Corus Entertainment Annual Report 2016 | 1
2 | Corus Entertainment Annual Report 2016
Table of Contents
Letters to Shareholders
The Power of Television
The Power of News and Radio
The Power of Original Content
Reaching Consumers Across Platforms
Our Brands
Directors and 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 Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Corporate Information
4
10
12
14
16
18
20
21
54
55
56
57
58
59
60
105
Corus Entertainment Annual Report 2016 | 3
Corus reaches
9 out of 10
Canadians every
single week.
4 | Corus Entertainment Annual Report 2016
Dear
Fellow
Shareholders
Fiscal 2016 has been nothing short of
transformational for Corus. We more than
doubled our size, bringing together many of the
most powerful media brands and content in the
country and assembling an extraordinary team
to lead our company through its next chapter.
As we head into fiscal 2017, we have a strong
foundation in place and a clear plan for growth.
We remain committed to returning value to our
shareholders as we take a balanced approach to
maintaining our dividend, paying down debt and
investing for the future.
As a pure play media and content company, the
new Corus has the scale and strength to not
only lead the industry in Canada, but to grow our
business around the world.
is simply
Today, Corus reaches 9 out of 10 Canadians
every single week,1 and in a month, we reach
96 percent of all Canadians.2 The power of this
reach
incredible, and provides us
with the ability to ensure our content not only
remains top of mind with consumers but also
provides our advertisers with the ability to
reach virtually all Canadians through premium,
engaging and contextually relevant content.
Audiences are consuming more content than
ever before, and while technologies and devices
are evolving, the premium brands, content and
partnerships we have will ensure we continue to
play a vital role in their lives moving forward.
We have gone through a period of board
renewal. Your board members bring a wealth of
knowledge and expertise to our company, and
along with our strong management team, will
help lead Corus through our next chapter.
I would also like to acknowledge the tremendous
commitment and hard work by all of our Corus
team this past year – it is their dedication and
tireless efforts that led us to the place we are
today. We’re so pleased to see how well the
integration is progressing, the incredible energy
throughout the company, and how our newly
combined teams are working successfully
together. We’re all very excited for the future of
Corus and the opportunities that lie ahead.
Heather Shaw
Executive Chair
1 Numeris PPM / Diary data, TV & Radio, Avg Wkly Rch, A2+, Total Canada // Comscore Media Metrix, multi-platform
3-month avg. reach adjusted to weekly formula applied to generate exclusive reach by platform
2 Numeris PPM/Diary data, TV & Radio, Avg Mthly Rch, A2+, Total Canada // Comscore Media Metrix, multi-platform,
A2+ Avg Mthly Rch // Standard duplication formula applied to generate exclusive reach by platform
Corus Entertainment Annual Report 2016 | 5
In fiscal 2016, we embarked on a multi-year
journey to transform Corus into an integrated
media and content company.
Our aspiration is to lead our industry in Canada by delivering
exceptional value to our customers, our clients and our
shareholders, and then leverage this strong domestic base to
build our content business internationally.
Our path has been guided by three strategic priorities we first
put in motion in fiscal 2015:
1. To own and control more content
2. To engage our audiences
3. To expand into new and adjacent markets
These priorities are in turn supported by three key initiatives:
• Build scale through strong partnerships;
• Pursue targeted M&A opportunities; and
• Focus on best-in-class execution.
This past year, we made considerable progress against these
priorities, the most notable being our transformational
acquisition of Shaw Media. This deal changed the face of media
in Canada, and provided Corus with the scale, the brands and the
talent to compete and to win both at home and abroad.
We are already seeing the power of the new Corus. In our
local markets, we have
integrated our radio and news
organizations, driving efficiencies and cost savings throughout
our operations. The teams have been successfully working to
harness the power of TV and radio by sharing content across
platforms, coordinating coverage of major events such as the
US elections, leveraging our TV personalities on radio and vice
versa, as well as bundling TV and radio together to create new
local revenue opportunities.
Through our combined assets, we also now have the
promotional heft to successfully launch and drive audiences
to our content. This fall for example, Global was the most-
watched network in primetime for premiere week, claiming 3
of the top 5 new programs and the #1 television show overall
with Bull, which had more than 2.8 million viewers tuned into
the premiere.1 With the power of the new Corus behind it, this
was the strongest premiere week for Global in over a decade,
and we’ve continued to hold our strong position with 3 of the
top 5 shows throughout the fall season.
