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Torstar 1st Quarter 07 cover 5/8/07 2:51 PM Page 1

For the three months ended March 31, 2007 and 2006

Dated: May 1, 2007

The following review and analysis of Torstar Corporation’s (the “Company”or “Torstar”) operations and financial position for the three months endedMarch 31, 2007 and 2006 is supplementary to, and should be read inconjunction with the audited consolidated financial statements of TorstarCorporation for the year ended December 31, 2006 set forth in theCompany’s Annual Report for such fiscal year and incorporated by reference in the Company’s renewal Annual Information Form datedMarch 20, 2007.

Torstar reports its financial results under Canadian generally acceptedaccounting principles (“GAAP”) in Canadian dollars. Per share amountsare calculated using the weighted average number of shares outstandingfor the applicable period.

Non–GAAP Measures

Management uses both operating profit, as presented in the consolidatedstatements of income, and EBITDA as measures to assess the performanceof the reporting units and business segments. EBITDA is a measure that isalso used by many of Torstar’s shareholders, creditors, other stakeholdersand analysts as a proxy for the amount of cash generated by the reportingunit or segment. EBITDA is not the actual cash provided by operatingactivities and is not a recognized measure of financial performance underGAAP. Torstar calculates EBITDA as the reporting unit or segment’s operatingprofit before restructuring provisions, interest, gains on sale of properties,taxes, depreciation and amortization of intangible assets. Torstar’smethod of calculating EBITDA may differ from other companies andaccordingly, may not be comparable to measures used by other companies.

Forward–looking statements

Certain statements in this report may constitute forward–looking statementsthat reflect management’s expectations regarding the Company’s futuregrowth, results of operations, performance and business prospects andopportunities as of the date of this report. Generally, these forward–lookingstatements can be identified by the use of forward–looking terminologysuch as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”,“would”, “could”, “if”, “may” and similar expressions. All such statements aremade pursuant to the “safe harbour” provisions of applicable Canadiansecurities legislation. These statements reflect current expectations ofmanagement regarding future events and operating performance, andspeak only as of the date of this report. The Company does not intend,and disclaims any obligation to, update any forward–looking statementswhether as a result of new information or otherwise.

1

INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS

Torstar_1st Quarter 2007 D 5/8/07 9:12 AM Page 1

By their very nature, forward–looking statements require management tomake 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 assumptionsmay not be accurate and that actual results, performance or achievementsmay differ significantly from such predictions, forecasts, conclusions orprojections expressed or implied by such forward–looking statements. We caution readers to not place undue reliance on the forward–lookingstatements in this MD&A as a number of factors could cause actualfuture results, conditions, actions or events to differ materially from thetargets, outlooks, expectations, goals, estimates or intentions expressedin the forward–looking statements.

These factors include, but are not limited to: general economic conditionsin the principal markets in which the Company operates, the Company’sability to operate in highly competitive industries, the Company’s ability tocompete with other forms of media, the Company’s ability to attractadvertisers, cyclical and seasonal variations in the Company’s revenues,newsprint costs, labour disruptions, foreign exchange fluctuations, restrictionsimposed on existing credit facilities, litigation, and uncertainties associatedwith 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 starting on page 24 of the Company’s 2006Annual Report concerning the effect certain risk factors could have onactual results, as well as the discussion in the Company’s current AnnualInformation Form.

In addition, a number of assumptions, including those assumptionsspecifically identified throughout this MD&A, were applied in making theforward–looking statements set forth in this MD&A, some or all of whichmay be incorrect.

OVERVIEW

Torstar Corporation is a broadly based media company listed on the Toronto Stock

Exchange (TS.B). Torstar reports its operations in two segments: Newspapers and

Digital; and Book Publishing. Its Newspapers and Digital Segment includes 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; and Metroland Media Group, publishers of community and daily

newspapers in Ontario. Its Book Publishing Segment represents Harlequin

Enterprises, a leading global publisher of women’s fiction. Torstar also has investments

in CTVglobemedia Inc. (“CTVgm”) and Black Press Limited which are accounted for as

Associated Businesses, using the equity method.


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3


OPERATING RESULTS – First Quarter 2007

Overall Performance

Total revenue was $377.4 million in the first quarter of 2007, up $20.3 million from

$357.1 million in the first quarter of 2006. Newspapers and Digital revenue grew

$14.2 million to $253.0 million split equally between growth in underlying operations

and differences in the publishing days in the first quarter of 2007. Reported Book

Publishing revenue was $124.5 million in the first quarter, up $6.2 million from

$118.3 million in the same period last year including $5.1 million from the favourable

impact of foreign exchange rates.

Operating profit was $34.4 million in the first quarter of 2007, up $13.7 million from

$20.7 million in 2006. Newspapers and Digital Segment operating profit was $19.9

million in the first quarter, up $5.7 million from $14.2 million in 2006 led by strong

growth at Metroland Media Group. Book Publishing operating profit was $19.1 million

in the first quarter of 2007, up $4.0 million from $15.1 million in 2006 with growth

in the North America Retail division. Corporate costs were $4.7 million in the first

quarter of 2007, down $0.2 million from the first quarter of 2006. In addition, in the

first quarter of 2006, a restructuring provision of $3.7 million was recorded related to

a voluntary severance program at the Toronto Star’s Vaughan Press Centre.

EBITDA, excluding restructuring provisions, was $48.3 million in the first quarter of

2007, up $9.8 million from $38.5 million in 2006.

