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Corus Entertainment Announces Fiscal 2014 Second Quarter Results

  • Consolidated revenue up 11% for the quarter and 9% year-to-date
  • Consolidated segment profit up 16% for the quarter and 12% year-to-date
  • Adjusted net income attributable to shareholders of $26.8 million, up 10% in the quarter
  • Adjusted basic earnings per share attributable to shareholders of $0.32 per share, up 10% in the quarter
  • Free cash flow of $123.0 million year-to-date

TORONTO, April 10, 2014 /PRNewswire/ - Corus Entertainment Inc. (TSX: CJR.B) announced its second quarter financial results today.

"We are already beginning to realize benefits from the integration of our newly acquired services; Historia, Séries+ and TELETOON.  In the second quarter, our acquisitions drove significant segment profit and margin growth in our Television business, delivering immediately accretive earnings per share and free cash flow," said John Cassaday, President and Chief Executive Officer of Corus Entertainment. "While our merchandising business faced tough year-over-year comparables in the quarter and Radio continues to be challenged, we are excited about the opportunities that our newly acquired assets, combined with the continued strength of our core brands, bring to the business."

Financial Highlights                        
      Three months ended     Six months ended
      February 28,     February 28,
(unaudited - in thousands of Canadian dollars except per share amounts)     2014      2013(3)     2014      2013 (3)
Revenues                        
  Television     152,101      132,343      330,050      289,965 
  Radio     39,312      40,277      87,368      92,601 
      191,413      172,620      417,418      382,566 
                         
Segment profit (1)                        
  Television     58,034      48,110      140,558      118,632 
  Radio     8,470      9,654      24,307      28,610 
  Corporate     (7,222)     (6,802)     (13,307)     (11,763)
      59,282      50,962      151,558      135,479 
                         
Net income attributable to shareholders     6,116      5,944      157,007      58,103 
Adjusted net income attributable to shareholders (1) (2)     26,780      24,432      81,957      76,591 
                         
Basic earnings per share     $ 0.07     $ 0.07     $ 1.85     $ 0.70
Adjusted basic earnings per share (1) (2)     $ 0.32     $ 0.29     $ 0.97     $ 0.92
Diluted earnings per share     $ 0.07     $ 0.07     $ 1.85     $ 0.69
                         
Free cash flow (1)     73,405      39,785      123,041      79,609 

(1) Adjusted net income attributable to shareholders, adjusted basic earnings per share, segment profit, segment profit margin and free cash flow do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit, segment profit margin and free cash flow because they are key measures used to evaluate performance.  For definitions and explanations, see discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.
(2) For the three months ended February 28, 2014, excludes radio broadcast license impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $18.7 million ($0.20 per share) and a decrease in the purchase price obligation of $2.1 million ($0.02 per share). For the six month period ended February 28, 2014, excludes the impact of a $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,  radio broadcast license impairment charges of $8.0 million ($0.07 per share), business acquisition, integration and restructuring costs of $40.7 million ($0.46 per share), an increase in the purchase price obligation of $5.3 million ($0.06 per share), and investment impairment related charges of $3.3 million ($0.04 per share).  For the three and six month periods ended February 28, 2013, excludes the impact of debt refinancing costs of $25.0 million ($0.22 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.  On December 20, 2013, the Company received Canadian Radio-television and Telecommunications Commission ("CRTC") approval to complete the acquisition of the remaining 50% interest in TELETOON that it did not already own as well as the acquisition of Historia and Séries+, s.e.n.c. ("H&S").  These acquisitions closed on January 1, 2014.  On January 24, 2014, the CRTC approved the Company's acquisition of the Ottawa-based radio stations (CKQB-FM and CJOT-FM) and the transaction closed on January 31, 2014.  As a result of these business combinations, the Company's consolidated results for fiscal 2014 reflect 100% interest in TELETOON effective September 1, 2013, 100% interest in H&S effective January 1, 2014, and 100% interest in the two Ottawa radio stations effective January 31, 2014 (refer to note 17 of the interim condensed consolidated financial statements for further details on all acquisitions).

