Torstar Corporation: Improved Newspaper Results Offset By Lower Book Publishing Profits And Restructuring Charges.

TORONTO -- Torstar Corporation today announced its results for the third quarter ended September 30, 2004.

Operating revenue was $357.0 million in the third quarter of 2004, down $11.0 million from $368.0 million in 2003. Newspaper revenues were up $6.0 million while Book Publishing revenues were down $17.1 million.

Third quarter operating profit was $37.3 million, down $13.1 million from $50.4 million in 2003. Newspaper operating profit was up slightly to $18.1 million from $17.9 million while Book Publishing profits were down $12.9 million in the quarter with approximately 70% of the decline driven by lower North America Retail results.

"This was a difficult quarter," said Robert Prichard, Torstar's President and Chief Executive Officer. "While our Newspaper business continued to grow despite a soft advertising market, our Book Publishing business suffered from significantly reduced book sales which have lowered revenues and profits in a very challenging market."

Torstar reported $12.3 million of unusual losses during the third quarter of 2004. This included restructuring costs of $9.7 million in the Newspaper and Book Publishing segments and a $3.9 million write-off of all of Torstar's remaining interactive portfolio. Also recorded in the quarter was a recovery of $1.3 million related to the provision made in the fourth quarter of 2003 for the closure of Harlequin craft kit business. On an after-tax basis the unusual items have a cost of $0.11 per share.

Net income was $11.3 million or $0.14 per share in the third quarter of 2004 down from $29.7 million or $0.38 per share in 2003. Year to date net income was $70.1 million or $0.88 per share down from $93.2 million or $1.20 per share in 2003. The change in earnings per share is attributable to the following items:

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                               Third quarter            Year to date
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Net income per share 2003              $0.38                   $1.20
Unusual items                          (0.11)                  (0.17)
Foreign exchange                       (0.01)                   0.03
Tax rate                               (0.02)                  (0.06)
Operations                             (0.09)                  (0.09)
Dilution effect                        (0.01)                  (0.03)
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Net income per share 2004              $0.14                   $0.88
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Newspapers

Toronto Star operating profit was down $1.0 million in the third quarter as advertising revenue declines were only partially offset by higher Internet revenues and lower newsprint and labour costs. Advertising linage was down 11.9% in the quarter with the continuing softness in automotive (down 15.7%) and employment (down 5.7%) linage as well as a decline in retail advertising. In the third quarter retail advertising, excluding automotive, was down 13.8% after being relatively stable during the first half of 2004. The average line rate remained strong in the third quarter, up 7.1%.

"The Star continues to hold its position in the very competitive Toronto newspaper market with strong readership and circulation performance," said Robert Prichard. "The advertising market was soft in the quarter which hurt linage and revenue, however, the Star's Internet properties continue to grow well. With its voluntary severance program, the Star is reducing its cost base. As the advertising market improves, the Star will realize revenue growth and margin improvement."

Metroland operating profit was flat in the third quarter as higher labour and infrastructure costs related to several new products and geographic expansions offset the 10.9% revenue growth in the quarter. Metroland's advertising linage was up 7.6% in the third quarter and distributions were up 11.0%. Depreciation expense was up $0.3 million in the third quarter as a result of Metroland's new printing press coming on-line.

"Metroland is committed to long-term double-digit growth and is performing very well," said Robert Prichard. "Metroland is continually expanding its product offerings and geographic presence, while building the printing and information technology infrastructure necessary to support its growth and expansion. In addition, Metroland has made eight strategic acquisitions over the past few months and its expansion into the Niagara region, including Niagara This Week, is ahead of plan. Metroland will deliver another strong year and is laying the foundation for future growth."

CityMedia operating profit was up 53% in the third quarter. Revenue growth at The Record in Kitchener-Waterloo and cost reductions across all operations in the group more than offset lower revenues at The Hamilton Spectator. The Record's advertising revenues were up 9.2% in the third quarter with increases in both linage and average line rate. The improvement came from stronger local retail linage, reflecting the strength in the local Kitchener-Waterloo economy. The Hamilton Spectator's advertising linage was down 8.9% in the quarter, offset partially by a strong average line rate.

"CityMedia Group had another strong quarter with operating profit up 53% over last year," said Robert Prichard. "The business is delivering on its plans for growth despite the soft national advertising market. The Brabant Fairway newspapers acquired in June  2003 are performing well and are contributing to CityMedia's growth."

Book Publishing

Harlequin's revenues were $135.8 million in the third quarter down $17.1 million from $152.9 million in 2003 after a net positive contribution from foreign exchange hedges of $1.7 million. Harlequin's operating profit was $23.3 million in the third quarter, down $12.9 million from $36.2 million in 2003.

The volume of books sold continued to challenge all of Harlequin's markets during the third quarter. North America Retail revenues and operating profits were down $9.4 million and $8.8 million respectively from lower volumes due to differences in the publishing schedule and lower net sales rates on both single title and series books. North America Direct-To-Consumer revenues and operating profits were down $3.6 million and $2.2 million as this division continues to face a declining customer base as a result of competitive pressures from alternative distribution channels and the reduced availability of mailing lists.

Overseas, the U.K., Japan and France experienced lower net sales rates on both single titles and series books resulting in a $3.8 million decline in revenue and a $1.7 million decline in operating profit.

"We anticipated a very soft quarter for Harlequin and the results have confirmed it as the mass-market paperback segment of the book publishing industry continues to be very challenging," said Robert Prichard. "We sold fewer books in all of our channels which reduced revenues and profits. Harlequin's management is focused on its core strategy to improve performance in its Retail, Direct-To-Consumer and Overseas businesses and is encouraged by the bestseller recognition achieved by new titles and leading authors. While we have a lot to accomplish to attain better results, the management team is determined to achieve them."

Other

During the third quarter Torstar repurchased and cancelled  514,300 Class B shares under the normal course issuer bid for a total price of $12.8 million. Year to date Torstar has repurchased and cancelled 891,900 Class B shares for a total purchase price of $23.0 million.

For further details on Torstar's third quarter results please see the Interim Management Discussion and Analysis and Consolidated Financial Statements dated October 27, 2004.

