Corus Entertainment Announces Fiscal 2015 Third Quarter Results

  • Free cash flow of $156.0 million year-to-date
  • Landmark multi-year licensing agreements completed with Nickelodeon and Disney
  • Consolidated revenues down 5% for the quarter and 2% year-to-date
  • Consolidated segment profit down 14% for the quarter and 4% year-to-date
  • Net loss attributable to shareholders of $8.1 million for the quarter, which includes a non-cash program rights and film investments impairment charge of $51.8 million
  • Adjusted basic earnings per share of $0.36 per share, down 27% for the quarter

TORONTO, July 15, 2015 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its third quarter financial results today.

"While our third quarter operating results were disappointing, we were pleased to deliver solid year-to-date free cash flow of $156 million," said Doug Murphy, President and Chief Executive Officer of Corus Entertainment. "Over the next 18 months, our focus will be to fortify our brands and competitive position by leveraging our strategic investments in premium content across platforms and delivery systems.  We have already made significant progress, inking ground-breaking content and rights deals with Nickelodeon and Disney, and expanding our digital presence in Radio and Television, most recently with the launch of the first in our suite of innovative kids TV Everywhere apps, TreehouseGO.  We are confident that we are on the right track to deepen our engagement with audiences and evolve the company for future growth in a dynamic, consumer-centric marketplace."


Financial Highlights 




















Three months ended


Nine months ended 



May 31,


May 31, 

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


2015


2014


2015


2014

Revenues 










Television


162,767


170,565


499,432


500,615


Radio


40,354


43,476


122,284


130,844



203,121


214,041


621,716


631,459










Segment profit(1)










Television


64,075


75,679


207,554


216,237


Radio


9,457


11,678


28,504


35,985


Corporate


(4,833)


(7,626)


(14,364)


(20,933)



68,699


79,731


221,694


231,289










Net income (loss) attributable to shareholders 


(8,109)


(30,325)


(42,989)


126,682

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


31,550


41,602


111,955


123,560










Basic earnings (loss) per share 


$ (0.09)


$ (0.36)


$ (0.50)


$ 1.49

Adjusted basic earnings per share(1) (2)


$  0.36


$  0.49


$  1.30


$ 1.46

Diluted earnings (loss) per share 


$ (0.09)


$ (0.36)


$ (0.50)


$ 1.49










Free cash flow(1)


63,419


59,399


156,043


182,440










(1)

Adjusted net income 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 months ended May 31, 2015, excludes intangible asset impairment charges of $51.8 million ($0.44 per share) and business acquisition, integration and restructuring charges of $2.7 million ($0.02 per share).  For the nine months ended May 31, 2015, excludes radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), intangible asset impairment charges of $51.8 million ($0.44 per share), business acquisition, integration and restructuring charges of $10.7 million ($0.09 per share), offset by a gain on distribution of investment of $17.0 million ($0.17 per share).  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 $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). 

 

Consolidated Results from Operations

Consolidated revenues for the three months ended May 31, 2015 were $203.1 million, down 5% from $214.0 million last year.  Consolidated segment profit was $68.7 million, down 14% from $79.7 million last year.  Net loss attributable to shareholders for the quarter was $8.1 million ($0.09 loss per share basic and diluted), compared to $30.3 million ($0.36 loss per share basic and diluted) last year.  Net loss attributable to shareholders for the third quarter includes intangible non-cash impairment charges of $51.8 million ($0.44 per share) and business acquisition, integration and restructuring costs of $2.7 million ($0.02 per share). Removing the impact of these items results in an adjusted net income attributable to shareholders of $31.6 million ($0.36 per share) in the quarter. Net income attributable to shareholders for the prior year quarter includes radio broadcast license and goodwill impairment charges of $75.0 million ($0.85 per share), capital asset impairment charges of $1.2 million ($0.01 per share), business acquisition, integration and restructuring costs of $0.6 million ($0.01 per share) and a decrease in the purchase price obligation of $2.0 million related to the acquisition of control of TELETOON ($0.02 per share).  Removing the impact of these items results in an adjusted net income attributable to shareholders of $41.6 million ($0.49 per share basic) for the prior year quarter.

