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Press release from CNW Group

Corus Entertainment Announces Fiscal 2012 Third Quarter Results

Thursday, July 12, 2012

Corus Entertainment Announces Fiscal 2012 Third Quarter Results07:00 EDT Thursday, July 12, 2012Year-to-date free cash flow(1) up 17%Net income attributable to shareholders up 7%Basic earnings per share up 6% to $0.52 per shareConsolidated revenues and segment profit(1) down 4%Strong segment profit(1) margins at Television (43%) and Radio (33%)TORONTO, July 12, 2012 /CNW/ - Corus Entertainment Inc. (TSX: CJR.B) announced its third quarter financial results today."Despite tough year-over-year comparables, we delivered a solid performance in the quarter, growing net income and earnings per share, maintaining our exceptional margins through rigorous cost controls and continuing to generate impressive free cash flow," said John Cassaday, President and CEO of Corus Entertainment. "Our specialty advertising revenues in the quarter were impacted by soft demand in the Kids segment, which overshadowed the continued strong performance in our Women's vertical and newer services, including ABC Spark. Looking ahead, our exceptional brands, superior programming and disciplined cost controls position us well for a recovery in the advertising market."Financial Highlights               (unaudited)Three months ended Nine months ended(in thousands of Canadian dollars except per share amounts)May 31, May 31, 2012 2011 2012 2011Revenues        Television154,749 161,043 503,075 476,989 Radio (2)49,329 50,745 143,577 148,031 204,078 211,788 646,652 625,020Segment profit(1)        Television66,732 69,992 207,648 210,184 Radio (2)16,151 16,000 42,432 44,186 Corporate(7,227) (7,223) (20,963) (24,963) 75,656 78,769 229,117 229,407        Net income attributable to shareholders:       From continuing operations43,221 40,352 125,340 113,841From discontinued operations— — — 5,023 43,221 40,352 125,340 118,864        Basic earnings per share attributable to shareholders:        From continuing operations$ 0.52 $ 0.49 $ 1.51 $ 1.39 From discontinued operations— — — 0.06 $ 0.52 $ 0.49 $ 1.51 $ 1.45(1)See definitions and discussion under Key Performance Indicators in MD&A(2)Reflects the disposition of the Quebec Radio operations, which occurred on February 1, 2011, as discontinued operations in all periods presentedConsolidated Results from Continuing OperationsConsolidated revenues for the three months ended May 31, 2012 were $204.1 million, down 4% from $211.8 million last year.  Consolidated segment profit(1) was $75.7 million, down 4% from $78.8 million last year.  Net income attributable to shareholders for the quarter was $43.2 million ($0.52 basic and $0.51 diluted), up 7% compared to $40.4 million ($0.49 basic and diluted) last year.Consolidated revenues for the nine months ended May 31, 2012 were $646.7 million, up 3% from $625.0 million last year.  Consolidated segment profit(1) was $229.1 million, consistent with $229.4 million last year.  Net income attributable to shareholders for the nine months was $125.3 million ($1.51 basic and $1.50 diluted), up 10% compared to $113.8 million ($1.39 basic and $1.38 diluted) last year.Operational Results - HighlightsTelevisionSegment revenues decreased 4% in Q3 2012, but increased 5% year-to-dateSegment profit(1) decreased 5% in Q3 2012 and 1% year-to-dateSpecialty advertising revenues decreased 11% in the quarter and 1% year-to-dateSubscriber revenues decreased 2% in the quarter and 1% year-to-dateMerchandise, distribution and other revenue increased 8% in the quarter and 39% year-to-dateMovie Central finished the quarter with 975,000 subscribersRadio(2)Segment revenues decreased 3% in Q3 2012 and year-to-dateSegment profit(1) increased 1% in Q3 2012, but decreased 4% year-to-date(1)See definitions and discussion under Key Performance Indicators in MD&A(2)Radio results reflect the disposition of the Quebec Radio operations, which occurred on February 1, 2011, as discontinued operations in all periods presentedCorus 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 and children's animation.  