.1 million in cash and cash equivalents (December 31,
2014 – $251.3 million).
The maturity profile of the Company’s financial liabilities, based on contractual undiscounted payments, is as follows:
2016
2017
2018
2019
2020
2021+
Total
Foreign currency forward contracts
$6,543
Accounts payable and accrued
liabilities¹
118,379
Licenses
Provisions
3,917
$2,208
$1,375
29,021
7,078
2,669
$157,860
$9,286
$4,044
$901
$901
$794
$794
$2,574
$2,574
$6,543
118,379
7,500
43,037
$175,459
¹ This amount excludes the $3.9 million of Licenses payable in 2016.
(ii) Credit risk
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. 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 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 90
TORSTAR - Consolidated Financial Statements
The following table sets out the ageing of the trade receivables:
Gross accounts receivable:
Current
Up to three months past due date
Three to twelve months past due date
Impaired
Allowances for doubtful accounts
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
Balance, end of year
(iii) Market risk
December 31, 2015
December 31, 2014
$63,101
72,811
10,105
207
146,224
(5,294)
$140,930
$70,016
77,183
11,757
278
159,234
(6,186)
$153,048
Year ended December 31
2015
($6,186)
(6,186)
2,685
(1,793)
($5,294)
2014
($7,585)
167
(7,418)
5,946
(4,714)
($6,186)
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’s primary exposure to foreign currency risk is through its investment in VerticalScope, which is
denominated in the U.S. dollar. In order to offset the exchange risk on its consolidated statement of financial position
from its net investment in VerticalScope, the Company entered into rolling forward foreign exchange contracts which
established a rate of of exchange of Cdn. dollar per U.S. dollar of $1.30 for $153.8 million as of the date of the
investment. The forward foreign exchange contracts have been designated as a hedge of the net investment in
VerticalScope. Gains or losses on the translation of the effective portion of the designated hedge amount are
transferred to OCI to offset any gains or losses on translation of the net investment. The hedge was highly effective
during the period ended December 31, 2015. The losses on the translation of the ineffective portion of the hedges
were $1.7 million and have been included in net income in 2015.
As at December 31, 2015, the forward contracts outstanding establish a rate of exchange of Cdn. dollar per U.S.
dollar of $1.34 for U.S. $137.0 million in 2016. The net fair value of the forward contracts outstanding at December 31,
2015 was $6.5 million unfavourable. Forward foreign exchange contracts settled in 2015 were $4.4 million
unfavourable. Any changes to the U.S. dollar/Cdn. dollar exchange rate during the year ended December 31, 2015
would have been offset by the gains or losses on translation of the net investment to the extent of hedge effectiveness.
b. Interest rate risk
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, 2015 would have decreased net
income by $1.0 million (2014 – $0.8 million), with an equal but opposite effect for an assumed increase of 1% in
short-term investment rates.
TORSTAR CORPORATION 2015 ANNUAL REPORT 91
TORSTAR - Consolidated Financial Statements
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 meet its potential obligations resulting from internal growth and acquisitions
and to pay dividends.
The Company defines capital as total equity. At December 31, 2015, capital under management was $419.7 million
(December 31, 2014 – $869.7 million). There have been no changes to the Company's approach to capital
management during the year.
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.