2 2007 2006

Newspapers and Digital $32,689 $26,558

Book Publishing 20,329 16,826

Corporate (4,672) (4,875)

EBITDA, excluding restructuring provisions $48,346 $38,509

Interest expense was $8.7 million in the first quarter of 2007, up $5.9 million from

$2.8 million in the first quarter of 2006. This significant increase was due to the higher

level of debt outstanding from the investment in CTVgm made late in the third quarter

of 2006, and higher interest rates. The average net debt (long–term debt and bank

overdraft net of cash and cash equivalents) was $687.5 million in the first quarter of

2007, up from $293.6 million in the first quarter of 2006. Torstar’s effective interest

rate was 5.1% in the first quarter of 2007 and 3.8% in 2006.


Income from associated businesses was $0.5 million in the first quarter of 2007

compared with a loss of $0.5 million in 2006. The first quarter of 2007 includes

$0.6 million from CTVgm’s results for the quarter ended February 28, 2007 (its second

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’s second quarter is not as strong as its first due to the seasonality of both the

CTV and CHUM operations. Torstar’s loss from Black Press was $0.1 million in the first

quarter of 2007 compared with a loss of $0.5 million in 2006. The first quarter loss

reflects the seasonal nature of the newspaper operations.

Torstar’s effective tax rate was 39.8% in the first quarter of 2007 compared with

44.1% in the first quarter of 2006. During the first quarter of 2007, a change in foreign

tax rates increased the tax expense by $0.5 million as future income tax assets were

adjusted to reflect the new tax rate. Excluding this impact, Torstar’s effective tax rate

was 37.9% in the first quarter of 2007. The lower effective tax rate in the quarter was

the result of the relative impact of capital–based taxes and non–tax effected foreign

losses on higher pre–tax income year over year. The full–year 2007 tax rate is expected

to be approximately 38%.

Net income was $15.7 million in the first quarter of 2007, up $5.9 million from

$9.8 million in 2006. Net income per share was $0.20 in the first quarter, up $0.07

from $0.13 in the first quarter of 2006. The average number of shares outstanding

was 78.4 million in the first quarter of 2007 and 78.1 million in 2006.

The following chart provides a continuity of earnings per share from 2006 to 2007:

Net income per share 2006 $0.13

Changes

• Operations 0.06

• Restructuring provisions in 2006 0.03

• Income from associated businesses 0.01

• Interest on CTVgm investment (0.04)

• Effective tax rate 0.01

Net income per share 2007 $0.20


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Segment Operating Results – Newspapers and Digital Segment

The Newspapers and Digital Segment includes the Star Media Group; Metroland

Media Group; and Transit Television Network (“Transit TV”).

Star Media Group includes the Toronto Star, with the largest circulation and readership

of any daily newspaper in Canada; Torstar’s interests in Sing Tao Daily and the Toronto,

Ottawa, Vancouver, Edmonton and Calgary editions of Metro; thestar.com;

Toronto.com; LiveDeal.ca; and Torstar Media Group Television (“TMG TV”). TMG TV is a

24–hour direct response television business operating the SHOP TV Canada channel

and TMG TV Productions. Star Media Group also includes Workopolis, Olive Canada

Network and the Torstar Digital corporate group.

Metroland Media Group (the combination of the former Metroland and CityMedia

Group Inc.) publishes in print and on–line more than 100 community newspapers and

three daily newspapers – The Hamilton Spectator, The Record (Kitchener, Cambridge

and Waterloo) and the Guelph Mercury. It is also the publisher of Goldbook

Directories, a number of specialty publications, and operates several consumer shows

throughout Ontario through its Premier Consumer Shows division.

Transit TV is a U.S. based operation that delivers full motion, broadcast–quality information

and entertainment to passengers on buses, rail and other modes of mass transit on

screens mounted in the vehicle. Torstar is continuing to review its strategic options for

Transit TV.

The following tables set out, in $000’s, the results for the reporting units within the

Newspapers and Digital Segment for the three months ended March 31, 2007 and 2006.

The 2006 results have been regrouped from the presentation in the first quarter of

2006 to reflect the change in reporting units that occurred in the fourth quarter of 2006.

Operating Revenue Operating Profit (Loss) Profit Margin

2007 2006 2007 2006 2007 2006

Star Media $119,435 $117,583 $2,922 $961 2.4% 0.8%

Metroland Media 133,033 120,897 19,904 16,262 15.0% 13.5%

Transit TV 518 284 (2,878) (2,976) n/a n/a

Segment Total $252,986 $238,764 $19,948 $14,247 7.9% 6.0%

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1 EBITDA is calculated as reporting unit or segment operating profit plus depreciation and amortization.

Depreciation andAmortization EBITDA1 EBITDA Margin

2007 2006 2007 2006 2007 2006

Star Media $7,990 $8,199 $10,912 $9,160 9.1% 7.8%

Metroland Media 3,788 3,406 23,692 19,668 17.8% 16.3%

Transit TV 963 706 (1,915) (2,270) n/a n/a

Segment Total $12,741 $12,311 $32,689 $26,558 12.9% 11.1%

Total revenue of the Newspapers and Digital Segment was $253.0 million in the first

quarter of 2007, up $14.2 million from $238.8 million in 2006. Digital revenues were

4.0% of the total in 2007, up from 3.0% in 2006.

The first quarter of 2007 was positively impacted by the calendar. The daily newspapers,

both the Toronto Star and the Metroland Media Group dailies, had an extra Saturday in

the quarter. The community newspapers had six extra calendar days in the quarter which

provided at least one additional publication day for most of the weekly publications.

The impact of these publication days was estimated to be $7.0 million on revenue

and $3.0 million on EBITDA. Excluding this impact, EBITDA increased $3.1 million or

11.7% in the quarter. The impact of the extra Saturday will reverse in the third quarter

for the Toronto Star and the second quarter for the Metroland Media Group dailies.