Consolidated revenues for the nine months ended May 31, 2015 were $621.7 million, down 2% from $631.5 million last year. Consolidated segment profit was $221.7 million, down 4% from $231.3 million last year. Net loss attributable to shareholders for the nine months ended May 31, 2015 was $43.0 million ($0.50 loss per share basic and diluted) compared to net income attributable to shareholders of $126.7 million ($1.49 per share basic and diluted) last year.  Net loss attributable to shareholders for the nine months ended May 31, 2015 includes Radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), business acquisition, integration and restructuring costs of $10.7 million ($0.09 per share), and program right and film investment impairment charges of $51.8 million ($0.44 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 $112.0 million ($1.30 per share) for the current year-to-date.  Net income attributable to shareholders for the nine months ended May 31, 2014 includes a 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 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).  Removing the impact of these items results in an adjusted net income attributable to shareholders of $123.6 million ($1.46 per share) for the prior year-to-date.

Operational Results - Highlights

Television

  • Specialty advertising revenues decreased 11% in Q3 2015 and 5% for the year-to-date
  • Subscriber revenues decreased 3% in Q3 2015, but increased 2% for the year-to-date
  • Merchandising, distribution and other revenues increased 15% in Q3 2015 and 9% for the year-to-date
  • Segment profit(1) decreased 15% in Q3 2015 and 4% for the year-to-date
  • Segment profit margin(1) of 39% in Q3 2015 and 42% for the year-to-date
  • Non-cash program rights and film investments impairment charges of $51.8 million in Q3 2015

Radio

  • Segment revenues decreased 7% in Q3 2015 and for the year-to-date
  • Segment profit(1) decreased 19% in Q3 2015 and 21% for the year-to-date
  • Segment profit margin(1) of 23% in Q3 2015 and for the year-to-date
  • Non-cash broadcast license and goodwill impairment charges of $130.0 million for the 2015 year-to-date

Corporate

  • Free cash flow of $156.0 million for the year-to-date
  • Free cash flow guidance remains unchanged at $180 million, refer to Outlook section of the Third Quarter 2015 Report to Shareholders

(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 nine months ended May 31, 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 July 15, 2015 at 2:00 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 1.416.641.6701 and for North America is 1.800.734.8582.  More information 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 other 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 May 31,



As at August 31,

(unaudited - in thousands of Canadian dollars)



2015



2014

ASSETS







Current







Cash and cash equivalents



43,848



11,585

Accounts receivable



188,309



183,009

Income taxes recoverable



9,177



9,768

Prepaid expenses and other



11,091



13,032








Total current assets



252,425



217,394








Tax credits receivable



33,275



29,044

Intangibles, investments and other assets



59,249



47,630

Property, plant and equipment



141,013



143,618

Program and film rights



323,914



330,437

Film investments



38,696



63,455

Broadcast licenses



956,984



979,984

Goodwill



827,859



934,859

Deferred tax assets



42,099



38,161




2,675,514



2,784,582








LIABILITIES AND SHAREHOLDERS' EQUITY







Current







Accounts payable and accrued liabilities



225,881



170,411

Current portion of long-term debt



150,000



Provisions



3,534



5,314

Total current liabilities



379,415



175,725








Long-term debt



680,332



874,251

Other long-term liabilities



143,833



171,793

Deferred tax liabilities



252,779



252,687

Total liabilities



1,456,359



1,474,456








SHAREHOLDERS' EQUITY







Share capital



990,019



967,330

Contributed surplus



9,137



8,385

Retained earnings



197,501



313,361

Accumulated other comprehensive income



6,323



3,767

Total equity attributable to shareholders



1,202,980



1,292,843

Equity attributable to non-controlling interest



16,175



17,283

Total shareholders' equity



1,219,155



1,310,126




2,675,514



2,784,582

 

