ANNUAL REPORT 2011_TORSTAR AR.indd 1 12-03-13 3:05 PM OPERATING RESULTS ($000) 2011 2010 Operating revenue $1,548,757 $1,483,768 EBITDA (1) 242,249 250,333 Operating profit 189,673 186,193 Net income 218,141 210,729 Cash from operating activities 114,955 157,654 EBITDA – Percentage of revenue 15.6% 16.9% Operating profit – percentage of revenue 12.2% 12.5% Cash from operating activities – percentage of average shareholders’ equity 17.8% 31.2% PER CLASS A AND CLASS B SHARES Net income $2.74 $2.65 Dividends $0.47 $0.37 Price range (high/low) $15.25/7.55 $13.23/5.92 FINANCIAL POSITION ($000) Long-term debt $196,191 $404,586 Equity $706,264 $584,560 The Annual Meeting of shareholders will be held Wednesday, May 9, 2012 at Le Méridien King Edward Hotel, 37 King Street East, Toronto beginning at 10 a.m. It will also be webcast live on the Internet. OPERATING REVENUE ($MILLIONS)(2) OPERATING PROFIT ($MILLIONS) (2) 07 1,547 07 163 08 1,534 08 118 09 1,451 09 95 10 1,484 10 186 11 1,548 11 190 INCOME (LOSS) FROM CONTINUING EBITDA ($MILLIONS) (1) (2) OPERATIONS PER SHARE (2) 07 1.29 07 225 (2.01) 08 08 213 09 0.45 09 192 10 2.65 10 250 11 2.74 11 242 (1) Consolidated operating profit, as presented on the consolidated statements of income, which is before charges for interest and taxes adjusted for depreciation and amortization of intangible assets. It also excludes restructuring and other charges. Please see “Non-IFRS Measures” on page 7. (2) 2010 is restated to an IFRS basis. 2007-2009 are based on Canadian GAAP and are not restated to IFRS. This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the Securities Act (Ontario). We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. Additional information about these factors is contained on page 7. under the heading “Forward-Looking Statements”. 72567$5&25325$7,21$118$/5(3257 B72567$5$5LQGG 30 Message frOM the Chair John honderich Chair, Board of Directors In spite of strong digital and economic headwinds, Torstar broke through to register another stellar year in 2011. While overall earnings (EBITDA) were off slightly from previous year, the company made significant investments across the board that we believe have strengthened both our financial position and our ability to compete in the future. With a very solid balance sheet and limited long-term debt, the Board of Directors approved more than $100 million in new investments. They include increasing our ownership in the Metro newspaper operations (Free Daily News Group) to 90 per cent and creating new Metro papers in Winnipeg and London, establishing new community papers in Brantford, North Bay, Kitchener and London, purchasing the Smith Falls-based Performance Printing Limited, creating a new entertainment weekly in Toronto called The Grid, and purchasing approximately 25 per cent of Blue Ant Media Inc, a new independent media company. When considered together, these investments constitute a significant expansion of our footprint, particularly in Ontario, our primary area of operation. Also, with our cross-country network of Metro newspapers, Torstar now has control of a national platform that positions us well for the future. On the digital side, Harlequin has been undergoing a dramatic transformation as sales shifted to digital books, which leapfrogged ahead at a strong rate. The team at Harlequin has done an outstanding job managing this transformation. Indeed, Harlequin registered its best year ever, leaving aside the impact of foreign exchange. On the newspaper side, investment in new digital opportunities continues apace with digital media revenues now accounting for more than 11 per cent of total media revenues, an increase of 22.8 per cent year over year. One of Torstar’s greatest strengths is the quality of the members of our executive team who bring a superb mix of experience, dedication and commitment to the company. President and Chief Executive Officer David Holland and Chief Financial Officer and Executive Vice-President Lorenzo DeMarchi have expertly steered Torstar through this difficult year, continuing their pattern of innovative leadership and collaboration. Harlequin Publisher and Chief Executive Officer Donna Hayes continues to excel at the highest level, reaffirming her position as one of the world’s great book publishers. 190 John Cruickshank, Publisher of the Toronto Star and President of the Star Media Group, forged ahead with his dynamic transformation at the Toronto Star, leading it to new heights of editorial excellence. Ian Oliver, President of Metroland Media Group, had an outstanding year as the principal architect of his group enlarging its Ontario footprint. Finally, Torstar Digital President Tomer Strolight continued to play a critical role at the core of Torstar’s digital strategy, moving forward with innovative thinking. As usual, a huge part of Torstar’s success in 2011 was the quality of performance and leadership exhibited throughout the company. In tough times, individual employees are often called upon to excel and 2011 was no exception. Time and again, they were more than up to the challenge. In an era of economic challenge, it was necessary to take steps to restructure our businesses that inevitably led to some painful decisions on staffing. We salute those who have departed, knowing their contributions will not be forgotten. 