Not only do we now have scale, we have differentiated scale,
over-indexing with women and family audiences, the most
coveted demographic for advertisers and distributors.
Combined, Corus now has 6 of the top 10 specialty channels
for adults aged 25-54, 7 of the top 10 specialty channels
among women aged 25-54, and 8 of the top 10 children’s
channels.2 These strong brands are also the perfect
environment for advertisers to place their branded content,
both on linear and through our digital platforms.
This strong foundation of Women & Lifestyle content has
enabled us to further build on our international content
business with the launch of Corus Studios. Last year, we
introduced three unscripted reality series: Masters of Flip,
Buying the View and Cheer Squad. These shows were met with
tremendous international interest, with Masters of Flip now
sold in more than 90 territories around the world and Buying the
View in over 60 territories.
In October, we debuted three additional new unscripted series,
Home to Win, Backyard Builds and $ave My Reno, and for fiscal
2017, we will more than double the number of unscripted reality
episodes for sale, when compared to fiscal 2016.
Another major initiative for fiscal 2016, in support of our
priority to build scale through partnerships and to control
more content, was the launch of our Disney suite of channels.
As the premiere brand steward in Canada, the addition of these
iconic brands to our portfolio establishes our position as the
leader in kids and family entertainment in our market. The
contribution of the new Disney suite of channels, along with
favourable renewal of certain carriage agreements in the quarter,
contributed to our strong subscriber growth in Q4 of fiscal 2016.
Corus is also leading the industry through our Ad Tech
innovations. Our Next Generation Advertising (NGA) initiative,
for example, offers advertisers the ability to target specific
improve their return on airtime
audience segments to
investments, and is one of the largest data sets of its kind in the
world. Combined with our Audience Intelligence Platform (AIP),
which has more than a million consumers who have opted in to
hear from Corus, we have a rich data set which can be leveraged
by advertisers, combining the mass reach and engagement of
television and radio, with the power of data.
And this is only the beginning.
Our team has just begun to unlock the many opportunities we
have as the new Corus, and we look forward to the progress
which we will continue to make in fiscal 2017. We are also firmly
focused on delivering on our financial commitments to:
• Ensure we identify and capture all revenue and cost
synergies, delivering $40-50 million in cost savings within
18-24 months of becoming the new Corus:
• Deliver solid free cash flow to enable investment to advance
our strategic priorities and reduce leverage to below 3.0x
or greater by the end of fiscal 2018; and
• Maintain our dividend of $1.14 per Class B Share.
We are tracking well against each of these priorities and are
confident in our momentum heading into fiscal 2017.
In summary, fiscal 2016 was a game-changing year for Corus.
As we head into fiscal 2017, we will continue to leverage all
opportunities we have as the new Corus, including continuing
to build on our Ad Tech investments, focusing on smart
investments to build our slate of owned-content both at home
and abroad, and strengthening our premium roster of brands
across television, radio, digital and social.
I’d like to thank our teams across the country for the
incredible passion, commitment and ingenuity they have
demonstrated this past year. We are well positioned to
continue to build on the significant advances we made
in 2016 towards our goal of transforming Corus from a
traditional broadcaster into a future-focused, integrated
media and content company, and to delivering exceptional
value to all of our stakeholders.
Doug Murphy
President and CEO
1 Numeris confirmed data, Total Canada, AMA(000), premiere week 2016 (Sept 19-25), National program schedule 8-11p, growth vs. premiere week 2015 (Sept 21-27)
2 Numeris TV Meter - Broadcast Year (8/31/2015 to 8/28/2016), Specialty Channels ex. Sports, Total Canada, M– Su, 2a–2a, Avg. Minute Audience
6 | Corus Entertainment Annual Report 2016
We are well positioned to continue
to build on the significant advances
we made this year towards our goal
of transforming Corus from
a traditional broadcaster, into
a future-focused, integrated
media and content company.
Corus Entertainment Annual Report 2016 | 7
media + content
powerhouse
The power of storytelling. The power of reach. The power to engage.
