Press ReleaseSource: Torstar Corporation

Torstar Corporation Announces Fourth Quarter and 2006 Full Year Results
Wednesday February 28, 4:00 pm ET

TORONTO, ONTARIO--(MARKET WIRE)--Feb 28, 2007 -- Torstar Corporation (Toronto:TS-B.TO - News) today announced its audited results for the year ended December 31, 2006.

Net income was $36.1 million in the fourth quarter of 2006, down $1.8 million from $37.9 million in the fourth quarter of 2005. Net income per share was $0.46 in 2006, down $0.02 from $0.48 in 2005. Excluding the impact of foreign exchange, net income in the fourth quarter would have been up $3.5 million or $0.05 per share. During the fourth quarter, net income was positively impacted by the investment in CTVglobemedia ("CTVgm") but offset by restructuring provisions in newspapers and book publishing. Underlying operating results were up at Metroland Media Group and Harlequin but down at the Star Media Group.

For the year, net income was $79.1 million in 2006, down $39.7 million from $118.8 million in 2005. Net income per share was $1.01 in 2006, down $0.51 from $1.52 in 2005. The negative impact of foreign exchange caused $23.4 million or $0.30 per share of the decline in year over year results.

"We had a solid fourth quarter," said Robert Prichard, Torstar's President and Chief Executive Officer. "Metroland, our largest business, delivered good revenue and profit growth, closing a strong year with positive momentum. Harlequin, excluding foreign exchange, delivered higher revenues and profits, also ending the year on a positive note. Offsetting these two strong performances were lower revenues and profits at the Toronto Star reflecting difficult advertising trends and increased promotional expenses. In our digital businesses we are encouraged by good revenue growth which we expect to continue into 2007. The quarterly results also included a substantial equity pickup from our investment in CTVglobemedia."

"2006 was a challenging year for Torstar," continued Robert Prichard, "particularly as we faced major negative foreign exchange impacts throughout the year. This is behind us now and with good growth and momentum at Metroland, a strong finish at Harlequin, positive trends in our digital businesses and a determined effort underway to stabilize results at the Toronto Star, we enter 2007 optimistic that it will be a better year."

The following chart provides a continuity of earnings per share from 2005 to 2006:

 

------------------------------------------------------------------------
                                            Fourth Quarter  Year to Date
------------------------------------------------------------------------
Net income per share 2005                            $0.48         $1.52
Changes
- Operations                                  (0.02)        (0.12)
- Currency impact on operations               (0.07)        (0.30)
- Restructuring provisions                    (0.10)        (0.17)
- Gain on sale of properties in 2005          (0.00)        (0.13)
- Non-cash foreign exchange                    0.01          0.04
- Income from associated businesses            0.16          0.16
- Interest on CTVgm investment                (0.04)        (0.05)
- Tax rate                                     0.02
- Change in statutory tax rates                0.02          0.06
------------------------------------------------------------------------
Net income per share 2006                            $0.46         $1.01
------------------------------------------------------------------------

OPERATING RESULTS - YEAR ENDED DECEMBER 31, 2006

Overall Performance

Total revenue was $1,528.3 million in 2006, down $28.6 million from $1,556.9 million in 2005. Newspaper and Digital revenue grew $20.7 million to $1,056.5 million including $14.3 million from acquisitions. Reported Book Publishing revenue was $471.8 million in 2006, down $49.3 million from $521.1 million in 2005. Underlying revenue growth of $9.4 million was more than offset by a $30.0 million decline from the strengthening of the Canadian dollar during the year and $28.7 million from lower gains on U.S. dollar hedges year over year.

Operating profit was $123.3 million in 2006, down $71.2 million from $194.5 million in 2005. The decrease included $20.2 million of higher restructuring provisions in 2006. Newspaper and Digital Segment operating profit was $107.8 million in 2006, down $12.5 million from $120.3 million in 2005 as lower revenue at the Toronto Star and the investment in Torstar Digital more than offset improved results at Metroland Media Group's community newspapers. Book Publishing reported operating profit was $56.3 million in 2006, down $39.1 million from $95.4 million in 2005. Underlying operating profit was down only $2.5 million in the year while the strengthening Canadian dollar decreased profits by $7.9 million and lower gains on the U.S. dollar hedges decreased profits by $28.7 million year over year. Underlying results were up for North America Retail and Overseas but were more than offset by lower North America Direct-To-Consumer results.

Corporate costs were $18.5 million in 2006, down $0.5 million from $19.0 million in 2005. EBITDA, excluding restructuring provisions was $202.1 million in 2006, down $51.4 million from $253.5 million in 2005. Excluding the impact of foreign exchange and restructuring provisions, EBITDA was down $14.8 million in the year.

Restructuring provisions of $22.3 million were incurred in 2006. Star Media Group undertook several initiatives, including the renegotiation of its labour contracts at the Vaughan Press Centre which resulted in a workforce reduction, the outsourcing of its circulation call centre and a fourth quarter targeted separation program for a total cost of $13.6 million. Restructuring provisions of $6.0 million were recorded by Metroland Media Group from restructuring of operations triggered by the combination of the CityMedia and Metroland operations. Harlequin reduced its global workforce by 4% in the third quarter of 2006 at a cost of $2.7 million. In 2005, the Toronto Star recorded a restructuring provision of $2.1 million for a voluntary severance program at the Vaughan Press Centre.

Interest expense was $20.8 million in 2006, up $10.3 million from $10.5 million in 2005. This almost doubling of the expense was from the higher level of debt outstanding during 2006, primarily from the investment in CTVgm, and higher interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $446.2 million in 2006, up from $290.2 million in 2005. Torstar's effective interest rate was 4.7% in 2006 and 3.6% in 2005.

Torstar has U.S. dollar denominated debt which provides a hedge against its U.S. dollar assets. However the offset is not exact as the U.S. dollar assets are primarily working capital with amounts fluctuating daily. As a result of the inexact offset and changes in the relative strength of the Canadian dollar, Torstar reports a non-cash foreign exchange gain or loss each year on the translation of its net U.S. dollar asset position. The Canadian dollar strengthened relative to the U.S. dollar by approximately 6% in 2006 and 7% in 2005. In 2006, there was a non-cash translation gain of $0.1 million on the translation of Torstar's net U.S. dollar asset position compared with a loss of $2.7 million reported in 2005.

