Corus Entertainment Announces Fiscal 2017 First Quarter Results

  • Consolidated revenues increased 105% for the quarter
  • Consolidated segment profit(1) growth of 100% for the quarter
  • Consolidated segment profit margin(1) of 41% for the quarter
  • Net income attributable to shareholders of $71.1 million ($0.36 per share basic) for the quarter
  • Adjusted basic earnings per share(2) of $0.41 per share for the quarter

 

TORONTO, Jan. 11, 2017 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its first quarter financial results today.

"We are off to a solid start to fiscal 2017 as we begin to realize the benefits of the Company's success in executing our integration strategy and advancing our strategic priorities," said Doug Murphy, President and Chief Executive Officer. "Our Q1 results reflect meaningful improvements in our cost structure, with solid segment profit margins and subscriber revenue growth offset by transitional advertising revenue softness, as anticipated.  In fiscal 2017, our resolute focus on deleveraging the balance sheet and delivering on our integration synergy goals will provide a strong value proposition to our shareholders."


Financial Highlights 







Three months ended 


November 30, 

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

2016

2015

Revenues 




Television

425,564

183,718


Radio

42,417

44,600


467,981

228,318




Segment profit(1)




Television

184,421

88,035


Radio

13,286

12,803


Corporate

(5,721)

(4,960)


191,986

95,878




Net income attributable to shareholders 

71,146

41,320

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

80,826

42,484




Basic earnings per share 

$ 0.36

$ 0.47

Adjusted basic earnings per share(1) (2)

$ 0.41

$ 0.49

Diluted earnings per share 

$ 0.36

$ 0.47




Free cash flow(1)

33,909

34,537

(1)

Segment profit, segment profit margin, adjusted net income attributable to shareholders, adjusted basic
earnings per share, and free cash flow do not have standardized meanings prescribed by IFRS.  The
Company believes these non-IFRS measures are frequently used as key measures to evaluate
performance.  For definitions and explanations, see discussion under the Key Performance Indicators
section of the Fiscal 2017 Report to Shareholders. 

(2)

For the three months ended November 30, 2016, adjusted net income attributable to shareholders and
adjusted basic earnings per share excludes business acquisition, integration and restructuring charges
of $13.2 million ($0.05 per share).  For the three months ended November 30, 2015, adjusted net income
attributable to shareholders excludes business acquisition, integration and restructuring charges of
$2.4 million ($0.03 per share) and includes notional amortization of certain Pay TV assets reclassified as
held for disposal of $1.4 million ($0.01 per share). 






 

Consolidated Results from Operations

Consolidated revenues for the three months ended November 30, 2016 were $468.0 million, an increase of 105% from $228.3 million last year.  Consolidated segment profit was $192.0 million, up 100% from $95.9 million last year.  Net income attributable to shareholders for the quarter ended November 30, 2016 was $71.1 million ($0.36 per share basic and diluted), as compared to $41.3 million ($0.47 per share basic and diluted) last year.  Net income attributable to shareholders for the first quarter of fiscal 2017 includes business acquisition, integration and restructuring costs of
$13.2 million ($0.05 per share).  Adjusting for the impact of these items results in an adjusted net income attributable to shareholders of $80.8 million ($0.41 per share basic) in the quarter.  Net income attributable to shareholders for the prior year quarter includes business acquisition, integration and restructuring costs of $2.4 million ($0.03 per share) and does not include amortization of certain assets reclassified as held for disposal of $1.4 million ($0.01 per share).  Adjusting for the impact of these items result in an adjusted net income attributable to shareholders of $42.5 million ($0.49 per share) in the prior year quarter. 

Commencing April 1, 2016, 100% of the operating results of Shaw Media Inc. ("Shaw Media"), as well as its assets and liabilities, were fully consolidated as a business combination in accordance with IFRS 3 – Business Combinations and, as a result, Shaw Media was accounted for by applying the acquisition method as of that date.  Shaw Media was reported as part of the Television segment as of April 1, 2016 (further discussion is provided in note 27 of the Company's audited consolidated financial statements for the year ended August 31, 2016).