The impact of the extra publishing days for the community newspapers will reverse in

the fourth quarter.

Star Media Group

The Star Media Group reported revenues of $119.4 million in the first quarter of

2007, an increase of $1.8 million from $117.6 million in the first quarter of 2006

with higher revenues for Torstar Digital and Metro offsetting lower advertising revenue

at the Toronto Star. Star Media Group’s EBITDA was $10.9 million in the first quarter

of 2007, up $1.7 million from $9.2 million in the same period in 2006. In the first

quarter of 2006, Weekly Scoop (which ceased publication in June 2006) had EBITDA

losses of $1.4 million. The Star Media Group had an operating profit of $2.9 million

in the first quarter of 2007, up $1.9 million from $1.0 million in the first quarter of 2006.

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Advertising revenue was down at the Toronto Star in the first quarter of 2007, despite

an extra Saturday compared with the first quarter of 2006. Advertising linage was

down 2.1% in the quarter while the effective average line rate was flat. National linage

was down slightly in the quarter while retail linage was relatively stable as this category

benefited from the new zoned advertising sections. Classified linage trends remained

a concern during the first quarter.

The continued market expansion of the jointly–owned Metro newspapers produced

revenue growth in the first quarter of 2007. Workopolis revenues were also higher in

the first quarter both from growth in the business as well as Torstar’s higher ownership

percentage of 50% in 2007 versus 40% in the first quarter of 2006.

Cost savings were realized at the Toronto Star in the first quarter of 2007 from lower

newsprint pricing, lower staff counts from the restructuring activities undertaken in

2006 and lower pension costs. These savings were partially offset by higher marketing

costs. Torstar continued to invest in building revenue for the digital operations during

the quarter including increased spending on payroll and marketing costs.

Metroland Media Group

Revenues of $133.0 million were up $12.1 million in the first quarter of 2007 at

Metroland Media Group with revenue growth at both the community and daily newspapers.

Approximately 40% of this growth can be attributed to the extra publishing days in the

quarter. EBITDA was $23.7 million in the first quarter of 2007, up $4.0 million from

$19.7 million in 2006. Operating profit was $19.9 million in the first quarter, up

$3.7 million from $16.2 million in the first quarter of 2006.

Advertising linage was up 11.9% at the community newspapers in the first quarter of

2007 including the impact of acquisitions made in 2006. Excluding the impact

of acquisitions, linage was up 9.6% in the quarter. Distribution revenues for the

community newspapers grew almost 18% in the first quarter of 2007.

Linage was down at the daily newspapers but was offset by higher effective average

line rates resulting in slightly higher advertising revenues in the first quarter of 2007.

Payroll costs were lower in the first quarter at the daily newspapers from the lower staff

counts from the restructuring activities that occurred late in 2006.

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2 EBITDA is calculated as segment operating profit plus depreciation and amortization.

Transit TV

Transit TV had revenues of $0.5 million in the first quarter of 2007, up from $0.3 million

in the first quarter of 2006. EBITDA losses of $1.9 million were down slightly from

$2.3 million in 2006 but higher depreciation, from the completion of the LA transit

system installation in 2006, produced operating losses that were flat year over year.

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.

The following tables set out, in $000’s, a summary of operating results for the Book

Publishing Segment and a continuity of revenue and operating profit, including the

impact of foreign currency movements, for the three months ended March 31, 2007.

2007 2006

Revenue $124,456 $118,349

EBITDA2 $20,329 $16,826

Depreciation & amortization 1,206 1,764

Operating profit $19,123 $15,062

EBITDA margin 16.3% 14.2%

Operating profit margin 15.4% 12.7%

Reported revenue, prior year $118,349

Impact of currency movements and foreign exchange contracts 5,114

Change in underlying revenue 993

Reported revenue, current year $124,456

Reported operating profit, prior year $15,062

Impact of currency movements and foreign exchange contracts 795

Change in underlying operating profit 3,266

Reported operating profit, current year $19,123

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Book Publishing revenues were up $1.0 million in the first quarter of 2007 excluding

the impact of foreign exchange. North America Retail was up $3.8 million, North

America Direct–To–Consumer was down $3.0 million and Overseas was up $0.2 million.

Book Publishing operating profits were up $3.3 million in the first quarter of 2007

excluding the impact of foreign exchange. North America Retail was up $3.4 million, North

America Direct–To–Consumer was down $0.4 million and Overseas was up $0.3 million.

North America Retail revenues were higher in the first quarter of 2007 with more

books sold in both the series and single title businesses. Operating profits were up

due to the increase in sales, product mix and cost savings including those resulting

from the restructuring undertaken in the fall of 2006.

North America Direct–To–Consumer revenue was down in the first quarter of 2007 with

fewer books sold in the traditional direct mail business more than offsetting an

increase in eHarlequin sales. Offsetting part of the decline in revenue were lower costs,

including advertising and promotion and savings from the restructuring undertaken in

the fall of 2006.

Overseas results were flat in the first quarter of 2007 with improved results in the

Nordic group and Germany offset by lower results in several other markets.

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 the first quarter of 2007, $5.0 million of cash was generated by operations,

$6.9 million was used for investing activities and $0.4 million was used in financing

activities. Cash and cash equivalents net of bank overdraft decreased by $2.4 million

in the quarter from $43.9 million to $41.5 million.

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Operating activities

Operating activities provided cash of $5.0 million in the first quarter of 2007, down

$16.9 million from $21.9 million in 2006.