Income from associated businesses was $16.0 million in 2006 compared with $0.6 million in 2005. The income in 2006 includes $14.0 million from CTVgm's results for the quarter ended November 30, 2006 (its first quarter of fiscal 2007) adjusted for the impact of the allocation of Torstar's purchase price to CTVgm's underlying assets and liabilities. (As Torstar and CTVgm do not have coterminous quarter-ends, Torstar reflects CTVgm's operations with a one-month lag.) CTVgm had a strong first quarter with revenues and EBITDA up in both its broadcast and print operations. During the quarter CTVgm acquired 100% of CHUM Limited, completed a refinancing and sold its 40% interest in Workopolis. CTVgm is equity accounting for CHUM while the common shares are being held in a trust pending regulatory approval of the transaction. Torstar's income from Black Press was $1.8 million in 2006 compared with $0.6 million in 2005. Black Press had a strong 2006, with EBITDA up from acquisitions and improved operations. Black Press' results were negatively impacted during 2006 by a non-cash mark-to-market loss on foreign exchange and interest rate derivatives.

Torstar reported a gain on the sale of properties of $12.4 million in 2005 from the sale of the land and building in Kitchener that had previously been occupied by The Record and the sale of surplus land at 7 Queen's Quay East in Toronto. On an after-tax basis the 2005 gain was $0.13 per share.

Torstar's effective tax rate was 33.3% in 2006 compared with 38.8% in 2005. During 2006, the Canadian federal government enacted corporate income tax decreases for future years. Under Canadian generally accepted accounting principles the impact of these changes on Torstar's future income tax assets and liabilities is to be recorded during the period the tax changes are substantially enacted. The impact was to reduce Torstar's tax expense by $4.6 million and its effective tax rate by 3.9%. Excluding this adjustment, Torstar's effective tax rate was 37.2%. The effective tax rate was lower in 2006 from the impact of the significant increase in income of associated businesses which is tax effected at a capital gains rate.

Segment Operating Results - Newspapers and Digital

The Newspapers and Digital Segment includes the newspaper, digital, specialty publications and commercial printing results for Star Media Group and Metroland Media Group ("Metroland"). The Star Media Group includes the Toronto Star, thestar.com, toronto.com, and the jointly owned LiveDeal.ca, Metro free daily newspapers in Toronto, Ottawa and Vancouver and the Chinese language newspaper Sing Tao Daily. The Star Media Group also includes the Torstar Digital corporate group, Workopolis and Olive Canada Network. Metroland Media Group publishes in print and on-line more than 100 community newspapers, three daily newspapers, Goldbook Directories, a number of specialty publications, and operates several consumer shows throughout Ontario. The results for Transit Television Network ("Transit TV"), a provider of full motion, broadcast-quality information and entertainment to passengers on buses, rail and other modes of mass transit on screens mounted in the vehicle, are also reported in this segment.

The following tables set out, in $000's, the results for the reporting units within the Newspapers and Digital Segment for the years ended December 31, 2006 and 2005.

 

---------------------------------------------------------------------------
                             Operating           Operating          Profit
                               Revenue        Profit (Loss)         Margin
                       2006     2005(1)    2006       2005     2006   2005
---------------------------------------------------------------------------

Star Media         $496,518   $501,627  $20,474    $37,806      4.1%   7.5%
Metroland Media     558,156    530,694   99,911     94,251     17.9%  17.8%
Transit TV            1,788      3,495  (12,536)   (11,769)     n/a    n/a

---------------------------------------------------------------------------
Segment Total    $1,056,462 $1,035,816 $107,849   $120,288     10.2%  11.6%
---------------------------------------------------------------------------


----------------------------------------------------------------------
                 Depreciation and
                     Amortization           EBITDA(2)   EBITDA Margin
                    2006     2005     2006      2005    2006     2005
----------------------------------------------------------------------

Star Media       $32,297  $33,894  $52,771   $71,700    10.6%    14.3%
Metroland Media   13,624   12,574  113,535   106,825    20.3%    20.1%
Transit TV         3,342    2,574   (9,194)   (9,195)    n/a      n/a

----------------------------------------------------------------------
Segment Total    $49,263  $49,042 $157,112  $169,330    14.9%    16.3%
----------------------------------------------------------------------

(1) Metroland's 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactive restatement, of EIC-156 - "Accounting by a vendor for consideration given to a customer". The effect was to decrease both revenues and operating expenses by $5.3 million in 2005. The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA.

(2) EBITDA is calculated as reporting unit or segment operating profit plus depreciation and amortization. It excludes restructuring provisions.

Total revenue of the Newspaper and Digital Segment was $1,056.5 million in 2006, up $20.7 million from $1,035.8 million in 2005, including $14.3 million from acquisitions. Digital revenues were 3.2% of the total in 2006, up from 2.6% in 2005.

Star Media Group

The Star Media Group reported revenues of $496.5 million in 2006, a decline of $5.1 million from $501.6 million in 2005 primarily from lower advertising revenue at the Toronto Star offset partially by higher digital revenues. Star Media Group's EBITDA was $52.8 million in 2006, down $18.9 million from $71.7 million in 2005. $1.3 million of the decline in EBITDA was from higher losses related to Weekly Scoop in 2006. The Star Media Group had an operating profit of $20.5 million in 2006, down $17.3 million from $37.8 million in 2005.

Advertising revenue continued to be a significant challenge for the Toronto Star throughout 2006. Advertising linage was down 7.2% in the year with declines across all major categories. National, travel and classified linage were each down approximately 10%. Retail linage was relatively stable as this category benefited from the new zoned advertising sections. The effective average line rate was up 2.4% in 2006. The jointly-owned Sing Tao Daily and Metro newspapers grew revenues by $4.6 million in 2006 from a combination of market expansion, increased advertising volumes and higher effective average rates. Workopolis continued its trend of increasing revenues and Olive Canada Network contributed to the Torstar Digital revenue growth in its first year of operations.

