Corus Entertainment announces fiscal 2018 third quarter results

  • Free cash flow(1) of $87.8 million for the quarter and $253.0 million for the year-to-date, up from $82.5 million and $212.5 million, respectively, last year
  • Revised Capital Allocation Policy positions Corus for the future
  • Consolidated revenues decreased 4% for the quarter and 2% for the year-to-date
  • Consolidated segment profit(1) decreased 3% for the quarter and 2% for the year-to-date
  • Consolidated segment profit margin(1) of 39% for the quarter and 36% for the year-to-date
  • Net loss attributable to shareholders of $935.9 million ($4.49 loss per share basic) for the quarter and $818.2 million ($3.94 loss per share basic) for the year-to-date, which includes non-cash impairment charges related to broadcast licenses and goodwill of $1,013.7 million
  • Adjusted basic earnings per share(2) of $0.37 per share for the quarter and $0.96 per share for the year-to-date

TORONTO, June 27, 2018 /PRNewswire/ – Corus Entertainment Inc. (TSX: CJR.B) announced its third quarter financial results today.











“We continue to advance our strategic priorities while contending with challenging television market conditions and exercising strong expense control, as reflected in this quarter’s results. The net loss in Q3 was driven by non-cash impairment charges recorded in the period to adjust book value to current market value.  Excluding these charges, adjusted earnings per share increased year-over-year,” said Doug Murphy, President and Chief Executive Officer. “Recently, Corus debuted a strong fall line-up for Global and our specialty channels, and announced the successful beta launch of CYNCH, the first automated buying platform for television advertising in Canada. Our revenue diversification strategy is also progressing well, with the greenlight of a robust slate of new shows to drive audiences for our networks and grow our international owned content business. Finally, we have positioned Corus for the future with our revised Capital Allocation Policy. Our focus on deleveraging will ensure that we create the balance sheet strength to continue to make these important investments in support of the ongoing transformation of our business model.”













Financial Highlights                                           













Three months ended

Nine months ended

May 31,

 May 31,

(in thousands of Canadian dollars except per share amounts)

2018

2017

2018

2017

Revenues

Television

402,990

422,324

1,154,676

1,183,784

Radio

38,420

39,304

113,587

114,012

441,410

461,628

1,268,263

1,297,796

Segment profit (1)

Television

160,803

171,294

433,051

457,114

Radio

11,447

11,598

31,851

31,225

Corporate

(1,829)

(7,079)

(3,835)

(17,857)

170,421

175,813

461,067

470,482

Net income (loss) attributable to shareholders

(935,899)

66,719

(818,184)

162,746

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

78,112

70,141

198,877

176,544

Basic earnings (loss) per share

($4.49)

$0.33

($3.94)

$0.81

Adjusted basic earnings per share (1) (2)

$0.37

$0.35

$0.96

$0.88

Diluted earnings (loss) per share

($4.49)

$0.33

($3.94)

$0.81

Free cash flow (1)

87,753

82,527

253,041

212,458













(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 Third Quarter 2018 Report to Shareholders.

(2)

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 May 31, 2018 were $441.4 million, down 4% from $461.6 million last year and consolidated segment profit was $170.4 million, a decrease of 3% from $175.8 million last year. Net loss attributable to shareholders for the quarter ended May 31, 2018 was $935.9 million ($4.49 loss per share basic and diluted), compared to net income attributable to shareholders of $66.7 million ($0.33 income per share basic and diluted) last year. Net loss attributable to shareholders for the third quarter of fiscal 2018 includes broadcast license and goodwill impairment charges of $1,013.7 million ($4.84 per share basic, net of income taxes), business acquisition, integration and restructuring costs of $5.3 million ($0.02 per share, net of income taxes). Adjusting for the impact of these items results in an adjusted net income attributable to shareholders of $78.1 million ($0.37 per share basic) in the quarter. Net income attributable to shareholders for the prior year quarter includes business acquisition, integration and restructuring costs of $4.6 million ($0.02 per share, net of income taxes). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $70.1 million ($0.35 per share basic) for the prior year quarter.













