Corus Entertainment Announces Fiscal 2014 First Quarter Results

• Monthly dividend increased 6.9%
• Consolidated revenue up 8%
• Consolidated segment profit up 9%
• Adjusted basic earnings per share attributable to shareholders of $0.65 per share
• Strong segment profit margins for Television (46%) and Radio (33%)
• Fiscal 2014 results include 100% interest in TELETOON Canada Inc. and fiscal 2013 is adjusted to equity account for Corus' 50% economic interest in TELETOON Canada Inc.

TORONTO, Jan. 14, 2014 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its first quarter financial results today.

"We have again benefited from our disciplined focus on cost controls, delivering excellent margins this quarter in the face of slow economic growth and tough year-over-year comparables in our merchandising business," said John Cassaday, President and Chief Executive Officer of Corus Entertainment.  "This is a pivotal year for us.  With our recently closed acquisition of TELETOON, Séries+ and Historia, combined with continued strong ratings on our core TV brands and increases from several of our newer brands, we are confident that Corus will see a return to solid growth in fiscal 2014."

Financial Highlights
				Three months ended
				November 30,
(unaudited - in thousands of Canadian dollars except per share amounts)				2013			2012 ^(3)
Revenues
	Television			177,949			157,622
	Radio			48,056			52,324
				226,005			209,946
Segment profit ^(1)
	Television			82,524			70,522
	Radio			15,837			18,956
	Corporate			(6,085)			(4,961)
				92,276			84,517
Net income attributable to shareholders				150,891			52,159
Adjusted net income attributable to shareholders ^(1) (2)				55,177			52,159
Basic earnings per share				$ 1.78			$ 0.63
Adjusted basic earnings per share ^(1) (2)				$ 0.65			$ 0.63
Diluted earnings per share				$ 1.78			$ 0.62
Free cash flow ^(1)				49,636			39,824

^(1)			See definitions and discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.
^(2)			For the quarter ended November 30, 2013, 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, business acquisition, integration and restructuring costs of $21.9 million ($0.25 per share), an increase in the purchase price obligation of $7.3 million ($0.09 per share), and investment impairment related charges of $3.3 million ($0.04 per share).
^(3)			Prior period figures have been restated to reflect the changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 Report to Shareholders.

 

Consolidated Results from Operations

For fiscal 2014, the operating results of TELETOON Canada Inc. ("TELETOON"), as well as its assets and liabilities, have been fully consolidated effective September 1, 2013 as a consequence of meeting the definition of control under IFRS 10 - Consolidated Financial Statements.  Accordingly, a business combination had occurred in accordance with IFRS 3 - Business Combinations and as a result, TELETOON must be accounted for by applying the acquisition method.  The Company held a 50% equity ownership interest in TELETOON as at November 30, 2013 and on December 20, 2013, received Canadian Radio-television and Telecommunication Commission ("CRTC") approval to complete the acquisition of the remaining 50% interest in TELETOON that it did not already own.  The acquisition closed on January 1, 2014 (refer to 2014 Report to Shareholders note 15 for further details).

For fiscal 2013, as a result of retroactive application of IFRS 11 - Joint Arrangements, the Company is no longer permitted to proportionately consolidate the operations of TELETOON up to August 31, 2013 (i.e. prior to the business combination on September 1, 2013) and is required to account for this investment using the equity method of accounting. As a consequence, the Television segment's revenue and segment profit for the first quarter of fiscal 2013 were reduced by $16.2 million and $8.2 million, respectively and instead, Corus' share of TELETOON's net income of $6.0 million was reported as Other expense (income) in the Consolidated Statements of Income and Comprehensive Income.  The restatement did not change reported net income for fiscal 2013.