Higher newsprint pricing and promotional costs were mitigated by savings in labour and pension expenses for the Toronto Star in 2006. During 2006, the Toronto Star undertook several initiatives to reduce costs, including the renegotiation of its labour contracts at the Vaughan Press Centre, the outsourcing of its circulation call centre and a targeted separation program. The cost savings from these programs will be realized in 2007.

Torstar Digital payroll and operating costs were higher in 2006 from the investment in building the LiveDeal.ca and Olive Canada Network businesses as well as developing TOPS (an online publishing system that will power all of Torstar's newspaper web sites and Toronto.com). Promotional costs were higher as Workopolis undertook a significant marketing program.

Weekly Scoop incurred operating losses of $4.5 million in the first six months of 2006, prior to ceasing publication in June. Operating losses were $3.2 million in 2005. TMG TV's revenue and operating profit were down year over year as the direct response advertising market continued to be challenging.

Metroland Media Group

Revenues were up $27.5 million in 2006 at Metroland Media Group including $14.3 million from the impact of acquisitions. Advertising and distribution revenues were up at the community newspapers while the daily newspapers had a decline in advertising revenues. EBITDA was $113.5 million in 2006, up $6.7 million from $106.8 million in 2005. Operating profit was $99.9 million in the year, up $5.6 million from $94.3 million in 2005.

During 2006, Metroland made several smaller acquisitions of community newspapers and magazines as well as realizing the full-year benefits of the acquisitions made during 2005. Metroland continued its trend of new publications and market expansion during 2006 including expansion of the Gold Book Directories.

Advertising linage was up 3.1% at the community newspapers, excluding acquisitions, and down 1.1% at the daily newspapers. Distribution volumes grew 6.0% in 2006 with just over 3.2 billion pieces distributed by the community and daily newspapers. Excluding the impact of acquisitions, distribution volumes grew by 4.5% in the year.

Newsprint costs were higher in 2006 as a result of higher prices and increased consumption from acquisitions and market expansions. Payroll and department costs were up in 2006, commensurate with the increase in revenue at the community newspapers and general wage increases. Costs related to the strike at the Hamilton Web facility, which was settled during the second quarter of 2006, were $1.4 million lower in 2006. Metroland Media Group undertook a restructuring of its operations in the fourth quarter of 2006 in order to realize cost savings resulting from the combination of the CityMedia and Metroland operations.

Transit TV

Transit TV 2006 revenues of $1.8 million were down from $3.5 million in 2005. In 2005, the revenue base was primarily from local advertisers. In 2006, Transit TV changed its sales emphasis from local to national advertisers. The national advertisers have been slower than expected to adopt this new advertising media resulting in lower revenues year over year. During 2006, Transit TV completed the Los Angeles Metro (MTA) installation. Transit TV reported an EBITDA loss of $9.2 million in 2006 consistent with the loss in 2005. Transit TV's operating loss was $12.5 million in 2006, up $0.7 million from $11.8 million in 2005 with higher depreciation from the completion of the Los Angeles installation.

Segment Operating Results - Book Publishing

The Book Publishing Segment reports the results of Harlequin Enterprises Limited, a leading global publisher of women's fiction. Harlequin publishes women's fiction around the world, selling books through the retail channel and directly to the consumer by mail and the Internet. Harlequin's women's fiction publishing operations are comprised of three divisions: North America Retail, North America Direct-To-Consumer and Overseas. In 2006 Harlequin published books in 26 languages in 109 international markets. Harlequin reported a total of 131 million books sold in 2006, consistent with 2005.

The following tables set out, in $000's, the results for the Book Publishing Segment, including the impact of foreign currency movements and foreign currency contracts, for the years ended December 31, 2006 and 2005.

 

----------------------------------------------------------------
                                             2006        2005(3)
----------------------------------------------------------------
Reported revenue, prior year             $521,072    $534,448
Impact of currency movements              (29,960)    (32,904)
Impact of U.S. dollar hedges              (28,666)      8,072
Change in underlying operating revenue      9,362      11,456
----------------------------------------------------------------
Reported revenue, current year           $471,808    $521,072
----------------------------------------------------------------

U.S. dollar hedge gains                       802      29,468
----------------------------------------------------------------
Revenue before hedges, current year      $471,006    $491,604
----------------------------------------------------------------

(3) Harlequin's 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactive restatement, of EIC-156 - "Accounting by a vendor for consideration given to a customer". The effect was to decrease both revenues and operating expenses by $4.8 million in 2005. The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA.

 

----------------------------------------------------------------
                                               2006        2005
----------------------------------------------------------------
Reported operating profit, prior year       $95,381     $97,182
Impact of currency movements                 (7,264)     (8,146)

Impact of U.S. dollar hedges                (28,666)      8,072
Impact of other currency foreign exchange
 contracts                                     (687)        214
Change in operating profit                   (2,487)     (1,941)
----------------------------------------------------------------
Reported operating profit, current year     $56,277     $95,381
----------------------------------------------------------------

Gains from U.S. dollar and other currency
 foreign exchange contracts                     958      30,311
----------------------------------------------------------------

Operating profit before foreign exchange
 contract gains, current year               $55,319     $65,070
----------------------------------------------------------------

Reported operating profit margin               11.9%       18.3%
Operating profit margin, before foreign
 exchange contract gains                       11.7%       13.2%
Reported operating profit, current year     $56,277     $95,381
Depreciation and amortization                 7,162       7,719
----------------------------------------------------------------
EBITDA(4), current year                     $63,439    $103,100
----------------------------------------------------------------

(4) EBITDA is calculated as segment operating profit plus depreciation and amortization. It excludes restructuring provisions.

Book Publishing revenues were up $9.4 million in 2006 excluding the impact of foreign exchange. North America Retail was up $9.9 million, North America Direct-To-Consumer was down $5.7 million and Overseas was up $5.2 million.

Book Publishing operating profits were down $2.5 million in 2006 excluding the impact of foreign exchange. North America Retail was up $2.7 million, North America Direct-To-Consumer was down $6.5 million and Overseas was up $1.3 million. Harlequin reduced its global workforce by 4% through a restructuring completed during the second half of 2006.

North America Retail increased book sales in 2006 after stabilizing in 2005. Significant efficiency improvements were made to the series business in 2006 as fewer books were printed and distributed and more books were sold. Sales of single title books also increased in 2006. Lower promotional and sales support costs were partially offset by increased product and distribution costs.