2011 also saw the return of Neil Clark, former Senior Vice-President Strategic Planning at the Toronto Star, to the Torstar Board of Directors. Mr. Clark has previously served on the Board. Throughout the year, the company has been extremely well served by the Board and I would like to express my personal appreciation for their wisdom, sagacity and good humour. TORSTAR CORPORATION 2011 ANNUAL REPORT 2 TORSTAR CORPORATION 2011 ANNUAL REPORT 3 2011_TORSTAR AR.indd 3 12-03-13 3:05 PM We are also thrilled that our newspapers, websites and journalists continued to be recognized for their outstanding editorial efforts throughout the year. tO Our sharehOlDers In 2011, the Toronto Star won three National Newspaper Awards for reporting and photography and captured the 2011 Canadian Journalism Foundation’s Excellence in Journalism Award in the large or national category. It was David holland the first time in the history of the award that a news organization had President and Chief Executive Officer won the top prize for two consecutive years. Also, Metroland newspapers earned 103 awards from the Ontario Community Newspaper Association Better Newspaper Awards and 91 awards from the Suburban Newspaper of America (SNA) Editorial Contest. Metroland led all companies with an Torstar delivered a very solid performance in 2011, with good operating strengths and capabilities. Across these operations, we have powerful brands, impressive 75 awards in the SNA Advertising and Promotions Contest. The results for the company as a whole, major accomplishments in our book access to significant print and digital audiences, a content development Grid, a weekly publication that was launched in the Toronto area in May, publishing and Canadian Media operations that contributed directly to capability, a distribution capability, promotional power and very committed, was named one of the five best designed newspapers in the world by the strategic progress, and a significant strengthening of the company’s financial talented and passionate employees. The Media division had revenues of $1.1 Society for News Design, an international non-profit design organization. position. billion in the year. Torstar Digital showed positive revenue growth in 2011. Among its portfolio Operating results Metroland Media Group is one of Canada’s leading community media of digital businesses, Workopolis, Canada’s foremost career website Despite the challenging economic environment, 2011 proved to be a good companies. Over the years, it has evolved into a diversified business, with a which is owned jointly by Torstar and Square Victoria Digital Properties year for Torstar. We believe the strategic moves we made both in investing in core platform of three daily and more than 110 community newspapers, and (a subsidiary of Power Corporation), enjoyed double-digit revenue and organic growth initiatives within our business and in acquisitions increases operations in flyer distribution, magazines, specialty publications, consumer EBITDA growth in 2011 and continued to expand its leading audience the diversity of our revenue base and will serve Torstar well as we move shows, commercial printing, teleshopping, product sales, directories and position. In 2011, Olive Media, a leading online advertising solutions forward. numerous digital operations. provider, continued to grow revenues. Also, WagJag, a digital marketing platform that features deep discounts to Canadians on local products and Torstar earned EBITDA of $242 million, a slight decrease from the $250 Considering the economic environment in Ontario, Metroland enjoyed a services, sold 2.2 million vouchers, a remarkable achievement given that million earned in 2010. The decline included $6 million from the negative solid year in 2011, with revenues up $41 million over the prior year to $582 it has only been in operation within Torstar since 2010. This initiative in impact of foreign exchange due to the strengthening of the Canadian dollar. million. Revenue growth included $45 million from higher product sales in group buying and the success enjoyed to date results from the powerful Total revenues were $1.55 billion, up from $1.48 billion the prior year. The the TMGTV operations and digital revenue growth of $11 million. Offsetting collaboration of Torstar Digital and Metroland assisted by the promotional growth in total revenue was driven by media segment revenues, which these increases were lower print revenues.