17. PROVISIONS
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
Provisions made during the year
Reversals of provisions during the year
Discontinued operations
Adjustment to contingent consideration
Provisions paid during the year
Interest accretion
Balance at December 31, 2015
Current
Non-current
Balance at December 31, 2014
Current
Non-current
Balance at December 31, 2013
Current
Non-current
Restructuring
Other
$36,650
(974)
35,676
24,087
(1,487)
(27,735)
277
$30,818
28,328
(1,054)
(25,504)
698
$33,286
$20,058
$13,228
$14,051
$16,767
$20,535
$16,115
$607
(150)
457
8,790
(40)
(274)
(394)
$8,539
137
(137)
5,800
(5)
(5,371)
$8,963
$8,963
$8,532
$7
$471
$136
Total
$37,257
(1,124)
36,133
32,877
(1,527)
(274)
(28,129)
277
$39,357
28,465
(1,191)
5,800
(5)
(30,875)
698
$42,249
$29,021
$13,228
$22,583
$16,774
$21,006
$16,251
TORSTAR CORPORATION 2015 ANNUAL REPORT 92
TORSTAR - Consolidated Financial Statements
Restructuring
During the year ended December 31, 2015, the Company recorded restructuring and other charges of $30.2 million,
which included restructuring provisions of $30.2 million and other charges of less than $0.1 million. Restructuring
provisions of $19.7 million were recorded in the MMG Segment and $10.5 million in the SMG Segment. The
restructuring provisions included $27.3 million related to ongoing efforts to reduce costs as well as additional provisions
of $2.6 million in respect of inventory related to MMG's decision to phase out product sales and $0.3 million write-
off of receivables.
In 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.
The non-current restructuring provisions are expected to be paid out through 2029.
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. During the year ended December 31, 2014, the
Company had assessed the fees that it may incur as well as the probability of occurrence of any losses in respect
of these matters, estimated the exposure under these indemnities and recorded a contingent liability in respect of
these matters. During the year ended December 31, 2015, the Company adjusted its estimates of these contingent
liabilities to reflect the appreciation of the U.S. dollar relative to the Canadian dollar as well as revised estimates of
the amounts of these contingent liabilities in respect of insurance, taxes, legal and other costs. The expense
associated with these adjustments has been included in the determination of Income (loss) from discontinued
operations.
Other provisions also include provisions for contingent consideration, which 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.
The Company is also 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.
18. OTHER LIABILITIES
Employees' shares subscribed (note 21(b))
RSU Plan (note 22(c))
DSU Plan (note 22(e))
Other employment benefits
Licenses (note 10)
Other
December 31, 2015
December 31, 2014
$1,294
778
1,828
1,504
3,419
1,049
$9,872
$1,860
1,867
3,617
1,626
1,026
$9,996
TORSTAR CORPORATION 2015 ANNUAL REPORT 93
TORSTAR - Consolidated Financial Statements
19. EMPLOYEE BENEFITS
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.
Other post employment benefits plans 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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 94
TORSTAR - Consolidated Financial Statements
Information concerning the Company’s post employment benefit plans is as follows:
Net defined benefit plan obligations
Changes to the net defined benefit obligation (asset) were as follows:
At December 31, 2013
Reclassified to Liabilities associated with assets
held for sale
Liability transferred from discontinued
operations
Expense recognized in the consolidated
statement of income:
Salaries and benefits
Interest and financing costs
Amounts recognized in OCI
Contributions to plan
At December 31, 2014
Expense recognized in the consolidated
statement of income:
Salaries and benefits
Interest and financing costs
Amounts recognized in OCI
Contributions to plans
At December 31, 2015
Pension plans
Funded
Canada
United
States
($37,308)
$6,343
Unfunded1
$26,283
Other post
employment
benefit
plans
$42,791
(1,449)
(38,757)
12,498
(2,156)
10,342
77,534
(37,432)
11,687
17,452
683
18,135
(445)
(17,951)
$11,426
(6,343)
(12,439)
13,844
42,791
611
632
601
1,233
1,129
(34)
16,783
537
604
1,141
3,393
(79)
300
1,965
2,265
4,933
(2,387)
47,602
364
1,819
2,183
469
(2,379)
$21,238
$47,875
Total
$38,109
(20,231)
17,878
611
13,430
410
13,840
83,596
(39,853)
76,072
18,353
3,106
21,459
3,417
(20,409)
$80,539
1 As at December 31, 2015, the unfunded pension plan includes an executive retirement plan liability of $21.2 million (December 31,
2014 – $16.8 million) which is supported by an outstanding letter of credit of $15.1 million as at December 31, 2015 (December 31,
2014 – $15.6 million).