The North America Direct-To-Consumer revenue decline in 2006 was due to both fewer shipments of a children's direct-to-home continuity program and from shipping disruptions experienced early in the year associated with the bankruptcy of a key supplier. While the lower revenue in the children's direct-to-home continuity program did not impact operating profit, the shipping disruptions, in conjunction with the long-term decline in the customer base and higher product costs contributed to the year over year decline in earnings. Improved sales through the Internet channel partially offset this decline.

The Overseas markets had mixed results in 2006 with improvements in the United Kingdom and the Nordic Group offset by lower results in Germany. In the United Kingdom improved retail results, primarily from adjustments to prior period returns provisions, more than offset lower direct-to-consumer volumes. The Nordic Group was up significantly with growth in both the single title and series lines. Germany's results were lower in 2006 with lower sales in its single title business primarily from the level of success in 2005 from a unique publishing program that did not continue in 2006. Brazil, a joint venture launched in 2005, showed improvement in 2006 selling more books and making progress towards break-even.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Funds are generally used for capital expenditures, debt repayment and distributions to shareholders. Long-term debt is used to supplement funds from operations and as required for acquisitions. It is expected that future cash flows from operating activities, combined with the credit facilities available will be adequate to cover forecasted financing requirements.

In 2006, $111.6 million of cash was generated by operations, $449.4 million was used for investing activities and $338.0 million was generated by financing activities. Cash and cash equivalents net of bank overdraft increased by $2.9 million in the year from $41.0 million to $43.9 million.

Operating activities

Operating activities provided cash of $111.6 million in 2006, down $12.5 million from $124.1 million in 2005. The lower level of cash provided in 2006 reflected the lower operating profits offset partially by lower pension funding and a smaller increase in non-cash working capital.

Other adjustments to operating cash flows were $2.4 million in 2006 and $17.6 million in 2005. In 2006, the adjustments included pension contributions in excess of pension expense partially offset by the non-cash stock-based compensation expense. In 2005, pension contributions in excess of pension expense and the gain from the sale of land were partially offset by the non-cash foreign exchange loss and the non-cash stock-based compensation expense.

Non-cash working capital investments increased $8.4 million in 2006. Receivables increased $16.3 million in 2006 primarily from improved fourth quarter revenues in Book Publishing as the Newspaper and Digital receivables were flat year over year. Prepaid and recoverable income taxes increased $13.5 million year over year primarily due to the timing of installments in 2006. Accounts payable and accrued liabilities increased $22.3 million in 2006 from a combination of higher restructuring provisions and the timing of payments for trade payables. In 2005, non-cash working capital increased $42.7 million from increases in receivable and prepaid balances and reductions in payables.

Investing activities

During 2006, $449.4 million was used for investments, up from $74.6 million in 2005.

In 2006, $378.0 million was used for the initial purchase of 20% of CTVgm and the additional investment related to CTVgm's acquisition of CHUM. In the fourth quarter of 2006, Torstar acquired an additional 10% of Workopolis for $28.8 million. Torstar also completed a number of other acquisitions during 2006 primarily of community newspapers and magazines for a total purchase price of $4.7 million and made an additional investment in Vocel, Inc. for $1.1 million.

During 2005, $59.4 million was used for acquisitions and investments, including community newspapers in the Muskoka, Huntsville, Parry Sound and Ottawa areas. Metroland Media Group also acquired the Toronto Wine and Cheese Show and Paton Publishing (a contract publisher and producer of focused marketing campaigns aimed principally at youth audiences). The Metroland Media Group 2005 acquisitions had a total purchase price of $48.4 million. Harlequin completed the $5.0 million acquisition of BET Books from Black Entertainment Television during 2005 and Torstar made $6.0 million of portfolio investments in Vocel, Inc. and LiveDeal, Inc.

Additions to property plant and equipment were $38.3 million in 2006, up slightly from $35.3 million in 2005. The 2006 additions included general capital replacement across all the operations, $8.5 million for inserting machines at Metroland Media Group's community newspapers and $4.1 million for the completion of Transit TV's Los Angeles installation.

During 2005, total proceeds of $17.7 million were received from the sale of the property in Kitchener that had previously been occupied by The Record and the surplus land at 7 Queen's Quay East in Toronto. There were no comparable transactions in 2006.

Financing activities

Cash of $338.0 million was generated by financing activities during 2006, compared with a use of $45.3 million in 2005.

Torstar increased its long-term debt by $390.2 million in 2006 primarily to fund its investment in CTVgm. During 2006, Torstar issued $618.8 million of bankers' acceptances under a new banking facility and repaid $228.6 million of commercial paper. No medium term notes were issued or matured during 2006.

Cash dividends paid to shareholders were $57.2 million in 2006, up $0.3 million from $56.9 million in 2005. $3.1 million of cash was received from the exercise of stock options in 2006, down from $8.4 million received in 2005.

Torstar had two normal course issuer bids outstanding during the period May 7, 2004 to May 5, 2006. In 2005, 904,100 Class B shares were repurchased for a total price of $20.9 million. There were no shares purchased in 2006.

OPERATING RESULTS - THREE MONTHS ENDED DECEMBER 31, 2006

Overall Performance

Total revenue was $414.6 million in the fourth quarter, down $2.6 million from $417.2 million in the fourth quarter of 2005. Newspaper and Digital revenue was up $2.0 million to $294.6 million including $1.5 million from acquisitions. Reported Book Publishing revenues were $120.0 million in the fourth quarter of 2006, down $4.6 million from $124.6 million in the same period last year. Excluding the impact of $8.1 million from lower gains on U.S. dollar hedges year over year, underlying revenues were up $3.6 million in the quarter.

Operating profit was $42.7 million in the fourth quarter, down $22.4 million from $65.1 million in the fourth quarter of 2005. The decrease included $11.7 million of restructuring provisions in 2006. Newspaper and Digital Segment operating profit was $42.5 million in 2006, down $5.3 million from $47.8 million in 2005, as improved results at Metroland Media Group were more than offset by the earnings impact of the revenue decline at the Toronto Star and the investment spending at Torstar Digital. Book Publishing Segment reported operating profits were $16.6 million in the fourth quarter, down $5.8 million from $22.4 million in the same period last year. Excluding the impact of $8.1 million from lower gains on U.S. dollar hedges year over year, underlying operating profits were up $2.4 million in the fourth quarter.