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. Wherever possible, words such as "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include newspapers led by the Toronto Star, Canada's largest daily newspaper; CityMedia Group, publishers of daily and community newspapers in Southwestern Ontario; Metroland Printing, Publishing & Distributing, publishers of more than 60 community newspapers in Southern Ontario; and Harlequin Enterprises, a leading global publisher of women's fiction.

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INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three and nine months ended September 30, 2004 and 2003

The following review and analysis of Torstar Corporation's (the "Company" or "Torstar") operations and financial position for the nine months ended September 30, 2004 and 2003 should be read in conjunction with the audited consolidated financial statements and Management's Discussion and Analysis of Torstar Corporation for the year ended December 31, 2003 set forth in the Company's Annual Report for such fiscal year and incorporated by reference in the Company's renewal annual information form dated March 1, 2004.

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. Wherever possible, words such as "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward-looking statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include newspapers led by the Toronto Star, Canada's largest daily newspaper; CityMedia Group, publishers of daily and community newspapers in Southwestern Ontario; Metroland Printing, Publishing & Distributing, publishers of more than 60 community newspapers in Southern Ontario; and Harlequin Enterprises, a leading global publisher of women's fiction.

Torstar reports its operations in two segments: Newspapers and Book Publishing.

RESULTS OF OPERATIONS - Third quarter and year to date 2004

Overall Performance

Operating revenue was $357.0 million in the third quarter of 2004, down $11.0 million from $368.0 million in 2003. Newspaper revenues were up $6.0 million with higher revenues at Metroland offsetting lower revenues at the Toronto Star. Book Publishing revenues were down $17.1 million with $18.8 million of revenue declines offset by $1.7 million of net foreign exchange gains.

Year to date, operating revenue was $1,098.8 million down marginally from $1,100.5 million in 2003. Newspaper revenues were up $37.2 million with revenue growth at all newspaper properties. Book publishing revenues were down $38.9 million due to lower global book sales.

Third quarter operating profit was $37.3 million, down $13.1 million from $50.4 million in 2003. Newspaper operating profit was up slightly to $18.1 million from $17.9 million with improved results in the CityMedia group offsetting lower operating profit at the Toronto Star and higher operating losses at TTN. Book Publishing profits were down $12.9 million in the quarter with approximately 70% of the decline driven by lower North America Retail results. Corporate costs were up $0.4 million in the quarter reflecting the impact of higher payroll costs including the expensing of stock options.

Year to date operating profit was $138.2 million, down $14.0 million from $152.2 million in 2003. Newspaper operating profit was up 15% or $10.3 million year to date with higher profits at each of the newspaper operations offsetting increased TTN operating losses. Book publishing profits were down 24% or $23.0 million year to date due to lower sales volumes in all markets. Corporate expenses were up $1.2 million year to date from higher payroll costs including the expensing of stock options.

Interest expense was $2.7 million in the third quarter, down slightly from 2003. Year to date interest expense was $8.1 million, down $1.2 million from 2003. The lower interest expense reflects the reduced levels of debt outstanding during the quarter and year.

Torstar reported $12.3 million of unusual losses from restructuring and investment write-downs during the third quarter of 2004. 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 past and future operating results. On an after-tax basis the unusual items have a cost of $0.11 per share. There were no unusual items reported in the third quarter of 2003.

In order to reduce costs and improve operating margins both the Toronto Star and CityMedia Group undertook restructuring activities during the third quarter. The Toronto Star had total restructuring costs of $7.9 million primarily related to the voluntary severance program that was announced on July 26, 2004. 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. The full impact of these savings will not be realized until late 2005.

Harlequin undertook a restructuring of its North American and U.K. operations during the third quarter 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. These savings will begin to be realized in the fourth quarter of 2004.

Harlequin 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 has been recognized as an unusual gain in the quarter.

A $3.9 million provision was taken in the third quarter of 2004 to write-off all of Torstar's remaining Interactive portfolio investments. These investments are all in non-public funds and companies and were committed to in the late 1990's as a part of Torstar's former Interactive segment.

In the first nine months of 2003 Torstar reported a net unusual gain of $7.1 million. This included a gain of $6.3 million on the sale of an investment in Miles Kimball Company, a gain of $5.8 million on the sale of community newspapers, a $2.9 million write-down of Interactive portfolio investments and a $2.1 million provision for newspaper restructuring. On an after-tax basis, the unusual gain contributed $0.07 per share.

During the third quarter of 2004 the Canadian dollar strengthened relative to the U.S. dollar. This resulted in Torstar reporting a non-cash foreign exchange loss of $1.1 million on the translation of its net U.S. dollar asset position. Year to date the non-cash foreign exchange loss was $1.3 million. Torstar has U.S. dollar denominated debt which provides a hedge against the U.S. dollar assets. However the offset is not exact as the U.S. dollar assets are primarily working capital and therefore fluctuate daily. In 2003 there was a nominal loss in the third quarter and a loss of $4.0 million year to date on the translation of Torstar's U.S. dollar asset position.

The effective tax rate was 46.7% in the third quarter and 40.0% year to date compared with 37.2% and 36.0% in the same periods of 2003. The differences in tax rates in 2004 compared with 2003 result from non-Canadian operating losses from TTN that were not tax-effected and the impact of capital losses and gains included in unusual items in 2004 and 2003 which were taxed at lower tax rates.

Net income was $11.3 million or $0.14 per share in the third quarter of 2004, down from $29.7 million or $0.38 per share in 2003. Year to date net income was $70.1 million or $0.88 per share, down from $93.2 million or $1.20 per share in 2003. The decline in earnings was driven by the impact of unusual gains and losses in 2003 and 2004, lower operating results and higher effective tax rates. The decline in earnings per share was also caused by an increase in the number of shares outstanding in 2004. The weighted average number of shares outstanding in the third quarter was 79.2 million in 2004 up from 77.9 million in 2003. Year to date the weighted average number of shares outstanding was 79.3 million in 2004, up from 77.4 million in 2003.