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME












Three months ended


Nine months ended



May 31,


May 31,

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


2015


2014


2015


2014

Revenues


203,121


214,041


621,716


631,459

Direct cost of sales, general and administrative expenses


134,422


134,310


400,022


400,170

Depreciation and amortization


6,056


7,385


17,919


18,653

Interest expense


13,140


13,453


38,567


35,327

Broadcast license and goodwill impairment



75,000


130,000


83,000

Intangible asset impairment


51,786



51,786


Business acquisition, integration and restructuring costs


2,693


560


10,695


41,216

Gain on acquisition





(127,884)

Other (income) expense, net


1,405


(1,489)


(12,691)


7,216










Income (loss) before income taxes


(6,381)


(15,178)


(14,582)


173,761

Income tax expense


486


13,691


24,962


43,224










Net income (loss) for the period


(6,867)


(28,869)


(39,544)


130,537










Net income (loss) attributable to:











Shareholders


(8,109)


(30,325)


(42,989)


126,682



Non-controlling interest


1,242


1,456


3,445


3,855



(6,867)


(28,869)


(39,544)


130,537










Earnings (loss) per share attributable to shareholders:











Basic


$ (0.09)


$ (0.36)


$ (0.50)


$ 1.49



Diluted


$ (0.09)


$ (0.36)


$ (0.50)


$ 1.49










Net income (loss) for the period


(6,867)


(28,869)


(39,544)


130,537

Other comprehensive income (loss), net of tax:










Items that may be reclassified subsequently to income:











Unrealized foreign currency translation adjustment


(657)


(646)


3,010


1,620



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


(51)


392


(191)


454



Unrealized change in fair value of cash flow hedges


191


37


(263)


(109)



(517)


(217)


2,556


1,965










Comprehensive income (loss) for the period


(7,384)


(29,086)


(36,988)


132,502










Comprehensive income (loss) attributable to:











Shareholders


(8,626)


(30,542)


(40,433)


128,647



Non-controlling interest


1,242


1,456


3,445


3,855



(7,384)


(29,086)


(36,988)


132,502

 

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


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)




(42,989)


2,556


(40,433)


3,445


(36,988)

Dividends declared




(72,871)



(72,871)


(4,553)


(77,424)

Issuance of shares under stock option plan


6,741


(1,090)




5,651



5,651

Issuance of shares under dividend reinvestment plan


15,948





15,948



15,948

Share-based compensation expense



1,842




1,842



1,842

At May 31, 2015


990,019


9,137


197,501


6,323


1,202,980


16,175


1,219,155































At August 31, 2013


937,183


7,221


256,517


1,653


1,202,574


18,259


1,220,833

Comprehensive income




126,682


1,965


128,647


3,855


132,502

Dividends declared




(68,014)



(68,014)


(6,001)


(74,015)

Issuance of shares under stock option plan


1,737


(278)




1,459



1,459

Issuance of shares under dividend reinvestment plan


18,557





18,557



18,557

Share-based compensation expense



1,489




1,489



1,489
















At May 31, 2014


957,477


8,432


315,185


3,618


1,284,712


16,113


1,300,825

 

CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS












Three months ended

May 31,


Nine months ended

May 31,

(unaudited - in thousands of Canadian dollars)


2015


2014


2015


2014

OPERATING ACTIVITIES









Net income (loss) for the period


(6,867)


(28,869)


(39,544)


130,537

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










Depreciation and amortization


6,056


7,385


17,919


18,653


Broadcast license and goodwill impairment



75,000


130,000


83,000


Intangible asset impairment


51,786



51,786



Amortization of program and film rights


54,078


51,624


161,781


153,768


Amortization of film investments


4,797


4,201


18,410


13,256


Deferred income taxes


(2,704)


(637)


(3,721)


4,384


Increase (decrease) in purchase price obligation



(1,952)



3,336


Share-based compensation expense


376


528


1,842


1,489


Imputed interest


4,076


3,840


11,053


10,985


Tangible benefit obligation





31,916


Gain on disposition of investment




(16,964)



Gain on acquisition





(127,884)


Other


1,677


485


3,565


1,900

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


3,058


14,870


(11,797)


3,312

Payment of program and film rights


(36,182)