Corporate costs were $4.7 million in the fourth quarter of 2006, down $0.5 million from $5.2 million in 2005. The decrease in costs in the fourth quarter is related to the timing of expenses year over year. EBTIDA, excluding restructuring provisions, was $68.4 million in the fourth quarter, down $10.2 million from $78.6 million in the same period last year. Excluding the impact of foreign exchange and restructuring provisions, EBITDA was down $2.0 million in the fourth quarter.

Restructuring provisions of $11.7 million were incurred in the fourth quarter of 2006. This included a targeted separation program at the Toronto Star and a restructuring at Metroland Media Group in order to realize cost savings from the combination of the CityMedia and Metroland operations.

Interest expense was $8.8 million in the fourth quarter of 2006, up $5.9 million from $2.9 million in the fourth quarter of 2005. This significant increase was from the higher level of debt outstanding during the fourth quarter of 2006, primarily from the CTVgm acquisition, and higher interest rates. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $667.4 million in the fourth quarter of 2006, up from $284.2 million in 2005. Torstar's effective interest rate was 5.3% in the fourth quarter of 2006 and 4.1% in 2005.

Torstar has U.S. dollar denominated debt which provides a hedge against its U.S. dollar assets. However the offset is not exact as the U.S. dollar assets are primarily working capital with amounts fluctuating daily. As a result of the inexact offset and changes in the relative strength of the Canadian dollar, Torstar reports a non-cash foreign exchange gain or loss each year on the translation of its net U.S. dollar asset position. In the fourth quarter of 2006, there was a non-cash translation gain of $1.1 million on the translation of Torstar's net U.S. dollar asset position compared with a gain of $0.1 million reported in 2005.

Income from associated businesses was $14.8 million in the fourth quarter of 2006 compared with $0.3 million in 2005. The income in 2006 includes $14.0 million from CTVgm's results for the quarter ended November 30, 2006 (its first quarter of fiscal 2007) adjusted for the impact of the allocation of Torstar's purchase price to CTVgm's underlying assets and liabilities. (As Torstar and CTVgm do not have coterminous quarter-ends, Torstar reflects CTVgm's operations with a one-month lag.) CTVgm had a strong first quarter with revenues and EBITDA up in both its broadcast and print operations. During the quarter CTVgm acquired 100% of CHUM, completed a refinancing and sold its 40% interest in Workopolis. CTVgm is equity accounting for CHUM while the common shares are being held in a trust pending regulatory approval of the transaction. Torstar's income from Black Press was $0.9 million in the fourth quarter of 2006. Black Press had a strong quarter, with EBITDA up from acquisitions and improved operations. Black Press' results were negatively impacted during the quarter by a non-cash mark-to-market loss on foreign exchange and interest rate derivatives.

Torstar's effective tax rate was 27.5% in the fourth quarter of 2006, down from 39.5% in the same period in 2005. The effective tax rate was lower in the fourth quarter of 2006 from the impact of the significant increase in income of associated businesses which is tax effected at a capital gains rate, the changes in future Canadian federal corporate income tax rates, the mix of income during the quarter and the timing of the recording of permanent differences in the fourth quarter of 2005.

Segment Results - Newspapers and Digital

The following tables set out, in $000's, the results for the reporting units within the Newspapers and Digital Segment for the fourth quarters ended December 31, 2006 and 2005.

 

---------------------------------------------------------------------------
                             Operating           Operating          Profit
                               Revenue        Profit (Loss)         Margin
                       2006     2005(5)    2006       2005     2006   2005
---------------------------------------------------------------------------

Star Media         $135,858   $140,202  $12,984    $21,081     9.6%  15.0%
Metroland Media     158,154    151,849   32,710     29,634    20.7%  19.5%
Transit TV              564        545   (3,203)    (2,892)    n/a    n/a

---------------------------------------------------------------------------
Segment Total      $294,576   $292,596  $42,491    $47,823    14.4%  16.3%
---------------------------------------------------------------------------


----------------------------------------------------------------------
                 Depreciation and
                     Amortization           EBITDA(6)   EBITDA Margin
                    2006     2005     2006      2005    2006     2005
----------------------------------------------------------------------

Star Media        $7,867   $7,833  $20,851   $28,914    15.3%    20.6%
Metroland Media    3,328    3,150   36,038    32,784    22.8%    21.6%
Transit TV           971      636   (2,232)   (2,256)    n/a      n/a

----------------------------------------------------------------------
Segment Total    $12,166  $11,619  $54,657   $59,442    18.6%    20.3%
----------------------------------------------------------------------

(5) Metroland's 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactive restatement, of EIC-156 - "Accounting by a vendor for consideration given to a customer". The effect was to decrease both revenues and operating expenses by $1.5 million in the fourth quarter of 2005. The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA.

(6) EBITDA is calculated as reporting unit or segment operating profit plus depreciation and amortization. It excludes restructuring provisions.

Newspaper and Digital revenues were up $2.0 million in the fourth quarter of 2006, including $1.5 million from acquisitions. Higher revenues at Metroland Media Group's community newspapers and Torstar Digital were reduced by lower advertising revenues at the Toronto Star. Digital revenues were 3.4% of the total in the fourth quarter of 2006, up from 2.5% in the fourth quarter of 2005.

Linage was down 9.3% in the fourth quarter of 2006 at the Toronto Star with national, travel and classified linage all having a difficult quarter. Retail linage was relatively stable. The lower linage included the impact of one less publishing Saturday compared with the fourth quarter of 2005. Both Workopolis and Olive Canada Network contributed to the revenue growth in the fourth quarter. At Metroland Media Group, community newspaper advertising revenues were up $5.0 million in the quarter with a 7.3% increase in linage, excluding the impact of acquisitions. Linage was down 4.6% at Metroland Media Group's daily newspapers in the fourth quarter with weakness in the national and multi-market retail categories. Distribution volumes were up 7.4% in the fourth quarter for the community and daily newspapers, increasing revenue by $2.8 million, excluding the impact of acquisitions.

