OUR STORY HAS JUST BEGUN
Annual Report 2014
TABLE OF CONTENTS
28
32
34
34
35
66
67
68
69
70
71
72
117
Message to Shareholders
List of Assets
Directors
Officers
Management’s Discussion and Analysis
Management’s Responsibility for Financial Reporting
Independent Auditors’ Report
Consolidated Statements of Financial Position
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Corporate Information
4
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CORUS
TELEVISION
24 Television networks targeted to kids,
women, family and pay TV audiences
84% of Canadians watch a
Corus Television network each week
16,000 hours of video on demand
is available each month
5
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Showtime’s Ray Donovan on Movie Central
6
CORUS ENTERTAINMENT ANNUAL REPORT 2014 7
CORUS ENTERTAINMENT ANNUAL REPORT 2014 8
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Love It or List It Vancouver on W Network
9
CORUS ENTERTAINMENT ANNUAL REPORT 2014 10
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Carlos, host of The Zone, on YTV
11
CORUS ENTERTAINMENT ANNUAL REPORT 2014 La Marraine on Séries+
12
CORUS ENTERTAINMENT ANNUAL REPORT 2014 13
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CORUS RADIO
39 radio stations in 8 out of Canada’s top 10 markets
7.7 MILLION Canadians tune in to a Corus Radio station each week
6.2 MILLION hours of content streamed from
Corus Radio stations each month
14
CLASSIC ROCK
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CLASSIC ROCK
15
CORUS ENTERTAINMENT ANNUAL REPORT 2014 16
CORUS ENTERTAINMENT ANNUAL REPORT 2014 The Lumineers perform at Edgefest
17
CORUS ENTERTAINMENT ANNUAL REPORT 2014 18
CORUS ENTERTAINMENT ANNUAL REPORT 2014 160 countries around the
world acquire Nelvana content
4,200+ kids titles in
the Nelvana library
70 major international program awards
earned, including Emmys® and Geminis
19
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Nelvana’s Little Charmers
20
CORUS ENTERTAINMENT ANNUAL REPORT 2014 21
CORUS ENTERTAINMENT ANNUAL REPORT 2014 22
CORUS ENTERTAINMENT ANNUAL REPORT 2014 KIDS CAN PRESS
65 MILLION copies of Franklin the Turtle
books sold in 30 languages around the world
2 MILLION copies of the Scaredy Squirrel
book series sold worldwide
500,000 books from the
CitizenKid series sold in
North America
8 Governor General’s
Literary Awards
23
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Up the Creek by Nicholas Oldland
24
CORUS ENTERTAINMENT ANNUAL REPORT 2014 25
CORUS ENTERTAINMENT ANNUAL REPORT 2014 26
CORUS ENTERTAINMENT ANNUAL REPORT 2014 INNOVATIVE
INVESTMENTS
27
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Heather A. Shaw, Executive Chair; John M. Cassaday, President and CEO
Message to Shareholders
In September 2014, Corus Entertainment reached an important milestone, celebrating our 15th year as a publicly
traded company. From our modest beginnings, with three specialty television networks and 11 radio stations,
Corus has grown to become one of Canada’s leading entertainment companies – a powerhouse in television
with popular Women, Family, Millennial and Kids brands; the home of iconic pay television services; a major radio
operator with 39 stations extending from British Columbia to Ontario in eight of Canada’s 10 largest markets; the
creator and distributor of world-class animation content; the largest publisher of children’s books in Canada; and
owner of an Emmy® award-winning animation software company. We have been engaging audiences since 1999
and our story has just begun.
THE FIRST 15
When Corus launched on September 1, 1999, the Company established five core values – Accountability, Initiative,
Innovation, Knowledge and Teamwork – which drive our success and define our corporate culture. We began with
CMT Canada, YTV, Canada’s first Kids network, and our preschool service Treehouse. From that foundation, we
have grown to become a major force in kids and family television. Today, over 90% of Canadian children tune in to
Corus’ portfolio of Kids channels every week.
Over the years, we grew the Company quickly with a number of major television, radio and content acquisitions.
In 2000, we increased our radio portfolio and acquired Western Canada’s pay television channels, which today
include premium brands like Movie Central and HBO Canada. We saw the value of owning content early, and in
2001, we acquired the world-renowned animation studio Nelvana, which now has a library of over 4,200 kids titles.
Nelvana provided a gateway for us to expand into international markets and today, we sell our multilingual kids
content in more than 160 countries around the world. In 2001, we also acquired WTN, which we rebranded as
W Network, launching a new vertical focusing on women. W Network has become the #1 specialty service for
women and is the anchor of our dynamic portfolio of services targeted to female audiences.
1999
Corus Entertainment
launches as a publicly
traded company
28
2000
2001
Corus acquires western Pay
TV services, 12 radio stations,
Nelvana, Kids Can Press and a
greater interest in TELETOON
Corus acquires controlling
interest in TLN Telelatino and
Metromedia’s radio assets
2002
WTN is rebranded as
W Network
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Message to Shareholders
Corus continued to expand, building new partnerships and brands and acquiring more assets. In 2010, the
Company moved into Corus Quay, a fully-digitized, LEEDS® Gold-certified media and broadcast centre on Toronto’s
waterfront. This has been a game changer, providing us with the technology, scalability and capabilities to position
the Company for growth. In 2014, we consolidated TELETOON’s five specialty networks and entered the Quebec
specialty television market, launching Corus Média with the acquisition of the leading services Historia and Séries+.
Corus Média is a significant new entrant in Quebec, representing more than 20% of the specialty television market.
We also achieved our goal of expanding into the Ottawa radio market with the purchase of two radio stations.
In addition to building a portfolio of strong and recognizable brands and assets, we have delivered significant
value to our shareholders. Since the Company’s inception, Corus has grown from an asset base of $862 million
to $2.8 billion. On a 15-year compound annual basis, our revenue has grown by 12% to $833 million, and our
segment profit has grown by 13% to $290 million. We are also committed to being good corporate citizens.
In 2012, we launched our philanthropic initiative, Corus Feeds Kids, which has been embraced by our employees,
and over the past 15 years, we have made a significant contribution to this and other charitable causes, raising
more than $210 million to help the communities we serve.
FISCAL 2014 AND EARLY 2015
2014 was a successful year for the Company, with the seamless integration of our acquisitions and our expansion
into new markets. In fact, we exceeded our synergy targets and our acquisitions were immediately accretive to
EPS and free cash flow. We grew revenues by 11%, matched our best ever performance in earnings and margins,
with segment profit up an impressive 15%, and delivered record free cash flow of $175 million, up 13% for the year.
Radio ratings in our key markets were soft, leading to lower-than-expected advertising revenues. In response, we
implemented aggressive turnaround plans that are gaining traction as we head into 2015, with ratings starting to
recover in key markets. We invested in research and programming while focusing on disciplined cost controls,
resulting in segment profit margins of 26%.
In our Television business, growth was largely attributable to our acquisitions. Advertising revenues on our core
Women’s networks were down, mainly due to softness in the Consumer Packaged Goods category, which
temporarily diverted spending into tent-pole sporting events in the year. We believe the spending from this category
will self-correct in the back half of fiscal 2015. On the ratings front, we were pleased to see that audience delivery
on our core television brands remains strong, with solid ratings on our Women’s and Kids networks, and we expect
this momentum to continue into fiscal 2015. Our pay television business saw some subscriber softness, and we
recently addressed this by strengthening our product offering, successfully locking up back-library rights on all
current HBO series to significantly enhance the value proposition for subscribers. Overall, the division delivered
excellent segment profit margins of 41% for the year, up from 40% last year.
In October, we revised our guidance for fiscal 2015, concurrent with the release of our year-end financial results,
to reflect continued uncertainty in the advertising markets, lowering our consolidated segment profit guidance to a
range of $300 to $320 million. The upper end of the range reflects the potential upside from our strong operating
leverage, should there be an improvement in the current economic and advertising environment. We are confident
that with our strong brands and ratings, we are well positioned heading into fiscal 2015. As well, with our strong free
cash flow performance in fiscal 2014, we increased our guidance to $180 million plus for fiscal 2015.
2003
2004
2005
2006
Corus’ first dividends are
paid to shareholders
Corus is named Employer of
the Year by Canadian Women
in Communications
Corus launches Treehouse
On-Demand, Canada’s first
SVOD service for kids
Corus acquires an additional
interest in TELETOON,
bringing its total ownership
of the network to 50%
29
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Strategic
Priorities
Own More
Content
Strengthen
Key Partnerships
Expand into
New Markets
Grow
Organically
FOUR STRATEGIC PRIORITIES FOR GROWTH
Our differentiated portfolio of brands and assets is unique in Canada. As we move
forward, we will focus on four strategic priorities for growth, building on our strengths
and capabilities.
1. OWN MORE CONTENT
The ability to own and exploit content across all platforms is critical to our long-term success.
To complement our expertise in creating kids content, we are expanding into the realm of
unscripted reality to create more Corus-owned programming for our Women and Family
networks. We will work hard to maximize the value of our owned women’s, family and kids’
content across various windows and through sales of format-rights in the international market.
As part of our content strategy, we are also teaming up with a number of top-tier
content creators to co-develop original series. For example, we recently entered into a
groundbreaking partnership with the primetime animation production studio Bento Box,
creator of hits like Bob’s Burgers and The Awesomes. This deal enables us to create a
slate of co-owned series targeted to millennials to fuel our TELETOON at Night brand, and
for linear and digital distribution in the U.S. and the international marketplace.
2. STRENGTHEN KEY PARTNERSHIPS
Corus has a proven track record as a trusted brand steward of best-in-class global media
companies, partnering with Time Warner on our pay television offering HBO (Canada),
Hearst Corporation on Cosmopolitan TV, Discovery Communications on OWN: Oprah
Winfrey Network (Canada), Viacom on Nickelodeon (Canada) and CMT (Canada), AMC
Networks on Sundance Channel (Canada) and The Walt Disney Company on ABC Spark.
We will continue to deepen these strong partnerships.
As a well-known and respected producer and distributor of kids content, we also have
excellent partnerships with the biggest global content and toy companies. Nelvana’s
strong pipeline of toyetic properties, including the girls preschool brand Little Charmers
and the boys action franchise Mysticons, developed with Michael Eisner’s Tornante Co.,
are just a few examples of how we are leveraging these global relationships.
To meet the evolving needs of our consumers, we continue to innovate with our cable,
satellite and telecommunications distributors to deploy more of our content across all
platforms. This spring, we will launch a number of our television brands as TV Everywhere
apps, starting with Treehouse, to give subscribers more access to our content anytime
and anywhere.
3. EXPAND INTO NEW MARKETS
In addition to our recent expansion into the Quebec television market and our plans to
apply for new French-language specialty television licenses, we are actively enhancing
our business with investments in companies that give us access to new areas of
growth. We have invested in three venture capital funds – Relay Ventures, which focuses
2007
2008
2009
2010
Corus partners with Hearst
Corporation on a strategic joint
venture to bring Cosmopolitan
TV to Canada
30
Corus launches HBO Canada
Corus launches Nickelodeon
(Canada)
Corus Quay is established.
Corus is named one of
Canada’s Top Employers for
Young People
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Message to Shareholders
on mobile companies; Steamboat Ventures, which has already created value for us through their position in
Go-Pro; and Gibraltar, which aims to identify the next cohort of great Canadian technology companies. We have
investments in two incubators – Execution Labs, which gives us a window into the mobile gaming space; and
ideaBoost, which focuses on media and technology.
We also have a significant ownership position in Fingerprint Digital, a mobile gaming and video platform for kids
and families, and we are currently co-developing our first mobile app with them around our Treehouse brand,
which is set to launch globally in 2015. Media giant DreamWorks has also recognized Fingerprint’s value, recently
becoming a shareholder through a follow-on investment. Finally, we have a substantial stake in Kin Community,
the largest women’s lifestyle Multi-Channel Network on YouTube, with over 268 million video views per month.
Kin Community is a strong digital complement to our Women’s television brands, providing us with greater scale
and unique solutions for our advertisers.
4. GROW ORGANICALLY
With our impressive portfolio of businesses, we are well positioned for growth. In our television division, our networks
are strong with key audiences - women, millennials, family and kids. We expect the strength of our brands and our
deep content offering will continue to drive positive ratings momentum on our core services. At home and abroad,
the emergence of new multi-platform offerings and buyers in the digital space is providing us with more outlets
and opportunities for our robust pipeline of content. In our Radio business, our operations are fully-focused on
growing audiences and ratings, and solid progress is being made on that front. Many of our large market stations
have been reformatted, refreshed and rebranded, and we are seeing encouraging signs of improvement in key
markets, which we expect to translate into advertising gains in the back end of the year. Radio is also leveraging
the Company’s investment in the digital marketing platform SoCast to drive further digital sales and audience
engagement. Deployed across Corus’ suite of radio stations, this website platform enables Radio’s on-air talent to
connect with audiences on social media, while they are live on air, creating more touch points with listeners.
LOOKING AHEAD
It has been an incredible journey for Corus over the past 15 years and we are proud of our achievements. We have
an excellent portfolio of assets that delivers highly targeted audiences and great content that is enjoyed by millions of
people every day. With Corus Quay, we have the technological capabilities to be agile and responsive in today’s highly
dynamic and evolving media environment. We have a deep pipeline of strategic investments that complement our core
business and we have an experienced leadership team who are committed to executing our four strategic priorities.
When Corus was founded, our goal was to build value for our shareholders and, 15 years later, we continue
to deliver on that commitment. We have a proven track record for delivering value to our shareholders with
some of the best operating margins in the business, compelling free cash flow and an attractive dividend yield.
Our fundamentals are sound and we are well positioned for the next chapter of our Company’s success. We are
excited about our future opportunities and our story has just begun.
We would like to thank our employees for their contributions, our Board of Directors for their continued support and
guidance, and our shareholders for their ongoing confidence in our Company.
John M. Cassaday
President and CEO
Heather A. Shaw
Executive Chair
2011
2012
2013
2014
Corus launches OWN: Oprah
Winfrey Network (Canada).
Kids Can Press has sold
65 million Franklin books
Corus launches its national
philanthropic initiative
Corus Feeds Kids.
Corus acquires Toon Boom
Corus’ acquisition of Historia,
Séries+ and remaining 50% of
TELETOON approved by CRTC.
Nelvana wins an Emmy® award
Corus enters the Ottawa
radio market.
Corus is named one of the
Top 100 Canadian Brands
31
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CORUS TELEVISION
Women & Family
W Network
OWN:
Oprah Winfrey Network
(Canada)
Cosmopolitan TV
W Movies
ABC Spark
CMT (Canada)
Sundance Channel
(Canada)
Kids
YTV
Treehouse
TELETOON
TELETOON Retro
Nickelodeon
(Canada)
Cartoon Network
(Canada)
Nelvana
Corus Média (Québec)
Historia
Séries+
TÉLÉTOON
TÉLÉTOON Rétro
Pay TV
Movie Central
HBO Canada
Encore Avenue
Other
Kids Can Press
Telelatino
(TLN)
CKWS TV
Kingston
CHEX TV
Peterborough
Channel 12
Durham
Toon Boom
Animation Inc.
STRATEGIC INVESTMENTS
SoCast
SRM*
Fingerprint
Digital, Inc.*
Kin Community*
Steamboat
Ventures*
Execution Labs*
Gibraltar*
Relay Ventures*
(*Assets in which Corus Entertainment has less than a 50% equity position)
32
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CORUS RADIO
Vancouver, British Columbia
CHMJ-AM
AM730 All Traffic
All The Time
Calgary, Alberta
CKNW-AM
CKNW News-Talk 980
CFMI-FM
Rock 101
CFOX-FM
The World Famous
CFOX
CHQR-AM
News Talk 770
CFGQ-FM
Q107
CKRY-FM
Country 105
Edmonton, Alberta
CHED-AM
630 CHED
CHQT-AM
iNews880
CISN-FM
CISN COUNTRY 103.9
CKNG-FM
925 Fresh Radio
Winnipeg, Manitoba
CJOB-AM
680 CJOB
CJGV-FM
99.1 Fresh Radio
CJKR-FM
Power 97
Barrie/Collingwood, Ontario
CHAY-FM
chay today @ 93 1fm
CIQB-FM
B101
CKCB-FM
95.1 The Peak FM
Cambridge/Kitchener, Ontario
Cornwall, Ontario
CJDV-FM
107.5 DAVE FM
CKBT-FM
91.5 The Beat
CFLG-FM
104.5 Fresh Radio
CJSS-FM
boom 101.9
Guelph, Ontario
CJOY-AM
1460 CJOY
CIMJ-FM
Magic 106.1
Hamilton, Ontario
Kingston, Ontario
CHML-AM
AM 900 CHML
CING-FM
95.3 Fresh Radio
CJXY-FM
Y108
CKWS-FM
Hits 104.3
CLASSIC ROCK
CFMK-FM
FM96
London/Woodstock, Ontario
CFPL-AM
AM980
CFHK-FM
103.1 Fresh Radio
CFPL-FM
FM96
CKDK-FM
Country 104
Ottawa, Ontario
Peterborough, Ontario
CKQB-FM
JUMP! 106.9
CJOT-FM
boom 99.7
CKRU-FM
Hits 100.5
CKWF-FM
THE WOLF 101.5
Toronto, Ontario
CFMJ-AM
Talk Radio AM640
CFNY-FM
102.1 the Edge
CILQ-FM
Q107
33
CORUS ENTERTAINMENT ANNUAL REPORT 2014 DIRECTORS
Fernand Bélisle
Member of the Audit Committee
Barry James
Member of the Audit Committee
John M. Cassaday
Member of the Executive Committee
Wendy A. Leaney
Member of the Audit Committee
Dennis Erker
Member of the Human Resources and
Compensation Committee
Ronald D. Rogers CA
Chair of the Audit Committee
Member of the Executive Committee
Mark Hollinger
Carolyn Hursh
Chair of the Corporate Governance
Committee
Member of the Executive Committee
Catherine Roozen
Member of the Human Resources and
Compensation Committee
Terrance Royer
Chair of the Human Resources and
Compensation Committee
Member of the Corporate Governance
Committee
Member of the Executive Committee
Independent Lead Director of the Board
of Directors
Heather A. Shaw
Chair of the Board of Directors
Chair of the Executive Committee
Julie M. Shaw
Vice Chair of the Board of Directors
Member of the Corporate Governance
Committee
OFFICERS
Judy Adam CA
Vice President, Finance,
Corus Entertainment Inc.
John M. Cassaday
President and Chief
Executive Officer,
Corus Entertainment Inc.
Scott Dyer
Executive Vice President,
Strategic Planning and
Chief Technology Officer,
Corus Entertainment Inc.
Gary Maavara
Executive Vice President and
General Counsel, Corporate Secretary,
Corus Entertainment Inc.
Thomas C. Peddie FCPA, FCA
Executive Vice President and
Chief Financial Officer,
Corus Entertainment Inc.
Heather A. Shaw
Executive Chair,
Corus Entertainment Inc.
Kathleen McNair
Executive Vice President,
Human Resources, Corporate
Communications and
Chief Integration Officer,
Corus Entertainment Inc.
Doug Murphy
Executive Vice President and
Chief Operating Officer,
Corus Entertainment Inc.
34
CORUS ENTERTAINMENT ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of the financial position and results of operations for the year ended August 31, 2014 is prepared at
November 7, 2014. The following should be read in conjunction with the Company’s August 31, 2014 audited consolidated financial statements
and notes therein.
The financial information presented herein has been prepared on the basis of International Financial Reporting Standards (“IFRS”). All dollar amounts
are in Canadian dollars unless specified otherwise. Per share amounts are calculated using the weighted average number of shares outstanding for
the applicable period.
USE OF NON-GAAP FINANCIAL MEASURES
This Management’s Discussion and Analysis 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 this report as well as the Report to Shareholders which is available on Corus’ website
at www.corusent.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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 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.
This document contains forward-looking statements about expected future events and the financial operating
performance of the Company. Annual targets for fiscal 2015 and related assumptions are described in the Outlook
section of this MD&A.
35
CORUS ENTERTAINMENT ANNUAL REPORT 2014 OVERVIEW
Corus Entertainment Inc. (“Corus” or the “Company”) commenced operations on September 1, 1999. On that date,
pursuant to a statutory plan of arrangement, Corus was separated from Shaw Communications Inc. (“Shaw”) as an
independently operated, publicly traded company and assumed ownership of Shaw’s radio broadcasting, specialty
television, digital audio services and cable advertising services businesses, as well as certain investments held by Shaw.
Corus operates through two operating segments: Television and Radio. The Corporate results represent the
incremental cost of corporate overhead in excess of the amount allocated to the operating segments. Generally,
Corus’ financial results depend on a number of factors, including the strength of the Canadian national economy
and the local economies of Corus’ served markets, local and national market competition from other broadcasting
stations, platforms and other advertising media, government regulation, market competition from other distributors
of animated programming and Corus’ ability to continue to provide popular programming.
TELEVISION
The Television segment is comprised of specialty television networks, pay television services, three conventional
television stations and the Corus content business, which consists of the production and distribution of films
and television programs, merchandise licensing, publishing and animation software. The Company’s multimedia
entertainment brands include: YTV; Treehouse; Nickelodeon (Canada); ABC Spark; TELETOON, TÉLÉTOON,
TELETOON Retro, TÉLÉTOON Rétro and Cartoon Network (Canada); W Network; OWN: Oprah Winfrey Network
(Canada); W Movies; Sundance Channel (Canada); Historia and Séries+ (acquired January 1, 2014); Corus’
western Canadian pay television services (Movie Central, including HBO Canada and Encore Avenue); three
conventional television stations serving Peterborough, Kingston and Durham; the Corus content business including
Nelvana (production and distribution of films and television programs, and merchandise licensing), Kids Can Press
(publishing) and Toon Boom (animation software); the Company’s majority interest in CMT (Canada), Telelatino (TLN,
EuroWorld Sport, Mediaset Italia, Sky TG24, Teleniños, Univision (Canada) (formerly TLN en Español), Telebimbi,
CineLatino), and Cosmopolitan TV.
Revenues for the specialty television networks are generated from subscriber fees and advertising. Revenues for
pay television are generated from subscriber fees. Revenues for the conventional television stations are derived
from advertising. Revenues for the content business are generated from licensing of proprietary films and television
programs, merchandise licensing, publishing and animation software sales.
RADIO
The Radio segment is comprised of 39 radio stations, situated primarily in high-growth urban centres in English
Canada, with a concentration in the densely populated area of Southern Ontario. Corus is one of Canada’s leading
radio operators in terms of audience reach. Revenues are derived from advertising aired over these stations.
ANNUAL SELECTED FINANCIAL INFORMATION
The following table presents summary financial information for Corus for each of the listed years ended August 31:
(in millions of Canadian dollars, except percentages and per share amounts)
% Increase (Decrease)
2014
2013(2)
2012(2)
2014 over 2013
2013 over 2012
10.8
15.4
(5.2)
(7.0)
Revenues
Segment profit(1)
Net income attributable to shareholders
Basic earnings per share
Diluted earnings per share
Total assets
Long-term debt
Cash dividends declared per share
Class A Voting
Class B Non-Voting
833.0
289.6
150.4
$1.77
$1.76
751.5
251.0
159.9
$1.91
$1.90
792.5
269.2
148.7
$1.79
$1.78
2,784.6
874.3
2,167.1
539.0
2,068.2
518.3
$1.0558
$1.0608
$0.9900
$0.9950
$0.9175
$0.9225
(1) As defined in Key Performance Indicators section.
(2) Restated to reflect retroactive application of IFRS 11 - Joint Arrangements.
36
CORUS ENTERTAINMENT ANNUAL REPORT 2014
RESULTS OF OPERATIONS
The following table presents summary financial information for Corus’ operating segments and a reconciliation of
net income to segment profit for each of the listed years ended August 31:
(in thousands of Canadian dollars, except percentages)
% Increase (Decrease)
2014
2013(2)
2014 over 2013
Revenues
Television
Radio
Direct cost of sales, general and administrative expenses
Television
Radio
Corporate
Segment profit(1)
Television
Radio
Corporate
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Debt refinancing
Business acquisition, integration and restructuring costs
Gain on acquisition
Gain on sale of associated company
Other expense (income), net
Income before income taxes
Income tax expense
Net income for the year
Net income attributable to:
Shareholders
Non-controlling interest
Net income for the year
16.3
(6.0)
10.8
14.5
(1.1)
(14.1)
8.6
18.9
(17.5)
14.1
15.4
660,424
172,592
567,845
183,691
833,016
751,536
387,151
127,105
29,122
338,104
128,543
33,915
543,378
500,562
273,273
45,487
(29,122)
229,741
55,148
(33,915)
289,638
250,974
24,068
48,320
83,000
—
46,792
(127,884)
—
5,740
209,602
53,433
26,812
44,795
5,734
25,033
7,343
—
(55,394)
(3,560)
200,211
34,462
156,169
165,749
150,408
5,761
159,895
5,854
156,169
165,749
(5.9)
(1.6)
(5.8)
(1) As defined in Key Performance Indicators section
(2) Restated to reflect retroactive application of IFRS 11 - Joint Arrangements
FISCAL 2014 COMPARED TO FISCAL 2013
For a discussion on the Company’s results of operations for the fourth quarter of fiscal 2014, we refer you to Corus’
Fourth Quarter 2014 Report to Shareholders filed on SEDAR on October 23, 2014.
The following discussion describes the significant changes in the consolidated results from operations.
OVERVIEW OF CONSOLIDATED RESULTS
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 was 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
37
CORUS ENTERTAINMENT ANNUAL REPORT 2014
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 of TELETOON
effective September 1, 2013, 100% interest in H&S effective January 1, 2014, and 100% interest in the two Ottawa-
based radio stations effective January 31, 2014 (refer to note 27 of the Company’s audited consolidated financial
statements for the year ended August 31, 2014 for further details on business combinations).
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 year ended
August 31, 2013 were reduced by $52.0 million and $19.0 million, respectively, and Corus’ share of TELETOON’s
net income of $12.1 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.
Net income attributable to shareholders for the year ended August 31, 2014 was $150.4 million on revenues of
$833.0 million, as compared to $159.9 million on revenues of $751.5 million in the prior year. Consolidated segment
profit increased 15% from the prior year, with Television up 19% and Radio down 18%. Further analysis is provided
in the discussions of segmented results.
Free cash flow, as defined in the Key Performance Indicators section, for the year ended August 31, 2014 was
$175.3 million compared to $154.7 million in the prior year.
REVENUES
In fiscal 2014, revenues of $833.0 million represented an increase of 11% from $751.5 million last year. On a
consolidated basis, advertising revenues increased by 15%, subscriber revenues increased by 21% and
merchandising, distribution and other revenues decreased by 24%. Refer to discussions of segmented results for
additional analysis of revenues.
DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
In fiscal 2014, expenses of $543.4 million represented a 9% increase over the prior year and are attributable
to higher costs in the Television reporting segment, offset by decreases in the Radio and Corporate reporting
segments. Refer to the discussions of segmented results for additional analysis of expenses.
DEPRECIATION AND AMORTIZATION
In fiscal 2014, depreciation expense of $24.1 million was down $2.7 million from the prior year as a result of lower
depreciation on property, plant and equipment, primarily as a result of the completion of lease terms, offset by the
$1.2 million asset impairment and additional amortization of intangible assets, specifically software.
INTEREST EXPENSE
On February 3, 2014, the Company’s credit agreement with a syndicate of banks was amended and restated.
The principal amendment effected was the establishment of a two year $150.0 million term facility, maturing
February 3, 2016, incremental to the existing $500.0 million revolving facility maturing February 11, 2017. The
$150.0 million term facility was fully drawn on inception and the proceeds were used to reduce the amount drawn
on the revolving facility. Both the term and revolving facilities are subject to the same covenants and security.
Interest rates on both the term and revolving facility loans fluctuate with Canadian prime rate, Canadian bankers’
acceptances and/or LIBOR plus an applicable margin.
Contemporaneously with the amendment and restatement of the credit agreement, the Company entered into a
Canadian dollar interest rate swap agreement to fix the interest rate on $150.0 million at 1.375%, plus an applicable
margin, to February 3, 2016.
In fiscal 2014, interest expense of $48.3 million was $3.5 million higher than the prior year. This resulted from increased
bank debt to finance business acquisitions and increased imputed interest charges on discounted liabilities, offset
by lower average interest rates on outstanding debt as a consequence of the issue of $550.0 million, 4.25% Senior
38
CORUS ENTERTAINMENT ANNUAL REPORT 2014 Unsecured Guaranteed Notes due February 11, 2020 (the “2020 Notes”) and repayment of $500.0 million 7.25%
Senior Unsecured Guaranteed Notes due February 11, 2017 (the “2017 Notes”). The effective interest rate on bank
loans and notes for the year ended August 31, 2014 decreased to 4.2% from 5.8% last year.
BROADCAST LICENSE AND GOODWILL IMPAIRMENT
Broadcast licenses and goodwill are tested for impairment annually as at August 31 or more frequently if events
or changes in circumstances indicate that they may be impaired. For both the second and third quarters of fiscal
2014, certain radio clusters had actual results and revised cash flow projections that fell short of previous estimates,
which indicated that interim broadcast license and goodwill impairment testing was required. As a result of these
tests, the Company recorded broadcast license impairment charges of $8.0 million in the second quarter of fiscal
2014 and broadcast license and goodwill impairment charges of $75.0 million in the third quarter of fiscal 2014
(refer to note 10 of the Company’s audited consolidated financial statements for the year ended August 31, 2014
for further details).
The Company has completed its annual impairment testing of broadcast licenses and goodwill and determined that
there were no further impairments at August 31, 2014.
