• Consolidated revenues up 14% for the quarter and 11% year-to-date
  • Consolidated segment profit up 23% for the quarter and 16% year-to-date
  • Adjusted net income attributable to shareholders of $41.6 million, up 21% in the quarter
  • Adjusted basic earnings per share attributable to shareholders of $0.49, up 20% in the quarter
  • Free cash flow of $182.4 million year-to-date, up from $121.1 million in the prior year

(July 10, 2014 – Toronto, Canada) Corus Entertainment Inc. (TSX: CJR.B) announced its third quarter financial results today.

“In the third quarter, the Company delivered impressive double-digit revenue and segment profit growth fueled by our newly acquired television and radio assets,” said John Cassaday, President and Chief Executive Officer of Corus Entertainment.  “While we experienced continued softness in the ad markets, we are encouraged by the ratings strength of our flagship networks W and YTV, which have maintained a leadership position with their core audiences, as well as the strong ratings gains from our family brands CMT and ABC Spark. The strength of our recent acquisitions, combined with our core business, continue to drive shareholder value with strong free cash flow and adjusted earnings per share growth for the Company.”

Financial Highlights   
Three months ended Nine months ended
May 31, May 31,
(unaudited – in thousands of Canadian dollars
except per share amounts)
2014  2013(3) 2014  2013(3)
Revenues   
  Television  170,565   139,995  500,615   429,960
  Radio  43,476   47,078  130,844   139,679
 214,041   187,073  631,459   569,639
      
Segment profit (1)       
  Television  75,679   58,154  216,237   176,786
  Radio  11,678   14,874  35,985   43,484
  Corporate  (7,626)  (8,464)  (20,933)  (20,227)
 79,731   64,564  231,289   200,043
      
Net income (loss) attributable to shareholders  (30,325)   89,913  126,682   148,016
Adjusted net income attributable to shareholders (1) (2)  41,602   34,519  123,560   111,110
        
Basic earnings (loss) per share ($ 0.36) $ 1.07 $ 1.49 $ 1.77
Adjusted basic earnings per share (1) (2) $ 0.49 $ 0.41 $ 1.46 $ 1.33
Diluted earnings (loss) per share ($ 0.36) $ 1.07 $ 1.49 $ 1.76
      
Free cash flow (1)  59,399   41,475  182,440   121,084
      
(1) Adjusted net income attributable to shareholders, adjusted basic earnings per share, segment profit, segment profit margin and free cash flow do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit, segment profit margin and free cash flow because they are key measures used to evaluate performance.  For definitions and explanations, see discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.  
(2) For the three months ended May 31, 2014, excludes radio broadcast license and goodwill impairment charges of $75.0 million ($0.85 per share), business acquisition, integration and restructuring costs of $0.6 million ($0.01 per share), capital asset impairment charges of $1.2 million ($0.01 per share) and a decrease in the purchase price obligation of $2.0 million ($0.02 per share).  For the nine month period ended May 31, 2014, excludes the impact of a $127.9 million ($1.51 per share) gain on remeasurement to fair value of the Company’s 50% interest in TELETOON which was held prior to consolidation on September 1, 2013,  radio broadcast license and goodwill impairment charges of $83.0 million ($0.92 per share), capital asset impairment charges of $1.2 million ($0.01 per share), business acquisition, integration and restructuring costs of $41.2 million ($0.47 per share), an increase in the purchase price obligation of $3.3 million ($0.04 per share), and investment impairment related charges of $3.3 million ($0.04 per share).  For the three and nine month periods ended May 31, 2013, excludes the impact of a gain on disposition of the Food Network Canada investment of $55.4 million ($0.66 per share), while for the nine month period, the impact of debt refinancing costs of $25.0 million ($0.22 per share) are excluded as well.
(3)  Prior period figures have been restated to reflect the changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 Report to Shareholders.  

 

Consolidated Results from Operations

For fiscal 2014, the operating results of TELETOON Canada Inc. (“TELETOON”), as well as its assets and liabilities, have been fully consolidated effective September 1, 2013 as a consequence of meeting the definition of control under IFRS 10 – Consolidated Financial Statements. Accordingly, a business combination had occurred in accordance with IFRS 3 – Business Combinations and as a result, TELETOON must be accounted for by applying the acquisition method.  On December 20, 2013, the Company received Canadian Radio-television and Telecommunications Commission (“CRTC”) approval to complete the acquisition of the remaining 50% interest in TELETOON that it did not already own, as well as the acquisition of Historia and Séries+, s.e.n.c. (“H&S”).  These acquisitions closed on January 1, 2014.  On January 24, 2014, the CRTC approved the Company’s acquisition of the Ottawa-based radio stations (CKQB-FM and CJOT-FM) and the transaction closed on January 31, 2014.  As a result of these business combinations, the Company’s consolidated results for fiscal 2014 reflect 100% interest in TELETOON effective September 1, 2013, 100% interest in H&S effective January 1, 2014, and 100% interest in the two Ottawa-based radio stations effective January 31, 2014 (refer to note 17 of the interim condensed consolidated financial statements for further details on all acquisitions).