In the first quarter of 2007, pension contributions in excess of pension expense

contributed to a use of cash of $4.1 million (“other operating activities”). In the first

quarter of 2006, pension contributions were only slightly higher than pension expense.

The increase in non–cash working capital was $21.8 million in the first quarter of

2007 compared with an increase of $3.1 million in 2006. Torstar’s usual trend in the

first quarter is for an increase in non–cash working capital as income taxes, other

payables and receivable balances all decrease. In the first quarter of 2007, payables

decreased by $36.8 million, including the payment of $8.4 million in respect of the

2006 restructuring provision. In the first quarter of 2006, payables decreased by

$14.3 million net of an increase in restructuring provisions of $1.7 million.

Investing activities

During the first quarter of 2007, $6.9 million was used for investments, down from

$10.1 million in 2006.

Additions to property plant and equipment were $5.4 million in the first quarter of

2007, down from $8.8 million in the first quarter of 2006.

Financing activities

Cash of $0.4 million was used in financing activities during the first quarter of 2007,

compared with $0.7 million provided by financing activities in the same period last

year. In the first quarter of 2006, $1.2 million of cash was provided by the exercise

of stock options.

Long–term debt

At March 31, 2007, Torstar had long–term debt of $736.3 million outstanding. The

debt consisted of U.S. dollar bankers’ acceptance of $133.4 million, Canadian dollar

bankers’ acceptance of $502.9 million and Canadian dollar medium term notes of

$100.0 million.

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Torstar’s long–term credit facility for $850 million is also designated as a standby line

in support of letters of credit. At March 31, 2007, $641.7 million was drawn under

the facility and a $28.6 million letter of credit was outstanding relating to the executive

retirement plan. The remaining credit of $179.7 million is considered to be adequate

to cover forecasted financing requirements.

Contractual obligations

There were no material changes in Torstar’s significant contractual obligations during

the first quarter of 2007.

KEY FACTORS AND RELATED RISKS

There have been no material changes in any risks or uncertainties facing Torstar since

the year ended December 31, 2006.

OUTLOOK

The first quarter results for the Newspapers and Digital Segment included the positive

impact from the publishing calendar year over year. This impact will reverse over the

rest of the year as the publishing days even out. Metroland Media Group has positive

momentum in both revenue and EBITDA growth. In contrast, linage trends at the

Toronto Star continue to be challenging. Torstar will continue to invest in its digital

properties during 2007, building revenue through new product offerings and

increased marketing spend.

The outlook for Harlequin remains stable for 2007 as the positive North America Retail

year over year results in the first quarter are balanced by the Direct–to–Consumer

trends and the mixed results in the Overseas operations. 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 and $7.0 million U.S. dollars during 2008 at a rate of $1.16.

Torstar’s investment in CTVgm will have an uneven impact on Torstar’s earnings in each

quarter of 2007. Earnings from CTVgm are expected to be stronger in Torstar’s second

and fourth quarters and weaker in the first and third quarters. The higher interest

expense from the increased levels of debt will negatively impact the year over year

comparisons through the third quarter.

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DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

As required by Multilateral Instrument 52–109 issued by the Canadian Securities

Administrators, Torstar’s Chief Executive Officer (“CEO”) and Chief Financial Officer

(“CFO”) will be making certifications related to the information in Torstar’s quarterly

filings (as defined in Multilateral Instrument 52–109) with the securities regulatory

authorities. As part of the certification, the CEO and CFO must certify that they are

responsible for establishing and maintaining disclosure controls and procedures and

have designed such disclosure controls and procedures (or caused such disclosure

controls and procedures to be designed under their supervision) to ensure that the

material information with respect to Torstar, including its consolidated subsidiaries, is

made known to them. The CEO and CFO must also certify that they have designed a

system of internal control over financial reporting to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with Canadian GAAP and to report any material

changes in internal controls over financial reporting.

Changes in internal controls over financial reporting

There have been no changes in Torstar’s internal controls over financial reporting that

occurred during the first quarter of 2007, the most recent interim period, that have

materially affected, or are reasonably likely to materially affect, Torstar’s internal controls

over financial reporting.

CHANGES IN ACCOUNTING POLICIES

On January 1, 2007, Torstar adopted the new CICA Handbook sections dealing with

Financial Instruments and Comprehensive Income. Upon the initial application,

Torstar recognized a loss of $10.6 million in the opening balance of Accumulated

Other Comprehensive Income which included the $9.1 million reclassification of the

Foreign Currency Translation balance. During the first quarter of 2007, Torstar recognized

$1.4 million of Other Comprehensive Income. More information on the adoption and

application of these new accounting policies can be found in Note 1 to the consolidated

financial statements.

SUPPLEMENTARY INFORMATION

The following chart sets out, in $000’s, the 2006 second and third quarter operating

revenue, operating profit (loss) and EBITDA for the Newspapers and Digital Segment,

regrouped to reflect the change in reporting units that occurred in the fourth quarter

of 2006.

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3 EBITDA is calculated as reporting unit or segment operating profit plus depreciation and amortization.

4 Torstar’s 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactiverestatement, of EIC–156 – “Accounting by a vendor for consideration given to a customer”. The effectwas to decrease both revenues and operating expenses by $2.6 million, $2.6 million and $ 2.5 millionin each of the second, third and fourth quarters respectively. There was no impact on net income.

