2015 Q4 MDA (Annual)

2015 TORSTAR CORPORATION 2015 ANNUAL REPORT PB 2015_TORSTAR AR.indd 1 16-03-15 11:37 AM OPERATING RESULTS ($000) 2015 2014 (1) Operating revenue $786,631 $858,134 Adjusted EBITDA (2) 51,412 92,070 Operating earnings (2) 21,235 61,396 Operating loss (354,069) (44,185) Net income (loss) (404,837) 173,064 Cash from operating activities 38,050 63,358 Adjusted EBITDA – Percentage of revenue (2) 6.5% 10.7% Cash from operating activities – percentage of average equity 5.9% 7.6% PER CLASS A AND CLASS B SHARES Net income (loss) ($5.02) $2.16 Dividends $0.5250 $0.5250 Price range (high/low) $7.50/$2.55 $8.47/$4.96 FINANCIAL POSITION ($000) Cash and cash equivalents and restricted cash $73,076 $290,239 Equity $419,737 $869,720 The Annual Meeting of shareholders will be held Wednesday, May 4, 2016 at The Toronto Star Building, 3rd Floor Auditorium, One Yonge Street, Toronto, beginning at 10 a.m. It will also be webcast live on the Internet. OPERATING REVENUE ($MILLIONS) (1) OPERATING EARNINGS ($MILLIONS) (1, 2) 13 936 13 76 14 858 14 61 15 787 15 21 NET INCOME (LOSS) PER SHARE ADJUSTED EBITDA ($MILLIONS) (1, 2) (0.35) 13 13 108 14 2.16 14 92 (5.02) 15 15 51 (1) These figures reflect the classification of Harlequin into discontinued operations. (2) These are non-IFRS measures. These along with other Non-IFRS measures appear in the President’s message. Refer to page 38 for a reconciliation of IFRS measures (excluding VerticalScope’s adjusted EBITDA to operating profit (loss)), VerticalScope’s Adjusted EBITDA has been calculated as total revenue, less salaries and benefits (1) These figures reflect the classification of Harlequin into discontinued operations. and operating costs, as presented on VerticalScope’s consolidated statement of income, and excludes amortization, depreciation, and interest expense. It also excludes transaction related costs associated with Torstar’s investment as well as certain tax credits. Adjusted EBITDA is not the actual cash provided by VerticalScope’s operating (2) These are non-IFRS measures. Refer to page 38 for a reconciliation to operating profit (loss). activities and is not a recognized measure of financial performance under IFRS. Adjusted EBITDA does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies, including how Torstar presents its own Adjusted EBITDA. This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario). We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, targets, outlooks, This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario). expectations, goals, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 8 under the We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, targets, outlooks, heading “Forward-Looking Statements”. expectations, goals, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 8 under the heading “Forward-Looking Statements”. TORSTAR CORPORATION 2015 ANNUAL REPORT 2 TORSTAR CORPORATION 2015 ANNUAL REPORT 3 2015_TORSTAR AR.indd 2 16-03-15 11:37 AM MESSAGE FROM THE CHAIR John Honderich Chair, Board of Directors 2015 was a year of reinvestment and innovation for Torstar as the company charted a new course for sustainability over the years ahead. The first significant development came with the purchase of a 56-per-cent interest in VerticalScope Holdings Inc., a digital media company that owns and operates more than 600 consumer enthusiast websites across North America. Torstar made the investment using a portion of the proceeds from its sale of Harlequin the year before to Harper Collins Publishers. With a proven record already of profitability and growth, VerticalScope is seen as an engine of growth for Torstar with the potential to expand even more. The second major development was the introduction by the Toronto Star of Toronto Star Touch, an innovative and fully interactive news app designed for tablets that revolutionizes how readers get their news. Styled after the highly successful app already in use by Montreal’s La Presse, Toronto Star Touch was rated one of the best apps of 2015 by Apple. On the editorial side, both the Toronto Star and Metroland newspapers continued their traditions of high quality of editorial content, innovative story-telling and ground-breaking investigations. The Toronto Star maintained its lead as this country’s most-read print newspaper. During the year the company also took some major steps to reduce costs as the relentless pressure of the internet combined with falling newspaper advertising revenues continued to buffet the company. Among these were decisions announced in early 2016 to close the Vaughan Press Centre, shut down the print version of the Guelph Mercury and reduce staff levels across both newspaper groups. Torstar has benefited tremendously by the dedication and effort of its employees and we