The company's multimedia entertainment brands include YTV, Treehouse, Nickelodeon (Canada), ABC Spark, W Network, OWN: Oprah Winfrey Network (Canada), CosmoTV, Sundance Channel (Canada), Movie Central, HBO Canada, Nelvana, Kids Can Press and 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, 2012 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 12, 2012 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 1.800.734.8583 and for local/international callers is 416.641.6705.  PowerPoint slides for the call will be posted 15 minutes prior 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         (unaudited) As at May 31,  As at August 31,  As at September 1,(in thousands of Canadian dollars) 2012  2011  2010ASSETS        Current        Cash and cash equivalents 56,636  55,922  7,969Accounts receivable 182,520  178,531  175,134Income taxes recoverable 3,036  603  1,781Prepaid expenses and other 11,490  13,497  18,008         Total current assets 253,682  248,553  202,892         Tax credits receivable 52,215  43,108  39,597Intangibles, investments and other assets 44,544  39,980  22,699Property, plant and equipment 166,537  169,600  161,585Program and film rights 263,068  256,970  244,963Film investments 76,119  83,133  80,611Broadcast licenses 569,505  569,505  610,423Goodwill 674,138  671,827  695,029Deferred tax asset 27,240  30,915  32,130  2,127,048  2,113,591  2,089,929         LIABILITIES AND SHAREHOLDERS' EQUITY        Current        Accounts payable and accrued liabilities 217,947  206,773  192,839Provisions 3,930  5,267  13,048Total current liabilities 221,877  212,040  205,887         Long-term debt 527,594  600,796  691,891Other long-term liabilities 84,374  104,574  95,840Deferred tax liability 142,869  141,361  146,044Total liabilities 976,714  1,058,771  1,139,662         SHAREHOLDERS' EQUITY        Share capital 913,467  882,679  856,655Contributed surplus 7,566  10,299  12,706Retained earnings 209,156  143,717  62,509Accumulated other comprehensive income (loss) 642  (1,075)  342Total equity attributable to shareholders 1,130,831  1,035,620  932,212Equity attributable to non-controlling interest 19,503  19,200  18,055Total shareholders' equity 1,150,334  1,054,820  950,267  2,127,048  2,113,591  2,089,929 CORUS ENTERTAINMENT INC.CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME             Three months ended Nine months ended(unaudited) May 31, May 31,(in thousands of Canadian dollars except per share amounts) 2012 2011 2012 2011Revenues 204,078 211,788 646,652 625,020Direct cost of sales, general and administrative expenses 128,422 133,019 417,535 395,613Depreciation 6,339 6,203 19,231 18,364Interest expense 13,190 14,693 40,027 43,483Restructuring 2,325 92 2,325 2,342Other income, net (3,532) (969) (4,702) (2,211)Income before income taxes 57,334 58,750 172,236 167,429Income tax expense 12,387 15,270 41,070 46,632Net income for the period from continuing operations 44,947 43,480 131,166 120,797Net income for the period from discontinued operations — — — 5,023Net income for the period 44,947 43,480 131,166 125,820         Net income attributable to:            Shareholders from continuing operations 43,221 40,352 125,340 113,841    Shareholders from discontinued operations — — — 5,023    Non-controlling interest 1,726 3,128 5,826 6,956  44,947 43,480 131,166 125,820         Basic earnings per share attributable to shareholders:            From continuing operations $ 0.52 $ 0.49 $ 1.51 $ 1.39    From discontinued operations — — — 0.06  $ 0.52 $ 0.49 $ 1.51 $ 1.45         Diluted earnings per share attributable to shareholders:            From continuing operations $ 0.51 $ 0.49 $ 1.50 $ 1.38    From discontinued operations — — — 0.06  $ 0.51 $ 0.49 $ 1.50 $ 1.44         Net income for the period 44,947 43,480 131,166 125,820Other comprehensive income (loss), net of tax            Unrealized foreign currency translation adjustment 1,434 4 1,971 (1,857)    Unrealized change in fair value of available-for-sale investments (163) (77) (254) (1)    Actuarial gain on employee future benefits — — — 433  1,271 (73) 1,717 (1,425)Comprehensive income for the period 46,218 43,407 132,883 124,395         Comprehensive income attributable to:            Shareholders 44,492 40,279 127,057 117,439    Non-controlling interest 1,726 3,128 5,826 6,956  46,218 43,407 132,883 124,395 CORUS ENTERTAINMENT INC.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY               (unaudited)(in thousands of Canadian dollars) Sharecapital Contributedsurplus Retainedearnings Accumulatedothercomprehensiveincome (loss) Totalattributabletoshareholders Non-controllinginterest Totalequity               At August 31, 2011 882,679 10,299 143,717 (1,075) 1,035,620 19,200 1,054,820Comprehensive income — — 125,340 1,717 127,057 5,826 132,883Dividends declared — — (58,123) — (58,123) (5,523) (63,646)Issuance of shares under stock option plan 13,669 (3,623) — — 10,046 — 10,046Issuance of shares under dividend reinvestment plan 19,229 — — — 19,229 — 19,229Shares 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                                             (unaudited)(in thousands of Canadian dollars) Sharecapital Contributedsurplus Retainedearnings Accumulatedothercomprehensiveincome (loss) Totalattributabletoshareholders Non-controllinginterest Totalequity               At September 1, 2010 856,655 12,706 62,509 342 932,212 18,055 950,267Comprehensive income (loss) — — 118,864 (1,425) 117,439 6,956 124,395Actuarial gain transfer — — 433 (433) — — —Dividends declared — — (46,093) —  (46,093) (5,107) (51,200)Issuance of shares under stock option plan 12,954 (3,448) — — 9,506 — 9,506Issuance of shares under dividend reinvestment plan 9,449 — — — 9,449 — 9,449Share-based compensation expense — 822 — — 822 — 822Other — — — — — (957) (957)               At May 31, 2011 879,058 10,080 135,713 (1,516) 1,023,335 18,947 1,042,282 CORUS ENTERTAINMENT INC.CONSOLIDATED STATEMENTS OF CASH FLOWS           Three months ended Nine months ended(unaudited) May 31, May 31,(in thousands of Canadian dollars) 2012 2011 2012 2011OPERATING ACTIVITIES        Net income for the period 44,947 43,480 131,166 125,820Deduct earnings from discontinued operations — — — (5,023)Add (deduct) non-cash items:         Depreciation 6,339 6,203 19,231 18,364 Amortization of program rights 46,317 44,174 139,805 129,563 Amortization of film investments 4,002 7,501 21,949 26,378 Deferred income taxes (51) 2,541 4,735 3,365 Stock-based compensation expense 298 274 890 822 Imputed interest 2,894 2,827 8,904 7,911 Gain on acquisition (2,383) — (2,383) — Other (2,000) (809) (2,790) (2,403)Net change in non-cash working capital balances related to operations 11,466 7,700 (9,260) 5,300Payment of program and film rights (44,841) (41,686) (131,267) (114,814)Net additions to film investments (6,391) (23,131) (40,364) (56,251)Cash provided by operating activities from continuing operations 60,597 49,074 140,616 139,032Cash used in operating activities from discontinued operations — — — (13,262)Cash provided by operating activities 60,597 49,074 140,616 125,770         INVESTING ACTIVITIES        Additions to property, plant and equipment (5,501) (5,387) (13,585) (32,602)Business combination (4,104) — (4,104) —Net cash flows for intangibles, investments and other assets (4,868) 210 (3,859) (4,057)Other (242) (350) (560) (932)Cash used in investing activities from continuing operations (14,715) (5,527) (22,108) (37,591)Cash provided by investing activities from discontinued operations — — — 74,996Cash provided by (used in) investing activities (14,715) (5,527) (22,108) 37,405         FINANCING ACTIVITIES        Decrease in bank loans (40,103) (28,458) (74,777) (73,222)Issuance of shares under stock option plan 1,709 3,622 10,046 9,506Shares repurchased — — (3,888) —Dividends paid (13,705) (11,023) (37,525) (34,572)Dividends paid to non-controlling interest — (741) (4,423) (5,107)Other (2,722) (3,000) (7,227) (7,324)Cash used in financing activities from continuing operations (54,821) (39,600) (117,794) (110,719)Net change during the period in cash and cash equivalents from continuing operations (8,939)  3,947  714  (9,278)Net change during the period in cash and cash equivalents from discontinued operations — — — 61,734Net change in cash and cash equivalents during the period (8,939) 3,947 714 52,456Cash and cash equivalents, beginning of period 65,575 56,478 55,922 7,969Cash and cash equivalents, end of period 56,636 60,425 56,636 60,425 CORUS ENTERTAINMENT INC.BUSINESS SEGMENT INFORMATION (unaudited)(in thousands of Canadian dollars)            Three months ended May 31, 2012               Radio  Television  Corporate  ConsolidatedRevenues 49,329  154,749  —  204,078Direct cost of sales, general and administrative expenses 33,178  88,017  7,227  128,422Segment profit (loss)(1) 16,151  66,732  (7,227)  75,656Depreciation 870  816  4,653  6,339Interest expense (256)  6,118  7,328  13,190Restructuring 1,053  1,151  121  2,325Other expense (income), net (55)  (866)  (2,611)  (3,532)Income (loss) before income taxes  14,539  59,513  (16,718)  57,334              Three months ended May 31, 2011               Radio  Television  Corporate  ConsolidatedRevenues 50,745  161,043  —  211,788Direct cost of sales, general and administrative expenses 34,745  91,051  7,223  133,019Segment profit (loss)(1) 16,000  69,992  (7,223)  78,769Depreciation 817  736  4,650  6,203Interest expense (74)  6,182  8,585  14,693Restructuring 79  6  7  92Other expense (income), net (515)  396  (850)  (969)Income (loss) before income taxes  15,693  62,672  (19,615)  58,750              Nine months ended May 31, 2012               Radio  Television  Corporate  ConsolidatedRevenues 143,577  503,075  —  646,652Direct cost of sales, general and administrative expenses 101,145  295,427  20,963  417,535Segment profit (loss)(1) 42,432  207,648  (20,963)  229,117Depreciation 2,427  2,168  14,636  19,231Interest expense (160)  19,350  20,837  40,027Restructuring 1,053  1,151  121  2,325Other expense (income), net (42)  (1,861)  (2,799)  (4,702)Income (loss) before income taxes  39,154  186,840  (53,758)  172,236              Nine months ended May 31, 2011               Radio  Television  Corporate  ConsolidatedRevenues 148,031  476,989  —  625,020Direct cost of sales, general and administrative expenses 103,845  266,805  24,963  395,613Segment profit (loss)(1) 44,186  210,184  (24,963)  229,407Depreciation 2,313  3,255  12,796  18,364Interest expense 2,398  16,059  25,026  43,483Restructuring 750  9  1,583  2,342Other expense (income), net (1,009)  (1,822)  620  (2,211)Income (loss) before income taxes  39,734  192,683  (64,988)  167,429(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,     2012  2011  2012  2011Advertising  97,076  104,374  300,395  306,873Subscriber fees  74,285  76,176  224,350  225,537Merchandise, distribution and other  32,717  31,238  121,907  92,610     204,078  211,788  646,652  625,020 For further information: 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. 416.479.6080Sally TindalDirector, CommunicationsCorus Entertainment Inc.416.479.6107