In fiscal 2013, the Company recorded broadcast license impairment charges of $5.7 million as certain Radio
cash generating units had actual results that fell short of previous estimates and the outlook for these markets
was less robust.
DEBT REFINANCING
In fiscal 2013, the Company issued $550.0 million principal amount of the 2020 Notes. Concurrently, the Company
provided notice of its intention to redeem the existing $500.0 million principal amount of the 2017 Notes effective
March 16, 2013. The notice of redemption on the 2017 Notes resulted in the Company recording a pre-tax debt
refinancing cost of $25.0 million in the second quarter of fiscal 2013. The components of this cost include the early
redemption premium of $18.1 million and the non-cash write-off of unamortized financing fees of $6.9 million.
GAIN ON ACQUISITION
In fiscal 2014, the Company recorded a non-cash gain of $127.9 million resulting from the remeasurement to fair
value of the Company’s original 50% interest in TELETOON which was held prior to the acquisition of control on
September 1, 2013.
GAIN ON SALE OF ASSOCIATED COMPANY
In fiscal 2013, the Company recorded a gain of $55.4 million on the disposition of its non-controlling interest in
Food Network Canada to Shaw Communications Inc. (“Shaw”), a related party subject to common voting control.
BUSINESS ACQUISITION, INTEGRATION AND RESTRUCTURING COSTS
In fiscal 2014, the Company incurred $46.8 million of business acquisition, integration and restructuring costs,
which included $14.9 million in restructuring costs related to the organizational structure realignment and recent
business acquisitions. In addition, upon acquisition of control of TELETOON on September 1, 2013, H&S on
January 1, 2014 and the two Ottawa radio stations on January 31, 2014, the Company recorded $31.9 million
related to the present value of CRTC tangible benefit obligations to be paid over a seven-year period, to benefit the
Canadian broadcasting system.
For the year ended August 31, 2013, the Company incurred $7.3 million of costs related to restructuring and certain
costs related to pending business combinations.
OTHER (INCOME) EXPENSE, NET
In fiscal 2014, other expense of $5.7 million includes a cumulative increase of $3.3 million in the purchase price
obligation to Bell (refer to note 19 of the Company’s audited consolidated financial statements for the year ended
August 31, 2014) and equity losses in associates of $2.4 million.
In fiscal 2013, other income of $3.6 million primarily includes income from joint ventures (TELETOON) of $12.1 million
offset by investment impairment charges of $7.1 million.
39
CORUS ENTERTAINMENT ANNUAL REPORT 2014 INCOME TAX EXPENSE
The effective tax rate for fiscal 2014 was 25.5% compared to the Company’s 26.6% statutory rate. The lower
effective tax rate reflects that both the non-cash gain resulting from the remeasurement to fair value of the
Company’s original 50% interest in TELETOON and the goodwill impairment are not subject to tax. A tax deduction
is not expected to be available in respect to certain transaction-related costs.
The effective tax rate for fiscal 2013 was 17.2% compared to the Company’s 26.5% statutory rate. The significantly
lower effective tax rate reflects that a portion of the gain realized on the disposition of the Company’s non-controlling
interest in Food Network Canada was not subject to tax and also reflects the utilization of capital loss carryforwards
for which no deferred tax asset had previously been recognized.
NET INCOME AND EARNINGS PER SHARE
Net income attributable to shareholders for fiscal 2014 was $150.4 million, as compared to $159.9 million last
year. Earnings per share for fiscal 2014 were $1.77 per share basic and $1.76 per share diluted, compared with
$1.91 per share basic and $1.90 per share diluted in the prior year. Net income attributable to shareholders
for fiscal 2014 includes a non-cash gain on the remeasurement to fair value of Corus’ original 50% ownership
interest in TELETOON of $127.9 million ($1.51 per share), radio goodwill and broadcast license impairment
charges of $83.0 million ($0.92 per share), capital asset impairment charges of $1.2 million ($0.01 per share),
business acquisition, integration and restructuring costs of $46.8 million ($0.51 per share), an increase in
the purchase price obligation of $3.3 million ($0.04 per share), and investment impairment related charges
of $2.3 million ($0.03 per share). Removing the impact of these items results in an adjusted net income
attributable to shareholders of $150.3 million ($1.77 per share).
Net income attributable to shareholders for fiscal 2013 includes a pre-tax charge for debt refinancing of $25.0 million
($0.22 per share), a gain from the disposition of Food Network Canada of $55.4 million ($0.66 per share), broadcast
license impairment charges of $5.7 million ($0.05 per share), business acquisition, integration and restructuring costs
of $7.3 million ($0.06 per share) and investment impairment charges of $7.1 million ($0.07 per share). Removing the
impact of these items results in an adjusted net income attributable to shareholders of $138.6 million ($1.65 per share)
in the prior year.
The weighted average number of basic shares outstanding at August 31, 2014 was 84,993,000 and has increased
in the current year due to the issuance and exercise of stock options and the issuance of shares from treasury under
the Company’s dividend reinvestment plan.
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Other comprehensive loss for fiscal 2014 was $0.1 million, compared to income of $3.1 million in the prior year. This
decrease of $3.2 million resulted primarily from higher actuarial losses on defined benefit plans and lower unrealized
gain from foreign currency translation adjustment in the current year.
TELEVISION
The Television segment is comprised of: YTV; Treehouse; Nickelodeon (Canada); ABC Spark; TELETOON,
TÉLÉTOON, TELETOON Retro, TÉLÉTOON Rétro and Cartoon Network (Canada); W Network; OWN: Oprah Winfrey
Network (Canada); W Movies; Sundance Channel (Canada); Historia and Séries+ (acquired January 1, 2014);
Corus’ western Canadian pay television services (Movie Central, including HBO Canada and Encore Avenue); three
conventional television stations serving Peterborough, Kingston and Durham; the Corus content business including
Nelvana (production and distribution of films and television programs, and merchandise licensing), Kids Can Press
(publishing) and Toon Boom (animation software); the Company’s majority interest in CMT (Canada), Telelatino (TLN,
EuroWorld Sport, Mediaset Italia, Sky TG24, Teleniños, Univision (Canada) (formerly TLN en Español), Telebimbi,
CineLatino), and Cosmopolitan TV.
40
CORUS ENTERTAINMENT ANNUAL REPORT 2014 FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Revenues
Expenses
Segment profit(1)
(1) As defined in the Key Performance Indicators section
(2) Restated to reflect retroactive application of IFRS 11 - Joint Arrangements
Year ended August 31,
2014
2013(2)
660,424
387,151
567,845
338,104
273,273
229,741
As a result of the business combinations, the Television results for fiscal 2014 reflect 100% interest in TELETOON
effective September 1, 2013, and 100% interest in Historia and Séries+ effective January 1, 2014 (refer to note 27
of the Company’s audited consolidated financial statements for the year ended August 31, 2014 for further details
on all acquisitions).
For fiscal 2013, as a result of retroactive application of IFRS 11 – Joint Arrangements, the Television revenues and
segment profit for the year ended August 31, 2013 were reduced by $52.0 million and $19.0 million, respectively,
and Corus’ share of TELETOON’s net income of $12.1 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 (refer to note 27 of the Company’s audited consolidated financial statements for the year
ended August 31, 2014 for further details).
Revenues increased 16% in fiscal 2014, primarily as a result of the accretive impact of TELETOON, Historia,
and Séries+, which drove an overall increase of 36% for specialty advertising and 21% for subscriber revenues.
Although specialty advertising and subscriber revenues increased due to the acquisitions, this was offset by
a general softness in the advertising market and a decline in Movie Central subscribers, as well as packaging
and rate changes on certain specialty networks. Merchandising, distribution and other revenues for fiscal
2014 declined 28% compared to the prior year from lower international distribution sales, lower sales from the
animation software business and, as anticipated, lower merchandising revenues as a result of declining royalties
from the Beyblade brand.
Total expenses increased 15%, primarily as a result of TELETOON, Historia and Séries+. Direct cost of sales (which
includes amortization of program rights and film investments, and other cost of sales) increased 10% from the
prior year as a result of TELETOON, Historia and Séries+, offset by lower film amortization and lower variable costs
associated with the merchandising business. General and administrative expenses increased 22% from the prior
year as a result of the TELETOON, Historia and Séries+ acquisitions and increased costs related to the animation
software business, offset by lower variable compensation costs.
Segment profit increased 19% in fiscal 2014. Segment profit margin for fiscal 2014 increased to 41% from 40%
in the prior year. The improvement in segment profit margin is primarily a result of swift integration of the acquired
assets, a reduced proportion of the lower margin merchandising and distribution businesses and an ongoing focus
on expense control throughout the core business.
RADIO
The Radio segment is comprised of 39 radio stations situated primarily in high-growth urban centres in English
Canada, with a concentration in the densely populated area of Southern Ontario. Corus is one of Canada’s leading
radio operators in terms of audience reach.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Revenues
Expenses
Segment profit(1)
(1)As defined in the Key Performance Indicators section
Year ended August 31,
2014
2013
172,592
127,105
183,691
128,543
45,487
55,148
41
CORUS ENTERTAINMENT ANNUAL REPORT 2014
Revenues decreased 6% in fiscal 2014 compared to the prior year, as the segment experienced a soft advertising
market in addition to ratings challenges in some markets.
Direct cost of sales, general and administrative expenses decreased 1% in fiscal 2014 compared to the prior year.
Variable expenses decreased 3% during the fiscal year, driven by lower sales commissions and copyright fees in
connection with the revenue decline, offset by higher cost of sales related to the local direct sales initiative. Fixed
costs, which represent a much higher proportion of the cost structure, remained consistent with the prior year. For
the year, the segment maintained tight cost controls through lower employee-related and premises costs, which
were offset by incremental costs from the acquired Ottawa radio stations, higher hockey broadcast rights fees, and
higher marketing and promotion expenses.
Segment profit decreased 18% in fiscal 2014. As a result of the revenue softness, the Radio segment’s margin for
fiscal 2014 decreased to 26% from 30% in the prior year.
The Company recorded non-cash impairment charges in broadcast licenses and goodwill of $83.0 million in fiscal
2014. These charges are excluded from the determination of segment profit.
In the fourth quarter of fiscal 2014, management implemented strategic changes that address both programming
and sales strategies, which are expected to reposition the segment for earnings growth in fiscal 2015 and beyond.
Restructuring costs were recorded in the fourth quarter of fiscal 2014 and will result in annualized cost savings in
the range of $3.0 million to $4.0 million.
CORPORATE
The Corporate results are comprised of the incremental cost of corporate overhead in excess of the amount
allocated to the operating segments.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Share-based compensation
Other general and administrative costs
Year ended August 31,
2014
10,876
18,246
29,122
2013
12,953
20,962
33,915
Share-based compensation includes expenses related to the Company’s stock options and other long-term
incentive plans (such as Performance Share Units – “PSUs”, Deferred Share Units – “DSUs”, and Restricted Share
Units – “RSUs”). The expense fluctuates with changes in assumptions, primarily regarding the Company’s share
price and number of units estimated to vest. Lower share-based compensation expense in fiscal 2014 reflects a
decrease in the number of units that achieved vesting targets compared to the prior year.
Other general and administrative costs decreased 13% in fiscal 2014 compared to the prior year, primarily as a
result of a continued focus on cost controls and lower costs related to performance incentives plans.
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
SEASONAL FLUCTUATIONS
Corus’ operating results are subject to seasonal fluctuations that can significantly impact quarter-to-quarter
operating results. In particular, as the Company’s broadcasting businesses are dependent on general advertising
and retail cycles associated with consumer spending activity, the first quarter results tend to be the strongest and
second quarter results tend to be the weakest in a fiscal year.
The following table sets forth certain unaudited data derived from the unaudited interim condensed consolidated
financial statements for each of the eight most recent quarters ended August 31, 2014. In Management’s opinion,
these unaudited consolidated financial statements have been prepared on a basis consistent with the audited
consolidated financial statements in the Company’s Annual Report for the year ended August 31, 2014.
42
CORUS ENTERTAINMENT ANNUAL REPORT 2014
(thousands of Canadian dollars, except per share amounts)
Earnings per share
Revenues
Segment
profit(1)
Net income
attributable to
shareholders
Adjusted net
income attributable
to shareholders
Basic
Diluted
Adjusted
2014
4th quarter
3rd quarter
2nd quarter
1st quarter
2013
4th quarter(2)
3rd quarter(2)
2nd quarter(2)
1st quarter(2)
201,557
214,041
191,413
226,005
181,897
187,073
172,620
209,946
58,349
79,731
59,282
92,276
50,931
64,564
50,962
84,517
23,727
(30,325)
6,116
150,891
11,879
89,913
5,944
52,159
26,785
41,602
26,780
55,177
25,816
34,519
24,432
52,159
$ 0.28
$ (0.36)
$ 0.07
$ 1.78
$ 0.14
$ 1.07
$ 0.07
$ 0.63
$ 0.28
$ (0.36)
$ 0.07
$ 1.78
$ 0.14
$ 1.07
$ 0.07
$ 0.62
$ 0.31
$ 0.49
$ 0.32
$ 0.65
$ 0.31
$ 0.41
$ 0.29
$ 0.63
(1) As defined in Key Performance Indicators section
(2) The fiscal 2013 quarters have been restated for the application of IFRS 11 - Joint Arrangements
SIGNIFICANT ITEMS CAUSING VARIATIONS IN QUARTERLY RESULTS
• Net income attributable to shareholders for the fourth quarter of fiscal 2014 was negatively impacted by
business acquisition, integration and restructuring costs of $5.6 million ($0.04 per share) offset by an
investment impairment recovery of $1.0 million ($0.01 per share).
• Net income attributable to shareholders for the third quarter of fiscal 2014 was negatively impacted by non-
cash radio broadcast license and goodwill impairment charges of $75.0 million ($0.85 per share), capital asset
impairment charges of $1.2 million ($0.01 per share), business acquisition, integration and restructuring costs
of $0.6 million ($0.01 per share) and positively impacted by a decrease in the purchase price obligation to Bell
of $2.0 million ($0.02 per share).
• Net income attributable to shareholders for the second quarter of fiscal 2014 was negatively impacted by
non-cash 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 positively impacted by a decrease
in the purchase price obligation to Bell of $2.1 million ($0.02 per share).
• Net income attributable to shareholders for the first quarter of fiscal 2014 was positively impacted by a non-
cash gain of $127.9 million ($1.51 per share) resulting from the remeasurement to fair value of the Company’s
50% interest in TELETOON which was held prior to the consolidation on September 1, 2013. This was offset
by business acquisition, integration and restructuring costs of $21.9 million ($0.25 per share), an increase
in the purchase price obligation to Bell of $7.3 million ($0.09 per share) and investment impairment related
charges of $3.3 million ($0.04 per share).
• Net income attributable to shareholders for the fourth quarter of fiscal 2013 was negatively impacted by a
non-cash expense of $5.7 million ($0.05 per share) related to broadcast license impairments on certain Radio
clusters, a charge of $5.2 million ($0.05 per share) related to restructuring costs and investment impairment
charges of $7.1 million ($0.07 per share).
• Net income attributable to shareholders for the third quarter of fiscal 2013 was positively impacted by the gain
of $55.4 million ($0.66 per share) related to the disposal of the Company’s non-controlling interest in Food
Network Canada.
• Net income attributable to shareholders for the second quarter of fiscal 2013 was negatively impacted by the
early redemption of all of the $500.0 million, 7.25% Senior Unsecured Guaranteed Notes that were due on
February 10, 2017. A debt refinancing charge of $25.0 million ($0.22 per share) was recorded to reflect the
redemption premium and the write-off of unamortized financing charges related to the 2017 Notes.
FINANCIAL POSITION
The major change in the Company’s consolidated results arises from the consolidation of 100% interest in TELETOON
effective September 1, 2013 as a consequence of meeting the definition of control under IFRS 10 – Consolidated
Financial Statements, the consolidation of 100% interest in Historia and Séries+ (“H&S”) effective January 1, 2014,
43
CORUS ENTERTAINMENT ANNUAL REPORT 2014
and 100% interest in two radio stations in Ottawa (CKQB-FM and CJOT-FM) effective January 31, 2014 (refer
to note 27 of the Company’s audited consolidated financial statements for the year ended August 31, 2014
for further details on all acquisitions). For fiscal 2013, as a result of retroactive application of IFRS 11 – Joint
Arrangements, the prior year was restated by replacing the proportionate consolidation of TELETOON at 50%
with a single investment amount in the investments in joint ventures line item in the consolidated statements
of financial position (refer to note 3 of the Company’s audited consolidated financial statements for the year
ended August 31, 2014 for further details).
Total assets at August 31, 2014 and August 31, 2013 were $2.8 billion and $2.2 billion, respectively. The
following discussion describes the significant changes in the consolidated statements of financial position
since August 31, 2013.
Current assets at August 31, 2014 were $217.4 million, down $92.7 million from August 31, 2013. Cash and cash
equivalents decreased by $69.7 million. Refer to the discussion of cash flows in the next section.
Accounts receivable increased $18.7 million, of which $35.0 million relates to the business acquisitions, offset by
higher cash collections during fiscal 2014. The accounts receivable balance typically grows in the first and third
quarters and decreases in the second quarter as a result of the broadcast revenue cycle. The Company carefully
monitors the aging of its accounts receivable.
Promissory note receivable of $47.8 million arose in fiscal 2013 from the sale of the Company’s non-controlling
interest in Food Network Canada to Shaw Media, a division of Shaw Communications Inc. (“Shaw”) and the
acquisition of the remaining 49% interest in ABC Spark from Shaw. The balance was settled upon the completion
of the Company’s acquisition of Shaw’s 50% interest in H&S on January 1, 2014.
Tax credits receivable decreased $12.5 million as a result of tax credit receipts exceeding accruals related to film
and interactive productions.
Investments and intangibles increased $4.7 million, primarily as a result of increases in investments offset by equity
losses from associates and amortization of intangibles.
Investment in joint venture was eliminated as a result of the consolidation of 100% interest in TELETOON upon
acquisition of control on September 1, 2013.
Property, plant and equipment decreased $7.6 million, as a result of asset impairment charges of $1.2 million and
depreciation expense exceeded additions for fiscal 2014.
Program and film rights increased $97.9 million, of which $77.5 million relates to the business acquisitions. As well,
additions of acquired rights of $228.0 million were offset by amortization of $207.6 million during fiscal 2014.
Film investments increased $1.2 million as film spending (net of tax credit accruals) of $21.0 million was offset by
film amortization of $19.8 million.
Broadcast licenses increased $464.9 million as business acquisitions added $482.4 million, offset by impairment
charges of $17.5 million related to the Radio segment. Goodwill increased $288.8 million as business acquisitions
added $354.4 million, offset by impairment charges of $65.5 million related to the Radio segment.
Accounts payable and accrued liabilities decreased $6.0 million, as a result of lower program rights payable and
lower trade payables, offset by $14.7 million relating to the business acquisitions and $4.8 million related to the
current portion of the CRTC benefits payable arising as a result of the acquisitions.
Provisions have increased $1.4 million as a result of business acquisition, integration and restructuring costs being
higher than payments made relating to work-force reduction and business initiatives taken in fiscal 2014.
Long-term debt at August 31, 2014 was $874.3 million, up $335.3 million as a result of the Company’s draw-down
on credit facilities to finance the business acquisitions.
Other long-term liabilities increased by $78.6 million, of which $37.6 million relates to the business acquisitions.
The increase is also due to the long-term portion of CRTC tangible benefits of $29.0 million relating to the business
acquisitions and by higher program rights payable.
Share capital increased $30.1 million, as the issuance of shares from treasury under the Company’s dividend
44
CORUS ENTERTAINMENT ANNUAL REPORT 2014 reinvestment plan and issuance of stock options added $24.7 million and $5.5 million, respectively, to share capital.
Contributed surplus increased $1.2 million due to share-based compensation expense of $2.0 million, offset by the
issuance of shares under the stock option plan of $0.9 million.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Overall, the Company’s cash and cash equivalents position decreased by $69.7 million over the year ended
August 31, 2014. Free cash flow for the year ended August 31, 2014 was $175.3 million, compared to free cash
flow of $154.7 million in the prior year. This increase in free cash flow primarily reflects higher cash from operating
activities and timing of program rights payments. Refer to Key Performance Indicators for a reconciliation of free
cash flow to consolidated statements of cash flows.
Cash provided by operating activities for the year ended August 31, 2014 was $194.5 million, compared to
$156.7 million last year. The increase of $37.8 million arises from higher net income from operations before non-
cash items of $67.0 million, lower additions to film investments of $20.7 million and higher cash inflows from
working capital of $16.2 million, offset by higher spend on program rights of $66.1 million.
Cash used in investing activities in the year ended August 31, 2014 was $526.2 million, compared to $13.7 million
in the prior year. The increase of $512.5 million is attributable to the business acquisitions of TELETOON, Historia,
Séries+ and the Ottawa radio stations of $497.4 million, lower dividends from joint ventures of $10.9 million, increase
in net cash outflows for investments and intangibles of $0.6 million and increase in CRTC tangible benefit payments
of $4.7 million, offset by a decrease of $1.1 million in additions to property, plant and equipment.
Cash used in financing activities in the year ended August 31, 2014 was $262.1 million, compared to $81.0 million
provided by financing activities in the prior year. In the current year, the Company incurred $333.2 million in bank
loans to finance the business acquisitions, paid dividends of $72.2 million and made capital lease payments of
$3.0 million. In the prior year, the Company issued the 2020 Notes of $550.0 million, redeemed the 2017 Notes of
$500.0 million and paid $26.7 million in financing fees. The bank debt was paid down by $29.9 million, $1.5 million
of shares were repurchased under the Normal Course Issuer Bid, capital lease payments of $10.7 million were
made and dividends of $63.0 million were paid.
LIQUIDITY
The Company’s capital management objectives are to maintain financial flexibility in order to pursue its strategy of
organic growth combined with strategic acquisitions and provide returns to its shareholders. The Company defines
capital as the aggregate of its shareholders’ equity and long-term debt less cash and cash equivalents.
The Company manages its capital structure in accordance with changes in economic conditions. In order to
maintain or adjust its capital structure, the Company may elect to issue or repay long-term debt, issue shares,
repurchase shares through a normal course issuer bid, pay dividends or undertake any other activities as deemed
appropriate under the specific circumstances.
The Company monitors capital using several key performance metrics, including: net debt to segment profit ratio
and dividend yield. The Company’s stated long-term objectives are not to exceed a net debt to segment profit ratio
of 3.5 times, and to maintain a dividend yield in excess of 2.5%. In the short term, the Company may permit the net
debt to segment profit ratio to go outside of the long-term guideline range (for long-term investment opportunities),
but endeavours to return to the policy guideline range as the Company believes that these objectives provide a
reasonable framework for providing a return to shareholders and is supportive of maintaining the Company’s credit
ratings. The Company is currently operating within these internally imposed objectives.
On February 3, 2014, the Company’s credit agreement with a syndicate of banks was amended and restated. The
principal amendment effected was the establishment of a two year $150.0 million term facility, maturing February 3,
2016, incremental to the existing $500.0 million revolving facility maturing February 11, 2017. The revolving facility
is used to finance permitted acquisitions and capital expenditures and for general corporate requirements in the
ordinary course of business, while the term loan facility was used to refinance outstanding advances under the
revolving facility. Both the term and revolving facilities are subject to the same covenants and security. Interest rates
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 on both the term and revolving facility loans fluctuate with Canadian prime rate, Canadian bankers’ acceptances
and/or LIBOR plus an applicable margin. As at August 31, 2014, the Company had available approximately
$315.0 million under the revolving term credit facility and was in compliance with all loan covenants.
As at August 31, 2014, the Company had a cash balance of $11.6 million and a positive working capital balance.
In January 2014, the Company utilized $491.4 million of cash-on-hand and existing bank lines of credit to close
the acquisition of the specialty television services Historia and Séries+, two Ottawa-based radio stations and
the remaining 50% of TELETOON Canada Inc. (refer to note 27 of the Company’s audited consolidated financial
statements for the year ended August 31, 2014 for further details).
Management believes that cash flow from operations and existing credit facilities will provide the Company with
sufficient financial resources to fund its operations for the next 12 months.
NET DEBT TO SEGMENT PROFIT
As at August 31, 2014, net debt was $862.7 million, up from $457.7 million at August 31, 2013. Net debt to
segment profit at August 31, 2014 was 3.0 times compared to 1.8 times at August 31, 2013. The increase in net
debt and net debt to segment profit reflects increased debt to finance the business acquisitions, but only includes
segment profit for the acquired assets from the date of acquisition. Refer to the Key Performance Indicators section
for further discussion.
TOTAL CAPITALIZATION
Book value at August 31, 2014 was $2,172.8 million, an increase of $494.3 million from August 31, 2013. The
increase results from an increase in bank debt to finance acquisitions.
OFF-BALANCE SHEET ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
During the second quarter of fiscal 2014, the Company entered into a Canadian interest rate swap agreement to
fix the interest rate on its outstanding term loan facility. The counterparties of the swap agreements are highly rated
financial institutions and the Company does not anticipate any non-performance. The fair value or future cash flows
of interest rate swap derivatives increase or decrease with fluctuations in market interest rates. The estimated fair
value of these agreements at August 31, 2014 is $0.1 million, which has been recorded in the audited consolidated
statements of financial position as a liability.
CONTRACTUAL COMMITMENTS
The Company has the following contractual obligations as at August 31, 2014:
(thousands of Canadian dollars)
Long-term debt
Bank loans
Interest on notes
Program rights payable
Program rights purchase commitments
Operating leases
Trade marks and other license commitments
Finance leases
Other obligations
Total
Less than one
year
One to three
years
Four to five
years
Beyond five
years
540,575
333,676
128,563
149,123
356,691
413,769
46,189
6,694
1,110
—
—
23,375
67,194
88,893
25,430
20,378
2,638
564
—
333,676
46,750
73,014
156,687
50,883
18,786
3,245
546
—
—
46,750
8,915
61,036
46,839
6,100
811
—
540,575
—
11,688
—
50,075
290,617
925
—
—
Total contractual obligations
1,976,390
228,472
683,587
170,451
893,880
In addition to the contractual obligations in the table above, the Company will pay interest on any bank debt
outstanding in future periods. In fiscal 2014, the Company incurred interest on bank debt of $8.7 million
(2013 - $0.5 million).
KEY PERFORMANCE INDICATORS
The Company measures the success of its strategies using a number of key performance indicators. These have
been outlined below, including a discussion as to their relevance, definitions, calculation methods and underlying
assumptions. In addition to disclosing results in accordance with IFRS as issued by the International Accounting
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Standards Board (“IASB”), the Company also provides supplementary non-IFRS measures as a method of evaluating
the Company’s performance. Certain key performance indicators are not measurements in accordance with IFRS
and should not be considered as an alternative to net income or any other measure of performance under IFRS.
These non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other issuers.
REVENUE
Revenue is a measurement defined by IFRS. Revenue is the gross inflow of economic benefits arising in the
course of the ordinary activities of an entity that results in increases in equity, such as cash, receivables or other
consideration arising from the sale of products and services and is net of items such as trade or volume discounts
and certain excise and sales taxes. It is one of the bases upon which free cash flow, a key performance indicator
defined below, is determined; therefore, it measures the potential to deliver free cash flow as well as indicating the
level of growth in a competitive marketplace.
The primary sources of revenues for the Company are outlined in the Overview section.
Corus’ sources of revenues are well diversified, with revenue streams for the year ended August 31, 2014 derived
primarily from three areas: advertising (49%), subscriber fees (40%) and merchandising, distribution and other
(11%) (2013 – 47%, 37% and 16%, respectively).
DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Direct cost of sales, general and administrative expenses include amortization of program and film rights (costs of
programming intended for broadcast, from which advertising and subscriber fee revenues are derived); amortization of
film investments (costs associated with internally produced and acquired television and film programming, from which
distribution and licensing revenues are derived); other cost of sales relating to merchandising, studio service work,
publishing, marketing (research and advertising costs); employee remuneration; regulatory license fees; and, selling,
general administration and overhead costs. Approximately 28% and 42%, respectively, of consolidated direct cost
of sales, general and administrative expenses in fiscal 2014 (2013 – 31% and 39%, respectively) were comprised of
employee remuneration and amortization of programming and film rights and film investments, respectively.
SEGMENT PROFIT AND SEGMENT PROFIT MARGIN
Segment profit is calculated as revenues less direct cost of sales, general and administrative expenses as reported in
the Company’s consolidated statements of income and comprehensive income. Segment profit may be calculated
and presented for an individual operating segment, a line of business, or for the consolidated Company. The Company
believes this is an important measure as it allows the Company to evaluate the operating performance of its business
segments or line of business and its ability to service and/or incur debt; therefore, it is calculated before (i) non-cash
expenses such as depreciation and amortization; (ii) interest expense; and (iii) items not indicative of the Company’s
core operating results, and not used in management’s evaluation of the business segment’s performance, such
as: goodwill and broadcast license impairment; debt refinancing; non-cash gains or losses; business acquisition,
integration and restructuring costs; and certain other income and expenses as included in note 19 to the audited
consolidated financial statements. Segment profit is also one of the measures used by the investing community
to value the Company and is included in note 21 to the audited consolidated financial statements. Segment profit
margin is calculated by dividing segment profit by revenues. Segment profit and segment profit margin do not have
any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by
other companies. Segment profit and segment profit margin should not be considered in isolation or as a substitute
for net income prepared in accordance with IFRS as issued by the IASB.