A summary of the components of the net defined benefit obligation as at December 31, 2015 and 2014 is as follows:
2015
Defined benefit obligations
Fair value of plan assets
Net defined benefit obligation
Recorded in:
Assets
Liabilities
Funded
$920,659
(909,233)
$11,426
$6,922
$18,348
Pension plans
Unfunded
$21,238
Other post
employment
benefit plans
$47,875
$21,238
$47,875
$21,238
$47,875
Total
$989,772
(909,233)
$80,539
$6,922
$87,461
TORSTAR CORPORATION 2015 ANNUAL REPORT 95
TORSTAR - Consolidated Financial Statements
2014
Defined benefit obligations
Fair value of plan assets
Net defined benefit obligation
Recorded in:
Assets
Liabilities
Funded
$930,398
(918,711)
$11,687
$9,243
$20,930
Pension plans
Unfunded
$16,783
Other post
employment
benefit plans
$47,602
$16,783
$47,602
$16,783
$47,602
Total
$994,783
(918,711)
$76,072
$9,243
$85,315
The following charts provide a summary of changes in the defined benefit obligation and the fair value of plan assets
during 2015 and 2014:
2015
Accrued benefit obligations:
Balance, beginning of year
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
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
Pension Plans
Funded
Unfunded
Other post
employment
benefit plans
Total
$930,398
$16,783
$47,602
$994,783
14,805
35,840
(63,024)
(2,082)
3,542
1,180
537
604
(79)
3,393
364
1,819
(2,379)
469
15,706
38,263
(65,482)
1,780
3,542
1,180
$920,659
$21,238
$47,875
$989,772
$918,711
35,157
(1,637)
(63,024)
17,951
3,542
(1,467)
$909,233
$11,426
(79)
79
(2,379)
2,379
$21,238
$47,875
$918,711
35,157
(1,637)
(65,482)
20,409
3,542
(1,467)
$909,233
$80,539
TORSTAR CORPORATION 2015 ANNUAL REPORT 96
TORSTAR - Consolidated Financial Statements
2014
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:
Pension plans
Funded
Canada
United
States
Unfunded
Other post
employment
benefit plans
Total
$859,832
$27,509
$26,283
$42,791
$956,415
(48,902)
810,930
11,773
37,625
(56,385)
122,483
3,920
52
$930,398
(27,509)
(12,439)
13,844
611
475
601
(34)
1,129
157
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
$16,783
$47,602
$994,783
Fair value, beginning of year
$900,436
$21,166
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
(21,166)
(47,453)
852,983
39,781
41,653
(56,385)
37,432
3,920
(673)
$918,711
$11,687
(34)
34
(2,387)
2,387
$16,783
$47,602
$921,602
(68,619)
852,983
39,781
41,653
(58,806)
39,853
3,920
(673)
$918,711
$76,072
Net benefit expense for defined benefit plans recognized in the 2015 and 2014 consolidated statement of income is
as follows:
2015
Current service cost
Net interest expense (income)
Past service cost
Administration costs
Net benefit expense
Pension plans
Unfunded
$537
604
Funded
$14,805
683
1,180
1,467
Other post
employment
benefit plans
$364
1,819
Total
$15,706
3,106
1,180
1,467
$18,135
$1,141
$2,183
$21,459
TORSTAR CORPORATION 2015 ANNUAL REPORT 97
TORSTAR - Consolidated Financial Statements
2014
Current service cost
Net interest expense (income)
Past service cost
Administration costs
Net benefit expense
Pension plans
Funded
$11,773
(2,156)
52
673
Unfunded
$475
601
157
Other post
employment
benefit plans
$300
1,965
Total
$12,548
410
209
673
$10,342
$1,233
$2,265
$13,840
Amounts recognized in the 2015 and 2014 consolidated statement of comprehensive income (before tax):
2015
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
Amounts recognized in OCI
2014
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
Pension plans
Funded
Unfunded
Other post
employment
benefit plans
Total
$2,560
(478)
2,082
(1,637)
$445
