Corus Entertainment Announces Fiscal 2013 Third Quarter Results

  • Net income attributable to shareholders up 108% in the quarter
  • Specialty advertising and subscriber revenues up 9% and 2%, respectively, in the quarter
  • Consolidated merchandising, distribution and other revenues declined 23% in the quarter
  • Consolidated segment profit down 10% in the quarter
  • Free cash flow of $128.0 million year-to-date

TORONTO, July 11, 2013 /PRNewswire/ - Corus Entertainment Inc. (TSX: CJR.B) announced its third quarter and nine months year-to-date financial results today.

"The third quarter was challenging on a number of fronts, most notably, advertising softness in Radio continued and our merchandising, production and distribution businesses faced tough year-over-year comparatives," said John Cassaday, President and Chief Executive Officer, Corus Entertainment. "We did deliver triple-digit growth in net income and earnings per share, and specialty advertising revenues increased by 9%, with growth in our key brands.  Despite these impressive gains in our core television broadcast business, our expectations for a stronger back half have not materialized and we will miss the lower end of our segment profit guidance.  Free cash flow guidance remains unchanged. Looking ahead, we are excited about the opportunity to expand our business through acquisitions that will enable us to enter the Ottawa radio and Quebec specialty television markets, subject to CRTC approval."

         
Financial Highlights        
  Three months ended Nine months ended
  May 31, May 31,
(unaudited - in thousands of Canadian dollars except per share amounts) 2013  2012  2013  2012 
Revenues        
  Television 152,982  154,749  470,228  503,075 
  Radio 47,078  49,329  139,679  143,577 
  200,060  204,078  609,907  646,652 
         
Segment profit (1)        
  Television 61,816  66,732  192,310  207,648 
  Radio 14,874  16,151  43,484  42,432 
  Corporate (8,464) (7,227) (20,227) (20,963)
  68,226  75,656  215,567  229,117 
         
Net income attributable to shareholders 89,913 43,221  148,016 125,340 
Adjusted net income attributable to shareholders (1) (2) 34,519 43,221  111,110 125,340 
         
Basic earnings per share $ 1.07  $ 0.52  $ 1.77  $ 1.51 
Adjusted basic earnings per share (1) (2) $ 0.41  $ 0.52  $ 1.33  $ 1.51 
Diluted earnings per share $ 1.07  $ 0.51  $ 1.76  $ 1.50 
         
Free cash flow (1) 44,573  55,354  128,432  130,185 
         
(1) See definitions and discussion under Key Performance Indicators in MD&A.
(2) Excludes the impact of $25.0 million ($0.22 per share) pre-tax debt refinancing costs and a gain on disposition of the Company's non-controlling interest in Food Network Canada of $55.4 million ($0.66 per share).

Consolidated Results from Operations

Consolidated revenues for the three months ended May 31, 2013 were $200.1 million, down 2% from $204.1 million last year.  Consolidated segment profit was $68.2 million, down 10% from $75.7 million last year.  Net income attributable to shareholders for the quarter was $89.9 million ($1.07 per share basic and diluted), up 108% compared to $43.2 million ($0.52 per share basic and $0.51 per share diluted) last year.  Net income for the quarter includes a gain related to the sale of the Company's non-controlling interest in Food Network Canada of $55.4 million.  Removing the impact of this item results in an adjusted net income attributable to shareholders of $34.5 million ($0.41 earnings per share basic) in the quarter.

Consolidated revenues for the nine months ended May 31, 2013 were $609.9 million, down 6% from $646.7 million last year.  Consolidated segment profit was $215.6 million, down 6% from $229.1 million last year.  Net income attributable to shareholders for the nine months was $148.0 million ($1.77 per share basic and $1.76 per share diluted), up 18% compared to $125.3 million ($1.51 per share basic and $1.50 per share diluted) last year.  Year-to-date net income includes a pre-tax charge for debt refinancing of $25.0 million and a gain related to the sale of the Company's non-controlling interest in Food Network Canada of $55.4 million.  Removing the impact of these items results in an adjusted net income attributable to shareholders of $111.1 million ($1.33 earnings per share basic) in the current year.