(thousands of Canadian dollars, except percentages)
Revenues
Direct cost of sales, general and administrative expenses
Segment profit
Segment profit margin
(1) Restated to reflect application of IFRS 11 - Joint Arrangements
Year ended August 31,
2014
2013(1)
833,016
543,378
751,536
500,562
289,638
250,974
34.8%
33.4%
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 FREE CASH FLOW
Free cash flow is calculated as cash provided by operating activities less cash used in investing activities, as
reported in the consolidated statements of cash flows, and then adding back cash used specifically for business
combinations and strategic investments. Free cash flow is a key metric used by the investing community that
measures the Company’s ability to repay debt, finance strategic business acquisitions and investments, pay
dividends and repurchase shares. Free cash flow does not have any standardized meaning prescribed by IFRS and
is not necessarily comparable to similar measures presented by other companies. Free cash flow should not be
considered in isolation or as a substitute for cash flows prepared in accordance with IFRS as issued by the IASB.
(thousands of Canadian dollars)
Cash provided by (used in):
Operating activities
Investing activities
Add back: cash used for business combinations and strategic investments
Free cash flow
Year ended August 31,
2014
2013(1)
194,477
(526,246)
(331,769)
507,045
156,729
(13,670)
143,059
11,652
175,276
154,711
(1) Restated to reflect application of IFRS 11 - Joint Arrangements
(2) Strategic investments in fiscal 2014 are comprised primarily of $497.4 million related to business acquisitions as further described in note 26 to the audited
consolidated financial statements.
ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS PER SHARE
Management uses adjusted net income and adjusted basic earnings per share as a measure of enterprise-wide
performance. Adjusted net income and adjusted basic earnings per share are defined as net income and basic
earnings per share before items such as: non-recurring gains or losses related to acquisitions and/or dispositions
of investments; costs of debt refinancing; non-cash impairment charges; and business acquisition, integration and
restructuring costs. Management believes that adjusted net income and adjusted basic earnings per share is a useful
measure that facilitates period-to-period operating comparisons. Adjusted net income and adjusted basic earnings
per share do not have any standardized meanings prescribed by IFRS and are not necessarily comparable to similar
measures presented by other companies. Adjusted net income and adjusted earnings per share should not be
considered in isolation or as a substitute for net income prepared in accordance with IFRS as issued by the IASB.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS PER SHARE RECONCILIATION
(thousands of Canadian dollars, except per share amounts)
Net income attributable to shareholders
Adjustments (net of tax):
Gain on remeasurement to fair value of original 50% of TELETOON
Broadcast license and goodwill impairment charges
Capital asset impairment charges
Increase in purchase price obligation
Impact of business acquisition, integration and restructuring costs
Gain on disposition of Food Network Canada investment
Impact of investment impairment charges
Debt refinancing costs related to issuance of $550.0 million of Senior Unsecured Guaranteed Notes
Year ended August 31,
2014
2013(1)
150,408
159,895
(127,884)
78,460
913
3,336
42,820
—
2,291
—
—
4,240
—
—
5,634
(55,394)
5,710
18,488
Adjusted net income attributable to shareholders
150,344
138,573
Basic earnings per share
Adjustments (net of tax):
Gain on remeasurement to fair value of original 50% of TELETOON
Broadcast license and goodwill impairment charges
Capital asset impairment charges
Increase in purchase price obligation
Impact of business acquisition, integration and restructuring costs
Gain on disposition of Food Network Canada investment
Impact of investment impairment charges
Debt refinancing costs related to issuance of $550.0 million of Senior Unsecured Guaranteed Notes
Adjusted basic earnings per share
(1) Restated to reflect application of IFRS 11 - Joint Arrangements
$1.77
$1.91
(1.51)
0.92
0.01
0.04
0.51
—
0.03
—
$1.77
—
0.05
—
—
0.06
(0.66)
0.07
0.22
$1.65
NET DEBT
Net debt is calculated as long-term debt less cash and cash equivalents as reported in the consolidated statements
of financial position. Net debt is an important measure as it reflects the principal amount of debt owing by the
Company as at a particular date. Net debt does not have any standardized meaning prescribed by IFRS and is not
necessarily comparable to similar measures presented by other companies.
(thousands of Canadian dollars)
Long-term debt
Cash and cash equivalents
Net debt
(1) Restated to reflect application of IFRS 11 - Joint Arrangements
2014
2013(1)
874,251
(11,585)
862,666
538,966
(81,266)
457,700
NET DEBT TO SEGMENT PROFIT
Net debt to segment profit is calculated as net debt divided by segment profit. It is one of the key metrics used by
the investing community to measure the Company’s ability to repay debt through ongoing operations. Net debt to
segment profit does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to
similar measures presented by other companies.
(thousands of Canadian dollars)
Net debt (numerator)
Segment profit (denominator)(2)
Net debt to segment profit
2014
2013(1)
862,666
289,638
3.0
457,700
250,974
1.8
(1) Restated to reflect application of IFRS 11 - Joint Arrangements
(2) Reflects aggregate amounts for the most recent four quarters, as detailed in the table in the Quarterly Consolidated Financial Information section and includes the
segment profit of the acquired assets from the date of acquisition.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
ENTERPRISE RISK MANAGEMENT
Corus’ enterprise risks are largely derived from the Company’s business environment and are fundamentally
linked to Corus’ strategies and business objectives. Corus strives to proactively mitigate its risk exposures
through rigorous performance planning and effective and efficient business operational management. Residual
exposure for certain risks is mitigated through appropriate insurance coverage where this is judged to be efficient
and commercially available.
Corus strives to avoid taking on undue risk exposures whenever possible and ensures any unnecessary risks are
aligned with business strategies, objectives, values and risk tolerance.
RISK GOVERNANCE
The Board of Directors is responsible for overseeing management with respect to the management of the principal
risks of the Company and ensuring that there are systems in place to effectively monitor and manage these risks.
This includes oversight of the implementation of enterprise risk management procedures and the development of
entity level controls. The Board carries out its risk management mandate primarily through the support of Board
Committees and senior management as follows:
• The Audit Committee, which is responsible for overseeing the Company’s policies and processes designed
to mitigate and manage applicable regulatory compliance risk, including the adequacy of internal control over
financial reporting;
• The Human Resources and Compensation Committee, which is responsible for the Company’s policies and
processes designed to mitigate and manage risks associated with the Company’s compensation plans;
• The Governance Committee, which is responsible for maintaining and monitoring the Company’s governance
processes, including its Code of Conduct;
• The Executive Management Team, which is responsible for the establishment of enterprise risk management
processes (which is carried out by the Company’s Risk Management Committee).
In addition, entity level controls, including the Company’s Code of Conduct (which is required to be reviewed and
signed to confirm compliance annually by directors and officers of the Company), financial controls and other
governance processes are in place and monitored regularly by the Company’s Risk and Compliance group (which
functions independently from management) who report to the Audit Committee on a quarterly basis.
RISK MANAGEMENT
The Company has established an Enterprise Risk Management Framework (“ERM”) which includes identifying,
assessing, managing and monitoring the significant risks that impact the Company.
A strategic risk assessment is conducted as part of the Company’s strategic planning process to identify and assess
the key business risks facing Corus and their potential impact on the achievement of the Company’s strategic plans.
Emerging risks are included in the assessment and risks are prioritized using standard risk assessment criteria.
The Risk Management Committee (“RMC”), which reports to the Executive Management Team, is mandated to
maintain the Company’s ERM for identifying, assessing, managing, monitoring and reporting the significant risks
that impact the Company. The RMC is comprised of thirteen senior managers from across the organization, with all
key operating segments and functions represented. The Committee meets on a quarterly basis to review financial,
hazard, operational and strategic risks to the Company. The likelihood and impact of these risks are ranked on a
high, medium and low basis. These risks are reviewed by the Company’s Disclosure Committee, the Chief Financial
Officer and the Chief Executive Officer and finally, with the Board as part of the quarterly risk review process.
RISKS AND UNCERTAINTIES
This section describes the principal risks and uncertainties that could have a material adverse effect on the business
and financial results of the Company and its subsidiaries.
IMPACT OF REGULATION ON CORUS’ RESULTS OF OPERATIONS
Corus’ Radio and Television business activities are regulated by the Canadian Radio-television and
Telecommunications Commission (“CRTC” or the “Commission”) under the Broadcasting Act and, accordingly,
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
Corus’ results of operations may be adversely affected by changes in regulations, policies and decisions by the
CRTC. The CRTC, among other things, issues licenses to operate radio and television stations. Corus’ radio
stations must also meet technical operating requirements under the Radiocommunications Act and regulations
promulgated under the Broadcasting Act.
The CRTC imposes a range of obligations upon licensees such as scheduling requirements for Canadian Content,
Canadian Content spending levels, limits on content genres on certain networks, access obligations (i.e. closed
captioning or descriptive video) and other obligations. Changes resulting from the CRTC’s interpretations of existing
policies and regulations could be materially adverse to Corus’ business and financial results.
Canadian Content programming is also subject to certification by various agencies of the federal government.
If programming fails to so qualify, Corus would not be able to use the programs to meet its Canadian Content
programming obligations and Corus might not qualify for certain Canadian tax credits and industry incentives.
In addition, to maintain eligibility under the Broadcasting Act and the Radiocommunications Act, there are limitations
on the ownership by non-Canadians of Corus’ Class A Voting Shares. Under certain circumstances, Corus’ Board
of Directors may refuse to issue or register the transfer of Corus’ Class A Voting Shares to any person that is a non-
Canadian or may sell the Corus Class A Voting Shares of a non-Canadian as if they were the owner of such Corus
Class A Voting Shares.
Corus’ radio, conventional television, specialty television and pay television undertakings rely upon blanket licenses
held by rights-holding collectives to make use of the music component of the programming that is used. The
royalties payable for these blanket licenses are determined by tariffs set by the Copyright Board under a regime
established by the Copyright Act. These royalties are paid by these undertakings on a monthly basis in the normal
course of their business.
The levels of the royalties payable by Corus are subject to change upon application by the collecting societies and
approval by the Copyright Board. The Government of Canada may, from time to time, make amendments to the
Copyright Act to implement Canada’s international treaty obligations and for other obligations and purposes. Any
such amendments could result in Corus’ broadcasting undertakings being required to pay additional royalties for
these licenses or be subject to additional administrative costs associated with the tariffs.
Refer also to the Canadian Communications Industry – Regulatory Environment section of the Company’s Annual
Information Form for further information.
CRTC Policy Review: Let’s Talk TV
In October 2014, the CRTC completed the public element of a broad television policy review which it called “Let’s
Talk TV”. The Commission’s stated key issues were as follows:
• Maximizing choice and flexibility (pick and pay);
• Relationships between broadcasting distribution undertakings and programmers;
• Ways to foster local programming, including a regulatory model for conventional television; and
• Ways to foster compelling Canadian programming, including program production, promotion, exhibition and
Canadian programming expenditures.
The detailed policy matters touched on many areas beyond these points. The Commission had proposed that a
new regulatory framework would come into force on December 15, 2015, however, a final decision is still pending.
During the public hearing, the Commission suggested that the status quo on carriage matters could be an option
and it also suggested that the timelines for implementation could be extended. This policy review was also coloured
by the Government’s direction that jobs be protected, which was included in the 2014 Speech from the Throne.
The potential outcome of this process is difficult to predict and as such, Corus is unable to quantify the potential
impacts at the present time. These could be materially adverse to Corus’ financial results.
COMPETITION
Corus encounters aggressive competition in all areas of its business. Corus’ failure to compete in these areas could
materially adversely affect Corus’ results of operations.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
The television production industry, television and radio broadcasting services have always involved a substantial
degree of risk. There can be no assurance of the economic success of radio stations, music formats, talent,
television programs or networks because the revenues derived depend upon audience acceptance of these or
other competing programs released into, or networks existing in, the marketplace at or near the same time, the
availability of alternative forms of entertainment and leisure time activities, general economic conditions, public
tastes generally and other intangible factors, all of which could rapidly change, and many of which are beyond
Corus’ control. The lack of audience acceptance for Corus’ radio stations, television programs, specialty and pay
television networks would have an adverse impact on Corus’ businesses, results of operations, prospects and
financial condition.
Radio
The financial success of each of Corus’ radio stations is dependent principally upon its share of the overall advertising
revenues within its geographic market, its promotional and other expenses incurred to obtain the revenues and
the economic strength of its geographic market. Radio advertising revenues are highly dependent upon audience
share. Audience share is derived from interest in on-air talent, music formats, and other intangible factors. This
can be influenced by the competition. Other stations may change programming formats to compete directly with
Corus’ stations for listeners and advertisers or launch aggressive promotional campaigns in support of already
existing competitive formats. If a competitor, particularly one with substantial financial resources, were to attempt
to compete in either of these fashions, ratings at Corus’ affected stations could be negatively impacted, resulting
in lower net revenues.
Radio broadcasting is also subject to competition from other broadcast, online and print media. Potential advertisers
can substitute advertising through the broadcast television system (which can offer concurrent exposure on a
number of networks to enlarge the potential audience), daily, weekly and free-distribution newspapers, outdoor
billboard advertising, magazines, other print media, direct mail marketing, the Internet and mobile advertising.
Competing media commonly target the customers of their competitors, and advertisers regularly shift dollars from
radio to these competing media and vice versa. In markets near the U.S. border, such as Kingston, Corus also
competes with U.S. radio stations. Accordingly, there can be no assurance that any of Corus’ radio stations will be
able to maintain or increase their current audience share and advertising revenue share.
Television – broadcast business
The financial success of Corus’ specialty and pay television business depends on obtaining revenues from
subscription fees and advertising as well as effectively managing programming costs.
i) Advertising and subscriber revenues
Numerous broadcast and specialty television networks compete with Corus for advertising revenues. The CRTC
continues to grant new specialty television licenses which further increase competition. Corus’ services also
compete with a number of foreign programming services which have been authorized for distribution in Canada
by the CRTC, such as A&E and CNN. Corus’ pay television services are providers of premium movies and series,
and also offer classic movies to western Canadian subscribers. These services compete with pay-per-view movie
offerings as well as video-on-demand offerings. Moreover, increasingly, Corus’ specialty, pay and conventional
television services are competing with alternative forms of entertainment that are not regulated by the CRTC (see
Technological Developments). This competition takes the form of competition for the supply of programming and
also for audiences. This can affect both the costs and revenues of a network. In addition, competition among
specialty television services in Canada is highly dependent upon the offering of prices, marketing and advertising
support and other incentives to cable operators and other distributors for carriage so as to favourably position and
package the services to subscribers to achieve high distribution levels. Any failure by Corus to compete effectively
in the areas of specialty and pay television services could materially adversely affect Corus’ results of operations.
ii) Programming expenditures
Programming costs are one of the most significant expenses in the Television segment. Although the Company has
processes to effectively manage these costs, increased competition in the television broadcasting industry due to
factors mentioned above, changes in viewer preferences and other developments could impact the availability of
programming content and adversely impact Corus’ results of operations.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Television – content business
The production and distribution of children’s television, books and other media content is very competitive. There
are numerous suppliers of media content, including vertically integrated major motion picture studios, television
networks, independent television production companies and children’s book publishers around the world. Many
of these competitors are significantly larger than Corus and have substantially greater resources, including easier
access to capital. Corus competes with other television and motion picture production companies for ideas and
storylines created by third parties as well as for actors, directors and other personnel required for a production.
Further, vertical integration of the television broadcast industry worldwide and the creation and expansion of new
networks, which create a substantial portion of their own programming, have decreased the number of available
timeslots for programs produced by third-party production companies. There can be no assurances that Corus
will be able to compete successfully in the future or that Corus will continue to produce or acquire rights to
additional successful programming or enter into agreements for the financing, production, distribution or licensing
of programming on terms favourable to Corus. There continues to be intense competition for the most attractive
timeslots offered by those services. There can be no assurances that Corus will be able to increase or maintain
penetration of broadcast schedules.
PRODUCTION OF FILM AND TELEVISION PROGRAMS
Each production is an individual artistic work and its commercial success is determined primarily by the size of the
market and audience acceptance. The latter cannot be accurately predicted. The success of a program is also
dependent on the type and extent of promotional and marketing activities, the quality and acceptance of other
competing programs, general economic conditions and other ephemeral and intangible factors, all of which can
rapidly change and many of which are beyond Corus’ control.
Production of film and television programs requires a significant amount of capital. Factors such as labour disputes,
technology changes or other disruptions affecting aspects of production may affect Corus or its co-production
partners and cause cost overruns and delay or hamper completion of a production.
Financial risks exist in productions relating to tax credits and co-production treaties. The aggregate amount of
government tax credits a project may receive can constitute a material portion of a production budget and typically
can be as much as 30% of total budgeted costs. There is no assurance that government tax credits and industry
funding assistance programs will continue to be available at current levels or that Corus’ production projects will
continue to qualify for them. As well, a significant number of Corus’ productions are co-productions involving
international treaties that allow Corus to access foreign financing and reduce production risk as well as qualify for
Canadian government tax credits. If an existing treaty between Canada and the government of one of the current
co-production partners were to be abandoned, one or more co-productions currently underway may also need
to be abandoned. Losing the ability to rely on co-productions would have a significant adverse effect on Corus’
production capabilities and production financing.
Results of operations for the production and distribution business for any period are dependent on the number,
timing and commercial success of television programs and feature films delivered or made available to various
media, none of which can be predicted with certainty.
Consequently, revenue from production and distribution may fluctuate materially from period to period and the
results of any one period are not necessarily indicative of results for future periods. Cash flows may also fluctuate
and are not necessarily closely correlated with revenue recognition.
Revenue from the film library can vary substantially from year to year, both by geographic territory and by year of
production. The timing of the Company’s ability to sell library product in certain territories will depend on the market
outlook in the particular territory and the availability of product by territory, which depends on the extent and term
of any prior sale in that territory.
MERCHANDISING
Success of merchandising brands depends on consumers’ tastes and preferences that can change in
unpredictable ways. The Company depends on the acceptance by consumers of its merchandising offerings,
therefore, success depends on the ability to predict and take advantage of consumer tastes in Canada and
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 around the world. In addition, the Company derives royalties from the sale of licensed merchandise by third
parties. Corus is dependent on the success of those third parties. Factors that negatively impact those third
parties could adversely affect the Company’s operating results.
INTELLECTUAL PROPERTY RIGHTS
Corus’ trade marks, copyrights and other proprietary rights are important to the Company’s competitive position.
In particular, the Content group must be able to protect its trade marks, copyrights and other proprietary rights
to competitively produce, distribute and license its television programs and published materials and market its
merchandise. Accordingly, Corus devotes the Company’s resources to the establishment and protection of trade
marks, copyrights and other proprietary rights on a worldwide basis. However, from time to time, various third
parties may contest or infringe upon the Company’s intellectual property rights.
The Company reviews these matters to determine what, if any, actions may be required or should be taken, including
legal action or negotiated settlement. There can be no assurance that the Company’s actions to establish and
protect trade marks, copyrights and other proprietary rights will be adequate to prevent imitation or unauthorized
reproduction of the Company’s products by others or prevent third parties from seeking to block sales, licensing or
reproduction of these products as a violation of their trade marks, copyrights and proprietary rights.
Moreover, there can be no assurance that others will not assert rights in, or ownership of, the Company’s trade
marks, copyrights and other proprietary rights, or that the Company will be able to successfully resolve these
conflicts. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as
do the laws of the United States or Canada.
PRODUCTION OF WEBSITES
The production of websites related to Corus’ Television and Radio brands generates hundreds of pages of content
each day. This content is in many forms including text, graphics, databases, photographs, audio files, radio files and
interactive content such as online games and third-party posts of content and links. Corus takes steps to ensure
that procedures are in place to clear rights and to vet third-party content. There remains a risk, however, that some
potentially defamatory or infringing content can be posted on a Corus website. Corus carries insurance coverage
against this risk but there remains a limited risk of liability to third-party claims.
TECHNOLOGICAL DEVELOPMENTS
New or alternative media technologies and business models, such as video-on-demand, subscription-video-on-
demand, high-definition television, personal video recorders, mobile television, internet protocol television, over-
the-top internet-based video entertainment services, digital radio services, satellite radio and direct-to-home
satellite have recently begun to compete, or may in the future compete, for programming and audiences. As well,
mobile devices like smart phones and tablets are allowing consumers to access content anywhere, anytime. These
technologies and business models may increase audience fragmentation, reduce the Company’s ratings or have an
adverse effect on advertising revenues from local and national audiences. These or other technologies and business
models may have a material adverse effect on Corus’ business, results of operations or financial condition.
ACQUISITIONS
The Company may, from time to time, make strategic acquisitions which involve significant risks and uncertainties.
As such, the Company may experience difficulties in realizing the anticipated benefits, incur unanticipated expenses
and/or have difficulty incorporating or integrating the acquired business, the occurrence of which could have a
material adverse effect on the Company.
DISTRIBUTION
Corus enters into long-term agreements with various cable and satellite providers for the distribution of its television
services. As the contracts expire, there could be a negative impact on revenues if the Company is unable to renew
them on acceptable terms which include revenues per subscriber and packaging that ultimately determines the
networks household reach.
54
CORUS ENTERTAINMENT ANNUAL REPORT 2014 ECONOMIC CONDITIONS
The Company’s operating performance depends on Canadian and worldwide economic conditions. Economic
uncertainty could impact demand for Corus’ advertising airtime as companies reduce their advertising spending.
There can be no assurance that an economic decline will not adversely affect the Company’s operating results.
CAPITAL MARKETS
The Company may require continuing access to capital markets to sustain its operations. Disruptions in the capital
markets, including changes in market interest rates or the availability of capital, could have a material adverse effect
on the Company’s ability to raise or refinance debt.
INTEREST RATE AND FOREIGN EXCHANGE RISK
Corus has the following financial exposures in its day-to-day operations:
Interest rates
The Company utilizes long-term financing extensively in its capital structure, which includes a banking facility, as
more fully described in note 13 to the audited consolidated financial statements. Interest rates on the balance of the
bank loans fluctuate with Canadian bankers’ acceptances and/or LIBOR.
The Company manages its exposure to floating interest rates through maintaining a balance of fixed rate and
floating rate debt. As at August 31, 2014, 79% (2013 – 100%) of the Company’s consolidated long-term debt was
fixed with respect to interest rates. From time-to-time, Corus also manages this risk through the use of interest rate
swap contracts to fix the interest rate on its floating rate debt.
Foreign exchange
A portion of the Company’s revenues and expenses is in currencies other than Canadian dollars and, therefore, is
subject to fluctuations in exchange rates. Approximately 4% of Corus’ total revenues in fiscal 2014 (2013 – 7%)
were in foreign currencies, the majority of which was U.S. dollars.
The impact of foreign exchange gains and losses are described in note 24 to the audited consolidated financial
statements.
INFORMATION SYSTEMS AND INTERNAL BUSINESS PROCESSES
The day-to-day operations of the Company are highly dependent on information technology systems and internal
business processes. An inability to operate or enhance information technology systems could have an adverse
impact on the Company’s ability to produce accurate and timely invoices, manage operating expenses and produce
accurate and timely financial reports. Although the Company has taken steps to reduce these risks, there can be no
assurance that potential failures of, or deficiencies in, these systems or processes will not have an adverse effect
on the Company’s operating results.
HOLDING COMPANY STRUCTURE
Substantially all of Corus’ business activities are operated by its subsidiaries. As a holding company, the Company’s
ability to meet its financial obligations is dependent primarily upon the receipt of interest and principal payments on
intercompany advances, management fees, cash dividends and other payments from its subsidiaries together with
proceeds raised by the Company through the issuance of equity and the incurrence of debt, and from proceeds
received on the sale of assets. The payment of dividends and making of loans, advances and other payments to
the Company by its subsidiaries may be subject to statutory or contractual restrictions, are contingent upon the
earnings of those subsidiaries and are subject to various business and other considerations.
DIVIDEND PAYMENTS
The Company currently pays monthly share dividends on both its Class A and Class B shares in amounts approved
quarterly by the Board of Directors. While the Company expects to generate sufficient free cash flow in fiscal 2015
to fund these dividend payments, if actual results are different from expectations there can be no assurance that
the Company will continue common share dividend payments at the current level.
55
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CONTINGENCIES
The Company and its subsidiaries are involved in litigation arising in the ordinary course and conduct of its business.
The Company recognizes liabilities for contingencies when a loss is probable and capable of being estimated. As at
August 31, 2014, there were no actions, suits or proceedings pending or against the Company or its subsidiaries
which would, in management’s estimation, likely be determined in such a manner as to have a material adverse
effect on the business of the Company.
OUTLOOK
At its annual Investor Day on January 29, 2014, the Company provided fiscal 2015 financial guidance of
$340.0 million to $360.0 million in consolidated segment profit, and free cash flow in excess of $170.0 million.
The segment profit guidance assumed a starting point of $330.0 million, which was based on the proforma
fiscal 2013 results of the Company’s core business, assuming a full year of segment profit from the recently
completed acquisitions (refer to note 26 of the audited consolidated financial statements for further details)
and projected synergies of $12.0 million. It also assumed growth scenarios of a 2%, 3% and 4% compound
annual growth rate off the $330.0 million base segment profit and the Company’s ability to successfully integrate
the acquisitions to achieve targeted synergies within its expected timelines. The growth scenarios assumed
the Canadian economy (GDP) would increase by 2% to 3% for 2015 to support the discretionary nature of
advertising expenditures. The Company also assumed minimal subscriber growth based on historical subscriber
trending and minimal merchandising, distribution and other revenues growth based on timing of the launches
of Corus’ new merchandise brands. Free cash flow guidance for fiscal 2015 of $170.0 million plus was based
on the Company’s recent historical working capital run-rates, annual capital expenditures of $15.0 million to
$20.0 million, inclusion of free cash flow from the acquisitions noted above and the Company’s ability to meet its
segment profit guidance for fiscal 2015 of $340.0 million to $360.0 million.
The actual fiscal 2014 financial results were below the Company’s expectations, primarily due to a weak advertising
market, lower than anticipated Pay subscribers, and slower actual Canadian economic growth than anticipated.
Although the Company exceeded its annual acquisition synergies target of $12.0 million, the proforma starting point
for its fiscal 2015 segment profit guidance is based on actual fiscal 2014 results assuming a full year of segment
profit from the recently completed acquisitions, which is closer to $300.0 million and not the previously stated
$330.0 million. As a result, the Company adjusted its fiscal 2015 consolidated segment profit guidance to a revised
range of $300.0 million to $320.0 million on October 23, 2014. The lower end of the Company’s revised guidance
range is based on the proforma starting point of $300.0 million and assumes no growth in segment profit as a
result of continued softness in the economy and its impact on the discretionary nature of advertising expenditures,
minimal subscriber growth and minimal merchandising, distribution and other revenues. The upper end of the
Company’s revised guidance range assumes segment profit growth of 6% - 7% based on a stronger economy and
advertising expenditures while Corus focuses on delivering continued excellent ratings on its Television properties
and recovering its Radio ratings in the key advertising markets of Toronto and Vancouver. The Company has
considerable operating leverage to achieve the upper end of its guidance range due to the fixed cost nature of its
business and the conversion rate of its incremental revenue.
Free cash flow continues to be a key strength for the Company. Corus delivered fiscal 2014 free cash flow of
$175.0 million and, as a result, fiscal 2015 free cash flow guidance was increased to $180.0 million plus on
October 23, 2014. The revised free cash flow guidance is based on achieving the Company’s revised forecasted
segment profit guidance of $300.0 million to $320.0 million, the Company’s historical working capital run rates
and a capital expenditures target of $20.0 million to $25.0 million. The Company will hold its annual Investor Day
on November 20, 2014.
TRANSACTIONS WITH RELATED PARTIES
Related party transactions are reviewed by Corus’ Corporate Governance Committee which is comprised mainly of
independent directors. The following sets forth the certain transactions in which the Company is involved.
56
CORUS ENTERTAINMENT ANNUAL REPORT 2014 TRANSACTIONS
The Company has transacted business in the normal course with Shaw and with entities over which the Company
exercises significant influence and joint control. These transactions are measured at the exchange amount, which is
the amount of consideration established and agreed to by the related parties, and have normal trade terms.
SHAW COMMUNICATIONS INC. (“SHAW”)
The Company and Shaw are subject to common voting control. During the year, the Company received cable
subscriber, programming and advertising fees of $118.5 million (2013 - $119.5 million), and no production and
distribution revenues (2013 - $3.0 million) from Shaw. In addition, the Company paid cable and satellite system
distribution access fees of $5.6 million (2013 - $4.6 million) and administrative and other fees of $1.9 million (2013 -
$1.5 million) to Shaw. At August 31, 2014, the Company had $22.3 million (2013 - $21.5 million) receivable from Shaw.
The Company provided Shaw with interactive impressions, radio and television spots in return for television
advertising. No monetary consideration was exchanged for these transactions and no amounts were recorded in
the accounts.
SPECIALTY CHANNELS
During the year, the Company received administrative and other fees of $1.1 million (2013 - $7.7 million) from
its non-wholly owned specialty channels including CMT, Cosmopolitan TV, and TLN. At August 31, 2014, the
Company had $0.1 million (2013 - $0.9 million) receivable from these entities.
KEY MANAGEMENT PERSONNEL
Key management personnel consist of the Board of Directors and the Executive Management Team who have
the authority and responsibility for planning, directing and controlling the activities of the Company. The Executive
Management Team are also officers of the Company.
Included in other investments (note 5 to the audited consolidated financial statements) and share capital (note 15
to the audited consolidated financial statements) is a loan of $0.2 million (2013 - $0.2 million) made to the Chief
Executive Officer of the Company for housing purposes prior to July 31, 2002. The loan is collateralized by charges
on the officers’ personal residence. The loan is non-interest bearing and is due October 31, 2022.