($1,401)
(1,842)
(150)
(3,393)
($211)
(258)
(469)
($3,393)
($469)
$948
(1,842)
(886)
(1,780)
(1,637)
($3,417)
Pension plans
Funded
Unfunded
Other post
employment
benefit plans
Total
($90,241)
(27,432)
(4,810)
(122,483)
41,653
(80,830)
3,296
($1,385)
256
(1,129)
($4,715)
(426)
208
(4,933)
(1,129)
(4,933)
($96,341)
(27,858)
(4,346)
(128,545)
41,653
(86,892)
3,296
($77,534)
($1,129)
($4,933)
($83,596)
The significant assumptions used by the Company in 2015 and 2014 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 2015 and 2014, the Company used the 2014 Private Sector Canadian Pensioners' Mortality Table
projected generationally using scale B with a multiplier applied at December 31, 2015 and December 31, 2014 (for
the larger plans, the multiplier ranged from 94% to 103%).
TORSTAR CORPORATION 2015 ANNUAL REPORT 98
TORSTAR - Consolidated Financial Statements
To determine benefit obligation at end of year:
Discount rate
Rate of future compensation increase
3.1% to 3.9%
2.0% to 2.5% 2.25% to 2.75%
3.5% to 3.9%
Pension plans
2015
2014
Other post employment benefit
plans
2015
3.9%
2014
3.9%
To determine benefit expense:
Discount rate
3.5% to 3.9%
4.2% to 4.7%
3.9%
4.7%
Rate of future compensation increase
2.25% to 2.75% 2.5% to 3.0%
Health care cost trend rates at end of year:
Initial rate
Ultimate rate
Year ultimate rate reached
Longevity for pensioners currently at age 65:
4.6%
5.0%
2017
4.4%
5.0%
2017
Male
Female
21.7 years
24.2 years
21.7 years
24.2 years
The effect of a one percent increase or decrease in significant financial assumptions used for the Company’s pension
and other post employment benefit plans would result in an increase (decrease) in the accrued benefit obligation:
Pension plans:
Discount rate
Rate of compensation increase
Other post employment benefit plans:
Discount rate
Per capita cost of health care
December 31, 2015
December 31, 2014
1% increase
1% decrease
1% increase
1% decrease
($116,645)
$133,583
($117,577)
$134,666
8,642
(8,494)
8,671
(8,520)
(5,121)
1,264
6,266
(1,102)
(5,530)
1,418
6,852
(1,225)
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, 2014 – 2.2%).
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.
TORSTAR CORPORATION 2015 ANNUAL REPORT 99
TORSTAR - Consolidated Financial Statements
Pension plan assets for the Canadian plans, measured as at December 31, 2015 and 2014 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
2015
$144,532
90,726
66,602
83,497
56,989
331,900
41,486
2,726
90,775
$909,233
2014
$31,761
127,446
131,684
79,080
84,442
309,634
64,278
4,033
86,353
$918,711
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, 2015, the target allocation
mix was 36% equity securities and 64% fixed income securities for the Canadian plans (December 31, 2014 – 37%
equity securities and 63% fixed income securities) .
The Company’s 2015 actual funding for its Canadian registered pension plans was approximately $18 million (2014
– $37 million). The Company has prepared actuarial reports as of December 31, 2013 for its significant plans.
Estimated funding in 2016 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 12.9 years (2014 – 13.5 years). As at December
31, 2015, the expected maturity profile of the undiscounted pension plan and other post employment benefits is $49
million in the next year, $471 million in 2 to 10 years and $1,148 million in over 10 years (December 31, 2014 – $48
million in the next year, $460 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 2015 was $1.9 million (2014 – $2.2 million).
