- Year-End Debt Target Achieved
- All Three Divisions Report Improved Fourth Quarter Operating Results
- TV and Radio Divisions Report Strong Increases in EBITDA*
- Records Non-Cash Write-Down of Content Assets and Adjusts Production Strategy
(Toronto, Canada) Corus Entertainment Inc. (TSX: CJR.B; NYSE: CJR) today announced its fourth quarter and August 31, 2002 year-end results. The Company reported strong operating performances across all three divisions. Fourth quarter results were in line with the operating guidance provided by the Company in July 2002. The Company also announced a write-down of its investment in Nelvana, reflecting the structural changes in the production and distribution industry throughout this past year. Corus reports in Canadian dollars.
For the fourth quarter ended August 31, 2002, Corus reported consolidated revenues of $165.7 million down from $166.6 million in the prior year. The decrease reflects continued strong growth in all divisions offset by the sale of the publishing business, Klutz and the pay-per-view service, Viewer’s Choice. On a pro forma* basis, revenue for the fourth quarter was up 6% from $155.7 million last year.
Net income for the quarter after absorbing a $200 million write-down of Nelvana was a loss of $190.0 million compared to a loss of $1.9 million last year. Earnings per share (“EPS”) for the quarter were a loss per share of $4.45 compared to a loss per share of $0.04 last year.
* This measure is provided to assist investors in determining the ability of the Company to generate cash from operations to cover financial charges before income and expense items from investing activities, income taxes and items not considered to be in the ordinary course of business. It is also widely used for valuation purposes. A reconciliation of EBITDA and net income is provided in the consolidated statements of income and retained earnings. EBITDA is calculated as net income before minority interest, equity earnings from investees, income tax expense (recovery),goodwill and intangible impairment loss, asset write-downs, hedge transaction loss, restructuring charges, dividend income, other (income) expenses, (gain) loss on sale of investments, interest expense, amortization and depreciation. A listing of these items is disclosed in the consolidated statements of income and retained earnings. These items are excluded in the determination of EBITDA as they are non-cash in nature, pre-tax, financing charges, income or expense from investing activities or are not considered to be in the ordinary course of business. EBITDA should not be considered in isolation of or as a substitute for (1) net income or loss, as an indicator of the Company’s operating performance, or (2) cash flows from operating, investing and financing activities, as a measure of the Company’s liquidity. Pro forma information (including pro forma revenues; pro forma EBITDA and pro forma EBITDA margin) is provided to assist investors in comparing results between periods after giving effect to significant acquisitions and divestitures. In particular, results from the same period in fiscal 2001 have been adjusted to reflect operating results of all businesses reporting in the current period as if the businesses had been owned for the same number of days in the prior year. Pro forma information is provided on the basis of the Company’s reportable business segments (Television, Radio and Content) for revenues and EBITDA – the measure of profitability reviewed by the chief operating decision maker of these divisions, since there were acquisitions and/or dispositions in each of these divisions during fiscal 2001 or fiscal 2002.
Adjusted basic EPS* for the quarter, which excludes various items not considered to be in the ordinary course of business and accounting policy changes was a loss per share of $0.43 (EPS of $0.16 prior to the film investment write-down) compared to EPS of $0.20 last year. See Appendix A for a reconciliation of adjusted basic EPS. Cash flow per share for the quarter was $1.69 up from $1.36 last year reflecting strong cash flow from operations. On a divisional basis all three divisions produced fiscal 2002 fourth quarter operating results that were better than both actual and pro forma results for the fourth quarter of fiscal 2001. Television revenue was $66.9 million, up 18% on an actual basis and 10% on a pro forma basis. Television EBITDA was $22.1 million, up 31% compared to $16.9 million on an actual basis and $16.8 million on a pro forma basis. Radio revenue was $55.5 million, an increase of 1% on an actual basis and flat on a pro forma basis. However because of strong cost controls, Radio EBITDA was $15.3 million, up 10% on an actual basis and up 12% on a pro forma basis. Content revenue was $45.5 million compared to $55.5 million on an actual basis and $39.7 million on a pro forma basis, reflecting the sale of Klutz during the year. Content EBITDA prior to absorbing a library write-down was $7.7 million, up 77%, compared to $4.3 million on an actual basis and $3.1 million on a pro forma basis last year. As previously disclosed, the market for television programming continued to impact the operations of Nelvana Limited (“Nelvana”), the Company’s Content division. As a result, the Company reevaluated Nelvana’s goodwill and other intangible assets, during the fourth quarter and recorded a $200 million non-cash, pre-tax write-down of which $40 million was designated as a write-down in the library, reflected in EBITDA, and $160 million for goodwill and other intangibles. This has reduced total Company EBITDA in the quarter from approximately $43 million to $3 million compared to $32 million last year. EBITDA as a percentage of revenues, prior to the write-down would have been 26% for the quarter, up from 19% in the prior year. The Company has continued to review all options for addressing current market conditions impacting the Content division, including further reducing costs and capital spending and increasing merchandising revenues. In fiscal 2002, the unit produced 252 episodes, consuming approximately $20 million in cash, compared to original capital spending guidance of $40-$50 million. In fiscal 2003, the Company plans to reduce production levels to less than 150 episodes. This action will lower the operating earnings of the Content division but will eliminate the need to invest additional cash in the division.
