TORSTAR - Management’s Discussion and Analysis
For the three and nine months ended September 30, 2014
This Management’s Discussion and Analysis (“MD&A”) comments on the financial condition and results of operations of
Torstar Corporation (“Torstar” or the “Company”), for the three and nine months ended September 30, 2014 and updates the
MD&A for fiscal year ended December 31, 2013 (the “Annual MD&A”). The information contained herein should be read in
conjunction with the audited consolidated financial statements of Torstar Corporation for the year ended December 31, 2013
and the annual MD&A which are set forth in the Company’s Annual Report for such fiscal year and incorporated by reference
in the Company’s renewal Annual Information Form dated March 21, 2014.
The Company prepares its condensed consolidated financial statements in accordance with 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 condensed consolidated financial statements has been prepared in accordance with IFRS, except for
certain “Non-IFRS Measures” as described in Section 12 of this MD&A.
This MD&A is dated November 4, 2014 and all amounts are denominated in Canadian dollars, unless otherwise noted. Per
share amounts are calculated using the weighted average number of shares outstanding for the applicable period.
The accounting policies applied in this interim MD&A are consistent with those disclosed in Note 2 to the annual consolidated
financial statements for the year ended December 31, 2013, except for the addition of policies and significant judgements
related to Assets Held for Sale and Discontinued Operations and for application of amendments to IAS 32 Financial
Instruments: Presentation, IAS 36 Impairment of Assets and IFRIC 21 Levies as described further in Section 8 of this MD&A.
Additional information relating to Torstar, including the 2013 Consolidated Financial Statements, Annual Report and Annual
Information Form, are available on Torstar’s website at www.torstar.com and on SEDAR at www.sedar.com.
Forward-looking statements
Certain statements in this MD&A and in the Company’s oral and written public communications may constitute forward-looking
statements that reflect management’s expectations regarding the Company’s future growth, financial performance and
business prospects and opportunities as of the date of this MD&A. Generally, these forward-looking statements can be
identified by the use of forward-looking terminology such as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”,
“would”, “could”, “if”, “may” and similar expressions. This MD&A includes, among others, forward-looking statements
regarding expected taxes payable on the Harlequin gain in Section 2 and 3 of this MD&A, Torstar’s forecasted revenues in
Section 3 of this MD&A, Torstar’s expected net savings from restructuring initiatives in Section 3 and Section 4 of this MD&A,
Torstar’s outlook for the balance of 2014 in Section 4 of this MD&A, expectations regarding the development and launch,
including the timing thereof, of the Toronto Star digital tablet edition and the expected capital spending requirements and
operating expenses associated therewith in Section 4 of this MD&A, expectations regarding cash flows, and financing
requirements in Section 5 of this MD&A, expectations regarding the costs, obligations, contributions, return on plan assets
and other expectations in Section 7 of this MD&A and expectations described in connection with critical accounting policies
and estimates in Section 8 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 other newspapers and other forms of media and media platforms;

the Company’s ability to attract and retain advertisers;

the Company’s ability to maintain adequate circulation/subscription levels;

the Company’s ability to attract and retain readers;

the Company’s ability to retain and grow its digital audience and profitably develop its digital businesses;

the Company’s ability to negotiate and agree on definitive documentation and to integrate the technology associated
with the Toronto Star digital tablet edition;

general economic conditions in the principal markets in which the Company operates;

labour disruptions;
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
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the Company’s ability to reduce costs;
loss of reputation;
newsprint costs;
availability of capital;
changes in pension fund obligations;
interest rates;
reliance on its printing operations;
reliance on technology and information systems;
availability of insurance;
litigation;
privacy, anti-spam, communications, e-commerce and environmental laws and other laws and regulations applicable
generally to the Company’s businesses;
dependence on key personnel;
dependence on third party suppliers and service providers;
intellectual property rights;
results of impairment tests;
risks related to business development and acquisition integration;
unexpected costs or liabilities related to acquisitions and dispositions;
product revenue and product liability;
credit risk;
foreign exchange fluctuations and foreign operations;
control of the Company by the Voting Trust; and
uncertainties associated with critical accounting estimates.
We caution that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results. In
addition, a number of assumptions, including those assumptions specifically identified throughout this MD&A, were applied in
making the forward-looking statements set forth in this MD&A which the Company believes are reasonable as of the date of
this MD&A. Some of the key assumptions include, without limitation, assumptions regarding the performance of the North
American economies; tax laws; continued availability of printing operations; availability of financing on appropriate terms;
exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan
obligations; expected future revenues; expected future liabilities; expected future cash flows and discount rates relating to
valuation of goodwill and intangible assets; and successful development and launch of new products including the Toronto
Star digital tablet edition. There is a risk that some or all of these assumptions may prove to be incorrect.
When relying on our forward-looking statements to make decisions with respect to the Company and its securities, investors
and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company does
not intend, and disclaims any obligation, to update any forward-looking statements, whether written or oral, or whether as a
result of new information or otherwise, except as may be required by law.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
Management’s Discussion and Analysis – Contents
Page
Section
1
2
3
Overview
Highlights
5
Highlights for the third quarter of 2014 compared to the third quarter of 2013
Operating Results
6
A discussion of Torstar’s operating results for the three and nine months ended
September 30, 2014 and 2013
4
Outlook
5
Liquidity and Capital Resources
6
Financial Instruments
7
Employee Future Benefit Obligations
8
4
A summary of Torstar’s business
12
The outlook for Torstar’s business in the balance of 2014
A discussion of Torstar’s cash flow, liquidity, credit facilities and other disclosures
13
15
A summary of Torstar’s financial instruments
15
A summary of Torstar’s employee future benefit obligations
Critical Accounting Policies and Estimates
A description of accounting estimates that are critical to determining Torstar’s financial results,
and changes to accounting policies
9
Recent Accounting Pronouncements
10
Controls and Procedures
11
Summary of Quarterly Results
12
Reconciliation and Definition of Non-IFRS Measures
13
Risks and Uncertainties
16
A discussion of recent IFRS developments that will affect Torstar
A discussion of Torstar’s disclosure controls and internal controls over financial reporting
16
17
A summary view of Torstar’s quarterly financial performance
A description and reconciliation of certain non-IFRS measures used by management
17
19
Risks and uncertainties facing Torstar
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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3
TORSTAR - Management’s Discussion and Analysis
1. Overview
A summary of Torstar’s business
Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (Symbol:TS.B).
Torstar has two reportable operating segments; Metroland Media Group (“MMG”) and Star Media Group (“SMG”).
Metroland Media Group includes more than 110 weekly community newspapers, three daily newspapers (The
Hamilton Spectator, the Waterloo Region Record and the Guelph Mercury), numerous other specialty and
monthly publications, magazines, telephone directories, consumer shows and distribution operations, a number of
websites and applications and product sales. Metroland Media Group also operates other digital businesses
which include goldbook.ca, save.ca, travelalerts.ca, and wagjag.com (“WagJag”).
Star Media Group includes the daily Toronto Star newspaper and thestar.com. The Star Media Group also
includes Free Daily News Group Inc. (“Metro English Canada”), which publishes the Metro free daily commuter
papers in several Canadian cities, Torstar’s interest in the Chinese-language Sing Tao Daily newspaper and its
related publications in Toronto, Vancouver and Calgary (pursuant to a joint venture with Sing Tao Holdings);
toronto.com; several other specialty publications and magazines and distribution services. Star Media Group also
includes eyeReturn Marketing Inc. (“eyeReturn Marketing”) and Torstar’s interests in Olive Media and Workopolis.
Torstar also has investments in Black Press Ltd. (“Black Press”), Blue Ant Media Inc. (“Blue Ant”), Canadian
Press Enterprises Inc. (“Canadian Press”), Shop.ca Network Inc. (“Shop.ca”) and until October 16, 2014, Tuango
Inc. (“Tuango”).
Previously, Torstar also owned Harlequin, a leading global publisher of books for women. On May 1, 2014,
Torstar entered into an agreement to sell all of the shares of Harlequin, to a division of HarperCollins Publishers
L.L.C., a subsidiary of News Corp., for a purchase price of $455 million. The transaction closed August 1, 2014.
Torstar’s investment in Harlequin previously represented the Book Publishing Segment. Effective the second
quarter of 2014, this was reclassified as Assets Held for Sale and Discontinued Operations and all comparative
figures below have been restated to reflect this change, unless otherwise noted. Refer to Section 3 – Operating
Results below and Note 20 of Torstar’s 2014 Third Quarter Condensed Consolidated Financial Statements for
further information.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
2. Highlights
Highlights for the third quarter of 2014 compared to the third quarter of 2013
(in $000’s, except per
share amounts)
Revenues
1
Three months ended September 30
Favourable
2014
2013
(Unfavourable)
Nine months ended September 30
% Favourable
2014
2013
(Unfavourable)
$211,202
$227,383
(7.1%)
$659,751
$712,598
(7.4%)
15,977
20,666
(22.7%)
63,037
65,498
(3.8%)
Operating profit (loss)
(93,104)
(79,142)
(17.6%)
(72,314)
(63,739)
(13.5%)
Net income (loss) from
continuing operations
Per Share
(86,998)
($1.08)
(80,220)
($1.01)
(8.4%)
(70,485)
($0.88)
(73,887)
($0.93)
4.6%
Net income from
discontinued operations
Per Share
212,332
$2.65
9,359
$0.12
NM
222,662
$2.78
25,348
$0.32
NM
Net income (loss)
attributable to equity
shareholders
Per Share
125,343
$1.57
(70,800)
($0.89)
NM
152,129
$1.90
(48,621)
($0.61)
NM
$0.28
$0.28
Adjusted EBITDA
1,2
1,2
Adjusted Earnings Per
2
$0.06
$0.08
Share
1
Includes proportionately consolidated share of joint venture operations,
2
These are Non-IFRS or additional IFRS measures, refer to Section 12 of this MD&A
NM - Figure not meaningful

Highlights:

The sale of Harlequin closed on August 1, 2014 for net accounting proceeds of $442.2 million, resulting in
a pre-tax accounting gain of $224.6 million. Cash taxes payable on the gain are currently expected to be
approximately $4.5 million.

Total segmented revenue was $211.2 million in the third quarter of 2014, down $16.2 million (7.1%) from
$227.4 million in the third quarter of 2013.

Segmented adjusted EBITDA was $16.0 million in the third quarter of 2014, down $4.7 million (22.7%)
from $20.7 million in the third quarter of 2013.

Segmented operating profit (loss) was a loss of $93.1 million in the third quarter of 2014, an increase of
$14.0 million from a loss of $79.1 million in the third quarter of 2013. The segmented operating losses for
the third quarters of 2014 and 2013 include a non-cash charge for impairment of assets totalling $97.3
million and $85.5 million respectively.

Net loss from continuing operations was $87.0 million ($1.08 per share) in the third quarter of 2014, an
increase of $6.8 million ($0.07 per share) from $80.2 million ($1.01 per share) in the third quarter of 2013.

Adjusted earnings per share was $0.06 in the third quarter of 2014, down $0.02 from $0.08 in the third
quarter of 2013.

Ended the third quarter with total cash and cash equivalents and restricted cash of $277.3 million after
retiring all outstanding debt.