OUTSTANDING SHARE DATA
As at October 31, 2014, 3,428,292 Class A Voting Shares and 82,576,327 Class B Non-Voting Shares were issued
and outstanding. Class A Voting Shares are convertible at any time into an equivalent number of Class B Non-
Voting Shares. The Class B Non-Voting Shares are convertible into an equivalent number of Class A Voting Shares
in limited circumstances as described in the Company’s most recent Annual Information Form.
IMPACT OF NEW ACCOUNTING POLICIES
CHANGES IN ACCOUNTING POLICIES
In December 2011, the IASB amended both IAS 32 - Financial Instruments: Presentation and IFRS 7 - Financial
Instruments: Disclosures by moving the disclosure requirements in IAS 32 to IFRS 7 and enhancing the disclosures
about offsetting financial assets and liabilities. The effective date of the amendments is for the Company’s fiscal
year commencing September 1, 2013. The Company has assessed the impact of these standards and determined
there is no impact on its consolidated financial statements.
IFRS 10 - Consolidated Financial Statements
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS
10 supersedes SIC-12 - Consolidations – Special Purpose Entities and replaces parts of IAS 27 - Consolidated and
Separate Financial Statements. The effective date of this amendment is for the Company’s fiscal year commencing
September 1, 2013. The Company has assessed the impact of this standard and determined there is no impact on
its consolidated financial statements.
57
CORUS ENTERTAINMENT ANNUAL REPORT 2014 IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The standard carries forward existing disclosures and also
introduces significant additional disclosure requirements that address the nature of, and risks associated with,
an entity’s interest in other entities. IFRS 12 replaces the previous disclosure requirements included in IAS 27 -
Consolidated and Separate Financial Statements, IAS 31 - Joint Ventures and IAS 28 - Investment in Associates. The
effective date of this amendment is for the Company’s fiscal year commencing September 1, 2013. The adoption of
this standard affects disclosures but does not have an impact on the recognized amounts or measurements in the
consolidated financial statements. As required, the enhanced disclosures are included in the annual consolidated
financial statements for the year ended August 31, 2014.
IFRS 13 - Fair Value Measurement
IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across
all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement. The
effective date of this amendment is for the Company’s fiscal year commencing September 1, 2013. The adoption
of this standard affects disclosures but does not otherwise have a material impact on the consolidated financial
statements. As required, the enhanced disclosures are included in the annual consolidated financial statements for
the year ended August 31, 2014.
IAS 28 - Investments in Associates and Joint Ventures
The IASB also amended IAS 28, an existing standard, to include joint ventures in its scope and to address the
changes in IFRS 10 to IFRS 12. The effective date of this amendment is for the Company’s fiscal year commencing
September 1, 2013. The adoption of the standard has the impact noted in IFRS 11 - Joint Arrangements below.
IAS 36 – Impairment of Assets
The Company has early adopted the amendments of IAS 36, Recoverable Amount of Disclosures for Non-Financial
Assets, effective September 1, 2013. These amendments amend the disclosure requirement relating to non-
financial assets such that companies are required to disclose the recoverable amount of an asset (or CGU) only in
periods in which impairment has been recorded or reversed in respect of that asset (or CGU). The amendments
also expand and clarify the disclosure requirements when an asset’s (or CGU’s) recoverable amount has been
determined on the basis of fair value less cost of sale. The amendment is effective for annual periods beginning on
or after January 1, 2014, retrospectively, with early adoption permitted. The Company has elected to early adopt
the provisions of these amendments in these consolidated financial statements.
IFRS 11 - Joint Arrangements
IFRS 11 replaced IAS 31 - Interest in Joint Ventures and SIC 13 - Jointly Controlled Entities - Non-monetary
Contributions by Ventures. The standard eliminates the use of the proportionate consolidation method to account
for jointly controlled entities. Joint ventures as defined in IFRS 11 have been accounted for using the equity method
of accounting while, for a joint operation, the venture will recognize its right to and obligations for the assets, liabilities,
revenues and expenses of the joint operation. The new standard was effective for Corus’ fiscal year commencing
September 1, 2013, with retroactive application to September 1, 2012. Historically, the Company proportionately
consolidated its jointly controlled entity, TELETOON Canada Inc. With the adoption of this standard, the revenues,
expenses, assets and liabilities from these operations for Corus’ prior fiscal year are no longer proportionately
consolidated in the Company’s consolidated financial statements but have been replaced by Investment in joint
ventures in the consolidated statements of financial position and the Company’s share of the joint venture’s income
is contained in Other expense (income), net in the consolidated statements of income and comprehensive income.
The effect of the Company’s retroactive application of this standard is summarized below for the consolidated
statements of financial position, income and comprehensive income and cash flows for the periods indicated.
58
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(thousands of Canadian dollars)
August 31, 2013
September 1, 2012
Assets
Cash and cash equivalents
Accounts receivable
Promissory note receivable
Income taxes recoverable
Prepaid expenses and other
Originally
Reported
IFRS 11
Adjustment
Restated
Originally
Reported
IFRS 11
Adjustment
Restated
86,081
176,504
47,759
341
16,416
(4,815)
(12,202)
—
10
(24)
81,266
164,302
47,759
351
16,392
24,588
173,421
—
9,542
12,664
(5,390)
(10,076)
—
—
(45)
19,198
163,345
—
9,542
12,619
Total current assets
327,101
(17,031)
310,070
220,215
(15,511)
204,704
Tax credits receivable
Investments and Intangibles
Investments in joint ventures
Property, plant and equipment
Program and film rights
Film investments
Broadcast licenses
Goodwill
Deferred tax assets
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities
Income taxes payable
Provisions
Total current liabilities
Long-term debt
Other long-term liabilities
Deferred tax liabilities
Total liabilities
41,564
42,975
—
151,398
289,181
62,734
563,771
674,393
39,463
—
—
125,931
(206)
(56,594)
(460)
(48,735)
(28,348)
—
41,564
42,975
125,931
151,192
232,587
62,274
515,036
646,045
39,463
43,865
42,390
—
163,563
271,244
67,983
569,505
674,393
28,327
—
—
121,704
(283)
(41,938)
(136)
(48,735)
(28,348)
—
43,865
42,390
121,704
163,280
229,306
67,847
520,770
646,045
28,327
2,192,580
(25,443)
2,167,137
2,081,485
(13,247)
2,068,238
172,663
—
3,941
(8,220)
—
—
164,443
—
3,941
185,991
—
2,322
(8,624)
1,303
—
177,367
1,303
2,322
176,604
(8,220)
168,384
188,313
(7,321)
180,992
538,966
105,020
151,157
—
(11,779)
(5,444)
538,966
93,241
145,713
518,258
87,853
150,971
—
(265)
(5,661)
518,258
87,588
145,310
971,747
(25,443)
946,304
945,395
(13,247)
932,148
Shareholders’ Equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
937,183
7,221
256,517
1,653
Total equity attributable to shareholders
1,202,574
Equity attributable to non-controlling interest
18,259
Total shareholders’ equity
1,220,833
—
—
—
—
—
—
—
937,183
7,221
256,517
1,653
910,005
7,835
198,445
(812)
1,202,574
1,115,473
18,259
20,617
1,220,833
1,136,090
—
—
—
—
—
—
—
910,005
7,835
198,445
(812)
1,115,473
20,617
1,136,090
2,192,580
(25,443)
2,167,137
2,081,485
(13,247)
2,068,238
59
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands of Canadian dollars, except per share amounts)
Year ended August 31, 2013
Originally
Reported
IFRS 11
Adjustment
Restated
Revenues
Direct cost of sales, general and administrative expenses
Segment profit
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Debt refinancing
Business acquisition, integration and restructuring costs
Gain on sale of associated company
Other expense (income), net
Income from joint ventures
Income before income taxes
Income tax expense
Net income for the period
Net income attributable to:
Shareholders
Non-controlling interest
Earnings per share attributable to shareholders:
Basic
Diluted
Net income for the period
Other comprehensive income (loss), net of tax:
Items that may be reclassified subsequently to income:
Unrealized foreign currency translation adjustment
Unrealized change in fair value of available-for-sale investments
Actuarial gain on employee future benefits
Comprehensive income for the period
Comprehensive income attributable to:
Shareholders
Non-controlling interest
803,541
533,529
270,012
26,903
46,332
5,734
25,033
7,343
(55,394)
8,553
—
205,508
39,759
165,749
159,895
5,854
165,749
$ 1.91
$ 1.90
165,749
2,333
132
616
3,081
168,830
162,976
5,854
168,830
(52,005)
(32,967)
(19,038)
(91)
(1,537)
—
—
—
—
(20)
(12,093)
(5,297)
(5,297)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
751,536
500,562
250,974
26,812
44,795
5,734
25,033
7,343
(55,394)
8,533
(12,093)
200,211
34,462
165,749
159,895
5,854
165,749
$ 1.91
$ 1.90
165,749
2,333
132
616
3,081
168,830
162,976
5,854
168,830
60
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
Operating Activities
Net income for the period
Add (deduct) non-cash items:
Depreciation and amortization
Broadcast license and goodwill impairment
Amortization of program and film rights
Amortization of film investment
Deferred income taxes
Investment impairments
Share-based compensation expense
Imputed interest
Debt refinancing
Gain on sale of associated company
Other
Net change in non-cash working capital balances related to operations
Payment of program and film rights
Net additions to film investment
Cash provided by operating activities
Investing Activities
Additions to property, plant and equipment
Dividends from investments in joint ventures
Net cash flows for investments and intangibles
Other
Cash used in investing activities
Financing Activities
Increase in bank loans
Issuance of notes
Redemption of notes
Financing fees
Issuance of shares under stock option plan
Shares repurchased
Dividends paid
Dividends paid to non-controlling interest
Other
Cash used in financing activities
Net change in cash and cash equivalents during the period
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
Year ended August 31, 2013
Originally
Reported
IFRS 11
Adjustment
Restated
165,749
—
165,749
26,903
5,734
190,176
25,759
(11,332)
7,121
1,586
11,816
25,033
(55,394)
700
4,584
(185,327)
(46,074)
167,034
(13,043)
—
(10,855)
(652)
(24,550)
(29,925)
550,000
(500,000)
(26,732)
884
(1,464)
(56,696)
(6,331)
(10,727)
(80,991)
61,493
24,588
86,081
(91)
—
(21,293)
—
—
—
—
(1,537)
—
—
(15,093)
2,184
25,525
—
(10,305)
14
10,866
—
—
10,880
—
—
—
—
—
—
—
—
—
—
575
(5,390)
(4,815)
26,812
5,734
168,883
25,759
(11,332)
7,121
1,586
10,279
25,033
(55,394)
(14,393)
6,768
(159,802)
(46,074)
156,729
(13,029)
10,866
(10,855)
(652)
(13,670)
(29,925)
550,000
(500,000)
(26,732)
884
(1,464)
(56,696)
(6,331)
(10,727)
(80,991)
62,068
19,198
81,266
61
CORUS ENTERTAINMENT ANNUAL REPORT 2014
RECENT ACCOUNTING PRONOUNCEMENTS
PENDING ACCOUNTING CHANGES
IFRS 9 - Financial Instruments: Classification and Measurement
In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of
its project to replace IAS 39. In October 2010, the IASB also incorporated new accounting requirements for
liabilities. The standard introduces new requirements for measurement and eliminates the current classification
of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements
for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. In 2013, the IASB also
incorporated new accounting requirements for hedging and introduced a new expected-loss impairment model
that will require more timely recognition of expected credit losses. Specifically, the new Standard requires entities to
account for expected credit losses from when financial instruments are first recognized and to recognize full lifetime
expected losses on a timelier basis. The effective date of this pronouncement has been tentatively set to be effective
for annual periods beginning on or after January 1, 2018. The Company is in the process of reviewing the standard
to determine the impact on the consolidated financial statements.
IFRIC 21 – Levies
In May 2013, the IFRS Interpretations Committee (IFRIC), with the approval of the IASB, issued IFRIC 21 – Levies.
IFRIC 21 provides guidance on when to recognize a liability to pay a levy imposed by government that is accounted
for in accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014, which will be September 1, 2014 for Corus and is to be
applied retrospectively. The Company has assessed the impact of this standard and there is no impact on the
consolidated financial statements.
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, which replaces IAS 18 - Revenues and covers principles for reporting about
the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
IFRS 15 is effective for annual periods beginning on or after January 1, 2017, which will be September 1, 2017
for Corus. The Company is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.
IAS 16 – Property, Plant and Equipment and IAS 38 – Intangibles
In May 2014, the IASB issued amendments to IAS 16 and IAS 38, prohibiting the use of revenue-based depreciation
for property, plant and equipment and significantly limiting the use of revenue-based amortization for intangible
assets. These amendments are effective for annual periods beginning on or after January 1, 2016, which will be
September 1, 2016 for Corus and is to be applied prospectively. The Company is in the process of reviewing the
standard to determine the impact on the consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
The Company’s significant accounting policies are described in note 3 to the fiscal 2014 audited consolidated
financial statements and notes thereto, which have been prepared in accordance with IFRS. The preparation of
these fiscal 2014 consolidated financial statements requires management to make estimates, assumptions and
judgments that affect the reported amounts of assets and liabilities, and related disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting periods.
Management uses estimates when accounting for certain items such as revenues, allowance for doubtful accounts,
amortization of film investments, useful lives of capital assets, asset impairments, provisions, share-based
compensation plans, employee benefit plans, deferred income taxes and impairment of goodwill and intangible
assets. Estimates are also made by management when recording the fair value of assets acquired and liabilities
assumed in a business combination.
Estimates are based on a number of factors, including historical experience, current events and other assumptions
that management believes are reasonable under the circumstances. By their nature, these estimates are subject to
measurement uncertainty and actual results could differ. Estimates and underlying assumptions are reviewed on an
62
CORUS ENTERTAINMENT ANNUAL REPORT 2014 ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised
and in any future periods affected. Actual results could differ from those estimates. Critical accounting estimates
and significant judgments are generally discussed with the Audit Committee each quarter.
The most significant estimates and judgments made by management are described below.
FILM INVESTMENTS
The individual-film-forecast-computation method is used to determine amortization. Under this method, capitalized
costs and the estimated total costs of participations and residuals, net of anticipated federal and provincial program
contributions, production tax credits and co-producers’ share of production costs for an individual film or television
program, are charged to amortization expense on a series or program basis in the same ratio that current period
actual revenues bear to management’s estimates of the total future revenue expected to be received from such
film or television program over a period not to exceed 10 years from the date of delivery. Future revenues are
based on historical sales performance for the genre of series or program, the number of episodes produced and
the availability of rights in each territory. Estimates of future revenues can change significantly due to the level of
market acceptance of film and television products. Accordingly, revenue estimates are reviewed periodically and
amortization is adjusted prospectively. In addition, if revenue estimates change significantly with respect to a film
or television program, the Company may be required to write down all or a portion of the unamortized costs of
such film or television program, therefore impacting direct cost of sales, general and administrative expenses and
profitability.
IMPAIRMENT OF LONG-LIVED ASSETS
At each reporting date, the Company assesses its long-lived assets, including property, plant and equipment,
program and film rights, film investments, goodwill and intangible assets, for potential indicators of impairment, such
as an adverse change in business climate that may indicate that these assets may be impaired. If any impairment
indicator exists, the Company estimates the asset’s recoverable amount. The recoverable amount is determined
for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets, in which case the asset is assessed as part of the cash generating unit (“CGU”) to which it belongs.
An asset’s or CGU’s recoverable amount is the higher of its fair value less costs to sell and its value in use. The
determination of the recoverable amount in the impairment assessment requires estimates based on quoted market
prices, prices of comparable businesses, present value or other valuation techniques, or a combination thereof,
necessitating management to make subjective judgments and assumptions.
Goodwill is allocated to a CGU or group of CGUs for the purposes of impairment testing based on the level at which
management monitors it, which is not larger than an operating segment. The Company records an impairment
loss if the recoverable amount of the CGU or the group of CGUs is less than the carrying amount. Goodwill and
indefinite-life assets, such as broadcast licenses, are not amortized but are tested for impairment at least annually
or more frequently if events or changes in circumstances indicate that an impairment may have occurred.
The Company completes its annual impairment testing process for broadcast licenses and goodwill during the
fourth quarter each year.
The test for impairment of either an intangible asset or goodwill is to compare the recoverable amount of the asset
or CGU (or group of CGUs in the case of goodwill) to the carrying value. The recoverable amount is the higher of
an asset’s or CGU’s (or group of CGUs in the case of goodwill) fair value less costs to sell and its value in use. The
recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets (such as broadcast licenses and goodwill)
and the asset’s value in use cannot be determined to equal its fair value less costs to sell. If this is the case, the
recoverable amount is determined for the CGU to which the asset belongs.
In calculating the recoverable amount, management is required to make several assumptions including, but not
limited to, segment profit growth rates, future levels of capital expenditures, expected future cash flows and
discount rates. The Company’s assumptions are influenced by current market conditions and general outlook
for the industry, both of which may affect expected segment profit growth rates and expected cash flows. The
Company has made certain assumptions for the discount and terminal growth rates to reflect possible variations
in the cash flows; however, the risk premiums expected by market participants related to uncertainties about the
63
CORUS ENTERTAINMENT ANNUAL REPORT 2014 industry, specific CGU or groups of CGUs may differ or change quickly depending on economic conditions and
other events. Changes in any of these assumptions could have a significant impact on the recoverable amount of
the CGU or groups of CGUs and the results of the related impairment testing.
During fiscal 2014, the Company recorded impairment charges totaling $83.0 million for certain broadcast licenses
and goodwill related to the radio business as a result of interim testing in the second and third quarters of fiscal 2014.
An increase of 50 basis points in the pre-tax discount rate, a decrease of 50 basis points in the earnings growth rate
each year, or a decrease of 50 basis points in the terminal growth rate, each used in isolation to perform the Radio
goodwill impairment test, would have resulted in additional goodwill impairment charges in the Radio segment of
between $1.6 million and $8.0 million. However, no material additional broadcast license impairments would arise.
The Company has completed its annual impairment testing of goodwill and indefinite lived intangible assets in
the fourth quarter of fiscal 2014 and concluded that there were no additional impairment charges required. The
Company also assessed for indicators that previous impairment losses had decreased. There were no previously
recorded impairment charges reversed.
INCOME TAXES
The Company is subject to income taxes in Canada and foreign jurisdictions. The calculation of income taxes in
many cases, however, requires significant judgment in interpreting tax rules and regulations. The Company’s tax
filings are subject to audits which could materially change the amount of current and deferred income tax assets
and liabilities and could, in certain circumstances, result in the assessment of interest and penalties.
Additionally, estimation of the income tax provision includes evaluating the recoverability of deferred tax assets
based on the assessment of the Company’s ability to use the underlying future tax deductions before they expire
against future taxable income. The assessment is based upon existing tax laws, estimates of future profitability and
tax planning strategies. If the future taxable results of the Company differ significantly from those expected, the
Company would be required to increase or decrease the carrying value of the deferred tax assets with a potentially
material impact on the Company’s consolidated statement of financial position and consolidated statement of
comprehensive income. The carrying amount of deferred tax assets is reassessed at each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to utilize all or part
of the deferred tax assets. Unrecognized deferred tax assets are recognized to the extent that it is more likely than
not that taxable profit will be available against which deferred tax assets can be utilized.
EMPLOYMENT BENEFIT PLANS
The Company has four defined benefit plans for certain unionized and non-unionized employees and two
supplementary executive retirement plans which provide pension benefits to certain of its key senior executives.
The amounts reported in the consolidated financial statements related to these plans are determined using actuarial
valuations that are based on several assumptions. The assumptions and estimates include the discount rate, rate of
compensation increase, trend in healthcare costs and expected average remaining years of service of employees.
Changes to these assumptions and estimates and plan asset performance that differs from the discount rate
used would impact the amounts recorded in the consolidated financial statements related to these plans. As well,
market-driven changes may result in changes in the discount rates and other variables which would result in the
Company being required to make contributions in the future that differ significantly from the current contributions
and assumptions incorporated into the actuarial valuation process.
The significant assumptions used on the benefit obligation are disclosed in note 29 of the audited consolidated
financial statements.
SHARE-BASED COMPENSATION
In the evaluation of the fair value of stock options, Deferred Share Units (“DSUs”), Performance Share Units (“PSUs”),
and Restricted Share Units (“RSUs”) granted to eligible officers, directors and employees, the Company makes
estimates and assumptions. Critical estimates and assumptions related to stock options include their expected
life, the risk-free interest rate and the expected volatility of the market price of the shares. Critical estimates and
assumptions related to DSUs, PSUs and RSUs include number of units expected to vest, the estimated dividend
equivalents, and the achievement of specific vesting conditions. The Company believes that the assumptions used
64
CORUS ENTERTAINMENT ANNUAL REPORT 2014 are reasonable based on information currently available, but changes to these assumptions could impact the fair
value of stock options, DSUs, PSUs and RSUs and therefore, the share-based compensation costs recorded in
direct cost of sales, general and administrative expenses.
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial Officer, together with management, are responsible for establishing
and maintaining disclosure controls and procedures (as defined in National Instrument 52-109) and have designed
such disclosure controls and procedures (or have caused it to be designed under their supervision) to provide
reasonable assurance that material information with respect to Corus, including its consolidated subsidiaries,
is made known to them. Disclosure controls and procedures ensure that information required to be disclosed
by Corus in the reports that it files or submits under the provincial securities legislation is recorded, processed,
summarized and reported within the time periods required. Corus has adopted or formalized such disclosure
controls and procedures as it believes are necessary and consistent with its business and internal management
and supervisory practices.
The Company’s Chief Executive Officer and Chief Financial Officer, supported by Corus’ management, evaluated
the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by these
annual filings, and have concluded that, as of August 31, 2014, the Company’s disclosure controls and procedures
were effective.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Chief Executive Officer and Chief Financial Officer, together with management, are responsible for designing
internal control over financial reporting (or cause it to be designed under their supervision) to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
reporting in accordance with IFRS.
The Chief Executive Officer and Chief Financial Officer, supported by Corus’ management, evaluated the effectiveness
of the Company’s internal control over financial reporting, as of August 31, 2014, based on the framework set forth
in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). Based on its evaluation under this framework, management concluded that the
Company’s internal control over financial reporting was effective as of that date.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting that occurred during fiscal 2014
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood
of certain events. There can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Annual Information Form, can be found on SEDAR at
www.sedar.com.
65
CORUS ENTERTAINMENT ANNUAL REPORT 2014 MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Corus Entertainment Inc. (“Corus”) and all the
information in this Annual Report are the responsibility of management and have been approved by the Board
of Directors (the “Board”).
The consolidated financial statements have been prepared by management in accordance with International
Financial Reporting Standards. When alternative accounting methods exist, management has chosen those it
deems most appropriate in the circumstances. Financial statements are not precise since they include certain
amounts based on estimates and judgments. Management has determined such amounts on a reasonable
basis in order to ensure that the consolidated financial statements are presented fairly in all material respects.
Management has prepared the financial information presented elsewhere in this Annual Report and has ensured
that it is consistent with the consolidated financial statements.
Corus maintains systems of internal accounting and administrative controls of high quality, consistent with
reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is
relevant, reliable and accurate, and that the Company’s assets are appropriately accounted for and adequately
safeguarded. During the past year, management has maintained the operating effectiveness of internal control
over external financial reporting. As at August 31, 2014, the Company’s Chief Executive Officer and Chief
Financial Officer evaluated, or caused an evaluation of under their direct supervision, the design and operation of
the Company’s internal controls over financial reporting (as defined in National Instrument 52-109, Certification of
Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that the Company’s
internal controls over financial reporting were appropriately designed and operating effectively.
The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting, and is
ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries out
this responsibility through its Audit Committee (the “Committee”).
The Committee is appointed by the Board, and all of its members are independent unrelated directors. The
Committee meets periodically with management, as well as with the internal and external auditors, to discuss
internal controls over the financial reporting process, auditing matters and financial reporting items, to satisfy
itself that each party is properly discharging its responsibilities, and to review the Annual Report, the consolidated
financial statements and the external auditors’ report. The Committee reports its findings to the Board for
consideration when approving the consolidated financial statements for issuance to the shareholders. The
Committee also considers, for review by the Board and approval by the shareholders, the engagement or re-
appointment of the external auditors.
The consolidated financial statements have been audited by Ernst & Young LLP, the external auditors on behalf
of the shareholders. Ernst & Young LLP has full and free access to the Committee.
John M. Cassaday
President and
Chief Executive Officer
Thomas C. Peddie FCPA, FCA
Executive Vice President
and Chief Financial Officer
66
CORUS ENTERTAINMENT ANNUAL REPORT 2014 INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF CORUS ENTERTAINMENT INC.
We have audited the accompanying consolidated financial statements of Corus Entertainment Inc., which
comprise the consolidated statements of financial position as at August 31, 2014 and 2013, and the consolidated
statements of income and comprehensive income, changes in equity and cash flows for the years then ended, and
a summary of significant accounting policies and other explanatory information.
MANAGEMENT’S RESPONSIBILITY FOR
THE CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
OPINION
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Corus Entertainment Inc. as at August 31, 2014 and 2013, and its financial performance and its cash flows for
the years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada,
November 7, 2014
Chartered Professional Accountants
Licensed Public Accountants
67
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
ASSETS
Current
Cash and cash equivalents
Accounts receivable (notes 4 and 23)
Promissory note receivable (note 26)
Income taxes recoverable
Prepaid expenses and other
Total current assets
Tax credits receivable
Investments and intangibles (note 5)
Investment in joint ventures (note 26)
Property, plant and equipment (note 6)
Program and film rights (note 7)
Film investments (note 8)
Broadcast licenses (note 9)
Goodwill (note 9)
Deferred tax assets (note 20)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities (note 11)
Income taxes payable (note 20)
Provisions (note 12)
Total current liabilities
Long-term debt (note 13)
Other long-term liabilities (note 14)
Deferred tax liabilities (note 20)
Total liabilities
SHAREHOLDERS’ EQUITY
Share capital (note 15)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (note 16)
Total equity attributable to shareholders
Equity attributable to non-controlling interest
Total shareholders’ equity
Commitments, contingencies and guarantees (notes 13 and 27)
See accompanying notes
As at August 31,
As at August 31,
As at September 1,
2014
2013
2012
11,585
183,009
—
9,768
13,032
217,394
29,044
47,630
—
143,618
330,437
63,455
979,984
934,859
38,161
81,266
164,302
47,759
351
16,392
310,070
41,564
42,975
125,931
151,192
232,587
62,274
515,036
646,045
39,463
19,198
163,345
—
9,542
12,619
204,704
43,865
42,390
121,704
163,280
229,306
67,847
520,770
646,045
28,327
2,784,582
2,167,137
2,068,238
170,411
—
5,314
175,725
874,251
171,793
252,687
1,474,456
967,330
8,385
313,361
3,767
1,292,843
17,283
1,310,126
2,784,582
164,443
—
3,941
168,384
538,966
93,241
145,713
946,304
937,183
7,221
256,517
1,653
1,202,574
18,259
1,220,833
2,167,137
177,367
1,303
2,322
180,992
518,258
87,588
145,310
932,148
910,005
7,835
198,445
(812)
1,115,473
20,617
1,136,090
2,068,238
68
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
For the years ended August 31,
(in thousands of Canadian dollars, except per share amounts)
Revenues
Direct cost of sales, general and administrative expenses (note 17)
Depreciation and amortization (notes 5 and 6)
Interest expense (note 18)
Broadcast license and goodwill impairment (notes 9 and 10)
Debt refinancing (note 13)
Business acquisition, integration and restructuring costs (notes 12 and 26)
Gain on acquisition (note 26)
Gain on sale of associated company (note 26)
Other expense (income), net (note 19)
Income before income taxes
Income tax expense (note 20)
Net income for the period
Net income attributable to:
Shareholders
Non-controlling interest
Earnings per share attributable to shareholders:
Basic
Diluted
2014
833,016
543,378
24,068
48,320
83,000
—
46,792
(127,884)
—
5,740
209,602
53,433
2013
751,536
500,562
26,812
44,795
5,734
25,033
7,343
—
(55,394)
(3,560)
200,211
34,462
156,169
165,749
150,408
5,761
156,169
159,895
5,854
165,749
$ 1.77
$ 1.76
$ 1.91
$ 1.90
Net income for the period
156,169
165,749
Other comprehensive income (loss), net of tax: (note 16)
Items that may be reclassified subsequently to net income:
Unrealized foreign currency translation adjustment
Unrealized change in fair value of available-for-sale investments
Unrealized change in fair value of cash flow hedges
Actuarial (loss) gain on employee future benefits
1,720
446
(52)
(2,188)
(74)
2,333
132
—
616
3,081
Comprehensive income for the period
156,095
168,830
Comprehensive income attributable to:
Shareholders
Non-controlling interest
See accompanying notes
150,334
5,761
156,095
162,976
5,854
168,830
69
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(in thousands of Canadian dollars)
At August 31, 2013
Comprehensive income (loss)
Actuarial loss transfer
Dividends declared
Issuance of shares
under stock option plan
Issuance of shares under
dividend reinvestment plan
Share-based compensation
expense
Share capital
(note 15)
Contributed
surplus
Retained
earnings
937,183
—
—
—
7,221
—
—
—
256,517
150,408
(2,188)
(91,376)
5,465
(862)
24,682
—
—
2,026
—
—
—
Accumulated other
comprehensive
income (loss)
(note 16)
Total equity
attributable to
shareholders
Non-
controlling
interest
Total
shareholders’
equity
1,653
(74)
2,188
—
1,202,574
150,334
—
(91,376)
18,259
5,761
—
(6,737)
1,220,833
156,095
—
(98,113)
—
—
—
4,603
24,682
2,026
—
—
—
4,603
24,682
2,026
At August 31, 2014
967,330
8,385
313,361
3,767
1,292,843
17,283
1,310,126
At August 31, 2012
Comprehensive income
Actuarial gain transfer
Dividends declared
Issuance of shares
under stock option plan
Issuance of shares under
dividend reinvestment plan
Shares repurchased
Share-based compensation
expense
Acquisition of non-controlling
interest (note 26)
910,005
—
—
—
7,835
—
—
—
198,445
159,895
616
(84,452)
1,155
(2,200)
—
26,731
(708)
—
—
—
(756)
—
—
1,586
—
—
(17,231)
(812)
3,081
(616)
—
1,115,473
162,976
—
(84,452)
20,617
5,854
—
(6,331)
1,136,090
168,830
—
(90,783)
—
—
—
—
—
(1,045)
26,731
(1,464)
1,586
—
—
—
—
(1,045)
26,731
(1,464)
1,586
(17,231)
(1,881)
(19,112)
At August 31, 2013
937,183
7,221
256,517
1,653
1,202,574
18,259
1,220,833
See accompanying notes
70
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended August 31,
(in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income for the period
Add (deduct) non-cash items:
Depreciation and amortization (notes 5 and 6)
Broadcast license and goodwill impairment (notes 9 and 10)
Amortization of program and film rights (notes 7 and 17)
Amortization of film investments (notes 8 and 17)
Deferred income taxes (note 20)
Increase in purchase price obligation (note 26)
Investment impairments (notes 5, 8 and 19)
Share-based compensation expense (note 15)
Imputed interest (note 18)
Tangible benefit obligation (note 26)
Debt refinancing (note 13)
Gain on sale of associated company (note 26)
Gain on acquisition (note 26)
Other
Net change in non-cash working capital balances related to operations (note 24)
Payment of program and film rights
Net additions to film investments
Cash provided by operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment (note 6)
Business combinations (note 26)
Dividends from investment in joint ventures (note 3)
Net cash flows for investments and intangibles
Other
Cash used in investing activities
FINANCING ACTIVITIES
Increase (decrease) in bank loans
Issuance of notes (note 13)
Redemption of notes (note 13)
Financing fees (note 13)
Issuance of shares under stock option plan
Shares repurchased (note 15)
Dividends paid
Dividends paid to non-controlling interest
Other
Cash provided by (used in) financing activities
Net change in cash and cash equivalents during the year
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Supplemental cash flow disclosures (note 24)
See accompanying notes
2014
2013
156,169
165,749
24,068
83,000
207,639
19,808
5,638
3,336
—
2,026
14,698
31,916
—
—
(127,884)
2,402
22,945
(225,935)
(25,349)
26,812
5,734
168,883
25,759
(11,332)
—
7,121
1,586
10,279
—
25,033
(55,394)
—
(14,393)
6,768
(159,802)
(46,074)
194,477
156,729
(11,976)
(497,393)
—
(11,493)
(5,384)
(526,246)
333,243
—
—
(587)
4,603
—
(65,474)
(6,737)
(2,960)
262,088
(69,681)
81,266
11,585
(13,029)
—
10,866
(10,855)
(652)
(13,670)
(29,925)
550,000
(500,000)
(26,732)
884
(1,464)
(56,696)
(6,331)
(10,727)
(80,991)
62,068
19,198
81,266
71
CORUS ENTERTAINMENT ANNUAL REPORT 2014
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
1. CORPORATE INFORMATION
Corus Entertainment Inc. (the “Company” or “Corus”) is a diversified Canadian communications and entertainment
company. The Company is incorporated under the Canada Business Corporations Act and its Class B Non-Voting
Shares are listed on the Toronto Stock Exchange (the “TSX”) under the symbol CJR.B.