For fiscal 2013, as a result of retroactive application of IFRS 11 - Joint Arrangements, the Company is no longer permitted to proportionately consolidate its 50% equity interest in 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 its investment using the equity method of accounting.  As a consequence, the Television revenues and segment profit for the second quarter of fiscal 2013 were reduced by $11.1 million and $3.7 million, respectively and instead, Corus' share of TELETOON's net income of $2.7 million was reported as Other expense (income) in the Consolidated Statements of Income and Comprehensive Income.  For the six months ended February 28, 2013, the Television revenues and segment profit were reduced by $27.3 million and $11.9 million, respectively, and Corus' share of TELETOON's net income of $8.7 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 February 28, 2014 were $191.4 million, up 11% from $172.6 million last year.  Consolidated segment profit was $59.3 million, up 16% from $51.0 million last year.  Net income attributable to shareholders for the quarter was $6.1 million ($0.07 basic and diluted per share), compared to $5.9 million ($0.07 basic and diluted per share) last year.  Net income attributable to shareholders for the second quarter includes radio broadcast license impairment charges of $8.0 million, business acquisition, integration and restructuring costs of $18.7 million and a decrease in the purchase price obligation of $2.1 million related to the acquisition of control of TELETOON.  Removing the impact of these items results in an adjusted net income of $26.8 million ($0.32 per share) in the quarter.  Net income attributable to shareholders for the prior year quarter includes a pre-tax charge for debt refinancing of $25.0 million.  Removing the impact of this item results in an adjusted net income attributable to shareholders of $24.4 million ($0.29 per share) in the prior year quarter.

Consolidated revenues for the six months ended February 28, 2014 were $417.4 million, up 9% from $382.6 million last year.  Consolidated segment profit was $151.6 million, up 12% from $135.5 million last year.  Net income attributable to shareholders for the six months ended February 28, 2014 was $157.0 million ($1.85 per share basic and diluted)  compared to $58.1 million ($0.70 per share basic and $0.69 per share diluted) last year.  Net income attributable to shareholders for the six months ended February 28, 2014 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, radio broadcast license impairment charges of $8.0 million, business acquisition, integration and restructuring costs of $40.7 million, an increase in the purchase price obligation of $5.3 million and investment impairment related charges of $3.3 million.  Removing the impact of these items results in an adjusted net income of $82.0 million ($0.97 per share) for the current year to date.  Removing the impact of the prior year pre-tax charge for debt refinancing of $25.0 million results in an adjusted net income attributable to shareholders of $76.6 million ($0.92 per share) in the prior year to date.

Operational Results - Highlights

Television

  • Fiscal 2014 reflects consolidation of 100% interest in TELETOON effective September 1, 2013 and 100% interest in Historia and Séries+ effective January 1, 2014; Fiscal 2013 was retroactively restated to apply IFRS 11 - Joint Arrangements, resulting in equity accounting for Corus' 50% economic interest in TELETOON (i.e. prior to the business combination on September 1, 2013)
  • Segment revenues increased 15% in Q2 2014 and 14% year-to-date
  • Specialty advertising revenues increased 38% in Q2 2014 and 36% year-to-date
  • Subscriber revenues increased 23% in Q2 2014 and 18% year-to-date
  • Merchandising, distribution and other revenues declined 38% in Q2 2014 and 35% year-to-date
  • Segment profit(1)  increased 21% in Q2 2014 and 18% year-to-date
  • Segment profit margin(1) of 38% in Q2 2014 and 43% year-to-date

Radio

  • Fiscal 2014 reflects consolidation of 100% interest in two Ottawa-based radio stations, CKQB-FM and CJOT-FM, effective January 31, 2014
  • Segment revenues decreased 2% in Q2 2014 and 6% year-to-date
  • Segment profit(1) decreased 12% in Q2 2014 and 15% year-to-date
  • Segment profit margin(1) of 22% in Q2 2014 and 28% year-to-date
  • Radio broadcast license impairment charge of $8.0 million recorded in Q2 2014

(1) Segment profit, segment profit margin and free cash flow do not have standardized meanings prescribed by IFRS.  The Company reports on segment profit, segment profit margin and free cash flow because they are key measures used to evaluate performance.  For definitions and explanations, see discussion under the Key Performance Indicators section of the 2014 Report to Shareholders.

Corus Entertainment Inc. reports in Canadian dollars.

The unaudited consolidated financial statements and accompanying notes for the three and six month periods ended February 28, 2014 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 April 10, 2014 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 local and international callers is 1.416.981.9095 and for North America is 1.800.410.1397.  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.