Consolidated revenues for the three months ended November 30, 2013 were $226.0 million, up 8% from $209.9 million last year.  Consolidated segment profit was $92.3 million, up 9% from $84.5 million last year.  Net income attributable to shareholders for the quarter was $150.9 million ($1.78 both basic and diluted per share), compared to $52.2 million ($0.63 basic and $0.62 diluted per share) last year.  Net income attributable to shareholders for the first quarter includes a non-cash gain of $127.9 million 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, business acquisition, integration and restructuring costs of $21.9 million, an increase in the purchase price obligation of $7.3 million and investment impairment related charges of $3.3 million.  Removing the impact of these items results in an adjusted basic earnings per share of $0.65 in the quarter.

Operational Results - Highlights

Television

• Fiscal 2014 reflects consolidation of 100% interest in TELETOON; Fiscal 2013 retroactively restated to apply IFRS 11 - Joint Arrangements, resulting in equity accounting for Corus' 50% economic interest in TELETOON
• Segment revenues increased 13%
• Specialty advertising revenues increased 35%
• Subscriber revenues increased 14%
• Merchandising, distribution and other revenues declined 33%
• Segment profit⁽¹⁾ increased 17%
• Segment profit margin of 46%
• Movie Central finished the quarter with 974,000 subscribers

Radio

• Segment revenues decreased 8%
• Segment profit⁽¹⁾ decreased 16%
• Segment profit margin of 33%

Other

• Completed the acquisition of Historia, Séries+ and the remaining 50% interest in TELETOON Canada Inc. on January 1, 2014
• Awaiting CRTC approval on the acquisition of two Ottawa-based radio stations, CKQB-FM and CJOT-FM

^(1)	See definitions and discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.

Corus Entertainment Inc. reports in Canadian dollars.

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, Séries+, as well as Nelvana, Kids Can Press, Toon Boom and 37 radio stations including CKNW AM 980, 99.3 The FOX, Country 105, 630 CHED, Fresh FM London, 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.

The unaudited consolidated financial statements and accompanying notes for the three months ended November 30, 2013 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 14, 2014 at 4:30 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 North America is 1.800.745.9476 and for local/international callers is 1.416.641.6705.  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.

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 related 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.

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
		As at November 30,			As at August 31,			As at September 1,
(unaudited - in thousands of Canadian dollars)		2013			2013 ^(1)			2012 ^(1)
ASSETS
Current
Cash and cash equivalents		109,044			81,266			19,198
Restricted cash		6,407			—			—
Accounts receivable		218,268			164,302			163,345
Promissory note receivable		47,759			47,759			—
Income taxes recoverable		—			351			9,542
Prepaid expenses and other		15,928			16,392			12,619
Total current assets		397,406			310,070			204,704
Tax credits receivable		43,290			41,564			43,865
Intangibles, investments and other assets		41,963			42,975			42,390
Investment in joint venture		—			125,931			121,704
Property, plant and equipment		147,958			151,192			163,280
Program and film rights		297,604			232,587			229,306
Film investments		67,869			62,274			67,847
Broadcast licenses		799,036			515,036			520,770
Goodwill		863,026			646,045			646,045
Deferred tax assets		38,904			39,463			28,327
		2,697,056			2,167,137			2,068,238
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities		201,258			164,443			177,367
Purchase price obligation		261,159			—			—
Income taxes payable		4,053			—			1,303
Provisions		4,881			3,941			2,322
Total current liabilities		471,351			168,384			180,992
Long-term debt		539,465			538,966			518,258
Other long-term liabilities		130,226			93,241			87,588
Deferred tax liabilities		201,607			145,713			145,310
Total liabilities		1,342,649			946,304			932,148
Share capital		943,203			937,183			910,005
Contributed surplus		7,654			7,221			7,835
Retained earnings		385,806			256,517			198,445
Accumulated other comprehensive income (loss)		2,102			1,653			(812)
Total equity attributable to shareholders		1,338,765			1,202,574			1,115,473
Equity attributable to non-controlling interest		15,642			18,259			20,617
Total shareholders' equity		1,354,407			1,220,833			1,136,090
		2,697,056			2,167,137			2,068,238

