Corus Entertainment Announces Fiscal 2015 Second Quarter Results

  • Consolidated segment profit up 1% for the quarter and year-to-date
  • Television revenues up 2% for the quarter and year-to-date
  • Television segment profit up 3% for the quarter and up 2% year-to-date
  • Net loss attributable to shareholders of $86.8 million for the quarter, which includes a non-cash Radio broadcast license and goodwill impairment charge of $130.0 million.
  • Adjusted basic earnings per share of $0.33 per share, up 3% for the quarter

TORONTO, April 9, 2015 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its second quarter financial results today.

"In the second quarter, the company continued to see strong audience delivery, particularly from our Women's, Family and French-language specialty networks, and improved radio ratings in certain key markets. However, as economic headwinds continue to impact advertising market confidence, we do not expect to achieve our segment profit guidance for fiscal 2015," said Doug Murphy, President and Chief Executive Officer of Corus Entertainment. "Moving forward, we continue to make excellent progress on our four strategic priorities and we are conducting a comprehensive review of opportunities arising from this new flexible regulatory environment. Our recent landmark deal with Nickelodeon is the first example of our priorities in action as we position the company for future growth, embracing the exciting changes and opportunities emerging from the evolving regulatory and content marketplace."



Financial Highlights











Three months ended


Six months ended 



February 28,


February 28, 

(unaudited - in thousands of Canadian dollars except per share amounts)


2015


2014


2015


2014

Revenues










Television


155,175


152,101


336,665


330,050


Radio


36,309


39,312


81,930


87,368



191,484


191,413


418,595


417,418










Segment profit (1)










Television


59,700


58,034


143,479


140,558


Radio


6,227


8,470


19,047


24,307


Corporate


(6,208)


(7,222)


(9,531)


(13,307)



59,719


59,282


152,995


151,558










Net income (loss) attributable to shareholders


(86,786)


6,116


(34,880)


157,007

Adjusted net income attributable to shareholders (1) (2)


28,499


26,780


80,405


81,957










Basic earnings (losses) per share


$ (1.01)


$ 0.07


$ (0.41)


$ 1.85

Adjusted basic earnings per share (1) (2)


$ 0.33


$ 0.32


$ 0.93


$ 0.97

Diluted earnings (losses) per share


$ (1.01)


$ 0.07


$ (0.41)


$ 1.85










Free cash flow (1)


59,242


73,405


92,624


123,041










(1)

Adjusted net income (loss) attributable to shareholders, adjusted basic earnings per share, segment profit and free cash flow do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit 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 2015 Report to Shareholders.

(2)

For the three and six months ended February 28, 2015, excludes radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), business acquisition, integration and restructuring charges of $8.0 million ($0.07 per share), offset by a gain on disposition of investment of $17.0 million ($0.17 per share). For the three months ended February 28, 2014, excludes radio broadcast license impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $18.7 million ($0.20 per share) and a decrease in the purchase price obligation of $2.1 million ($0.02 per share). For the six month period ended February 28, 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 impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $40.7 million ($0.46 per share), an increase in the purchase price obligation of $5.3 million ($0.06 per share) and investment impairment related charges of $3.3 million ($0.04 per share).

 

Consolidated Results from Operations

Consolidated revenues for the three months ended February 28, 2015 were $191.5 million, which is comparable to   $191.4 million last year.  Consolidated segment profit was $59.7 million, up 1% from $59.3 million last year.  Net loss attributable to shareholders for the quarter was $86.8 million ($1.01 loss per share basic and diluted), compared to net income attributable to shareholders of $6.1 million ($0.07 per share basic and diluted) last year. Net loss attributable to shareholders for the second quarter includes Radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), business acquisition, integration and restructuring costs of $8.0 million ($0.07 per share), offset by a gain on disposition of investment of $17.0 million ($0.17 per share).  Removing the impact of these items results in an adjusted net income attributable to shareholders of $28.5 million ($0.33 per share) in the quarter.  Net income attributable to shareholders for the prior year quarter includes radio broadcast license impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $18.7 million ($0.20 per share) and a decrease in the purchase price obligation of $2.1 million ($0.02 per share) related to the acquisition of control of TELETOON.  Removing the impact of these items results in an adjusted net income attributable to shareholders of $26.8 million ($0.32 per share) in the prior year quarter.

