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Press release from PR Newswire

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, 2012 Year-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 share Consolidated revenues and segment profit(1) down 4% Strong segment profit(1) margins at Television (43%) and Radio (33%) TORONTO, July 12, 2012 /PRNewswire/ - 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   2011 Revenues                 Television 154,749   161,043   503,075   476,989   Radio (2) 49,329   50,745   143,577   148,031   204,078   211,788   646,652   625,020 Segment profit(1)                 Television 66,732   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 operations 43,221   40,352   125,340   113,841 From 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 presented Consolidated Results from Continuing Operations Consolidated 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 - Highlights Television Segment revenues decreased 4% in Q3 2012, but increased 5% year-to-date Segment profit(1) decreased 5% in Q3 2012 and 1% year-to-date Specialty advertising revenues decreased 11% in the quarter and 1% year-to-date Subscriber revenues decreased 2% in the quarter and 1% year-to-date Merchandise, distribution and other revenue increased 8% in the quarter and 39% year-to-date Movie Central finished the quarter with 975,000 subscribers Radio(2) Segment revenues decreased 3% in Q3 2012 and year-to-date Segment 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 presented 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 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     2010 ASSETS                 Current                 Cash and cash equivalents   56,636     55,922     7,969 Accounts receivable   182,520     178,531     175,134 Income taxes recoverable   3,036     603     1,781 Prepaid 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     39,597 Intangibles, investments and other assets   44,544     39,980     22,699 Property, plant and equipment   166,537     169,600     161,585 Program and film rights   263,068     256,970     244,963 Film investments   76,119     83,133     80,611 Broadcast licenses   569,505     569,505     610,423 Goodwill   674,138     671,827     695,029 Deferred 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     192,839 Provisions   3,930     5,267     13,048 Total current liabilities   221,877     212,040     205,887                   Long-term debt   527,594     600,796     691,891 Other long-term liabilities   84,374     104,574     95,840 Deferred tax liability   142,869     141,361     146,044 Total liabilities   976,714     1,058,771     1,139,662                   SHAREHOLDERS' EQUITY                 Share capital   913,467     882,679     856,655 Contributed surplus   7,566     10,299     12,706 Retained earnings   209,156     143,717     62,509 Accumulated other comprehensive income (loss)   642     (1,075)     342 Total equity attributable to shareholders   1,130,831     1,035,620     932,212 Equity attributable to non-controlling interest   19,503     19,200     18,055 Total 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   2011 Revenues   204,078   211,788   646,652   625,020 Direct cost of sales, general and administrative expenses   128,422   133,019   417,535   395,613 Depreciation   6,339   6,203   19,231   18,364 Interest expense   13,190   14,693   40,027   43,483 Restructuring   2,325   92   2,325   2,342 Other income, net   (3,532)   (969)   (4,702)   (2,211) Income before income taxes   57,334   58,750   172,236   167,429 Income tax expense   12,387   15,270   41,070   46,632 Net income for the period from continuing operations   44,947   43,480   131,166   120,797 Net income for the period from discontinued operations   ?   ?   ?   5,023 Net 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   125,820 Other 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)   Share capital   Contributed surplus   Retained earnings   Accumulated other comprehensive income (loss)   Total attributable to shareholders   Non- controlling interest   Total equity                               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                                                                                           (unaudited) (in thousands of Canadian dollars)   Share capital   Contributed surplus   Retained earnings   Accumulated other comprehensive income (loss)   Total attributable to shareholders   Non- controlling interest   Total equity                               At September 1, 2010   856,655   12,706   62,509   342   932,212   18,055   950,267 Comprehensive income (loss)   ?   ?   118,864   (1,425)   117,439   6,956   124,395 Actuarial 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   ?   9,506 Issuance of shares under dividend reinvestment plan   9,449   ?   ?   ?   9,449   ?   9,449 Share-based compensation expense   ?   822   ?   ?   822   ?   822 Other   ?   ?   ?   ?   ?   (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   2011 OPERATING ACTIVITIES                 Net income for the period   44,947   43,480   131,166   125,820 Deduct 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)   5,300 Payment 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   139,032 Cash 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   ?   ?   ?   74,996 Cash 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   9,506 Shares 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   ?   ?   ?   61,734 Net change in cash and cash equivalents during the period   (8,939)   3,947   714   52,456 Cash and cash equivalents, beginning of period   65,575   56,478   55,922   7,969 Cash 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    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   870    816    4,653    6,339 Interest expense   (256)    6,118    7,328    13,190 Restructuring   1,053    1,151    121    2,325 Other 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    Consolidated Revenues   50,745    161,043    ?    211,788 Direct cost of sales, general and administrative expenses   34,745    91,051    7,223    133,019 Segment profit (loss)(1)   16,000    69,992    (7,223)    78,769 Depreciation   817    736    4,650    6,203 Interest expense   (74)    6,182    8,585    14,693 Restructuring   79    6    7    92 Other 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    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   2,427    2,168    14,636    19,231 Interest expense   (160)    19,350    20,837    40,027 Restructuring   1,053    1,151    121    2,325 Other 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    Consolidated Revenues   148,031    476,989    ?    625,020 Direct cost of sales, general and administrative expenses   103,845    266,805    24,963    395,613 Segment profit (loss)(1)   44,186    210,184    (24,963)    229,407 Depreciation   2,313    3,255    12,796    18,364 Interest expense   2,398    16,059    25,026    43,483 Restructuring   750    9    1,583    2,342 Other 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    2011 Advertising    97,076    104,374    300,395    306,873 Subscriber fees    74,285    76,176    224,350    225,537 Merchandise, distribution and other    32,717    31,238    121,907    92,610        204,078    211,788    646,652    625,020   SOURCE Corus Entertainment Inc.For further information: <p> <b>John Cassaday </b><br/> <b>President and Chief Executive Officer </b><br/> <b>Corus Entertainment Inc. </b><br/> <b>416.479.6018 </b><br/> <br/> <b>Tom Peddie </b><br/> <b>Executive</b><b> Vice President and Chief </b><b>Financial Officer   </b><br/> <b>Corus Entertain</b><b>ment Inc. </b><br/> <b>416.479.6080</b><br/> <br/> <b>Sally Tindal</b><br/> <b>Director, Communications</b><br/> <b>Corus Entertainment Inc.</b><br/> <b>416.479.6107</b> </p>