EBITDA for the Newspaper and Digital Segment was $54.7 million in the fourth quarter, down $4.7 million from $59.4 million in 2005. Improved results at Metroland Media Group were more than offset by the earnings impact from the revenue declines and increased promotional expenses at the Toronto Star and the investment spending at Torstar Digital. In the fourth quarter of 2005, Weekly Scoop had EBITDA losses of $2.6 million. Operating profit was $42.5 million in the fourth quarter of 2006, down $5.3 million from $47.8 million in 2005.

Segment Results - Book Publishing

The following tables set out, in $000's, the results for the Book Publishing Segment, including the impact of foreign currency movements and foreign currency contracts, for the fourth quarters ended December 31, 2006 and 2005.

 

----------------------------------------------------------------------
                                                     2006      2005(7)
----------------------------------------------------------------------
Reported revenue, fourth quarter prior year      $124,631    $128,873
Impact of currency movements                         (137)     (7,849)
Impact of U.S. dollar hedges                       (8,065)        567
Change in underlying operating revenue              3,605       3,040
----------------------------------------------------------------------
Reported revenue, fourth quarter current year    $120,034    $124,631
----------------------------------------------------------------------

U.S. dollar hedge gains                                47       8,112
----------------------------------------------------------------------
Revenue before hedges, fourth quarter
 current year                                    $119,987    $116,519
----------------------------------------------------------------------


-------------------------------------------------------------------------
                                                          2006      2005
-------------------------------------------------------------------------
Reported operating profit, fourth quarter prior year   $22,438   $24,865
Impact of currency movements                               (92)   (1,510)
Impact of U.S. dollar hedges                            (8,065)      567
Impact of other currency foreign exchange contracts        (63)      686
Change in operating profit                               2,357    (2,170)
-------------------------------------------------------------------------

Reported operating profit, fourth quarter current year $16,575   $22,438
-------------------------------------------------------------------------


Gains from U.S. dollar and other currency foreign
 exchange contracts                                         91     8,219
-------------------------------------------------------------------------

Operating profit before foreign exchange contract
 gains, fourth quarter current year                    $16,484   $14,219
-------------------------------------------------------------------------

Reported operating profit margin                          13.8%     18.0%
Operating profit margin, before foreign exchange
 contract gains                                           13.7%     12.2%

Reported operating profit, fourth quarter current year $16,575   $22,438
Depreciation and amortization                            1,847     1,875
-------------------------------------------------------------------------
EBITDA(8), fourth quarter current year                 $18,422   $24,313
-------------------------------------------------------------------------

(7) Harlequin's 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactive restatement, of EIC-156 - "Accounting by a vendor for consideration given to a customer". The effect was to decrease both revenues and operating expenses by $1.0 million in the fourth quarter of 2005. The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA.

(8) EBITDA is calculated as segment operating profit plus depreciation and amortization. It excludes restructuring provisions.

Book Publishing revenues were up $3.6 million in the fourth quarter of 2006 excluding the impact of foreign exchange. North America Retail was up $5.6 million, North America Direct-To-Consumer was down $4.2 million and Overseas was up $2.2 million.

Book Publishing operating profits were up $2.4 million in the fourth quarter of 2006 excluding the impact of foreign exchange. North America Retail was up $3.3 million, North America Direct-To-Consumer was down $2.1 million and Overseas was up $1.2 million.

North America Retail revenues and operating profits were up in the fourth quarter with higher series and single title net unit sales and lower promotional expenses. North America Direct-To-Consumer revenues were lower in the fourth quarter from the lower sales of the children's direct-to-home continuity program and the lower customer base including the impact of the shipping disruption earlier in the year. Overseas gains included continued strong results from the Nordic Group and improved results in the United Kingdom.

Liquidity

In the fourth quarter of 2006, $28.8 million of cash was generated by operations, $39.4 million was used for investing activities and $6.6 million was generated by financing activities. Cash and cash equivalents net of bank overdraft decreased by $1.1 million in the quarter from $45.0 million to $43.9 million.

Operating activities provided $28.8 million of cash in the quarter, down from $34.8 million in 2005. The decrease reflected the lower level of operating income, lower pension funding and a smaller increase in non-cash working capital in the fourth quarter year over year.

During the fourth quarter of 2006, $30.5 million was used for acquisitions, primarily for the incremental 10% of Workopolis. During the fourth quarter of 2005, $24.5 million was spent on acquisitions and investments including the community newspapers in Ottawa, BET Books and the portfolio investment in LiveDeal, Inc. Fixed asset additions were $9.0 million in the quarter down slightly from $10.2 million in 2005.

Torstar issued $19.2 million of bankers' acceptances during the fourth quarter of 2006 and paid dividends of $14.1 million. Torstar issued $13.2 million of commercial paper during the fourth quarter of 2005 and paid dividends of $14.3 million. During the fourth quarter of 2005, Torstar purchased 314,900 shares for a total price of $7.0 million under the normal course issuer bid that opened on May 6, 2005.

2007 OUTLOOK

The outlook for the Newspapers and Digital Segment is mixed. The community newspapers have been able to maintain linage and revenue growth over the past few years and continue to perform well. However, the daily newspaper businesses continue to face significant revenue challenges. The Toronto Star has realized linage declines of 7% and 8% for 2006 and 2005 respectively, with higher effective average line rates unable to offset the revenue loss. The level of competition for advertising dollars in Toronto, both in print and from other forms of media, remains high. New products and pricing strategies will continue to be introduced by the newspapers to meet the changing needs of advertisers. In addition, provision of services to our readers and advertisers leveraging the Internet will remain a priority. Cost savings of approximately $6.5 million are expected to be realized in 2007 from the various restructuring provisions undertaken in 2006. The focus in 2007 for Torstar Digital, led by Workopolis, is to grow revenue after building audience and market share in 2006. While some of the individual properties are expected to improve EBITDA results in 2007, overall costs for Torstar Digital, including marketing spending, are expected to offset most of the growth resulting in stable EBITDA in 2007 for Torstar Digital.

