Corus Entertainment Announces Fiscal 2019 First Quarter Results

• Consolidated revenues increased 2% for the quarter, driven by a 4% increase in Television advertising revenues
• Consolidated segment profit⁽¹⁾ increased 8% for the quarter
• Consolidated segment profit margin⁽¹⁾ of 41% for the quarter
• Net income attributable to shareholders of $60.4⁽²⁾ million ($0.28 per share basic) for the quarter
• Adjusted basic earnings per share^(1)(2)(3) of $0.33 per share for the quarter
• Free cash flow⁽¹⁾ of $42.4 million for the quarter

TORONTO, Jan. 11, 2019 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its first quarter financial results today.

"Our first quarter results reflect disciplined execution of this year's operating plan and the continuing implementation of our longer term strategic priorities," said Doug Murphy, President and Chief Executive Officer. "We returned to growth in Television advertising revenue, driven primarily by a strong fall schedule and a significant improvement in television advertising demand. This revenue increase, coupled with an ongoing focus on expense control, resulted in considerable segment profit growth and margin improvement. The benefits of our revised capital allocation policy, when combined with our improved revenue and segment profit performance, has notably impacted our leverage metrics while increasing balance sheet strength and flexibility for the Company this quarter as we invest for future growth."

Financial Highlights

	Three months ended
	November 30,
(in thousands of Canadian dollars except per share amounts)	2018	2017
Revenues
Television	426,190	415,464
Radio	41,281	41,924
	467,471	457,388
Segment profit ^(1)
Television	184,553	168,602
Radio	13,012	13,521
Corporate	(5,927)	(4,236)
	191,638	177,887
Net income attributable to shareholders ^(2)	60,415	77,673
Adjusted net income attributable to shareholders ^(1) (2) (3)	70,111	78,885
Basic earnings per share ^(2)	$0.28	$0.38
Adjusted basic earnings per share ^(1) (2) (3)	$0.33	$0.38
Diluted earnings per share ^(2)	$0.28	$0.38
Free cash flow ^(1)	42,406	83,215

(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, explanations and reconciliations see discussion under the Key Performance Indicators section of the First Quarter 2019 Report to Shareholders.
(2)	Net income attributable to shareholders as well as basic and diluted earnings per share for the quarter ended November 30, 2018 was impacted by a change in accounting estimate related to the useful life of the Company's television brand assets. Commencing September 1, 2018, the useful life of television brand assets was changed from indefinite life to lives ranging from three to 20 years. For the first quarter of fiscal 2019, this has resulted in an additional $34.9 million in amortization expense in the depreciation and amortization line within the Consolidated Statement of Income and Comprehensive Income, and reduced net income attributable to shareholders by $25.7 million ($0.12 per share basic). Further discussion of this can be found in the Impact of New Accounting Policies and Changes in Estimates section of the First Quarter 2019 Report to Shareholders.
(3)	Refer to page 10 of this press release for details of adjustments to arrive at adjusted net income attributable to shareholders and adjusted basic earnings per share.

Consolidated Results from Operations

Consolidated revenues for the three months ended November 30, 2018 were $467.5 million, up 2% from $457.4 million last year and consolidated segment profit was $191.6 million, an increase of 8% from $177.9 million last year. Net income attributable to shareholders for the quarter ended November 30, 2018 was $60.4 million ($0.28 per share basic), compared to $77.7 million ($0.38 per share basic) last year. Net income attributable to shareholders for the first quarter of fiscal 2019 includes business acquisition, integration and restructuring costs of $13.2 million ($0.05 per share). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $70.1 million ($0.33 per share basic) in the quarter. Net income attributable to shareholders for the prior year quarter includes business acquisition, integration and restructuring costs of $1.6 million ($nil per share). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $78.9 million ($0.38 per share basic) for the prior year quarter.

Consolidated net income attributable to shareholders as well as basic and diluted earnings per share for the quarter ended November 30, 2018 was impacted by a change in accounting estimates related to the useful life of the Company's television brands. Commencing September 1, 2018, the useful life of television brands was changed from indefinite life to lives ranging from three to 20 years. For the first quarter of fiscal 2019, this has resulted in an additional $34.9 million in amortization expense in the depreciation and amortization line within the Consolidated Statement of Income and Comprehensive Income, and reduced net income attributable to shareholders by $25.7 million ($0.12 per share basic). Further discussion of this can be found in the Impact of New Accounting Policies and Changes in Estimates section of the First Quarter 2019 Report to Shareholders.