Consolidated revenues for the six months ended February 28, 2015 were $418.6 million, which is comparable to $417.4 million last year. Consolidated segment profit was $153.0 million, up 1% from $151.6 million last year. Net loss attributable to shareholders for the six months ended February 28, 2015 was $34.9 million ($0.41 loss per share basic and diluted) compared to net income attributable to shareholders of $157.0 million ($1.85 per share basic and diluted) last year.  Net loss attributable to shareholders for the six months ended February 28, 2015 includes Radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), business acquisition, integration and restructuring costs of $8.0 million ($0.07 per share), offset by a gain on disposition of investment of $17.0 million ($0.17 per share).  Removing the impact of these items results in an adjusted net income attributable to shareholders of $80.4 million ($0.93 per share) for the current year-to-date.  Removing the impact of the prior year non-cash gain of $127.9 million ($1.51 per share) 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 impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $40.7 million ($0.46 per share), an increase in the purchase price obligation of $5.3 million ($0.06 per share), and investment impairment related charges of $3.3 million ($0.04 per share) results in an adjusted net income attributable to shareholders of $82.0 million ($0.97 per share). 

Operational Results - Highlights

Television

  • Specialty advertising revenues decreased 7% in Q2 2015 and 2% for the year-to-date 
  • Subscriber revenues increased 2% in Q2 2015 and 5% for the year-to-date
  • Merchandising, distribution and other revenues increased 32% in Q2 2015 and 7% for the year-to-date
  • Segment profit(1) increased 3% in Q2 2015 and 2% for the year-to-date
  • Segment profit margin(1) of 38% in Q2 2015 and 43% for the year-to-date

Radio

  • Segment revenues decreased 8% in Q2 2015 and 6% for the year-to-date
  • Segment profit(1) decreased 26% in Q2 2015 and 22% for the year-to-date
  • Segment profit margin(1) of 17% in Q2 2015 and 23% for the year-to-date
  • Non-cash broadcast license and goodwill impairment charges of $130.0 million in Q2 2015 and for the year-to-date

Corporate

  • Financial guidance revised, refer to Outlook section of the Second Quarter 2015 Report to Shareholders
  • $18.5 million pre-tax cash proceeds from disposition of GoPro shares held by Steamboat Ventures

 (1)

Segment profit and segment profit margin do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit and segment profit margin because they are key measures used to evaluate performance.  For definitions and explanations, see discussion under the Key Performance Indicators section of the 2015 Report to Shareholders.

 

Corus Entertainment Inc. reports in Canadian dollars.

The unaudited consolidated financial statements and accompanying notes for the three and six months ended February 28, 2015 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 April 9, 2015 at 2:30 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 416.981.9039 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, Rock 101, Country 105, 630 CHED, Fresh Radio, 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.

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION











As at February 28,



As at August 31,

(unaudited - in thousands of Canadian dollars)



2015



2014

ASSETS







Current







Cash and cash equivalents



38,213



11,585

Accounts receivable



192,810



183,009

Income taxes recoverable



1,094



9,768

Prepaid expenses and other



12,103



13,032








Total current assets



244,220



217,394








Tax credits receivable



32,071



29,044

Intangibles, investments and other assets



60,278



47,630

Property, plant and equipment



141,314



143,618

Program and film rights



332,333



330,437

Film investments



62,416



63,455

Broadcast licenses



956,984



979,984

Goodwill



827,859



934,859

Deferred tax assets



39,005



38,161




2,696,480



2,784,582








LIABILITIES AND SHAREHOLDERS' EQUITY







Current







Accounts payable and accrued liabilities



187,519



170,411

Provisions



8,358



5,314

Total current liabilities



195,877



175,725








Long-term debt



864,715



874,251

Other long-term liabilities



138,093



171,793

Deferred tax liabilities



252,290



252,687

Total liabilities



1,450,975



1,474,456








SHAREHOLDERS' EQUITY







Share capital



984,458



967,330

Contributed surplus



8,906



8,385

Retained earnings



230,368



313,361

Accumulated other comprehensive income



6,840



3,767

Total equity attributable to shareholders



1,230,572



1,292,843

Equity attributable to non-controlling interest



14,933



17,283

Total shareholders' equity



1,245,505



1,310,126




2,696,480



2,784,582

 

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME












Three months ended


Six months ended



February 28,


February 28,

(unaudited - in thousands of Canadian dollars except per share amounts)