After a long and distinguished career with Nelvana, Michael Hirsh has advised that he plans to step aside as CEO of Nelvana and assume advisory responsibilities with the company. Mr. Hirsh will focus on strengthening our customer service, will be involved with our creative partners and will work on global development projects for the company. “After 30 years in the trenches at Nelvana, I am delighted to have the opportunity to focus on mentoring a new leader for Nelvana as well as focusing on the things I love. I plan to spend my time building even stronger rapport with our customers and searching for the next hit. We have a very strong competitive position and a terrific plan to respond to the recent structural changes in the industry,” said Michael Hirsh, CEO of Nelvana.
* Adjusted basic earnings per share is provided to assist investors in comparing results between periods after giving effect to items not considered to be in the ordinary course of business and accounting policy changes. A reconciliation of basic earnings per share and adjusted basic earnings per share is provided in Appendix A. Adjusted basic earnings per share should not be considered in isolation of or as a substitute for basic earnings per share as a measure of a company’s profitability.
Consolidated revenues for the 2002 fiscal year were $652.8 million compared to $556.8 million last year, reflecting acquisitions and organic growth. On a pro forma basis, revenue last year amounted to $628.4 million, reflecting the impact of various acquisitions and divestitures.
Fiscal 2002 EBITDA was $156.4 million before absorbing the $40 million library write-down compared to $123.9 million last year. Pro forma EBITDA was $138.3 million in the prior year. EBITDA as a percentage of revenues, prior to the write-down would have been 24% for the year up from 22% in the prior year.
Net income for fiscal 2002 was a loss of $166.0 million after absorbing write-downs, restructuring and finance charges and asset sales compared to net income of $128.2 million in fiscal 2001, which included a gain of $103 million primarily from the sale of The Family Channel Inc. EPS in fiscal 2002 were a loss per share of $3.90 compared to EPS of $3.09 last year. Adjusted basic EPS for fiscal 2002, which excludes various items not considered to be in the ordinary course of business and accounting policy changes was $0.31 ($0.90 prior to the film investment write-down) compared to $0.85 last year. See Appendix A for a reconciliation of adjusted basic EPS.
Cash flow per share for fiscal 2002 was $5.39, up significantly from $3.83 last year reflecting improved cash flow from operations. In addition, with approximately $230 million generated from various divestitures during the year, we achieved our target of reducing debt to $629 million from $717 million in fiscal 2001.
Year-end divisional results were in line with expectations and all up sharply compared to the previous year. Television revenue was $284.7 million compared to $228.7 million last year, up 24%, and up 12% on a pro forma basis. Television EBITDA was $90.1 million, compared to $73.7 million, up 22% on an actual basis, and up 11% on a pro forma basis (up 20% before the new digital channels). Television EBITDA margin was 32% (34% excluding the digital networks) compared to 32% a year ago. Radio revenue was $211.4 million compared to $191.8 million, up 10% on an actual basis, and up 1% on a pro forma basis. Radio EBITDA was $52.9 million compared to $48.1 million, up 10% on both an actual and pro forma basis. Radio finished the year with an EBITDA margin of 25% compared to last yearÕs pro forma margin of 23%, as the company continued to focus on improving margins. Content revenue was $160.0 million compared to $137.4 million on an actual basis and $165.6 million on a pro forma basis. Content EBITDA was $19.0 million prior to absorbing the $40 million library write-down and a loss of $21.0 million after absorbing the library write-down compared to $12.1 million last year and $19.5 million on a pro forma basis last year.