Operational Results - Highlights for Q1 2019 

Television

• Segment revenues increased 3%
• Advertising revenues increased 4%
• Subscriber revenues were flat
• Merchandising, distribution and other revenues were up 3%
• Segment profit⁽¹⁾ increased 9%
• Segment profit margin⁽¹⁾ of 43%, compared to 41% in the prior year

Radio

• Segment revenues decreased 2%
• Segment profit⁽¹⁾ decreased 4%
• Segment profit margin⁽¹⁾ of 32% was consistent with the prior year

Corporate

• Free cash flow⁽¹⁾ of $42.4 million, down from $83.2 million in the prior year
• Net debt to segment profit⁽¹⁾ leverage at 3.15 times, down from 3.28 times at August 31, 2018
• Consolidated segment profit margin⁽¹⁾ of 41%, compared to 39% in the prior year

(1)

Segment profit, segment profit margin, and free cash flow 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 First Quarter 2019 Report to Shareholders.

Corus Entertainment Inc. reports its financial results in Canadian dollars.

The unaudited interim condensed consolidated financial statements and accompanying notes for the three months ended November 30, 2018 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, 2019 at 8:00 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 1.647.427.7450 and for North America is 1.888.231.8191. 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 attributable to shareholders, 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 at www.sedar.com.

Caution Concerning Forward-Looking Information

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 information"). 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 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 may be considered forward-looking information. Although Corus believes that the expectations reflected in such forward-looking information are reasonable, such information involves assumptions and risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied with respect to the forward-looking information, including without limitation, factors and assumptions regarding the general market conditions and general outlook for the industry, interest rates, stability of the advertising, distribution, merchandise and subscription markets, operating and capital costs and tariffs, taxes and fees, our ability to source desirable content and our capital and operating results being consistent with our expectations. Actual results may differ materially from those expressed or implied in such information. 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 any forward-looking information may be found under the heading "Risks and Uncertainties" in the Management's Discussion and Analysis for the year ended August 31, 2018 and the first quarter ended November 30, 2018 and under the heading "Risk Factors" in our Annual Information Form. Corus cautions that the foregoing list of important assumptions and factors that may affect future results is not exhaustive. When relying on our forward-looking information to make decisions with respect to Corus, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Unless otherwise specified, all forward-looking information in this document speaks as of the date of this document. Unless otherwise required by applicable securities laws, Corus disclaims any intention or obligation to publicly update or revise any forward-looking information 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 44 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. Corus' roster of premium brands include 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)	2018	2018
ASSETS
Current
Cash and cash equivalents	70,667	94,801
Accounts receivable	512,087	388,751
Income taxes recoverable	—	3,305
Prepaid expenses and other assets	27,103	20,723
Total current assets	609,857	507,580
Tax credits receivable	22,349	18,047
Investments and other assets	98,986	82,213
Property, plant and equipment	224,069	231,192
Program rights	560,564	538,357
Film investments	43,871	43,424
Intangibles^(1)	1,974,286	2,012,086
Goodwill	1,387,652	1,387,652
Deferred income tax assets	60,755	62,403
	4,982,389	4,882,954
LIABILITIES AND EQUITY
Current
Accounts payable and accrued liabilities	451,747	405,762
Current portion of long-term debt	95,466	106,375
Provisions	13,218	11,175
Income taxes payable	18,454	—
Total current liabilities	578,885	523,312
Long-term debt	1,832,614	1,877,558
Other long-term liabilities	326,141	295,206
Provisions	11,949	7,801
Deferred income tax liabilities	493,494	502,274
Total liabilities	3,243,083	3,206,151
EQUITY
Share capital	2,330,477	2,330,477
Contributed surplus	12,164	12,119
Accumulated deficit	(804,657)	(856,668)
Accumulated other comprehensive income	45,768	36,460
Total equity attributable to shareholders	1,583,752	1,522,388
Equity attributable to non-controlling interest	155,554	154,415
Total equity	1,739,306	1,676,803
	4,982,389	4,882,954

(1)

Net income attributable to shareholders as well as basic and diluted earnings per share for the quarter ended November 30, 2018 was impacted by a change in accounting estimate related to the useful life of the Company's television brand assets. Commencing September 1, 2018, the useful life of television brand assets was changed from indefinite life to lives ranging from three to 20 years. For the first quarter of fiscal 2019, this has resulted in an additional $34.9 million in amortization expense in the depreciation and amortization line within the Consolidated Statement of Income and Comprehensive Income, and reduced net income attributable to shareholders by $25.7 million ($0.12 per share basic). Further discussion of this can be found in the Impact of New Accounting Policies and Changes in Estimates section of the First Quarter 2019 Report to Shareholders.