Net income attributable to equity shareholders was $125.3 million ($1.57 per share) in the third quarter of
2014 up $196.1 million ($2.46 per share) from a loss of $70.8 million ($0.89 per share) in the third quarter
of 2013.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
The following chart provides a continuity of earnings per share from the third quarter and first nine months of 2013
to the third quarter and first nine months of 2014:
Third quarter
Adjusted
Earnings Per Earnings
Share
Per Share
Earnings per share from continuing operations attributable to equity
shareholders in 2013
Changes
 Operations
 Interest and financing costs
 Associated businesses
 Restructuring and other charges*
 Impairment of assets*
 Non-cash foreign exchange*
 Other income (expense) *
 Change in deferred taxes
Earnings per share from continuing operations attributable to equity
shareholders in 2014
Earnings per share from discontinued operations attributable to equity
shareholders in 2014
Nine months ended Sept 30
Adjusted
Earnings Per Earnings Per
Share
Share
($1.01)
$0.08
($0.93)
$0.28
(0.04)
0.03
(0.01)
0.02
(0.14)
(0.07)
(0.04)
0.03
(0.01)
(0.05)
0.08
(0.03)
0.06
(0.14)
(0.07)
(0.02)
0.22
(0.05)
0.08
(0.03)
$0.06
($0.88)
0.14
($1.08)
$2.65
$0.28
$2.78
Earnings per share attributable to equity shareholders in 2014
$1.57
$0.06
$1.90
$0.28
* Items are excluded from definition of adjusted earnings per share. Refer to Section 12 for a reconciliation of earnings per share to adjusted
earnings per share
3. Operating Results
A discussion of Torstar’s operating results for the three and nine months ended September 30, 2014 and 2013.
Unless otherwise noted, the following is a discussion of Torstar’s third quarter and year to date 2014 operating
results relative to the comparable periods in 2013. Effective the third quarter of 2014, Torstar has disaggregated
the former Media Segment and has now disclosed Metroland Media Group and Star Media Group as separate
reportable operating segments for segment reporting purposes. All comparative information has been restated to
reflect this change.
Overall Performance
Torstar has two reportable operating segments to which Corporate costs have not been allocated. Management
of the segments are accountable for the revenues, adjusted EBITDA, operating earnings and operating profit of
the segments which include their proportionately consolidated share of joint venture operations.
When reported in the consolidated statement of income, joint ventures are accounted for using the equity method
and accordingly the net income of joint ventures is included in “Income (loss) from joint ventures”. The following
tables set out the segmented results which include Torstar’s proportionate share of joint venture results for the
three and nine months ended September 30, 2014 and September 30, 2013 and provides a reconciliation to the
consolidated statement of income.
Three months ended September 30, 2014
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
MMG*
$115,070
(53,722)
(48,345)
13,003
(3,512)
9,491
SMG*
$96,132
(35,424)
(52,382)
8,326
(4,300)
4,026
(1,475)
(2,432)
(97,348)
($95,754)
$8,016
($3,537)
(1,815)
(5,352)
(14)
(5,366)
Total
Segmented*
$211,202
(92,683)
(102,542)
15,977
(7,826)
8,151
Adjustments
&
Eliminations
for Joint
Ventures
($11,277)
4,547
4,568
(2,162)
677
(1,485)
Total Per
Consolidated
Statement of
Income
$199,925
(88,136)
(97,974)
13,815
(7,149)
6,666
($5,366)
(3,907)
(97,348)
($93,104)
1
15,000
$13,516
(3,906)
(82,348)
($79,588)
Corporate
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
Three months ended September 30, 2013
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
MMG*
$119,601
(56,105)
(48,943)
14,553
(3,964)
10,589
SMG*
$107,782
(40,531)
(58,327)
8,924
(4,870)
4,054
(2,648)
(12,458)
($4,517)
(2,858)
(73,000)
($71,804)
($2,122)
(689)
(2,811)
(10)
(2,821)
Total
Segmented*
$227,383
(98,758)
(107,959)
20,666
(8,844)
11,822
Adjustments
&
Eliminations
for Joint
Ventures
($11,705)
5,017
4,755
(1,933)
681
(1,252)
Total Per
Consolidated
Statement of
Income
$215,678
(93,741)
(103,204)
18,733
(8,163)
10,570
($2,821)
(5,506)
(85,458)
($79,142)
237
9,000
$7,985
(5,269)
(76,458)
($71,157)
($8,340)
(3,309)
(11,649)
(45)
(11,694)
Total
Segmented*
$659,751
(283,616)
(313,098)
63,037
(25,651)
37,386
Adjustments
&
Eliminations
for Joint
Ventures
($35,051)
13,871
13,759
(7,421)
2,058
(5,363)
Total Per
Consolidated
Statement of
Income
$624,700
(269,745)
(299,339)
55,616
(23,593)
32,023
($11,694)
(11,828)
(97,872)
($72,314)
52
15,000
$9,689
(11,776)
(82,872)
($62,625)
Adjustments
&
Eliminations
for Joint
Ventures
($36,240)
15,457
14,229
(6,554)
2,043
(4,511)
Total Per
Consolidated
Statement of
Income
$676,358
(292,871)
(324,543)
58,944
(24,049)
34,895
270
9,000
$4,759
(17,047)
(76,828)
($58,980)
Corporate
Nine months ended September 30, 2014
(in $000’s)
Operating revenue
Salaries and benefits
Other operating costs
Adjusted EBITDA**
Amortization & depreciation
Operating earnings**
Restructuring and other
charges
Impairment of assets
Operating profit (loss)**
MMG*
$353,437
(162,344)
(145,038)
46,055
(11,128)
34,927
SMG*
$306,314
(112,932)
(164,751)
28,631
(14,478)
14,153
(6,386)
(266)
$28,275
(5,442)
(97,606)
($88,895)
Corporate
Nine months ended September 30, 2013
Total
(in $000’s)
MMG*
SMG*
Corporate
Segmented*
Operating revenue
$375,244
$337,354
$712,598
Salaries and benefits
(171,681)
(128,547)
($8,100)
(308,328)
Other operating costs
(156,185)
(180,400)
(2,187)
(338,772)
Adjusted EBITDA**
47,378
28,407
(10,287)
65,498
Amortization & depreciation
(11,532)
(14,530)
(30)
(26,092)
Operating earnings**
35,846
13,877
(10,317)
39,406
Restructuring and other
charges
(7,280)
(10,037)
(17,317)
Impairment of assets
(12,828)
(73,000)
(85,828)
Operating profit (loss)**
$15,738
($69,160)
($10,317)
($63,739)
* Includes proportionately consolidated share of joint venture operations
**These are Non-IFRS or additional IFRS measures, refer to Section 12 of this MD&A
Revenue
Segmented revenue was down $16.2 million or 7.1% in the third quarter of 2014, inclusive of an increase in
product sales at Metroland Media Group. Year to date, segmented revenue was down $52.8 million or 7.4%
inclusive of a $4.8 million decrease in product sales and TMGTV revenue at Metroland Media Group. Segmented
revenues, excluding the impact of TMGTV revenue and product sales at Metroland Media Group, were down
$16.9 million or 7.4% in the third quarter and down $48.0 million or 6.7% in the first nine months of 2014. These
declines were primarily the result of lower print advertising revenues which continued to be under pressure during
the third quarter and first nine months of 2014. However, multi-platform subscriber revenues and flyer distribution
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
revenues, which account for approximately 35% of segmented revenue in the third quarter of 2014 were relatively
stable in the third quarter and first nine months of 2014. At Metroland Media Group, print advertising revenues
declined during the third quarter of 2014, in both the community and daily newspapers. However, similar to the
second quarter of 2014, the rate of decline slowed relative to earlier in the year with the trend improving as the
third quarter progressed until the latter part of September. At the Star Media Group, revenue declines in the third
quarter reflected the closure of print operations in three of Metro’s smaller markets. Star Media Group revenues
for the first nine months of 2014, were also believed to be negatively impacted by the transition of advertising
sales for the Toronto Star to Metro which occurred in the first quarter of 2014.
Digital revenue trends continued to improve in the third quarter with digital revenue 4.4% above the prior year.
On a year to date basis, digital revenue was up 0.6% primarily as a result of revenue growth in eyeReturn
Marketing, thestar.com, the Metroland community websites and save.ca, partially offset by lower revenues at
WagJag and Workopolis. Adjusting for the declines in WagJag and Workopolis revenues, digital revenues would
have increased 8.4% in the third quarter and 5.6% in the first nine months of 2014. Digital revenues were 13.2%
of total segment revenues in the third quarter and 12.5% in the first nine months of 2014 compared to 11.8% in
the third quarter and 11.5% in the first nine months of 2013.
Adjusted EBITDA
Segmented adjusted EBITDA was down $4.7 million or 22.7% in the third quarter of 2014 reflecting a combined
$2.2 million decrease in adjusted EBITDA from the Metroland Media Group and Star Media Group as well as an
increase of $2.5 million in Corporate expenses. During the third quarter, declines in print advertising revenues
and general wage increases exceeded the impact of cost reductions. Overall costs at Metroland Media Group and
Star Media Group decreased by $14.0 million in the third quarter of 2014 including $7.7 million of savings from
restructuring initiatives, as well as lower pension costs and the impact of lower newsprint price and consumption
largely due to print advertising revenue declines.
Year to date, segmented adjusted EBITDA was down $2.5 million or 3.8% reflecting a combined $1.1 million
decrease in adjusted EBITDA from Metroland Media Group and Star Media Group as well as a $1.4 million
increase in Corporate expenses. During the first nine months of 2014, declines in print advertising revenues and
general wage increases exceeded the impact of cost reductions. Overall costs at Metroland Media Group and
Star Media Group decreased by $51.8 million in the first nine months of 2014 including $23.5 million of savings
from restructuring initiatives, as well as lower pension costs, decreased product sales costs and costs at TMGTV
and the impact of lower newsprint price and consumption.
Profitability in the digital properties continued to improve in the third quarter and in the first nine months of 2014
across Metroland Media Group and Star Media Group.
The increase in Corporate expenses in the third quarter of 2014 was the result of consulting costs, the return to a
normal level of short-term incentive accruals relative to a reduction in the third quarter of 2013 as well as
unfavourable mark-to-market movements in share-based hedging instruments. The increase in Corporate
expenses in the first nine months of 2014 reflects consulting costs and a return to a normal level of short-term
incentive accruals relative to a reduction in the third quarter of 2013, partially offset by favourable mark-to-market
movements in share-based hedging instruments relative to the comparable period in 2013.
Operating earnings
Segmented operating earnings were down $3.7 million in the third quarter of 2014. Year to date, total segmented
operating earnings were down $2.0 million in 2014.
Restructuring and other charges
Segmented restructuring and other charges of $3.9 million were recorded in the third quarter of 2014. Year to
date, segmented restructuring and other charges were $11.8 million. Segmented restructuring and other charges
were $5.5 million in the third quarter and $17.3 million in the first nine months of 2013.
The restructuring initiatives undertaken through the first nine months of 2014 are expected to result in annualized
net labour savings of approximately $15.3 million and a reduction of approximately 195 positions. Of the
annualized savings, $8.4 million are expected to be realized in 2014 (including $4.9 million in the first nine
months) and $6.9 million in 2015.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
Impairment of assets
During the third quarter of 2014, Torstar incurred charges related to asset impairment of property, plant and
equipment, goodwill and investments in joint ventures totalling $97.3 million. Year to date, these charges totalled
$97.9 million and also included $0.2 million related to impairment of intangible assets. During the third quarter of
2013, Torstar incurred charges related to asset impairment totalling $85.5 million related to certain property, plant
and equipment, intangible assets, goodwill and investments in joint ventures. During the first nine months of 2013,
these charges totalled $85.8 million. These charges have no impact on cash flows.
During the third quarters of 2014 and 2013, Torstar conducted impairment tests on the carrying value of intangible
assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. In carrying out this
testing during the third quarter of 2014, it was determined that the carrying amount of goodwill in the Star Media
Group of CGUs exceeded the value in use and Torstar recorded an impairment charge of $82.0 million for
goodwill in the Star Media Group of CGUs. This impairment was the result of lower forecasted revenues
reflecting continued shifts in spending by advertisers. Torstar also recorded a $15.0 million impairment charge in
respect of its joint venture investment in Workopolis during the third quarter of 2014 resulting from lower
forecasted revenues attributable to an increase in competition in the online recruitment and job search markets
and prevailing economic conditions.
In the third quarter of 2013, it was determined that the carrying amount of certain intangible assets within the
Metroland Media Group CGU and goodwill in the Star Media Group of CGUs exceeded the value in use.
Accordingly, Torstar recorded impairment of $12.5 million for intangible assets in the Metroland Media Group
CGU and $64.0 million for goodwill in the Star Media Group of CGUs. These impairments were also the result of
lower forecasted revenues reflecting shifts in spending by advertisers. Certain of the impairment charges related
to intangible assets within the Metroland Media Group CGU were also the result of internal reorganization,
realignment and integration of certain digital businesses which occurred during the third quarter of 2013. As a
result of factors noted above, Torstar also recorded a $9.0 million impairment charge in respect of its Sing Tao
Daily joint venture investment in the third quarter of 2013.
Operating profit (loss)
Segmented operating loss was $93.1 million in the third quarter of 2014 compared to a loss of $79.1 million in the
third quarter of 2013. Year to date, segmented operating loss was $72.3 million in 2014, compared to a loss of
$63.7 million in the first nine months of 2013.
Interest and financing costs
Interest and financing costs were $0.6 million in the third quarter of 2014 down $3.4 million from the third quarter
of 2013. Year to date, interest and financing costs were $5.0 million down $7.1 million from the first nine months
of 2013. The lower interest and financing costs in 2014 reflect a combination of lower financing costs related to
employee benefit plans as well as lower interest on debt as all amounts outstanding under previous debt facilities
were paid off during the third quarter of 2014 using proceeds from the sale of Harlequin.
Foreign exchange
Non-cash foreign exchange losses were $7.2 million in the third quarter of 2014 and $7.9 million year to date.
This compares to a gain of $0.3 million and a loss of $0.6 million in the comparable periods of 2013.
In order to offset the foreign exchange rate risk from Harlequin’s net US dollar denominated assets, Torstar
historically maintained a certain level of US dollar denominated debt and had previously designated $80.0 million
of US debt as a hedge of its US dollar denominated net investment in Harlequin. Upon the sale of Harlequin and
subsequent repayment of debt, Torstar realized $5.8 million of accumulated foreign exchange losses related to
extinguishing this hedge.
The balance of the foreign exchange losses for the third quarter of 2014 relate to the weakening of the Canadian
dollar relative to the US dollar prior to the closing of the sale of Harlequin and subsequent repayment of US dollar
denominated debt.
Income (loss) from joint ventures
Loss from joint ventures was $13.7 million in the third quarter of 2014 compared to $7.9 million in the third quarter
of 2013. Year to date, loss from joint ventures was $10.6 million in 2014, compared to $5.3 million in the first nine
months of 2013. These losses primarily reflect impairment charges of $15.0 million recorded in the third quarter of
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TORSTAR - Management’s Discussion and Analysis
2014 related to Torstar’s joint venture investment in Workopolis and $9.0 million recorded in the third quarter of
2013 related to Torstar’s joint venture investment in Sing Tao Daily, as discussed above.
Income (loss) of associated businesses
Loss of associated businesses was $0.3 million in the third quarter of 2014 compared to income of $1.2 million in
the third quarter of 2013. The third quarter of 2014 includes income of $1.1 million from Black Press and income
of $0.1 million from Tuango, offset by a loss of $0.8 million from Blue Ant and a loss of $0.7 million from Shop.ca.
The third quarter of 2013 included income of $1.6 million from Black Press and income of $0.3 million from
Tuango, partially offset by a loss of $0.7 million from Shop.ca.
The year to date loss from associated businesses was $0.9 million in 2014 compared to income of $2.9 million in
2013. The 2014 year to date loss primarily included income of $1.8 million from Black Press and income of $0.4
million from Tuango offset by losses of $2.1 million from Shop.ca and $1.0 million from Blue Ant. The 2013 year
to date income primarily included income of $4.2 million from Black Press and income of $0.3 million from
Tuango, partially offset by losses of $1.6 million from Shop.ca.
Subsequent to the end of the third quarter, Torstar sold its interest in Tuango for proceeds of $7.6 million and an
estimated gain of $4.2 million.
Other income (expense)
Other income was $0.1 million in the third quarter of 2014 compared to other expense of $0.1 million in the third
quarter of 2013. Other expense was $1.5 million for the first nine months of 2014 compared to other income of
$0.4 million in the first nine months of 2013.