^(1)	Prior period figures have been restated to reflect the changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 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)					2013			2012 ^(1)
Revenues					226,005			209,946
Direct cost of sales, general and administrative expenses					133,729			125,429
Depreciation and amortization					5,735			6,406
Interest expense					9,270			12,132
Business acquisition, integration and restructuring costs					21,922			—
Gain on acquisition					(127,884)			—
Other expense (income), net					9,711			(5,529)
Income before income taxes					173,522			71,508
Income tax expense					21,180			17,492
Net income for the period					152,342			54,016
Net income attributable to:
Shareholders					150,891			52,159
Non-controlling interest					1,451			1,857
					152,342			54,016
Earnings per share attributable to shareholders:
		Basic			$ 1.78			$ 0.63
		Diluted			$ 1.78			$ 0.62
Net income for the period					152,342			54,016
Other comprehensive income (loss), net of tax:
	Items that may be reclassified subsequently to income:
		Unrealized foreign currency translation adjustment			375			290
		Unrealized change in fair value of available-for-sale investments			74			290
					449			580
Comprehensive income for the period					152,791			54,596
Comprehensive income attributable to:
		Shareholders			151,340			52,739
		Non-controlling interest			1,451			1,857
					152,791			54,596

^(1)	Prior period figures have been restated to reflect changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 Report to Shareholders.

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, 2013		937,183		7,221		256,517		1,653		1,202,574		18,259		1,220,833
Comprehensive income		—		—		150,891		449		151,340		1,451		152,791
Dividends declared		—		—		(21,602)		—		(21,602)		(4,068)		(25,670)
Issuance of shares under stock option plan		160		(24)		—		—		136		—		136
Issuance of shares under dividend reinvestment plan		5,860		—		—		—		5,860		—		5,860
Share-based compensation expense		—		457		—		—		457		—		457
At November 30, 2013		943,203		7,654		385,806		2,102		1,338,765		15,642		1,354,407
At August 31, 2012		910,005		7,835		198,445		(812)		1,115,473		20,617		1,136,090
Comprehensive income		—		—		52,159		580		52,739		1,857		54,596
Dividends declared		—		—		(20,050)		—		(20,050)		(5,013)		(25,063)
Issuance of shares under dividend reinvestment plan		6,788		—		—		—		6,788		—		6,788
Shares repurchased		(708)		—		(756)		—		(1,464)		—		(1,464)
Share-based compensation expense		—		340		—		—		340		—		340
At November 30, 2012		916,085		8,175		229,798		(232)		1,153,826		17,461		1,171,287

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
				Three months ended November 30,
(unaudited - in thousands of Canadian dollars)				2013			2012 ^(1)
OPERATING ACTIVITIES
Net income for the period				152,342			54,016
Add (deduct) non-cash items:
	Depreciation and amortization			5,735			6,406
	Amortization of program and film rights			50,531			41,128
	Amortization of film investments			3,912			6,207
	Deferred income taxes			2,455			(1,294)
	Increase in purchase price obligation			7,344			—
	Share-based compensation expense			457			340
	Imputed interest			3,036			2,525
	Business acquisition, integration and restructuring costs			20,023			—
	Gain on acquisition			(127,884)			—
	Other			1,255			(6,330)
Net change in non-cash working capital balances related to operations				(22,659)			(24,478)
Payment of program and film rights				(28,091)			(24,625)
Net additions to film investments				(10,066)			(16,074)
Increase in restricted cash				(6,407)			—
Cash provided by operating activities				51,983			37,821
INVESTING ACTIVITIES
Additions to property, plant and equipment				(1,936)			(3,535)
Dividends from joint venture				—			4,890
Net cash flows for intangibles, investments and other assets				(1,907)			73
Other				(67)			(88)
Cash used in investing activities				(3,910)			1,340
FINANCING ACTIVITIES
Increase in bank loans				—			9,985
Issuance of shares under stock option plan				136			—
Shares repurchased				—			(1,464)
Dividends paid				(15,698)			(13,223)
Dividends paid to non-controlling interest				(4,068)			(4,313)
Other				(665)			(2,312)
Cash used in financing activities				(20,295)			(11,327)
Net change in cash and cash equivalents during the period				27,778			27,834
Cash and cash equivalents, beginning of the period				81,266			19,198
Cash and cash equivalents, end of the period				109,044			47,032

^(1)	Prior period figures have been restated to reflect changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 Report to Shareholders.