For Book Publishing, following the modest decline in profit experienced in 2006, the outlook for 2007 is for stability. Harlequin has stabilized the total number of books sold over the past three years despite difficult trends in its direct-to-consumer operations. Investment will continue in innovation and new products including digital initiatives in 2007. Cost savings of approximately $3.0 million are expected from the restructuring undertaken in late 2006. Harlequin will continue to be subject to the impact of changes in the value of the Canadian dollar relative to the U.S. dollar and other currencies. Torstar has reduced a portion of this exposure by entering into forward foreign exchange contracts to sell $27.5 million U.S. dollars during 2007 at a rate of $1.14.

Torstar's investment in CTVgm will have an uncertain impact on Torstar's earnings in 2007. The results reported by Torstar for CTVgm in the fourth quarter of 2006 are not indicative of what is expected to be reported in the next three quarters. This is due to the seasonal nature of CTVgm's businesses with the fall being the strongest quarter. Torstar will have increased interest expense in 2007 from the higher levels of debt and higher interest rates. This interest expense will be funded by Torstar's other operations as there currently is no expectation of cash distributions from CTVgm.

RECENT DEVELOPMENTS

In February 2007, Torstar and Metro International announced the launch of Metro Calgary on March 5th and Metro Edmonton on April 2nd. The new editions will be distributed through a combination of promoters, street boxes and strategic locations ramping up to a total daily circulation of 60,000 copies per city.

OTHER

On February 28, 2007, Torstar declared a quarterly dividend of 18.5 cents per share on its Class A shares and Class B non-voting shares, payable on March 31, 2007, to shareholders of record at the close of business on March 13, 2007.

Eligible Dividend Designation

On February 22, 2007, Canadian federal tax legislation was passed reducing the effective tax rate on "eligible dividends" paid after 2005 by large Canadian corporations to Canadian individuals. Torstar advises that, for the purposes of the Income Tax Act, Canada and for any relevant provincial tax legislation, all dividends paid by it in 2006 were eligible dividends, and all dividends paid hereafter (including the above dividend payable on March 31, 2007) will be designated as eligible dividends unless indicated otherwise.

ADDITIONAL INFORMATION

For additional information, please refer to Torstar's audited consolidated financial statements for the year ended December 31, 2006 and the 2006 Annual Management's Discussion and Analysis. Both documents were filed today with Sedar and are available on Torstar's corporate website at www.torstar.com.

CONFERENCE CALL

Torstar Corporation has scheduled a conference call for February 28, 2007 at 5:00 p.m. to discuss its fourth quarter results. The dial-in number in the Toronto area is 416-641-6451 and the toll free number for long distance participants is 1-800-734-1246. A live broadcast of the conference call will be available over the Internet at the News & Media Centre page on www.torstar.com and will be archived on the website within one hour of the completion of the webcast. A recording of the conference call will be available for 9 days by calling 416-626-4100 or 1-800-558-5253 and entering reservation number 21327039.

About Torstar Corporation

Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include the Star Media Group led by the Toronto Star, Canada's largest daily newspaper and digital properties including thestar.com, toronto.com, LiveDeal.ca, Workopolis, and Olive Canada Network; Metroland Media Group, publishers of community and daily newspapers in Ontario; and Harlequin Enterprises, a leading global publisher of women's fiction.

Non-GAAP Measures

Management uses both operating profit and EBITDA as measures to assess the performance of the reporting units and business segments. EBITDA is a measure that is also used by many of Torstar's shareholders, creditors, other stakeholders and analysts as a proxy for the amount of cash generated by the reporting unit or segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under GAAP. Torstar calculates EBITDA as the reporting unit or segment's operating profit before restructuring provisions, interest, unusual items, taxes, depreciation and amortization of intangible assets. Torstar's method of calculating EBITDA may differ from other companies and accordingly, may not be comparable to measures used by other companies.

Forward-looking statements

Certain statements in this report may constitute forward-looking statements that reflect management's expectations regarding the Company's future growth, results of operations, performance and business prospects and opportunities as of the date of this press release. 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. 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 press release. The Company does not intend, and disclaims any obligation to, update any forward-looking statements whether as a result of new information or otherwise.

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 to not place undue reliance on the forward-looking statements in this press release 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: general economic conditions in the principal markets in which the Company operates, revenues, the Company's ability to operate in highly competitive industries, the Company's ability to compete with other forms of media, the Company's ability to attract advertisers, cyclical and seasonal variations in the Company's revenues, newsprint costs, labour disruptions, foreign exchange fluctuations, restrictions imposed on existing credit facilities, litigation, 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. For more information, please see the discussion of risks affecting Torstar and its businesses in Torstar's 2006 Management's Discussion & Analysis, a copy of which is available at www.sedar.com, as well as the discussion in the Company's current Annual Information Form, which is incorporated herein by reference.

In addition, a number of assumptions, including those assumptions specifically identified throughout this press release, were applied in making the forward-looking statements set forth in this press release, some or all of which may be incorrect.

Torstar's new releases are available on the Internet at www.torstar.com.

 

                              Torstar Corporation
                            Consolidated Statements
                                   of Income

                                     (unaudited)               (audited)
                               Three months ended     Twelve months ended
                                      December 31             December 31
--------------------------------------------------------------------------
(thousands of dollars)             2006      2005        2006        2005
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating revenue
 Newspapers and digital        $294,576  $292,596  $1,056,462  $1,035,816
 Book publishing                120,034   124,631     471,808     521,072
--------------------------------------------------------------------------
                               $414,610  $417,227  $1,528,270  $1,556,888
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating profit
 Newspapers and digital         $42,491   $47,823    $107,849    $120,288
 Book publishing                 16,575    22,438      56,277      95,381
 Corporate                       (4,697)   (5,211)    (18,475)    (19,001)
 Restructuring provisions       (11,652)              (22,319)     (2,119)
--------------------------------------------------------------------------
                                 42,717    65,050     123,332     194,549
Interest                         (8,810)   (2,904)    (20,761)    (10,463)
Foreign exchange                  1,050       113          70      (2,723)
Income of associated
 businesses                      14,811       335      16,000         565
Gain on sale of properties                                         12,415
--------------------------------------------------------------------------
Income before taxes              49,768    62,594     118,641     194,343
Income and other taxes          (13,700)  (24,700)    (39,500)    (75,500)
--------------------------------------------------------------------------
Net income                      $36,068   $37,894     $79,141    $118,843
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Earnings per Class A and Class
 B share:
  Net income - Basic              $0.46     $0.48       $1.01       $1.52
  Net income - Diluted            $0.46     $0.48       $1.01       $1.51
--------------------------------------------------------------------------
--------------------------------------------------------------------------