For fiscal 2013, as a result of retroactive application of IFRS 11 – Joint Arrangements, the Company is no longer permitted to proportionately consolidate its 50% equity interest in the operations of TELETOON up to August 31, 2013 (i.e. prior to the business combination on September 1, 2013) and is required to account for its investment using the equity method of accounting.  As a consequence, the Television revenues and segment profit for the third quarter of fiscal 2013 were reduced by $13.0 million and $3.7 million, respectively and instead, Corus’ share of TELETOON’s net income of $2.3 million was reported as Other expense (income) in the Consolidated Statements of Income and Comprehensive Income.  For the nine months ended May 31, 2013, the Television revenues and segment profit were reduced by $40.3 million and $15.5 million, respectively, and Corus’ share of TELETOON’s net income of $11.0 million was reported as Other expense (income) in the Consolidated Statements of Income and Comprehensive Income. The restatement did not change reported net income for fiscal 2013.

Consolidated revenues for the three months ended May 31, 2014 were $214.0 million, up 14% from $187.1 million last year.  Consolidated segment profit was $79.7 million, up 23% from $64.6 million last year.  Net loss attributable to shareholders for the quarter was $30.3 million ($0.36 basic and diluted per share), compared to net income of $89.9 million ($1.07 basic and diluted per share) last year.  Net income attributable to shareholders for the third quarter includes radio broadcast license and goodwill impairment charges of $75.0 million, capital asset impairment charges of $1.2 million, business acquisition, integration and restructuring costs of $0.6 million and a decrease in the purchase price obligation of $2.0 million related to the acquisition of control of TELETOON.  Removing the impact of these items results in an adjusted net income of $41.6 million ($0.49 per share) in the quarter.  Net income attributable to shareholders for the prior year quarter includes a gain related to the sale of the Company’s non-controlling interest in Food Network Canada of $55.4 million.  Removing the impact of this item results in an adjusted net income attributable to shareholders of $34.5 million ($0.41 per share) in the prior year quarter.

Consolidated revenues for the nine months ended May 31, 2014 were $631.5 million, up 11% from $569.6 million last year.  Consolidated segment profit was $231.3 million, up 16% from $200.0 million last year.  Net income attributable to shareholders for the nine months ended May 31, 2014 was $126.7 million ($1.49 per share both basic and diluted)  compared to $148.0 million ($1.77 per share basic and $1.76 per share diluted) last year.  Net income attributable to shareholders for the nine months ended May 31, 2014 includes a non-cash gain of $127.9 million resulting from the remeasurement to fair value of the Company’s 50% interest in TELETOON which was held prior to consolidation on September 1, 2013, radio broadcast license and goodwill impairment charges of $83.0 million, capital asset impairment charges of $1.2 million, business acquisition, integration and restructuring costs of $41.2 million, an increase in the purchase price obligation of $3.3 million and investment impairment related charges of $3.3 million.  Removing the impact of these items results in an adjusted net income of $123.6 million ($1.46 per share) for the current year-to-date. Prior year-to-date net income includes a pre-tax charge for debt refinancing of $25.0 million and a gain related to the sale of the Company’s non-controlling interest in Food Network Canada of $55.4 million.  Removing the impact of these items results in an adjusted net income attributable to shareholders of $111.1 million ($1.33 per share) in the prior year-to-date.

Operational Results – Highlights

Television

  • Fiscal 2014 reflects consolidation of 100% interest in TELETOON, effective September 1, 2013 and 100% interest in Historia and Séries+, effective January 1, 2014; Fiscal 2013 was retroactively restated to apply IFRS 11 – Joint Arrangements, resulting in equity accounting for Corus’ 50% economic interest in TELETOON (i.e. prior to the business combination on September 1, 2013)
  • Segment revenues increased 22% in Q3 2014 and 16% year-to-date
  • Specialty advertising revenues increased 42% in Q3 2014 and 38% year-to-date
  • Subscriber revenues increased 24% in Q3 2014 and 20% year-to-date
  • Merchandising, distribution and other revenues declined 27% in Q3 2014 and 33% year-to-date
  • Segment profit(1) increased 30% in Q3 2014 and 22% year-to-date
  • Segment profit margin(1) of 44% in Q3 2014 and 43% year-to-date

Radio

  • Fiscal 2014 reflects consolidation of 100% interest in two Ottawa-based radio stations, CKQB-FM and CJOT-FM, effective January 31, 2014
  • Segment revenues decreased 8% in Q3 2014 and 6% year-to-date
  • Segment profit(1) decreased 21% in Q3 2014 and 17% year-to-date
  • Segment profit margin(1) of 27% in Q3 2014 and 28% year-to-date
  • Non-cash broadcast license and goodwill impairment charges of $75.0 million recorded in Q3 2014 and $83.0 million year-to-date.