Use of Non-GAAP Financial Measures

This press release includes the non-GAAP 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 ("GAAP") and may be different from non-GAAP measures used by other companies.  In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results.  A reconciliation of the Company's non-GAAP 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 Statements

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 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 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.

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 and Séries+, as well as Nelvana, Kids Can Press, Toon Boom and 39 radio stations including CKNW AM 980, 99.3 The FOX, Country 105, 630 CHED, Fresh FM London, JUMP! 106.9, 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.

CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                   
      As at February 28,     As at August 31,     As at September 1,
(unaudited - in thousands of Canadian dollars)     2014      2013(1)     2012(1)
ASSETS                  
Current                  
Cash and cash equivalents     42,285      81,266      19,198 
Accounts receivable     209,648      164,302      163,345 
Promissory note receivable     —      47,759      —  
Income taxes recoverable     6,267       351      9,542 
Prepaid expenses and other     12,605      16,392      12,619 
                   
Total current assets     270,805      310,070      204,704 
                   
Tax credits receivable     41,929      41,564      43,865 
Intangibles, investments and other assets     43,210      42,975      42,390 
Investment in joint venture     —       125,931      121,704 
Property, plant and equipment     146,096      151,192      163,280 
Program and film rights     300,178      232,587      229,306 
Film investments     67,926      62,274      67,847 
Broadcast licenses     989,435      515,036      520,770 
Goodwill     999,991      646,045      646,045 
Deferred tax assets     37,651      39,463      28,327 
      2,897,221      2,167,137      2,068,238 
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Current                  
Accounts payable and accrued liabilities     228,326      164,443      177,367 
Purchase price obligations     8,127      —       —  
Income taxes payable     —       —       1,303 
Provisions     5,199      3,941      2,322 
Total current liabilities     241,652      168,384      180,992 
                   
Long-term debt     913,649      538,966      518,258 
Other long-term liabilities     142,213      93,241      87,588 
Deferred tax liabilities     254,451      145,713      145,310 
Total liabilities     1,551,965      946,304      932,148 
                   
Share capital     949,991      937,183      910,005 
Contributed surplus     8,012      7,221      7,835 
Retained earnings     368,761      256,517      198,445 
Accumulated other comprehensive income (loss)     3,835      1,653      (812)
Total equity attributable to shareholders     1,330,599      1,202,574      1,115,473 
Equity attributable to non-controlling interest     14,657      18,259      20,617 
Total shareholders' equity     1,345,256      1,220,833      1,136,090 
      2,897,221      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     Six months ended
      February 28,     February 28,
(unaudited - in thousands of Canadian dollars except per share amounts)     2014      2013(1)     2014      2013(1)
Revenues     191,413      172,620      417,418      382,566 
Direct cost of sales, general and administrative expenses     132,131      121,658      265,860      247,087 
Depreciation and amortization     5,533      7,495      11,268      13,901 
Interest expense     12,604      13,271      21,874      25,403 
Broadcast license impairment     8,000      —       8,000      —  
Debt refinancing     —       25,033      —       25,033 
Business acquisition, integration and restructuring costs     18,734      —       40,656      —  
Gain on acquisition     —       —       (127,884)     —  
Other (income) expense, net     (1,006)     (3,138)     8,705      (8,667)
                         
Income before income taxes     15,417      8,301      188,939      79,809 
Income tax expense     8,353      1,421      29,533      18,913 
                         
Net income for the period     7,064      6,880      159,406      60,896 
                         
Net income attributable to:                        
Shareholders     6,116      5,944      157,007      58,103 
Non-controlling interest     948      936      2,399      2,793 
      7,064      6,880      159,406      60,896 
                         
Earnings per share attributable to shareholders:                        
    Basic     $ 0.07     $ 0.07     $ 1.85     $ 0.70
    Diluted     $ 0.07     $ 0.07     $ 1.85     $ 0.69
                         
Net income for the period     7,064      6,880      159,406      60,896 
Other comprehensive income (loss), net of tax:                        
  Items that may be reclassified subsequently to income:                        
    Unrealized foreign currency translation adjustment     1,891      1,191      2,266      1,481 
    Unrealized change in fair value of available-for-sale investments     (12)     36      62      326 
    Unrealized change in fair value of cash flow hedges     (146)     —      (146)     — 
      1,733      1,227      2,182      1,807 
                         