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)	2018	2017
Revenues	467,471	457,388
Direct cost of sales, general and administrative expenses	275,833	279,501
Depreciation and amortization^(1)	54,328	20,758
Interest expense	31,339	32,075
Business acquisition, integration and restructuring costs	13,181	1,608
Other expense, net	1,237	7,554
Income before income taxes	91,553	115,892
Income tax expense	24,777	30,885
Net income for the period	66,776	85,007
Other comprehensive income (loss), net of income taxes:
Items that may be reclassified subsequently to income:
Unrealized foreign currency translation adjustment	290	438
Unrealized change in fair value of cash flow hedges	(378)	(409)
	(88)	29
Items that will not be reclassified to income:	2,326	(2,739)
Actuarial gain (loss) on employee post-employment benefits
Other comprehensive income (loss), net of income taxes	2,238	(2,710)
Comprehensive income for the period	69,014	82,297
Net income attributable to:
Shareholders	60,415	77,673
Non-controlling interest	6,361	7,334
	66,776	85,007
Comprehensive income attributable to:
Shareholders	62,653	74,963
Non-controlling interest	6,361	7,334
	69,014	82,297
Earnings per share attributable to shareholders:
Basic	$0.28	$0.38
Diluted	$0.28	$0.38

(1)

Net income attributable to shareholders as well as basic and diluted earnings per share for the quarter ended November 30, 2018 was impacted by a change in accounting estimate related to the useful life of the Company's television brand assets. Commencing September 1, 2018, the useful life of television brand assets was changed from indefinite life to lives ranging from three to 20 years. For the first quarter of fiscal 2019, this has resulted in an additional $34.9 million in amortization expense in the depreciation and amortization line within the Consolidated Statement of Income and Comprehensive Income, and reduced net income attributable to shareholders by $25.7 million ($0.12 per share basic). Further discussion of this can be found in the Impact of New Accounting Policies and Changes in Estimates section of the First Quarter 2019 Report to Shareholders.

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited - in thousands of Canadian dollars)	Share capital	Contributed surplus	Accumulated deficit	Accumulated other comprehensive income	Total equity attributable to shareholders	Non- controlling interest	Total equity
As at August 31, 2018, as previously presented	2,330,477	12,119	(856,668)	36,460	1,522,388	154,415	1,676,803
IFRS 9 transitional adjustment ^(1)	—	—	—	9,396	9,396	—	9,396
IFRS 15 transitional adjustment ^(1)	—	—	1,985	—	1,985	—	1,985
Adjusted balance as at September 1, 2018	2,330,477	12,119	(854,683)	45,856	1,533,769	154,415	1,688,184
Comprehensive income	—	—	60,415	2,238	62,653	6,361	69,014
Dividends declared	—	—	(12,715)	—	(12,715)	(5,222)	(17,937)
Actuarial gain on post- retirement benefit plans	—	—	2,326	(2,326)	—	—	—
Share-based compensation expense	—	45	—	—	45	—	45
As at November 30, 2018	2,330,477	12,164	(804,657)	45,768	1,583,752	155,554	1,739,306
(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
As at August 31, 2017	2,291,814	11,449	114,492	22,938	2,440,693	158,828	2,599,521
Comprehensive income (loss)	—	—	77,673	(2,710)	74,963	7,334	82,297
Dividends declared	—	—	(59,015)	—	(59,015)	(12,009)	(71,024)
Issuance of shares under dividend reinvestment plan	9,809	—	—	—	9,809	—	9,809
Issuance of shares under stock option plan	85	—	—	—	85	—	85
Actuarial loss on post- retirement benefit plans	—	—	(2,739)	2,739	—	—	—
Share-based compensation expense	—	188	—	—	188	—	188
As at November 30, 2017	2,301,708	11,637	130,411	22,967	2,466,723	154,153	2,620,876

^(1)							Refer to the Company's First Quarter 2019 Report to Shareholders for details on New Accounting Pronouncements Adopted in Fiscal 2019 in the Impact of New Accounting Policies and Changes in Estimates section.