Operating Revenue Operating Profit (Loss) EBITDA3

Q2 2006 Q3 2006 Q2 2006 Q3 2006 Q2 2006 Q3 2006

Star Media $127,536 $115,541 $7,032 ($503) $15,290 $7,470

Metroland Media 147,794 131,311 31,191 19,748 34,653 23,176

Transit TV 352 588 (3,279) (3,078) (2,484) (2,208)

Segment Total $275,682 $247,440 $34,944 $16,167 $47,459 $28,438

SUMMARY OF QUARTERLY RESULTS(In thousands of dollars except for per share amounts)

Mar. 31, 2007 Dec. 31, 2006 Sept. 30, 2006 June 30, 2006

Revenue $377,442 $414,610 $366,216 $390,331

Net income $15,737 $36,068 $7,667 $25,631

Net income per Class A voting and Class B non–voting share

Basic $0.20 $0.46 $0.10 $0.33

Diluted $0.20 $0.46 $0.10 $0.33

Mar. 31, 2006 Dec. 31, 2005 Sept. 30, 2005 June 30, 2005

Revenue4 $357,113 $417,227 $378,002 $402,851

Net income $9,775 $37,894 $23,698 $36,112

Net income per Class A voting and Class B non–voting share

Basic $0.13 $0.48 $0.30 $0.46

Diluted $0.12 $0.48 $0.30 $0.46

The summary of quarterly results illustrates the cyclical nature of revenues and operating

profit in the Newspapers and Digital Segment. The fourth and second quarters are

generally the strongest for the newspapers.


Gains from the sale of properties and restructuring provisions have impacted the level

of net income in several quarters. In 2006, the first, third and fourth quarters had

restructuring provisions of $3.7 million, $7.0 million and $11.7 million respectively.

In 2005, the third quarter had a restructuring provision of $2.1 million and the

first and third quarters had gains from the sale of properties of $1.3 million and

$11.1 million respectively.

RECENT DEVELOPMENTS

Subsequent to the end of the quarter, Torstar together with Gesca Ltd. purchased

LiveDeal, Inc.’s interest in the LiveDeal.ca partnership. Torstar now has a 60% interest

in LiveDeal.ca.

OTHER

At March 31, 2007, Torstar had 9,909,402 Class A voting shares and 68,577,441

Class B non–voting shares outstanding. More information on Torstar share capital is

provided in Note 6 of the consolidated financial statements.

At March 31, 2007, Torstar had 5,788,042 options to purchase Class B non–voting

shares outstanding to executives and non–executive directors. More information on

Torstar’s stock option plan is provided in Note 7 of the consolidated financial statements.

Additional information relating to Torstar including the Annual Information Form is

available on SEDAR at www.sedar.com.

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15

TORSTAR CORPORATION

Consolidated Balance Sheets

(Unaudited) March 31 December 31

(thousands of dollars) 2007 2006Assets

Current:

Cash and cash equivalents $43,506 $46,037

Receivables 253,521 269,977

Inventories 36,368 38,208

Prepaid expenses 76,005 72,665

Prepaid and recoverable income taxes 4,772 16,665

Future income tax assets 21,546 23,002

Total current assets 435,718 466,554

Property, plant and equipment (net) 341,263 349,842

Investment in associated businesses (note 5) 417,562 416,320

Goodwill (net) 554,027 552,928

Other assets 176,452 171,547

Future income tax assets 43,318 44,282

Total assets $1,968,340 $2,001,473

Liabilities and Shareholders' Equity

Current:

Bank overdraft $1,958 $2,173

Accounts payable and accrued liabilities 190,174 227,001

Income taxes payable 2,445 14,174

Total current liabilities 194,577 243,348

Long–term debt (note 2) 736,285 724,193

Other liabilities 90,828 88,313

Future income tax liabilities 73,529 72,873

Shareholders' equity:

Share capital (note 6) 381,191 382,397

Contributed surplus 7,922 7,466

Retained earnings 493,235 491,999

Accumulated other comprehensive loss (note 4) (9,227) (9,116)

Total shareholders' equity 873,121 872,746

Total liabilities and shareholders' equity $1,968,340 $2,001,473

(See accompanying notes)


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TORSTAR CORPORATION

Consolidated Statements of Income

(Unaudited) Three months ended March 31

(thousands of dollars) 2007 2006Operating revenue

Newspapers and digital $252,986 $238,764Book publishing 124,456 118,349

$377,442 $357,113Operating profit

Newspapers and digital $19,948 $14,247Book publishing 19,123 15,062Corporate (4,686) (4,891)Restructuring provisions (note 10) (3,700)

34,385 20,718Interest (8,734) (2,819)Foreign exchange (15) 52Income (loss) of associated businesses 501 (476)Income before taxes 26,137 17,475Income and other taxes (10,400) (7,700)

Net income $15,737 $9,775

Earnings per Class A and Class B share: (Note 6(b))Net income – Basic $0.20 $0.13Net income – Diluted $0.20 $0.12


Consolidated Statements Of Comprehensive Income


(thousands of dollars) (note 1) 2007 2006Net income $15,737 $9,775Other comprehensive income, net of tax:

Unrealized foreign currency translation adjustment 642 463

Unrealized change in fair value of cash flow hedges 775

Realized gains on cash flow hedges transferred to net income (2)

Other comprehensive income 1,415 463Comprehensive Income $17,152 $10,238(See accompanying notes)


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TORSTAR CORPORATION

Consolidated Statements Of Changes In Shareholders' Equity


(thousands of dollars) 2007 2006Share capital (note 6) $381,191 $378,224

Contributed surplus $7,922 $5,499

Retained earnings

Balance, beginning of period $491,999 $470,783

Net income 15,737 9,775

Dividends (14,501) (14,456)

Balance, end of period $493,235 $466,102

Accumulated other comprehensive income

Balance, beginning of period as

previously reported — —

Unrealized foreign currency translation

adjustment losses ($9,116) ($10,939)