 (1)    Segment profit, segment profit margin and free cash flow do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit, segment profit margin and free cash flow because they are key measures used to evaluate performance.  For definitions and explanations, see discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.

Corus Entertainment Inc. reports in Canadian dollars.

The unaudited consolidated financial statements and accompanying notes for the three and nine month periods ended May 31, 2014 and Management’s Discussion and Analysis are available on the Company’s website at www.corusent.com in the Investor Relations section.

A conference call with Corus senior management is scheduled for July 10, 2014 at 3:00 p.m. ET.  While this call is directed at analysts and investors, members of the media are welcome to listen in. The dial-in number for the conference call for local and international callers is 1.416.981.9038 and for North America is 1.800.734.8582.  PowerPoint slides for the call will be posted 15 minutes prior to the start of the call and can be found on the Corus Entertainment website at www.corusent.com in the Investor Relations section.

Use of Non-GAAP Financial Measures

This press release includes the non-GAAP financial measures of adjusted net income, adjusted basic earnings per share and free cash flow that are not in accordance with, nor an alternate to, generally accepted accounting principles (“GAAP”) and may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on the Company’s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company’s financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results.  A reconciliation of the Company’s non-GAAP measures is included in the Company’s most recent Report to Shareholders which is available on Corus’ website at www.corusent.com as well as on SEDAR.

 

Caution Concerning Forward-Looking Statements

This press release contains forward-looking information and should be read subject to the following cautionary language:

To the extent any statements made in this report contain information that is not historical, these statements are forward-looking statements and may be forward-looking information within the meaning of applicable securities laws (collectively, “forward-looking statements”).  These forward-looking statements relate to, among other things, our objectives, goals, strategies, intentions, plans, estimates and outlook, including advertising, distribution, merchandise and subscription revenues, operating costs and tariffs, taxes and fees, and can generally be identified by the use of the words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, “will”, “may” and other similar expressions.  In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.  Although Corus believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties and undue reliance should not be placed on such statements.  Certain material factors or assumptions are applied in making forward-looking statements, including without limitation factors and assumptions regarding advertising, distribution, merchandise and subscription revenues, operating costs and tariffs, taxes and fees and actual results may differ materially from those expressed or implied in such statements.  Important factors that could cause actual results to differ materially from these expectations include, among other things: our ability to attract and retain advertising revenues; audience acceptance of our television programs and cable networks; our ability to recoup production costs, the availability of tax credits and the existence of co-production treaties; our ability to compete in any of the industries in which we do business; the opportunities (or lack thereof) that may be presented to and pursued by us; conditions in the entertainment, information and communications industries and technological developments therein; changes in laws or regulations or the interpretation or application of those laws and regulations; our ability to integrate and realize anticipated benefits from our acquisitions and to effectively manage our growth; our ability to successfully defend ourselves against litigation matters arising out of the ordinary course of business;  and changes in accounting standards. Additional information about these factors and about the material assumptions underlying such forward-looking statements may be found in our Annual Information Form.  Corus cautions that the foregoing list of important factors that may affect future results is not exhaustive.  When relying on our forward-looking statements to make decisions with respect to Corus, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Unless otherwise required by applicable securities laws, we disclaim any intention or obligation to publicly update or revise any forward-looking statements whether as a result of new information, events or circumstances that arise after the date thereof or otherwise.

About Corus Entertainment Inc.

Corus Entertainment Inc. is a Canadian-based media and entertainment company that creates, broadcasts and licenses content across a variety of platforms for audiences around the world. The Company’s portfolio of multimedia offerings encompasses specialty television and radio with additional assets in pay television, television broadcasting, children’s book publishing, children’s animation and animation software. Corus’ brands include YTV, TELETOON, ABC Spark, W Network, OWN: Oprah Winfrey Network (Canada), HBO Canada, Historia and Séries+, as well as Nelvana, Kids Can Press, Toon Boom and 39 radio stations including CKNW AM 980, 99.3 The FOX, Country 105, 630 CHED, Fresh FM London, JUMP! 106.9, Q107 and 102.1 the Edge. A publicly traded company, Corus is listed on the Toronto Stock Exchange (CJR.B). Experience Corus on the web at www.corusent.com.

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For further information, please contact:

 

John Cassaday
President and Chief Executive Officer
Corus Entertainment Inc.
416.479.6018                                        

Tom Peddie
Executive Vice President and Chief Financial Officer
Corus Entertainment Inc.

416.479.6080

Sally Tindal
Director, Communications
Corus Entertainment Inc.
416.479.6107