Other income (expense) for 2014 includes a $2.8 million charge related to the de-recognition of interest rate
swaps which were previously designated as cash flow hedges. These swaps were no longer designated as
effective hedges on June 30, 2014 in connection with the sale of Harlequin and the net fair value of negative $2.7
million was reclassified into other expense in the second quarter. These swaps were extinguished in the third
quarter at an incremental cost of approximately $0.1 million.
In addition, in March 2014, Torstar and Metro International S.A. (“MISA”) agreed to an early settlement of the
existing put and call arrangements between them with regards to the remaining 10% interest in Metro English
Canada (previously owned by MISA). The agreed upon price for the early settlement was $10.1 million. The
existing put and call arrangements were both exercisable at the same fixed price of $11.2 million beginning in
October 2014. Accordingly, Torstar recorded a gain of $1.1 million on the transaction in the first quarter of 2014.
Other income (expense) for the third quarter and first nine months of 2013 primarily reflect reductions in
contingent consideration related to acquisitions prior to 2013 and investment write-downs.
Income and other taxes
Torstar recorded tax recoveries of $14.4 million and $18.0 million in the third quarter and first nine months of 2014
respectively, compared to a tax recovery of $1.5 million in the third quarter of 2013 and a provision of $0.3 million
in the first nine months of 2013.
The tax recoveries in the third quarter of 2014 are primarily attributable to a deferred tax benefit associated with
the recognition of certain previously unrecognized loss carryforwards and certain tax and accounting base
differences in connection with the sale of Harlequin. The tax recoveries for the first nine months of 2014 also
include the recognition of a deferred tax benefit associated with the donation of the Toronto Star’s photo archive
to the Toronto Public Library during the second quarter of 2014.
Net income (loss) from continuing operations
Torstar reported a net loss from continuing operations of $87.0 million or $1.08 per share in the third quarter of
2014, an increase of $6.8 million or $0.07 per share from a loss of $80.2 million or $1.01 per share in the third
quarter of 2013. Adjusted earnings per share was $0.06 in the third quarter of 2014, down $0.02 per share from
$0.08 per share in the third quarter of 2013.
Torstar reported a net loss from continuing operations of $70.5 million or $0.88 per share in the first nine months
of 2014, a decrease of $3.4 million or $0.05 per share from a loss of $73.9 million or $0.93 per share in the first
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
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TORSTAR - Management’s Discussion and Analysis
nine months of 2013. Adjusted earnings per share was $0.28 in the first nine months of 2014, consistent with the
first nine months of 2013.
The average number of Class A and Class B non-voting shares outstanding was 80.1 million in the third quarter of
2014 and 80.0 million year to date. In 2013, the average number of Class A and Class B non-voting shares
outstanding was 79.9 million in the third quarter and 79.8 million year to date.
Gain on sale and discontinued operations
On August 1, 2014 Torstar sold all of the shares of Harlequin to a division of HarperCollins Publishers L.L.C., a
subsidiary of News Corp., for a purchase price of $455.0 million. Net accounting proceeds were approximately
$442.2 million ($22.8 million of which is being held in escrow) and reflect the purchase price plus adjustments for
working capital and other related items. The sale of Harlequin resulted in a pre-tax accounting gain of $224.6
million, net of transaction costs. Cash taxes payable on the gain are currently expected to be approximately $4.5
million.
Effective the second quarter of 2014, Harlequin was reclassified as Assets Held for Sale and Discontinued
Operations. Upon the closing of the sale in the third quarter of 2014, the net assets of Harlequin have been derecognized from Assets Held for Sale.
Discontinued operations for the third quarter and first nine months of 2014 include Harlequin’s results through to
July 31, 2014. Revenues from discontinued operations were $30.2 million in the third quarter and $213.2 million
in the nine months ended September 30, 2014. Revenues from discontinued operations were $94.7 million in the
third quarter of 2013 and $284.1 million in the nine months ended September 30, 2013.
Net Income from discontinued operations and gain on sale was $212.3 million in the third quarter of 2014 and
$222.7 million for the nine months ended September 30, 2014 and include a pre-tax gain of $224.6 million related
to the sale of Harlequin. Net income from discontinued operations was $9.4 million in the third quarter of 2013 and
$25.3 million in the first nine months of 2013.
Refer to Note 20 of Torstar’s 2014 Third Quarter Condensed Consolidated Financial Statements for further
information.
Net income (loss) attributable to equity shareholders
Torstar reported net income attributable to equity shareholders of $125.3 million or $1.57 per share in the third
quarter of 2014 up $196.1 million or $2.46 per share from a loss of $70.8 million or $0.89 per share in the third
quarter of 2013.
Torstar reported net income attributable to equity shareholders of $152.1 million or $1.90 per share in the first
nine months of 2014 up $200.7 million or $2.51 per share from a loss of $48.6 million or $0.61 per share in the
first nine months of 2013.
Segment Operating Results – Metroland Media Group
Metroland Media Group revenues for the third quarter were down $4.5 million or 3.8%, inclusive of an increase in
product sales. Year to date, MMG revenues were down $21.8 million or 5.8% including a $4.8 million decline in
product sales and TMGTV revenues. Revenues, excluding the impact of TMGTV revenue and product sales at
Metroland Media Group, were down $5.3 million or 4.4% in the third quarter and down $17.0 million or 4.5% in the
first nine months of 2014. The revenue decreases primarily reflect print advertising revenue declines at the
newspapers of 8.9% for the third quarter and 9.6% for the first nine months of 2014. While print advertising
revenues declined during the third quarter of 2014, similar to the second quarter of 2014, the rate of decline
slowed relative to earlier in the year with the trend improving as the quarter progressed until the latter part of
September. Flyer distribution revenues were down a modest 2.6% and 0.4% in the third quarter and first nine
months of 2014 respectively.
Metroland Media Group digital revenue increased 3.0% in the third quarter reflecting growth in the community
websites, save.ca and other properties partially offset by a decline at WagJag. For the nine months ended
September 30, 2014, digital revenue was down 2.2% primarily as a result of lower revenues at WagJag and
partially offset by growth in other digital properties including the community websites and save.ca. Adjusting for
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TORSTAR - Management’s Discussion and Analysis
the declines in WagJag revenue, Metroland Media Group digital revenues would have increased 9.2% in the third
quarter and 5.6% in the first nine months of 2014.
Metroland Media Group adjusted EBITDA was down $1.6 million in the third quarter and $1.3 million year to date
as the negative impact of revenue declines, investments in digital initiatives and general wage increases more
than offset the positive impact of cost savings from restructuring, improved digital revenues, decreased costs at
TMGTV and product sales, lower pension costs, and lower newsprint consumption and price. Metroland Media
Group costs decreased by $3.0 million in the third quarter and $20.5 million year to date, which included $4.2
million and $12.8 million of savings from restructuring initiatives in the respective periods.
Operating earnings were $9.5 million in the third quarter of 2014, and $34.9 million in the first nine months of
2014, down $1.1 million from the third quarter of 2013 and down $0.9 million from the first nine months of 2013.
Segment Operating Results – Star Media Group
Star Media Group revenues were down $11.7 million or 10.8% in the third quarter with print advertising revenues
down 20.8% at the Toronto Star, partially offset by growth in digital advertising revenues and multi-platform
subscriber revenues. At the Metro newspapers, third quarter revenues were down relative to the prior year
reflecting the closure of print operations in three of Metro’s smaller markets early in the third quarter combined
with lower advertising revenues, which on a geographic basis were mostly concentrated in Metro’s Ontario
publications.
The revenue trends for the first nine months of 2014 were similar to those experienced in the third quarter. Year
to date, Star Media Group revenues were down $31.0 million or 9.2% with print advertising revenues down 19.7%
at the Toronto Star partially offset by growth in digital advertising and multi-platform subscriber revenue. At the
Metro newspapers, consistent with the third quarter experience, revenues decreased in the first nine months of
2014, reflecting the closure of print operations in three smaller markets combined with print advertising revenue
declines largely the result of declines in Metro’s Ontario publications. Star Media Group revenues for the first nine
months of 2014 were also believed to be negatively impacted by the transition of advertising sales for the Toronto
Star to Metro which occurred in the first quarter of 2014.
Digital revenue from properties in Star Media Group were up 5.1% in the third quarter of 2014 and up 2.2% in the
first nine months of 2014 reflecting revenue growth in eyeReturn Marketing and thestar.com, partially offset by
decreased revenue from Workopolis. Profitability of Star Media Group digital properties continued to improve in
the third quarter and first nine months of 2014.
Star Media Group adjusted EBITDA was down $0.6 million in the third quarter and up $0.2 million in the first nine
months of 2014 as lower revenues were partially offset by cost reductions of $11.0 million in the third quarter and
$31.3 million year to date. These cost reductions included $3.5 million of cost savings from restructuring
initiatives in the third quarter ($10.7 million year to date), lower pension costs, and the impact of lower newsprint
price and consumption. Operating earnings were $4.0 million in the third quarter of 2014, consistent with the third
quarter of 2013. For the year to date, Star Media Group operating earnings were $14.2 million up $0.3 million in
the first nine months of 2014.
4. Outlook
The outlook for Torstar’s business in the balance of 2014
Through the third quarter and first nine months of 2014, Metroland Media Group and Star Media Group continued
to face challenges as a result of continued shifts in spending by advertisers. Indications are that the revenue
trends experienced at Star Media Group and Metroland Media Group in the second and third quarters of 2014
have continued early into the fourth quarter with print advertising revenues likely to continue to be under pressure.
However, multi-platform subscriber revenues and flyer distribution revenues are expected to be relatively stable in
the balance of the year. Across Torstar, cost reduction has been and is expected to remain an important area of
focus. Metroland Media Group and Star Media Group are expected to realize $5.9 million of savings in the
balance of 2014 from restructuring initiatives undertaken through the end of the third quarter of 2014. However, at
Star Media Group year over year earnings in the fourth quarter are expected to be negatively impacted by the
timing of digital investment spending and the lapping of certain revenue and cost initiatives implemented in the
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TORSTAR - Management’s Discussion and Analysis
second half of 2013. Full year net investment spending associated with growth initiatives in 2014 is currently
expected to be somewhat lower than 2013 levels.
From a cash flow perspective, in 2014, Torstar anticipates spending approximately $37 million for the required
funding of its registered defined benefit pension plans. Looking forward, based on the most recent actuarial
valuations, Torstar anticipates that the funding obligation for its registered defined benefit pension plans for 2015
will be in the order of $25 million.
Capital expenditures in 2014 are currently anticipated to be approximately $21 million.
Lastly as part of the Toronto Star’s multi-platform evolution, the Star Media Group has reached agreement in
principle with La Presse to develop a new tablet product for the Toronto Star. The parties are working toward
completion of definitive documents and expect to begin to development in the fourth quarter, with an anticipated
launch in the fall of 2015. This innovative new tablet product will be based on technology, research, and
experience associated with the new La Presse+ product launched in 2013. The project is expected to require
additional capital spending of approximately $1 million to $2 million in the fourth quarter of 2014 and an additional
$10 million to $12 million in 2015. There are no significant operating expenses anticipated in 2014 and estimates
of the potential impact on 2015 operating results are still in development. The Toronto Star will seek to expand its
audiences and increase engagement through this and other projects and it anticipates eliminating the paywall in
2015 with some potential impact on circulation revenue.
5. Liquidity and Capital Resources
A discussion of Torstar’s cash flow, liquidity, credit facilities and other disclosures
Torstar uses the cash generated by its operations to fund capital expenditures, distributions to shareholders,
acquisitions and debt repayment. Historically long-term debt has been used to supplement funds from operations
as required, generally for capital expenditures or acquisitions.
In connection with the closing of the sale of Harlequin, all amounts outstanding under previous debt facilities were
paid using proceeds from the sale. It is expected that future cash flows from operating activities, combined with
existing cash and cash equivalents, will be adequate to cover forecasted financing requirements in the
foreseeable future.
In the third quarter of 2014, $5.7 million of cash was used in operating activities from continuing operations,
$411.4 million was generated by investing activities for continuing operations and $193.9 million was used in
financing activities from continuing operations. Cash and cash equivalents from total operations increased by
$207.8 million in the quarter from $24.8 million to $232.6 million. Total cash and cash equivalents and restricted
cash was $277.3 million at the end of the third quarter.
Year to date, $25.0 million of cash was generated by operating activities from continuing operations, $392.7
million was provided by investing activities from continuing operations and $209.9 million was used for financing
activities from continuing operations. Cash and cash equivalents from total operations increased by $215.2
million in the first nine months of 2014 from $17.4 million to $232.6 million.
Operating Activities
Operating activities from continuing operations used cash of $5.7 million in the third quarter of 2014 reflecting; (i)
an increase of $22.0 million in restricted cash held as collateral and (ii) funding $10.8 million of contributions to
Torstar’s registered defined benefit pension plans; partially offset by (iii) an $11.2 million decrease in non-cash
working capital. The decrease in non-cash working capital was attributable to decreased accounts receivable
partially offset by decreased accounts payable and accrued liabilities, both resulting from seasonality. During the
third quarter of 2013, cash of $8.6 million was provided by operating activities from continuing operations after
funding $15.1 million of contributions to the registered defined benefit pension plans partially offset by a $5.0
million decrease in non-cash working capital.
Year to date, operating activities from continuing operations provided cash of $25.0 million in 2014 reflecting; (i)
an increase of $22.0 million in restricted cash held as collateral and (ii) funding $28.6 million of contributions to
Torstar’s registered defined benefit pension plans; partially offset by (iii) a $24.4 million decrease in non-cash
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TORSTAR - Management’s Discussion and Analysis
working capital. During the first nine months of 2013, cash of $3.6 million was provided by operating activities
from continuing operations after funding $44.2 million of contributions to the registered defined benefit pension
plans and a $6.6 million increase in non-cash working capital.
Investing Activities
During the third quarter of 2014, $411.4 million was provided by investing activities from continuing operations.
This included $442.2 million in net proceeds received on the sale of Harlequin partially offset by a $22.8 million
increase in restricted cash reflecting funds held in escrow (related to the Harlequin sale) and $8.0 million for
additions to property, plant and equipment and intangible assets. During the third quarter of 2013, $7.2 million
was used in investing activities from continuing operations including $4.9 million for additions to property, plant
and equipment and $2.5 million of additional investment in associated businesses (Blue Ant).
During the first nine months of 2014, $392.7 million was provided by investing activities from continuing
operations. This included $442.2 million in net proceeds received on the sale of Harlequin partially offset by a
$22.8 million increase in restricted cash reflecting funds held in escrow and $15.0 million for additions to property,