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

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                                      Third                  Year to
                                    Quarter                     Date
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Net income per share 2003             $0.38                    $1.20
Unusual items                         (0.11)                   (0.17)
Foreign exchange                      (0.01)                    0.03
Tax rate                              (0.02)                   (0.06)
Operations                            (0.09)                   (0.09)
Dilution effect                       (0.01)                   (0.03)
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Net income per share 2004             $0.14                    $0.88
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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 and 16 weekly or monthly publications. Its daily newspapers are The Hamilton Spectator, The Record (Kitchener, Cambridge and Waterloo) and the Guelph Mercury. Metroland publishes more than 60 community newspapers, the jointly-owned daily commuter paper Metro and Chinese language Sing Tao Daily as well as a number of specialty publications and operates several consumer shows. This segment also includes the results of Torstar Media Group Television  ("TMG TV") and Transit Television Network ("TTN").

Selected financial information for the Newspaper segment (in $000's):

Three months ended September 30
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                          Toronto         CityMedia
                             Star  Metroland  Group  Other(1)  Total
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2004
Revenue                   $94,313  $87,878  $35,830  $3,167 $221,188
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Operating profit             (320)  16,104    4,377  (2,060)  18,101
Depreciation                8,382    1,812    1,460     567   12,221
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Segment EBITDA(2)          $8,062  $17,916   $5,837 ($1,493) $30,322
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Margins:
- Operating profit            N/A     18.3%    12.2%    N/A      8.2%
- EBITDA                      8.5%    20.4%    16.3%    N/A     13.7%

2003
Revenue                   $97,773  $79,468  $35,805  $2,142 $215,188
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Operating profit              708   16,183    2,863 (1,826)   17,928
Depreciation                8,560    1,517    1,493     395   11,965
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Segment EBITDA             $9,268  $17,700   $4,356 ($1,431) $29,893
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Margins:
- Operating profit            0.7%    20.4%     8.0%    N/A      8.3%
- EBITDA                      9.5%    22.3%    12.2%    N/A     13.9%
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(1) Consists of TMGTV and TTN.TTN was 51% owned in the first quarter of 2003 and became a wholly-owned subsidiary in the second quarter of 2003.

(2) Torstar reports its financial results under Canadian  generally accepted accounting principles ("GAAP"). However, management believes that many of the company's shareholders, creditors, other stakeholders and analysts prefer to assess the company's performance using earnings before interest, unusual items, taxes, depreciation and amortization of intangible assets ("EBITDA") as an estimate of the cash generated by the business, in addition to the GAAP measures. Torstar calculates segment EBITDA as operating profit before 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.

Nine months ended September 30
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                          Toronto         CityMedia
                             Star  Metroland  Group  Other     Total
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2004
Revenue                  $304,375 $266,337 $109,333  $9,774 $689,819
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Operating profit           15,472   53,375   14,227  (4,923)  78,151
Depreciation               25,728    4,791    4,381   1,458   36,358
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Segment EBITDA            $41,200  $58,166  $18,608 ($3,465)$114,509
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Margins:
- Operating profit            5.1%    20.0%    13.0%    N/A     11.3%
- EBITDA                     13.5%    21.8%    17.0%    N/A     16.6%

2003
Revenue                  $301,286 $241,315 $101,578  $8,374 $652,553
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Operating profit           11,392   48,739   10,412  (2,595)  67,948
Depreciation               26,067    4,508    4,250     949   35,774
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Segment EBITDA            $37,459  $53,247  $14,662 ($1,646)$103,722
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Margins:
- Operating profit            3.8%    20.2%    10.3%    N/A     10.4%
- EBITDA                     12.4%    22.1%    14.4%    N/A     15.9%

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Toronto Star operating profit was down $1.0 million in the third quarter as advertising revenue declines were only partially offset by higher Internet revenues and lower newsprint and labour costs. Year to date, the 35.8% increase in operating profit was attributable to higher Internet revenues and lower newsprint costs offset partially by higher labour costs. Newsprint costs were down $1.0 million in the quarter and $1.8 million year to date, due primarily to lower consumption related to lower advertising linage. Labour costs were lower in the quarter due to lower benefit costs while higher year to date due to general wage increases offset partially by lower pension costs.

Advertising linage was down 11.9% in the quarter with the continuing softness in automotive and employment linage as well as a decline in retail advertising. Automotive linage has been soft throughout the year, down 15.7% in the third quarter and 15.4% year to date. Employment linage was down 5.7% in the third quarter and 9.4% year to date. Employment linage has shown signs of improvement during the year from being down 15.6% and 5.9% in the first and second quarters respectively. In the third quarter retail advertising, excluding automotive, was down 13.8% after being relatively stable during the first half of 2004. The reduction in linage was primarily caused by a number of large retailers reducing their in-paper advertising spend. A portion of the retail in-paper advertising dollars have moved to inserts, at either the Toronto Star or Metroland. The Toronto Star's insert volume was up 2.7% in the third quarter and up 12.5% year to date.

The average line rate remained strong in the third quarter, up 7.1%, but was not sufficient to offset the linage decreases. Year to date the 7.3% increase in the average line rate offset the lower linage resulting in flat revenues year over year. Revenues from the Toronto Star's Internet activities - including workopolis.com and thestar.com - increased by $0.6 million in the third quarter and $2.3 million year to date.

Metroland's operating profit was flat in the third quarter as the 10.9% increase in revenues was offset by higher labour, depreciation and infrastructure costs. Year to date, operating profit was up 9.5% on revenue growth of 11.0%. The year to date growth in operating profits stalled during the third quarter as increases in labour and operating costs related to several new products and geographic expansions exceeded the revenue generated by these operations. Metroland invested in a significant number of new products and regions as part of its growth strategy during the third quarter, and as is typical for startups, revenue growth lags behind expenses in the early stages. Depreciation expense was up $0.3 million in the third quarter and year to date as a result of Metroland's new printing press coming on-line.

Metroland's advertising revenue was up 5.2% in the third quarter with linage up 7.6%. Year to date, advertising revenue was up 4.6% with linage up 3.0%. Classified and real estate linage were strong both in the third quarter and year to date. Like the Toronto Star, Metroland was negatively impacted during the third quarter by the large retailers reducing their in-paper advertising spend. Metroland's distribution business continued to grow during the third quarter. The number of pieces distributed was up 11.0% in the quarter and 10.1% year to date. Distribution revenues were up 10.3% in the quarter and 9.8% year to date.

Metroland's jointly owned Metro and Sing Tao Daily contributed $0.8 million of the higher revenues during the third quarter and $3.3 million year to date as advertising revenues were stronger at both newspapers. Operating profits from these properties were up $0.4 million in the quarter and $1.4 million year to date. During the third quarter, Metroland commercial printing operations acquired the printing contract for Metro beginning in 2005.