Corus is a leading media and content company that creates and delivers high-quality
brands and content across platforms for audiences in Canada and around the world.
Our multimedia offerings encompass 45 specialty television services, 15 conventional
television stations, 39 radio stations and a global content business which consists of the
production and distribution of television and film content, merchandise licensing, children’s
book publishing, animation software, and media and technology services.
Corus’ powerful portfolio is comprised of many of the most iconic and beloved media
brands in Canada. In fact, 9 out of 10 Canadians engage with our brands every single week.1
Not only does this provide advertisers with the ability to reach consumers en masse, our
Next Generation Advertising capabilities allow us to target specific consumers based on
their interests or demographics, combining the power of television and radio with the
intelligence of data.
8 | Corus Entertainment Annual Report 2016
specialty
networks
conventional
stations
radio stations
Corus original content is sold in
countries
around the world
45
15
39
160
#1
109out of
Canadian-owned children’s publisher
Kids Can Press
Canadians
reached each week by Corus1
1 Numeris PPM / Diary data, TV & Radio, Avg Wkly Rch, A2+, Total Canada // Comscore Media Metrix, multi-platform
3-month avg. reach adjusted to weekly formula applied to generate exclusive reach by platform
Corus Entertainment Annual Report 2016 | 9
TV
Since its inception, the power of television has been unmatched.
No other medium has the power to engage, to influence, to entertain, or to evoke emotion quite like television.
In Canada, audiences continue to consume television more than any other media, watching over 130 million
hours of television every single day! Corus has a 35% share1 of the English-speaking television market in Canada,
bolstered by Global Television, which reaches over 17 million Canadians weekly,2 and fueled by our leading specialty
entertainment brands, which are the top choice with audiences across the country. Combined, Corus now has
6 of the top 10 specialty channels for adults aged 25-54, 7 of the top 10 specialty channels among women aged
25-54, and 8 of the top 10 children’s channels.3
Strong Specialty Network Rankings
top
3
of
6 10
Specialty Channels
3
of
7 top
10
Specialty Channels
Among Women
3
8 top
10
of
Specialty Channels
Among Kids
3.1
billion
The Power of Television
TV’s unparalleled reach and strong viewer
connection makes it the most impactful and
efficient of all advertising mediums. While
digital platforms have grown in popularity,
TV still dominates time spent with media by
Canadians of all ages.
total hours viewed
sept - nov 2016
4
533
million
529
million
videos
1 Numeris TV Meter – Broadcast Year (8/31/2015 to 8/28/2016), Live 7+ days, Total Canada, A2+ M–Su, 2a–2a
2 Numeris TV Meter – Broadcast Year (8/31/2015 to 8/28/2016), Total Canada, A2+ M-Su 2a-2a, Avg. Weekly Reach
3 Numeris TV Meter - Broadcast Year (8/31/2015 to 8/28/2016), Specialty Channels ex. Sports, Total Canada, M– Su, 2a–2a, Avg. Minute Audience
4 All data represents September 2016 to November 2016 total video minutes viewed-Persons 2+. Television: Numeris, Total Canada, All Locations, all Corus channels.
Digital: comScore desktop video minute actuals with estimated mobile video minutes. Corus digital properties added to Corus television properties.
10 | Corus Entertainment Annual Report 2016
Corus Entertainment Annual Report 2016 | 11
News and
Radio
The Power of Local.
In the increasingly global world we live in, the power of local media and advertising is as impactful as
ever. Local news and radio continue to be highly trusted, go-to sources for news and entertainment,
as consumers seek relevant information and perspectives on the events of the day and on what’s
happening in their local communities.
Corus is the third-largest radio operator in Canada, with 5.7 million listeners tuning in weekly,1 and
more than 6.4 million hours of live content streamed every month. In addition to this, our 7 talk radio
stations see more than 400,000 downloads per month of our audio on demand and podcast content.
This year, Corus was the first Canadian commercial broadcaster to be added to the Apple Music platform.
Now, with the addition of Global News and our 15 conventional stations across the country, Corus can
better serve the local markets and leverage synergies between news and radio to grow and enhance
local advertising opportunities, while creating growth through content sharing, cross promotion and
advertising bundling.