plant and equipment and intangible assets, $1.4 million for additional investments in associated businesses and
$10.8 million for acquisitions and investments. Of the $10.8 million of cash used for acquisitions and investments,
$10.1 million was used for the March 31, 2014 purchase of the remaining 10% of Metro English Canada. During
the first nine months of 2013, $17.5 million was used in investing activities from continuing operations. This
included $12.4 million for additions to property, plant and equipment and intangible assets, $3.0 million of
additional investments in associated businesses and $2.4 million for acquisitions and investments.
Financing Activities
Net cash of $193.9 million was used in financing activities from continuing operations in the third quarter of 2014
including $183.9 million for the payment of debt and $10.4 million for the payment of dividends. In the third
quarter of 2013, $8.3 million of cash was used in financing activities from continuing operations including $1.7
million of proceeds from the issuance of long-term debt partially offset by $10.4 million for the payment of
dividends.
Year to date, net cash of $209.9 million was used in financing activities from continuing operations with $179.7
million used for the net payment of debt and $31.1 million used for the payment of dividends. In the first nine
months of 2013, net cash of $17.7 million was used in financing activities from continuing operations with $31.1
million used for the payment of dividends partially offset by $13.4 million provided from the issuance of long-term
debt.
Contractual Obligations
As at September 30, 2014, Torstar has the following significant contractual obligations:
1
(in $000’s )
Nature of the Obligation
Office leases
Services
Total
Total
$74,857
6,634
$81,491
Balance of
2014
$3,293
256
$3,549
2015–2016
$26,880
3,734
$30,614
2017–2018
$24,555
1,564
$26,119
2019 +
$20,129
1,080
$21,209
Outstanding Share and Share Option Information
As at September 30, 2014, Torstar had 9,851,964 Class A voting shares and 70,327,355 Class B non-voting
shares outstanding. More information on Torstar’s share capital is provided in Note 16 of the condensed
consolidated financial statements.
As at September 30, 2014, Torstar had 4,849,169 options to purchase Class B non-voting shares outstanding to
executives. More information on Torstar’s share option plan is provided in Note 17 of the condensed consolidated
financial statements.
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TORSTAR - Management’s Discussion and Analysis
6. Financial Instruments
A summary of Torstar’s financial instruments
Foreign Exchange
During the first six months of 2014, Torstar realized a loss of $1.0 million on forward foreign exchange contracts
to sell $20.0 million U.S. dollars at an average rate of $1.05. Historically, these forward foreign exchange
contracts were designated as revenue hedges for accounting purposes with any resulting gains or losses being
recognized in Book Publishing revenues as realized. With the anticipated closing of the sale of Harlequin, which
previously represented the Book Publishing Segment, Harlequin’s results were reclassified as discontinued
operations effective the second quarter of 2014. In addition, effective the second quarter of 2014, Torstar
derecognized the outstanding contracts as hedges and the net fair value of negative $0.5 million was reclassified
into income from discontinued operations. In anticipation of the closing of the Harlequin sale, in July, 2014,
Torstar terminated all outstanding forward foreign exchange contracts for a payment of $0.4 million, recording an
incremental gain of $0.1 million in the third quarter.
During the third quarter of 2013, Torstar realized a loss of $0.2 million on forward foreign exchange contracts to
sell $12.8 million U.S. dollars at an average rate of $1.02. During the first nine months of 2013, Torstar realized a
loss of $0.1 million on forward foreign exchange contracts to sell $37.2 million U.S. dollars at an average rate of
$1.02.
7. Employee Future Benefit Obligations
A summary of Torstar’s employee future benefit obligations
During the third quarter of 2014, Torstar recorded, through other comprehensive income, an actuarial loss of
$21.9 million ($16.3 million after tax) related to the defined benefit pension and the post employment benefit
plans. Year to date, the actuarial losses were $60.2 million ($45.0 million after tax). These losses were estimated
by management and largely reflect an increase in employee future benefit liabilities from a decrease in long-term
interest rates.
Actuarial reports for the most significant group of Torstar’s registered defined benefit pension plans (in terms of
assets and obligations and excluding those related to Harlequin) were completed as of December 31, 2013.
Based on these valuations, Torstar had an estimated solvency deficit of $51.7 million. Based on the December
31, 2013 solvency report, a 100 basis point change in the discount rate used to calculate solvency liabilities would
result in a change in liabilities of approximately $129 million. Given the change in the discount rate, combined
with asset returns and contributions to the plans from January 1, 2014 through to September 30, 2014, Torstar
estimates that the solvency deficit for these plans at September 30, 2014 was approximately $98 million.
From a cash flow perspective, in 2014, Torstar anticipates spending approximately $37 million for the required
funding of its registered defined benefit pension plans, exclusive of those related to Harlequin. Looking forward,
based on the most recent actuarial valuations, Torstar anticipates that the funding obligation for its registered
defined benefit pension plans for 2015 will be in the order of $25 million.
8. Critical Accounting Policies and Estimates
A description of accounting estimates that are critical to determining Torstar’s financial results, and changes to accounting
policies
Accounting Policies
The accounting policies adopted in the preparation of the condensed consolidated financial statements are
consistent with those followed in the preparation of the annual consolidated financial statements for the year
ended December 31, 2013, except for the addition of the policy below regarding Assets Held for Sale and
Discontinued Operations and the adoption of new standards and interpretations effective January 1, 2014.
Assets Held for Sale and Discontinued Operations - Non-current assets and disposal groups are classified 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
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TORSTAR - Management’s Discussion and Analysis
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.
Effective January 1, 2014, Torstar applied IAS 32 Financial Instruments: Presentation, IAS 36 Impairment of
Assets and IFRIC 21 Levies for the first time.
IAS 32 Financial Instruments: Presentation - In December 2011, the IASB amended IAS 32 to clarify certain
requirements for offsetting financial assets and liabilities. The amendment addresses the meaning and application
of the concepts of legally enforceable right of set-off and simultaneous realization and settlement. Application of
this amendment affected presentation and disclosures but did not have an impact on financial results.
IAS 36 Impairment of Assets - In May 2013, the IASB amended IAS 36 to reduce the circumstances in which the
recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required,
and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or
reversals) where the recoverable amount (based on fair value less costs of disposal) is determined using a
present value technique. The application of this amendment did not affect disclosures nor did it impact the
financial results in 2014.
IFRIC 21 Levies - IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a
government, identifying the obligating event as the activity that triggers the payment of the levy in accordance with
the relevant legislation. If an obligation is triggered by reaching a minimum threshold, the liability is recognized
when the minimum threshold is reached but if the obligating event occurs over a period of time, the liability is
recognized progressively. The adoption of this guidance did not have an impact on financial results.
Accounting Estimates
The condensed consolidated financial statements are prepared in accordance with IFRS, which require Torstar to
make estimates and assumptions that affect the amounts reported in the condensed consolidated financial
statements. During the third quarter of 2014, Torstar updated its estimates of estimated future cash flows and
discount rates in connection with the impairment test of goodwill, property plant and equipment and intangible
assets. The change in estimated future cash flows primarily reflected lower forecasted revenues reflecting shifts
in spending by advertisers and changes in the online recruiting and job search markets. The updated discount
rates primarily reflected movements in the long-term interest rate as well as changes in estimated future cash
flows. There have been no other significant changes in Torstar's critical accounting estimates from what was
previously disclosed in the Annual MD&A.
9. Recent Accounting Pronouncements
A discussion of recent IFRS developments that will affect Torstar
The International Accounting Standards Board (“IASB”) continues to issue new and revised IFRS. A listing of the
issued but not yet effective changes in IFRS was included in Note 2(t) in Torstar’s December 31, 2013
consolidated financial statements and in Torstar’s Condensed Consolidated Financial Statements for the three
and nine months ended September 30, 2014.
10. Controls and Procedures
A discussion of Torstar’s disclosure controls and internal controls over financial reporting
There have been no changes in Torstar’s internal controls over financial reporting that occurred during the interim
period ended September 30, 2014, that have materially affected, or are reasonably likely to materially affect,
Torstar’s internal controls over financial reporting.
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 original Committee of Sponsoring
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
16
TORSTAR - Management’s Discussion and Analysis
Organizations of the Treadway Commission (COSO) framework, and based on that assessment concluded that
internal controls over financial reporting were effective as at September 30, 2014.
11. Summary of Quarterly Results
A summary view of Torstar’s quarterly financial performance
The following table presents selected financial information for each of the eight most recently completed quarters:
(in $000’s - except
per share amounts)
Revenue*
Net Income (loss) from
continuing operations
Per Class A voting
and Class B nonvoting share Basic and Diluted
Net Income
attributable to equity
shareholders
Sept 30,
2014
$199,925
June 30,
2014
$225,591
March 31,
2014
$199,184
($86,998)
$18,104
($1,591)
($1.08)
$125,343
$0.23
$19,682
($0.02)
$7,104
Quarter Ended
Dec 31,
Sept 30,
2013
2013
$259,415
$215,678
$15,841
$0.20
$20,637
($80,220)
June 30,
2013
$243,558
March 31,
2013
$217,122
Dec 31,
2012
$278,402
$12,552
($6,219)
$10,711
$0.16
($0.08)
$0.13
($1.01)
($70,800)
$18,006
$4,173
$21,079
Per Class A voting
and Class B nonvoting share
Basic and Diluted
$1.57
$0.25
$0.09
$0.26
($0.89)
$0.23
$0.05
$0.26
Basic and Diluted
$1.56
$0.25
$0.09
$0.26
($0.89)
$0.23
$0.05
$0.26
*These figures have been restated for the classification of Harlequin (Book Publishing Segment) as Held for Sale/Discontinued Operations.
Refer to Note 20 of Torstar’s 2014 third quarter Condensed Consolidated Financial Statements for further information.
The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in Star Media
Group and Metroland Media Group. The second and fourth quarters are generally the strongest with the first and
third quarter being the softest.
Restructuring and other charges have also impacted the level of net income for several quarters. Reported on a
segmented basis, restructuring and other charges were $3.6 million, $4.4 million and $3.9 million in the first,
second and third quarters of 2014 respectively and $5.7 million, $6.1 million, $5.3 million and $16.1 million in the
first, second, third and fourth quarters of 2013 respectively. In 2012, the fourth quarter had restructuring and other
charges (reported on a segmented basis) of $5.3 million. Additionally, losses on impairment of assets (reported
on a segmented basis) of $0.3 million, $0.3 million and $97.3 million were recorded in the first, second and third
quarters of 2014 and $0.4 million, $85.5 million and $0.3 million were recorded in the second, third and fourth
quarters of 2013 respectively. Loss on impairment of assets (reported on a segmented basis) of $11.7 million was
also recorded in the fourth quarter of 2012.
In addition, the third quarter of 2014 includes a $224.6 million pre-tax gain on the sale of Harlequin.
12. 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, 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.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
17
TORSTAR - Management’s Discussion and Analysis
Adjusted EBITDA/Segmented Adjusted EBITDA
Management believes that Adjusted EBITDA is an important proxy for the amount of cash generated by Torstar’s
ongoing operations (or by a reporting unit or business segment) to generate liquidity to fund future capital needs
and management uses this metric for this purpose. Adjusted EBITDA is not the actual cash provided by operating
activities and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted
EBITDA as operating revenue less salaries and benefits and other operating costs as presented on the
consolidated statement of income and excludes restructuring and other charges and impairment of assets.
Restructuring and other charges and impairment of assets are eliminated as these activities are not related to
ongoing operations as of the end of the period. The exclusion of impairment of assets also eliminates the noncash impact. Adjusted EBITDA is also used by investors and analysts for valuation purposes. The intent of
adjusted EBITDA is to provide additional useful information to investors and analysts and financial statement
readers and the measure does not have any standardized meaning under IFRS and accordingly may not be
comparable to measures used by other companies (including calculating EBITDA on an adjusted basis to exclude
restructuring and other charges and impairment of assets). Segmented adjusted EBITDA is calculated in the
same manner described above, except that it is calculated using total segment results prior to the elimination of
proportionately consolidated results for joint ventures.
Operating earnings/Segmented operating earnings
Operating earnings is used by management to represent the results of ongoing operations inclusive of
amortization and depreciation. It is not a recognized measure of financial performance under IFRS. Torstar
calculates operating earnings as operating revenue less salaries and benefits and other operating costs and
amortization and depreciation. Operating earnings excludes restructuring and other charges and impairment of
assets. Restructuring and other charges and impairment of assets are eliminated as these activities are not
related to ongoing operations as of the end of the period. Torstar’s method of calculating operating earnings
(including calculating operating earnings on an adjusted basis to exclude restructuring and other charges and
impairment of assets) may differ from other companies and accordingly may not be comparable to measures
used by other companies. Segmented operating earnings is calculated in the same manner described above,
except that it is calculated using total segment results prior to the elimination of proportionately consolidated
results for joint ventures.
The following is a reconciliation of Adjusted EBITDA and Operating earnings (and Segmented Adjusted
EBITDA/Segmented Operating earnings – as applicable) with Operating profit (Segmented Operating profit – as
applicable). Adjusted EBITDA, Segmented Adjusted EBITDA, Operating earnings and Segmented Operating
earnings are regularly reported to the chief operating decision maker and corresponds to the definition used in our
historical discussions.
Operating profit (loss)
Add: Restructuring and other charges
Add: Impairment of assets
Operating earnings
Add: Amortization and depreciation
Adjusted EBITDA
Segmented
Nine months
ended
Third Quarter
September 30,
2014
2014
($93,104)
($72,314)
3,907
11,828
97,348
97,872
$8,151
$37,386
7,826
25,651
$15,977
$63,037
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
Per Consolidated Statement of
Income
Nine months
ended
Third Quarter
September 30,
2014
2014
($79,588)
($62,625)
3,906
11,776
82,348
82,872
$6,666
$32,023
7,149
23,593
$13,815
$55,616
18
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
Nine months
ended
Third Quarter
September 30,
2013
2013
($79,142)
($63,739)
5,506
17,317
85,458
85,828
$11,822
$39,406
8,844
26,092
$20,666
$65,498
Per Consolidated Statement of
Income
Nine months
ended
Third Quarter
September 30,
2013
2013
($71,157)
($58,980)
5,269
17,047
76,458
76,828
$10,570
$34,895
8,163
24,049
$18,733
$58,944
Adjusted earnings per share
Adjusted earnings per share is used by management to represent the per share earnings of results of ongoing
operations and is not a recognized measure of financial performance under IFRS. Torstar calculates adjusted
earnings per share as earnings per share from continuing operations less the per share effect of restructuring and
other charges, impairment of assets, non-cash foreign exchange, other income (expense) and change in deferred
taxes. Torstar’s method of calculating adjusted earnings per share may differ from other companies and
accordingly may not be comparable to measures used by other companies. The following is a reconciliation of
adjusted earnings per share to earnings per share.
Third Quarter
2014
Adjusted earnings per share

