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Torstar Corporation Reports First Quarter Results and Increase in Quarterly Dividend

(May 09, 2012)

TORONTO, ONTARIO -- (Marketwire) -- 05/09/12 -- Torstar Corporation (TSX:TS.B) today reported financial results for the first quarter ended March 31, 2012.

Highlights for the quarter:

-- Revenue was $350.8 million in the first quarter of 2012, down $0.6 million from $351.4 million in the first quarter of 2011. Excluding acquisitions and the impact of foreign exchange, revenues were down $11.0 million or 3.1% in the first quarter. -- EBITDA (see "non-IFRS measures") was $40.2 million in the first quarter of 2012, down $1.5 million from $41.7 million in the first quarter of 2011. -- Net income attributable to equity shareholders was $29.3 million ($0.37 per share) in the first quarter up $13.8 million ($0.17 per share) from $15.5 million ($0.20 per share) last year. -- Adjusted earnings per share (excluding restructuring and other charges and non-cash foreign exchange in both years, other income and gain on sale of assets in 2012 and swap settlement charges in 2011) was $0.24 in the first quarter of 2012, up $0.02 from $0.22 in the first quarter of 2011. -- Net debt was $155.3 million at March 31, 2012, up $2.0 million from $153.3 million at December 31, 2011. -- Torstar's Board of Directors have approved, effective with the June 30, 2012 dividend a 5% increase in the quarterly dividend from $0.125 to $0.13125 per share.

"Results were solid in the quarter given the environment" said David Holland, President and CEO of Torstar Corporation, "with EBITDA down $1.5 million to $40.2 million. In the Media Segment, EBITDA was $22.1 million, down $0.4 million, as continued efforts on cost control mitigated the impact of a challenging print advertising environment. At Harlequin, EBITDA was down $1.5 million on lower revenues as we continue to adjust in the print and digital book publishing markets to the shift to digital reading."


"Looking forward, in the Canadian Media operations visibility remains limited on the print advertising market and the digital advertising market continues to evolve rapidly. At Harlequin, after a strong 2011, we are anticipating a modest decline in results in 2012."

"We were pleased this morning to announce a 5% increase in Torstar's quarterly dividend from $0.125 to $0.13125. This increase is consistent with the goal stated last year at this time of returning the company back to a pattern of dividend increases on an annual basis."

The following table provides a continuity of earnings per share from 2011 to 2012:

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- First Quarter ---------------------------------------------------------------------------- Net income attributable to equity shareholders per share 2011 $0.20 Changes - Operations 0.02 - Restructuring and other charges (0.02) - Settlement of interest rate swap contracts (2011) 0.03 - Non-cash foreign exchange (0.01) - Gain on sale of assets 0.04 - Other income (remeasurement gain) 0.11 0.17 ---------------------------------------------------------------------------- Net income attributable to equity shareholders per share 2012 $0.37 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

OPERATING RESULTS - FIRST QUARTER 2012

Overall Performance

The following table sets out the segmented results for the three months ended March 31, 2012 and 2011.

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 2012 ----------------------------------------------- Book (in $000's) Media Publishing Corporate Total ---------------------------------------------------------------------------- Operating revenue $244,112 $106,643 $350,755 Salaries and benefits (101,049) (25,078) $(2,491) (128,618) Other operating costs (120,972) (60,162) (771) (181,905) ---------------------------------------------------------------------------- EBITDA 22,091 21,403 (3,262) 40,232 Amortization & depreciation (8,266) (976) (11) (9,253) ---------------------------------------------------------------------------- Operating earnings 13,825 20,427 (3,273) 30,979 ---------------------------------------------------------------------------- Restructuring and other charges (2,595) (2,595) ---------------------------------------------------------------------------- Operating profit $11,230 $20,427 $(3,273) $28,384 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 2011 ----------------------------------------------- Book (in $000's) Media Publishing Corporate Total ---------------------------------------------------------------------------- Operating revenue $236,037 $115,385 $351,422 Salaries and benefits (94,532) (24,942) $(2,766) (122,240) Other operating costs (119,037) (67,553) (913) (187,503) ---------------------------------------------------------------------------- EBITDA 22,468 22,890 (3,679) 41,679 Amortization & depreciation (6,850) (915) (15) (7,780) ---------------------------------------------------------------------------- Operating earnings 15,618 21,975 (3,694) 33,899 ---------------------------------------------------------------------------- Restructuring and other charges (401) (401) ---------------------------------------------------------------------------- Operating profit $15,217 $21,975 $(3,694) $33,498 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Revenue

Total revenue was $350.8 million in the first quarter of 2012, down $0.6 million from $351.4 million in the first quarter of 2011.