Comprehensive income for the period     8,797      8,107      161,588      62,703 
                         
Comprehensive income attributable to:                        
    Shareholders     7,849      7,171      159,189      59,910 
    Non-controlling interest     948      936      2,399      2,793 
      8,797      8,107      161,588      62,703 

(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   —     —     157,007    2,182    159,189    2,399    161,588 
Dividends declared   —     —     (44,763)   —     (44,763)   (6,001)   (50,764)
Issuance of shares under stock option plan   1,063    (170)   —     —     893    —     893 
Issuance of shares under dividend reinvestment plan   11,745    —     —     —     11,745    —     11,745 
Share-based compensation expense   —     961    —     —     961    —     961 
At February 28, 2014   949,991    8,012    368,761    3,835    1,330,599    14,657    1,345,256 
                               
                             
At August 31, 2012   910,005    7,835    198,445    (812)   1,115,473    20,617    1,136,090 
Comprehensive income   —     —     58,103    1,807    59,910    2,793    62,703 
Dividends declared   —     —     (41,445)   —     (41,445)   (5,116)   (46,561)
Issuance of shares under stock option plan   994    (245)   —     —     749    —     749 
Issuance of shares under dividend reinvestment plan   13,515    —     —     —     13,515    —     13,515 
Shares repurchased   (708)   —     (756)   —     (1,464)   —     (1,464)
Share-based compensation expense   —     732    —     —     732    —     732 
At February 28, 2013   923,806    8,322    214,347    995    1,147,470    18,294    1,165,764 

 
CORUS ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
             
      Three months ended     Six months ended
      February 28,     February 28,
(unaudited - in thousands of Canadian dollars)     2014      2013(1)     2014      2013(1)
OPERATING ACTIVITIES                        
Net income for the period     7,064      6,880      159,406      60,896 
Add (deduct) non-cash items:                        
  Depreciation and amortization     5,533      7,495      11,268      13,901 
  Broadcast license impairment     8,000      —       8,000      —  
  Amortization of program and film rights     51,613      42,093      102,144      83,221 
  Amortization of film investments     5,143      3,501      9,055      9,708 
  Deferred income taxes     2,566     (5,432)     5,021     (6,726)
  Increase in purchase price obligation     (2,056)     —       5,288     —  
  Share-based compensation expense     504      392      961      732 
  Imputed interest     4,109      2,628      7,145      5,153 
  Tangible benefit obligation     11,892      —       31,915      —  
  Debt refinancing     —       25,033      —       25,033 
  Gain on acquisition     —       —       (127,884)     —  
  Other     160      (2,120)     1,415      (8,450)
Net change in non-cash working capital balances related to operations     11,102      15,175      (11,557)     (9,303)
Payment of program and film rights     (32,587)     (36,898)     (60,678)     (61,523)
Net additions to film investments     (3,682)     (18,160)     (13,748)     (34,234)
Decrease in restricted cash     6,407      —       —       —  
Cash provided by operating activities     75,768      40,587      127,751      78,408 
                         
INVESTING ACTIVITIES                        
Additions to property, plant and equipment     (2,344)     (3,929)     (4,280)     (7,464)
Business combinations     (491,441)     —       (491,441)     —  
Dividends from investment in joint venture     —       2,861      —       7,751 
Net cash flows for intangibles, investments and other assets     (3,167)     (7,039)     (5,074)     (6,966)
Other     (55)     (236)     (122)     (324)
Cash used in investing activities     (497,007)     (8,343)     (500,917)     (7,003)
                         
FINANCING ACTIVITIES                        
Increase (decrease) in bank loans     373,065      (39,910)     373,065      (29,925)
Issuance of notes     —       550,000      —       550,000 
Financing fees     (587)     (8,607)     (587)     (8,607)
Issuance of shares under stock option plan     757      749      893      749 
Shares repurchased     —       —       —       (1,464)
Dividends paid     (16,238)     (13,775)     (31,936)     (26,998)
Dividends paid to non-controlling interest     (1,933)     (803)     (6,001)     (5,116)
Other     (584)     (2,789)     (1,249)     (5,101)
Cash provided by financing activities     354,480      484,865      334,185      473,538 
Net change in cash and cash equivalents during the period     (66,759)     517,109      (38,981)     544,943 
Cash and cash equivalents, beginning of the period     109,044      47,032      81,266      19,198 
Cash and cash equivalents, end of the period     42,285      564,141      42,285      564,141 