Metroland continued to expand its product offerings during the third quarter of 2004. Metroland made several acquisitions during the quarter including the Port Perry Star, Awesome Productions (a Baby and an Interior Design trade show), Heart of Country (five craft trade shows), Gold Book (publishes telephone directories in Brampton, Burlington and Oakville), World of Wheels and Canadian Auto World Magazines, and the Port Colborne Leader. These acquisitions, along with the Niagara This Week start-up and other product initiatives, continue to grow and strengthen the Metroland franchise.

CityMedia operating profit was up 53% in the third quarter with revenue growth at The Record and cost reductions across all operations in this group more than offsetting lower revenues at The Hamilton Spectator. Year to date operating profit was up 19.2% excluding the impact of the Brabant Fairway acquisition made in June 2003. The year to date growth was driven by lower newsprint and operating costs which offset lower revenues at the daily newspapers and higher payroll costs.

The Hamilton Spectator's advertising revenue was down 3.7% in the quarter despite a strong average line rate. Advertising linage was down 8.9% in the quarter with lower retail and automotive advertising having a significant impact. The Spectator's revenue has been reduced by the lower advertising spend by national retailers as well as a weaker local economy. Year to date linage was down 8.1% offset partially by a 5.5% increase in the average line rate.

The Record's advertising revenues were up 9.2% in the third quarter with both linage and the average line rate up. The Record's advertising linage has improved each quarter this year from down 2.1% in the first quarter to up 0.6% in the third. Year to date linage was down 0.5% but was more than offset by a 4.6% increase in the average line rate. The improvement came from stronger local retail linage, reflecting the strength in the Kitchener-Waterloo economy. This geographic area has seen significant population growth over the past few years and this growth has resulted in an increase in the presence of large retailers over the past year and in particular a large number of store openings during the third quarter.

CityMedia's newsprint costs were down $0.6 million in the quarter due primarily to lower consumption. Cost containment initiatives continued during the third quarter with cost savings offsetting the impact of lower revenues at The Hamilton Spectator. At the other properties cost containment initiatives combined with higher revenues to increase operating profits. During the third quarter CityMedia completed the purchase of two small community newspapers and obtained the rights to publish the Hamilton Gold Book directory as part of the acquisition made by Metroland.

TTN had an operating loss of $2.4 million in the third quarter compared with a loss of $1.6 million in 2003. Year to date TTN's operating loss was $6.2 million compared with a loss of $3.3 million in 2003. EBITDA losses were $1.9 million in the quarter and $5.0 million year to date compared with $1.3 million and $2.9 million in 2003. The losses are in line with expectations as TTN continues to build out its business. The Milwaukee operation was EBITDA break-even during the third quarter. In late July, TTN signed a contract with the Atlanta transit authority to install the passenger information and entertainment system on its buses. Installation has begun and is anticipated to be complete by the end of the fourth quarter.

Book Publishing

The Book Publishing segment reports the results of Harlequin Enterprises Limited, a leading global publisher of women's fiction, offering women a broad range of books, from romance to psychological thrillers to relationship novels. 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 revenues were $135.8 million in the third quarter, down $17.1 million from $152.9 million in 2003 with lower book sales in all markets. Year to date revenues were $409.0 million, down $38.9 million from $447.9 million in 2003. Harlequin's revenues are affected by changes in foreign currencies as the non-Canadian book sales are translated into Canadian dollars. To offset some of this risk on its U.S. dollar sales, Torstar has entered into U.S. dollar forward foreign exchange and option contracts. The changes in reported revenues are as follows (in $000's):

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                                      Third                  Year to
                                    Quarter                     Date
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Reported revenue, 2003             $152,852                 $447,916
Impact of currency movements         (2,641)                 (13,641)
Impact of U.S. dollar hedges (3)      4,343                   13,851
Change in operating revenue         (18,763)                 (39,141)
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Reported revenue, 2004             $135,791                 $408,985
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(3) The impact of the U.S. dollar hedges is reported in revenue effective January 1, 2004. The 2003 U.S. dollar hedges were reported in operating profit. Torstar has hedged $75 million of its U.S. dollar revenue in 2004 and $76 million in 2005. For more details see Note 13 in Torstar's December 31, 2004 annual financial statements.

Revenues were down $18.8 million in the quarter excluding the impact of foreign exchange consisting of North America Retail which was down $9.4 million, North America Direct-To-Consumer which was down $3.6 million and Overseas which was down $3.8 million. Year to date revenues were down $39.1 million excluding the impact of foreign exchange with North America Retail down $15.2 million, North America Direct-To-Consumer down $10.4 million and Overseas down $8.9 million. In 2003, the former Creativity division had revenues of $2.0 million in the third quarter and $4.6 million year to date.

Harlequin's operating profit was $23.3 million in the third quarter, down $12.9 million from $36.2 million in 2003. Year to date operating profit was $72.3 million, down $23.0 million from $95.3 million in 2003. Harlequin's operating profit is affected by changes in foreign currencies as the non-Canadian operations results are translated into Canadian dollars. In addition to the US dollar foreign exchange contracts, Harlequin also has Euro, Yen and Pound Sterling foreign exchange contracts that are used to offset some of the risk on the overseas operations. Effective January 1, 2004, these non-US dollar foreign exchange contracts were not eligible for hedge accounting and are marked-to-market with the gain or loss included along with the realized gains or losses in operating profit each quarter.

The changes in reported operating profits are as follows (in $000's):

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                                      Third                  Year to
                                    Quarter                     Date
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Reported operating profit, 2003     $36,246                  $95,302
Impact of currency movements         (1,352)                  (5,498)
Impact of US dollar hedges (4)          460                    5,153
Impact of other currency hedges         405                      464
Change in operating profit          (12,434)                 (23,104)
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Reported operating profit, 2004     $23,325                  $72,317
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Operating margins:
- 2003 Reported                        23.7%                    21.3%
- 2003 Adjusted (5)                    23.1%                    20.9%
- 2004 Reported                        17.2%                    17.7%

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(4) Gains on the U.S. dollar hedges were recorded in operating profit in 2003. Therefore the impact in 2004 is the year over year change.