Consolidated revenues for the nine months ended May 31, 2018 were $1,268.3 million, down 2% from $1,297.8 million last year. Consolidated segment profit was $461.1 million, down 2% from $470.5 million last year. Net loss attributable to shareholders for the nine months ended May 31, 2018 was $818.2 million ($3.94 loss per share basic and diluted), compared to net income attributable to shareholders of $162.7 million ($0.81 income per share) last year. Net loss attributable to shareholders for the nine months ended May 31, 2018 includes broadcast license and goodwill impairment charges of $1,013.7 million ($4.87 per share basic, net of income taxes), business acquisition, integration and restructuring costs of $9.4 million ($0.03 per share, net of income taxes). Adjusting for the impact of these items results in an adjusted net income attributable to shareholders of $198.9 million ($0.96 per share basic) for the current fiscal year-to-date. Net income attributable to shareholders for the nine months ended May 31, 2017 includes business acquisition, integration and restructuring costs of $18.7 million ($0.07 per share, net of income taxes). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $176.5 million ($0.88 per share basic) for the prior fiscal year-to-date.













Operational Results – Highlights Television

  • Segment revenues decreased 5% in Q3 2018 and 2% for the year-to-date
  • Advertising revenues decreased 5% in Q3 2018 and 4% for the year-to-date
  • Subscriber revenues decreased 1% in Q3 2018 and were flat for the year-to-date
  • Merchandising, distribution and other revenues decreased 19% in Q3 2018 and were flat for the year-to-date
  • Segment profit(1) decreased 6% in Q3 2018 and decreased 5% for the year-to-date
  • Segment profit margin(1) of 40% in Q3 2018 and 38% for the year-to-date, compared to 41% and 39%, respectively, in the prior year comparable periods
  • Non-cash goodwill impairment charge in Q3 2018 of $1,000.0 million

Radio

  • Segment revenues decreased 2% in Q3 2018 and were flat for the year-to-date
  • Segment profit(1) decreased 1% in Q3 2018 and increased 2% for the year-to-date
  • Segment profit margin(1) of 30% in Q3 2018 and 28% for the year-to-date, compared to 30% and 27%, respectively, in the prior year comparable periods
  • Non-cash broadcast license impairment charge in Q3 2018 of $13.7 million

Corporate

  • Free cash flow(1) of $87.8 million in Q3 2018 and $253.0 million for the year-to-date, up from $82.5 million and $212.5 million, respectively, in the prior year
  • Net debt to segment profit(1) leverage at 3.38 times
  • Consolidated segment profit margin in Q3 2018 of 39% and 36% for the year-to-date, compared to 38% and 36%, respectively, in the prior comparable periods
  • Revised Capital Allocation Policy positions Corus for the future

(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 Third Quarter 2018 Report to Shareholders.

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













The unaudited consolidated financial statements and accompanying notes for the three and nine months ended May 31, 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 June 27, 2018 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, 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 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 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 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, 2017 and the third quarter ended May 31, 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.













CONSOLIDATED STATEMENTS OF FINANCIAL POSITION













(unaudited – in thousands of Canadian dollars)

As at May 31,

2018

As at August 31,

2017

ASSETS

Current

Cash and cash equivalents

85,700

93,701

Accounts receivable

459,943

408,443

Income taxes recoverable

1,388

Prepaid expenses and other assets

26,454

21,870

Total current assets

572,097

525,402

Tax credits receivable

22,354

18,172

Investments and other assets

69,085

64,559

Property, plant and equipment

232,413

260,068

Program rights

565,675

648,346

Film investments

46,611

40,728

Intangibles

2,007,646

2,045,813

Goodwill

1,387,652

2,387,652

Deferred income tax assets

65,396

77,104

4,968,929

6,067,844

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current

Accounts payable and accrued liabilities

478,908

415,661

Current portion of long-term debt

106,375

172,500

Provisions

11,081

15,791

Income taxes payable

8,359

Total current liabilities

604,723

603,952

Long-term debt

1,903,577

1,919,080

Other long-term liabilities

306,503

442,349

Provisions

7,072

11,707

Deferred income tax liabilities

497,653

491,235

Total liabilities

3,319,528

3,468,323

SHAREHOLDERS’ EQUITY

Share capital

2,321,084

2,291,814

Contributed surplus

11,956

11,449

Retained earnings (deficit)

(877,636)

114,492

Accumulated other comprehensive income

36,687

22,938

Total equity attributable to shareholders

1,492,091

2,440,693

Equity attributable to non-controlling interest

157,310

158,828

Total shareholders’ equity

1,649,401

2,599,521

4,968,929

6,067,844

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)













Three months ended

Nine months ended

May 31, 

May 31,

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

2018

2017

2018

2017

Revenues

441,410

461,628

1,268,263

1,297,796

Direct cost of sales, general and administrative expenses

270,989

285,815

807,196

827,314

Depreciation and amortization

20,432

23,390

62,022

68,943

Interest expense

32,500

39,918

96,341

118,595

Broadcast license and goodwill impairment

1,013,692

1,013,692

Business acquisition, integration and restructuring costs

5,285

4,638

9,368

18,718

Other expense, net

1,002

4,626

5,083

7,521

Income (loss) before income taxes

(902,490)