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended
	November 30,
(unaudited - in thousands of Canadian dollars)	2018	2017
OPERATING ACTIVITIES
Net income for the period	66,776	85,007
Adjustments to reconcile net income to cash flow from operations:
Amortization of program rights	129,570	133,383
Amortization of film investments	3,529	2,526
Depreciation and amortization^(1)	54,328	20,758
Deferred income tax recovery	(9,347)	(169)
Share-based compensation expense	45	188
Imputed interest	10,594	11,867
Proceeds from termination of interest rate swap	—	24,644
Payment of program rights	(110,214)	(115,677)
Net spend on film investments	(10,663)	(8,748)
CRTC benefit payments	(861)	(1,987)
Other	(3,470)	426
Cash flow from operations	130,287	152,218
Net change in non-cash working capital balances related to operations	(84,916)	(66,541)
Cash provided by operating activities	45,371	85,677
INVESTING ACTIVITIES
Additions to property, plant and equipment	(2,569)	(1,581)
Proceeds from sale of property	3	545
Net cash flows for intangibles, investments and other assets	(399)	(906)
Cash used in investing activities	(2,965)	(1,942)
FINANCING ACTIVITIES
Decrease in bank loans	(57,009)	(26,562)
Deferred financing costs	—	(4,088)
Issuance of shares under stock option plan	—	85
Dividends paid	—	(49,048)
Dividends paid to non-controlling interest	(7,222)	(12,009)
Other	(2,309)	(2,344)
Cash used in financing activities	(66,540)	(93,966)
Net change in cash and cash equivalents during the period	(24,134)	(10,231)
Cash and cash equivalents, beginning of the period	94,801	93,701
Cash and cash equivalents, end of the period	70,667	83,470

(1)

Net income attributable to shareholders as well as basic and diluted earnings per share for the quarter ended November 30, 2018 was impacted by a change in accounting estimate related to the useful life of the Company's television brand assets. Commencing September 1, 2018, the useful life of television brand assets was changed from indefinite life to lives ranging from three to 20 years. For the first quarter of fiscal 2019, this has resulted in an additional $34.9 million in amortization expense in the depreciation and amortization line within the Consolidated Statement of Income and Comprehensive Income, and reduced net income attributable to shareholders by $25.7 million ($0.12 per share basic). Further discussion of this can be found in the Impact of New Accounting Policies and Changes in Estimates section of the First Quarter 2019 Report to Shareholders.

CORUS ENTERTAINMENT INC.
BUSINESS SEGMENT INFORMATION

(unaudited - in thousands of Canadian dollars)
Three months ended November 30, 2018
	Television	Radio	Corporate	Consolidated
Revenues	426,190	41,281	—	467,471
Direct cost of sales, general and administrative expenses	241,637	28,269	5,927	275,833
Segment profit (loss)^(1)	184,553	13,012	(5,927)	191,638
Depreciation and amortization				54,328
Interest expense				31,339
Business acquisition, integration and restructuring costs				13,181
Other expense, net				1,237
Income before income taxes				91,553
Three months ended November 30, 2017
	Television	Radio	Corporate	Consolidated
Revenues	415,464	41,924	—	457,388
Direct cost of sales, general and administrative expenses	246,862	28,403	4,236	279,501
Segment profit (loss)^(1)	168,602	13,521	(4,236)	177,887
Depreciation and amortization				20,758
Interest expense				32,075
Business acquisition, integration and restructuring costs				1,608
Other expense, net				7,554
Income before income taxes				115,892

(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 First Quarter 2019 Report to Shareholders.

REVENUES BY TYPE

	Three months ended
	November 30,
(unaudited - in thousands of Canadian dollars)	2018	2017
Advertising	321,335	312,211
Subscriber fees	126,684	126,255
Merchandising, distribution and other	19,452	18,922
	467,471	457,388

NON-IFRS FINANCIAL MEASURES              

	Three months ended
(unaudited - in thousands of Canadian dollars, except per share amounts)	November 30,
Adjusted Net Income Attributable to Shareholders	2018	2017
Net income attributable to shareholders	60,415	77,673
Adjustments, net of income tax:
Business acquisition, integration and restructuring costs	9,696	1,212
Adjusted net income attributable to shareholders	70,111	78,885
Basic earnings per share	$0.28	$0.38
Adjustments, net of income tax:
Business acquisition, integration and restructuring costs	$0.05	—
Adjusted basic earnings per share	$0.33	$0.38
Free Cash Flow
Cash provided by (used in):
Operating activities	45,371	85,677
Investing activities	(2,965)	(1,942)
	42,406	83,735
Deduct: cash provided by business dispositions and strategic investments^(1)	—	(520)
Free cash flow	42,406	83,215

⁽¹⁾ Strategic investments are comprised of investments in venture funds and associated companies.

SOURCE Corus Entertainment Inc.

Doug Murphy, President and Chief Executive Officer, Corus Entertainment Inc., [e-mail]; John Gossling, Executive Vice President and Chief Financial Officer, Corus Entertainment Inc., [e-mail]; Heidi Kucher, Director, Investor Relations, Corus Entertainment Inc., [e-mail]; Cheryl Fullerton, Executive Vice President, People & Communications, Corus Entertainment Inc., [e-mail]