TORSTAR CORPORATION 2015 ANNUAL REPORT 100
TORSTAR - Consolidated Financial Statements
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 period
Converted to Class B
Balance, end of period
Class B shares (non-voting)
Balance, beginning of period
Converted from Class A
Dividend reinvestment plan
Issued under ESPP
Share option plan
Other
Balance, end of period
Total Class A and Class B shares
Year ended December 31
2015
2014
Shares
Amount
Shares
Amount
9,851,964
(12,609)
9,839,355
$2,676
(3)
$2,673
9,853,814
(1,850)
9,851,964
$2,677
(1)
$2,676
70,355,301
$397,901
70,064,699
$395,928
12,609
151,466
119,650
67,187
850
3
682
763
473
5
1,850
97,859
91,230
97,938
1,725
1
649
589
721
13
70,707,063
80,546,418
$399,827
$402,500
70,355,301
80,207,265
$397,901
$400,577
An unlimited number of Class B shares is authorized. While the number of Class A shares is unlimited, the issuance
of further Class A shares, may under certain circumstances, require unanimous board approval.
(c) Earnings per share
Basic earnings per share amounts have been determined by dividing net income attributable to equity shareholders
by the weighted average number of Class A and Class B shares outstanding during the period.
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 the ESPP does not
result in an adjustment to income.
TORSTAR CORPORATION 2015 ANNUAL REPORT 101
TORSTAR - Consolidated Financial Statements
The reconciliation of the denominator in calculating diluted per share amounts is as follows:
(thousands of shares)
Weighted average number of shares outstanding, basic
2015
80,400
Effect of dilutive securities
- share options
- ESPP
Weighted average number of shares outstanding, diluted
80,400
2014
80,078
169
7
80,254
Year ended December 31
Outstanding share options totalling 5,543,589 (December 31, 2014 – 3,044,705), 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, and in total:
First quarter ended March 31: 13.125 cents (2014 – 13.125 cents)
Second quarter ended June 30: 13.125 cents (2014 – 13.125 cents)
Third quarter ended September 30: 13.125 cents (2014 – 13.125 cents)
Fourth quarter ended December 31: 13.125 cents (2014 – 13.125 cents)
Total dividends
Year ended December 31
2015
$10,536
10,555
10,558
10,565
$42,214
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 15,000,000 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, 2015,
options to purchase 11,555,941 shares have been granted, net of options cancelled (December 31, 2014 –
10,697,283).
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
2015
2014
Share options
4,752,118
1,406,876
(67,187)
(548,218)
5,543,589
Weighted
average
exercise price
$9.89
$6.52
($5.87)
($13.72)
$8.66
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
The weighted average share price when the options were exercised during 2015 was $7.07 (2014 – $7.53).
TORSTAR CORPORATION 2015 ANNUAL REPORT 102
TORSTAR - Consolidated Financial Statements
As at December 31, 2015, outstanding share options were as follows:
Range of exercise price
$5.75 – $8.37
$12.21 – $22.14
$5.75 – $22.14
Share options
outstanding
4,554,178
989,411
5,543,589
Weighted
average
remaining
contractual life
6.90 years
2.70 years
6.15 years
Weighted
average
exercise price
Share options
exerciseable
Weighted
average
exercise price
$6.88
$16.82
$8.66
2,143,116
989,411
3,132,527
$7.22
$16.82
$10.25
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)
2015
$0.81 – $0.93
1.3% – 1.5%
8.1%
2014
$1.14 – $1.23
1.9% – 2.2%
9.0%
36.1% – 44.1%
38.8% – 41.2%
6
6
In January 2016, 1,389,039 share options were granted at an exercise price of $2.78 per share.