Cumulative impact of accounting changes

relating to financial instruments (note 1) (1,526)

Adjusted balance, beginning of period (10,642) (10,939)

Other comprehensive income 1,415 463

Balance, end of period (note 4) ($9,227) ($10,476)

Total shareholders' equity $873,121 $839,349



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TORSTAR CORPORATION

Consolidated Statements Of Cash Flow


(thousands of dollars) 2007 2006Cash was provided by (used in)

Operating activities $4,968 $21,877Investing activities (6,856) (10,132)Financing activities (396) 697

(Decrease) increase in cash (2,284) 12,442Effect of exchange rate changes (32) 398Cash, beginning of period 43,864 41,045Cash, end of period $41,548 $53,885

Operating activities:Net income $15,737 $9,775Depreciation 13,586 13,373Amortization 375 718Future income taxes 1,624 (1,427)(Income) loss of associated businesses (501) 476Other (note 11) (4,095) 2,086

26,726 25,001Increase in non–cash working capital (21,758) (3,124)Cash provided by operating activities $4,968 $21,877

Investing activities:Additions to property, plant and equipment ($5,362) ($8,797)Acquisitions (1,671) (1,625)Other 177 290Cash used in investing activities ($6,856) ($10,132)

Financing activities:Issuance of banker's acceptance $13,541Issuance of commercial paper $13,476Dividends paid (14,378) (14,347)Exercise of stock options 108 1,161Other 333 407Cash (used in) provided by financing activities ($396) $697

Cash represented by:Cash and cash equivalents $43,506 $55,599Bank indebtedness (1,958) (1,714)

$41,548 $53,885(See accompanying notes)


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TORSTAR CORPORATION

TORSTAR CORPORATION

Notes to the Interim Consolidated Financial Statements

(Dollar amounts in thousands unless otherwise stated)

1. Accounting policies

The accounting policies used in the preparation of these unaudited interim

consolidated financial statements conform with those in Torstar Corporation’s

December 31, 2006 audited annual consolidated financial statements except as

noted below.These interim financial statements do not include all of the disclosures

included in the annual financial statements and accordingly should be read in

conjunction with the annual consolidated financial statements.

On January 1, 2007, the Company prospectively adopted the CICA Handbook

Section 3855 “Financial Instruments — Recognition and Measurement”, Section

3861 “Financial Instruments — Disclosure and Presentation”, Section 3865

“Hedges” and Section 1530 “Comprehensive Income” as described in Note 1(s)

of the annual consolidated financial statements, with no restatement of prior periods

except for the presentation of the foreign currency translation adjustment. These

sections provide standards for recognition, measurement, disclosure and

presentation of financial assets, financial liabilities and non–financial derivatives,

and describe when and how hedge accounting may be applied. Section 1530

provides standards for the reporting and presentation of comprehensive income.

Upon initial application, all adjustments to the carrying amount of financial

assets and liabilities were recognized as an adjustment to the opening balance

of retained earnings or accumulated other comprehensive income, depending

on the classification of existing assets or liabilities. The Company has recognized

a loss of $10,642 to the opening balance of accumulated other comprehensive

income consisting of $9,116 for the reclassification of the foreign currency

translation adjustment as at December 31, 2006 and losses (net of taxes) of

$387 and $1,139 with respect to the forward currency contracts and interest

rate swaps respectively designated as cash flow hedges. There was no impact on

opening retained earnings.

Under the new standards, all financial assets are classified as (i) held–for–trading,

(ii) held–to–maturity investments, (iii) loans and receivables or (iv) available–for–sale.

Also, all financial liabilities are classified as (i) held–for–trading or (ii) other financial

liabilities. Upon initial recognition, all financial instruments are recorded on

the consolidated balance sheet at their fair values. After initial recognition, the


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TORSTAR CORPORATION

financial instruments are measured at their fair values, except for held–to–maturity

investments, loans and receivables and other financial liabilities, which are

measured at amortized cost using the effective interest rate method. Changes

in the fair value of financial instruments classified as held–for–trading are

recognized in net income. If a financial asset is classified as available–for–sale,

any gain or loss arising from a change in its fair value is recognized in other

comprehensive income until the financial asset is derecognized and all cumulative

gain or loss is then recognized in net income.

The Company has classified its cash and cash equivalents, short–term investments

and derivative financial instruments that are not designated as hedges as

held–for–trading. They are presented at their fair value and the gains or losses

arising on the revaluation at the end of each period are included in net income.

The carrying values of these instruments approximate their fair values.

Accounts receivable are classified as loans and receivables, which are measured

at amortized cost. Accounts payable and accrued liabilities are classified as

other financial liabilities and are measured at amortized cost. The long term debt

instruments have been classified as other financial liabilities and are measured

at amortized cost as the company has the ability and intention to hold to maturity.

Derivative financial instruments that are designated as cash flow hedges, such

as the interest rate swap agreements and forward foreign exchange contracts are

classified as available for sale and are presented at their fair value. The gains or

losses arising from the revaluation at the end of each period are included in

other comprehensive income to the extent of hedge effectiveness.

An embedded derivative is a component of a hybrid instrument that also

includes a non–derivative host contract, with the effect that some of the

cash flows of the combined instrument vary in a way similar to a stand–alone

derivative. If certain conditions are met, an embedded derivative is separated

from the host contract and accounted for as a derivative in the balance sheet,

at its fair value. The Company will recognize embedded derivatives on its

consolidated balance sheet, when applicable. On transition and for the three

months ended March 31, 2007, there was no impact on the financial

statements of the Company from embedded derivatives.