CORUS ENTERTAINMENT INC.
BUSINESS SEGMENT INFORMATION
(unaudited - in thousands of Canadian dollars)
Three months ended November 30, 2013
			Television			Radio			Corporate			Consolidated
Revenues			177,949			48,056			—			226,005
Direct cost of sales, general and administrative expenses			95,425			32,219			6,085			133,729
Segment profit (loss)^(1)			82,524			15,837			(6,085)			92,276
Depreciation and amortization												5,735
Interest expense												9,270
Business acquisition, integration and restructuring costs												21,922
Gain on acquisition												(127,884)
Other expense, net												9,711
Income before income taxes												173,522
Three months ended November 30, 2012
			Television ^(2)			Radio			Corporate			Consolidated^(2)
Revenues			157,622			52,324			—			209,946
Direct cost of sales, general and administrative expenses			87,100			33,368			4,961			125,429
Segment profit (loss)^(1)			70,522			18,956			(4,961)			84,517
Depreciation and amortization												6,406
Interest expense												12,132
Other income, net												(5,529)
Income before income taxes												71,508
Revenues by type
			Three months ended
			November 30,
									2013			2012^(2)
Advertising									123,372			107,493
Subscriber fees									79,115			69,412
Merchandising, distribution and other									23,518			33,041
									226,005			209,946

^(1)			See definitions and discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.
^(2)			Prior period figures have been restated to reflect the changes in accounting standards described in note 3 to the interim condensed consolidated financial statements contained in the 2014 Report to Shareholders.

 

The following statements provide a reconciliation of changes related to the retroactive adoption of IFRS 11 - Joint Arrangements in the consolidated statements of financial position, income and comprehensive income, and cash flows for the periods indicated.

Consolidated Statements of Financial Position
(in thousands of Canadian dollars)			August 31, 2013									September 1, 2012
			Originally Published			IFRS 11 Adjustment			Restated			Originally Published			IFRS 11 Adjustment			Restated
Assets
Cash and cash equivalents			86,081			(4,815)			81,266			24,588			(5,390)			19,198
Accounts receivable			176,504			(12,202)			164,302			173,421			(10,076)			163,345
Promissory note receivable			47,759			—			47,759			—			—			—
Income taxes recoverable			341			10			351			9,542			—			9,542
Prepaid expenses and other			16,416			(24)			16,392			12,664			(45)			12,619
Total current assets			327,101			(17,031)			310,070			220,215			(15,511)			204,704
Tax credits receivable			41,564			—			41,564			43,865			—			43,865
Intangibles, investments and other assets			42,975			—			42,975			42,390			—			42,390
Investments in joint venture			—			125,931			125,931			—			121,704			121,704
Property, plant and equipment			151,398			(206)			151,192			163,563			(283)			163,280
Program and film rights			289,181			(56,594)			232,587			271,244			(41,938)			229,306
Film investments			62,734			(460)			62,274			67,983			(136)			67,847
Broadcast licenses			563,771			(48,735)			515,036			569,505			(48,735)			520,770
Goodwill			674,393			(28,348)			646,045			674,393			(28,348)			646,045
Deferred tax assets			39,463			—			39,463			28,327			—			28,327
			2,192,580			(25,443)			2,167,137			2,081,485			(13,247)			2,068,238
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities			172,663			(8,220)			164,443			185,991			(8,624)			177,367
Income taxes payable			—			—			—			—			1,303			1,303
Provisions			3,941			—			3,941			2,322			—			2,322
Total current liabilities			176,604			(8,220)			168,384			188,313			(7,321)			180,992
Long-term debt			538,966			—			538,966			518,258			—			518,258
Other long-term liabilities			105,020			(11,779)			93,241			87,853			(265)			87,588
Deferred tax liabilities			151,157			(5,444)			145,713			150,971			(5,661)			145,310
Total liabilities			971,747			(25,443)			946,304			945,395			(13,247)			932,148
Share capital			937,183			—			937,183			910,005			—			910,005
Contributed surplus			7,221			—			7,221			7,835			—			7,835
Retained earnings			256,517			—			256,517			198,445			—			198,445
Accumulated other comprehensive income (loss)			1,653			—			1,653			(812)			—			(812)
Total equity attributable to shareholders			1,202,574			—			1,202,574			1,115,473			—			1,115,473
Equity attributable to non-controlling interest			18,259			—			18,259			20,617			—			20,617
Total shareholders' equity			1,220,833			—			1,220,833			1,136,090			—			1,136,090
			2,192,580			(25,443)			2,167,137			2,081,485			(13,247)			2,068,238