(b) ESPP
As at December 31, outstanding employee subscriptions were as follows:
Maturing in
Subscription price at entry date
Number of shares
2015
2014
2016
$7.65
91,581
2017
$6.28
94,515
2015
$6.38
2016
$7.65
155,063
113,805
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)
2015
$0.62
0.6%
8.4%
34.9%
2
2014
$0.71
1.0%
8.2%
31.0%
2
TORSTAR CORPORATION 2015 ANNUAL REPORT 103
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
Dividend equivalents
Units outstanding, end of year
2015
827,936
(191,181)
256,858
(52,389)
30,936
872,160
2014
634,983
(146,805)
366,994
(27,236)
827,936
In 2014, the Company amended the RSU plan to accrue dividend equivalents on all grants beginning with the 2015
fiscal year, payable in additional units in an amount equal to dividends paid on Class B non-voting shares of the
Company. The dividend equivalents are expensed over the vesting period of the grant.
As at December 31, 2015, 574,918 units have been accrued at a value of $1.6 million of which 294,936 units have
been accrued in Accounts payable and accrued liabilities at a value of $0.8 million while 279,982 units have been
accrued in Other liabilities at a value of $0.8 million (December 31, 2014 – 477,470 units were accrued at a value
of $3.1 million of which 191,181 units were accrued in Accounts payable and accrued liabilities at a value of $1.2
million and 286,289 units were accrued in Other liabilities at a value of $1.9 million).
The Company has entered into a derivative instrument in order to lock in the expense for 345,300 RSUs. Changes
in the fair value of this instrument are recorded as compensation expense and offset the impact of changes in the
value of the RSUs that have been accrued. As the RSUs are accrued over the three-year period until the RSUs
vest, there will not be an exact offset each period.
In January 2016, 446,762 RSUs have been granted and 294,936 RSUs have vested and were paid.
In 2015, the Company has recognized share-based compensation expense totalling $1.7 million (2014 – $2.2
(d)
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
2015
554,876
57,260
7,202
13,290
69,836
(44,981)
657,483
2014
490,130
67,308
2,902
8,482
38,035
(51,981)
554,876
As at December 31, 2015, the 657,483 units outstanding were valued at $1.8 million (December 31, 2014 – 554,876
units valued at $3.6 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 2015 ANNUAL REPORT 104
TORSTAR - Consolidated Financial Statements
22. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity for the components of Accumulated other comprehensive income:
As at December 31,
2013
Associated with Assets
held for sale
OCI
As at December 31,
2014
OCI
As at December 31,
2015
Foreign CTA 1
Cash flow
hedges
Available-for-
sale securities 1
Net investment
hedge 2
Total
$1,583
($3,666)
($5,520)
($7,603)
637
(3,029)
3,029
(1,673)
(90)
111
21
10,761
$10,782
(5,520)
5,520
(8,007)
(1,036)
(8,639)
8,660
21
3,100
($8,007)
$3,121
$346
$346
1Net of deferred income tax asset/liability of $nil (2014 – $nil).
2Net of deferred income tax asset of $700 and current income tax recovery of $600 (2014 – $nil).
23. OTHER INCOME (EXPENSE)
Investment write-down and loss
Gain on sale of associated business
Gain on sale of available-for-sale investment
Gain on settlement of Metro call option liability
Loss on cancellation of interest rate swaps
Adjustment to contingent consideration
Other
Year ended December 31
2015
($2,300)
155
5
303
($1,837)
2014
$4,463
736
1,051
(2,781)
274
11
$3,754
2015
The Company recorded a write-down of $2.3 million in respect of one of its portfolio investments.
2014
The Company sold its remaining interest in Tuango for proceeds of $7.6 million and recorded a gain of $4.5 million.
In addition, the Company sold an available-for-sale equity investment for proceeds of $0.7 million and recorded a
gain of $0.7 million.
The Company recorded a gain of $1.1 million on the early settlement of the put and call arrangements in connection
with the remaining 10% interest in Metro.