(5) The adjusted margin includes the US dollar hedge gain in 2003 in revenue to make it comparable to the 2004 margin.

Operating profits were down $12.4 million excluding the impact of foreign exchange in the third quarter with North America Retail down $8.8 million, North America Direct-To-Consumer down $2.2 million and Overseas down $1.7 million. Year to date operating profits were down $23.1 million excluding the impact of foreign exchange with North America Retail down $15.9 million, North America Direct-To-Consumer down $5.6 million and Overseas down $3.3 million. In 2003, the former Creativity division had operating losses of $0.3 million in the third quarter and $1.7 million year to date.

The volume of books sold continued to challenge all of Harlequin's markets during the third quarter. North America Retail had lower volumes due to differences in the publishing schedule and lower net sales rates on both single title and series books. The U.S. mass-market paperback segment of the industry was down 6.3% August year to date while Harlequin was down 10.0%. North America Direct-To-Consumer continues to face a declining customer base as a result of competitive pressures from alternative distribution channels and the reduced availability of mailing lists. North American price increases in June helped to reduce the impact of the lower volumes during the third quarter for both Retail and Direct-To-Consumer. Overseas, the U.K., Japan and France experienced lower net sales rates on both single titles and series books.

Despite market challenges Harlequin has remained focused on its strategy of increasing book sales through high quality content and editorial innovation. During the third quarter Harlequin launched a new adventure series - Bombshell - and a new single title romance imprint - HQN Books. HQN Books has celebrated strong bestseller list placements since its August launch with titles debuting at #13 and #21 on the New York Times bestseller list and #34 on USA Today. Also, a MIRA and a Silhouette title appeared in the top 15 New York Times spots for four consecutive weeks.

Harlequin's overseas programs have also made significant list placements. In France, three MIRA titles were listed on the bestseller list from Livres Hebdo. In Germany, a title placed on the only official German paperback bestseller list. In the U.K series titles represented six of the top 10 positions in the Bookseller's Heatseekers chart in a recent week and one single title book reached #36 on the Bookseller Top 50 list. This global recognition for Harlequin titles demonstrates the quality of Harlequin's publication program and their appeal to readers.

Harlequin's EBITDA was $25.5 million in the third quarter and $78.6 million year to date down from $38.3 million and $101.0 million in the corresponding periods last year.

Associated Business

Torstar has a 19.35% equity investment in Black Press Ltd., a privately held company that publishes 95 newspapers (both dailies and weeklies) and has 13 printing plants in Western Canada, Washington State and Hawaii. Torstar also has a 30% interest in Q-ponz Inc., a coupon envelope business based in Toronto. Black Press's performance continues to exceed expectations as the business is growing well. Year to date Torstar's share of net income of associated businesses was $0.2 million compared with a loss of $0.2 million in 2003.

LIQUIDITY AND CAPITAL RESOURCES

The change in cash and cash equivalents net of bank overdraft was flat in the third quarter of 2004. Operating activities provided $57.5 million of cash during the second quarter while $17.6 million was used for investing activities and $39.3 million was used for financing activities.

Operating activities

Cash provided by operating activities was $57.5 million in the third quarter including a $22.1 million decrease in non-cash working capital. Lower net income in the quarter included non-cash operating expenses of $4.3 million related to pensions and $3.9 million related to the write-down of the Interactive portfolio. The decrease in non-cash working capital in the quarter arose from lower receivables, related to lower revenues than in the second quarter, and an increase in payables relating partially to the restructuring provisions made in the quarter. In the third quarter of 2003, non-cash working capital decreased by only $4.2 million. The most significant difference year over year was that Book Publishing receivables increased in the third quarter of 2003 but decreased in 2004.

Year to date, $128.2 million of cash was provided by operating activities including $4.8 million from a decrease in non-cash working capital. Year to date, non-cash working capital has not changed significantly compared with the same period in 2003 when it increased by $22.0 million due primarily to the timing of payments.

Investing activities

During the third quarter of 2004, $17.6 million of cash was used in investing activities compared with $14.7 million in 2003. Additions to property plant and equipment of $7.8 million were lower than 2003 when $7.9 million was spent on Metroland's new printing press and a colour expansion for The Hamilton Spectator. $9.7 million was used for acquisitions of community newspapers, shows, and directories during the third quarter of 2004.

Financing activities

Cash of $39.3 million was used in financing activities, compared with $13.8 million provided by financing activities in 2003. Torstar repaid a $75.0 million medium-term note when it matured on July 27, 2004 through a combination of funds on hand and the issuance of $60.7 million of commercial paper. Year to date, $150.0 million of medium-term notes have been repaid at maturity with $96.6 million of commercial paper issued. Cash dividends of $13.6 million were paid in the quarter up from $12.4 million in 2004 reflecting the increased dividend and a higher number of shares outstanding. Year to date, Torstar has received cash of $22.1 million from the exercise of stock options.

During the third quarter Torstar repurchased and cancelled 514,300 Class B shares under the normal course issuer bid for a total price of $12.8 million. Year to date Torstar has repurchased and cancelled 891,900 Class B shares for a total purchase price of $23.0 million.

It is expected that future cash flows from operating activities, combined with the credit facilities available will be adequate to cover forecasted financing requirements.

OUTLOOK

The outlook for the Newspaper segment is difficult to predict. Torstar's newspapers have maintained their circulation and readership levels, have strong line rates and are working at taking costs out of their operations and improving operating margins. However, it is very difficult to predict accurately future advertising linage as the majority of newspaper advertisements are placed within a week of the publication date and Torstar's Newspaper revenue levels are sensitive to changes in linage. A 1% shift in advertising linage at the daily newspapers impacts revenue by $3.5 to 4.0 million over a full year. At present, management is cautiously optimistic that linage in the fourth quarter will be stronger year over year than it was in the third quarter.

The outlook for the Book Publishing segment has not improved since the second quarter. The mass-market paperback segment continues to be highly competitive, challenging and soft. Harlequin continues to focus on having the best product in the market both today and for the longer term. This will be accomplished through continuing editorial innovation and the development of key authors. The Book Publishing results for the fourth quarter of 2004 are expected to remain soft compared to the prior year but current indications are that operating profit should be comparable with the past two quarters.