Additionally, Global News has bureaus and correspondents in every major Canadian city as well as in
Washington, D.C. and London, England, providing analysis on important local, national and international
events — and we are leveraging this content across radio, television and all of our digital and social
platforms to drive audiences.
Powerful Combination of Radio and
Local Television to Deliver Local Audiences
+
+ radio
• Content Sharing • Cross Promotion
• Ad Bundling
• Cost Efficiencies
1 Numeris Radio, PPM & Diary – Combined, A2+ and A25-54, Reach Plan (M-Su 5a-1a), Fall 2015 (8/31/2015 to 11/29/2015 for PPM Markets and 9/7/2015 to 11/1/2015
for Diary Markets) Average Weekly Reach and Share of Tuning
12 | Corus Entertainment Annual Report 2016
Corus Entertainment Annual Report 2016 | 13
original
Content
The Power of Content.
We are living in the golden age of content, with audiences consuming more television programming
than ever before. A key strategic priority for Corus is to own and control more content across platforms
and to bring many of our successful domestic shows to audiences around the world.
Through Nelvana, we have a deep history of producing and distributing children’s animated content
globally, and last year, we started building our owned slate of Women & Lifestyle original content, with
the introduction of three unscripted reality series for sale globally: Masters of Flip, Buying the View and
Cheer Squad. These shows were met with tremendous interest — Masters of Flip is now available in
more than 90 territories, and Buying the View in more than 60 territories internationally.
This fall, under the umbrella Corus Studios, we debuted three additional new unscripted lifestyle series
– Home to Win, Backyard Builds and $ave My Reno – as we continue to grow our slate of original content.
In fiscal 2017, we will more than double the number of episodes of unscripted reality content for sale, in
comparison to last year.
Nelvana also expanded its content pipeline, with sales to some of the world’s most renowned media
companies this year. A number of strong franchise properties will be launched in the international
market over the next year, including:
• Mysticons, which is set for global debut in 2017 on Nickelodeon platforms worldwide
• Hotel Transylvania: The Television Series, which is slated to premiere on Disney Channels
worldwide next year
• The ZhuZhus, a new series based on the popular heritage ZhuZhu Pets brand, which was also
licensed to Disney Channels worldwide
• Esme and Roy, a new Sesame Workshop Original animated series that will debut on HBO in 2017,
then on Treehouse in Canada
• Bravest Warriors, a new series in development from Adventure Time creator Pendleton Ward
studios
14 | Corus Entertainment Annual Report 2016
Corus Entertainment Annual Report 2016 | 15
Reaching
Consumers
Across Platforms
Powerful linear brands make powerful digital brands.
In a cluttered and fragmented environment, consumers are engaging with Corus’ premium content
across platforms and devices. In fiscal 2016, our social content was viewed over one billion times on
social media, and every month, Globalnews.ca receives more than 56 million total views as consumers
seek out news and information they can trust. Across our suite of websites, Corus reaches over 10 million
Canadians online monthly,1 and our growing suite of mobile apps provides consumers with live streaming
on-the-go, across devices.
The strength and breadth of Corus’ portfolio of brands enables us to optimize our advertising revenues
through cross-platform and cross-brand sales, as well as reinforce our scale and scope by promoting
Corus programming across all of our channels and digital platforms.
