Revenue and EBITDA* Gains Led by Over-Performance from Television Division and Strong Growth in Major Market Radio Operations
(Toronto, Canada) Corus Entertainment Inc. (TSX: CJR.B; NYSE: CJR) continued its uninterrupted record of year-over-year revenue and EBITDA growth (5% and 11% respectively on a pro forma basis*) in announcing its third quarter earnings today. The strong results were attributable to advertising gains from its television and radio operations. The company also reported continued progress in its debt reduction initiative. Corus reports in Canadian dollars.
The consolidated results for the three-month period ending May 31, 2002 included an 8% increase in revenues, from $138 million last year to $149.4 million, and EBITDA growth of 27% to $38.4 million. Net income was $0.5 million, down from $103.4 million last year primarily as a result of higher gains from investments and future tax recovery in the prior year. EBITDA margin was 26% for the quarter compared to 22% last year while earnings per share were $0.01 compared with $2.43 last year. Cash flow per share for the quarter was $1.20 compared with $0.61 last year. The results of the current quarter include an after-tax gain of $10.8 million from the sale of Viewer’s Choice, Klutz and Astral Media Inc. shares, as well as an after-tax hedge transaction loss of $11.7 million from unwinding cross-currency interest rate swaps. The prior year included amortization of broadcast licenses and goodwill net of taxes of $11.3 million, an after-tax gain of $87 million from the sale of our 50% interest in The Family Channel Inc. and a future income tax recovery of $23 million. Excluding the above items, adjusted EPS for the third quarter fiscal 2002 would be $0.03/share compared to $0.11/share in the prior year.
“We are clearly seeing the benefits of executing well against our three-point plan,” said John Cassaday, President and CEO of Corus Entertainment. “We expanded our industry-leading margins in radio and television. Ad sales are also recovering, and were most apparent in two key areas, YTV and our Toronto Radio properties. Nelvana’s margin however, was impacted by the global downturn in advertising, particularly in the German market. We are responding to this with further cost reductions and a strategic commitment to build our merchandise revenues behind our classic brands.”
On a divisional basis, Television continued its strong performance with significant growth in subscriber revenue fuelling 30% and 26% increases in revenues and EBITDA respectively for the quarter, exceeding expectations. On a pro forma basis, revenue grew by 9% and EBITDA by 3% over the prior year. Excluding the digital networks launched in September 2001, pro forma EBITDA gained 16%. The Television division also reported strong advertising growth for Corus’ specialty television services, up 9% versus the previous year. Corus Radio has enjoyed strong revenue growth in a number of major markets and at the same time, showed overall improvement in operating margins. Revenue and EBITDA growth for the division increased by 3% and 17% respectively over the prior year. On a pro forma basis, revenue and EBITDA also grew by 3% and 17% respectively. National advertising continues to recover more slowly than anticipated but the cost saving initiatives introduced in the first quarter helped to offset the shortfall by delivering a reduction in pro forma operating, general and administrative expenses of 3%. The Content division experienced a decline in revenues of 28% to $18.9 million for the quarter over the same period last year. EBITDA was a loss of $1.2 million compared to a loss of $0.4 million in the prior year. These results reflected the disappointing situation in the European market, particularly in Germany where a number of broadcasters are facing financial difficulties. These market pressures have resulted in lower revenue per episode compared to the prior year. While overall production levels are on target, EBITDA for the division is down as a result of lost sales to RTV Family Entertainment AG in Germany. However, both merchandising and publishing revenues showed positive movement in the quarter with revenue gains of 123% and 8% respectively on a pro forma basis over the previous year. The year-to-date consolidated results included a 25% increase in revenues, from $390.2 million last year to $487 million and a 23% increase in EBITDA to $113.6 million. Net income was $23.8 million, down from $130.1 million last year. Earnings per share were $0.56 compared with $3.16 last year. Cash flow per share was $3.71 compared to $2.46. The results for the nine-month period include an after-tax gain of $21.6 million from the sale of Viewer’s Choice, Klutz, Comedy Network and Astral Media shares, as well as an after-tax hedge transaction loss of $11.7 million from unwinding cross-currency interest rate swaps and an after-tax restructuring charge of $9.8 million. The prior year included amortization of broadcast licenses and goodwill net of taxes of $25.4 million, an after-tax gain of $87 million from the sale of our 50% interest in the Family Channel Inc. and a future income tax recovery of $42 million. Excluding the above items, adjusted EPS would be $0.56/share compared to $0.63/share in the prior year. Despite meaningful progress on all aspects of our three-point plan, there is a risk that we will not achieve our fiscal 2002 EBITDA target (adjusted for the sale of Klutz) of $165 million. The economic impact of overall softness in the Content business has been much greater than contemplated and although local advertising sales in Radio have been strong, they have not been strong enough to offset the reduction in national sales during the first half of the year. We are now estimating EBITDA to be in the $155 million to $160 million range.
“In addition to staying focused on our three-point plan and improving operational efficiencies within the organization during the third quarter, Corus demonstrated its leadership in the media and entertainment industry with a highly successful rebranding and relaunch of W Network, as well as significant program sales to the some of the most influential broadcasters in the world, including ABC, Walt Disney International and Nickelodeon,” added Heather Shaw, Executive Chair of Corus Entertainment. “We continue to grow the Corus reputation internationally and we’re well positioned to translate that reputation into shareholder value.”
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 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.
Senior Vice President & Chief Financial Officer, Corus Entertainment Inc.
Vice President, Communications, Corus Entertainment Inc.