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Torstar reported a loss of $12.3 million in 2004 from unusual items compared with a $0.7 million loss in 2003. Torstar has reported these items as unusual as they did not occur in the normal course of Torstar’s operating businesses and could otherwise distort an assessment of future operating results. 

In order to reduce costs and improve operating margins both the Toronto Star and CityMedia undertook restructuring activities during 2004. The Toronto Star had total restructuring costs of $7.9 million primarily related to a voluntary severance program and CityMedia incurred severances for a total cost of $0.7 million. These restructurings will result in a net reduction of 73 full time employees with annual savings of $4.7 million that will be fully realized by late 2005. 

Harlequin completed a restructuring of its North American and U.K. operations in 2004 in order to reduce costs. These restructurings had a cost of $1.1 million and resulted in a reduction of 28 full time employees with annual savings of $2.1 million. 

Harlequin had established a provision at the end of 2003 for the closure of its craft kit business. Part of the business was ultimately sold and some obligations were finalized in the third quarter at a lower cost than originally estimated. Combined, these items reduced the closure costs by $1.3 million, which was recognized as an unusual gain in the third quarter. 

$3.9 million provision was taken in 2004 to write off all of Torstar’s remaining Interactive portfolio investments. These investments are all in nonpublic funds and companies and were committed to in the late 1990’s as a part of Torstar’s former Interactive Media segment. 

The 2003 loss from unusual items included $6.6 million for restructuring in the Newspaper segment, $4.4 million for the closure of Harlequin’s craft kit business, and $3.0 million of write-downs on the Interactive portfolio. Offsetting the losses were gains of $6.7 million realized on a sale of eight newspapers and $6.6 million realized on the sale of an investment in Miles Kimball Company . Torstar’s effective tax rate was 39.1% in 2004, unchanged from 2003. Excluding the impact of unusual items and the impact in 2003 of the change in provincial income taxes, the effective rate was 38.2% in 2004, up from 36.5% in 2003. This increase was from changes in the underlying mix of income, including the increased losses at TTN that are not being tax-effected. 

Income from associated businesses was $0.5 million in 2004, up $0.4 million from $0.1 million in 2003 reflecting improved results at Black Press Ltd. 

Net income was $112.7 million in 2004, down $10.8 million from $123.5 million in 2003. Net income per share was $1.42 in 2004, down $0.17 from $1.59 in 2003. The average number of Class B non-voting shares outstanding in 2004 was 79.2 million, up from 77.6 million in 2003 as a result of the exercise of stock options, offset partially by the repurchase of shares under a normal course issuer bid. 

The following chart provides a continuity of earnings per share from 2003 to 2004: 

<img src='content_image/63002.jpg'>

## NEWSPAPERS 

The Newspaper Segment includes the newspaper, commercial printing and Internet results of the Toronto Star, CityMedia Group and Metroland Printing, Publishing and Distributing. CityMedia Group publishes three daily newspapers – The Hamilton Spectator, The Record (Kitchener, Cambridge and Waterloo) and the Guelph Mercury – along with 10 weekly and a number of specialty and monthly publications. Metroland publishes 67 community newspapers, a number of specialty publications, operates several consumer shows and publishes the jointly owned Toronto daily commuter paper Metro and the Chinese language newspaper Sing Tao Daily. This segment also includes the results of Torstar Media Group Television (“TMG TV”) and Transit Television Network (“TTN”). 

Newspapers generate revenue from advertising and circulation with advertising being the more significant source. Advertising revenue is a combination of linage (volume) and rate. Linage has traditionally been tied to the economy in the newspaper’s local market. As the economy improves linage has tended to increase with linage decreases occurring during poor economic times. Over the past five years, newspapers have seen linage affected by the migration of advertising to other media including the Internet. 