16 | Corus Entertainment Annual Report 2016
1comScore Media Metrix Multi-Platform Data - July-September 2016
Corus Entertainment Annual Report 2016 | 17
Corus Television
Conventional Stations
PMS 300
C0 M0 Y0 K100
R0 G094 B184
PMS 1797
C0 M100 Y99 K4
R180 G040 B022
BLACK
C0 M0 Y0 K100
R0 G0 B0
PMS 300
C0 M0 Y0 K100
R0 G094 B184
PMS 1797
C0 M100 Y99 K4
R180 G040 B022
BLACK
C0 M0 Y0 K100
R0 G0 B0
Women + Lifestyle
positive
positive
negative
negative
Kids + General Entertainment
Original Content
Digital Everywhere
studios
*
18 | Corus Entertainment Annual Report 2016
(*Corus Entertainment owns less than a 50% equity position)
Corus Radio
Vancouver, British Columbia
CHMJ-AM
AM730 All Traffic
All The Time
Calgary, Alberta
CKNW-AM
News Talk 980 CKNW
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
92.5 Fresh Radio
Winnipeg, Manitoba
CJOB-AM
680 CJOB
CJGV-FM
99.1 Fresh Radio
CJKR-FM
BIG 97.5
Barrie/Collingwood, Ontario
CHAY-FM
93.1 Fresh Radio
CIQB-FM
B101
CKCB-FM
95.1 The Peak FM
Cambridge/Kitchener, Ontario
Cornwall, Ontario
CJDV-FM
107.5 DAVE ROCKS
CKBT-FM
91.5 The Beat
CFLG-FM
104.5 Fresh Radio
CJSS-FM
boom 101.9
Guelph, Ontario
Kingston, Ontario
CJOY-AM
1460 CJOY
CIMJ-FM
Magic 106.1
CKWS-FM
104.3 Fresh Radio
CFMK-FM
BIG 96.3
Hamilton, Ontario
CHML-AM
AM 900 CHML
CING-FM
95.3 Fresh Radio
CJXY-FM
Y108
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
100.5 Fresh Radio
CKWF-FM
THE WOLF 101.5
Toronto, Ontario
CFMJ-AM
Talk Radio AM640
CFNY-FM
102.1 the Edge
CILQ-FM
Q107
Corus Entertainment Annual Report 2016 | 19
Board of Directors
Doug Murphy
Member of the Executive
Committee
Heather Shaw
Chair of the Board
of Directors
Chair of the Executive
Committee
Fernand Bélisle
Member of the Human
Resources and Compensation
Committee
Serves as the Independent
Lead Director for Corus
Entertainment Inc.
Peter Bissonnette
Member of the
Executive Committee
Michael D’Avella
Member of the Audit
Committee
Trevor English
John Frascotti
Member of
the Corporate
Governance
Committee
Catherine Roozen
Chair of the Human
Resources and
Compensation
Committee
Member of the
Executive Committee
Mark Hollinger
Chair of the Corporate
Governance
Committee
Member of the
Executive Committee
Terrance Royer
Member of the Audit
Committee
Member of the
Human Resources
and Compensation
Committee
Barry James
Chair of the Audit
Committee
Member of the
Executive Committee
Julie Shaw
Vice Chair of the
Board of Directors
Member of
the Corporate
Governance
Committee
Officers
Doug Murphy
President and Chief
Executive Officer
Heather Shaw
Executive Chair
Barbara Williams
Executive Vice President and
Chief Operating Officer
Judy Adam, CA
Senior Vice President,
Finance
Scott Dyer
Senior Vice President
and President, Nelvana
John Gossling, FCPA, FCA
Executive Vice President
and Chief Financial Officer
Gary Maavara
Executive Vice
President and
General Counsel,
Corporate Secretary
Greg McLelland
Executive Vice
President and Chief
Revenue Officer
Kathleen McNair
Executive Vice
President, Special
Advisor to the CEO
and Chief Integration
Officer
20 | Corus Entertainment Annual Report 2016
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of the financial position and results of operations for the year ended August 31, 2016 is prepared at November 14, 2016. The following
should be read in conjunction with the Company’s August 31, 2016 audited consolidated financial statements and notes therein. The financial highlights included in the
discussion of the segmented results are derived from the audited consolidated financial statements. All amounts are stated in Canadian dollars unless specified otherwise.
Corus Entertainment Inc. (“Corus” or the “Company”) reports its financial results under International Financial Reporting Standards (“IFRS”) in Canadian dollars. Per share
amounts are calculated using the weighted average number of shares outstanding for the applicable period.
USE OF NON-IFRS FINANCIAL MEASURES
The Management’s Discussion and Analysis contains references to certain measures that do not have a standardized
meaning under IFRS as prescribed by the International Accounting Standards Board and are therefore unlikely to be
comparable to similar measures presented by other companies. Rather, these measures are provided as additional
information to complement IFRS measures by providing a further understanding of operations from management’s
perspective. Accordingly, non-IFRS measures should not be considered in isolation nor as a substitute for analysis
of financial information reported under IFRS. The Company presents non-IFRS measures, specifically, segment
profit, adjusted segment profit, adjusted net income, adjusted basic earnings per share, free cash flow, net debt
and net debt to segment profit.