(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 February 28, 2014                        
        Television     Radio     Corporate     Consolidated
Revenues     152,101      39,312      —       191,413 
Direct cost of sales, general and administrative expenses     94,067      30,842      7,222      132,131 
Segment profit (loss)(1)     58,034      8,470      (7,222)     59,282 
Depreciation and amortization                       5,533 
Interest expense                       12,604 
Broadcast license impairment                       8,000 
Business acquisition, integration and restructuring costs                       18,734 
Other expense (income), net                       (1,006)
Income before income taxes                       15,417 
                           
Three months ended February 28, 2013                        
        Television (2)     Radio     Corporate     Consolidated
Revenues     132,343      40,277      —       172,620 
Direct cost of sales, general and administrative expenses     84,233      30,623      6,802      121,658 
Segment profit (loss) (1)     48,110      9,654      (6,802)     50,962 
Depreciation and amortization                       7,495 
Interest expense                       13,271 
Debt refinancing                       25,033 
Other expense (income), net                       (3,138)
Income before income taxes                       8,301 
                           
Six months ended February 28, 2014                        
        Television     Radio     Corporate     Consolidated
Revenues     330,050      87,368      —       417,418 
Direct cost of sales, general and administrative expenses     189,492      63,061      13,307      265,860 
Segment profit (loss) (1)     140,558      24,307      (13,307)     151,558 
Depreciation and amortization                       11,268 
Interest expense                       21,874 
Broadcast license impairment                       8,000 
Business acquisition, integration and restructuring costs                       40,656 
Gain on sale of associated company                       (127,884)
Other expense (income), net                       8,705 
Income before income taxes                       188,939 
                           
Six months ended February 28, 2013                        
        Television (2)     Radio     Corporate     Consolidated
Revenues     289,965      92,601      —       382,566 
Direct cost of sales, general and administrative expenses     171,333      63,991      11,763      247,087 
Segment profit (loss) (1)     118,632      28,610      (11,763)     135,479 
Depreciation and amortization                       13,901 
Interest expense                       25,403 
Debt refinancing                       25,033 
Other expense (income), net                       (8,667)
Income before income taxes                       79,809 

(1) Segment profit does not have a standardized meaning prescribed by IFRS. For definitions and explanations, see 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.

 

                         
Revenues by type                        
        Three months ended     Six months ended
        February 28,     February 28,     February 28,     February 28,
        2014      2013 (1)     2014      2013 (1)
Advertising     87,870      75,021      211,242      182,514 
Subscriber fees     83,562      68,204      162,677      137,616 
Merchandising, distribution and other     19,981      29,395      43,499      62,436 
        191,413      172,620      417,418      382,566 

(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.

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 period indicated.

Consolidated Statements of Financial Position
             
(thousands of Canadian dollars)     August 31, 2013     September 1, 2012
      Originally
Reported
    IFRS 11
Adjustment
    Restated     Originally
Reported
    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 ventures     —       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 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, except per share amounts)     Three months ended February 28, 2013     Six months ended February 28, 2013
      Originally
Published
    IFRS 11
Adjustment
    Restated     Originally
Published
    IFRS 11
Adjustment
    Restated
                                     
Revenues     183,700      (11,080)     172,620      409,847      (27,281)     382,566 
Direct cost of sales, general and administrative expenses     129,052      (7,394)     121,658      262,506      (15,419)     247,087 
Segment profit     54,648      (3,686)     50,962      147,341      (11,862)     135,479 
                                     
Depreciation and amortization     7,517      (22)     7,495      13,946      (45)     13,901 
Interest expense     13,271      —       13,271      25,403      —       25,403 
Debt refinancing     25,033      —       25,033      25,033      —       25,033 
Other expense (income), net     (426)     (2)     (428)     80      (11)     69 
Income from joint ventures     —       (2,710)     (2,710)     —       (8,736)     (8,736)
Income before income taxes     9,253      (952)     8,301      82,879      (3,070)     79,809 
Income tax expense     2,373      (952)     1,421      21,983      (3,070)     18,913 
Net income for the period     6,880      —       6,880      60,896      —       60,896 
                                     