                           Torstar Corporation
                       Consolidated Balance Sheets
                                  (audited)

                                              December 31  December 31
----------------------------------------------------------------------
(thousands of dollars)                               2006         2005
----------------------------------------------------------------------
----------------------------------------------------------------------

Assets
 Current:
  Cash and cash equivalents                       $46,037      $47,783
  Receivables                                     269,977      253,718
  Inventories                                      38,208       35,568
  Prepaid expenses                                 72,665       77,211
  Prepaid and recoverable income taxes             16,665        3,130
  Future income tax assets                         23,002       21,630
                                               ------------ ----------

 Total current assets                             466,554      439,040
                                               ------------ ----------

 Property, plant and equipment (net)              349,842      365,665
 Investment in associated businesses              416,320       23,618
 Goodwill (net)                                   552,928      537,545
 Other assets                                     171,547      145,712
 Future income tax assets                          44,282       50,102
                                               ------------ ----------

 Total assets                                  $2,001,473   $1,561,682
                                               ------------ ----------
                                               ------------ ----------

Liabilities and Shareholders' Equity
 Current:
  Bank overdraft                                   $2,173       $6,738
  Accounts payable and accrued liabilities        227,001      204,710
  Income taxes payable                             14,174       15,047
                                               ------------ ----------

 Total current liabilities                        243,348      226,495
                                               ------------ ----------

 Long-term debt                                   724,193      334,317
                                               ------------ ----------
 Other liabilities                                 88,313       85,689
                                               ------------ ----------
 Future income tax liabilities                     72,873       73,529
                                               ------------ ----------

Shareholders' equity:
Share capital                                     382,397      376,925
Contributed surplus                                 7,466        4,883
Retained earnings                                 491,999      470,783
Foreign currency translation adjustment            (9,116)     (10,939)
                                               ------------ ----------

 Total shareholders' equity                       872,746      841,652
                                               ------------ ----------

Total liabilities and shareholders' equity     $2,001,473   $1,561,682
                                               ------------ ----------
                                               ------------ ----------



                           Torstar Corporation
              Consolidated Statements Of Cash Flows

                                        (unaudited)            (audited)
                                  Three months ended  Twelve months ended
                                         December 31          December 31
--------------------------------------------------------------------------
(thousands of dollars)                2006      2005       2006      2005
--------------------------------------------------------------------------

--------------------------------------------------------------------------
Cash was provided by (used in)
 Operating activities              $28,830   $34,752   $111,591  $124,140
 Investing activities              (39,360)  (32,479)  (449,394)  (74,630)
 Financing activities                6,592    (7,382)   337,997   (45,335)
--------------------------------------------------------------------------
Increase (decrease) in cash         (3,938)   (5,109)       194     4,175
Effect of exchange rate changes      2,777      (797)     2,625    (3,945)
Cash, beginning of period           45,025    46,951     41,045    40,815
--------------------------------------------------------------------------
Cash, end of period                $43,864   $41,045    $43,864   $41,045
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Operating activities:
 Net income                        $36,068   $37,894    $79,141  $118,843
 Depreciation                       13,181    12,876     53,496    54,274
 Amortization                          843       632      2,987     2,549
 Future income taxes                 4,552     7,209      2,752     9,309
 Income of associated businesses   (14,811)     (335)   (16,000)     (565)
 Other                              (3,265)   (7,495)    (2,354)  (17,563)
--------------------------------------------------------------------------
                                    36,568    50,781    120,022   166,847
Increase in non-cash
 working capital                    (7,738)  (16,029)    (8,431)  (42,707)
--------------------------------------------------------------------------
Cash provided by operating
 activities                        $28,830   $34,752   $111,591  $124,140
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Investing activities:
 Additions to property, plant
  and equipment                    ($9,041) ($10,177)  ($38,317) ($35,260)
 Investment in associated business    (203)            (377,982)
 Acquisitions and investments      (30,480)  (24,487)   (34,647)  (59,358)
 Proceeds on sale of properties                                    17,744
 Other                                 364     2,185      1,552     2,244
--------------------------------------------------------------------------
Cash used in investing activities ($39,360) ($32,479) ($449,394) ($74,630)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Financing activities:
 Issuance of bankers' acceptance   $19,169             $618,763
 Repayment of commercial paper                         (255,114) ($92,150)
 Issuance of commercial paper                $13,178     26,519    58,390
 Issuance of medium term notes                                    100,000
 Repayment of medium term notes                                   (45,000)
 Dividends paid                    (14,141)  (14,339)   (57,237)  (56,869)
 Exercise of stock options             914                3,054     8,390
 Purchase of shares for cancellation          (7,017)             (20,858)
 Other                                 650       796      2,012     2,762
--------------------------------------------------------------------------
Cash (used in) provided by
 financing activities               $6,592   ($7,382)  $337,997  ($45,335)
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Cash represented by:
 Cash and cash equivalents         $46,037   $47,783    $46,037   $47,783
 Bank overdraft                     (2,173)   (6,738)    (2,173)   (6,738)
--------------------------------------------------------------------------
                                   $43,864   $41,045    $43,864   $41,045
--------------------------------------------------------------------------
--------------------------------------------------------------------------



                        Torstar Corporation
             Consolidated Statements Of Retained Earnings
                               (audited)

                                                      Twelve months ended
                                                              December 31
--------------------------------------------------------------------------
(thousands of dollars)                                     2006      2005
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Retained earnings, beginning of period                 $470,783  $425,787

Net income                                               79,141   118,843

Dividends                                               (57,925)  (57,869)

Premium paid on repurchase of shares for cancellation             (15,978)
--------------------------------------------------------------------------

Retained earnings, end of period                       $491,999  $470,783
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Contact:
     Contacts:
     D. Holland
     Executive Vice-President and Chief Financial Officer
     Torstar Corporation
     (416) 869-4031
     Website: http://www.torstar.com
      

Source: Torstar Corporation


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