2015


2014


2015


2014

Revenues


191,484


191,413


418,595


417,418

Direct cost of sales, general and administrative expenses


131,765


132,131


265,600


265,860

Depreciation and amortization


6,089


5,533


11,863


11,268

Interest expense


12,746


12,604


25,427


21,874

Broadcast license and goodwill impairment


130,000


8,000


130,000


8,000

Business acquisition, integration and restructuring costs


8,002


18,734


8,002


40,656

Gain on acquisition





(127,884)

Other expense (income), net


(15,902)


(1,006)


(14,096)


8,705










Income (loss) before income taxes


(81,216)


15,417


(8,201)


188,939

Income tax expense


4,643


8,353


24,476


29,533










Net income (loss) for the period


(85,859)


7,064


(32,677)


159,406










Net income (loss) attributable to:









Shareholders


(86,786)


6,116


(34,880)


157,007

Non-controlling interest


927


948


2,203


2,399



(85,859)


7,064


(32,677)


159,406










Earnings (losses) per share attributable to shareholders:











Basic


$ (1.01)


$ 0.07


$ (0.41)


$ 1.85



Diluted


$ (1.01)


$ 0.07


$ (0.41)


$ 1.85










Net income (loss) for the period


(85,859)


7,064


(32,677)


159,406

Other comprehensive income (loss), net of tax:










Items that may be reclassified subsequently to income:











Unrealized foreign currency translation adjustment


2,437


1,891


3,667


2,266



Unrealized change in fair value of available-for-sale investments


170


(12)


(140)


62



Unrealized change in fair value of cash flow hedges


(416)


(146)


(454)


(146)



2,191


1,733


3,073


2,182










Comprehensive income (loss) for the period


(83,668)


8,797


(29,604)


161,588










Comprehensive income (loss) attributable to:











Shareholders


(84,595)


7,849


(31,807)


159,189



Non-controlling interest


927


948


2,203


2,399



(83,668)


8,797


(29,604)


161,588

 

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
















(unaudited - in thousands of Canadian dollars)


Share
capital


Contributed
surplus


Retained
earnings


Accumulated
other
comprehensive
income (loss)


Total equity
attributable
to
shareholders


Non-
controlling
interest


Total
equity

At August 31, 2014


967,330


8,385


313,361


3,767


1,292,843


17,283


1,310,126

Comprehensive income (loss)




(34,880)


3,073


(31,807)


2,203


(29,604)

Dividends declared




(48,113)



(48,113)


(4,553)


(52,666)

Issuance of shares under stock option plan


5,781


(945)




4,836



4,836

Issuance of shares under dividend reinvestment plan


11,347





11,347



11,347

Share-based compensation expense



1,466




1,466



1,466

At February 28, 2015


984,458


8,906


230,368


6,840


1,230,572


14,933


1,245,505
















At August 31, 2013


937,183


7,221


256,517


1,653


1,202,574


18,259


1,220,833

Comprehensive income




157,007


2,182


159,189


2,399


161,588

Dividends declared




(44,763)



(44,763)


(6,001)


(50,764)

Issuance of shares under stock option plan


1,063


(170)




893



893

Issuance of shares under dividend reinvestment plan


11,745





11,745



11,745

Share-based compensation expense



961




961



961

At February 28, 2014


949,991


8,012


368,761


3,835


1,330,599


14,657


1,345,256
















 

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS












Three months ended
February 28,


Six months ended
February 28,

(unaudited - in thousands of Canadian dollars)


2015


2014


2015


2014

OPERATING ACTIVITIES









Net income (loss) for the period


(85,859)


7,064


(32,677)


159,406

Adjustments to reconcile net income (loss) to cash provided by operating activities:










Depreciation and amortization


6,089


5,533


11,863


11,268


Broadcast license and goodwill impairment


130,000


8,000


130,000


8,000


Amortization of program and film rights


53,366


51,613


107,703


102,144


Amortization of film investments


6,692


5,143


13,613


9,055


Deferred income taxes


(3,864)


2,566


(1,017)


5,021


Increase (decrease) in purchase price obligation



(2,056)



5,288


Share-based compensation expense


937


504


1,466


961


Imputed interest


3,481


4,109


6,977


7,145


Tangible benefit obligation



11,892



31,915


Gain on disposition of investment


(16,964)



(16,964)



Gain on acquisition





(127,884)


Other


1,406


160


1,888


1,415

Net change in non-cash working capital balances related to operations


11,594


11,570


(14,855)


(7,189)

Payment of program and film rights


(46,064)


(32,587)


(96,481)


(60,678)