Restructuring and other charges

Impairment of assets

Non-cash foreign exchange

Other income (expense)

Change in deferred taxes
Earnings per share from continuing operations
2013
$0.06
(0.04)
(1.21)
(0.07)
0.18
($1.08)
$0.08
(0.05)
(1.04)
($1.01)
Nine months ended September 30
2014
2013
$0.28
$0.28
(0.11)
(0.16)
(1.21)
(1.04)
(0.07)
(0.01)
(0.01)
0.24
($0.88)
($0.93)
Operating profit
Operating profit is an additional IFRS measure used by management to represent the results of operations
inclusive of impairments and restructuring and other charges and appears in Torstar’s consolidated statement of
income.
13. Risks and Uncertainties
Risks and uncertainties facing Torstar
Torstar is subject to a number of risks and uncertainties, which are set forth in our Annual MD&A for the year ended
December 31, 2013 and which is incorporated herein by reference, a copy of which is available on Torstar’s website
at www.torstar.com and on SEDAR at www.sedar.com. A risk is the possibility that an event might happen in the
future that could have a negative effect on the financial condition, financial performance or business of Torstar. The
actual effect of any event on Torstar’s business could be materially different from what is anticipated. The
description of risks in the Annual MD&A does not include all possible risks.
TORSTAR CORPORATION 2014 THIRD QUARTER MD&A
19
TORSTAR – Condensed Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Financial Position
(Thousands of Canadian Dollars)
(Unaudited)
As at
September 30 2014
Assets
Current:
Cash and cash equivalents
Restricted cash (note 5)
Receivables
Inventories
Prepaid expenses and other current assets
Prepaid and recoverable income taxes
Total current assets
Restricted cash (note 5)
Investments in joint ventures (note 6)
Investments in associated businesses (note 7)
Property, plant and equipment (note 8)
Intangible assets (note 9)
Goodwill (note 10)
Other assets
Employee benefits assets (note 15)
Deferred income tax assets
Total assets
Liabilities and Equity
Current:
Bank overdraft
Accounts payable and accrued liabilities
Derivative financial instruments (note 13)
Provisions (note 14)
Income tax payable
Total current liabilities
Long-term debt (note 13)
Derivative financial instruments (note 13)
Provisions (note 14)
Other liabilities
Employee benefits (note 15)
Deferred income tax liabilities
Equity:
Share capital (note 16)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (note 18)
Total equity attributable to equity shareholders
Minority interests
Total equity
Total liabilities and equity
$232,561
21,970
145,658
8,790
9,401
3,733
422,113
22,750
57,275
39,251
126,902
61,160
344,417
10,582
18,403
22,741
$1,125,594
$103,958
24,772
10,701
139,431
9,512
9,978
79,645
9,529
400,398
18,424
455,208
611
874,641
2,858
877,499
$1,125,594
(see accompanying notes)
ON BEHALF OF THE BOARD
(Signed)
John Honderich
Director
(Signed)
Paul Weiss
Director
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
1
As at
December 31 2013
$19,151
261,485
29,368
47,872
3,765
361,641
80,901
40,215
150,665
73,942
533,982
11,465
44,532
51,369
$1,348,712
$1,741
202,888
911
20,807
9,810
236,157
175,898
4,125
16,251
12,425
82,641
24,431
398,605
17,383
385,589
(7,603)
793,974
2,810
796,784
$1,348,712
TORSTAR – Condensed Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Income
(Thousands of Canadian Dollars except per share amounts)
(Unaudited)
Three months ended
September 30
2013
2014
Restated*
Nine months ended
September 30
2013
2014
Restated*
Operating revenue
$199,925
$215,678
$624,700
$676,358
Salaries and benefits
Other operating costs
Amortization and depreciation (notes 8 and 9)
Restructuring and other charges (note 14)
Impairment of assets (note 11)
Operating loss
Interest and financing costs (note 13(b))
Foreign exchange
Loss from joint ventures (note 6)
Income (loss) of associated businesses (note 7)
Other income (expense) (note 19)
(88,136)
(97,974)
(7,149)
(3,906)
(82,348)
(79,588)
(615)
(7,247)
(13,695)
(346)
93
(101,398)
14,400
(86,998)
(93,741)
(103,204)
(8,163)
(5,269)
(76,458)
(71,157)
(4,004)
251
(7,931)
1,228
(107)
(81,720)
1,500
(80,220)
(269,745)
(299,339)
(23,593)
(11,776)
(82,872)
(62,625)
(4,953)
(7,860)
(10,599)
(925)
(1,523)
(88,485)
18,000
(70,485)
(292,871)
(324,543)
(24,049)
(17,047)
(76,828)
(58,980)
(12,065)
(614)
(5,262)
2,914
420
(73,587)
(300)
(73,887)
Income and other taxes recovery (expense) (note 12)
Net loss from continuing operations
Gain on sale and income from discontinued
operations (note 20)
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 16(b)):
Basic:
From continuing operations
From discontinued operations
Diluted:
From continuing operations
From discontinued operations
212,332
9,359
222,662
25,348
$125,334
($70,861)
$152,177
($48,539)
$125,343
($9)
($70,800)
($61)
$152,129
$48
($48,621)
$82
($1.08)
$2.65
$1.57
($1.01)
$0.12
($0.89)
($0.88)
$2.78
$1.90
($0.93)
$0.32
($0.61)
($1.08)
$2.64
$1.56
($1.01)
$0.12
($0.89)
($0.88)
$2.78
$1.90
($0.93)
$0.32
($0.61)
(see accompanying notes)
*The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
2
TORSTAR – Condensed Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Comprehensive Income
(Thousands of Canadian Dollars)
(Unaudited)
Three months ended
September 30
2013
2014
Restated*
Net income
Nine months ended
September 30
2013
2014
Restated*
$125,334
($70,861)
$152,177
68
(2)
69
57
(15)
(40)
(68)
(52)
Net movement on available-for-sale financial assets
Income tax effect
(108)
800
(100)
6
Net movement on cash flow hedges
Income tax effect
625
(300)
($48,539)
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 7)
4,125
(1,096)
Loss on cash flow hedges transferred to net income
Income tax effect
Realized loss on hedge of net investment transferred to
net income
Income tax effect
2,163
(600)
5,840
(800)
Unrealized gain (loss) on hedge of net investment (no
income tax effect)
5,520
5,093
1,816
1,991
9,250
(2,688)
(1,114)
(21,947)
5,600
28,677
(7,200)
(60,193)
15,200
124,393
(31,400)
(317)
(16,664)
(369)
21,108
(52)
(45,045)
908
93,901
($35,795)
$92,787
Other comprehensive income (loss) that will not be
reclassified to net income (loss) in subsequent periods:
Actuarial gain (loss) on employee benefits (note 15)
Income tax effect
Actuarial gain (loss) on employee benefits for associated
businesses (no income tax effect) (note 7)
Other comprehensive income (loss) from continuing
operations, net of tax
($11,571)
$23,099
Other comprehensive income (loss) from discontinued
operations
Income tax effect
Other comprehensive income (loss) from discontinued
operations, net of tax (note 20)
(4,506)
532
3,470
(1,400)
(9,133)
2,158
15,557
(3,700)
($3,974)
$2,070
($6,975)
11,857
Total other comprehensive income (loss), net of tax
($15,545)
$25,169
($42,770)
$104,644
Comprehensive income (loss), net of tax
$109,789
$109,407
($45,692)
$56,105
Attributable to:
$109,798
$109,359
Equity shareholders
($45,631)
$56,023
($9)
$48
Minority interests
($61)
$82
(see accompanying notes)
*The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
3
TORSTAR – Condensed Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Changes in Equity
(Thousands of Canadian Dollars)
(Unaudited)
At December 31, 2013
Share
capital
Contributed
surplus
Retained
earnings
$398,605
$17,383
$385,589
($7,603)
475
721
$793,974
$2,810
$796,784
152,129
48
152,177
(42,770)
101,145
8,214
109,359
597
1,150
$400,398
$18,424
$455,208
At January 1, 2013
$397,425
$16,057
$317,033
48
$611
($9,699)
(48,621)
(31,051)
612
597
597
1,150
1,150
$874,641
$2,858
$877,499
$720,816
$2,864
$723,680
(48,621)
103,311
1,333
104,644
54,690
1,333
56,023
(31,432)
82
82
719
1,003
1,003
(625)
$398,453
$17,060
$340,291
($8,366)
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
$747,438
4
56,105
(31,123)
719
1,003
(48,539)
104,644
(31,123)
719
109,407
612
Distribution
At September 30, 2013
(see accompanying notes)
(42,770)
(31,051)
(109)
309
Total
equity
8,214
(31,526)
Net income for the period
Other comprehensive
income
Total comprehensive
income
Minority
interests
(50,984)
At September 30, 2014
Dividends (note 16)
Issue of share capital –
other (note 16)
Share-based
compensation expense
Total
attributable to
equity
shareholders
152,129
Net income for the period
Other comprehensive
income (loss)
Total comprehensive
income
Dividends (note 16)
Exercise of share options
(note 16)
Issue of share capital –
other (note 16)
Share-based
compensation expense
Accumulated
other
comprehensive
loss (“AOCI”)
$2,321
(625)
$749,759
TORSTAR – Condensed Consolidated Financial Statements
Torstar Corporation
Consolidated Statement of Cash Flows
(Thousands of Canadian Dollars)
(Unaudited)
Three months ended
September 30
2013
2014
Restated*
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase in cash
Effect of exchange rate changes from discontinued operations
Cash, beginning of period
Cash, end of period
Operating activities:
Net loss from continuing operations
Amortization and depreciation (notes 8 and 9)
Deferred income taxes (note 12)
Loss from joint ventures (note 6)
Distributions from joint ventures (note 6)
Loss (income) of associated businesses (note 7)
Dividend from associated businesses (note 7)
Impairment of assets (note 11)
Non-cash employee benefit expense (note 15)
Employee benefits funding (note 15)
Restricted cash (note 5)
Other (note 21)
Decrease (increase) in non-cash working capital
Cash provided by (used in) operating activities of continuing operations
Cash provided by (used in) operating activities of discontinued
operations
Cash provided by (used in) operating activities
Investing activities:
Additions to property, plant and equipment and intangible assets
(notes 8 and 9)
Investment in associated businesses
Acquisitions and investments (note 22)
Net proceeds from the sale of Harlequin (note 20)
Restricted cash (notes 5 and 20)
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:
Attributed to continuing operations:
Cash
Cash equivalents – short-term deposits
Attributed to discontinued operations:
Cash equivalents – short-term deposits
Bank overdraft
Nine months ended
September 30
2013
2014
Restated*
($9,636)
410,992
(193,924)
207,432
305
24,824
$232,561
$29,384
(8,850)
(8,388)
12,146
529
7,540
$20,215
$33,621
391,073
(209,946)
214,748
403
17,410
$232,561
$44,774
(22,074)
(17,713)
4,987
168
15,060
$20,215
($86,998)
7,149
(12,000)
13,695
750
346
725
82,348
3,774
(10,778)
(21,970)
6,037
(16,922)
11,231
(5,691)
($80,220)
8,163
($70,485)
23,593
(15,300)
10,599
5,060
925
919
82,872
11,060
(28,559)
(21,970)
1,885
599
24,387
24,986
($73,887)
24,049
2,400
5,262
4,735
(2,914)
382
76,828
20,943
(44,203)
(3,945)
($9,636)
20,816
$29,384
8,635
$33,621
41,213
$44,774
($8,020)
($4,880)
(2,500)
(32)
($15,045)
(1,417)
(10,754)
442,207
(22,750)
441
392,682
(1,609)
$391,073
($12,416)
(3,000)
(2,409)
(28)
442,207
(22,750)
(22)
411,387
(395)
$410,992
7,931
1,735
(1,228)
76,458
6,951
(15,094)
(1,130)
3,566
5,002
8,568
257
(7,155)
(1,695)
($8,850)
($183,893)
(10,370)
131
208
($193,924)
$10,409
222,152
$232,561
$1,743
(10,381)
250
($8,388)
$28,641
$28,641
($190,923)
11,199
(31,051)
612
217
($209,946)
$10,409
222,152
$232,561
$3,567
(11,993)
($8,426)
$232,561
$232,561
Net cash, end of period
$20,215
(see accompanying notes)
*The 2013 comparative amounts have been restated to reflect the classification of Harlequin into discontinued operations.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
5
(3,447)
10,148
(6,587)
3,561
371
(17,454)
(4,620)
($22,074)
$13,428
(31,123)
(18)
($17,713)
$28,641
$28,641
$3,567
(11,993)
($8,426)
$20,215
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands of Canadian dollars except per share amounts)
(Unaudited)
1. CORPORATE INFORMATION
Torstar Corporation is incorporated under the laws of Ontario, Canada and its Class B (non-voting) shares are
publicly traded on the Toronto Stock Exchange. The registered office is located at One Yonge Street, Toronto,
Canada. The principal activities of the Company and its subsidiaries are described in Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
These condensed consolidated financial statements have been prepared in accordance with IFRS as issued by
the International Accounting Standards Board (“IASB”) applicable to the preparation of consolidated interim
financial statements, including International Accounting Standard (“IAS”) 34.
These condensed consolidated financial statements have been authorized for issue in accordance with a
resolution from the Board of Directors on November 4, 2014.
The condensed consolidated financial statements do not include all the information and disclosures required in
the annual consolidated financial statements, and accordingly should be read in conjunction with the Company’s
annual consolidated financial statements for the year ended December 31, 2013.
On May 1, 2014, the Company entered into an agreement to sell all of the shares of Harlequin to a division of
HarperCollins Publishers L.L.C., a subsidiary of News Corp. for a purchase price of $455 million. The sale closed
on August 1, 2014. The Company’s investment in Harlequin previously represented the Book Publishing
Segment. Effective the second quarter of 2014, this investment 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
have been derecognized from Assets held for sale. The 2013 comparative interim and annual consolidated
statements of income, comprehensive income and cash flows have been restated to reflect the classification of
Harlequin into discontinued operations. All other notes to the consolidated financial statements primarily include
amounts for continuing operations, unless otherwise indicated. Additional disclosures are provided in Note 20.
In addition, effective the third quarter of 2014, the Company has disaggregated the former Media Segment and
has now disclosed Metroland Media Group (“MMG”) and Star Media Group (“SMG”) as separate reportable
operating segments for segment reporting purposes as a result of emerging divergence in revenue trends. The
comparative information contained herein has also been restated to reflect this change. Additional disclosures
are provided in Note 3.
(b) Changes in accounting standards
The accounting policies adopted in preparation of the condensed consolidated financial statements are consistent
with those followed in the preparation of the Company’s annual consolidated financial statements for the year
ended December 31, 2013, except for the following:
The Company has added the following accounting policy note based on IFRS 5 Non-Current Assets Held for Sale
and Discontinued Operations:
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
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
6
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
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 CGU or a group of CGUs;
Classified as held for sale or already disposed in such a way; or
A major line of business or major geographical area.
Discontinued operations are excluded from the results of continuing operations and are presented as a single
amount, net of tax, as income from discontinued operations in the consolidated statement of income.
Use of estimates and judgements
There have been no significant changes in the Company’s critical accounting estimates or significant judgements
from what was previously disclosed in the annual consolidated financial statements for the year ended December
31, 2013 except for the addition of the judgement below regarding classification of assets and liabilities as held for
sale and discontinued operations.
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.
An agreement in respect of the sale of Harlequin was signed on May 1, 2014 and accordingly, effective the
second quarter of 2014, the Company classified its investment in Harlequin 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
have been derecognized from Assets held for sale.
Policies adopted in 2014
The Company adopted new standards and interpretations effective January 1, 2014. The nature and the impact