103,241

(725,439)

256,705

Income tax expense

26,253

27,551

72,584

68,330

Net income (loss) for the period

(928,743)

75,690

(798,023)

188,375

Other comprehensive income (loss), net of income taxes:

Items that may be reclassified subsequently to income (loss):

Unrealized foreign currency translation adjustment

177

191

607

404

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

(118)

(271)

(118)

(271)

Unrealized change in fair value of cash flow hedges

(459)

(3,253)

13,260

10,063

(400)

(3,333)

13,749

10,196

Items that will not be reclassified to income (loss):

Actuarial gain (loss) on employee post-employment benefits

4,997

(3,756)

4,129

9,309

4,597

(7,089)

17,878

19,505

Comprehensive income (loss) for the period

(924,146)

68,601

(780,145)

207,880

Net income (loss) attributable to:

Shareholders

(935,899)

66,719

(818,184)

162,746

Non-controlling interest

7,156

8,971

20,161

25,629

(928,743)

75,690

(798,023)

188,375

Comprehensive income (loss) attributable to:

Shareholders

(931,302)

59,630

(800,306)

182,251

Non-controlling interest

7,156

8,971

20,161

25,629

(924,146)

68,601

(780,145)

207,880

Earnings (loss) per share attributable to shareholders:

Basic

($4.49)

$0.33

($3.94)

$0.81

Diluted

($4.49)

$0.33

($3.94)

$0.81

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY













(unaudited – in thousands of Canadian dollars)

Share

capital

Contributed

surplus

Retained

earnings

(deficit)

Accumulated

other

comprehensive

income (loss)

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)

(818,184)

17,878

(800,306)

20,161

(780,145)

Dividends declared

(178,073)

(178,073)

(21,729)

(199,802)

Issuance of shares under dividend reinvestment plan

29,185

29,185

29,185

Issuance of shares under stock option plan

85

85

85

Actuarial loss on post-retirement benefit plans

4,129

(4,129)

Share-based compensation expense

507

507

507

Funding of equity interest

50

50

As at May 31, 2018

2,321,084

11,956

(877,636)

36,687

1,492,091

157,310

1,649,401

CONSOLIDATED STATEMENTS OF CASH FLOWS













Three months ended

Nine months ended

May 31,

May 31,

(unaudited – in thousands of Canadian dollars)

2018

2017

2018

2017

OPERATING ACTIVITIES

Net income (loss) for the period

(928,743)

75,690

(798,023)

188,375

Adjustments to reconcile net income (loss) to cash flow from operations:

Amortization of program rights

134,259

136,598

393,334

391,009

Amortization of film investments

4,362

7,815

10,217

16,777

Depreciation and amortization

20,432

23,390

62,022

68,943

Broadcast license and goodwill impairment

1,013,692

1,013,692

Deferred income taxes

11,641

8,584

11,739

15,798

Share-based compensation expense

151

178

507

632

Imputed interest

10,452

13,442

33,330

39,195

Proceeds from termination of interest rate swap

24,644

Payment of program rights

(133,073)

(132,557)

(371,442)

(375,919)

Net spend on film investments

(10,646)

(11,106)

(30,927)

(17,534)

CRTC benefit payment

(376)

(5,609)

(1,273)

(17,581)

Other

(2,546)

893

(5,274)

2,235

Cash flow from operations

119,605

117,318

342,546

311,930

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

(26,658)

(32,646)

(77,420)

(102,911)

Cash provided by operating activities

92,947

84,672

265,126

209,019

INVESTING ACTIVITIES

Additions to property, plant and equipment

(2,338)

(2,160)

(7,297)

(13,567)

Proceeds from sale of property

545

Business combinations, net of acquired cash

3,000

3,000

Proceeds from disposition of non-controlling interest

5,250

Net cash flows for intangibles, investments and other assets

(3,763)

(383)

(7,442)

(4,741)

Cash (used in) provided by investing activities

(6,101)

457

(14,194)

(10,058)

FINANCING ACTIVITIES

Decrease in bank loans

(26,724)

(28,144)

(81,451)

(85,616)

Deferred financing costs

(4,088)

Issuance of shares under stock option plan

85

Dividends paid

(48,853)

(25,716)

(148,220)