Net additions to film investments


(10,031)


(4,150)


(23,846)


(18,116)

Decrease in restricted cash



6,407



Cash provided by operating activities


50,783


75,768


87,670


127,751










INVESTING ACTIVITIES









Additions to property, plant and equipment


(4,931)


(2,344)


(7,754)


(4,280)

Business combinations



(491,441)



(491,441)

Proceeds from disposition of investment


18,490



18,490


Net cash flows for intangibles, investments and other assets


(2,425)


(3,167)


(17,586)


(5,074)

Other


(4,737)


(55)


(5,248)


(122)

Cash provided by (used in) investing activities


6,397


(497,007)


(12,098)


(500,917)










FINANCING ACTIVITIES









Increase (decrease) in bank loans


(29,688)


373,065


(9,897)


373,065

Financing fees


(750)


(587)


(750)


(587)

Issuance of shares under stock option plan


3,417


757


4,836


893

Dividends paid


(17,982)


(16,238)


(35,901)


(31,936)

Dividends paid to non-controlling interest


(419)


(1,933)


(4,553)


(6,001)

Other


(1,385)


(584)


(2,679)


(1,249)

Cash provided by (used in) financing activities


(46,807)


354,480


(48,944)


334,185

Net change in cash and cash equivalents during the period


10,373


(66,759)


26,628


(38,981)

Cash and cash equivalents, beginning of the period


27,840


109,044


11,585


81,266

Cash and cash equivalents, end of the period


38,213


42,285


38,213


42,285

 


CORUS ENTERTAINMENT INC.

BUSINESS SEGMENT INFORMATION










(unaudited - in thousands of Canadian dollars)


















Three months ended February 28, 2015











Television


Radio


Corporate


Consolidated

Revenues


155,175


36,309



191,484

Direct cost of sales, general and administrative expenses


95,475


30,082


6,208


131,765

Segment profit (loss)(1)


59,700


6,227


(6,208)


59,719

Depreciation and amortization








6,089

Interest expense








12,746

Broadcast license and goodwill impairment








130,000

Business acquisition, integration and restructuring costs








8,002

Other expense (income), net








(15,902)

Loss before income taxes








(81,216)










Three months ended February 28, 2014











Television


Radio


Corporate


Consolidated

Revenues


152,101


39,312



191,413

Direct cost of sales, general and administrative expenses


94,067


30,842


7,222


132,131

Segment profit (loss)(1)


58,034


8,470


(7,222)


59,282

Depreciation and amortization








5,533

Interest expense








12,604

Broadcast license and goodwill impairment








8,000

Business acquisition, integration and restructuring costs








18,734

Other expense (income), net








(1,006)

Income before income taxes








15,417










Six months ended February 28, 2015











Television


Radio


Corporate


Consolidated

Revenues


336,665


81,930



418,595

Direct cost of sales, general and administrative expenses


193,186


62,883


9,531


265,600

Segment profit (loss)(1)


143,479


19,047


(9,531)


152,995

Depreciation and amortization








11,863

Interest expense








25,427

Broadcast license and goodwill impairment








130,000

Business acquisition, integration and restructuring costs








8,002

Other expense (income), net








(14,096)

Loss before income taxes








(8,201)










Six months ended February 28, 2014











Television


Radio


Corporate


Consolidated

Revenues


330,050


87,368



417,418

Direct cost of sales, general and administrative expenses


189,492


63,061


13,307


265,860

Segment profit (loss)(1)


140,558


24,307


(13,307)


151,558

Depreciation and amortization








11,268

Interest expense








21,874

Broadcast license and goodwill impairment








8,000

Gain on acquisition








(127,884)

Business acquisition, integration and restructuring costs








40,656

Other expense (income), net








8,705

Income before income taxes








188,939

(1)

Segment profit does not have a standardized meaning prescribed by IFRS. For definitions and explanations, see
discussion under the Key Performance Indicators section of the 2015 Report to Shareholders.

Revenues by type
















Three months ended



Six months ended




February 28,



February 28,



February 28,



February 28,




2015



2014



2015



2014

Advertising



81,309



87,870



202,275



211,242

Subscriber fees



85,245



83,562



170,659



162,677

Merchandising, distribution and other



24,930



19,981



45,661



43,499




191,484



191,413



418,595



417,418

 

SOURCE Corus Entertainment Inc.

For further information: Doug Murphy, President and Chief Executive Officer, Corus Entertainment Inc., 416.479.6649; 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

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