wish particularly to thank those who served and are no longer with us. Their efforts will not be forgotten. The company has also been served tremendously by the senior executive team that has diligently and wisely directed the reinvestment and innovation strategy. Leading the team is President and Chief Executive Officer David Holland, very ably assisted by Chief Financial Officer and Executive Vice-President Lorenzo DeMarchi. Both, along with Senior Vice-President Strategy and Digital Ventures Chris Goodridge, were instrumental in the VerticalScope selection and eventual purchase. Also providing strategic and operation expertise in 2015 were Ian Oliver, President of Metroland Media Group and John Cruickshank, Publisher of the Toronto Star and President of Star Media Group, who has announced he will be stepping down in May, 2016. Ever since John took over as Publisher in 2009 he has led the Toronto Star to new editorial heights. At the same time, he has wisely and innovatively guided Star Media Group through one of the most tumultuous periods in its history. We owe him a great deal. Finally, Torstar has the good fortune to have a totally engaged, strategic and responsive Board of Directors. The directors’ combined knowledge and perspective were called upon repeatedly as we charted a new path. We were also pleased to announce the appointment of Daryl Aitken as a new director. With her marketing, advertising and digital experience, she brings unique skills to the Board. TORSTAR CORPORATION 2015 ANNUAL REPORT 2 TORSTAR CORPORATION 2015 ANNUAL REPORT 3 2015_TORSTAR AR.indd 3 16-03-15 11:37 AM million; revenue was down 11% to $344 million. Approximately half of T O O U R SHAREHOLDERS the decline in EBITDA was attributable to the start-up investment in Toronto Star Touch. The remaining half was attributable to declining print advertising revenues. The revenue decline was mitigated in part by ongoing efforts to reduce costs. Toronto Star subscriber revenues David Holland continue to remain relatively stable. President and Chief Executive Officer The Toronto Star, our flagship publication, enjoyed successes on a number of fronts. In addition to launching Toronto Star Touch, the Toronto Star continued its tradition of editorial excellence in the print edition and There has never been a time of such rapid change and evolution in the providing a deeper level of engagement and immersion as compared maintained a lead of more than twice as many weekday readers as its media industry as we are experiencing today. And in this fast-changing to a desktop experience. As part of Star Media Group’s broader multi- closest paid daily competitor in the Greater Toronto Area. In addition, era, Torstar is in the midst of a meaningful transition, taking the steps platform strategy, this initiative is proving to be a tremendous catalyst thestar.com had 2.9 million average monthly unique desktop visitors and necessary to position ourselves for a more digital future. We do not expect for change within the organization as we develop our screen-based story- an increasingly important growth in mobile and tablet audience. this transition to be easy, but we do believe it will ultimately be proved telling capability, furthering our commitment to serving our audiences worthwhile. and advertisers in innovative ways. The Toronto Star, with its strength in the Greater Toronto Area, is complemented geographically by Metro. The Metro print publication Over the past 21 months, Torstar’s asset base has been repositioned In our Metroland Media Group operation, we have a meaningful is second only to the Toronto Star in average weekday readership in significantly. In August 2014, we closed the sale of Harlequin Enterprises connection to the communities we serve through publishing and delivery the Greater Toronto Area. Metro also publishes daily print editions in Limited for $455 million. We came to a view that the value of Harlequin to of community newspapers to households throughout Ontario. We are Vancouver, Calgary, Edmonton, Winnipeg, Ottawa and Halifax. We are a larger publisher exceeded the value of Harlequin within Torstar. We acted gaining momentum in building deeper digital connections to audience committed to building value in the Metro franchise. on our conviction. For the year following the sale, we assessed a number of and advertisers in these communities. We are committed to building options to employ the financial capacity created from this transaction. We across print and digital platforms and evolving into the community media Metroland Media Group is a leading community media company with a were delighted on July 29, 2015 to announce our acquisition of a 56-per- and marketing solutions organization of the future.

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