RECENT DEVELOPMENTS

The Niagara region continues to provide expansion opportunities for Metroland. On October 6th, Metroland's Niagara This Week community newspaper expanded to a second publishing day for the St. Catharines area in order to meet customer demand for a mid-week product. In October Metroland also completed the acquisition of Niagara Life Magazine, Oakville Today and launched a new monthly business publication, Niagara Business Times. The publication is distributed to more than 5,000 businesses in the region.

OTHER

At September 30, 2004, Torstar had 9,918,475 Class A voting shares and 69,065,341 Class B non-voting shares outstanding and 4,951,962 options to purchase Class B non-voting shares outstanding to executives and non-executive directors. More information on Torstar's share capital and stock option plan is provided in Notes 3 and 4 of the consolidated financial statements.

Additional information relating to Torstar is available on SEDAR at www.sedar.com.

Dated: October 27, 2004

---------------------------------------------------------------------
---------------------------------------------------------------------

                               Torstar Corporation

                             Consolidated Financial
                                   Statements

                           For the third quarter ended

                           September 30, 2004 and 2003

                               Torstar Corporation
                             Consolidated Statements
                                   of Income
                                  (unaudited)

                            Three months ended     Nine months ended
                                  September 30          September 30
---------------------------------------------------------------------
(thousands of dollars)           2004     2003       2004       2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating revenue
 Newspapers                  $221,188 $215,188   $689,819   $652,553
 Book publishing              135,791  152,852    408,985    447,916
---------------------------------------------------------------------
                             $356,979 $368,040 $1,098,804 $1,100,469
---------------------------------------------------------------------
Operating profit
 Newspapers                   $18,101  $17,928    $78,151    $67,948
 Book publishing               23,325   36,246     72,317     95,302
 Corporate                     (4,155)  (3,810)   (12,301)   (11,074)
---------------------------------------------------------------------
                               37,271   50,364    138,167    152,176
 Interest                      (2,725)  (3,047)    (8,133)    (9,331)
 Foreign exchange              (1,084)     (10)    (1,279)    (3,984)
 Unusual items (note 8)       (12,282)            (12,282)     7,115
---------------------------------------------------------------------
 Income before taxes           21,180   47,307    116,473    145,976
 Income and other taxes        (9,900) (17,600)   (46,600)   (52,600)
---------------------------------------------------------------------
 Income before income (loss) of
  associated businesses        11,280   29,707     69,873     93,376
 Income (loss) of associated
  businesses                       29        8        238       (216)
---------------------------------------------------------------------
Net income                    $11,309  $29,715    $70,111    $93,160
---------------------------------------------------------------------

Earnings per Class A and Class
 B share (note 3(c)) :
 Net income - Basic             $0.14    $0.38      $0.88      $1.20
 Net income - Diluted           $0.14    $0.38      $0.87      $1.19
---------------------------------------------------------------------
---------------------------------------------------------------------

(See accompanying notes)


                               Torstar Corporation
                            Consolidated Balance Sheets
                                  (unaudited)

                                      September 30       December 31
---------------------------------------------------------------------
(thousands of dollars)                        2004              2003
---------------------------------------------------------------------
---------------------------------------------------------------------

Assets
 Current:
  Cash and cash equivalents                $42,280           $53,660
  Receivables                              234,038           245,697
  Inventories                               40,926            38,041
  Prepaid expenses                          80,658            73,971
  Prepaid and recoverable income taxes         518               837
  Future income tax assets                  23,983            23,597
---------------------------------------------------------------------

 Total current assets                      422,403           435,803
---------------------------------------------------------------------

 Property, plant and equipment (net)       392,009           401,172
 Investment in associated businesses
  (note 7)                                  22,761            21,074
 Goodwill (net) (note 7)                   491,083           488,258
 Other assets (note 7)                      99,934           100,930
 Future income tax assets                   64,745            64,530
---------------------------------------------------------------------

 Total assets                           $1,492,935        $1,511,767
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities and Shareholders' Equity
 Current:
  Bank overdraft                            $2,797            $3,243
  Accounts payable and accrued liabilities 205,772           204,779
  Income taxes payable                      22,843            19,032
---------------------------------------------------------------------

 Total current liabilities                 231,412           227,054
---------------------------------------------------------------------

 Long-term debt (note 2)                   331,717           387,800
---------------------------------------------------------------------
 Other liabilities                          87,977            87,174
---------------------------------------------------------------------
 Future income tax liabilities              66,157            64,684
---------------------------------------------------------------------

 Shareholders' equity:
 Share capital (note 3)                    371,697           349,921
 Contributed surplus                         2,006               878
 Retained earnings                         406,001           395,758
 Foreign currency translation
  adjustment                                (4,032)           (1,502)
---------------------------------------------------------------------

 Total shareholders' equity                775,672           745,055
---------------------------------------------------------------------

 Total liabilities and shareholders'
  equity                                $1,492,935        $1,511,767
---------------------------------------------------------------------
---------------------------------------------------------------------

(See accompanying notes)

                               Torstar Corporation
                            Consolidated Statements Of
                                   Cash Flows
                                   (unaudited)
                             Three months ended     Nine months ended
                                   September 30          September 30
---------------------------------------------------------------------
(thousands of dollars)            2004     2003       2004       2003
---------------------------------------------------------------------