of each new standard/amendment which affect the Company are described below:
IAS 32 Financial Instruments: Presentation
The amendments to IAS 32 clarified certain requirements for offsetting financial assets and liabilities. The
amendments require disclosure of information about recognized financial instruments subject to enforceable
master netting arrangements even if they are not set off, to allow financial statement users to evaluate the effect
or potential effect of netting arrangements. The amendment affects presentation and disclosures but did not have
an impact on financial results.
IAS 36 Impairment of Assets
The amendments to IAS 36 reduced the circumstances in which the recoverable amount of assets or cash
generating units is required to be disclosed, clarified the disclosures required and introduced an explicit
requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable
amount (based on fair value less costs of disposal) is determined using a present value technique. This
amendment affects disclosures but did not have an impact on financial results.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
7
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
IFRIC 21 Levies
IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government, identifying the
obligating event as the activity that triggers the payment of the levy in accordance with the relevant legislation. If
an obligation is triggered by reaching a minimum threshold, the liability is recognized when the minimum threshold
is reached but if the obligating event occurs over a period of time, the liability is recognized progressively. The
adoption of this guidance did not have an impact on financial results.
Several other new standards and amendments apply for the first time in 2014. However, they do not impact the
interim or annual consolidated financial statements of the Company. The Company has not early adopted any
other standard, interpretation or amendment that has been issued but is not yet effective.
Future changes in accounting standards
IFRS 15 Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 which specifies how and when an entity will recognize revenue as well as
requiring such entities to provide users of financial statements with more informative, relevant disclosures. The
standard provides a single, principles based five-step model to be applied to all contracts with customers. The
Company does not anticipate early adoption and plans to adopt the standard on its effective date of January 1,
2017. The Company is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.
IFRS 9 Financial Instruments
In July 2014, the IASB issued a finalized version of IFRS 9 which contains accounting requirements for financial
instruments replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains
requirements in the following areas: Classification and Measurement; Impairment; Hedge accounting; and
Derecognition. The Company does not anticipate early adoption and plans to adopt the standard on its effective
date of January 1, 2018. The Company is in the process of reviewing the standard to determine the impact on the
consolidated financial statements.
3. SEGMENTED INFORMATION
The Company has identified two reportable operating segments: MMG and SMG to which Corporate costs have
not been allocated. Management of each segment is accountable for the revenues and segment operating profit
or loss which includes the proportionately consolidated share of joint venture operations.
Segment profit or loss has been defined as segmented operating profit or loss which corresponds to operating
profit or loss as presented in the consolidated statement of income but includes the proportionately consolidated
share of joint venture operations. All other income and expense items are managed on a Company basis and are
not provided to the chief operating decision-maker (“CODM”) at the operating segment level. Also, assets and
liabilities are not provided to the CODM at the operating segment level. These items are therefore not allocated
to the operating segments.
MMG includes more than 110 weekly community newspapers; three daily newspapers (The Hamilton Spectator,
the Waterloo Region Record and the Guelph Mercury); numerous other specialty and monthly publications,
magazines, telephone directories, consumer shows and distribution operations; a number of websites and
applications and product sales. MMG also operates other digital businesses which include goldbook.ca, save.ca,
travelalerts.ca, and wagjag.com.
SMG includes the daily Toronto Star newspaper and thestar.com. SMG also includes Free Daily News Group
Inc. (“Metro English Canada”), which publishes the Metro free daily commuter papers in several Canadian cities;
the Company’s interest in the Chinese-language Sing Tao Daily newspaper and its related publications in
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
8
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
Toronto, Vancouver and Calgary (pursuant to a joint venture with Sing Tao Holdings); toronto.com; several other
specialty publications and magazines and distribution services. SMG also includes eyeReturn Marketing Inc. and
the Company’s interests in Olive Media and Workopolis.
The Company also has investments in Black Press Ltd. (“Black Press”); Blue Ant Media Inc. (“Blue Ant”);
Canadian Press Enterprises Inc. (“Canadian Press”); Shop.ca Network Inc. (“Shop.ca”); and until October 16,
2014, Tuango Inc. (“Tuango”).
Three months ended
September 30, 2014
Operating Revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
Reportable segment operating profit
(loss)
Interest and financing costs
Foreign exchange
Loss from joint ventures
Loss of associated businesses
Other income
Loss before taxes from continuing
operations
Corporate
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
$211,202
($11,277)
$199,925
MMG
SMG
$115,070
$96,132
(53,722)
(48,345)
(3,512)
(1,475)
(35,424)
(52,382)
(4,300)
(2,432)
(97,348)
($3,537)
(1,815)
(14)
(92,683)
(102,542)
(7,826)
(3,907)
(97,348)
4,547
4,568
677
1
15,000
(88,136)
(97,974)
(7,149)
(3,906)
(82,348)
$8,016
($95,754)
($5,366)
($93,104)
$13,516
($79,588)
(615)
(7,247)
(13,695)
(346)
93
($101,398)
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
$227,383
($11,705)
$215,678
Three months ended
September 30, 2013
MMG
SMG
Operating Revenue
$119,601
$107,782
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
(56,105)
(48,943)
(3,964)
(2,648)
(12,458)
(40,531)
(58,327)
(4,870)
(2,858)
(73,000)
($2,122)
(689)
(10)
(98,758)
(107,959)
(8,844)
(5,506)
(85,458)
5,017
4,755
681
237
9,000
(93,741)
(103,204)
(8,163)
(5,269)
(76,458)
Reportable segment operating loss
Interest and financing costs
Foreign exchange
Loss from joint ventures
Income of associated businesses
Other expense
Loss before taxes from continuing
operations
($4,517)
($71,804)
($2,821)
($79,142)
$7,985
($71,157)
(4,004)
251
(7,931)
1,228
(107)
Corporate
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
($81,720)
9
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
Nine months ended
September 30, 2014
Corporate
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
$659,751
($35,051)
$624,700
MMG
SMG
Operating Revenue
$353,437
$306,314
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
Reportable segment operating profit
(loss)
Interest and financing costs
Foreign exchange
Loss from joint ventures
Loss of associated businesses
Other expense
Loss before taxes from continuing
operations
(162,344)
(145,038)
(11,128)
(6,386)
(266)
(112,932)
(164,751)
(14,478)
(5,442)
(97,606)
($8,340)
(3,309)
(45)
(283,616)
(313,098)
(25,651)
(11,828)
(97,872)
13,871
13,759
2,058
52
15,000
(269,745)
(299,339)
(23,593)
(11,776)
(82,872)
$28,275
($88,895)
($11,694)
($72,314)
$9,689
($62,625)
(4,953)
(7,860)
(10,599)
(925)
(1,523)
($88,485)
Total
Adjustments
and
Eliminations¹
Per
Consolidated
Statement of
Income
$712,598
($36,240)
$676,358
Nine months ended
September 30, 2013
MMG
SMG
Operating Revenue
$375,244
$337,354
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets
Reportable segment operating profit
(loss)
Interest and financing costs
Foreign exchange
Loss from joint ventures
Income of associated businesses
Other income
Loss before taxes from continuing
operations
(171,681)
(156,185)
(11,532)
(7,280)
(12,828)
(128,547)
(180,400)
(14,530)
(10,037)
(73,000)
($8,100)
(2,187)
(30)
(308,328)
(338,772)
(26,092)
(17,317)
(85,828)
15,457
14,229
2,043
270
9,000
(292,871)
(324,543)
(24,049)
(17,047)
(76,828)
$15,738
($69,160)
($10,317)
($63,739)
$4,759
($58,980)
(12,065)
(614)
(5,262)
2,914
420
Corporate
($73,587)
¹ Adjustments and eliminations represent the elimination of the proportionately consolidated results of, and
transactions with joint ventures.
4. INVENTORIES
The Company expensed inventory costs of $13.5 million for the three months ended September 30, 2014 (2013 –
$16.2 million) and $41.8 million for the nine months ended September 30, 2014 (2013 – $52.3 million).
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
10
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
5. RESTRICTED CASH
The Company has restricted cash totalling $44.7 million comprised of $22.0 million held as collateral for
outstanding standby letters of credit and $22.8 million held in an escrow account related to the sale of Harlequin.
The outstanding letters of credit include $21.7 million in respect of an unfunded executive retirement plan liability
as indicated in Note 15.
September 30
2014
Current:
Letters of credit
$21,970
Non-Current:
Escrowed amount (note 20)
$22,750
December 31
2013
6. INVESTMENTS IN JOINT VENTURES
The Company’s joint ventures are primarily in the SMG Segment and include investments in Workopolis (50%)
and Sing Tao Daily (approximately 50%). Effective April 1, 2014, pursuant to the Company entering into an
agreement for the sale of Harlequin, the amounts related to the Book Publishing Segment joint venture operations
were reclassified to Assets held for sale. The sale transaction closed on August 1, 2014 as indicated in Note 20.
The table below provides a continuity of Investments in joint ventures:
Balance, beginning of period
Reclassified to Assets held for sale
Loss from joint ventures
Distribution from joint ventures
Investment and other
Net change related to Investments in joint
ventures of discontinued operations
Balance, end of period
Three months ended
September 30
2014
2013
$71,719
$89,466
71,719
(13,695)
(750)
1
Nine months ended
September 30
2014
2013
$80,901
$91,258
(7,968)
72,933
91,258
(10,599)
(5,262)
(5,060)
(4,735)
1
30
89,466
(7,931)
(1,735)
(1)
221
$57,275
(1,271)
$57,275
$80,020
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
11
$80,020
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
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
As at September 30, 2014
SMG
Segment
As at December 31, 2013
Book
SMG
Publishing
Total
Segment
Segment
Segments
Cash and cash equivalents
Other current assets
$11,494
7,450
$6,825
12,811
$4,606
4,475
$11,431
17,286
Total current assets
Property, plant & equipment
Goodwill
Intangible assets
Other non-current assets
18,944
6,373
23,419
18,643
19,636
6,351
38,419
19,478
9,081
149
4,739
277
74
28,717
6,500
43,158
19,755
74
$67,379
$83,884
$14,320
$98,204
Bank overdraft
Other current liabilities
$9,218
$10,432
$4
5,851
$4
16,283
Total current liabilities
Other non-current liabilities
Total equity
9,218
886
57,275
10,432
519
72,933
5,855
497
7,968
16,287
1,016
80,901
$67,379
$83,884
$14,320
$98,204
Total assets
Total liabilities and equity
(ii) Statements of Income and Comprehensive Income
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Impairment of assets (note 11)
Operating loss
Interest and financing costs
Foreign exchange
Other income
Income and other taxes
Net loss and Comprehensive loss from
continuing operations
Three months ended
September 30
2014
2013
$11,345
$11,769
Nine months ended
September 30
2014
2013
$35,262
$36,431
(4,547)
(4,636)
(677)
(1)
(15,000)
(13,516)
2
(5)
24
(13,495)
(200)
(5,017)
(4,819)
(681)
(237)
(9,000)
(7,985)
(1)
7
201
(7,778)
(153)
(13,871)
(13,970)
(2,058)
(52)
(15,000)
(9,689)
2
(5)
(9,692)
(907)
(15,457)
(14,420)
(2,043)
(270)
(9,000)
(4,759)
1
4
201
(4,553)
(709)
($13,695)
($7,931)
($10,599)
($5,262)
7. INVESTMENTS IN ASSOCIATED BUSINESSES
As of September 30, 2014, the Company’s Investments in associated businesses include a 19.4% equity interest
in Black Press; a 23.3% equity investment in Blue Ant; a 33.3% equity interest in Canadian Press; a 16.2% equity
investment in Shop.ca; and until October 16, 2014, a 38.2% equity investment in Tuango.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
12
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
The table below provides a continuity of Investments in associated businesses:
Balance, beginning of period
Investment in Shop.ca in exchange for Media
inventory provided
Investment in Blue Ant
Investment in Shop.ca
Dividends received
Income (loss) of associated businesses
OCI – Actuarial gain (loss) on employee benefits
OCI – Foreign currency translation adjustment
Three months ended
September 30
2014
2013
$40,654
$36,455
Nine months ended
September 30
2014
2013
$40,215
$32,921
2,500
965
2,500
(725)
(346)
(317)
(15)
$39,251
Balance, end of period
1,000
(919)
(925)
(52)
(68)
1,228
(369)
(40)
$39,251
$39,774
(382)
2,914
908
(52)
$39,774
Loss of associated businesses for the three months ended September 30, 2014 included income of $1.1 million
from Black Press and income of $0.1 million from Tuango, offset by losses of $0.8 million from Blue Ant and $0.7
million from Shop.ca (2013 – income of $1.6 million from Black Press and income of $0.3 million from Tuango
partially offset by a loss of $0.7 million from Shop.ca).
For the nine month period ended September 30, 2014, Loss of associated businesses included income of $1.8
million from Black Press and income of $0.4 million from Tuango, offset by losses of $2.1 million from Shop.ca
and $1.0 million from Blue Ant (2013 – income of $4.2 million from Black Press and income of $0.3 million from
Tuango partially offset by a loss of $1.7 million from Shop.ca).
The OCI amounts recorded are from Black Press.
8. PROPERTY, PLANT AND EQUIPMENT
Land
Cost
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions
Disposals
Balance at September 30, 2014
Depreciation and impairment
Balance at December 31, 2013
Reclassified to Assets held for sale
$5,519
(2,706)
2,813
(70)
$2,743
Additions
Impairments (note 11)
Disposals
Foreign exchange
Balance at September 30, 2014
Net book value
At December 31, 2013
At September 30, 2014
$5,519
$2,743
Building and
leasehold
improvements
Machinery
and
equipment
Total
$142,264
(17,381)
124,883
1,612
(735)
$125,760
$201,304
(32,711)
168,593
3,816
(9,948)
$162,461
$349,087
(52,798)
296,289
5,428
(10,753)
$290,964
$64,528
(13,284)
51,244
4,765
237
(717)
$55,529
$133,894
(24,959)
108,935
8,858
460
(9,721)
1
$108,533
$198,422
(38,243)
160,179
13,623
697
(10,438)
1
$164,062
$77,736
$70,231
$67,410
$53,928
$150,665
$126,902
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
13
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
9. INTANGIBLE ASSETS
Indefinite
life
Cost
Balance at December 31, 2013
Reclassified to Assets held for sale
Additions – internally developed
Additions – purchased
Reclassifications¹
Disposals
Balance at September 30, 2014
Amortization and impairment
Balance at December 31, 2013
Reclassified to Assets held for sale
$27,059
(6,333)
20,726
3,105¹
14,583
$38,414
$10,909
Net book value
At December 31, 2013
At September 30, 2014
$89,009
(22,562)
66,447
2,974
3,512
(1,734)
$71,199
$52,278
(17,031)
35,247
7,959
175
Finite life
Other
$38,958
(1,325)
37,633
26
(20,000)
$17,659
$17,897
(1,013)
16,884
2,011
Total
Total
$127,967
(23,887)
104,080
2,974
3,538
(20,000)
(1,734)
$88,858
$155,026
(30,220)
124,806
2,974
6,643
(5,417)
(1,734)
$127,272
$81,084
(18,044)
63,040
9,970
175
(5,417)
(1,656)
$66,112
$73,942
$61,160
$10,909
(1,656)
$41,725
$13,478
$70,175
(18,044)
52,131
9,970
175
(5,417)