Consolidated Statements of Income and Comprehensive Income
(in thousands of Canadian dollars)					Three months ended November 30, 2012
					Originally Published			IFRS 11 Adjustment			Restated
Revenues					226,147			(16,201)			209,946
Direct cost of sales, general and administrative expenses					133,454			(8,025)			125,429
Segment profit					92,693			(8,176)			84,517
Depreciation and amortization					6,429			(23)			6,406
Interest expense					12,132			—			12,132
Other expense (income), net					506			(6,035)			(5,529)
Income before income taxes					73,626			(2,118)			71,508
Income tax expense					19,610			(2,118)			17,492
Net income for the period					54,016			—			54,016
Net income attributable to:
Shareholders					52,159			—			52,159
Non-controlling interest					1,857			—			1,857
					54,016			—			54,016
Earnings per share attributable to shareholders:
Basic					$ 0.63			—			$ 0.63
Diluted					$ 0.62			—			$ 0.62
Net income for the period					54,016			—			54,016
Other comprehensive income (loss), net of tax
	Items that may be reclassified subsequently to income:
		Unrealized foreign currency translation adjustment			290			—			290
		Unrealized change in fair value of available-for-sale investments			290			—			290
					580			—			580
Comprehensive income for the period					54,596			—			54,596
Comprehensive income attributable to:
Shareholders					52,739			—			52,739
Non-controlling interest					1,857			—			1,857
					54,596			—			54,596

Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)				Three months ended November 30, 2012
				Originally Published			IFRS 11 Adjustment			Restated
Operating Activities
Net income for the period				54,016			—			54,016
Add (deduct) non-cash items:
	Depreciation and amortization			6,429			(23)			6,406
	Amortization of program and film rights			45,693			(4,565)			41,128
	Amortization of film investment			6,207			—			6,207
	Deferred income taxes			(1,294)			—			(1,294)
	Share-based compensation expense			340			—			340
	Imputed interest			2,525			—			2,525
	Other			(304)			(6,026)			(6,330)
Net change in non-cash working capital balances related to operations				(29,133)			4,655			(24,478)
Payment of program and film rights				(27,626)			3,001			(24,625)
Net additions to film investments				(16,074)			—			(16,074)
Cash provided by operating activities				40,779			(2,958)			37,821
Investing Activities
Additions to property, plant and equipment				(3,542)			7			(3,535)
Dividends from joint venture				—			4,890			4,890
Net cash flows for intangibles, investments and other assets				73			—			73
Other				(88)			—			(88)
Cash used in investing activities				(3,557)			4,897			1,340
Financing Activities
Increase in bank loans				9,985			—			9,985
Shares repurchased				(1,464)			—			(1,464)
Dividends paid				(13,223)			—			(13,223)
Dividends paid to non-controlling interest				(4,313)			—			(4,313)
Other				(2,312)			—			(2,312)
Cash used in financing activities				(11,327)			—			(11,327)
Net change in cash and cash equivalents during the period				25,895			1,939			27,834
Cash and cash equivalents, beginning of the period				24,588			(5,390)			19,198
Cash and cash equivalents, end of period				50,483			(3,451)			47,032

SOURCE: Corus Entertainment Inc.

John Cassaday 
President and Chief Executive Officer 
Corus Entertainment Inc.   
416.479.6018  

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