Operational Results - Highlights

Television

  • Segment revenues decreased 1% in Q3 and 7% year-to-date
  • Specialty advertising revenues increased 9% in Q3 and 1% year-to-date
  • Subscriber revenues increased 2% for Q3 and were flat year-to-date
  • Merchandising, distribution and other revenues declined 26% in Q3 and 31% year-to-date
  • Segment profit(1) decreased 7% in Q3 and year-to-date
  • Segment profit margin of 41% year-to-date
  • Movie Central finished the quarter with 1,009,000 subscribers, up 33,000 year-to-date

Radio

  • Segment revenues decreased 5% in Q3 and 3% year-to-date
  • Segment profit(1) decreased 8% in Q3, but increased 2% year-to-date
  • Segment profit margin of 31% year-to-date

Other

  • Acquired the remaining 49% interest in ABC Spark and disposed of the Company's non-controlling interest in Food Network Canada in the quarter for a gain of $55.4 million.
  • Entered into agreements to establish Radio presence in Ottawa, consolidate ownership of TELETOON and acquire 100% of Historia and Séries+.  These transactions are subject to CRTC approval.

(1) See definitions and discussion under Key Performance Indicators in MD&A.

Corus Entertainment Inc. reports in Canadian dollars.

About Corus Entertainment Inc.

Corus Entertainment Inc. is a Canadian-based media and entertainment company.  Corus is a market leader in specialty television and radio with additional assets in pay television, television broadcasting, children's book publishing, children's animation and animation software.  The Company's multimedia entertainment brands include YTV, Treehouse, Nickelodeon (Canada), ABC Spark, W Network, OWN: Oprah Winfrey Network (Canada), Cosmopolitan TV, Sundance Channel (Canada), Movie Central, HBO Canada, Nelvana, Kids Can Press, Toon Boom and 37 radio stations including CKNW AM 980, 99.3 The FOX, Country 105, 630 CHED, Q107, and 102.1 the Edge.  Corus creates engaging branded entertainment experiences for its audiences across multiple platforms.  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 and nine months ended May 31, 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 July 11, 2013 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 North America is 1.800.732.6870 and for local/international callers is 416.620.9188.  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 May 31, As at August 31,
(unaudited - in thousands of Canadian dollars) 2013  2012 
ASSETS    
Current    
Cash and cash equivalents 78,281  24,588 
Accounts receivable 187,016  173,421 
Promissory note receivable 47,759  — 
Income taxes recoverable —  9,542 
Prepaid expenses and other 13,035  12,664 
     
Total current assets 326,091  220,215 
     
Tax credits receivable 51,796  43,865 
Intangibles, investments and other assets 44,181  42,390 
Property, plant and equipment 153,653  163,563 
Program and film rights 267,500  271,244 
Film investments 76,735  67,983 
Broadcast licenses 569,505  569,505 
Goodwill 674,393  674,393 
Deferred tax assets 39,013  28,327 
  2,202,867  2,081,485 
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current    
Accounts payable and accrued liabilities 196,649  185,991 
Income taxes payable 3,554  — 
Provisions 943  2,322 
Total current liabilities 201,146  188,313 
     
Long-term debt 538,462  518,258 
Other long-term liabilities 89,712  87,853 
Deferred tax liabilities 152,144  150,971 
Total liabilities 981,464  945,395 
     
     
SHAREHOLDERS' EQUITY    
Share capital 930,802  910,005 
Contributed surplus 6,797  7,835 
Retained earnings 265,560  198,445 
Accumulated other comprehensive income (loss) 831  (812)
Total equity attributable to shareholders 1,203,990  1,115,473 
Equity attributable to non-controlling interest 17,413  20,617 
Total shareholders' equity 1,221,403  1,136,090 
  2,202,867  2,081,485 
     

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) 2013  2012  2013  2012 
Revenues 200,060  204,078  609,907  646,652 
Direct cost of sales, general and administrative expenses 131,834  128,422  394,340  417,535 
Depreciation and amortization 6,926  6,339  20,872  19,231 
Interest expense 10,456  13,190  35,859  40,027 
Debt refinancing —  —  25,033  — 
Business acquisition, integration and restructuring costs 2,147 2,325  2,147 2,325 
Gain on sale of associated company (55,394) —  (55,394) — 
Other (income) expense, net 82 (3,532) 162 (4,702)
         