The Company’s registered office is at 1500, 850 – 2nd Street SW, Calgary Alberta, T2P 0R8. The Company’s
executive office is at Corus Quay, 25 Dockside Drive, Toronto, Ontario, M5A 0B5.
These consolidated financial statements include the accounts of the Company and all its subsidiaries and joint
ventures. The Company’s principal business activities are: the operation of radio stations; the operation of specialty,
pay and conventional television networks; and the Corus content business which consists of the production and
distribution of films and television programs, merchandise licensing, publishing and the production and distribution
of animation software.
2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These consolidated
financial statements have been prepared using the accounting policies in note 3.
These consolidated financial statements have been authorized for use in accordance with a resolution from the
Board of Directors on October 23, 2014.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements have been prepared on a cost basis, except for derivative financial instruments
and available-for-sale financial assets, which have been measured at fair value. The consolidated financial statements
are presented in Canadian dollars, which is also the Company’s functional currency and all values are rounded to
the nearest thousand, except where otherwise noted. Each entity consolidated by the Company determines its own
functional currency based on the primary economic environment in which the entity operates.
BASIS OF CONSOLIDATION
Subsidiaries
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries, which
are the entities over which the Company has control. Control exists when the entity is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. The non-controlling interest component of the Company’s subsidiaries is included in equity.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains
control, and continue to be consolidated until the date when such control ceases. The determination of control is
assessed either through share ownership and/or control of the subsidiaries board of directors, which may require
significant judgment.
The financial statements of the Company’s subsidiaries are prepared for the same reporting period as the Company,
using consistent accounting policies. All intra-company balances, transactions, unrealized gains and losses resulting
from intra-company transactions and dividends are eliminated in full.
Associates and joint arrangements
Associates are entities over which the Company has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
A joint venture is a type of joint arrangement in which the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
The considerations made in determining joint control or significant influence are similar to those necessary to
determine control over subsidiaries. The Company accounts for investments in associates and joint ventures using
the equity method.
Investments in associates and joint ventures accounted for using the equity method are originally recognized at cost.
Under the equity method, the investment in the associate or joint venture is carried on the consolidated statements of
financial position at cost plus post-acquisition changes in the Company’s share of income and other comprehensive
income (“OCI”), less distributions of the investee. Goodwill on the acquisition of the associates and joint ventures is
included in the cost of the investments and is neither amortized nor assessed for impairment separately.
The financial statements of the Company’s equity-accounted for investments are prepared for the same reporting
period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those
of the Company. All intra-company unrealized gains resulting from intra-company transactions and dividends are
eliminated against the investment to the extent of the Company’s interest in the associate. Unrealized losses are
eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
After the application of the equity method, the Company determines at each reporting date whether there is any
objective evidence that the investment in the associate or joint venture is impaired and consequently, whether it is
necessary to recognize an additional impairment loss on the Company’s investment in its associate or joint venture.
If this is the case, the Company calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognizes the amount in the consolidated statements of income
and comprehensive income.
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method of accounting, which requires the Company
to identify and attribute values and estimated lives to the intangible assets acquired based on their estimated
fair value. These determinations involve significant estimates and assumptions regarding cash flow projections,
economic risk and weighted average cost of capital. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition-date fair value and the amount of any non-controlling interest in
the acquiree.
For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and
included in business acquisition, integration and restructuring costs.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be a financial asset or
liability will be recognized in accordance with International Accounting Standard (“IAS”) 39 - Financial Instruments:
Recognition and Measurement either in profit or loss or as a change to OCI. If the contingent consideration is
classified as equity, it should not be remeasured until it is finally settled within equity.
REVENUE RECOGNITION
Advertising revenues are recognized in the period in which the advertising is aired under broadcast contracts and
collection is reasonably assured.
Subscriber fee revenues are recognized monthly based on estimated subscriber levels for the period-end, which
are based on the preceding month’s actual subscribers as submitted by the broadcast distribution undertakings.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 The Company’s revenues related to production and distribution revenues from the distribution and licensing of film
rights; royalties from merchandise licensing, publishing and music contracts; sale of licenses, customer support,
training and consulting related to the animation software business; revenues from customer support; and sale of
books are recognized when the significant risks and rewards of ownership have transferred to the buyer; the amount
of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will
flow to the entity; the stage of completion of the transaction at the end of the reporting period can be measured
reliably; the costs incurred for the transaction and the costs to complete the transaction can be measured reliably;
and the Company does not retain either continuing managerial involvement or effective control.
Customer advances on contracts are recorded as unearned revenue until all of the foregoing revenue recognition
conditions have been met.
Non-refundable advances, whether recoupable or non-recoupable, on royalties are recognized when the license
period has commenced and collection is reasonably assured, unless there are future performance obligations
associated with the royalty advance for which, in that case, revenue recognition is deferred and recognized when
the performance obligations are discharged. Refundable advances are deferred and recognized as revenue as the
performance obligations are discharged.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term deposits with maturities of less than three months at the
date of purchase. Cash that is held in escrow, or otherwise restricted from use, is excluded from current assets and
is reported separately from cash and cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment
losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment, and borrowing
costs for long-term construction projects if the recognition criteria are met. When significant parts of property,
plant and equipment are required to be replaced at intervals, the Company recognizes such parts as individual
assets with specific useful lives and depreciation, respectively. Repair and maintenance costs are recognized in the
consolidated statements of income and comprehensive income as incurred.
Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets as follows:
Land and assets not available for use
Equipment
Broadcasting
Computer
Leasehold improvements
Buildings
Structure
Components
Furniture and fixtures
Other
Not depreciated
5 - 10 years
3 - 5 years
Lease term
20 - 30 years
10 - 20 years
7 years
4 - 10 years
An item of property, plant and equipment and any significant part initially recognized are derecognized upon disposal
or when no future economic benefits are expected from their use or disposal. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the consolidated statements of income and comprehensive income when the asset is derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at least annually and the
depreciation charge is adjusted prospectively, if appropriate.
BORROWING COSTS
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes
a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset.
All other borrowing costs are expensed in the period they are incurred.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
PROGRAM RIGHTS
Program rights represent contract rights acquired from third parties to broadcast television programs, feature films
and radio programs. The assets and liabilities related to these rights are recorded when the Company controls
the asset, the expected future economic benefits are probable and the cost is reliably measurable. The Company
generally considers these criteria to be met and records the assets and liabilities when the license period has begun,
the program material is accepted by the Company and the material is available for airing. Long-term liabilities related
to these rights are recorded at the net present value of future cash flows, using an appropriate discount rate. These
costs are amortized over the contracted exhibition period as the programs or feature films are aired. Program and
film rights are carried at cost less accumulated amortization. At each reporting date, the Company assesses its
program rights for indicators of impairment and, if any exist, the Company estimates the asset’s or cash generating
unit’s (“CGUs”) recoverable amount.
The amortization period and the amortization method for program rights are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the assets are accounted for by changing the amortization period or method, as appropriate,
and are treated as changes in accounting estimates. Amortization of program rights is included in direct cost of
sales, general and administrative expenses and has been disclosed separately in the consolidated statements of
cash flows.
FILM INVESTMENTS
Film investments represent the costs of projects in development, projects in process, the unamortized costs of
proprietary films and television programs that have been produced by the Company or for which the Company has
acquired distribution rights, and third-party-produced equity film investments. Such costs include development and
production expenditures and attributed studio and other costs that are expected to benefit future periods. Costs
are capitalized upon project greenlight for produced and acquired films and television programs.
The individual-film-forecast-computation method is used to determine amortization. Under this method, capitalized
costs and the estimated total costs of participations and residuals, net of anticipated federal and provincial program
contributions, production tax credits and coproducers’ share of production costs, are charged to amortization
expense on a series or program basis in the same ratio that current period actual revenues (numerator) bears to
estimated remaining unrecognized future revenues as of the beginning of the current fiscal year (denominator).
Future revenues are projected for periods generally not exceeding 10 years from the date of delivery or acquisition.
For episodic television series, future revenues include estimates of revenues over a period generally not exceeding
10 years from the date of delivery of the first episode or, if still in production, five years from the date of delivery
of the most recent episode, if later. Future revenues are based on historical sales performance for the genre of
series or program, the number of episodes produced and the availability of rights in each territory. Estimates of
future revenues can change significantly due to the level of market acceptance of film and television products.
Accordingly, revenue estimates are reviewed periodically and amortization is adjusted prospectively. In addition, if
revenue estimates change significantly with respect to a film or television program, the Company may be required
to write down all or a portion of the unamortized costs of such film or television program, therefore impacting direct
cost of sales, general and administrative expenses and profitability.
Projects in process represent the accumulated costs of television series or feature films currently in production.
Completed project and distribution rights are stated at the lower of unamortized cost and recoverable amount as
determined on a series or program basis. Revenue and cost forecasts for each production are evaluated at each
reporting date in connection with a comprehensive review of the Company’s film investments, on a title-by-title
basis. When an event or change in circumstances indicates that the recoverable amount of a film is less than its
unamortized cost, the carrying value is compared to the recoverable amount and if the carrying value is higher, the
carrying value is written down to the recoverable amount. The recoverable amount of the film is determined using
management’s estimates of future revenues under a discounted cash flow approach.
Third-party-produced equity film investments are carried at fair value. Cash received from an investment is recorded as
a reduction of such investment on the consolidated statements of financial position and the Company records income
on the consolidated statements of income and comprehensive income only when the investment is fully recouped.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Amortization of film investments is included in direct cost of sales, general and administrative expenses and has
been disclosed separately in the consolidated statements of cash flows.
GOODWILL AND INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired in a
business combination are measured at fair value as at the date of acquisition. Following initial recognition, intangible
assets are carried at cost less accumulated amortization and accumulated impairment charges, if any. Internally
generated intangible assets such as goodwill, brands and customer lists, excluding capitalized program and film
development costs, are not capitalized and expenditures are reflected in the consolidated statements of income
and comprehensive income in the year in which the expenditure is incurred.
Intangible assets are recognized separately from goodwill when they are separable or arise from contractual or
other legal rights and their fair value can be measured reliably. The useful lives of intangible assets are assessed as
either finite or indefinite.
Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment
whenever there is an indication that the intangible assets may be impaired. The amortization period and the
amortization method for intangible assets with finite useful lives are reviewed at least at the end of each reporting
period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the assets are accounted for by changing the amortization period or method, as appropriate, and
are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives
is recognized in the consolidated statements of income and comprehensive income in the expense category,
consistent with the function of the intangible assets.
Amortization is recorded on a straight-line basis over the estimated useful life of the asset as follows:
Brand names, trade marks and digital rights
Software, patents and customer lists
Agreement term
3 - 5 years
Intangible assets with indefinite useful lives are not amortized. Broadcast licenses are considered to have an
indefinite life based on management’s intent and ability to renew the licenses without significant cost and without
material modification of the existing terms and conditions of the license. The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the
amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If
this consideration is lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference
is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to a CGU
or group of CGUs that are expected to benefit from the synergies of the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units. The group of CGUs is not larger than the level at
which management monitors goodwill or the Company’s operating segments.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss
on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair value
of the operation disposed of and the portion of the CGU retained.
Broadcast licenses and goodwill are tested for impairment annually or more frequently if events or circumstances
indicate that they may be impaired. The Company completes its annual testing during the fourth quarter each year.
Broadcast licenses by themselves do not generate cash inflows and therefore, when assessing these assets for
impairment, the Company looks to the CGU to which the asset belongs. The identification of CGUs involves
judgment and is based on how senior management monitors operations; however, the lowest aggregations of
assets that generate largely independent cash inflows represent CGUs for broadcast license impairment testing.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 CGUs for broadcast license impairment testing
For the Television segment, the Company has determined that there are two CGUs: (1) specialty and pay television
networks that are operated and managed directly by the Company; and (2) other, as these are the levels at which
independent cash inflows have been identified.
For the Radio segment, the Company has determined that the CGU is a radio cluster whereby a cluster represents
a geographic area, generally a city, where radio stations are combined for the purpose of managing performance.
These clusters are managed as a single asset by a general manager and overhead costs are allocated amongst the
cluster and have independent cash inflows at the cluster level.
Groups of CGUs for goodwill impairment testing
For purposes of impairment testing of goodwill, the Company has grouped the CGUs within the Television and
Radio operating segments and is performing the test at the operating segment level. This is the lowest level at which
management monitors goodwill for internal management purposes.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statements of
income and comprehensive income when the asset is derecognized.
GOVERNMENT FINANCING AND ASSISTANCE
The Company has access to several government programs that are designed to assist film and television
production in Canada. Funding from certain programs provides a supplement to a series’ Canadian license fee
and is recorded as revenue when cash has been received. Government assistance with respect to federal and
provincial production tax credits is recorded as a reduction of film investments when eligible expenditures are made
and there is reasonable assurance of realization. Assistance in connection with internally produced film investments
is recorded as a reduction in film investments. The accrual of production tax credits on a contemporaneous basis
with production expenditures are based on a five-year historical trending of the ratio of actual production tax credits
received to total production tax credits applied for.
Government assistance with respect to digital activities is recorded as a reduction in the related expenses when
management has reasonable assurance that the conditions of the government programs are met.
Government grants approved for specific publishing projects are recorded as revenue when the related expenses
are incurred and there is reasonable assurance of realization.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of operations having a functional currency other than Canadian dollars are translated at the rate
of exchange at the consolidated statements of financial position date. Revenues and expenses are translated at
average exchange rates for the year. The resulting foreign currency translation adjustments are recognized in OCI.
Foreign currency transactions are translated into the functional currency at the rate of exchange at the transaction
date. Foreign currency denominated monetary assets and liabilities are translated into the functional currency at
the rate of exchange at the consolidated statements of financial position date. Gains and losses on translation of
monetary items are recognized in the consolidated statements of income and comprehensive income.
INCOME TAXES
Tax expense comprises current and deferred income taxes. Tax expense is recognized in the consolidated
statements of income, unless it relates to items recognized outside the consolidated statements of income. Tax
expense relating to items recognized outside of the consolidated statements of income is recognized in correlation
to the underlying transaction in either OCI or equity.
Current income tax
The Company records current income tax expense or recovery based on taxable income earned or loss incurred
for the period in each tax jurisdiction where it operates, and for any adjustment to taxes payable in respect of
previous years, using tax laws that are enacted or substantively enacted at the consolidated statements of
financial position date.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation. The Company establishes provisions related to tax uncertainties, where
appropriate, based on its best estimate of the amount that will ultimately be paid to or received from taxation
authorities.
Deferred income tax
The Company uses the liability method of accounting for deferred income taxes. Under this method, the Company
recognizes deferred income tax assets and liabilities for future income tax consequences attributable to temporary
differences between the financial statement carrying amounts of assets and liabilities and their respective income
tax bases, and on unused tax losses and tax credit carryforwards. The deferred tax assets and liabilities related to
intangible assets with indefinite useful lives have been measured based on the Company’s expectation that these
assets will be recovered through use. The Company measures deferred income taxes using tax rates and laws
that have been enacted or substantively enacted at the reporting date and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
The Company recognizes deferred income tax assets only to the extent that it is probable that future taxable profits
will be available against which the deductible temporary differences as well as unused tax losses and tax credit
carryforwards can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized. Unrecognized deferred tax assets
are reassessed at each reporting date and are recognized to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be recovered. The Company recognizes the effect of a change in
income tax rates in the period of enactment or substantive enactment.
Deferred income taxes are not recognized if they arise from the initial recognition of goodwill, nor are they recognized
on temporary differences arising from the initial recognition of an asset or liability in a transaction that is not a
business combination and that affects neither accounting nor taxable profit nor loss. Deferred income taxes are also
not recognized on temporary differences relating to investments in subsidiaries to the extent that it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
To determine the provision for income taxes, certain assumptions are made, including filing positions on certain
items and the ability to realize deferred tax assets. In the event the outcome differs from management’s assumptions
and estimates, the effective tax rate in future periods could be affected.
PROVISIONS
Provisions are recognized if the Company has a present legal or constructive obligation as a result of past events,
if it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation as of the date of the consolidated statements of financial position, taking into account the risks and
uncertainties surrounding the obligation. In some situations, external advice may be obtained to assist with
the estimates.
Provisions are discounted and measured at the present value of the expenditure expected to be required to settle
the obligation, using an after-tax discount rate that reflects the current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized
as interest expense. Future information could change the estimates and thus impact the Company’s financial
position and results of operations.
FINANCIAL INSTRUMENTS
Financial assets within the scope of IAS 39 - Financial Instruments: recognition and measurement are classified as
financial assets at fair value through profit or loss, loans and receivables or available-for-sale (“AFS”), as appropriate.
The Company determines the classification of its financial assets at initial recognition.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Financial instruments classified at fair value through profit or loss and financial assets classified as AFS are recognized
on the trade date, which is the date that the Company commits to purchase or sell the asset.
The Company has classified its financial instruments as follows:
Fair value through
profit or loss
Loans and
receivables
Available-for-sale
Other financial
liabilities
Derivatives
• Cash and cash equivalents
• Accounts receivable
• Loans and other
receivables included
in “investments and
intangibles”
• Promissory note
receivable
• Other portfolio
investments included
in “investments and
intangibles”
• Third-party-produced
equity film investments
• Accounts payable
and accrued liabilities
• Long-term debt
• Other long-term
financial liabilities
included in “Other
long-term liabilities”
• Derivatives that are part
of a cash flow hedging
relationship
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried at fair value. Changes in fair value are recognized in
other income (expense) in the consolidated statements of income and comprehensive income.
Loans and receivables
Loans and receivables are initially recognized at fair value plus transaction costs. They are subsequently measured
at amortized cost using the effective interest method less any impairment. Receivables are reduced by provisions
for estimated bad debts which are determined by reference to past experience and expectations.
Financial assets classified as AFS
Financial assets that are not classified as at fair value through profit or loss or as loans and receivables are classified
as AFS. A financial asset classified as AFS is initially recognized at its fair value plus transaction costs that are directly
attributable to the acquisition of the financial asset. AFS financial instruments are subsequently measured at fair
value, with unrealized gains and losses recognized in OCI and accumulated in accumulated other comprehensive
income (“AOCI”) until the investment is derecognized or determined to be impaired, at which time the cumulative
gain or loss is reclassified to the consolidated statements of income and comprehensive income and removed
from AOCI. AFS equity instruments not quoted in an active market where fair value is not reliably determinable are
recorded at cost less impairment, if any, determined based on the present values of expected future cash flows.
Other financial liabilities
Financial liabilities within the scope of IAS 39 are classified as other financial liabilities. The Company determines the
classification of its financial liabilities at initial recognition.
Other financial liabilities are measured at amortized cost using the effective interest rate method. Long-term
debt instruments are initially measured at fair value, which is the consideration received, net of transaction costs
incurred. Transaction costs related to the long-term debt instruments are included in the value of the instruments
and amortized using the effective interest rate method.
Derivatives
Derivatives that are part of an established and documented cash flow hedging relationship, such as interest rate
swap agreements, are presented at their fair value, with gains or losses arising from the revaluation at the end of
each year included in other comprehensive income (loss) to the extent of hedge effectiveness.
Instruments that have been entered into by the Company to hedge exposure to interest rate risk are reviewed on a
regular basis to ensure the hedges are still effective and that hedge accounting continues to be appropriate.
Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired, or when the
Company transfers its rights to receive cash flows from the asset and the associated risks and rewards to a third
party. The unrealized gains and losses recorded in AOCI are transferred to the consolidated statements of income
and comprehensive income on disposal of an AFS asset.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 Determination of fair value
Fair value is defined as the price at which an asset or liability could be exchanged in a current transaction between
knowledgeable, willing parties, other than in a forced or liquidation sale. The fair value of instruments that are
quoted in active markets is determined using the quoted prices where they represent those at which regularly and
recently occurring transactions take place. The Company uses valuation techniques to establish the fair value of
instruments where prices quoted in active markets are not available. Therefore, where possible, parameter inputs
to the valuation techniques are based on observable data derived from prices of relevant instruments traded in an
active market. These valuation techniques involve some level of management estimation and judgment, the degree
of which will depend on the price transparency for the instrument or market and the instrument’s complexity.
The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes
the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based
on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value
hierarchy are defined as follows:
Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets
and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
The fair values of cash and cash equivalents are classified within Level 1 because they are based on quoted prices
for identical assets in active markets.
The fair value of portfolio investments measured at fair value are classified within Level 2 because even though the
security is listed, it is not actively traded. The Company determines the fair value for interest rate swaps as the net
discounted future cash flows using the implied zero-coupon forward swap yield curve. The change in the difference
between the discounted cash flow streams for the hedged item and the hedging item is deemed to be hedge
ineffectiveness and is recorded in the consolidated statements of income. The fair value of the interest rate swap
is based on forward yield curves, which are observable inputs provided by banks and available in other public data
sources, and are classified within Level 2.
The fair value of the 4.25% Senior Unsecured Guaranteed Notes (“2020 Notes”) are classified within Level 2
because they are traded, however, in what is not considered an active market.
The fair value of third-party-produced equity film investments and the related forward purchase obligations are
classified within Level 3, as there is little to no market activity and the amounts recorded are based on a discounted
cash flow model and expected future cash flows.
The fair value of investments in venture funds is not reliably measured given the start-up nature of the underlying
investments of these funds and therefore, they are measured at cost.
HEDGES
Hedge accounting is applied to interest rate swap agreements to fix the interest rate on the term facility. In order to
apply hedge accounting, a high correlation (which indicates effectiveness) is required in the offsetting changes in
the values of the financial instruments (the hedging items) used to establish the designated hedging relationships
at inception and actual effectiveness for each reporting period thereafter. A designated hedging relationship is
assessed at inception for its anticipated effectiveness and actual effectiveness for each reporting period thereafter.
Any ineffectiveness, is reflected in the consolidated statements of income and other comprehensive income as
financing costs within other expense (income), net.
In the application of hedge accounting, an amount (the hedge value) is recorded on the consolidated statements
of financial position in respect of the fair value of the hedging item. The net difference, if any, between the amount
recognized in the determination of net income and the amounts necessary to reflect the fair value of the designated
cash flow hedging items on the consolidated statements of financial position is recognized as a component of OCI.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 SHARE-BASED COMPENSATION
The Company has a stock option plan, two Deferred Share Units (“DSUs”) plans, a Performance Share Units
(“PSUs”) plan and a Restricted Share Units (“RSUs”) plan, with units under such plans awarded to certain employees
and directors.
The fair value of the stock options granted which represent equity awards are measured using the Black-Scholes
option pricing model. For stock options, the model considers each tranche with graded vesting features as a
separate share option grant. Forfeitures for the stock options are estimated on the grant date and revised if the
actual forfeitures differ from previous estimates.
This fair value is recognized as share-based compensation expense over the vesting periods, with a related credit
to contributed surplus. The contributed surplus balance is reduced as options are exercised through a credit to
share capital. The consideration paid by option holders is credited to share capital when the options are exercised.
Eligible executives and non-employee directors may elect to receive DSUs equivalent in value to Class B Non-
Voting Shares of the Company in lieu of certain cash payments. Share-based compensation expense is recorded
in the year of receipt of the DSUs and changes in the fair value of outstanding DSUs, including deemed dividend
equivalents, are recorded as an expense in the period that they occur. These DSUs can only be redeemed once the
executive or director is no longer employed with the Company.
Eligible executives may be granted awards of DSUs, PSUs and RSUs equivalent in value to Class B Non-Voting
Shares of the Company. PSUs, DSUs and RSUs vest after three to five years and are settled in cash at the end of
the restriction period or in the case of DSUs when the executive is no longer employed with the Company. DSUs,
PSUs and RSUs are accrued over the three to five-year vesting period as share-based compensation expense and
a related liability.
Forfeitures are estimated on the grant date and revised if the actual forfeitures differ from the estimates. The liability
is recorded at fair value, which includes deemed dividend equivalents in the case of PSUs and DSUs, at each
reporting date. Accrued DSUs, PSUs and RSUs are recorded as long-term liabilities, except for the portion that will
vest within 12 months which is recorded as a current liability.
Each DSU, PSU and RSU entitles the participant to receive a cash payment in an amount equal to the 20-day
volume weighted average price (“VWAP”) of Class B Non-Voting Shares traded on the TSX at the end of the
restriction period, multiplied by the number of vested units determined by achievement of vesting conditions.
The cost of share-based compensation is included in direct cost of sales, general and administrative expenses.
EMPLOYEE BENEFITS
The Company has previously early adopted IAS 19 - Employee Future Benefits (as amended in 2011) fully and
retrospectively.
The Company maintains capital accumulation (defined contribution) and defined benefit employee benefit plans.
Company contributions to capital accumulation plans are expensed as incurred.
The defined benefit plans are unfunded plans for members of senior management and funded plans for certain other
employees. The costs of providing benefits under the defined benefit plans are calculated by independent actuaries
separately for each plan using the projected unit credit method prorated on service and management’s best
estimate of assumptions of salary increases and retirement ages of employees. On an interim basis, management
estimates the changes in the actuarial gains and losses. These estimates are adjusted when the annual valuation
or estimate is completed by the independent actuaries. The present value of the defined benefit obligations are
determined by discounting estimated future cash flows using a discount rate based on high-quality corporate
bonds with maturities that match the expected maturity of the obligations. A lower discount rate would result in a
higher employee benefit obligation.
Current service, interest and past service costs and gains or losses on settlement are recognized in the consolidated
statements of income and comprehensive income. Actuarial gains and losses for the plans are recognized in full in
the period in which they occur in OCI. Such actuarial gains and losses are also immediately recognized in retained
earnings and are not reclassified to profit or loss in subsequent periods. The asset or liability that is recognized
81
CORUS ENTERTAINMENT ANNUAL REPORT 2014 on the consolidated statements of financial position is the present value of the defined benefit obligation at the
reporting date less the fair value of the plans’ assets. For the funded plans, the value of any additional minimum
funding requirements (as determined by the applicable pension legislation) is recognized to the extent that the
amounts are not considered recoverable. Recoverability is primarily based on the extent to which the Company can
reduce the future contributions to the plans.
Past service costs are recognized immediately upon the introduction of, or changes to, the defined benefit plans.