Net income attributable to:                                    
Shareholders     5,944      —       5,944      58,103      —       58,103 
Non-controlling interest     936      —       936      2,793      —       2,793 
      6,880      —       6,880      60,896      —       60,896 
                                     
Earnings per share attributable to shareholders:                                    
Basic     $ 0.07     —       $ 0.07     $ 0.70     —       $ 0.70
Diluted     $ 0.07     —       $ 0.07     $ 0.69     —       $ 0.69
                                     
                                     
Net income for the period     6,880      —       6,880      60,896      —       60,896 
                                     
Other comprehensive income (loss), net of tax                                    
Items that may be reclassified subsequently to income:                                    
  Unrealized foreign currency translation adjustment     1,191      —       1,191      1,481      —       1,481 
  Unrealized change in fair value of available-for-sale investments     36      —       36      326      —       326 
      1,227      —       1,227      1,807      —       1,807 
Comprehensive income for the period     8,107      —       8,107      62,703      —       62,703 
                                     
Comprehensive income attributable to:                                    
Shareholders     7,171      —       7,171      59,910      —       59,910 
Non-controlling interest     936      —       936      2,793      —       2,793 
      8,107      —       8,107      62,703      —       62,703 

                                     
Consolidated statements of Cash Flows            
                                     
(in thousands of Canadian dollars)     Three months ended February 28, 2013     Six months ended February 28, 2013
      Originally
Published
    IFRS 11
Adjustment
    Restated     Originally
Published
    IFRS 11
Adjustment
    Restated
Operating Activities                                    
Net income for the period     6,880      —       6,880      60,896      —       60,896 
Add (deduct) non-cash items:                                    
  Depreciation and amortization     7,517      (22)     7,495      13,946      (45)     13,901 
  Amortization of program and film rights     46,908      (4,815)     42,093      92,601      (9,380)     83,221 
  Amortization of film investment     3,501      —       3,501      9,708      —       9,708 
  Deferred income taxes     (5,432)     —       (5,432)     (6,726)     —       (6,726)
  Share-based compensation expense     392      —       392      732      —       732 
  Imputed interest     2,628      —       2,628      5,153      —       5,153 
  Debt refinancing     25,033      —       25,033      25,033      —       25,033 
  Other     590      (2,710)     (2,120)     286      (8,736)     (8,450)
Net change in non-cash working capital balances related to operations     19,587      (4,412)     15,175      (9,546)     243      (9,303)
Payment of program and film rights     (39,806)     2,908      (36,898)     (67,432)     5,909      (61,523)
Net additions to film investment     (18,160)     —       (18,160)     (34,234)     —       (34,234)
Cash provided by operating activities     49,638      (9,051)     40,587      90,417      (12,009)     78,408 
                                     
Investing Activities                                    
Additions to property, plant and equipment     (3,930)         (3,929)     (7,472)         (7,464)
Dividends from investment in joint venture     —      2,861     2,861         7,751     7,751
Net cash flows for intangibles, investments and other assets     (7,039)     —       (7,039)     (6,966)     —      (6,966)
Other     (236)     —       (236)     (324)     —       (324)
Cash used in investing activities     (11,205)     2,862      (8,343)     (14,762)     7,759      (7,003)
                                     
Financing Activities                                    
Increase in bank loans     (39,910)     —       (39,910)     (29,925)     —       (29,925)
Issuance of notes     550,000      —       550,000      550,000      —       550,000 
Financing fees     (8,607)     —       (8,607)     (8,607)     —       (8,607)
Issuance of shares under stock option plan     749      —       749      749      —       749 
Shares repurchased     —       —       —       (1,464)     —       (1,464)
Dividends paid     (13,775)     —       (13,775)     (26,998)     —       (26,998)
Dividends paid to non-controlling interest     (803)     —       (803)     (5,116)     —       (5,116)
Other     (2,789)     —       (2,789)     (5,101)     —       (5,101)
Cash provided by financing activities     484,865      —       484,865      473,538      —       473,538 
                                     
Net change in cash and cash equivalents during the period     523,298      (6,189)     517,109      549,193      (4,250)     544,943 
Cash and cash equivalents, beginning of the period     50,483      (3,451)     47,032      24,588      (5,390)     19,198 
Cash and cash equivalents, end of the period     573,781      (9,640)     564,141      573,781      (9,640)     564,141 

 

SOURCE Corus Entertainment Inc.

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