Cash was provided by (used in)
 Operating activities         $57,462  $52,926   $128,185   $120,312
 Investing activities         (17,589) (14,677)   (45,797)   (74,869)
 Financing activities         (39,282)  13,835    (92,139)     7,398
---------------------------------------------------------------------
Increase (decrease) in cash       591   52,084     (9,751)    52,841
Effect of exchange rate
 changes                       (1,750)      42     (1,183)    (2,062)
Cash, beginning of period      40,642   36,187     50,417     37,534
---------------------------------------------------------------------
Cash, end of period           $39,483  $88,313    $39,483    $88,313
---------------------------------------------------------------------
Operating activities:
 Net income                   $11,309  $29,715    $70,111    $93,160
 Depreciation                  13,775   13,367     40,792     39,792
 Amortization                     641      646      1,926      1,788
 Future income taxes             (214)   1,600        123      5,000
 (Income) loss of associated
  businesses                      (29)      (8)      (238)       216
 Other (note 9)                 9,916    3,407     10,671      2,353
---------------------------------------------------------------------
                               35,398   48,727    123,385    142,309
Decrease (increase) in
 non-cash working capital      22,064    4,199      4,800    (21,997)
---------------------------------------------------------------------
Cash provided by operating
 activities                   $57,462  $52,926   $128,185   $120,312
---------------------------------------------------------------------
Investing activities:
 Additions to property, plant
  and equipment               ($7,845)($14,476)  ($31,547)  ($48,549)
 Acquisitions (note 7)         (9,733)            (13,073)   (41,285)
 Proceeds on sale of businesses
  (note 8)                                                    15,602
 Investment in associated
  business (note 7)                                (1,413)
 Other                            (11)    (201)       236       (637)
---------------------------------------------------------------------
Cash used in investing
 activities                  ($17,589)($14,677)  ($45,797)  ($74,869)
---------------------------------------------------------------------
Financing activities:
 Repayment of medium term
  notes                      ($75,000)          ($150,000)  ($35,000)
 Issuance of commercial paper
  (net)                        60,697  $20,653     96,635     57,937
 Dividends paid               (13,588) (12,433)   (40,888)   (37,059)
 Exercise of stock options
  (note 3(a))                     369    4,555     22,104     18,790
 Purchase of shares for
  cancellation (note 3(b))    (12,795)            (23,007)
 Other                          1,035    1,060      3,017      2,730
---------------------------------------------------------------------
Cash provided by (used in)
 financing activities        ($39,282) $13,835   ($92,139)    $7,398
---------------------------------------------------------------------

Cash represented by:
 Cash and cash equivalents    $42,280  $90,441    $42,280    $90,441
 Bank overdraft                (2,797)  (2,128)    (2,797)    (2,128)
---------------------------------------------------------------------
                              $39,483  $88,313    $39,483    $88,313
---------------------------------------------------------------------
---------------------------------------------------------------------

(See accompanying notes)

                               Torstar Corporation
                           Consolidated Statements Of
                                Retained Earnings
                                   (unaudited)
                                                   Nine months ended
                                                        September 30
---------------------------------------------------------------------
(thousands of dollars)                               2004       2003
---------------------------------------------------------------------

Retained earnings, beginning of period           $395,758   $321,992

Net income                                         70,111     93,160

Dividends                                         (41,617)   (37,208)

Premium paid on repurchase of shares (note 3(b))  (18,251)
---------------------------------------------------------------------

Retained earnings, end of period                 $406,001   $377,944
---------------------------------------------------------------------

(See accompanying notes)

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, 2003 audited annual consolidated financial statements except for the adoption of Accounting Guideline 13 ("AcG-13") "Hedging Relationships" as described in Note 1(p) of the annual consolidated financial statements. AcG-13 has been applied effective January 1, 2004 on a prospective basis without restatement of prior periods. These interim financial statements do not include all of the disclosures included in the annual consolidated financial statements and accordingly should be read in conjunction with the annual consolidated financial statements.

2. Long-term debt

---------------------------------------------------------------------
                                                 As at         As at
                                         September 30,  December 31,
                                                  2004          2003
---------------------------------------------------------------------
Commercial paper:
 Cdn. Dollar denominated                      $158,408       $55,364
 U.S. Dollar denominated                       128,309       137,436
---------------------------------------------------------------------
                                               286,717       192,800
---------------------------------------------------------------------
Medium Term Notes:
 Cdn. Dollar denominated                        45,000       195,000
---------------------------------------------------------------------

                                              $331,717      $387,800
---------------------------------------------------------------------
---------------------------------------------------------------------

All commercial paper and medium term notes with a term of less than one year have been classified as long-term debt as the company has the ability and intention to refinance these amounts under its existing credit facilities.

The carrying values of the various long-term debt instruments approximate their fair value at September 30, 2004. The fair value of the interest rate component in the company's swap agreements was $1.4 million unfavourable at September 30, 2004.

3. Share Capital

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

Class A shares (voting)

At September 30, 2004 there were 9,918,475 Class A shares outstanding with a stated value of $2,695. The only changes in the Class A shares since December 31, 2003 were the conversion to Class B shares of 5,700 shares with a stated value of $2.

Class B shares (non-voting)

                                                Shares        Amount
---------------------------------------------------------------------
December 31, 2003                           68,630,659      $347,225
Converted from Class A                           5,700             2
Issued under Employee Share Purchase Plan      152,367         3,621
Share options exercised                      1,139,167        22,138
Purchased for cancellation                    (891,900)       (4,756)
Dividend reinvestment program                   27,747           729
Other                                            1,601            43
---------------------------------------------------------------------
September 30, 2004                          69,065,341      $369,002
---------------------------------------------------------------------
---------------------------------------------------------------------

Total Class A and Class B shares            78,983,816      $371,697
---------------------------------------------------------------------
---------------------------------------------------------------------

b) The company commenced a normal course issuer bid on May 7, 2004, effective for one year, to repurchase for cancellation up to 2 million Class B shares, representing approximately 2.9% of the company's outstanding Class B shares. As at September 30, 2004 891,900 Class B shares were repurchased and cancelled at an average repurchase price of $25.80 per share for a total consideration of $23,007. Retained earnings were reduced by $18,251 representing the excess of the cost of the shares repurchased over their stated value.

c) Earnings per share

Basic per share amounts have been determined by dividing net income by the weighted average number of shares outstanding during the period. Diluted per share amounts have taken into consideration the dilutive effect of stock options and the employee share purchase plan. The weighted average number of Class A and Class B shares outstanding (in thousands) were:

Three months ended  Nine months ended
                                     September 30       September 30
---------------------------------------------------------------------
                                     2004    2003       2004    2003
---------------------------------------------------------------------
Basic                              79,249  77,947     79,297  77,402
Diluted                            79,789  79,232     80,165  78,506

d) During the nine months ended September 30, 2004, controlling shareholders sold 100,000 Class B shares and were issued 6,400 Class B shares under the company's share option plan.