Media Segment revenues were up $8.1 million in the first quarter of 2012 including $9.7 million from acquisitions made in 2011. Excluding the impact of acquisitions, revenues were down $1.6 million in the quarter. Print advertising revenues were down at the Toronto Star and Metroland Media Group newspapers partially offset by revenue growth at the Metro newspapers. Digital revenues were flat in the quarter with growth in some properties offset by declines in others. The national finance category of advertising continued to be weak in the first quarter and was a significant contributor to the revenue declines in both print and digital media. Digital revenues were 11.2% of total Media Segment revenues in the first quarter of 2012 down slightly from 11.5% in the same period last year.

Book Publishing Segment revenues were down $8.7 million in the first quarter of 2012 including a $0.7 million improvement from the impact of foreign exchange. Excluding the impact of foreign exchange, revenues were down $9.4 million in the quarter with declines in print revenues more than offsetting digital revenue growth.

EBITDA

Total EBITDA was $40.2 million in the first quarter of 2012, down $1.5 million from $41.7 million in the first quarter of 2011.

Media Segment EBITDA was relatively stable, down $0.4 million in the first quarter. Prior year acquisitions provided $1.1 million of EBITDA growth in the quarter. Revenue declines, $0.4 million of higher pension costs and investments in growth initiatives were partially offset by $3.0 million of cost savings from restructuring initiatives, lower marketing costs in the digital properties and general cost savings. A portion of the cost savings resulted from timing of expenditures and is anticipated to reverse later in the year.

Book Publishing Segment EBITDA was down $1.5 million in the first quarter as a result of the lower revenues.

Corporate expenses were $3.3 million in the first quarter of 2012, down $0.4 million from $3.7 million in the first quarter of 2011. The decrease was primarily related to year over year differences in the mark-to-market of a share-based hedging instrument.

Operating profit

Operating profit was $28.4 million in the first quarter of 2012, down $5.1 million from $33.5 million in the first quarter of 2011.

Other income and gain on sale of assets

During the first quarter of 2012, Torstar sold a portion of its 50% joint venture interest in Tuango for net proceeds of $3.9 million and recorded a gain on sale of assets of $3.4 million. Torstar retained a 38.2% interest in Tuango. As a result of the sale transaction and revised shareholders' agreement, Torstar lost joint control of Tuango and accordingly moved from proportionately consolidating Tuango to accounting for it as an associated business using the equity method. The investment in associated businesses was recorded at fair value, resulting in a remeasurement gain of $10.4 million which has been included in other income.

Net income attributable to equity shareholders

Torstar reported net income attributable to equity shareholders of $29.3 million or $0.37 per share in the first quarter of 2012 up $13.8 million or $0.17 per share from $15.5 million or $0.20 per share in the first quarter of 2011.

DIVIDEND

On May 8, 2012, Torstar declared a quarterly dividend of 13.125 cents per share on its Class A shares and Class B non-voting shares, payable on June 30, 2012, to shareholders of record at the close of business on June 8, 2012. Torstar advises that, for the purposes of the Income Tax Act, Canada and for any relevant provincial tax legislation, this dividend is designated as an eligible dividend.

ADDITIONAL INFORMATION

For additional information, please refer to Torstar's condensed consolidated financial statements and interim Management's Discussion and Analysis for the period ended March 31, 2012. Both documents will be filed today on SEDAR and are available on Torstar's corporate website www.torstar.com.

CONFERENCE CALL

Torstar has scheduled a conference call for May 9, 2012 at 8:15 a.m. to discuss its first quarter results. The dial-in number is 416-340-8527 or 1-877-240-9772. A live broadcast of the conference call will also be available over the internet on the Presentations, Events and Conference Calls page (Investor Relations) on Torstar's website www.torstar.com. A recording of the conference call will be available for 9 days by calling 905-694-9451 or 1-800-408-3053 and entering reservation number 3672277. An online archive of the broadcast will be available shortly after the completion of the call and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) page on Torstar's website www.torstar.com.