Income before income taxes 104,009  57,334  186,888  172,236 
Income tax expense 12,497  12,387  34,480  41,070 
         
Net income for the period 91,512  44,947  152,408  131,166 
         
Net income attributable to:        
Shareholders 89,913 43,221  148,016  125,340 
Non-controlling interest 1,599 1,726  4,392  5,826 
  91,512 44,947  152,408  131,166 
         
Earnings per share attributable to shareholders:        
       Basic $ 1.07 $ 0.52 $ 1.77 $ 1.51
       Diluted $ 1.07 $ 0.51 $ 1.76 $ 1.50
         
Net income for the period 91,512  44,947  152,408  131,166 
Other comprehensive income (loss), net of tax        
  Items that may be reclassified subsequently to income:        
       Unrealized foreign currency translation adjustment 204  1,434  1,685  1,971 
       Unrealized change in fair value of available-for-sale investments (368) (163) (42) (254)
  (164) 1,271  1,643  1,717 
         
Comprehensive income for the period 91,348  46,218  154,051  132,883 
         
Comprehensive income attributable to:        
       Shareholders 89,749  44,492  149,659  127,057 
       Non-controlling interest 1,599  1,726  4,392  5,826 
  91,348  46,218  154,051  132,883 
             

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, 2012 910,005  7,835  198,445  (812) 1,115,473  20,617  1,136,090 
Comprehensive income —   —   148,016  1,643 149,659  4,392  154,051 
Dividends declared —   —   (62,914) —   (62,914) (5,715) (68,629)
Issuance of shares under stock option plan 1,155  (2,200) —   —   (1,045) —   (1,045)
Issuance of shares under dividend reinvestment plan 20,350  —   —   —   20,350  —   20,350 
Shares repurchased (708) —   (756) —   (1,464) —   (1,464)
Share-based compensation expense —   1,162  —   —   1,162  —   1,162 
Acquisition of non-controlling interest —   —   (17,231) —   (17,231) (1,881) (19,112)
At May 31, 2013 930,802  6,797  265,560  831 1,203,990  17,413  1,221,403 
               
At August 31, 2011 882,679  10,299  143,717  (1,075) 1,035,620  19,200  1,054,820 
Comprehensive income —   —   125,340  1,717  127,057  5,826  132,883 
Dividends declared —   —   (58,123) —   (58,123) (5,523) (63,646)
Issuance of shares under stock option plan 13,669  (3,623) —   —   10,046  —   10,046 
Issuance of shares under dividend reinvestment plan 19,229  —   —   —   19,229  —   19,229 
Shares repurchased (2,110) —   (1,778) —   (3,888) —   (3,888)
Share-based compensation expense —   890  —   —   890  —   890 
At May 31, 2012 913,467  7,566  209,156  642  1,130,831  19,503  1,150,334 
               

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
         
    Three months ended
 May 31,
 Nine months ended
 May 31,
(unaudited - in thousands of Canadian dollars) 2013  2012  2013  2012 
OPERATING ACTIVITIES        
Net income for the period 91,512  44,947  152,408  131,166 
Add (deduct) non-cash items:        
   Depreciation and amortization 6,926  6,339  20,872  19,231 
   Amortization of program and film rights 49,476  46,317  142,077  139,805 
   Amortization of film investments 7,691  4,002  17,399  21,949 
   Deferred income taxes (3,250) (51) (9,976) 4,735 
   Share-based compensation expense 430  298  1,162  890 
   Imputed interest 2,526  2,894  7,679  8,904 
   Debt refinancing —   —   25,033  —  
   Gain on sale of associated company (55,394) —   (55,394) —  
   Gain on acquisition —   (2,383) —   (2,383)
   Other (404) (2,000) (118) (2,790)
Net change in non-cash working capital balances related to operations 1,521  11,466  (8,025) (9,260)
Payment of program and film rights (38,895) (44,841) (106,327) (131,267)
Net additions to film investments (14,709) (6,391) (48,943) (40,364)
Cash provided by operating activities 47,430  60,597  137,847  140,616 
         