A loss of $2.8 million was recorded on the extinguishment of the interest rate swaps which had been derecognized
in connection with the then expected sale of Harlequin.
TORSTAR CORPORATION 2015 ANNUAL REPORT 105
TORSTAR - Consolidated Financial Statements
24. DISCONTINUED OPERATIONS
On August 1, 2014, the Company sold 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”) 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 (Note 5) 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 sale, the net assets of Harlequin were derecognized from Assets held for sale. 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 (loss) on sale of Harlequin (note 17)
Income before taxes from discontinued operations
Income and other taxes
Net income (loss) from discontinued operations
Attributable to:
Equity shareholders
Net income (loss) from discontinued operations attributable to
equity shareholders per Class A (voting) and Class B (non-voting)
share (note 20(c)):
Basic
Diluted
Year ended
December 31
2015
($5,800)
(5,800)
800
($5,000)
2014
$213,198
(58,403)
(134,796)
(1,043)
(5)
18,951
(457)
4,090
639
(2,629)
20,594
224,618
245,212
(22,550)
$222,662
($5,000)
$222,662
($0.06)
($0.06)
$2.78
$2.77
TORSTAR CORPORATION 2015 ANNUAL REPORT 106
TORSTAR - Consolidated Financial Statements
(ii) Statement of Comprehensive Income
Net income (loss) from discontinued operations
Other comprehensive income (loss) that are or may be reclassified
subsequently to net income (loss):
Realized foreign currency translation adjustment for joint ventures (no
income tax effect)
Realized foreign currency translation adjustment for joint ventures (no
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 loss on employee benefits
Income tax effect
Other comprehensive loss from discontinued operations, net of tax
Comprehensive income (loss) from discontinued operations, net of
tax
Attributable to:
Equity shareholders
(iii) Statement of Cash Flows
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase in cash
Effect of exchange rate changes
Cash, beginning of period
Cash paid on closing
Cash, end of period
Year ended December 31
2015
($5,000)
2014
$222,662
461
(2,134)
911
(274)
(1,036)
(8,371)
2,432
(5,939)
($6,975)
($5,000)
$215,687
($5,000)
$215,687
Year ended December 31
2015
2014
$8,635
(1,609)
21,311
28,337
403
(9,132)
(19,608)
TORSTAR CORPORATION 2015 ANNUAL REPORT 107
TORSTAR - Consolidated Financial Statements
25. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Share-based compensation plans
Foreign exchange
Restructuring provisions
Investment write-down and loss
Gain on sale of investments
Gain on Metro call option liability
Interest accretion
Other
Year ended December 31
2015
($1,645)
1,022
(4,237)
2,300
(155)
802
(336)
($2,249)
2014
$2,674
7,656
641
(5,199)
(1,051)
310
(1,429)
$3,602
26. ACQUISITIONS AND PORTFOLIO INVESTMENTS
2015 Acquisitions
During the year ended December 31, 2015, the Company completed an acquisition in its MMG Segment for less
than $0.1 million. The Company also made portfolio investments for cash of $2.0 million.
In addition, the Company made payments of less than $0.1 million for contingent consideration in respect of prior
year acquisitions (Carroll Publishing in the MMG Segment and Inside Queen's Park in the SMG Segment).
Total cash used for acquisition and portfolio investments was $2.1 million.
The acquisition made was in respect of London Baby Expo (a consumer show for baby products) on March 1, 2015.
This acquisition contributed approximately $0.1 million of revenue and less than $0.1 million of operating profit in
the MMG Segment in 2015. If the acquisition had occurred on January 1, 2015, the Company's consolidated revenues
and operating loss would have remained unchanged at $786.6 million and $354.1 million respectively.
The portfolio investments have been classified as AFS financial assets and included $1.8 million for an 8.1% interest
in CanadaStays.com and approximately $0.2 million for a 0.5% interest in Kensington Venture Fund.