In addition, for fiscal 2016, certain of Corus' Pay Television business ("Pay TV") assets and liabilities were reclassified as held for disposal effective November 19, 2015 as a consequence of meeting the definition of assets held for sale under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations.  The disposal group, Pay TV, did not qualify for discontinued operations presentation and as a result, its operating results remained in continuing operations in the consolidated statement of income and comprehensive income for the year ended August 31, 2016.  However, intangible assets classified as held for disposal ceased being amortized effective November 19, 2015 and as a consequence, amortization of program and film rights in the Television segment for the quarter ended November 30, 2015 was $1.4 million lower than it would have been had amortization on these assets not ceased.  On February 29, 2016, the Pay TV disposition was completed and the related proceeds and gain associated with this disposal group were recognized (further discussion is provided in note 27 of the Company's audited consolidated financial statements for the year ended August 31, 2016).

These transactions contributed to the significant year-over-year variances in the consolidated operating results for the first quarter of fiscal 2017, as the first quarter of the prior year includes the operating results of the Pay TV business but does not include the operating results of the Shaw Media business.  In the prior year's quarter, the Shaw Media business generated revenues and segment profit of $294.5 million and $118.1 million, respectively, while the Pay TV business generated revenues and segment profit of $31.4 million and $15.3 million, respectively. On a pro forma basis, including Shaw Media and excluding Pay TV for the first quarter of last year, total revenues declined 5% and segment profit declined 3% compared to the prior year. Segment profit margin of 41% in the first quarter of fiscal 2017 is consistent with the prior year and up from 40% on a pro forma basis.

Operational Results - Highlights

Television

  • Segment revenues increased 132% in Q1 2017 [down 5% on a pro forma basis(2)]
  • Advertising revenues increased 269% in Q1 2017 [down 7% on a pro forma basis(2)]
  • Subscriber revenues increased 45% in Q1 2017 [up 6% on a pro forma basis(2)]
  • Merchandising, distribution and other revenues decreased 20% in Q1 2017 [down 33% on a pro forma basis(2)]
  • Segment profit(1) increased 109% in Q1 2017 [down 3% on a pro forma basis(2)]

Radio

  • Segment revenues decreased 5% in Q1 2017
  • Segment profit(1) increased 4% in Q1 2017
  • Segment profit margin(1) of 31% in Q1 2017, compared to 29% in Q1 2016

(1)

Segment profit and segment profit margin do not have standardized meanings prescribed by IFRS.  The Company reports on these because they are key measures used to evaluate performance. For definitions and explanations, see discussion under the Key Performance Indicators section of the 2017 Report to Shareholders.

(2)

Pro forma results reflect the inclusion of Shaw Media and the exclusion of the Pay TV business in Q1 2016.



 

Corus Entertainment Inc. reports in Canadian dollars.

The unaudited consolidated financial statements and accompanying notes for the three months ended November 30, 2016 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 January 11, 2017 at 9:00 a.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 1.416.981.9009 and for North America is 1.800.945.8198.  More information can be found on the Corus Entertainment website at www.corusent.com in the Investor Relations section.

Use of Non-IFRS Financial Measures

This press release includes the non-IFRS 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 ("IFRS") and may be different from non-IFRS measures used by other companies.  In addition, these non-IFRS measures are not based on any comprehensive set of accounting rules or principles.

Non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. 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-IFRS financial measures are meant to supplement, and to be viewed in conjunction with, IFRS financial results.  A reconciliation of the Company's non-IFRS 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, Corus disclaims 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. (TSX: CJR.B) is a leading media and content company that creates and delivers high quality brands and content across platforms for audiences around the world. The company's portfolio of multimedia offerings encompasses 45 specialty television services, 39 radio stations, 15 conventional television stations, a global content business, digital assets, live events, children's book publishing, animation software, technology and media services. The Corus roster of premium brands includes Global Television, W Network, OWN: Oprah Winfrey Network Canada, HGTV Canada, Food Network Canada, HISTORY®, Showcase, National Geographic, Q107, CKNW, Fresh Radio, Disney Channel Canada, YTV and Nickelodeon Canada. Visit Corus at www.corusent.com.


CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





As at November 30,

As at August 31,

(unaudited - in thousands of Canadian dollars)

2016

2016

ASSETS



Current



Cash and cash equivalents

17,011

71,363

Accounts receivable

490,550

379,861

Prepaid expenses and other

23,364

18,835




Total current assets

530,925

470,059




Tax credits receivable

22,734

19,860

Investments and other assets

48,102

46,759

Property, plant and equipment

275,078

282,105

Program and film rights

705,795

682,268

Film investments

49,155

45,164

Intangibles

2,070,563

2,076,237

Goodwill

2,390,652

2,390,652

Deferred income tax assets

80,480

80,281


6,173,484

6,093,385




LIABILITIES AND SHAREHOLDERS' EQUITY



Current



Accounts payable and accrued liabilities

472,385

393,367

Current portion of long-term debt

115,000

115,000

Provisions

16,262

21,390

Income taxes payable

10,067

1,982

Total current liabilities

613,714

531,739




Long-term debt

2,054,485

2,081,020

Other long-term liabilities

494,770

539,672

Deferred income tax liabilities

472,650

464,607

Total liabilities

3,635,619

3,617,038




SHAREHOLDERS' EQUITY



Share capital

2,198,711

2,168,543

Contributed surplus

10,667

10,444

Retained earnings

165,998

142,499

Accumulated other comprehensive income (loss)

7,857

(3,569)

Total equity attributable to shareholders

2,383,233

2,317,917

Equity attributable to non-controlling interest

154,632

158,430

Total shareholders' equity

2,537,865

2,476,347


6,173,484

6,093,385




 


CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME





Three months ended


November 30,

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

2016

2015

Revenues

467,981

228,318

Direct cost of sales, general and administrative expenses

275,995

132,440

Depreciation and amortization

22,460

11,002

Interest expense

39,720

18,890

Business acquisition, integration and restructuring costs

13,165

2,361

Other expense, net

6,832

3,925




Income before income taxes

109,809

59,700

Income tax expense

29,106

16,877




Net income for the period

80,703

42,823




Net income attributable to:



Shareholders

71,146

41,320

Non-controlling interest

9,557

1,503


80,703

42,823




Earnings per share attributable to shareholders:





Basic

$ 0.36

$ 0.47



Diluted

$ 0.36

$ 0.47




Net income for the period

80,703

42,823

Other comprehensive income, net of income taxes:




Items that may be reclassified subsequently to income:





Unrealized foreign currency translation adjustment

392

299



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

(116)



Unrealized change in fair value of cash flow hedges

11,034

214



Actuarial gain on employee post-employment benefits

9,084


20,510

397




Comprehensive income for the period

101,213

43,220




Comprehensive income attributable to:





Shareholders

91,656

41,717



Non-controlling interest

9,557

1,503


101,213

43,220




 


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, 2016

2,168,543

10,444

142,499

(3,569)

2,317,917

158,430

2,476,347

Comprehensive income

71,146

20,510

91,656

9,557

101,213

Dividends declared

(56,731)

(56,731)

(13,355)

(70,086)

Issuance of shares under dividend reinvestment plan

30,168

30,168

30,168

Actuarial gain transfer

9,084

(9,084)

Share-based compensation expense

223

223

223

At November 30, 2016

2,198,711

10,667

165,998

7,857

2,383,233

154,632

2,537,865

















(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, 2015

994,571

9,471

191,182

7,353

1,202,577

17,334

1,219,911

Comprehensive income

41,320

397

41,717

1,503

43,220

Dividends declared

(24,928)

(24,928)

(4,149)

(29,077)

Issuance of shares under dividend reinvestment plan

3,573

3,573

3,573

Share-based compensation expense

267

267

267

At November 30, 2015

998,144

9,738

207,574

7,750

1,223,206

14,688

1,237,894









 


CORUS ENTERTAINMENT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS





Three months ended
November 30,

(unaudited - in thousands of Canadian dollars)