The impact of these changes in accounting policies on net income for the three

months ended March 31, 2007 was insignificant.


21

TORSTAR CORPORATION

2. Long–term debt

As at March 31, As at December 31,

2007 2006Bankers’ acceptance:

Cdn. Dollar denominated $502,931 $491,885

U.S. Dollar denominated 133,354 132,308

636,285 624,193

Medium Term Notes:

Cdn. Dollar denominated 100,000 100,000

$736,285 $724,193

a) All bankers’ acceptance with a term of less than one year have been classified

as long–term debt as the company has the ability to refinance these amounts

under its existing long–term credit facilities. The interest rate spread above the

bankers’ acceptance rate if in Canadian dollars, or LIBOR rate if in U.S. dollars,

at March 31, 2007 was 0.6% and varies based on the company’s long–term

credit rating. The carrying values of the bankers’ acceptance approximate their

fair value at March 31, 2007.

The company is party to three interest rate swap agreements with major

Canadian chartered banks that will fix the interest rate on $250 million of

Canadian dollar borrowings for five years ending September 2011. As a result,

the company will pay quarterly a fixed rate of 4.3% per annum (plus the interest

rate spread based on the company’s long term credit rating, currently 0.6%) and

will receive quarterly floating rate payments based on 90 day bankers’ acceptance

rates. These swap contracts have been designated as hedges. The fair value of

these swap agreements was $0.1 million unfavourable at March 31, 2007.

The average rate on Canadian dollar bank borrowings outstanding at March 31, 2007

was 5.0%. Including the effect of the above noted swap arrangements, the effective

rate was 5.0%.


22

TORSTAR CORPORATION

The company is party to an interest rate swap arrangement that will fix the interest

rate on U.S. $80 million of borrowings at approximately 3.5% (plus the credit

spread of 0.6%) for four years ending December 2007. The swap has been

designated as a hedge. The fair value of the U.S. interest rate swap arrangement

was $1.7 million favourable at March 31, 2007.

At March 31, 2007 bank debt outstanding included U.S. borrowings of U.S.

$115.7 million at an average rate of 6.1%. Including the effect of the above

noted swap arrangement, the effective rate was 4.7%.

b) The company issued in September 2005 $75 million 3.85% medium term notes

which mature on September 8, 2010. The company has entered into interest rate

swap agreements effectively converting this debt into floating rate debt based on

90–day bankers’ acceptance rates plus 0.39%. The company also issued in

September 2005 $25 million 3.7% medium term notes which mature on

September 9, 2009. The company has entered into an interest rate swap agreement

effectively converting this debt into floating rate debt based on 90–day bankers’

acceptance rates plus 0.36%. Interest on the medium term notes as well as

the payments under the swap agreements is paid semi–annually. The swap

agreements have been designated as hedges and mature on the due dates of

the respective notes.

The effective interest rate on the medium term notes outstanding at March 31, 2007

was 4.9%. The fair value of the medium term notes was $3.4 million favourable

at March 31, 2007. The fair value of the Canadian interest rate swap agreements

related to the medium term debt issuance noted above were $2.5 million

unfavourable at March 31, 2007.

c) The company is exposed to credit related losses in the event of non–performance

by counterparties to the above described derivative instruments, but it does not

anticipate any counterparties to fail to meet their obligations given their high credit

ratings. The company has a policy of only accepting major financial institutions,

as approved by the Board of Directors, as counterparties.


3. Derivative instruments at fair value

The fair values of derivatives designated as hedges as disclosed in notes 2 and

9 are as follows:

As at March 31, 2007Assets Liabilities

Foreign currency hedges $184 $460

Interest rate swaps 1,915 2,818

$2,099 $3,278

These amounts are included in Other assets and Other liabilities.

4. Accumulated other comprehensive loss (net of tax)

As at March 31, 2007Foreign currency translation adjustment ($8,474)

Unrealized losses on cash flow hedges (753)1

($9,227)

1 Net of income tax benefit of $426.

5. Investment in associated businesses

The company’s Investment in associated businesses includes a 20% equity interest

in CTVglobemedia Inc. (“CTVgm”), a 19.35% equity interest in Black Press Ltd.

and a 30% equity interest in Q–ponz Inc. The Investment in associated businesses

is comprised of the following:

December 31, 2006 $416,320

Income of associated businesses 501

Change in investee foreign currency translation adjustment 741

March 31, 2007 $417,562

23

TORSTAR CORPORATION


24

TORSTAR CORPORATION

Outlined below is summarized financial information for 100% of CTVgm, including fair

value adjustments, for the three months and period ended February 28, 2007. The

allocation of the fair values is subject to change upon the final determination of the

valuation of certain of the intangible assets.

Balance Sheet

Current assets $510,136

Property, plant and equipment 323,744

Investment in CHUM 1,397,997

Goodwill and other intangible assets 2,208,811

Other assets 234,743

$4,675,431

Current liabilities $291,386

Long–term debt 2,192,776

Other liabilities and non–controlling interests 234,573

Shareholders’ equity 1,956,696

$4,675,431

Statement of Income

Revenues $394,206

Net income $2,835

6. Share capital

a) A summary of changes to the company’s share capital is as follows:

Class A shares (voting)

At March 31, 2007 there were 9,909,402 Class A shares outstanding with a stated

value of $2,692. During the quarter, 5,390 Class A shares were converted to

Class B shares.