(43,975)


(135,189)


(104,653)

Net additions to film investments


(10,867)


(19,017)


(34,713)


(32,765)

Cash provided by operating activities


69,284


63,483


154,428


191,234










INVESTING ACTIVITIES









Additions to property, plant and equipment


(4,941)


(3,435)


(12,695)


(7,715)

Business combinations



(5,265)



(496,706)

Proceeds from disposition of investment




18,490


Net cash flows for intangibles, investments and other assets


(2,969)


(2,321)


(20,555)


(7,395)

Other


(668)


(201)


(3,390)


(323)

Cash used in investing activities


(8,578)


(11,222)


(18,150)


(512,139)










FINANCING ACTIVITIES









Increase (decrease) in bank loans


(34,966)


(39,964)


(44,863)


333,101

Financing fees




(750)


(587)

Issuance of shares under stock option plan


815


566


5,651


1,459

Dividends paid


(20,100)


(16,380)


(56,001)


(48,316)

Dividends paid to non-controlling interest




(4,553)


(6,001)

Other


(820)


(532)


(3,499)


(1,781)

Cash provided by (used in) financing activities


(55,071)


(56,310)


(104,015)


277,875










Net change in cash and cash equivalents during the period


5,635


(4,049)


32,263


(43,030)

Cash and cash equivalents, beginning of the period


38,213


42,285


11,585


81,266

Cash and cash equivalents, end of the period


43,848


38,236


43,848


38,236

 



CORUS ENTERTAINMENT INC.

BUSINESS SEGMENT INFORMATION










(unaudited - in thousands of Canadian dollars)


















Three months ended May 31, 2015











Television


Radio


Corporate


Consolidated

Revenues


162,767


40,354



203,121

Direct cost of sales, general and administrative expenses


98,692


30,897


4,833


134,422

Segment profit (loss)(1)


64,075


9,457


(4,833)


68,699

Depreciation and amortization








6,056

Interest expense








13,140

Intangible asset impairment








51,786

Business acquisition, integration and restructuring costs








2,693

Other expense (income), net








1,405

Loss before income taxes








(6,381)










Three months ended May 31, 2014











Television


Radio


Corporate


Consolidated

Revenues


170,565


43,476



214,041

Direct cost of sales, general and administrative expenses


94,886


31,798


7,626


134,310

Segment profit (loss)(1)


75,679


11,678


(7,626)


79,731

Depreciation and amortization








7,385

Interest expense








13,453

Broadcast license and goodwill impairment








75,000

Business acquisition, integration and restructuring costs








560

Other expense (income), net








(1,489)

Loss before income taxes








(15,178)










Nine months ended May 31, 2015











Television


Radio


Corporate


Consolidated

Revenues


499,432


122,284



621,716

Direct cost of sales, general and administrative expenses


291,878


93,780


14,364


400,022

Segment profit (loss)(1)


207,554


28,504


(14,364)


221,694

Depreciation and amortization








17,919

Interest expense








38,567

Broadcast license and goodwill impairment








130,000

Intangible asset impairment








51,786

Business acquisition, integration and restructuring costs








10,695

Other expense (income), net








(12,691)

Loss before income taxes








(14,582)

(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.

 











Nine months ended May 31, 2014











Television


Radio


Corporate


Consolidated

Revenues


500,615


130,844



631,459

Direct cost of sales, general and administrative expenses


284,378


94,859


20,933


400,170

Segment profit (loss)(1)


216,237


35,985


(20,933)


231,289

Depreciation and amortization








18,653

Interest expense








35,327

Broadcast license and goodwill impairment








83,000

Gain on acquisition








(127,884)

Business acquisition, integration and restructuring costs








41,216

Other expense (income), net








7,216

Income before income taxes








173,761

(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



Nine months ended




May 31,



May 31,




2015



2014



2015



2014

Advertising



97,048



108,039



299,323



319,281

Subscriber fees



84,282



86,522



254,941



249,199

Merchandising, distribution and other



21,791



19,480



67,452



62,979




203,121



214,041



621,716



631,459

 

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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