ANNUAL GENERAL MEETING

Torstar will be holding its Annual General Meeting at 10:00 a.m. on May 9, 2012 at Le Meridien King Edward Hotel, 37 King Street East, Toronto, Ontario in the Sovereign Room. The Annual General Meeting will also be webcast live on the Presentations, Events and Conference Calls Page (Investor Relations) at www.torstar.com with interactive capabilities. An online archive of the webcast will be available shortly after the completion of the meeting and will be accessible by visiting the Presentations, Events and Conference Calls page (Investor Relations) page on Torstar's website www.torstar.com.

About Torstar Corporation

Torstar Corporation is a broadly based media and book publishing 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, Workopolis, Olive Media, and eyeReturn Marketing; Metroland Media Group, publisher of community and daily newspapers in Ontario; and Harlequin, a leading global publisher of books for women.

Non-IFRS measures

In addition to operating profit, as presented in the consolidated statement of income, management uses EBITDA and operating earnings as measures to assess the consolidated performance and the performance of the reporting units and business segments.

EBITDA (earnings before interest, taxes, depreciation and amortization) 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 Torstar's operations or by a reporting unit or business segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Torstar calculates EBITDA as operating revenue less salaries and benefits and other operating costs as presented on the consolidated statement of income. EBITDA excludes restructuring and other charges. Torstar's method of calculating EBITDA may differ from other companies and accordingly may not be comparable to measures used by other companies.

Operating earnings is used by management to represent the results of ongoing operations and is not a recognized measure of financial performance under IFRS. Torstar calculates operating earnings as operating revenue less other operating costs, salaries and benefits and amortization and depreciation. Operating earnings excludes restructuring and other charges. Torstar's method of calculating operating earnings may differ from other companies and accordingly may not be comparable to measures used by other companies.

Forward-looking statements

Certain statements in this press release 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 report. 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 release. 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 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: the Company's ability to operate in highly competitive industries; the Company's ability to compete with other forms of media and media platforms; general economic conditions in the principal markets in which the Company operates; the Company's ability to attract and retain advertisers; 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 trend towards digital books and the Company's ability to distribute its books through the changing distribution landscape; the Company's ability to accurately estimate the rate of book returns through the wholesale and retail channels; the popularity of its authors and its ability to retain popular authors; labour disruptions; newsprint costs; the Company's ability to reduce costs; foreign exchange fluctuations; credit risk; restrictions imposed by existing credit facilities, debt financing and availability of capital; pension fund obligations; results of impairment tests; reliance on its printing operations; reliance on technology and information systems; risks related to business development; interest rates; availability of insurance; litigation; environmental, privacy, communications and e-commerce laws and regulations applicable generally to our businesses; dependence on key personnel; loss of reputation; product liability; intellectual property rights; control of Torstar 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 press release, were applied in making the forward-looking statements set forth in this press release. Some of the key assumptions include, without limitation, assumptions regarding the performance of the North American economy; tax laws in the countries in which we operate; continued availability of printing operations; continued availability of financing on appropriate terms; exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan obligations; royalty rates, expected future revenues, expected future cash flows and discount rates relating to valuation of goodwill and intangible assets; and successful development of new products. 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.

For more information, please see the discussion of risks affecting Torstar and its businesses in Torstar's 2011 Management's Discussion & Analysis which has been filed on www.sedar.com and is available on Torstar's corporate website www.torstar.com.