“Our radio and television units performed very well this past year. Despite a well publicized advertising downturn we had organic growth in our top line, strong EBITDA growth as a result of our cost reduction initiatives and we increased our industry leading operating margins. It was a tougher year for Nelvana but we have taken the necessary steps to put the business on a solid footing for the future,” said John Cassaday, President and Chief Executive Officer of Corus Entertainment.
“It has been one year since we announced our three point plan to improve our operating results and strengthen our financial position. While fiscal 2002 certainly presented us with a difficult operating environment, we are pleased with the progress we have made on all fronts, which include achieving our debt reduction target, improving our operating margins and consolidating our core assets. Our strategy of assembling assets that together, offer our shareholders an integrated and balanced investment in media and entertainment remains on track,” added Heather Shaw, Executive Chair of Corus Entertainment. “As we adjust our focus and planned expenditures for the next fiscal year, we are creating the stability and flexibility required to respond to the evolving entertainment market and to capitalize on new opportunities and realities of the industry.”
Corus Entertainment is a Canadian-based media and entertainment company. Corus is a market leader in both specialty TV and Radio. Corus also owns Nelvana Limited, an internationally recognized producer and distributor of children’s programming and products. The Company’s other interests include music, television broadcasting and advertising services. A publicly traded company, Corus is listed on the Toronto (CJR.B) and New York (CJR) Exchanges. Corus’ Web site can be found at www.corusentertainment.com.
Certain statements in this press release may constitute forward-looking statements and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current 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; and, changes in accounting standards. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. 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.
For further information, please contact:
President and Chief Executive Officer
Corus Entertainment Inc.
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Corus Entertainment Inc.
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Corus Entertainment Inc.
CORUS ENTERTAINMENT INC. APPENDIX A ADJUSTED BASIC EARNINGS (LOSS) PER SHARE (Unaudited)
Net income (loss) for the three months and year ended August 31, 2002 and 2001 reflect a number of items not considered to be in the ordinary course of business and accounting policy changes which affect the comparability of the figures. These items include:
- Gain on sale of investments in fiscal 2002 and 2001
- Restructuring charges in fiscal 2002
- Hedge transaction loss in fiscal 2002
- Goodwill impairment losses in fiscal 2002
- Asset write-downs in fiscal 2002 and 2001
- Amortization of broadcast licenses and goodwill which is no longer required in fiscal 2002
- Future income tax recovery recorded in fiscal 2001
Comparable results, adjusted to exclude the above items are as follows: (thousands of Canadian dollars) Three months ended Year ended Aug. 31 2002 Aug. 31 2001 Aug. 31 2002 Aug. 31 2001 Net income (loss), as reported (189,877) (1,901) (166,037) 128,167 Gain on sale of investments, after-tax – (1,328) (19,890) (89,137) Restructuring charge, after-tax 3,721 – 13,253 – Hedge transaction loss, after-tax – – 11,749 – Goodwill impairment loss, after-tax 162,124 – 162,124 – Asset write-downs, after-tax 5,602 – 11,898 1,054 Amortization of broadcast licenses/goodwill, net of tax – 11,703 – 37,329 Future income tax recovery – – – (42,258) Adjusted net income (loss) – including film investment write-down (18,430) 8,474 13,097 35,155 Film investment write-down 25,150 – 25,150 – Adjusted net income (loss) – before film investment write-down 6,720 8,474 38,247 35,155 (thousands of Canadian dollars except per share data) Three months ended Year ended Aug. 31 2002 Aug. 31 2001 Aug. 31 2002 Aug. 31 2001 Basic earnings (loss) per share, as reported (4.45) (0.04) (3.90) 3.09 Gain on sale of investments, after-tax – (0.03) (0.46) (2.15) Restructuring charge, after-tax 0.09 – 0.31 – Hedge transaction loss, after-tax – – 0.28 – Goodwill impairment loss, after-tax 3.80 – 3.80 – Asset write-downs, after-tax 0.13 – 0.28 0.03 Amortization of broadcast licenses/goodwill, net of tax – 0.27 – 0.90 Future income tax recovery – – – (1.02) Adjusted basic earnings (loss) per share – including film investment write-down (0.43) 0.20 0.31 0.85 Film investment write-down 0.59 – 0.59 – Adjusted basic earning per share – before film investment write-down 0.16 0.20 0.90 0.85