IMPAIRMENT OF LONG-LIVED ASSETS
At each reporting date, the Company assesses its long-lived assets, including property, plant and equipment,
program and film rights, film investments, goodwill and intangible assets, for potential indicators of impairment, such
as an adverse change in business climate that may indicate that these assets may be impaired. If any impairment
indicator exists, the Company estimates the asset’s recoverable amount. The recoverable amount is determined for
an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets, in which case the asset is assessed as part of the CGU to which it belongs. An asset’s or CGU’s recoverable
amount is the higher of its fair value less costs to sell (“FVLCS”) and its value in use (“VIU”). The determination of
the recoverable amount in the impairment assessment requires estimates based on quoted market prices, prices
of comparable businesses, present value or other valuation techniques, or a combination thereof, necessitating
management to make subjective judgments and assumptions.
The Company records impairment losses on its long-lived assets when the Company believes that their carrying
value may not be recoverable. For assets excluding goodwill, an assessment is made at each reporting date as
to whether there is any indication that previously recognized impairment losses may no longer exist or may have
decreased. If the reasons for impairment no longer apply, impairment losses may be reversed up to a maximum of
the carrying amount of the respective asset if the impairment loss had not been recognized.
Goodwill
Goodwill is reviewed for impairment annually or more frequently if there are indications that impairment may have
occurred.
Goodwill is allocated to a CGU or group of CGUs for the purposes of impairment testing based on the level at which
management monitors it, which is not larger than an operating segment. The Company records an impairment loss
if the recoverable amount of the CGU or group of CGUs is less than the carrying amount.
Refer to note 10 for further details on the Company’s annual impairment testing for goodwill.
Broadcast licenses
Broadcast licenses are reviewed for impairment annually or more frequently if there are indications that impairment
may have occurred.
Broadcast licenses are allocated to a CGU for the purposes of impairment testing. The Company records an
impairment loss if the recoverable amount of the CGU is less than the carrying amount.
Refer to note 10 for further details on the Company’s annual impairment testing for broadcast licenses.
Intangible assets and property, plant and equipment
The useful lives of the intangible assets with definite lives (which are amortized) and property, plant and equipment
are confirmed at least annually and only tested for impairment if events or changes in circumstances indicate that
an impairment may have occurred.
LEASES
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement
at the inception date: whether fulfillment of the arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset. Where the Company is the lessee, asset values recorded
under finance leases are amortized on a straight-line basis over the period of expected use. Obligations recorded
under finance leases are reduced by lease payments net of imputed interest. Operating lease commitments, for
which lease payments are recognized as an expense in the consolidated statements of income and comprehensive
income, are recognized on a straight-line basis over the lease term.
82
CORUS ENTERTAINMENT ANNUAL REPORT 2014 EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted average number of common shares outstanding during
the year. The computation of diluted earnings per share assumes the basic weighted average number of common
shares outstanding during the year is increased to include the number of additional common shares that would
have been outstanding if the dilutive potential common shares had been issued. The dilutive effect of stock options
is determined using the treasury stock method.
USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires management to make estimates, judgments
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting periods. Estimates and judgments are continually evaluated
and are based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results.
The most significant estimates made by management in the preparation of the Company’s consolidated financial
statements include estimates related to:
• future revenue projections used in determining amortization of film investments;
• the recoverability of long-lived assets including property, plant and equipment, program and film rights, film
investments, goodwill, broadcast licenses and intangible assets;
• determining fair value of share-based compensation;
• certain actuarial and economic assumptions used in determining defined benefit pension costs, accrued
pension benefit obligations and pension plan assets;
• the estimated useful lives of assets; and
• tax provisions and uncertain tax positions in each of the jurisdictions in which the Company operates.
The most significant judgments made by management in the preparation of the Company’s consolidated financial
statements include judgments related to:
• assessments about whether line items are sufficiently material to warrant separate presentation in the primary
financial statements and, if not, whether they are sufficiently material to warrant separate presentation in the
financial statement notes;
• identifying CGUs;
• the allocation of our net assets including shared corporate and administrative assets, to our CGUs when
determining their carrying amounts;
• determining that broadcast licenses have indefinite lives;
• determining control for purposes of consolidation of an investment; and
• determining tax rate for recognition of deferred income tax on broadcast licenses.
The significant assumptions that affect these estimates and judgments in the application of accounting policies are
noted throughout these consolidated financial statements.
CHANGES IN ACCOUNTING POLICIES
In December 2011, the IASB amended both IAS 32 - Financial Instruments: Presentation and IFRS 7 - Financial
Instruments: Disclosures by moving the disclosure requirements in IAS 32 to IFRS 7 and enhancing the disclosures
about offsetting financial assets and liabilities. The effective date of the amendments is for the Company’s fiscal year
commencing September 1, 2013. The Company has assessed the impact of these amendments and determined
there is no impact on its consolidated financial statements.
IFRS 10 - Consolidated Financial Statements
IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS
10 supersedes SIC-12 - Consolidation – Special Purpose Entities and replaces parts of IAS 27 - Consolidated
83
CORUS ENTERTAINMENT ANNUAL REPORT 2014
and Separate Financial Statements. The effective date of this amendment is for the Company’s fiscal year
commencing September 1, 2013. The adoption of this standard had no impact on the Company’s consolidated
financial statements.
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements,
associates and unconsolidated structured entities. The standard carries forward existing disclosures and also
introduces significant additional disclosure requirements that address the nature of, and risks associated with,
an entity’s interest in other entities. IFRS 12 replaces the previous disclosure requirements included in IAS 27 -
Consolidated and Separate Financial Statements, IAS 31 - Joint Ventures and IAS 28 - Investments in Associates.
The effective date of this amendment is for the Company’s fiscal year commencing September 1, 2013. The adoption
of this standard affects disclosures but does not have an impact on the recognized amounts or measurements in
the consolidated financial statements.
IFRS 13 - Fair Value Measurement
IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS
standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement. The effective date
of this amendment is for the Company’s fiscal year commencing September 1, 2013. The adoption of this standard
affected disclosures but does not otherwise have a material impact on the consolidated financial statements.
IAS 28 - Investments in Associates and Joint Ventures
The IASB also amended IAS 28, an existing standard, to include joint ventures in its scope and to address the
changes in IFRS 10 to IFRS 12. The effective date of this amendment is for the Company’s fiscal year commencing
September 1, 2013. The adoption of the standard had the impact noted in IFRS 11 - Joint Arrangements below.
IAS 36 - Impairment of Assets
The Company has early adopted the amendments of IAS 36, Recoverable Amount of Disclosures for Non-Financial
Assets, effective September 1, 2013. These amendments amend the disclosure requirement relating to non-
financial assets such that companies are required to disclose the recoverable amount of an asset (or CGU) only in
periods in which impairment has been recorded or reversed in respect of that asset (or CGU). The amendments
also expand and clarify the disclosure requirements when an asset’s (or CGU’s) recoverable amount has been
determined on the basis of FVLCS. The amendment is effective for annual periods beginning on or after January
1, 2014, retrospectively, with early adoption permitted. The Company has elected to early adopt the provisions of
these amendments in these consolidated financial statements.
IFRS 11 - Joint Arrangements
IFRS 11 replaced IAS 31 - Interests in Joint Ventures and SIC 13 - Jointly Controlled Entities - Non-monetary
Contributions by Ventures. The standard eliminates the use of the proportionate consolidation method to account
for jointly controlled entities. Joint ventures as defined in IFRS 11 have been accounted for using the equity method of
accounting while, for a joint operation, the venturer will recognize its right to and obligations for the assets, liabilities,
revenues and expenses of the joint operation. The new standard was effective for Corus’ fiscal year commencing
September 1, 2013 with retroactive application to September 1, 2012. Historically, the Company proportionately
consolidated its jointly controlled entity, TELETOON Canada Inc. With the adoption of this standard, the revenues,
expenses, assets and liabilities from these operations for Corus’ prior fiscal year are no longer proportionately
consolidated in the Company’s consolidated financial statements but have been replaced by “Investment in joint
ventures” in the consolidated statements of financial position and the Company’s share of the joint venture’s income
is contained in other expense (income), net in the consolidated statements of income and comprehensive income.
The effect of the Company’s retroactive application of this standard is summarized below for the consolidated
statements of financial position, income and comprehensive income, and cash flows for the periods indicated.
84
CORUS ENTERTAINMENT ANNUAL REPORT 2014 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Assets
Cash and cash equivalents
Accounts receivable
Promissory note receivable
Income taxes recoverable
Prepaid expenses and other
Total current assets
Tax credits receivable
Investments and intangibles
Investment in joint ventures
Property, plant and equipment
Program and film rights
Film investments
Broadcast licenses
Goodwill
Deferred tax assets
August 31, 2013
September 1, 2012
Originally
Reported
IFRS 11
Adjustment
Restated
Originally
Reported
IFRS 11
Adjustment
Restated
86,081
176,504
47,759
341
16,416
(4,815)
(12,202)
—
10
(24)
81,266
164,302
47,759
351
16,392
24,588
173,421
—
9,542
12,664
(5,390)
(10,076)
—
—
(45)
19,198
163,345
—
9,542
12,619
327,101
(17,031)
310,070
220,215
(15,511)
204,704
41,564
42,975
—
151,398
289,181
62,734
563,771
674,393
39,463
—
—
125,931
(206)
(56,594)
(460)
(48,735)
(28,348)
—
41,564
42,975
125,931
151,192
232,587
62,274
515,036
646,045
39,463
43,865
42,390
—
163,563
271,244
67,983
569,505
674,393
28,327
—
—
121,704
(283)
(41,938)
(136)
(48,735)
(28,348)
—
43,865
42,390
121,704
163,280
229,306
67,847
520,770
646,045
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
Income taxes payable
Provisions
Total current liabilities
Long-term debt
Other long-term liabilities
Deferred tax liabilities
Total liabilities
172,663
—
3,941
(8,220)
—
—
164,443
—
3,941
185,991
—
2,322
(8,624)
1,303
—
177,367
1,303
2,322
176,604
(8,220)
168,384
188,313
(7,321)
180,992
538,966
105,020
151,157
—
(11,779)
(5,444)
538,966
93,241
145,713
518,258
87,853
150,971
—
(265)
(5,661)
518,258
87,588
145,310
971,747
(25,443)
946,304
945,395
(13,247)
932,148
Shareholders’ Equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
937,183
7,221
256,517
1,653
Total equity attributable to shareholders
1,202,574
Equity attributable to non-controlling interest
18,259
Total shareholders’ equity
1,220,833
—
—
—
—
—
—
—
937,183
7,221
256,517
1,653
910,005
7,835
198,445
(812)
1,202,574
1,115,473
18,259
20,617
—
—
—
—
—
—
910,005
7,835
198,445
(812)
1,115,473
20,617
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
85
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Year ended August 31, 2013
Revenues
Direct cost of sales, general and administrative expenses
Segment profit
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Debt refinancing
Business acquisition, integration and restructuring costs
Gain on sale of associated company
Other expense (income), net
Income from joint ventures
Income before income taxes
Income tax expense
Net income for the period
Net income attributable to:
Shareholders
Non-controlling interest
Earnings per share attributable to shareholders:
Basic
Diluted
Net income for the period
Other comprehensive income, net of tax:
Items that may be reclassified subsequently to net income:
Unrealized foreign currency translation adjustment
Unrealized change in fair value of available-for-sale investments
Actuarial gain on employee future benefits
Comprehensive income for the period
Comprehensive income attributable to:
Shareholders
Non-controlling interest
Originally
Reported
803,541
533,529
270,012
26,903
46,332
5,734
25,033
7,343
(55,394)
8,553
—
205,508
39,759
165,749
159,895
5,854
165,749
$ 1.91
$ 1.90
165,749
2,333
132
616
3,081
168,830
162,976
5,854
168,830
IFRS 11
Adjustment
(52,005)
(32,967)
(19,038)
(91)
(1,537)
—
—
—
—
(20)
(12,093)
(5,297)
(5,297)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Restated
751,536
500,562
250,974
26,812
44,795
5,734
25,033
7,343
(55,394)
8,533
(12,093)
200,211
34,462
165,749
159,895
5,854
165,749
$ 1.91
$ 1.90
165,749
2,333
132
616
3,081
168,830
162,976
5,854
168,830
86
CORUS ENTERTAINMENT ANNUAL REPORT 2014
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating Activities
Net income for the period
Add (deduct) non-cash items:
Depreciation and amortization
Broadcast license and goodwill impairment
Amortization of program and film rights
Amortization of film investments
Deferred income taxes
Investment impairments
Share-based compensation expense
Imputed interest
Debt refinancing
Gain on sale of associated company
Other
Net change in non-cash working capital balances related to operations
Payment of program and film rights
Net additions to film investments
Cash provided by operating activities
Investing Activities
Additions to property, plant and equipment
Dividends from investment in joint ventures
Net cash flows for investments and intangibles
Other
Cash used in investing activities
Financing Activities
Decrease in bank loans
Issuance of notes
Redemption of notes
Financing fees
Issuance of shares under stock option plan
Shares repurchased
Dividends paid
Dividends paid to non-controlling interest
Other
Cash used in financing activities
Net change in cash and cash equivalents during the period
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
Year ended August 31, 2013
Originally
Reported
IFRS 11
Adjustment
Restated
165,749
—
165,749
26,903
5,734
190,176
25,759
(11,332)
7,121
1,586
11,816
25,033
(55,394)
700
4,584
(185,327)
(46,074)
167,034
(13,043)
—
(10,855)
(652)
(24,550)
(29,925)
550,000
(500,000)
(26,732)
884
(1,464)
(56,696)
(6,331)
(10,727)
(80,991)
61,493
24,588
86,081
(91)
—
(21,293)
—
—
—
—
(1,537)
—
—
(15,093)
2,184
25,525
—
(10,305)
14
10,866
—
—
10,880
—
—
—
—
—
—
—
—
—
—
575
(5,390)
(4,815)
26,812
5,734
168,883
25,759
(11,332)
7,121
1,586
10,279
25,033
(55,394)
(14,393)
6,768
(159,802)
(46,074)
156,729
(13,029)
10,866
(10,855)
(652)
(13,670)
(29,925)
550,000
(500,000)
(26,732)
884
(1,464)
(56,696)
(6,331)
(10,727)
(80,991)
62,068
19,198
81,266
PENDING ACCOUNTING CHANGES
IFRS 9 - Financial Instruments: Classification and Measurement
In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of
its project to replace IAS 39. In October 2010, the IASB also incorporated new accounting requirements for
liabilities. The standard introduces new requirements for measurement and eliminates the current classification
of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements
for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. In 2013, the IASB also
incorporated new accounting requirements for hedging and introduced a new expected-loss impairment model
that will require more timely recognition of expected credit losses. Specifically, the new standard requires entities to
account for expected credit losses from when financial instruments are first recognized and to recognize full lifetime
expected losses on a timelier basis. The effective date of this pronouncement has been tentatively set to be effective
87
CORUS ENTERTAINMENT ANNUAL REPORT 2014
for annual periods beginning on or after January 1, 2018. The Company is in the process of reviewing the standard
to determine the impact on the consolidated financial statements.
IFRIC 21 - Levies
In May 2013, the IFRS Interpretations Committee (IFRIC), with the approval of the IASB, issued IFRIC 21 – Levies.
IFRIC 21 provides guidance on when to recognize a liability to pay a levy imposed by government that is accounted
for in accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 is effective for
annual periods beginning on or after January 1, 2014, which will be September 1, 2014 for Corus and is to be
applied retrospectively. The Company has assessed the impact of this standard and there is no impact on the
consolidated financial statements.
IFRS 15 - Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, which replaces IAS 18 - Revenues and covers principles for reporting about
the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. IFRS 15
is effective for annual periods beginning on or after January 1, 2017, which will be September 1, 2017 for Corus. The
Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.
IAS 16 - Property, Plant and Equipment and IAS 38 – Intangibles
In May 2014, the IASB issued amendments to IAS 16 and IAS 38, prohibiting the use of revenue-based depreciation
for property, plant and equipment and significantly limiting the use of revenue-based amortization for intangible
assets. These amendments are effective for annual periods beginning on or after January 1, 2016, which will be
September 1, 2016 for Corus and is to be applied prospectively. The Company is in the process of reviewing the
standard to determine the impact on the consolidated financial statements.
4. ACCOUNTS RECEIVABLE
Trade
Other
Less allowance for doubtful accounts
5. INVESTMENTS AND INTANGIBLES
Balance - September 1, 2012
Increase (decrease) in investment
Investment impairment
Equity loss in associates
Dividends from associates
Amortization of intangible assets
Fair value adjustment
Balance - August 31, 2013
Increase in investment
Investment impairment
Equity loss in associates
Amortization of intangible assets
Fair value adjustment
Balance - August 31, 2014
2014
168,969
19,840
188,809
5,800
183,009
Intangibles
Investments in
associates
13,452
10,690
—
—
—
(4,416)
—
19,726
4,434
—
—
(7,177)
—
16,983
20,438
(8,606)
(3,399)
(138)
(1,100)
—
(485)
6,710
4,268
(706)
(1,685)
—
—
8,587
Other
8,500
7,887
—
—
—
—
152
16,539
5,006
—
—
—
515
22,060
2013
152,911
13,880
166,791
2,489
164,302
Total
42,390
9,971
(3,399)
(138)
(1,100)
(4,416)
(333)
42,975
13,708
(706)
(1,685)
(7,177)
515
47,630
INTANGIBLES
Intangible assets are comprised of software, patents, customer lists, brand names, trade marks and digital rights.
The Company expects the net book value of intangible assets with a finite life to be amortized by December 2020.
88
CORUS ENTERTAINMENT ANNUAL REPORT 2014
OTHER
Other is primarily comprised of investments in venture funds. These venture funds invest in early growth stage
companies that are pursuing opportunities in technology, mobile media and consumer sectors.
INVESTMENTS IN ASSOCIATES
In assessing the level of control or influence that the Company has over an investment, management considers
ownership percentages, board representation, as well as other relevant provisions in shareholder agreements. The
Company exercises significant influence over the following investments which have been accounted for using the
equity method and are included in investments in associates.
Fingerprint Digital Inc.
Fingerprint is a technology company providing a turnkey mobile solution to content creators and distributors seeking
to link mobile offerings within one branded network. Its focus is educational gaming platforms for kids and their
parents across any connected device.
Food Network Canada (“Food Network”)
Food Network is a Canadian Category A specialty television network. This brand is the destination for Canadians
for all things food-related and provides entertainment programming related to food and nutrition.
Food Network had been classified as an associated business based on management’s judgment that the Company
has, based on rights to board representation and other provisions in the shareholder agreement, significant influence
despite owning only 19.9% of the voting rights. On April 30, 2013, the Company disposed of its interest in Food
Network Canada, which had a carrying value of $11,388 on the disposition date (note 26).
KidsCo Limited
KidsCo Limited was an international children’s television channel for preschoolers, children aged 6 to 10 and
families. The channel was available in 18 languages and presented in over 100 territories on satellite, cable and IPTV
platforms across Europe, Asia, Africa, Australia and the Middle East.
At August 31, 2013, the Company performed its annual impairment test for fiscal 2013 and determined that this
investment was impaired based on expected future cash flows. As a result, an impairment charge was recorded
in other expense (income), net of $3,399. On December 31, 2013, KidsCo ceased business and was wound up.
SoCast Inc. (formerly Supernova Interactive Inc.)
SoCast Inc. is a digital media company that develops and creates software service platforms, including its social
relationship management platform for entertainment companies.
The following amounts represent the Company’s share in the financial position and results of operations of the
associates:
As at August 31,
Assets
Liabilities
Net assets
For the year ended August 31,
Revenues
Expenses
Net loss for the year
2014
8,926
339
8,587
2014
320
2,005
(1,685)
2013
7,025
315
6,710
2013
13,620
13,758
(138)
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
6. PROPERTY, PLANT AND EQUIPMENT
Cost
Balance - September 1, 2012
Additions
Disposals and retirements
Balance - August 31, 2013
Additions
Acquisitions
Disposals and retirements
Balance - August 31, 2014
Accumulated depreciation
Balance - September 1, 2012
Depreciation
Disposals and retirements
Balance - August 31, 2013
Depreciation
Impairments
Disposals and retirements
Balance - August 31, 2014
Net book value
August 31, 2013
August 31, 2014
Broadcasting
and computer
equipment
Buildings and
leasehold
improvements
Furniture
and
fixtures
Other
Total
155,009
11,505
(25,642)
140,872
8,874
783
(4,414)
104,666
2,161
(726)
106,101
1,483
—
(154)
20,210
810
(2,233)
18,787
134
37
(383)
3,732
—
(1,269)
2,463
2,109
80
(92)
289,156
14,476
(29,870)
273,762
12,600
900
(5,043)
146,115
107,430
18,575
4,560
282,219
97,826
16,545
(25,286)
89,085
11,709
—
(4,886)
95,908
17,906
5,791
(587)
23,110
5,971
1,240
(123)
8,825
2,541
(2,227)
9,139
2,423
—
(369)
1,319
118
(201)
1,236
90
—
(24)
125,876
24,995
(28,301)
122,570
20,193
1,240
(5,402)
30,198
11,193
1,302
138,601
Land
5,539
—
—
5,539
—
—
—
5,539
—
—
—
—
—
—
—
—
5,539
5,539
51,787
50,207
82,991
77,232
9,648
1,227
151,192
7,382
3,258
143,618
Included in property, plant and equipment are assets under finance lease with a cost of $28,297 at August 31, 2014
(2013 - $27,355) and accumulated depreciation of $19,080 (2013 - $16,764).
7. PROGRAM AND FILM RIGHTS
Balance - September 1, 2012
Additions
Transfers from film investments
Amortization
Balance - August 31, 2013
Additions
Transfers from film investments
Acquisitions (note 26)
Amortization
Balance - August 31, 2014
Cost
Accumulated amortization
Net book value
229,306
154,371
17,793
(168,883)
232,587
220,966
6,984
77,539
(207,639)
330,437
2013
710,824
478,237
232,587
2014
967,159
636,722
330,437
The Company expects that 50% of the net book value of program and film rights will be amortized during the year
ended August 31, 2015. The Company expects the net book value of program and film rights to be amortized by
September 2019.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
8. FILM INVESTMENTS
The following table sets out the continuity for film investments, which include the Company’s internally produced
proprietary film and television programs, acquired distribution rights and third-party-produced equity film investments:
Balance - September 1, 2012
Additions
Tax credit accrual
Transfer to program and film rights
Investment impairment
Amortization
Balance - August 31, 2013
Additions
Tax credit accrual
Transfer to program and film rights
Amortization
Balance - August 31, 2014
67,847
63,670
(21,969)
(17,793)
(3,722)
(25,759)
62,274
47,774
(19,801)
(6,984)
(19,808)
63,455
At August 31, 2014, the Company performed an impairment test on certain third-party-produced equity film
investments and determined no impairments were present based on expected future cash flows. In 2013, an
impairment charge was recorded in other expense of $3,722.
Cost
Accumulated amortization
Net book value
2014
953,238
889,783
63,455
2013
925,885
863,611
62,274
The Company expects that 34% of the net book value of film investments will be amortized during the year
ended August 31, 2015. The Company expects the net book value of film investments to be fully amortized
by August 2023.
9. BROADCAST LICENSES AND GOODWILL
Broadcast licenses and goodwill are tested for impairment annually as at August 31, or more frequently if events
or changes in circumstances indicate that they may be impaired. During the second and third quarters of fiscal
2014, the Company concluded that interim impairment tests were required for goodwill for the Radio segment and
for broadcast licenses for certain Radio CGUs. As a result of these tests, the Company recorded goodwill and
broadcast license impairment charges of $65.5 million and $17.5 million in fiscal 2014, respectively, as certain radio
CGUs had actual results that fell short of previous estimates and the outlook for these markets was less robust.
At August 31, 2014, the Company performed its annual impairment test for fiscal 2014 and determined that there
were no further impairments, other than those recorded in the second and third quarters of fiscal 2014, for the year
then ended. The changes in the book value of goodwill were as follows:
Balance - August 31, 2012
Balance - August 31, 2013
Acquisitions (note 26)
Impairments (note 10)
Balance - August 31, 2014
Total
646,045
646,045
354,363
(65,549)
934,859
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
The changes in the book value of broadcast licenses for the period ended August 31, 2014, were as follows:
Balance - August 31, 2012
Impairments
Balance - August 31, 2013
Acquisitions (note 26)
Impairments (note 10)
Balance - August 31, 2014
Total
520,770
(5,734)
515,036
482,399
(17,451)
979,984
At August 31, 2013 the Company performed its annual impairment test for fiscal 2013. As certain CGUs had actual
results that fell short of previous estimates and the outlook for these markets was less robust, impairment losses of
$5,734 were recorded for certain Radio broadcast licenses.
Broadcast licenses and goodwill are located primarily in Canada.
10. IMPAIRMENT TESTING
At each reporting date, the Company is required to assess its intangible assets and goodwill for potential indicators
of impairment such as an adverse change in business climate that may indicate that these assets may be impaired.
If any such indication exists, the Company estimates the recoverable amount of the asset or CGU and compares
it to the carrying value. In addition, irrespective of whether there is any indication of impairment, the Company is
required to test intangible assets with an indefinite useful life and goodwill for impairment at least annually.
For long-lived assets other than goodwill, the Company is also required to assess, at each reporting date, whether
there is any indication that previously recognized impairment losses may no longer exist or may have decreased.
The Company completes its annual testing during the fourth quarter of each fiscal year.
The test for impairment of either an intangible asset or goodwill is to compare the recoverable amount of the asset
or CGU to the carrying value. The recoverable amount is the higher of an asset’s or CGU’s FVLCS and its VIU. The
recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets (such as broadcast licenses and goodwill) and
the asset’s VIU cannot be determined to equal its FVLCS. If this is the case, the recoverable amount is determined
for the CGU to which the asset belongs.
The Company has determined the VIU calculation is higher than FVLCS and therefore, the recoverable amount for
all CGUs or groups of CGUs is based on VIU with the exception of two Radio CGUs.
In determining FVLCS, recent market transactions are taken into account, if available. If no such transactions can
be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples,
quoted share prices for publicly traded subsidiaries or other available fair value indicators.
The VIU calculation uses cash flow projections generally for a five-year period and a terminal value. The terminal
value is the value attributed to the CGU’s operations beyond the projected period using a perpetuity growth rate.
The assumptions in the VIU calculations are segment profit growth rates (for periods within the cash flow projections
and in perpetuity for the calculation of the terminal value), future levels of capital expenditures and discount rates.
Segment profit growth rates and future levels of capital expenditures are based on management’s best estimates
considering historical and expected operating plans, strategic plans, economic considerations and the general
outlook for the industry and markets in which the CGU operates. The projections are prepared separately for each
of the Company’s CGUs to which the individual assets are allocated and are based on the most recent financial
budgets approved by the Company’s Board of Directors and management forecasts generally covering a period of
five years with growth rate assumptions over this period. For longer periods, a terminal growth rate is determined
and applied to project future cash flows after the fifth year.
• The discount rate applied to each asset, CGU or group of CGUs to determine VIU is a pre-tax rate that reflects
an optimal debt-to-equity ratio and considers the risk-free rate, market equity risk premium, size premium and
the risks specific to each asset or CGU’s cash flow projections.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
• In calculating the VIU, the Company uses an appropriate range of discount rates in order to establish a range
of values for each CGU or group of CGUs.
The pre-tax discount and growth rates used by the Company for the purpose of its VIU calculations performed for
each of the following groups of CGUs in the following periods were:
2014
2013
Television
Managed brands
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
Other
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
Radio
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
11% - 13%
4.3% - 13.6%
2%
11% - 13%
4.3% - 13.6%
2%
13% - 15%
2.0% - 8.1%
2%
11% - 13%
0% - 4.6%
2%
11% - 13%
0% - 4.6%
2%
12% - 14%
5.0% - 7.1%
2%
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced
to the recoverable amount and the reduction is recorded as an impairment loss in the consolidated statements of
income and comprehensive income.
If the recoverable amount of the CGU or group of CGUs is less than its carrying amount, an impairment loss is
recognized. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the
CGU or group of CGUs and then to the other assets of the CGU or group of CGUs pro rata on the basis of the
carrying amount for each asset in the CGU or group of CGUs. The individual assets in the CGU cannot be written
down below their fair value less costs to sell, if determinable.
Except for goodwill, a previously recognized impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss
been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of income
and comprehensive income.
In the second quarter of fiscal 2014, the Company determined that there was a broadcast license impairment in
two Radio CGUs in Ontario. For one CGU, the Company used VIU to determine the recoverable amount, which
resulted in an impairment charge of $6,000, while the FVLCS was used for the second CGU, which resulted in an
impairment charge of $2,000 that reduced the carrying value (primarily broadcast licenses) of these CGUs to their
recoverable amount. The recoverable amount for the Radio segment group of CGUs’ overall goodwill impairment
test was based on VIU.
In the third quarter of fiscal 2014, operating results in the Radio segment fell below previous estimates made in
the second quarter, as the Radio segment continued to experience a soft advertising market and rating challenges
in some markets. As well, the overall radio advertising market experienced a year-over-year decline in the quarter
and on a year-to-date basis, causing the Company to lower its cash flow projections to reflect a weaker near term
outlook. As a result, the Company determined there was a broadcast license impairment in three Radio CGUs in
Ontario and one in British Columbia, as well as a goodwill impairment in the Radio segment group of CGUs overall.