INVESTING ACTIVITIES        
Additions to property, plant and equipment (2,856) (5,501) (10,328) (13,585)
Business combination —   (4,104) —   (4,104)
Net cash flows for intangibles, investments and other assets (2,321) (4,868) (9,287) (3,859)
Other (90) (242) (414) (560)
Cash used in investing activities (5,267) (14,715) (20,029) (22,108)
         
FINANCING ACTIVITIES        
Decrease in bank loans —   (40,103) (29,925) (74,777)
Issuance of notes —   —   550,000  —  
Redemption of notes (500,000) —   (500,000) —  
Financing fees (18,125) —   (26,732) —  
Issuance of shares under stock option plan 135  1,709  884  10,046 
Shares repurchased —   —   (1,464) (3,888)
Dividends paid (14,586) (13,705) (41,584) (37,525)
Dividends paid to non-controlling interest (599) —   (5,715) (4,423)
Other (4,488) (2,722) (9,589) (7,227)
Cash used in financing activities (537,663) (54,821) (64,125) (117,794)
Net change in cash and cash equivalents during the period (495,500) (8,939) 53,693  714 
Cash and cash equivalents, beginning of the period 573,781  65,575  24,588  55,922 
Cash and cash equivalents, end of the period 78,281  56,636  78,281  56,636 
           

CORUS ENTERTAINMENT INC.
BUSINESS SEGMENT INFORMATION
 
(unaudited - in thousands of Canadian dollars)
           
Three months ended May 31, 2013
    Radio Television Corporate Consolidated
Revenues 47,078  152,982  —   200,060 
Direct cost of sales, general        
  and administrative expenses 32,204  91,166  8,464  131,834 
Segment profit (loss)(1) 14,874  61,816  (8,464) 68,226 
Depreciation and amortization       6,926 
Interest expense       10,456 
Business acquisition, integration and restructuring costs       2,147
Gain on sale of associated company       (55,394)
Other expense, net       82 
Income before income taxes       104,009 
           
Three months ended May 31, 2012
    Radio Television Corporate Consolidated
Revenues 49,329  154,749  —   204,078 
Direct cost of sales, general        
  and administrative expenses 33,178  88,017  7,227  128,422 
Segment profit (loss)(1) 16,151  66,732  (7,227) 75,656 
Depreciation and amortization       6,339 
Interest expense       13,190 
Business acquisition, integration and restructuring costs       2,325 
Other income, net       (3,532)
Income before income taxes       57,334 
           
Nine months ended May 31, 2013        
    Radio Television Corporate Consolidated
Revenues 139,679  470,228  —   609,907 
Direct cost of sales, general        
  and administrative expenses 96,195  277,918  20,227  394,340 
Segment profit (loss)(1) 43,484  192,310  (20,227) 215,567 
Depreciation and amortization       20,872 
Interest expense       35,859 
Debt refinancing       25,033 
Business acquisition, integration and restructuring costs       2,147 
Gain on sale of associated company       (55,394)
Other expense, net       162 
Income before income taxes       186,888 
           
Nine months ended May 31, 2012        
    Radio Television Corporate Consolidated
Revenues 143,577  503,075  —   646,652 
Direct cost of sales, general        
  and administrative expenses 101,145  295,427  20,963  417,535 
Segment profit (loss)(1) 42,432  207,648  (20,963) 229,117 
Depreciation and amortization       19,231 
Interest expense       40,027 
Business acquisition, integration and restructuring costs       2,325 
Other income, net       (4,702)
Income before income taxes       172,236 
           
(1) See definitions and discussion under Key Performance Indicators in MD&A.
           

Revenues by type        
      Three months ended   Nine months ended
        May 31,       May 31,
    2013  2012  2013  2012 
Advertising 99,040  97,076  297,440  300,395 
Subscriber fees 75,924  74,285  224,703  224,350 
Merchandising, distribution and other 25,096  32,717  87,764  121,907 
    200,060  204,078  609,907  646,652 

 

SOURCE Corus Entertainment Inc.



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