MANAGEMENT’S DISCUSSION & ANALYSIS DISCUSSION AND ANALYSIS Selected financial information for the Newspaper Segment for the fourth quarter (in $000’s): TORONTO STAR METROL AND CITYMEDIA OTHER TOTAL 2004 Revenue 8 $125,672 $111,747 $44,720 $2,993 $285,132 Operating profit 20,569 21,481 9,797 (2,397) 49,450 Depreciation 8,459 1,910 882 652 11,903 Segment EBITDA $29,028 $23,391 $10,679 ($1,745) $61,353 Margins: Operating profit 16.4% 19.2% 21.9% n/a 17.3% EBITDA 23.1% 20.9% 23.9% n/a 21.5% 2003 Revenue $117,231 $89,948 $41,043 $2,610 $250,832 Operating profit 16,518 19,785 7,767 (1,902) 42,168 Depreciation 8,713 1,538 1,491 381 12,123 Segment EBITDA $25,231 $21,323 $9,258 ($1,521) $54,291 Margins: Operating profit 14.1% 22.0% 18.9% n/a 16.8% EBITDA 21.5% 23.7% 22.6% n/a 21.6% Restated 2003 Margins$^{8}$: Operating profit 13.2% n/a 18.3% n/a 16.2% EBITDA 20.1% n/a 21.8% n/a 20.8% Advertising revenues at the Toronto Star were up slightly in the fourth quarter as a 10.2% increase in the effective line rate advertising rose 3.6% but declines were experienced  in each of retail, travel and classified, down 9.9%, 7.4% and 13.5% respectively Automotive advertising was down 12.8% (mostly classified) and employment  advertising declined 6.4%. On-line advertising revenues at thestar .com and workopolis.com were up $0.6 million in the fourth quarter Circulation revenues were up slightly in the quarter excluding the $8.1 million impact from the change in accounting. Lower newsprint consumption offset partially by higher pricing reduced the Toronto Star’s paper costs by $1 .2 million in the fourth quarter Labour costs were down $1.0 million as lower pension and long-term  disability costs more than offset general wage increases. Other costs were down $1.6 million due primarily to reduced promotional activities in the fourth quarter. Metroland’s costs were up in the quarter, reflecting the increased costs related to the revenue growth from product and geographic expansion. Depreciation expense was $0.4 million higher in the fourth quarter of 2004 due to the new press that came on-line during the second quarter of 2004. Metroland’s revenues were up $21.8 million in the fourth quarter including $2.5 million from acquisitions. Advertising linage at the community newspapers was up 13.2% in the quarter, slightly offset by a 1.3% decrease in the effective line rate. Distribution revenue was up  $4.8 million or 22.3% in the fourth quarter as over  700 million pieces were delivered. A portion of the increase is timing resulting from an extra Friday (which is the largest distribution day) in December 2004. This impact will reverse in the first quarter of 2005. Sing Tao and Metro had strong fourth quarters and contributed a combined $1.5 million of additional advertising revenue. 8 Effective 2004, Torstar has begun to report home delivery circulation revenues for the Toronto Star and CityMedia on a gross basis rather than net of certain distribution costs.  The fourth quarter 2004 adjustment to revenue was $8.1 million for the Toronto Star and $1.5 million for CityMedia. The 2003 results have not been restated for this change. The restated 2003 margins illustrate what the impact would have been on margins had the revenue been restated. For more details on the change, see the discussion in “Changes in Accounting Policies”. 33 TORSTAR 2004