The fair value of assets acquired and liabilities assumed from the acquisition and investments completed are as
follows:
Year ended December 31, 2015
MMG
Segment
SMG
Segment
Corporate
Total
Assets
Goodwill
Working Capital
Total purchase price and cash consideration paid
Contingent consideration on prior acquisitions
$40
(4)
36
27
63
$22
22
$40
(4)
36
49
85
Portfolio investments
$2,021
2,021
Total cash used in acquisitions and portfolio investments
$63
$22
$2,021
$2,106
TORSTAR CORPORATION 2015 ANNUAL REPORT 108
TORSTAR - Consolidated Financial Statements
2014 Acquisitions
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. 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:
Year ended December 31, 2014
Deferred payments on prior acquisitions
Contingent consideration on prior acquisitions
Portfolio investments
Total cash used in acquisitions and portfolio investments
27. COMMITMENTS AND CONTINGENCIES
SMG Segment
$10,065
14
10,079
680
$10,759
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.
Along with the other shareholders of Kanetix Ltd. ("Kanetix"), 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
Receivable from office sub-leases
Total
$54,864
70,204
$125,068
($10,478)
2016
$14,917
14,782
$29,699
($2,925)
2017 - 2018
$23,650
2019 - 2020
$16,062
38,407
$62,057
($5,060)
15,060
$31,122
($2,493)
2021+
$235
1,955
$2,190
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
2015
$5,476
3,480
(765)
$8,191
2014
$7,160
3,122
1,915
(112)
$12,085
TORSTAR CORPORATION 2015 ANNUAL REPORT 109
TORSTAR - Consolidated Financial Statements
The following summarizes the total value of sales to, purchases from and amounts owed to and by the Company’s
joint ventures and associates.
Joint Ventures
2015
2014
Associates
2015
2014
Sales to
Purchases from Amounts owed by Amounts owed to
$319
510
219
$13
237
8,680
8,731
$216
102
52
224
$8
1,347
1,105
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 AND OTHER EVENTS
On February 1, 2016, the Company received the entire $22.8 million portion of the proceeds from the sale of Harlequin
which had been held in an escrow account for eighteen months.
On February 4, 2016, the Company closed the sale of a property in Mississauga and received net proceeds of $5.5
million. The Company will recognize a gain of approximately $1.3 million during the three months ending March 31,
2016.
In February 2016, the Company extinguished $68.0 million of U.S. rolling forward contracts it had in place in respect
of the hedge of the net investment in VerticalScope and simultaneously entered into a $68.0 million zero cost collar
arrangement with a range of Canadian $1.46 to Canadian $1.26 for U.S. $1.00.
Through March 2, 2016, a series of restructuring initiatives have been undertaken in the Star Media Group and
Metroland Media Group segments. These initiatives include the intended outsourcing of certain functions, including
the outsourcing of printing of the Toronto Star to Transcontinental Printing. The combined severance provision and
various other transition costs associated with the decision to outsource printing of the Toronto Star, which will be
recorded as a restructuring charge in 2016 are expected to be approximately $22 million.
TORSTAR CORPORATION 2015 ANNUAL REPORT 110
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Board of directors
John A. Honderich
Chair, Torstar Corporation
Former Publisher, Toronto Star
Director since 2004
Campbell R. Harvey
Professor of 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
Chief Operating Officer
Element Financial Corporation
Director since 2009
Alnasir Samji
Managing Principal, Alderidge Consulting
Director since 2009
TORSTAR CORPORATION 2015 ANNUAL REPORT 112
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Board of directors
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
Daryl Aitken
Owner, Operator
Fabric Spark
Director since 2015
TORSTAR CORPORATION 2015 ANNUAL REPORT 112
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TORSTAR CORPORATION 2015 ANNUAL REPORT 115
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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
TORSTAR CORPORATION 2015 ANNUAL REPORT 114
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2015
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