In the third quarter of fiscal 2014, for three CGUs, the Company used VIU to determine the recoverable
amount, while the FVLCS was used for one CGU, which resulted in impairment charges totalling $10,691
(predominantly comprised of broadcast license impairments) that reduced the carrying values of these CGUs
to their recoverable amount at the end of the third quarter. The recoverable amount of these CGUs after the
impairment charges is $49,171.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
The recoverable amount for the Radio segment group of CGUs’ overall goodwill impairment test was based on
VIU. In the third quarter of fiscal 2014, the Company recognized an impairment charge of $65,549 based on the
conclusions stated in the preceding paragraph. The recoverable amount and carrying value of the Radio segment
group of CGUs after the impairment charge is approximately $378,689.
Sensitivity to changes in assumptions
An increase of 50 basis points in the pre-tax discount rate, a decrease of 50 basis points in the earnings growth rate
each year, or a decrease of 50 basis points in the terminal growth rate, each used in isolation to perform the Radio
goodwill impairment test, would have resulted in additional goodwill impairment in the Radio segment of between
$1,600 and $8,000. However, no material additional broadcast license impairments would arise.
The Company has completed its annual impairment testing of goodwill and intangible assets for fiscal 2014. There
were no additional impairment losses to be recorded as a result of the testing. The Company also assessed for
any indicators of whether previous impairment losses had decreased. No previously recorded impairment losses
on broadcast licenses were reversed.
The carrying amounts of goodwill and broadcast licenses allocated to each CGU and/or group of CGUs are set out
in the following tables:
Goodwill
Television
Radio
Broadcast licenses
Television
Managed brands
Other
Radio(1)
2014
2013
760,760
174,099
934,859
412,764
233,281
646,045
2014
2013
825,000
7,424
147,560
979,984
351,101
7,424
156,511
515,036
(1) Broadcast licenses for Radio consist of all Radio CGUs combined. There is no individual Radio CGU that comprises more than 10% of the total broadcast licenses balance.
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are comprised of the following:
Trade accounts payable and accrued liabilities
Program rights payable
Film investment accruals
Dividends payable
Financing lease accruals
2014
86,023
63,061
3,111
15,578
2,638
2013
70,552
74,456
2,620
14,358
2,457
170,411
164,443
94
CORUS ENTERTAINMENT ANNUAL REPORT 2014
12. PROVISIONS
The Company recorded restructuring charges of $3,930 (2013 – $4,424) primarily related to severance and
employee related costs as a result of the business acquisitions and the related integration. The Company anticipates
that these provisions will be substantially paid by fiscal 2015.
The continuity of provisions is as follows:
Restructuring
Balance, beginning of period
Additions
Payments
Balance, end of period
Long term portion
Total current restructuring provision
Legal claims
Total current provisions balance, end of period
13. LONG-TERM DEBT
Bank loans
Senior unsecured guaranteed notes
Unamortized financing fees
2014
2013
4,441
3,930
(3,076)
5,295
(630)
4,665
649
5,314
2014
333,677
550,000
(9,426)
874,251
2,452
4,424
(2,435)
4,441
(1,094)
3,347
594
3,941
2013
—
550,000
(11,034)
538,966
Interest rates on the balance of the bank loans fluctuate with Canadian bankers’ acceptances and/or LIBOR.
As at August 31, 2014, the weighted average interest rate on the outstanding bank loans and Notes was 3.9%
(2013 – 4.3%). Interest on the bank loans and Notes averaged 4.2% for fiscal 2014 (2013 – 5.8%).
The banks hold as collateral a first ranking charge on all assets and undertakings of Corus and certain of
Corus’ subsidiaries as designated under the credit agreement. Under the facility, the Company has undertaken
to comply with financial covenants regarding a minimum interest coverage ratio and a maximum debt to cash
flow ratio. Management has determined that the Company was in compliance with the covenants provided under
the bank loans as at August 31, 2014.
On February 3, 2014, the Company’s credit agreement with a syndicate of banks was amended and restated. The
principal amendment effected was the establishment of a two year $150.0 million term facility, maturing February
3, 2016, incremental to the existing $500.0 million revolving facility maturing February 11, 2017. The $150.0 million
term facility was fully drawn on inception and the proceeds were used to reduce the amount drawn on the revolving
facility. Both the term and revolving facilities are subject to the same covenants and security. Interest rates on both
the term and revolving facilities fluctuate with Canadian prime rate, Canadian bankers’ acceptances and/or LIBOR
plus an applicable margin.
Contemporaneously with the amendment and restatement of the credit agreement, the Company entered into
Canadian dollar interest rate swap agreements to fix the interest rate on $150.0 million at 1.375%, plus an applicable
margin, to February 3, 2016. The fair value of Level 2 financial instruments such as interest rate swap agreements
is calculated by way of discounted cash flows, using market interest rates and applicable credit spreads. The
Company has assessed that there is no ineffectiveness in the hedge of its interest rate exposure. The effectiveness
of the hedging relationship is reviewed on a quarterly basis. As an effective hedge, unrealized gains or losses on the
interest rate swap agreements are recognized in OCI.
In the second quarter of fiscal 2013, the Company issued $550.0 million principal amount of 4.25% Senior Unsecured
Guaranteed Notes due February 11, 2020 (“2020 Notes”) and redeemed the existing $500.0 million principal amount
of 7.25% Senior Unsecured Guaranteed Notes due February 10, 2017 (“2017 Notes”) effective March 16, 2013.
95
CORUS ENTERTAINMENT ANNUAL REPORT 2014
The issuance of the 2020 Notes and redemption of the 2017 Notes resulted in the Company recording debt
refinancing costs of $25.0 million in the second quarter of fiscal 2013, which included the early redemption premium
of $18.1 million and the non-cash write-off of unamortized financing fees of $6.9 million related to the 2017 Notes.
On February 27, 2013, the Company’s $500.0 million credit facility, available on a revolving basis, with a syndicate
of banks was amended. The principal amendment was to extend the maturity date to February 11, 2017.
14. OTHER LONG-TERM LIABILITIES
Public benefits associated with acquisitions
Unearned revenue
Program rights payable
Long-term employee obligations
Deferred leasehold inducements
Derivative fair value
Merchandising and tradmark liabilities
Finance lease accrual
2014
27,604
6,611
71,926
34,451
16,052
72
11,021
4,056
171,793
2013
1,414
8,751
20,735
30,343
15,414
—
13,486
3,098
93,241
15. SHARE CAPITAL
AUTHORIZED
The Company is authorized to issue, upon approval of holders of no less than two-thirds of the existing Class
A shares, an unlimited number of Class A participating shares (“Class A Voting Shares”), as well as an unlimited
number of Class B non-voting participating shares (“Class B Non-Voting Shares”), Class A Preferred Shares, and
Class 1 and Class 2 Preferred Shares.
Class A Voting Shares are convertible at any time into an equivalent number of Class B Non-Voting Shares. The Class
B Non-Voting Shares are convertible into an equivalent number of Class A Voting Shares in limited circumstances.
The Class A Preferred Shares are redeemable at any time at the demand of Corus and retractable at any time at
the demand of a holder of a Class A Preferred Share for an amount equal to the consideration received by Corus at
the time of issuance of such Class A Preferred Shares. Holders of Class A Preferred Shares are entitled to receive
a non-cumulative dividend at such rate as Corus’ Board of Directors may determine on the redemption amount
of the Class A Preferred Shares. Each of the Class 1 Preferred Shares, the Class 2 Preferred Shares, the Class A
Voting Shares and the Class B Non-Voting Shares rank junior to and are subject in all respects to the preferences,
rights, conditions, restrictions, limitations and prohibitions attached to the Class A Preferred Shares in connection
with the payment of dividends.
The Class 1 and Class 2 Preferred Shares are issuable in one or more series with attributes designated by the Board
of Directors. The Class 1 Preferred Shares rank senior to the Class 2 Preferred Shares.
In the event of liquidation, dissolution or winding-up of Corus or other distribution of assets of Corus for the purpose
of winding up its affairs, the holders of Class A Preferred Shares are entitled to a payment in priority to all other
classes of shares of Corus to the extent of the redemption amount of the Class A Preferred Shares, but will not be
entitled to any surplus in excess of that amount. The remaining property and assets will be available for distribution
to the holders of the Class A Voting Shares and Class B Non-Voting Shares, which shall be paid or distributed
equally, share for share, between the holders of the Class A Voting Shares and the Class B Non-Voting Shares,
without preference or distinction.
96
CORUS ENTERTAINMENT ANNUAL REPORT 2014
ISSUED AND OUTSTANDING
Balance – September 1, 2012
Conversion of Class A Voting Shares
to Class B Non-Voting Shares
Issuance of shares under stock option plan
Issuance of shares under dividend
reinvestment plan
Shares repurchased
Balance – August 31, 2013
Conversion of Class A Voting Shares
to Class B Non-Voting Shares
Issuance of shares under stock option plan
Issuance of shares under dividend
reinvestment plan
Class A
Voting Shares
Class B
Non-Voting Shares
#
$
#
$
Total
$
3,434,292
26,595
79,924,384
883,410
910,005
(4,000)
—
—
—
(31)
—
—
—
4,000
50,200
1,134,666
(64,104)
31
1,155
26,731
(708)
—
1,155
26,731
(708)
3,430,292
26,564
81,049,146
910,619
937,183
(2,000)
—
—
(15)
—
—
2,000
259,500
1,024,947
15
5,465
24,682
940,781
—
5,465
24,682
967,330
Balance – August 31, 2014
3,428,292
26,549
82,335,593
No Class A Preferred Shares, Class 1 Preferred Shares or Class 2 Preferred Shares are outstanding at
August 31, 2014.
STOCK OPTION PLAN
Under the Company’s Stock Option Plan (the “Plan”), the Company may grant options to purchase Class B Non-
Voting Shares to eligible officers, directors and employees of or consultants to the Company. The number of
Class B Non-Voting Shares which the Company is authorized to issue under the Plan is 10% of the issued and
outstanding Class B Non-Voting Shares. All options granted are for terms not to exceed 10 years from the grant
date. The exercise price of each option equals the closing market price of the Company’s stock on the trading
date immediately preceding the date of the grant. Options vest 25% on each of the first, second, third and fourth
anniversary dates of the date of grant.
A summary of the changes to the stock options outstanding is presented as follows:
Outstanding – September 1, 2012
Granted
Exercised
Forfeited or expired
Outstanding - August 31, 2013
Granted
Exercised
Outstanding - August 31, 2014
Number of options
#
Weighted average
exercise price per share
$
1,816,098
595,900
(50,200)
(203,725)
2,158,073
662,800
(259,500)
2,561,373
19.04
22.00
17.60
16.15
20.17
23.72
17.73
21.33
97
CORUS ENTERTAINMENT ANNUAL REPORT 2014
As at August 31, 2014, the options outstanding and exercisable consist of the following:
Range of exercise prices ($)
17.50 - 19.27
19.28 - 21.91
21.92 - 22.48
22.49 - 25.40
Options outstanding
Options exercisable
Number
outstanding
(#)
Weighted average
remaining
contractual life
(years)
Weighted
average
exercise price
($)
476,673
412,900
857,800
814,000
2,561,373
2.2
4.3
5.0
5.6
4.6
17.57
19.79
22.09
23.52
21.33
Number
outstanding
(#)
476,673
224,550
345,400
151,200
1,197,823
Weighted
average
exercise price
($)
17.57
19.95
22.18
22.65
19.98
The fair value of each option granted since September 1, 2003 was estimated on the date of the grant using the
Black-Scholes option pricing model. The estimated fair value of the options is amortized to income over the options’
vesting period on a straight-line basis. In fiscal 2014, the Company has recorded share-based compensation
expense of $2,026 (2013 – $1,586). This charge has been credited to contributed surplus. Unrecognized share-
based compensation expense at August 31, 2014 related to the Plan was $1,847 (2013 – $1,466).
The fair value of each option granted in fiscal 2014 and 2013 was estimated on the date of the grant using the
Black-Scholes option pricing model with the following assumptions:
Granted in the second quarter of 2014 and vesting in:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
Granted in the first quarter of 2014 and vesting in:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
Granted in 2013 and vesting in:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
2015
$4.11
1.9%
4.1%
26.5%
6
2014
$3.78
1.8%
4.3%
27.0%
6
2013
$3.59
1.4%
4.4%
28.9%
5
2016
$4.32
1.9%
4.1%
27.4%
6
2015
$3.86
1.9%
4.3%
27.3%
6
2014
$3.57
1.5%
4.4%
28.4%
6
2017
$4.09
2.0%
4.1%
26.0%
7
2016
$3.71
1.9%
4.3%
26.3%
7
2015
$3.76
1.5%
4.4%
29.4%
6
2018
$4.48
2.0%
4.1%
27.7%
7
2017
$3.50
2.0%
4.3%
24.9%
7
2016
$3.43
1.5%
4.4%
27.2%
7
The expected life of the options is based on historical data and current expectations and is not necessarily indicative
of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over
a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual
outcome.
On October 24, 2014, the Company granted a further 688,800 options for Class B Non-Voting Shares to eligible
officers and employees of the Company. These options are exercisable at $23.27 per share.
DIVIDENDS
The holders of Class A Voting Shares and Class B Non-Voting Shares are entitled to receive such dividends as the
Board of Directors determines to declare on a share-for-share basis, as and when any such dividends are declared
or paid. The holders of Class B Non-Voting Shares are entitled to receive during each dividend period, in priority to
98
CORUS ENTERTAINMENT ANNUAL REPORT 2014
the payment of dividends on the Class A Voting Shares, a dividend which is $0.005 per share per annum higher
than that received on the Class A Voting Shares. This higher dividend rate is subject to proportionate adjustment
in the event of future consolidations or subdivisions of shares and in the event of any issue of shares by way of
stock dividend. After payment or setting aside for payment of the additional non-cumulative dividends on the Class
B Non-Voting Shares, holders of Class A Voting Shares and Class B Non-Voting Shares participate equally, on a
share-for-share basis, on all subsequent dividends declared.
2014
Date of record
September 16, 2013
October 15, 2013
November 15, 2013
December 13, 2013
January 15, 2014
February 14, 2014
March 14, 2014
April 15, 2014
May 15, 2014
June 16, 2014
July 15, 2014
August 15, 2014
Dividend yield of Class B Non-Voting Shares
2013
Date of record
September 14, 2012
October 15, 2012
November 15, 2012
December 14, 2012
January 15, 2013
February 14, 2013
March 14, 2103
April 15, 2013
May 15, 2013
June 14, 2013
July 15, 2013
August 15, 2013
Dividend yield of Class B Non-Voting Shares
Date paid
September 30, 2013
October 31, 2013
November 29, 2013
December 30, 2013
January 31, 2014
February 28, 2014
March 31, 2014
April 30, 2014
May 30, 2014
June 30, 2014
July 31, 2014
August 29, 2014
Date paid
September 28, 2012
October 31, 2012
November 30, 2012
December 31, 2012
January 31, 2013
February 28, 2013
March 28, 2013
April 30, 2013
May 31, 2013
June 28, 2013
July 31, 2013
August 30, 2013
Class A
Voting Shares
Amount paid
Class B
Non-Voting Shares
Amount paid
$0.084583
$0.084583
$0.084583
$0.084583
$0.084583
$0.090417
$0.090417
$0.090417
$0.090417
$0.090417
$0.090417
$0.090417
$1.055834
$0.085000
$0.085000
$0.085000
$0.085000
$0.085000
$0.090833
$0.090833
$0.090833
$0.090833
$0.090833
$0.090833
$0.090833
$1.060831
4.34%
Class A
Voting Shares
Amount paid
Class B
Non-Voting Shares
Amount paid
$0.079583
$0.079583
$0.079583
$0.079583
$0.079583
$0.084583
$0.084583
$0.084583
$0.084583
$0.084583
$0.084583
$0.084583
$0.989996
$0.0800
$0.0800
$0.0800
$0.0800
$0.0800
$0.0850
$0.0850
$0.0850
$0.0850
$0.0850
$0.0850
$0.0850
$0.9950
3.94%
The total amount of dividends declared in fiscal 2014 was $91,376 (2013 - $84,452).
On October 23, 2014 the Company declared dividends of $0.090417 per Class A Voting Share and $0.090833 per
Class B Non-Voting Share payable on each of November 28, 2014, December 30, 2014 and January 30, 2015 to the
shareholders of record at the close of business on November 14, 2014, December 15, 2014 and January 15, 2015,
respectively.
99
CORUS ENTERTAINMENT ANNUAL REPORT 2014
EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator (in thousands) used for the computation of the
basic and diluted earnings per share amounts:
Net income attributable to shareholders (numerator)
Weighted average number of shares outstanding (denominator)
Weighted average number of shares outstanding - basic
Effect of dilutive securities
Weighted average number of shares outstanding - diluted
2014
150,408
2013
159,895
84,993
334
85,327
83,860
330
84,190
The calculation of diluted earnings per share for fiscal 2014 excluded 12,618 (2013 – nil) weighted average
Class B Non-Voting Shares issuable under the Company’s Stock Option Plan because these options were not
“in-the-money”.
SHARE-BASED COMPENSATION
The following table provides additional information on the employee PSUs, DSUs and RSUs as at:
Balance - September 1, 2012
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2013
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2014
PSUs
#
885,067
319,783
33,803
(8,655)
(319,697)
910,301
313,736
36,657
(30,250)
(275,980)
954,464
DSUs
#
633,703
79,019
29,519
—
(3,725)
738,516
86,890
35,896
—
—
861,302
RSUs
#
89,874
51,903
—
(3,159)
—
138,618
52,250
—
(10,520)
(38,035)
142,313
Share-based compensation expense recorded for the year in respect of these plans was $10,876 (2013 – $12,953).
As at August 31, 2014, the carrying value of these units at the end of the year that have vested multiplied by the
closing share price at the end of the year was $28,715 (2013 – $27,046).
DIVIDEND REINVESTMENT PLAN
The Company’s Board of Directors has approved a discount of 2% for Class B Non-Voting Shares issued from
treasury pursuant to the terms of its dividend reinvestment plan. In fiscal 2014, the Company issued 1,024,947
(2013 – 1,134,666) Class B Non-Voting Shares, resulting in an increase in share capital of $24,682 (2013 – $26,731).
NORMAL COURSE ISSUER BID
On June 20, 2012, the Company announced that the TSX had accepted the notice filed by the Company of
its intention to renew its Normal Course Issuer Bid for its Class B Non-Voting Participating Shares through
the facilities of the TSX, or other alternative Canadian trading systems. The Company was authorized to
purchase for cancellation a maximum of 4,000,000 Class B Non-Voting Participating Shares during the
period from June 22, 2012 through June 21, 2013.
The shares purchased for cancellation are as follows:
September 2012
Fiscal 2013
100
#
64,104
64,104
$
1,464
1,464
Average per share
$
22.84
22.84
CORUS ENTERTAINMENT ANNUAL REPORT 2014 During fiscal 2014, the total cash consideration paid exceeded the carrying value of the shares repurchased by nil
(2013 - $756), which was charged to retained earnings.
16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance - September 1, 2012
Items that may be subsequently reclassified
to income:
Amount
Income tax
Items that will never be subsequently
reclassified to net income:
Amount
Income tax
Transfer to retained earnings
Balance - August 31, 2013
Items that may be subsequently reclassified
to income:
Amount
Income tax
Items that will never be subsequently
reclassified to net income:
Amount
Income tax
Transfer to retained earnings
Balance - August 31, 2014
Unrealized
Foreign
currency
translation
adjustment
Unrealized
change in
fair value of
available-
for-sale
investments
(1,065)
253
2,333
—
2,333
—
—
—
—
152
(20)
132
—
—
—
—
1,267
386
1,720
—
1,720
—
—
—
—
515
(69)
446
—
—
—
—
Unrealized
change in fair
value of cash
flow hedges
Actuarial gains
(losses) on
defined benefit
plans
—
—
—
—
—
—
—
—
—
(71)
19
(52)
—
—
—
—
—
—
—
—
838
(222)
616
(616)
—
—
—
—
(2,977)
789
(2,188)
2,188
Total
(812)
2,485
(20)
2,465
838
(222)
616
(616)
1,653
2,164
(50)
2,114
(2,977)
789
(2,188)
2,188
2,987
832
(52)
—
3,767
17. DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Amortization of program and film rights
Amortization of film investments
Other cost of sales
Employee costs
Other general and administrative
18. INTEREST EXPENSE
Interest on long-term debt
Imputed interest on long-term liabilities
Other
2014
207,639
19,808
27,615
149,459
138,857
543,378
2014
32,121
14,698
1,501
48,320
2013
168,883
25,759
35,276
155,687
114,957
500,562
2013
32,814
10,279
1,702
44,795
101
CORUS ENTERTAINMENT ANNUAL REPORT 2014
19. OTHER EXPENSE (INCOME), NET
Interest income
Foreign exchange loss
Equity loss of investees
Third-party-produced film investment write down
Investment in associates (recovery) impairment
Income from joint ventures
Increase in purchase price obligation (note 26)
Other
20. INCOME TAXES
The significant components of income tax expense are as follows:
Current tax expense
Deferred tax expense
Resulting from temporary differences
Resulting from the recognition of tax losses
Resulting from the creation (reversal) of various future tax reserves
Other
2014
(722)
649
1,685
—
(256)
—
3,336
1,048
5,740
2014
47,796
5,687
(1,641)
2,085
(494)
2013
(1,091)
876
623
3,722
3,399
(12,093)
—
1,004
(3,560)
2013
45,579
(3,288)
(284)
(7,288)
(257)
Income tax expense reported in the consolidated statements of income and
comprehensive income
53,433
34,462
A reconciliation of income tax computed at the statutory tax rates to income tax expense is as follows:
Tax at combined federal and provincial rates:
Income subject to tax at less than statutory rates
Non-taxable portion of capital gains
Goodwill impairment
Transaction costs
Increase (recovery) of various tax reserves
Miscellaneous differences
Fiscal 2014
Fiscal 2013
$
55,641
632
(34,063)
17,340
9,949
2,505
1,429
53,433
%
26.6
0.3
(16.3)
8.3
4.7
1.2
0.7
25.5
$
53,056
(1,022)
(10,125)
—
—
(6,383)
(1,064)
34,462
%
26.5
(0.5)
(5.1)
—
—
(3.2)
(0.5)
17.2
The change in the Company’s statutory tax rate from the prior year resulted from a change to substantively
enacted provincial income tax rates and also from a change in the relative proportions of income (loss) earned
in the various provinces.
102
CORUS ENTERTAINMENT ANNUAL REPORT 2014
The movement in the net deferred tax assets (liabilities) was as follows:
Broadcast
licenses
and other
intangibles
$
Accrued
compen-
sation
$
Fixed assets
and film assets
$
Program
rights
$
Non-capital
loss carry
forwards
$
Investments
$
Financing
and debt
retirement
$
Other
$
Total
$
(147,180)
10,065
17,390
1,093
2,435
(2,460)
(985)
2,659
(116,983)
605
—
653
(222)
(674)
—
(255)
—
284
—
1,972
(20)
5,129
—
3,400
—
11,114
(242)
—
—
—
—
—
—
—
(139)
(139)
(146,575)
10,496
16,716
838
2,719
(508)
4,144
5,920
(106,250)
10,665
—
1,180
789
(3,741)
—
(3,994)
—
1,641
—
(9,557)
(68)
(2,118)
19
—
(126,595)
—
—
—
—
941
11,868
—
—
—
9,536
—
—
290
—
(1)
(5,634)
740
(1)
869
(103,381)
(262,505)
12,465
13,916
8,712
4,360
(597)
2,045
7,078
(214,526)
Balance
September 1, 2012
Recognized in profit
or loss
Recognized in OCI
Recognized in
equity
Balance -
August 31, 2013
Recognized in profit
or loss
Recognized in OCI
Recognized in
equity
Acquisitions and
dispositions
Balance –
August 31, 2014
At August 31, 2014, the Company had approximately $19,582 (2013 - $10,307) of non-capital loss carryforwards
available which expire between the years 2026 and 2034. A deferred tax asset of $4,360 (2013 - $2,438) has been
recognized in respect of these losses and a tax benefit of $525 (2013 - $284) has not been recognized.
At August 31, 2014, the Company had approximately $28,691 (2013 - $28,792) of capital loss carryforwards
available which have no expiry date. No tax benefit has been recognized in respect of these losses.
The Company has taxable temporary differences associated with its investments in its subsidiaries. No deferred
tax liabilities have been provided with respect to such temporary differences as the Company is able to control the
timing of the reversal and such reversal is not probable in the foreseeable future.
There are no income tax consequences attached to the payment of dividends, in either 2014 or 2013, by the
Company to its shareholders.
21. BUSINESS SEGMENT INFORMATION
The Company’s business activities are conducted through two segments: Television and Radio.
TELEVISION
The Television segment is comprised of specialty television networks, pay television services, conventional television
stations, and the Corus content business, which consists of the production and distribution of films and television
programs, merchandise licensing, publishing and animation software. Revenues are generated from subscriber
fees, advertising and the licensing of proprietary films and television programs, merchandise licensing, publishing
and animation software sales.
RADIO
The Radio segment comprises 39 radio stations, situated primarily in high-growth urban centres in English Canada,
with a concentration in the densely populated area of Southern Ontario. Revenues are derived from advertising
aired over these stations.
Corporate results represent the incremental cost of corporate overhead in excess of the amount allocated to the
other operating segments.
Management evaluates each division’s performance based on revenues less direct cost of sales, general and
administrative expenses. Segment profit excludes depreciation, interest expense, restructuring and certain other
income and expenses.
103
CORUS ENTERTAINMENT ANNUAL REPORT 2014
The accounting policies of the segments are the same as those described in the summary of significant accounting
policies of the most recent audited consolidated financial statements.
Year ended August 31, 2014
Television
Radio
Corporate
Consolidated
660,424
387,151
273,273
172,592
127,105
—
29,122
45,487
(29,122)
833,016
543,378
289,638
24,068
48,320
83,000
46,792
(127,884)
5,740
209,602
Radio
Corporate
Consolidated
Television
567,845
338,104
229,741
183,691
128,543
—
33,915
55,148
(33,915)
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Business acquisition, integration and restructuring costs
Gain on acquisition
Other expense, net
Income before income taxes
Year ended August 31, 2013
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Gain on sale of associated company
Debt refinancing
Business acquisition, integration and restructuring costs
Other income, net
Income before income taxes
The following tables present further details on the Television and Radio operating segments:
Revenues are derived from the following areas:
Advertising
Subscriber fees
Merchandising, distribution and other
2014
404,344
335,274
93,398
833,016
Revenues are derived from the following geographical sources, by location of customer:
Canada
International
2014
801,862
31,154
833,016
104
751,536
500,562
250,974
26,812
44,795
5,734
(55,394)
25,033
7,343
(3,560)
200,211
2013
352,461
276,211
122,864
751,536
2013
695,615
55,921
751,536
CORUS ENTERTAINMENT ANNUAL REPORT 2014
SEGMENT ASSETS AND LIABILITIES
Assets
Television
Radio
Corporate
Liabilities
Television
Radio
Corporate
Assets and liabilities are located primarily within Canada.
CAPITAL EXPENDITURES BY SEGMENT
Television
Radio
Corporate
2014
2013
2,222,597
386,454
175,531
2,784,582
427,965
71,609
974,882
1,474,456
2014
3,133
3,857
4,986
1,408,929
460,341
297,867
2,167,137
251,387
75,488
619,429
946,304
2013
3,105
2,401
7,523
11,976
13,029
Property, plant and equipment are located primarily within Canada.
22. CAPITAL MANAGEMENT
The Company’s capital management objectives are to maintain financial flexibility in order to pursue its strategy
of organic growth combined with strategic acquisitions and to provide returns to its shareholders. The Company
defines capital as the aggregate of its shareholders’ equity and long-term debt less cash and cash equivalents.
Total managed capital is as follows:
Long-term debt
Cash and cash equivalents
Net debt
Shareholders’ equity
2014
874,251
(11,585)
862,666
1,310,126
2,172,792
2013
538,966
(81,266)
457,700
1,220,833
1,678,533
The Company manages its capital structure in accordance with changes in economic conditions. In order to
maintain or adjust its capital structure, the Company may elect to issue or repay long-term debt, issue shares,
repurchase shares through a normal course issuer bid, pay dividends or undertake any other activities as deemed
appropriate under the specific circumstances.
The Company monitors capital on a number of bases, including: net debt to segment profit ratio and dividend yield.
The Company’s stated objectives are not to exceed a net debt to segment profit ratio of 3.5 times, and maintain a
dividend yield in excess of 2.5%. The Company believes that these objectives provide a reasonable framework for
providing a return to shareholders. The Company is currently operating within these internally imposed objectives.
The Company is not subject to any externally imposed capital requirements, and there has been no change in the
Company’s capital management approach during the year.
105
CORUS ENTERTAINMENT ANNUAL REPORT 2014
23. FINANCIAL INSTRUMENTS
The following tables set out the classification of financial and non-financial assets and liabilities:
Total assets
11,585
183,199
Fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
Other
financial
liabilities
11,585
—
—
—
—
183,009
190
—
—
—
19,047
5,354
24,401
—
—
—
—
—
Non-
financial
—
—
28,393
2,537,004
Total
carrying
amount
11,585
183,009
47,630
2,542,358
2,565,397
2,784,582
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
175,725
874,251
84,718
—
—
—
87,075
252,687
175,725
874,251
171,793
252,687
1,134,694
339,762
1,474,456
As at August 31, 2014
Cash and cash equivalents
Accounts receivable
Investments and intangibles
Other assets
Accounts payable, accrued
liabilities and provisions
Long-term debt
Other long-term liabilities
Other liabilities
Total liabilities
As at August 31, 2013
Cash and cash equivalents
Accounts receivable
Investments and intangibles
Other assets
81,266
—
—
—
—
164,302
210
—
Total assets
81,266
164,512
Accounts payable, accrued
liabilities and provisions
Long-term debt
Other long-term liabilities
Other liabilities
Total liabilities
—
—
—
—
—
—
—
—
—
—
—
—
12,971
5,581
18,552
—
—
—
—
—
—
—
—
—
—
—
—
29,794
1,873,013
81,266
164,302
42,975
1,878,594
1,902,807
2,167,137
168,384
538,966
37,319
—
—
—
55,922
145,713
168,384
538,966
93,241
145,713
744,669
201,635
946,304
FAIR VALUES
The fair values of financial instruments included in current assets and current liabilities approximate their carrying
values due to their short-term nature.