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

---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Torstar Corporation Consolidated Statement of Financial Position (Thousands of Canadian Dollars) (Unaudited) As at As at March 31 December 31 2012 2011 ---------------------------------------------------------------------------- Assets Current: Cash and cash equivalents $45,771 $50,588 Receivables 242,584 278,010 Inventories 30,914 36,995 Derivative financial instruments 1,315 367 Prepaid expenses and other current assets 46,580 47,063 Prepaid and recoverable income taxes 9,687 2,451 ---------------------------------------------------------------------------- Total current assets 376,851 415,474 ---------------------------------------------------------------------------- Property, plant and equipment 174,534 177,245 ---------------------------------------------------------------------------- Investment in associated businesses 30,606 16,935 ---------------------------------------------------------------------------- Intangible assets 108,440 107,845 ---------------------------------------------------------------------------- Goodwill 661,787 665,029 ---------------------------------------------------------------------------- Other assets 1,973 1,798 ---------------------------------------------------------------------------- Deferred income tax assets 91,757 100,441 ---------------------------------------------------------------------------- Total assets $1,445,948 $1,484,767 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Liabilities and Equity Current: Bank overdraft $6,513 $7,661 Current portion of long-term debt 196,191 Accounts payable and accrued liabilities 181,007 210,567 Provisions 19,849 22,599 Income tax payable 12,179 17,398 ---------------------------------------------------------------------------- Total current liabilities 219,548 454,416 ---------------------------------------------------------------------------- Long-term debt 194,587 ---------------------------------------------------------------------------- Derivative financial instruments 8,290 8,761 ---------------------------------------------------------------------------- Provisions 15,897 16,906 ---------------------------------------------------------------------------- Other liabilities 27,829 27,900 ---------------------------------------------------------------------------- Employee benefits 241,745 262,876 ---------------------------------------------------------------------------- Deferred income tax liabilities 8,317 7,644 ---------------------------------------------------------------------------- Equity: Share capital 395,810 395,334 Contributed surplus 15,153 14,828 Retained earnings 325,498 301,863 Accumulated other comprehensive loss (8,960) (8,286) ---------------------------------------------------------------------------- Total equity attributable to equity shareholders 727,501 703,739 Minority interests 2,234 2,525 ---------------------------------------------------------------------------- Total equity 729,735 706,264 ---------------------------------------------------------------------------- Total liabilities and equity $1,445,948 $1,484,767 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Torstar Corporation Consolidated Statement of Income (Thousands of Canadian Dollars except per share amounts) (Unaudited) Three months ended March 31 2012 2011 ---------------------------------------------------------------------------- Operating revenue $350,755 $351,422 Salaries and benefits (128,618) (122,240) Other operating costs (181,905) (187,503) Amortization and depreciation (9,253) (7,780) Restructuring and other charges (2,595) (401) ---------------------------------------------------------------------------- Operating profit 28,384 33,498 Interest and financing costs (2,271) (10,715) Foreign exchange (6) 768 Loss of associated businesses (412) (563) Other income 10,407 Gain on sale of assets 3,417 ---------------------------------------------------------------------------- 39,519 22,988 Income and other taxes (10,250) (7,600) ---------------------------------------------------------------------------- Net income $29,269 $15,388 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Attributable to: Equity shareholders $29,310 $15,472 Minority interests $(41) $(84) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Net income attributable to equity shareholders per Class A (voting) and Class B (non-voting) share: Basic $0.37 $0.20 Diluted $0.37 $0.19 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Torstar Corporation Consolidated Statement of Cash Flows (Thousands of Canadian Dollars) (Unaudited) Three months ended March 31 2012 2011 ---------------------------------------------------------------------------- Cash was provided by (used in) Operating activities $12,470 $9,029 Investing activities (6,322) (9,734) Financing activities (9,534) 1,765 ---------------------------------------------------------------------------- Increase (decrease) in cash (3,386) 1,060 Effect of exchange rate changes (283) 172 Cash, beginning of period 42,927 36,033 ---------------------------------------------------------------------------- Cash, end of period $39,258 $37,265 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Operating activities: Net income $29,269 $15,388 Amortization and depreciation 9,253 7,780 Deferred income taxes 6,600 3,300 Loss of associated businesses 412 563 Non-cash employee benefit expense 3,919 3,682 Employee benefits funding (18,744) (12,765) Other (14,081) (4,242) ---------------------------------------------------------------------------- 16,628 13,706 Increase in non-cash working capital (4,158) (4,677) ---------------------------------------------------------------------------- Cash provided by operating activities $12,470 $9,029 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Investing activities: Additions to property, plant and equipment and intangible assets $(7,240) $(8,450) Investment in associated businesses (500) Acquisitions and investments (2,513) (1,091) Proceeds from sale of assets 3,931 Other (193) ---------------------------------------------------------------------------- Cash used in investing activities $(6,322) $(9,734) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Financing activities: Repayment of bankers' acceptances $(111) Issuance of bankers' acceptances $8,521 Dividends paid (9,880) (7,247) Exercise of share options 349 311 Other 108 180 ---------------------------------------------------------------------------- Cash provided by (used in) financing activities $(9,534) $1,765 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Cash represented by: Cash $36,057 $32,427 Cash equivalents - short-term deposits 9,714 8,931 ---------------------------------------------------------------------------- Cash and cash equivalents 45,771 41,358 Bank overdraft (6,513) (4,093) ---------------------------------------------------------------------------- $39,258 $37,265 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

Contacts:
Torstar Corporation
L. DeMarchi
Executive Vice-President and Chief Financial Officer
(416) 869-4776
www.torstar.com


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