4. Stock-based compensation

The company has four stock-based compensation plans: an executive share option plan, an employee share purchase plan, a deferred share unit plan for employees and a deferred share unit plan for non-employee directors.

a) A summary of changes in the executive share option plan is as
follows:
                                                    Weighted average
                                           Shares     exercise price
---------------------------------------------------------------------
December 31, 2003                       5,454,225             $21.19
Granted                                   661,300              29.01
Exercised                              (1,139,167)            (19.40)
Cancelled                                 (24,396)            (22.91)
---------------------------------------------------------------------
September 30, 2004                      4,951,962             $22.64
---------------------------------------------------------------------
---------------------------------------------------------------------

Options exercisable at September 30, 2004 are as follows:
Range of                                   Number   Weighted average
exercise price                        exercisable     Exercise price
---------------------------------------------------------------------
  $15.75-18.05                            556,500             $17.10
  $18.50-22.20                          1,384,499             $20.71
  $25.00-29.01                            705,447             $25.14
---------------------------------------------------------------------
  $15.75-29.01                          2,646,446             $21.13
---------------------------------------------------------------------
---------------------------------------------------------------------

b) The company has recognized in 2004 compensation expense totalling $1.2 million for the stock options granted in 2004 and 2003 and the employee share purchase plans originating in 2003 and 2004. The fair value of the executive stock options granted in 2004 was estimated to be $5.52 (2003 - $5.28) per option at the date of grant using the Black-Scholes option pricing model with the assumptions of a risk-free interest rate of 4.1% (2003 - 4.1%), expected dividend yield of 2.4% (2003 - 2.5%), expected volatility of 20.6% (2003 - 23.2%) and an expected time until exercise of 5 years.

c) No compensation expense has been recognized for the company's stock-based compensation plans granted in 2002. Had compensation cost for the company's stock-based compensation plans been determined based on the fair value method of accounting for stock-based compensation, the company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:

Three months ended Nine months ended
                                      September 30      September 30
---------------------------------------------------------------------
                                     2004     2003     2004     2003
---------------------------------------------------------------------
Net income          - As reported $11,309  $29,715  $70,111  $93,160
                    - Pro forma   $10,745  $29,375  $68,277  $91,671
Earnings per share
 - Basic            - As reported   $0.14    $0.38    $0.88    $1.20
                    - Pro forma     $0.14    $0.38    $0.86    $1.18
Earnings per share
 - Diluted          - As reported   $0.14    $0.38    $0.87    $1.19
                    - Pro forma     $0.13    $0.37    $0.85    $1.17

d) The company has a Deferred Share Unit Plan for executives and non-employee directors. As at September 30, 2004, 82,178 units were outstanding at a value of $2.1 million.

5. 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 $12.3 million for the nine months ended September 30, 2004 (2003 - $14.1 million) and $4.3 million for the quarter ended September 30, 2004 (2003 - $4.3 million). With respect to post-employment benefits other than pensions, for the nine months and quarter ended September 30, 2004 the net benefit cost was $3.1 million and $1.2 million respectively (2003 - $2.6 million and $0.9 million respectively).

6. Forward Foreign Exchange Contracts and Options

As described in Note 13 of the company's December 31, 2003 annual financial statements, the company has entered into various forward foreign exchange contracts and option contracts.

During the first three quarters of 2004:

- The company entered into offsetting positions for 4.5 million of its 6.0 million 2005 Euro forward foreign exchange contracts. The remaining forward foreign exchange contract establishes a rate of exchange of Canadian dollar per Euro in 2005 of $1.66.

- The company entered into offsetting positions for 150 million of its 785 million 2004 Japanese Yen forward foreign exchange contracts. This had no impact on the established rate of exchange of Canadian Dollar per Japanese Yen in 2004 of $0.013.

- The company entered into offsetting positions for 2.625 million of its 5 million 2004 U.K. Pound Sterling forward foreign exchange contracts. This improved the established rate of exchange of Canadian Dollar per U.K. Pound Sterling in 2004 to $2.53.

As a result of adopting Accounting Guideline 13, the company has marked to market its outstanding Euro, U.K. Pound Sterling and Japanese Yen forward foreign exchange contracts at September 30, 2004. As a result, an unrealized gain of $0.7 million was included in the operating profit of the book publishing segment for the nine months ended September 30, 2004 ($0.5 million gain in the third quarter).

7. Acquisitions

The company completed a number of community newspaper acquisitions during 2004. The total purchase price was $13.1 million. $2.8 million of the price of the purchases has been allocated to goodwill and $8.8 million has been included in Other assets pending the completion of the final allocation of the purchase prices. The company also acquired on June 17, 2004 a 30% equity interest in an associated business.

On June 6, 2003 the company acquired the assets of the Brabant and Fairway newspaper groups, the printing operations of the Hamilton Printing Group, the Flamborough Review and the Orangeville Banner. The purchase price was $40.6 million. Net tangible assets acquired were $4.3 million including $2.2 million of property, plant and equipment. $36.3 million of the purchase price has been allocated to goodwill.

8. Unusual items

During the third quarter of 2004, the company recognized an unusual loss of $12.3 million. This included restructuring costs of $8.6 million in the newspaper segment and $1.1 million in the book publishing segment. In addition, a $3.9 million write-off of the company's remaining interactive portfolio investments was recorded. A $1.3 million recovery was recorded in the third quarter related to the provision made in the fourth quarter of 2003 for the closure of Harlequin's 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.

For the nine months ended September 30, 2003, the unusual gain of $7.1 million included a gain of $5.8 million from the sale of eight of Metroland's weekly newspapers and a gain of $6.3 million realized on the sale of an investment in Miles Kimball Company. The company also recorded a $2.9 million write-down of its remaining investment portfolio and a $2.1 million provision for restructuring charges in the Newspaper group.

9. Other Cash Provided by (Used In) Operating Activities

                                Three months ended Nine months ended
                                      September 30      September 30
---------------------------------------------------------------------
                                     2004     2003     2004     2003
---------------------------------------------------------------------
Foreign exchange                   $1,084      $10   $1,279   $3,984
Post employment benefits            4,294    3,380    2,829    7,515
Write-down of portfolio investments 3,870             3,870    2,975
Stock-based compensation expense      450             2,442
Gain on sale of newspapers                                    (5,810)
Gain on sale of Miles Kimball                                 (6,341)
Other                                 218       17      251       30
---------------------------------------------------------------------
                                   $9,916   $3,407  $10,671   $2,353
---------------------------------------------------------------------

Torstar Corporation (TSX:TS.B)