(1,656)
$55,203
$16,150
$27,505
$36,731
$29,474
$21,061
$4,181
$57,792
$33,655
10,909
Amortization
Impairments (note 11)
Reclassifications¹
Disposals
Balance at September 30, 2014
Software
(5,417)
¹ Metro Trademark acquisition
In October 2011, the Company had entered into a franchise agreement with Metro International S.A. (“MISA”) for
which it paid $20.0 million which was recorded as an intangible asset with a finite useful life to be amortized over
the ten-year period of the agreement. In August 2014, the Company terminated the franchise agreement with
MISA and on the same date, the Company acquired the Metro trademark for use in Canada for an additional
payment of $3.1 million. The carrying value of the trademark is $17.7 million comprising the $3.1 million
additional payment and the unamortized balance of $14.6 million. The previous amortizable franchise agreement
has been derecognized and has been replaced by a trademark asset with an indefinite useful life.
10. GOODWILL
The following is a continuity of the Goodwill balance:
Goodwill
Balance at December 31, 2013
Disposition on the sale of Harlequin (note 20)
Impairment (note 11)
Balance at September 30, 2014
$533,982
(107,565)
(82,000)
$344,417
Goodwill has been allocated to the following groups of cash generating units (“CGU”):
Metroland Media Group
Star Media Group
Harlequin
Total
September 30,
2014
$265,529
78,888
$344,417
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
14
December 31,
2013
$258,175
168,242
107,565
$533,982
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
11. IMPAIRMENT OF ASSETS
The Company recorded the following impairment on its assets:
Three months ended
September 30
2014
2013
$348
$177
12,281
82,000
64,000
82,348
76,458
15,000
9,000
$97,348
$85,458
Property, plant and equipment (note 8)
Intangible assets (note 9)
Goodwill (note 10)
Investments in joint ventures (note 6)
Nine months ended
September 30
2014
2013
697
$177
175
12,651
82,000
64,000
82,872
76,828
15,000
9,000
$97,872
$85,828
Impairment Testing
During the three months ended September 30, 2014, the Company conducted an impairment test on the carrying
value of intangible assets with a finite useful life, intangible assets with an indefinite useful life and goodwill. In
carrying out this testing, it was determined that the carrying amount of goodwill in the Star Media Group of CGUs
exceeded the value in use and the Company recorded an impairment charge of $82.0 million for goodwill in the
Star Media Group of CGUs. This impairment was the result of lower forecasted revenues reflecting continued
shifts in spending by advertisers. The Company also recorded a $15.0 million impairment charge in respect of its
joint venture investment in Workopolis during the third quarter of 2014. This resulted from lower forecasted
revenues attributable to an increase in competition in the online recruitment and job search markets.
During the three months ended September 30, 2013, as a result of the internal reorganization, realignment and
integration of certain digital businesses during the third quarter of 2013, the Company recorded impairments of
$2.8 million consisting of $0.2 million for leaseholds, $1.3 million for indefinite-life intangible assets and $1.3
million with respect to finite-life intangible assets in the Metroland Media Group of CGUs.
In addition, the Company also conducted an impairment test on the carrying value of intangible assets with a finite
useful life, intangible assets with an indefinite useful life and goodwill during the three months ended September
30, 2013. In carrying out this testing, it was determined that the carrying amount of certain intangible assets
within the Metroland Media Group of CGUs and the carrying value of the Star Media Group of CGUs exceeded
the value in use. Accordingly, the Company recorded impairments of $9.7 million comprising $7.9 million for
indefinite-life intangible assets and $1.8 million for finite-life intangible assets in the Metroland Media Group of
CGUs, and $64.0 million for goodwill in the Star Media Group of CGUs. Consistent with 2014, these impairments
were the result of lower forecasted revenues reflecting shifts in spending by advertisers. As a result of the
impairment test and factors noted above, the Company also recorded an impairment of $9.0 million in respect of
its joint venture investment in Sing Tao Daily during the third quarter of 2013.
These impairments had no effect on the Company’s operations or cash flows. There were no other impairments
or reversals of impairments recorded as a result of the testing.
The after-tax discount and perpetual growth rates used by the Company for the purpose of impairment testing in
the three months ended September 30, 2014 and September 30, 2013 for each of the group of CGUs were:
September 30, 2014
Metroland Media Group
Star Media Group
Discount
12.1%
12.5% – 13.9%
Growth
0.0%
0.0% – 1.5%
September 30, 2013
Discount
12.7%
13.1% – 14.5%
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
15
Growth
0.0%
0.0% – 1.5%
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
These after-tax rates correspond to pre-tax rates in an estimated range of 16% – 17% for the three months ended
September 30, 2014 and 16 – 18% for the three months ended September 30, 2013.
In its assessment of the recoverable amounts of the group of CGUs, the Company performed a sensitivity
analysis of the discount and perpetual growth rates. The results of the sensitivity analysis show that a reasonable
change to key assumptions would not result in an impairment loss to the other CGU groups for which no
impairment loss was required.
12. INCOME TAXES
Income tax expense is made up of the following:
Three months ended
September 30
Current income tax expense (recovery):
Current year
Adjustment for prior years
Deferred income tax expense (recovery):
Origination and reversal of temporary differences
Recognition of previously unrecognized tax losses
Adjustment for prior years
Income tax expense (recovery) in the consolidated
statement of income
Deferred income tax expense (recovery) in OCI
Income tax expense (recovery) in OCI
Total income taxes
Nine months ended
September 30
2014
2013
2014
2013
($2,500)
100
(2,400)
($1,500)
($2,300)
(400)
(2,700)
$800
(2,900)
(2,100)
2,600
(14,700)
100
(12,000)
100
(200)
100
(1,000)
(14,700)
400
(15,300)
2,100
2,400
(14,400)
(1,500)
(18,000)
300
(4,800)
(4,800)
7,500
7,500
(14,004)
(14,004)
32,000
32,000
($19,200)
$6,000
($32,004)
$32,300
(1,500)
300
The Company recognized a tax benefit of $6.8 million in respect of losses carried forward of $51 million that can
be used in the current year to reduce the capital gain realized on the sale of Harlequin. The Company also
recognized a deferred tax asset of $7.9 million for the excess of the tax basis over the carrying value for an
investment in a subsidiary that can be used to reduce the 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 will be
made to the Canadian Cultural Property Export Review Board to treat this gift as a donation of Canadian cultural
property and to determine its fair value. The Company has reported an estimated income tax recovery of $5.8
million in respect of this donation in the period ended September 30, 2014. The estimated recovery will be
adjusted based on the final determination of value.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
16
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
13. FINANCIAL INSTRUMENTS
Long-term debt
(a) Bank debt
September 30
2014
December 31
2013
Bankers’ acceptances:
Cdn. dollar denominated
U.S. dollar denominated
$68,683
107,215
$175,898
nil
Current
Long-term
$175,898
(i) In August 2014, the Company cancelled its long-term credit facilities after applying a portion of the
proceeds received from the sale of Harlequin to extinguish the debt. Prior to August 2014, the long-term
credit facilities consisted of a $150 million revolving facility maturing January 2017 (“Tranche A”) and a
$200 million revolving facility maturing in January 2015 (“Tranche B”). The interest rate spread above the
bankers’ acceptance rate if in Canadian dollars, or the LIBOR rate if in U.S. dollars, varied based on the
Company’s net debt to operating cash flow ratio (range of 1.4% to 2.5%) for borrowings under either
tranche and was 1.5% at December 31, 2013.
(ii) The average interest rate on Canadian dollar bank borrowings outstanding at December 31, 2013 was
2.7%.
(iii) In May 2008, the Company entered into two interest rate swap agreements that fix the interest rate on
U.S. $80 million of borrowings at approximately 4.2% (plus the interest rate spread referred to in 13(a)(i)
for seven years ending May 2015. These swaps were designated as cash flow hedges until June 30,
2014 when the Company derecognized the hedges pursuant to the expected sale of Harlequin. In July
2014, the Company extinguished the swaps at a cost of $2.8 million which has been recorded in Other
income (expense) in the consolidated statement of income (Note 19).
(iv) Bank debt outstanding at December 31, 2013 included U.S. dollar borrowings of U.S. $101.0 million at an
average interest rate of 1.7%. Including the effect of the interest rate swap noted in 13(a)(iii), the effective
interest rate at December 31, 2013 was 4.9%.
(b) Interest and financing costs:
Interest on long-term debt
Interest received on short-term investments
Interest accretion costs
Interest – other
Net financing expense relating to employee
benefit plans
Three months ended
September 30
2014
2013
$946
$2,051
(458)
69
108
(40)
8
98
$615
Nine months ended
September 30
2014
2013
$4,908
$5,859
(458)
241
385
(33)
5
295
$4,953
1,837
$4,004
5,816
$12,065
(c) Interest paid during the three and nine month periods ended September 30, 2014 was $1.0 million and $5.0
million respectively (2013 – $2.0 million and $5.8 million respectively). Interest received during both the three
and nine month periods ended September 30, 2014 was $0.5 million (2013 – nil).
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
17
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
Hedge activities
(d) Cash flow hedges
Forward foreign exchange contracts
The Company was previously exposed to foreign currency risk through Harlequin’s international operations.
The most significant foreign currency exposure was to movements in the U.S. dollar/Cdn. dollar exchange
rate. To manage this exchange risk in its operating results, the Company’s practice was to enter into forward
foreign exchange contracts to hedge a portion of its U.S dollar revenues as detailed below.
The Company entered into forward foreign exchange contracts to allow it to convert a portion of its expected
future U.S. dollar revenue into Canadian dollars. The forward foreign exchange contracts established a rate
of exchange of Canadian dollar per U.S. dollar of $1.05 for U.S. $40.0 million in 2014 and $1.07 for U.S.
$20.0 million in 2015 (December 31, 2013 – $1.05 for U.S. $40.0 million in 2014 and $1.07 for U.S. $20.0
million in 2015). At June 30, 2014, the Company derecognized the outstanding contracts as hedges pursuant
to the expected sale of Harlequin. In July 2014, the Company paid $0.4 million to extinguish the outstanding
contracts, which has been recorded in discontinued operations (At December 31, 2013 – the net fair value of
these contracts was $0.9 million unfavourable).
In the past, the Company also entered into forward foreign exchange contracts to hedge other currencies
(Yen, Euro, Pound Sterling) realized in Harlequin’s overseas operations. During 2013, the Company entered
into forward foreign exchange contracts, which established a rate of exchange of Canadian dollar per Euro of
$1.47, to allow it to convert €8.0 million of its expected future cash flows in 2014 into Canadian dollars. These
Euro forward foreign exchange contracts were not designated as cash flow hedges. In July 2014, the
Company closed the outstanding contracts realizing a gain of $0.1 million, which has been recorded in
discontinued operations (At December 31, 2013, the net fair value of these contracts was approximately nil).
(e) Hedge of net investments in foreign operations
The Company had designated $80 million of its U.S. dollar debt as a hedge of its U.S. dollar denominated net
investment in subsidiaries with the U.S. dollar as their functional currency. Gains or losses on the translation of
the designated hedge amount were transferred to OCI to offset any gains or losses on translation of the net
investments in subsidiaries with the U.S. dollar as their functional currency.
With the closing of the sale of Harlequin on August 1, 2014, the Company derecognized the hedge and
transferred the related accumulated loss balance in OCI of $5.8 million into net income.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
18
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
14. PROVISIONS
Balance at December 31, 2013
Reclassified to Liabilities associated with
assets held for sale
Restructuring
Legal
Contingent
consideration
$36,650
$250
$158
Provisions made during the period
Reversals of provisions during the period
Adjustment to contingent consideration
Provisions paid during the period
Interest accretion
Balance at September 30, 2014
(974)
35,676
12,654
(878)
(150)
100
40
(40)
(22,168)
208
$25,492
(100)
Current
Non-current
$15,995
$9,497
Balance at December 31, 2013:
Current
Non-current
$20,535
$16,115
$250
Other
Total
$37,058
158
$8,750
(107)
(9)
$42
$8,750
$27
$15
$8,750
$22
$136
(1,124)
35,934
21,444
(918)
(107)
(22,277)
208
$34,284
$24,772
$9,512
$20,807
$16,251
Restructuring
During the nine month period ended September 30, 2014, the Company recorded restructuring provisions of
$11.8 million, consisting of $6.4 million in the MMG Segment and $5.4 million in the SMG Segment for staff
reductions.
Legal
The Company is involved in various legal actions, which arise in the ordinary course of business. While the final
outcome of these matters cannot be predicted with certainty, any additional liability that may arise from such
contingencies is not expected to have a material adverse effect on the financial position or results of operations of
the Company.
Other
In connection with the sale of Harlequin, the Company indemnified the Purchaser for costs and fees related to
certain matters including certain tax and pre-existing litigation matters. The Company has assessed the fees that
it may incur as well as the probability of occurrence of any losses in respect of these matters, and estimated the
exposure under these indemnities. The total contingent liability recorded in respect of these matters was $8.8
million and this amount has been included in the determination of the gain on sale of Harlequin.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
19
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
15. EMPLOYEE FUTURE BENEFITS
The Company maintains a number of defined benefit plans which provide pension benefits to its employees
primarily in the Province of Ontario. Pension benefits are calculated based on a combination of years of service
and compensation levels.
The Company also maintains capital accumulation plans in Canada.
Post-employment benefits other than pensions provide for various health and life insurance benefits to employees
in the newspaper operations hired prior to August 23, 2000.
Changes to the net defined benefit obligation were as follows:
Pension plans
Funded
Canada
United States
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 plans
Foreign exchange and other
At September 30, 2014
Recorded in:
Assets
Liabilities
1
Unfunded
($37,308)
$6,343
$26,283
(1,449)
(38,757)
(6,343)
(12,439)
13,844
1
Post
employment
benefit plans
Total
$42,791
$38,109
42,791
(20,231)
17,878
611
10,010
(1,617)
8,393
54,983
(26,557)
611
513
448
961
242
1,464
1,706
10,765
295
11,060
($1,938)
1,080
(18)
(81)
$16,397
4,130
(1,984)
140
$46,783
60,193
(28,559)
59
$61,242
($18,403)
$16,465
$16,397
$46,783
($18,403)
$79,645
The unfunded pension plan includes an executive retirement plan liability of $16.4 million (December 31, 2013 – $24.7