2016

2015

OPERATING ACTIVITIES



Net income for the period

80,703

42,823

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




Amortization of program and film rights

127,725

54,263


Amortization of film investments

4,027

3,331


Depreciation and amortization

22,460

11,002


Deferred income taxes

564

1,938


Venture fund distribution gain

(533)


Share-based compensation expense

223

267


Imputed interest

13,193

10,451


CRTC benefit payment

(6,158)

(2,328)


Other

567

198

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

(86,107)

(29,825)

Payment of program and film rights

(124,099)

(45,129)

Net additions to film investments

(10,750)

(9,827)

Cash provided by operating activities

22,348

36,631




INVESTING ACTIVITIES



Additions to property, plant and equipment

(5,626)

(2,703)

Net proceeds from assets held for disposal

21,100

Business acquisition costs paid in the period

(2,476)

Proceeds from disposition of investment

1,684

Net cash flows for intangibles, investments and other assets

(3,256)

(2,663)

Cash provided by (used in) investing activities

(8,882)

14,942




FINANCING ACTIVITIES



Decrease in bank loans

(28,180)

(19,999)

Dividends paid

(26,060)

(21,298)

Dividends paid to non-controlling interest

(13,355)

(4,149)

Other

(223)

(1,379)

Cash used in financing activities

(67,818)

(46,825)

Net change in cash and cash equivalents during the period

(54,352)

4,748

Cash and cash equivalents, beginning of the period

71,363

37,422

Cash and cash equivalents, end of the period

17,011

42,170




 


CORUS ENTERTAINMENT INC.

BUSINESS SEGMENT INFORMATION


(unaudited - in thousands of Canadian dollars)







Three months ended November 30, 2016



Television

Radio

Corporate

Consolidated

Revenues

425,564

42,417

467,981

Direct cost of sales, general and administrative expenses

241,143

29,131

5,721

275,995

Segment profit (loss)(1)

184,421

13,286

(5,721)

191,986

Depreciation and amortization




22,460

Interest expense




39,720

Business acquisition, integration and restructuring costs




13,165

Other expense, net




6,832

Income before income taxes




109,809







Three months ended November 30, 2015



Television

Radio

Corporate

Consolidated

Revenues

183,718

44,600

228,318

Direct cost of sales, general and administrative expenses

95,683

31,797

4,960

132,440

Segment profit (loss)(1)

88,035

12,803

(4,960)

95,878

Depreciation and amortization




11,002

Interest expense




18,890

Business acquisition, integration and restructuring costs




2,361

Other expense, net




3,925

Income before income taxes




59,700



(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 2017 Report to Shareholders.



 

Revenues by type













Three months ended






November 30,






2016


2015

Advertising





323,405


118,930

Subscriber fees





126,464


86,954

Merchandising, distribution and other





18,112


22,434






467,981


228,318









 


Non-IFRS Financial Measures



 Three months ended
November 30,

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

2016

2015

Adjusted Net Income Attributable to Shareholders




Net income attributable to shareholders

71,146

41,320


Adjustments, net of income tax:





Amortization of certain Pay TV assets

(1,029)



Business acquisition, integration and restructuring costs

9,680

2,193


Adjusted net income attributable to shareholders

80,826

42,484





Adjusted basic earnings per share

$0.41

$0.49





Free cash flow



Cash provided by (used in):




Operating activities

22,348

36,631


Investing activities

(8,882)

14,942



13,466

51,573


Add back: cash provided from (used for) business combinations and

strategic investments (1)(2)

20,443

(17,036)


Free cash flow

33,909

34,537


(1)

Strategic investments are comprised of investments in venture funds and associated companies.


(2)

Adjusted to remove the impact of disposing the Pay TV business




 

SOURCE Corus Entertainment Inc.

For further information: Doug Murphy, President and Chief Executive Officer, Corus Entertainment Inc., 416.479.6649; John Gossling, Executive Vice President and Chief Financial Officer, Corus Entertainment Inc., 416.479.6100; Dervla Kelly, Vice President, Communications, Corus Entertainment Inc., 416.934.7121

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