The fair value of publicly-traded shares included in investments and intangibles is determined by quoted share
prices in active markets. The fair value of other financial instruments included in this category is determined using
other valuation techniques.
The fair value of bank loans is estimated based on discounted cash flows using year-end market yields, adjusted to
take into account the Company’s own credit risk. On February 3, 2014, the Company’s bank loans were amended
and, as a result, the Company has estimated the fair value of its bank debt to be approximately equal to its carrying
amount as at August 31, 2014.
Contemporaneously with the amendment of the bank loans, the Company entered into Canadian dollar interest
rate swap agreements. The fair value of the interest rate swap agreements is calculated by way of discounted cash
flows, using market interest rates and applicable credit spreads.
The fair value of the Company’s Notes is based on the trading price of the Notes, which takes into account the
Company’s own credit risk. At August 31, 2014, the Company has estimated the fair value of its Notes to be
approximately $543,400 (2013 - $518,650).
The fair values of financial instruments in other long-term liabilities approximate their carrying values as they are
recorded at the net present values of their future cash flows, using an appropriate discount rate.
106
CORUS ENTERTAINMENT ANNUAL REPORT 2014
Fair value estimates are made at a specific point in time, based on relevant market information and information
about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.
The following tables present information related to the Company’s financial assets measured at fair value on
a recurring basis and the level within the guidance hierarchy in which the fair value measurements fall as at
August 31 as follows:
As at August 31, 2014
Assets
Cash and cash equivalents
Investments
Other non-financial assets
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities carried at fair value
As at August 31, 2013
Cash and cash equivalents
Investments
Other non-financial assets
Assets carried at fair value
Quoted prices in active markets for
identical assets or liabilities
(level 1)
Significant other
observable inputs
(level 2)
Significant
unobservable inputs
(level 3)
11,585
—
—
11,585
—
—
—
1,167
—
1,167
72
72
—
—
5,354
5,354
—
—
Quoted prices in active markets for
identical assets or liabilities
(level 1)
Significant other
observable inputs
(level 2)
Significant
unobservable inputs
(level 3)
81,266
—
—
81,266
—
602
—
602
—
—
5,581
5,581
Excluded from the above tables are the Company’s investments that are measured at cost, as fair value is not
reliably measured.
RISK MANAGEMENT
The Company is exposed to various risks related to its financial assets and liabilities. These risk exposures are
managed on an ongoing basis.
Credit risk
In the normal course of business, the Company is exposed to credit risk from its accounts receivable from customers.
The carrying amounts for accounts receivable are net of applicable allowances for doubtful accounts, which are
estimated based on past experience, specific risks associated with the customer and other relevant information.
The maximum exposure to credit risk is the carrying amount of the financial assets.
The following table sets out the details of the aging of accounts receivable and allowance for doubtful accounts as
at August 31 as follows:
Trade
Current
One to three months past due
Over three months past due
Other
Less allowance for doubtful accounts
2014
2013
91,798
58,867
18,304
168,969
19,840
188,809
5,800
183,009
91,175
50,179
11,557
152,911
13,880
166,791
2,489
164,302
107
CORUS ENTERTAINMENT ANNUAL REPORT 2014
The following table sets out the continuity for the allowance for doubtful accounts:
Balance, beginning of year
Provision for doubtful accounts
Acquisitions
Write-off of bad debts
Balance, end of year
2014
2,489
2,692
1,683
(1,064)
5,800
2013
2,757
339
—
(607)
2,489
The Company invoices 14% of its revenues to one related party (2013 – 16%). This related party comprises 12% of
the accounts receivable balance as at August 31, 2014 (2013 – 13%).
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated
with its financial obligations. The Company manages liquidity risk primarily by maintaining sufficient unused capacity
within its long-term debt facility, and by continuously monitoring forecast and actual cash flows. The unused
capacity at August 31, 2014 was approximately $315,000 (2013 - $500,000). Further information with respect to
the Company’s long-term debt facility is provided in note 13.
The following table sets out the undiscounted contractual obligations related to repayment of long-term debt,
program rights payable and other liabilities as at August 31, 2014:
Long-term debt
Bank loans
Interest on notes
Program rights payable
Accounts payable and other accrued liabilities
Other liabilities
Total
540,575
333,676
128,563
149,123
112,664
1,110
1,265,711
Less than
one year
—
—
23,375
67,194
112,664
564
203,797
One to
three years
Beyond
three years
—
333,676
46,750
73,014
—
546
453,986
540,575
—
58,438
8,915
—
—
607,928
In fiscal 2014, the Company incurred interest on bank loans, swaps on credit facilities and Notes of $32,121
(2013 - $32,814).
Market risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices,
whether those changes are caused by factors specific to the individual instrument or its issuers or factors affecting
all instruments traded in the market.
The Company is exposed to foreign exchange risk through its treasury function, international content distribution
operations and U.S. dollar denominated programming purchasing. The most significant foreign currency exposure
is to movements in the U.S. dollar to Canadian dollar exchange rate and the U.S dollar to euro exchange rate. The
impact of foreign exchange on income before income taxes and non-controlling interest is detailed in the table
below:
Direct cost of sales, general and administrative expenses
Other income, net
2014
(362)
(649)
(1,011)
2013
(10)
(876)
(886)
An assumed 10% increase or decrease in exchange rates as at August 31, 2014 would not have had a material
impact on net income or other comprehensive income for the year.
The Company is exposed to interest rate risk on the bankers’ acceptances issued at floating rates under its
bank loan facility. An assumed 1% increase or decrease in short-term interest rates during the year ended
August 31, 2014 would not have had a material impact on net income for the year.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
Other considerations
The Company does not engage in trading or other speculative activities with respect to derivative financial
instruments.
24. CONSOLIDATED STATEMENTS OF CASH FLOWS
Additional disclosures with respect to the consolidated statements of cash flows are as follows:
Interest paid, interest received and income taxes paid and classified as operating activities are as follows:
Interest paid
Interest received
Income taxes paid
2014
33,667
722
50,249
Net change in non-cash working capital balances related to operations consists of the following:
Accounts receivable
Prepaid expenses and other
Accounts payable and accrued liabilities
Income taxes payable and recoverable
Other long-term liabilities
Other
2014
22,061
3,461
(6,900)
(9,549)
(3,897)
17,769
22,945
2013
35,346
1,091
27,272
2013
359
(3,852)
(5,036)
7,960
5,249
2,088
6,768
25. GOVERNMENT FINANCING AND ASSISTANCE
Revenues include $2,542 (2013 - $4,945) of production financing obtained from government programs. This
financing provides a supplement to a production series’ Canadian license fees and is not repayable.
As well, revenues include $935 (2013 - $1,105) of government grants relating to the marketing of books in both
Canada and international markets. The majority of the grants are repayable if the average profit margin for the three-
year period following receipt of the funds equals or is greater than 15%.
26. BUSINESS COMBINATIONS AND DIVESTITURES
ACQUISITION OF CONTROL OF TELETOON CANADA INC. (“TELETOON”)
On September 1, 2013, Corus determined that the definition of control as defined under IFRS 10 – Consolidated
Financial Statements with respect to its investment in TELETOON was met. The determination of control was based
on the following:
(1) Power over the investee:
• Effective September 1, 2013, as a consequence of an amendment to TELETOON’s underlying Shareholders
Agreement and changes to its board composition, Corus gained majority Board representation of
TELETOON. This resulted in the Company gaining significant decision-making ability to direct the relevant
activities of TELETOON;
(2) Exposure or rights to variable returns of the investee:
• The Company had exposure to variable returns of TELETOON through its existing 50% equity interest, a
fixed forward purchase price, and potential operating synergies; and
(3) The ability to use power over the investee to affect the amount of the investor’s returns:
• The Company’s rights to direct the relevant activities of TELETOON were substantive, and its exposure to
the variable returns from TELETOON were such that the Company’s ability to direct TELETOON’s relevant
activities could have a significant impact to Corus as an owner.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
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 CRTC approval to complete the acquisition of the remaining 50% interest in TELETOON that it
did not already own. This acquisition closed on January 1, 2014. As a result of the change in control, the Company’s
existing equity interest must be remeasured to fair value as at the date of change in control, September 1, 2013.
The fair value of the Company’s equity interest in TELETOON before the business combination amounted to
$253,815. The Company recorded a non-cash gain of $127,884 in the first quarter of fiscal 2014 as a result of the
remeasurement to fair value of its 50% previously owned equity interest of TELETOON, which is recorded as gain
on acquisition in the consolidated statements of income and comprehensive income.
The results of the operations of TELETOON, as well as its assets and liabilities, are now included in the Television
segment effective September 1, 2013 at 100%. The purchase price equation was accounted for using the
purchase method.
ACQUISITION OF CONTROL OF HISTORIA AND SÉRIES+ S.E.NC. (“H&S”)
On January 1, 2014, the Company acquired 50% of the outstanding shares of the French-language specialty
channels, H&S, from Bell as part of its acquisition of Astral Media Inc. (“Astral”). In addition, on the same date
the Company acquired the remaining 50% of the outstanding shares of H&S from Shaw Media, a division of
Shaw Communications Inc. (“Shaw”), a related party to Corus subject to common voting control. The results of
operations of H&S, as well as its assets and liabilities, are included in the Television segment at 100% interest,
effective January 1, 2014.
The purchase price equation was accounted for using the purchase method.
ACQUISITION OF CONTROL OF OTTAWA RADIO STATIONS (CJOT-FM AND CKQB-FM, “OTTAWA RADIO”)
On January 31, 2014, the Company acquired 100% of the outstanding shares of the Ottawa radio stations from
Bell. The results of operations of Ottawa radio, as well as their assets and liabilities, are included in the Radio
segment at 100% interest, effective January 31, 2014.
The purchase price equation was accounted for using the purchase method.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 PURCHASE PRICE EQUATIONS
The following table summarizes the fair value of the consideration owing and the fair value assigned to each major
class of assets and liabilities for each purchase price equation:
Fair value recognized on acquisition date:
TELETOON
H&S Ottawa radio
Total
Assets
Cash
Restricted cash
Accounts receivable
Other assets
Property, plant and equipment
Program and film rights
Broadcast licenses
Liabilities
Accounts payable and accrued liabilities
Other long-term liabilities
Deferred tax liability
Total identifiable net assets at fair value
Goodwill arising on acquisition
Fair value of existing 50% ownership interest
Purchase price obligation on acquisition date
Revaluation of purchase price obligation at period end
Distribution of restricted cash
Settlement of promissory note with Shaw
4,815
4,815
24,332
48
—
69,036
284,000
—
—
7,435
16
—
8,503
189,899
387,046
205,853
—
—
550
36
900
—
8,500
9,986
4,815
4,815
32,317
100
900
77,539
482,399
602,885
(10,023)
(35,119)
(53,253)
(4,464)
—
(50,041)
(138)
(2,444)
(84)
(14,625)
(37,563)
(103,378)
(98,395)
(54,505)
(2,666)
(155,566)
288,651
218,979
(253,815)
253,815
3,336
(6,051)
—
151,348
129,017
—
280,365
—
—
(47,759)
7,320
6,367
—
13,687
—
—
—
447,319
354,363
(253,815)
547,867
3,336
(6,051)
(47,759)
Cash consideration
251,100
232,606
13,687
497,393
The Company identified intangible assets of $482,399 related to broadcast licenses. Goodwill of $354,363 arises
principally from the ability to leverage media content and the expected operating synergies arising from the
integration of the acquired businesses with Corus’ existing operations. None of the goodwill recognized is expected
to be deductible for income tax purposes.
In fiscal 2014, the Company incurred $14,876 in transaction, restructuring and consulting costs related to the
business acquisitions. In addition, the Company, upon acquisition of control of TELETOON, H&S and the two
Ottawa radio stations on September 1, 2013, January 1, 2014 and January 31, 2014, respectively, recorded a
charge of $31,916 related to the present value of the CRTC tangible benefit obligation to be paid over a seven-year
period, to benefit the Canadian broadcasting system as part of these acquisitions. These costs were recorded in
the consolidated statements of income and comprehensive income in the line item entitled business acquisition,
integration and restructuring costs.
In the third quarter of fiscal 2014, working capital adjustments of $5,288 were settled in cash, with a corresponding
$3,336 income adjustment included in other (income) expense, net (note 19) in the consolidated statements of
income and comprehensive income.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
PROFORMA DISCLOSURES
The following pro forma supplemental information presents certain results of operations as if the transactions noted
above had been completed at the beginning of the fiscal period presented.
For the year ended August 31, 2014
Revenues
Net income attributable to shareholders
As currently reported(1)
Pro forma(2)
833,016
150,408
854,147
158,016
(1) Revenues of $132,238 and net income of $34,015 are included in the consolidated statements of income and comprehensive income from the date of acquisition.
(2) Pro forma amounts for the year ended August 31, 2014, reflect H&S and the two Ottawa radio stations as if they were acquired September 1, 2013. TELETOON was
fully consolidated effective September 1, 2013.
The pro forma supplemental information is based on estimates and assumptions which are believed to be
reasonable. The pro forma supplemental information is not necessarily indicative of the Company’s consolidated
financial results in future periods or the results that would have been realized had the business acquisitions been
completed at the beginning of the period presented. The pro forma supplemental information excludes business
integration costs and opportunities.
TRANSACTIONS WITH SHAW COMMUNICATIONS INC. (“SHAW”)
During the third quarter of 2013, the Company entered into a series of agreements with Shaw, a related party
subject to common voting control.
On April 30, 2013, the Company disposed of its 20% interest in Food Network Canada to Shaw Media, a division
of Shaw, for $66,806, resulting in a gain of $55,394 (note 5). Contemporaneously, on April 30, 2013, the Company
acquired the remaining 49% interest in the voting shares of ABC Spark from Shaw, increasing its ownership interest
to 100%. The carrying value of the non-controlling interest of ABC Spark at the acquisition date was $1,881. The
$17,231 difference between the consideration and the carrying value of the interest acquired was recognized
in retained earnings within shareholders’ equity in fiscal 2013. The Company received a non-interest bearing
promissory note from Shaw of $47,789 to satisfy the net consideration in respect of these transactions.
On January 1, 2014, the Company acquired from Shaw its 50% interest in its two French-language channels,
Historia and Séries+. The promissory note from Shaw was settled upon closing of the Company’s acquisition of
H&S from Shaw.
27. COMMITMENTS, CONTINGENCIES AND GUARANTEES
LEASES
The Company enters into operating leases for the use of facilities and equipment. During fiscal 2014, rental expenses
in direct cost of sales, general and administrative expenses totalled approximately $21,422 (2013 - $21,239).
Future minimum rental payments payable under non-cancellable operating leases at August 31, are as follows:
Within one year
After one year but not more than five years
More than five years
2014
25,430
97,722
290,617
413,769
2013
24,428
88,888
279,157
392,473
The Company has entered into finance leases for the use of computer equipment and software, telephones,
furniture and broadcast equipment. The leases range between three and five years and bear interest rates varying
from 2.1% to 7.0%. Future minimum lease payments under finance leases together with the present value of the
net minimum lease payments are as follows:
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
Minimum payments
2014
Present value of
payments
Minimum payments
2013
Present value of
payments
Within one year
After one year but not more than five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
2,921
4,362
7,283
589
6,694
2,638
4,056
6,694
—
6,694
2,556
3,247
5,803
558
5,245
2,147
3,098
5,245
—
5,245
PURCHASE COMMITMENTS
The Company has entered into various agreements for the right to broadcast or distribute certain film, television and
radio programs in the future. These agreements, which range in term from one to five years, generally commit the
Company to acquire specific films, television and radio programs or certain levels of future productions. The acquisition
of these broadcast and distribution rights is contingent on the actual delivery of the productions. Management
estimates that these agreements will result in future program and film expenditures of approximately $61,711 (2013 -
$53,997). In addition, the Company has commitments of $97 (2013 - nil) for future television script production.
The Company has commitments related to trade marks and certain other intangible rights until February 2021,
for a total of approximately $16,641 (2013 - $19,942). The Company has certain additional annual commitments,
some of which are contingent on performance, to pay royalties for trade mark rights. In addition, the Company
has licenses and other commitments over the next five years to use specific software, signal and satellite functions
of approximately $29,549 (2013 - $40,352). Generally, it is not the Company’s policy to issue guarantees to non-
controlled affiliates or third parties, with limited exceptions.
LITIGATION
The Company, its subsidiaries and joint ventures are involved in litigation matters arising out of the ordinary course
and conduct of its business. Although such matters cannot be predicted with certainty, management does not
consider the Company’s exposure to litigation to be material to these consolidated financial statements.
OTHER MATTERS
Many of the Company’s agreements, specifically those related to acquisitions and dispositions of business assets,
included indemnification provisions where the Company may be required to make payments to a vendor or
purchaser for breach of fundamental representation and warranty terms in the agreements with respect to matters
such as corporate status, title of assets, environmental issues, consents to transfer, employment matters, litigation,
taxes payable and other potential material liabilities. The maximum potential amount of future payments that the
Company could be required to make under these indemnification provisions is not reasonably quantifiable, as
certain indemnifications are not subject to a monetary limitation. As at August 31, 2014, management believed
there was only a remote possibility that the indemnification provisions would require any material cash payment.
The Company indemnifies its directors and officers against any and all claims or losses reasonably incurred in
the performance of their service to the Company to the extent permitted by law. The Company has acquired and
maintains liability insurance for directors and officers of the Company and its subsidiaries.
28. RELATED PARTY TRANSACTIONS
CONTROLLING SHAREHOLDER
JR Shaw and members of his family, and the corporations owned and/or controlled by JR Shaw and members of
his family (the “Shaw Family Group”) own a majority of the outstanding Class A Voting Shares of the Company. The
Class A Voting Shares are the only shares entitled to vote in all shareholder matters. All of the Class A Voting Shares
held by the Shaw Family Group are subject to a voting trust agreement entered into by such persons. The voting
rights with respect to such Class A Voting Shares are exercised by the representative of a committee of five trustees.
Accordingly, the Shaw Family Group is, and as long as it owns a majority of the Class A Voting Shares, will continue to
be able to elect a majority of the Board of Directors of the Company and to control the vote on matters submitted to
a vote of the Company’s Class A shareholders. The Shaw Family Group is represented as Directors of the Company.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 The Shaw Family Group is also the controlling shareholder of Shaw Communications Inc. (“Shaw”). As a result,
Shaw and Corus are subject to common voting control.
TRANSACTIONS
The Company has transacted business in the normal course with Shaw and with entities over which the Company
exercises significant influence and joint control. These transactions are measured at the exchange amount, which
is the amount of consideration established and agreed to by the related parties and having normal trade terms.
SHAW COMMUNICATIONS INC. (“SHAW”)
The Company and Shaw are subject to common voting control. During the year, the Company received subscriber,
programming licensing and advertising fees of $118,452 (2013 - $122,460) from Shaw. In addition, the Company
paid cable and satellite system distribution access fees of $5,578 (2013 - $4,605) and administrative and other
fees of $1,941 (2013 - $1,534) to Shaw. At August 31, 2014, the Company had $22,303 (2013 - $21,541)
receivable from Shaw.
The Company provided Shaw with interactive impressions, radio and television spots in return for television advertising.
No monetary consideration was exchanged for these transactions and no amounts were recorded in the accounts.
SIGNIFICANT SUBSIDIARIES
The following table includes the significant subsidiaries of the Company:
Name
Historia Network
Séries+ Network
ABC Spark Network
Cosmopolitan Television (“Cosmo”)
Corus Premium Television
Corus Radio Company
Country Music Television (“CMT”)
Encore Avenue
Movie Central
Nelvana
Telelatino Network (“TLN”)
TELETOON Canada (note 3)
OWN Network
W Network
YTV Canada
Percentage ownership
Jurisdiction
2014
Canada
Canada
Canada
Nova Scotia
Canada
Nova Scotia
British Columbia
Canada
Canada
Ontario
Canada
Canada
Ontario
Canada
Canada
100%
100%
100%
54%
100%
100%
80%
100%
100%
100%
50.5%
100%
100%
100%
100%
2013
—
—
51%
54%
100%
100%
80%
100%
100%
100%
50.5%
50%
100%
100%
100%
SPECIALTY CHANNELS
During the year, the Company received administrative and other fees of $1,134 (2013 - $7,739) from its non-
wholly owned specialty channels including CMT, Cosmo, and TLN. At August 31, 2014, the Company had $79
(2013 - $853) receivable from these entities.
EMPLOYEE BENEFITS
The Company has a defined contribution plan for qualifying full-time employees. Under the plan, the Company
contributes up to 6% (2013 – 5%) of an employee’s earnings, not exceeding the limits set by the Income Tax
Act (Canada). The amount contributed in fiscal 2014 related to the defined contribution plan was $6,072 (2013
- $5,822). The amount contributed is approximately the same as the expense included in the consolidated
statements of income and comprehensive income.
The Company maintains four defined benefit plans (“DBPs”) and two supplementary executive retirement plans
which provide pension benefits to certain of its employees in Canada that are included in long-term employee
obligations (note 14). The four DBPs are funded plans with pension benefits calculated based on a combination of
years of service and compensation levels.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
The two supplementary executive retirement plans (“SERP” and “CEO SERP”) are unfunded defined benefit plans,
which provide post-retirement income. Benefits under these plans are based on the employee’s highest three-year
average rate of base pay and, in the case of the CEO SERP, base pay plus 50% of short-term incentives at target,
during their most recent 10 years of service, accrued starting from the date of the implementation of the plan, and
currently includes a benefit for past service, as applicable under the terms of the plan.
The net defined benefit obligation, as determined by independent actuaries as at August 31, 2014, amounted to
$16,555 (2013 - $12,186). The net benefit expense included in the consolidated statements of income for the
year amounted to $1,665 (2013 - $1,383). The net actuarial loss recognized in the consolidated statements of
comprehensive income for the year amounted to $2,188 (2013 - $616 actuarial gain). The remaining change in the
liability relates to contributions made in the year. The discount rate used to measure the benefit obligations was
between 3.25% and 4.25% (2013 - 3.25% to 4.8%).
KEY MANAGEMENT PERSONNEL
Key management personnel consist of the Board of Directors and the Executive Management Team who have
the authority and responsibility for planning, directing and controlling the activities of the Company. The Executive
Management Team are also officers of the Company.
Included in other investments (note 5) and share capital (note 15) is a loan of $190 (2013 - $210) made to the Chief
Executive Officer of the Company for housing purposes prior to July 31, 2002. The loan is collateralized by charges
on the officers’ personal residence. The loan is non-interest bearing and is due October 31, 2022.
Key management personnel compensation, including the Executive Management Team, officers and directors of
the Company, is as follows:
Salaries and benefits
Post-employment benefits
Share-based compensation (note 15)
2014
7,428
1,588
6,138
2013
9,010
1,435
7,047
15,154
17,492
Except for the President and Chief Executive Officer, no other member of the executive leadership team has an
employment agreement or any other contractual arrangement in place with the Company in connection with
any termination or change of control event, other than the conditions provided in the compensation plans of the
Company. Generally, severance entitlements, including short-term incentives payable to the executive leadership
team other than the President and Chief Executive Officer, would be determined in accordance with applicable
common law requirements. Long-term incentive plans, such as stock options, are exercisable if vested, while
PSUs, DSUs, RSUs and SERP, would be payable if vested.
The employment agreement with the President and Chief Executive Officer provides for a severance payment if the
executive’s employment is terminated without cause or under change of control: equal to two times the aggregate
amount of his annual salary and short-term incentive bonus at target; a provision for the vesting of all previously
awarded but unvested stock options; all PSUs and DSUs would be payable if vested; and the CEO SERP would
vest immediately and accrue up to two years of additional service to a maximum age of 62.
29. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously presented
to conform to the presentation of the 2014 consolidated financial statements and to give effect to the accounting
changes described in note 3.
30. SUBSEQUENT EVENT
On September 4, 2014, the Company acquired an equity interest in Digital Entertainment Corporation of America
(“DECA”) for US$10,000, which operates the Kin Community Network. DECA operates a women-targeted multi-
channel network on YouTube. This investment will be accounted for using the equity method.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014
CORUS ENTERTAINMENT INC.
Stock Exchange Listing and
Trading Symbol
Toronto Stock Exchange
TSX: CJR.B
Registered Office
1500, 850-2nd Street SW
Calgary, Alberta T2P 0R8
Executive Office
Corus Quay
25 Dockside Drive
Toronto, Ontario M5A 0B5
Telephone: 416.479.7000
Facsimile: 416.479.7007
Website
www.corusent.com
Auditors
Ernst & Young LLP
Primary Bankers
The Toronto-Dominion Bank
Shareholder Services
For assistance with the following:
• Change of address
• Transfer or loss of share certificates
• Dividend payments or direct deposit
of dividends
• Dividend Reinvestment Plan
please contact our Transfer Agent and
Registrar:
CST Trust Company
PO Box 700, Station B
Montreal, Quebec H3B 3K3
Telephone: 1.800.387.0825
Facsimile:
1.888.249.6189 (in North America)
514.985.8843 (outside North America)
www.canstockta.com
Annual General Meeting
January 13, 2015
2 p.m. MT/4 p.m. ET
Sheraton Eau Claire
Wildrose Room
255 Barclay Parade S.W.
Calgary, Alberta
T2P 5C2
Dividend Information
Corus Entertainment pays its dividend
on a monthly basis and all dividends
are “eligible” dividends for Canadian tax
purposes unless indicated otherwise.
For further information on the dividend,
including the latest approved dividends and
historical dividend information, please visit
the Investor Relations section of
Corus Entertainment’s website
(www.corusent.com).
Dividend Reinvestment Plan
(“DRIP”)
CST Trust Company acts as administrator
of Corus Entertainment’s Dividend
Reinvestment Plan, which is available to the
Company’s registered Class A and Class B
Shareholders residing in Canada.
To review the full text of the Plan and
obtain an enrollment form, please visit
the Plan Administrator’s website at
www.canstockta.com or contact them
at 1.800.387.0825.
Corporate Social Responsibility
(“CSR”)
Since the Company’s launch in 1999,
Corus Entertainment (“Corus”) has had
a long and successful track record of
corporate social responsibility (CSR) that
encompasses community, employees,
industry engagement and environmental
initiatives. Corus and its employees have
embraced the philosophy of giving back to
the community by supporting worthwhile
causes company-wide as well as
individually. With the launch of our national
initiative Corus Feeds Kids in 2012, which
focuses on the well-being of children, Corus
remains committed to making a difference
and enriching the lives of the communities
we serve. For more information or to
view Corus’ CSR report, please visit
the Corus Entertainment website
(www.corusent.com).
Corporate Governance
The Board of Directors of the Company
endorses the principles that sound
corporate governance practices
(“Corporate Governance Practices”) are
important to the proper functioning of the
Company and the enhancement of the
interests of its shareholders.
The Company’s Statement of Corporate
Governance Practices as they compare
to the CSA Guidelines on Corporate
Governance, and the Charter of the
Board of Directors may be found in the
Company’s most recently filed Management
Information Circular and in the Investor
Relations section of Corus Entertainment’s
website (www.corusent.com).
Further Information
Financial analysts, portfolio managers,
other investors and interested parties
may contact Corus Entertainment at
416.479.7000 or visit
Corus Entertainment’s website
(www.corusent.com).
Corus Entertainment’s Annual Reports,
Annual Information Forms, Management
Information Circulars, quarterly financial
reports, press releases, investor
presentations and other relevant materials
are available in the Investor Relations
section of Corus Entertainment’s website
(www.corusent.com).
To receive additional copies of Corus
Entertainment’s Annual Report, please
fax your request to the Director,
Communications at 416.479.7007.
Copyright and Sources
© Corus® Entertainment Inc.
All rights reserved.
Trademarks appearing in this Annual Report
are Trademarks of Corus® Entertainment
Inc., or a subsidiary thereof which might be
used under license.
For specific copyright information on any
images used in this Annual Report, or
specific source information for any media
research used in this Annual Report, please
contact the Director, Communications at
416.479.7000.
Concept and Design: Reno Lee | Printing: Merrill Corporation Canada | Photographs: PAGE 4/5, YTV’s The Next Star: Andy Vanderkaay; PAGE 6/7,
Showtime’s Ray Donovan on Movie Central: Courtesy of Showtime; PAGE 8/9, Love It or List It Vancouver on W Network: Anya Chibis; PAGE 10/11,
Carlos, host of The Zone, on YTV: Andy Vanderkaay; PAGE 12/13, La Marraine on Séries+: Courtesy of Séries+; PAGE 14/15, London’s FM96 The Taz Show:
Kent Guy; PAGE 16/17, The Lumineers perform at Edgefest: Mark Booth; PAGE 20/21, Nelvana’s Little Charmers: Courtesy of Spin Master Charming
Productions and Nelvana Limited; PAGE 22/23, Scaredy Squirrel: © Mélanie Watt; PAGE 24/25, Up the Creek by Nicholas Oldland: Illustration © 2015
Nicholas Oldland. Reprinted by permission of Kids Can Press; PAGE 26, Heather A. Shaw and John M. Cassaday: Courtesy of Toronto Stock Exchange.
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CORUS ENTERTAINMENT ANNUAL REPORT 2014 corusent.com