25

TORSTAR CORPORATION

Class B shares (non–voting)

Shares AmountDecember 31, 2006 68,558,932 $380,939

Converted from Class A 5,390 2

Stock options exercised 6,400 108

Dividend reinvestment plan 6,569 123

Other 150 3

March 31, 2007 68,577,441 $381,175

Total Class A and Class B shares 78,486,843 $383,867

Reduction for RSU Trust shares (note 7(d)) (2,676)

Share Capital 78,486,843 $381,191

b) Earnings per share

Basic per share amounts have been determined by dividing net income by the

weighted average number of Class A and Class B shares outstanding during the

period after deducting the unvested shares held by the RSU Trust. Diluted per

share amounts have taken into consideration the dilutive effect of stock options;

the employee share purchase plan and the unvested shares held by the RSU

Trust. The weighted average number of Class A and Class B shares outstanding

(in thousands) were:

Three months ended March 31

2007 2006Basic 78,423 78,146

Diluted 78,520 78,447


26

TORSTAR CORPORATION

7. Stock–based compensation

The company has five stock–based compensation plans: an executive share

option plan, an employee share purchase plan, a deferred share unit (“DSU”)

plan for employees, a DSU plan for non–employee directors and an executive

restricted share unit (“RSU”) plan.

a) A summary of changes in the executive share option plan is as follows:

Weighted averageShare options exercise price

December 31, 2006 5,388,145 $22.80

Granted 502,797 19.61

Exercised (6,400) (16.90)

Forfeited or expired (96,500) (23.14)

March 31, 2007 5,788,042 $22.52

Options exercisable at March 31, 2007 are as follows:

Range of Share options Weighted averageexercise price exercisable exercise price

$15.75–18.05 334,700 $17.36

$18.50–22.20 2,557,214 $21.17

$25.00–29.01 1,580,737 $26.41

$15.75–29.01 4,472,651 $22.74

b) The company has recognized in 2007 compensation expense totalling $0.9 million

(2006 — $0.8 million) for the stock options granted in 2004 to 2007, RSUs granted in

2006 to 2007 and the employee share purchase plans originating in 2005 to 2006.

The fair value of the executive stock options granted in 2007 was estimated to be

$2.56 per option at the date of grant using the Black–Scholes option pricing model

with the assumptions of a risk–free interest rate of 4.0%, expected dividend yield

of 3.8%, expected volatility of 16.3% and an expected time until exercise of 6 years.


27

TORSTAR CORPORATION

c) The company has a DSU Plan for executives and non–employee directors. As at

March 31, 2007, 291,528 units were outstanding at a value of $5.7 million. The

company has entered into a derivative instrument in order to offset its exposure

to 252,813 units. Changes in the fair value of this instrument will be recorded as

compensation expense and will offset the impact of changes in the value of the

outstanding deferred share units.

d) During 2006, the company introduced an RSU plan. Under the plan, eligible senior

executives are granted RSU awards to receive Torstar Class B non–voting shares

as part of their long–term incentive compensation. The value of an RSU is equal

in value to a Torstar Class B non–voting share. RSUs vest after three years at

which time Torstar Class B non–voting shares will be distributed to the participants.

203,680 RSUs have been granted to date of which 186,573 remain outstanding

at March 31, 2007.

An employee benefit trust (“RSU Trust”) has been established to purchase the

necessary Torstar Class B non–voting shares in the open market. For accounting

purposes, the RSU Trust is treated as a Variable Interest Entity and consolidated

in the accounts of the company. As a result, unamortized compensation expense

representing the related shares held by the RSU Trust is presented as a reduction

of the company’s share capital.

8. Employee future benefits

The company maintains a number of defined benefit plans, which provide pension

benefits to its employees in Canada and the United States. Post employment

benefits other than pensions are also available to employees, primarily in

the Canadian newspapers operations, which provide for various health and life

insurance benefits.

The company has expensed net pension benefit costs of $2.7 million for the

three months ended March 31, 2007 (2006 — $4.1 million). With respect to

post–employment benefits other than pensions, for the three months ended

March 31, 2007 the net benefit cost was $1.0 million (2006 — $1.2 million).


28

TORSTAR CORPORATION

9. Forward foreign exchange contracts and options

As described in Note 13 of the company’s December 31, 2006 annual financial

statements, the company has entered into various forward foreign exchange

contracts. The company has entered into forward foreign exchange contracts

which establish a rate of exchange of Canadian dollar per U.S. dollar of $1.14

for U.S. $27.5 million in 2007 and $1.16 for U.S. $7.0 million in 2008. The net

fair value of these contracts was $0.3 million unfavourable at March 31, 2007.

10. Restructuring charges

During the first quarter of 2006, the company recognized restructuring charges

of $3.7 million with respect to a voluntary severance program at the Toronto

Star’s printing facility.

Accounts payable and accrued liabilities include $8.6 million for restructuring

provisions at March 31, 2007 ($17.0 million at December 31, 2006). The

change in the liability during 2007 includes payments of $7.7 million related to

provisions made in 2006 and $0.7 million for provisions made prior to 2006.

11. Other cash (used in) provided by operating activities

Three months ended March 31

2007 2006Foreign exchange $15 ($52)

Post employment benefits (4,507) (627)

Stock–based compensation expense 1,292 2,744

Other (895) 21

($4,095) $2,086


C O R P O R A T E O F F I C E

ONE YONGE STREET

TORONTO, ONTARIO M5E 1P9

(416) 869-4010

www. to rs ta r.com

S H A R E S L I S T E D

TORSTAR CLASS B SHARES ARE TRADED

ON THE TORONTO STOCK EXCHANGE UNDER

TS.B

T R A N S F E R A G E N T

AND REGISTRAR

CIBC MELLON TRUST COMPANY

A U D I T O R S

ERNST & YOUNG LLP,

TORONTO

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