million) which is supported by an outstanding letter of credit of $21.7 million as at September 30, 2014 (December 31, 2013
– $26.9 million).
Capital accumulation plans
The total amount expensed for capital accumulation plans for the three and nine month periods ended September
30, 2014 was $0.5 million and $1.6 million respectively (2013 – $0.5 million and $1.5 million respectively).
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
20
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
16. SHARE CAPITAL
(a) Summary of changes in the Company’s share capital:
Nine months ended September 30
2014
2013
Shares
Amount
Shares
Amount
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
70,064,699
1,850
70,463
91,230
97,938
1,175
70,327,355
$395,928
1
475
589
721
8
$397,722
69,882,308
4,140
47,770
101,030
$394,746
1
309
710
1,525
70,036,773
9
$395,775
Total Class A and Class B shares
80,179,319
$400,398
79,894,187
$398,453
9,853,814
(1,850)
9,851,964
$2,677
(1)
$2,676
9,861,554
(4,140)
9,857,414
$2,679
(1)
$2,678
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.
(b) 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 employee share purchase plan (“ESPP”) does not result in an adjustment to income.
The reconciliation of the denominator in calculating diluted per share amounts is as follows:
(thousands of shares)
Weighted average number of shares outstanding, basic
Effect of dilutive securities
- share options
- ESPP
Weighted average number of shares outstanding, diluted
Three months ended
September 30
2014
2013
80,075
79,877
375
28
80,478
Nine months ended
September 30
2014
2013
80,044
79,822
171
7
79,877
80,222
79,822
Outstanding share options totalling 3,113,823, which are anti-dilutive, have been excluded from the above
calculation of dilutive securities (September 30, 2013 – no effect was given to the potential exercise of share
options and ESPP in the calculation of net loss per share as the effect would be anti-dilutive).
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
21
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
(c) 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:
Three months ended
September 30
2014
2013
First quarter ended March 31: 13.125 cents (2013 – 13.125 cents)
Second quarter ended June 30: 13.125 cents (2013 – 13.125 cents)
Third quarter ended September 30: 13.125 cents (2013 – 13.125 cents)
Total dividends
$10,521
$10,521
$10,484
$10,484
Nine months ended
September 30
2014
2013
$10,489
10,516
10,521
$31,526
$10,466
10,482
10,484
$31,432
17. SHARE-BASED COMPENSATION PLANS
(a) Share option plan
A summary of changes in the share option plan is as follows:
Share options
Weighted
average exercise
price
At December 31, 2013
Granted
Exercised
Forfeited or expired
4,267,450
1,066,416
(97,938)
(386,759)
$12.18
$5.85
($6.25)
($24.28)
At September 30, 2014
4,849,169
$9.94
Options exercisable at September 30, 2014 were as follows:
Range of exercise price
Share options
exercisable
Weighted
average exercise
price
$5.75 – 8.37
$12.21 – 19.61
$21.85 – 29.01
1,635,085
734,179
426,635
$7.39
$16.07
$22.06
$5.75 – 29.01
2,795,899
$11.91
The fair value of the share options granted in 2014 (which will vest and be expensed over four years) was
estimated to be within the range of $1.14 to $1.23 per option at the date of grant using the Black-Scholes
option pricing model with the assumptions of a risk free interest rate of between 1.9% to 2.2%; expected
dividend of $0.525 per share; expected volatility of between 38.8% to 41.2% and an expected time until
exercise of 5 to 7 years. Volatility is calculated using the logarithmic share price returns approach based on
historical Company share prices.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
22
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
(b) Restricted share unit (“RSU”) plan
A summary of changes in the RSU plan is as follows:
Units
At December 31, 2013
Vested and paid
Granted
Forfeited
At September 30, 2014
634,983
(146,805)
366,994
(12,648)
842,524
As at September 30, 2014, 420,754 units have been accrued at a value of $2.8 million of which 176,946 units
have been accrued in Accounts payable and accrued liabilities at a value of $1.2 million while 243,808 units
have been accrued in Other liabilities at a value of $1.6 million (December 31, 2013 – 336,833 units were
accrued at a value of $2.0 million of which 132,577 units were accrued in Accounts payable and accrued
liabilities at a value of $0.8 million and 204,256 units were accrued in Other liabilities at a value of $1.2
million).
The Company has entered into a derivative instrument in order to lock in the expense for 670,000 RSUs.
Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of
changes in the value of the RSUs that have been accrued. As the RSUs are accrued over the three-year
period until the RSUs vest, there will not be an exact offset each period.
(c) For the three and nine month periods ended September 30, 2014, the Company has recognized share-based
compensation expense totalling $1.1 million and $1.5 million respectively (2013 – $0.5 million and $2.2 million
respectively).
(d) Deferred share unit (“DSU”) plan
A summary of changes in the DSU plan is as follows:
Units
At December 31, 2013
Granted
Directors’ mandatory retainer
Directors’ voluntary election
Dividends
Redemption
At September 30, 2014
490,130
50,855
2,135
5,697
27,481
(51,981)
524,317
As at September 30, 2014, the 524,317 units outstanding were valued at $3.5 million (December 31, 2013 –
490,130 units valued at $2.9 million).
The Company has entered into a derivative instrument in order to offset its exposure to 490,000 units.
Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of
changes in the value of the outstanding DSUs.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
23
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following is a continuity for the components of Accumulated other comprehensive loss:
Foreign
CTA
As at December 31, 2013
Associated with Assets
held for sale
OCI
As at September 30, 2014
Continuing operations
AvailableNet
Cash flow
for-sale
investment
hedges
securities
hedge
$1,583¹
($3,666)²
(1,673)
(90)
1
637
(3,029)
3,029
($89)¹
4
($5,520)
700
(5,520)
5,520
$700³
Associated with
Assets held for sale
Foreign
CTA
Total
Cash flow
hedges
($7,603)
Total
($7,603)
(1,036)
(8,639)
9,250
$1,673
1,673
(1,673)
($637)
(637)
637
$611
(7,603)
8,214
$611
1
Net of deferred income tax asset/liability of $nil (2013 – $nil).
²Net of deferred income tax asset of $nil (2013 – $1,370).
³Net of deferred income tax liability of $100.
4
Net of deferred tax asset of $nil (2013 – $nil).
19. OTHER INCOME (EXPENSE)
Gain on settlement of Metro call option liability
Loss on cancellation of interest rate swaps (note 13(a)(iii))
Adjustment to contingent consideration (note 14)
Investment write-down and loss
Other
Three months ended
September 30
2014
2013
Nine months ended
September 30
2014
2013
($114)
107
$1,051
(2,781)
107
100
$288
(500)
105
$93
($107)
100
($1,523)
$908
(562)
74
$420
Metro call option liability
In March 2014, the Company and MISA agreed to an early settlement of the put and call arrangements between
them with regards to the remaining 10% interest in Metro English Canada, which was owned by MISA, at a price
of $10.1 million. The put and call arrangements were both exerciseable at the same fixed price of $11.2 million
starting in October 2014. The Company recorded a gain of $1.1 million on the transaction.
20. GAIN ON SALE AND DISCONTINUED OPERATIONS
On May 1, 2014, the Company entered into an agreement to sell all of the shares of Harlequin (which previously
represented the Company’s Book Publishing Segment) to a division of HarperCollins Publishers L.L.C., a
subsidiary of News Corp. (the “Purchaser”). Effective the second quarter of 2014, Harlequin (including its
respective interests in joint ventures) was classified as Assets held for sale in the consolidated statement of
financial position and Harlequin’s operating results (for the seven months to July 31, 2014) have been presented
as a discontinued operation in the consolidated statements of income, comprehensive income and cash flows and
all comparative figures have been restated to reflect this change.
On August 1, 2014, the Company sold all of the shares of Harlequin for a purchase price of $455 million subject to
certain adjustments for working capital and other related items. The Company received net proceeds of $442.2
million resulting in a pre-tax gain of $224.6 million for the three and nine month periods ended September 30,
2014. The proceeds included restricted cash of $22.8 million which will be held in an escrow account for a period
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
24
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
of eighteen months from the date of sale to indemnify the Purchaser for any claims arising in accordance with the
conditions specified in the Share Purchase Agreement.
Upon the closing of the sale, the net assets of Harlequin have been derecognized from Assets held for sale and
the related gain on disposal has been included in discontinued operations. Certain intercompany eliminations
have been reversed in the amounts presented in order to accurately represent the continuing and discontinued
operations. The detailed results of discontinued operations are presented below:
(i) Statement of Income
Operating revenue
Salaries and benefits
Other operating costs
Amortization and depreciation
Restructuring and other charges
Operating profit
Interest and financing costs
Foreign exchange
Income from joint ventures
Other expense
Gain on sale of Harlequin
Income before taxes from discontinued operations
Income and other taxes
Three months ended
September 30
2014
2013
$30,169
$94,735
(8,293)
(22,995)
(20,471)
(57,166)
(6)
1,399
(4)
4,903
(516)
(418)
5,364
224,618²
229,982
(17,650)³
12,559
(3,200)
Nine months ended
September 30
2014
2013
$213,198
$284,058
(58,403)
(68,948)
(134,796)
(172,022)
(1,043)
(2,901)
(5)
(3,986)
18,951
36,201
(457)
(1,089)
4,090
63
639
899
(2,629)¹
(226)
20,594
35,848
,
224,618¹ ²
245,212
35,848
(22,550)³
(10,500)
(958)
(731)
12,885
(359)
(249)
282
12,559
Net income from discontinued operations
$212,332
$9,359
$222,662
$25,348
Attributable to:
Equity shareholders
$212,332
$9,359
$222,662
$25,348
$2.65
$2.64
$0.12
$0.12
Net income from discontinued operations
attributable to equity shareholders per Class A
(voting) and Class B (non-voting) share (note
16(b)):
Basic
Diluted
$2.78
$2.78
$0.32
$0.32
¹ $2.3 million of transaction costs related to the sale of Harlequin as at June 30, 2014 have been reclassified from
Other expense to Gain on sale of Harlequin.
² These amounts include transaction and other costs of $9.6 million related to the sale of Harlequin.
³ Income taxes related to the sale of Harlequin of $17.0 million are included in these amounts. Deferred tax
benefits totalling $14.7 million not related to Harlequin have been used to offset this expense.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
25
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
(ii) Statement of Comprehensive Income
Three months ended
September 30
Net income from discontinued operations
Nine months ended
September 30
2014
2013
2014
$212,332
$9,359
$222,662
$25,348
461
54
2013
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)
449
Unrealized foreign currency translation adjustment for joint
ventures (no income tax effect)
Realized foreign currency translation adjustment (no income
tax effect)
11
(2,984)
Unrealized foreign currency translation adjustment (no
income tax effect)
144
(2,134)
(1,708)
Net movement on cash flow hedges
Income tax effect
2,375
2,487
(600)
(226)
100
(2,535)
190
911
(274)
(1,036)
(1,971)
532
(1,439)
2,680
(800)
1,880
(8,371)
2,432
(5,939)
Loss on cash flow hedges transferred to net income
Income tax effect
2,447
13,210
(3,800)
9,410
Other comprehensive income (loss) that will not be
reclassified to net income (loss) in subsequent periods:
Actuarial gain (loss) on employee benefits
Income tax effect
Other comprehensive income (loss) from discontinued
operations, net of tax
Comprehensive income from discontinued operations,
net of tax
($3,974)
$2,070
($6,975)
$11,857
$208,358
$11,429
$215,687
$37,205
$208,358
$11,429
$215,687
$37,205
Attributable to:
Equity shareholders
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
26
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
(iii) Statement of Cash Flows
Cash was provided by (used in)
Operating activities
Investing activities
Financing activities
Increase (decrease) in cash
Effect of exchange rate changes
Cash, beginning of period
Cash paid on closing
Cash, end of period
Operating activities:
Net income
Gain on disposal of Harlequin
Amortization and depreciation
Deferred income taxes
Loss (income) from joint ventures
Distributions from joint ventures
Non-cash employee benefit expense
Employee benefits funding
Other
Decrease in non-cash working capital
Cash provided by (used in) operating activities of
discontinued operations
Investing activities:
Additions to property, plant and equipment and intangible
assets
Acquisitions and investments
Other
Cash used in investing activities of discontinued operations
Financing activities:
Intercompany dividends paid
Intercompany
Cash provided by (used in) financing activities of
discontinued operations
Cash of discontinued operations represented by:
Cash equivalents – short-term deposits
Bank overdraft
Cash, end of period
Three months ended
September 30
Nine months ended
September 30
2014
2013
2014
$20,816
(1,695)
(46,783)
(27,662)
529
18,707
($8,426)
$8,635
(1,609)
21,311
28,337
403
(9,132)
19,608
(19,608)
($3,945)
(395)
2,103
(2,237)
305
21,540
19,608
(19,608)
($8,426)
$212,332
(207,618)
2,565
516
24
2,645
(8,944)
(5,488)
(3,968)
23
($3,945)
$9,359
958
300
(282)
73
1,291
(1,588)
(27)
10,084
10,732
2013
$41,213
(4,620)
(102,728)
(66,135)
168
57,541
($8,426)
($8,426)
$222,662
(207,618)
1,043
3,765
(639)
1,710
4,826
(15,255)
(5,301)
5,193
3,442
$25,348
2,901
1,900
(899)
2,199
3,975
(4,887)
(1,368)
29,169
12,044
$20,816
$8,635
$41,213
($395)
($1,695)
($1,720)
($4,570)
(50)
($395)
($1,695)
111
($1,609)
($4,620)
$2,103
($40,230)
(6,553)
($4,238)
25,549
($44,480)
(58,248)
$2,103
($46,783)
$21,311
($102,728)
$3,567
(11,993)
($8,426)
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
27
$3,567
(11,993)
($8,426)
TORSTAR – Condensed Consolidated Financial Statements (Unaudited)
21. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Share-based compensation plans
Foreign exchange
Restructuring provisions
Gain on Metro call option liability (note 19)
Media inventory provided to Shop.ca (note 7)
Interest accretion (note 13(b))
Adjustment to contingent consideration
Investment write-down and loss
Other
Three months ended
September 30
2014
2013
($27)
$317
7,247
(251)
(1,445)
(1,103)
69
(107)
300
108
(288)
500
(413)
$6,037
($1,130)
Nine months ended
September 30
2014
2013
$2,023
$91
7,860
614
(6,560)
(1,555)
(1,051)
(965)
241
385
(107)
(908)
562
(521)
(1,671)
$1,885
($3,447)
22. ACQUISITIONS AND INVESTMENTS
Total
(SMG Segment)
Nine months ended September 30, 2014
Deferred payment on prior acquisitions (note 19)
Contingent consideration on prior acquisitions (note 14)
Investments
$10,065
9
10,074
680
Total cash used in acquisitions and investments
$10,754
23. RELATED PARTY TRANSACTIONS
The following summarizes the total value of sales to, purchases from and amounts owed to and by the
Company’s joint ventures and associates for the nine month period ended September 30, 2014.
Joint Ventures
Associates
Sales to
$422
$20
Purchases from
$6,824
Amounts owed by
$137
$7
Amounts owed to
$900
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.
24. SUBSEQUENT EVENT
In October 2014, the Company sold its investment in Tuango, an associated business, for proceeds of $7.6
million and an estimated gain on sale of $4.2 million.
TORSTAR CORPORATION 2014 THIRD QUARTER REPORT
28