(78,600)

Dividends paid to non-controlling interest

(5,541)

(8,540)

(21,729)

(27,125)

Other

(444)

(495)

(3,530)

(972)

Cash used in financing activities

(81,562)

(62,895)

(258,933)

(192,313)

Net change in cash and cash equivalents during the period

5,284

22,234

(8,001)

6,648

Cash and cash equivalents, beginning of the period

80,416

55,777

93,701

71,363

Cash and cash equivalents, end of the period

85,700

78,011

85,700

78,011

BUSINESS SEGMENT INFORMATION













(unaudited – in thousands of Canadian dollars)

Three months ended May 31, 2018

Television

Radio

Corporate

Consolidated

Revenues

402,990

38,420

441,410

Direct cost of sales, general and administrative expenses

242,187

26,973

1,829

270,989

Segment profit (loss)(1)

160,803

11,447

(1,829)

170,421

Depreciation and amortization

20,432

Interest expense

32,500

Broadcast license and goodwill impairment

1,013,692

Business acquisition, integration and restructuring costs

5,285

Other expense, net

1,002

Loss before income taxes

(902,490)

Three months ended May 31, 2017

Television

Radio

Corporate

Consolidated

Revenues

422,324

39,304

461,628

Direct cost of sales, general and administrative expenses

251,030

27,706

7,079

285,815

Segment profit (loss)(1)

171,294

11,598

(7,079)

175,813

Depreciation and amortization

23,390

Interest expense

39,918

Business acquisition, integration and restructuring costs

4,638

Other expense, net

4,626

Income before income taxes

103,241

Nine months ended May 31, 2018

Television

Radio

Corporate

Consolidated

Revenues

1,154,676

113,587

1,268,263

Direct cost of sales, general and administrative expenses

721,625

81,736

3,835

807,196

Segment profit (loss)(1)

433,051

31,851

(3,835)

461,067

Depreciation and amortization

62,022

Interest expense

96,341

Broadcast license and goodwill impairment

1,013,692

Business acquisition, integration and restructuring costs

9,368

Other expense, net

5,083

Loss before income taxes

(725,439)

Nine months ended May 31, 2017

Television

Radio

Corporate

Consolidated

Revenues

1,183,784

114,012

1,297,796

Direct cost of sales, general and administrative expenses

726,670

82,787

17,857

827,314

Segment profit (loss)(1)

457,114

31,225

(17,857)

470,482

Depreciation and amortization

68,943

Interest expense

118,595

Business acquisition, integration and restructuring costs

18,718

Other expense, net

7,521

Income before income taxes

256,705













(1)

Segment profit (loss) does not have a standardized meaning prescribed by IFRS. For definitions and explanations, see discussion under the Key Performance Indicators section of the 2018 Report to Shareholders.













REVENUES BY TYPE













Three months ended

Nine months ended

May 31,

May 31,

(unaudited – in thousands of Canadian dollars)

2018

2017

2018

2017

Advertising

291,040

304,550

824,914

853,901

Subscriber fees

126,164

127,539

379,427

379,556

Merchandising, distribution and other

24,206

29,539

63,922

64,339

441,410

461,628

1,268,263

1,297,796













NON-IFRS FINANCIAL MEASURES                                       













Three months ended

Nine months ended

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

May 31,

May 31,

Adjusted Net Income Attributable to Shareholders

2018

2017

2018

2017

Net income (loss) attributable to shareholders

(935,899)

66,719

(818,184)

162,746

Adjustments, net of income tax:

Broadcast license and goodwill impairment charges

1,010,061

1,010,061

Business acquisition, integration and restructuring costs

3,950

3,422

7,000

13,798

Adjusted net income attributable to shareholders

78,112

70,141

198,877

176,544

Basic earnings (loss) per share

($4.49)

$0.33

($3.94)

$0.81

Adjustments, net of income tax:

Broadcast license and goodwill impairment charges

$4.84

$4.87

Business acquisition, integration and restructuring costs

$0.02

$0.02

$0.03

$0.07

Adjusted basic earnings per share

$0.37

$0.35

$0.96

$0.88

Free Cash Flow

Cash provided by (used in):

Operating activities

92,947

84,672

265,126

209,019

Investing activities

(6,101)

457

(14,194)

(10,058)

86,846

85,129

250,932

198,961

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

strategic investments (1)

907

(2,602)

2,109

13,497

Free cash flow

87,753

82,527

253,041

212,458













(1)

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













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SOURCE Corus Entertainment Inc.













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www.corusent.com


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