The Company believes these non-IFRS measures are frequently used by securities analysts, investors and other
interested parties as measures of financial performance and to provide supplemental measures of operating
performance and thus highlight trends that may not otherwise be apparent when relying solely on IFRS financial
measures. A reconciliation of the Company’s non-IFRS 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
This document contains forward-looking information and should be read subject to the following cautionary language:
To the extent any statements made in this report contain information that is not historical, these statements are
forward-looking statements and may be forward-looking information within the meaning of applicable securities
laws (collectively, “forward-looking statements”). These forward-looking statements relate to, among other things,
our objectives, goals, strategies, intentions, plans, estimates and outlook, including advertising, distribution,
merchandise and subscription revenues, operating costs and tariffs, taxes and fees, currency value fluctuations
and interest rates, and can generally be identified by the use of 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, currency value fluctuations and interest rates, 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, regulations, and policies 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, Corus disclaims 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.
For a discussion on the Company’s results of operations for fiscal 2015, we refer you to the Company’s Annual
Report for the year ended August 31, 2015, filed on SEDAR on November 5, 2015.
The following discussion describes the significant changes in the consolidated results from operations.
Corus Entertainment Annual Report 2016 | 21
Management’s Discussion and Analysis
OVERVIEW
Corus Entertainment Inc. (“Corus” or the “Company”) is a Canadian-based integrated media and content company
that creates and delivers high quality brands and content across platforms for audiences in Canada and around
the world. The Company’s portfolio of multimedia offerings encompasses 45 specialty television networks, 15
conventional television stations, 39 radio stations and a global content business, digital assets, children’s book
publishing, animation software, technology and media services.
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 and factual reality programming, and Corus’ ability to continue to provide popular programming.
TELEVISION
The Television segment is comprised of 45 specialty television networks, 15 conventional television stations and a
content business, which consists of the production and distribution of films and television programs, merchandise
licensing, publishing, animation software, and media and technology services. On February 29, 2016, Corus ceased
operations of its pay television business. On April 1, 2016, Corus acquired 100% of Shaw Media (the “Acquisition”
or “Shaw Media”) from Shaw Communications Inc. (“Shaw”), which included 19 specialty television networks,
12 Global Television branded conventional television stations, Global News, globalnews.ca, and HistoryGO and
GlobalGO mobile apps.
Revenues for the specialty television networks are generated from both advertising and subscribers, while revenues
from the conventional television stations are derived solely from advertising. Revenues for the content business are
generated from the licensing of proprietary films and television programs, merchandise licensing, children’s book
publishing and animation software, and media and technology service sales. For both advertising and subscriber
revenues, it is critical that the Company offer Canadians entertaining content that engages them. The Company’s
content is available to Canadians through a variety of platforms, including conventional or specialty television,
online websites or mobile apps. Catering to consumer demand for quality and choice, the Company strives to offer
the best content available to Canadians when and where they choose to consume it.
RADIO
The Radio segment is comprised of 39 radio stations across Canada situated primarily in high-growth urban centres
in English Canada, with a concentration in the densely populated area of Southern Ontario. The Company’s primary
method of distribution is over-the-air, analog radio transmission, with additional delivery platforms including HD
Radio, websites and mobile apps.
Revenues for the Company’s radio business are derived primarily from advertising.
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)
Revenues
Segment profit(1)
Net income (loss) attributable to shareholders
Adjusted net income attributable to shareholders(1)
Basic earnings (loss) per share
Adjusted basic earnings per share(1)
Diluted earnings (loss) per share
Total assets
Long-term debt (inclusive of current portion)
Cash dividends declared per share
Class A Voting
Cc lass B Non-Voting
Notes:
(1) As defined in “Key Performance Indicators” section.
2016
1,171.3
411.0
125.9
129.0
$ 0.96
$ 0.98
$ 0.96
6,093.4
2,196.0
2015
815.3
277.2
(25.2)
135.9
$ (0.29)
$ 1.57
$ (0.29)
2,632.1
801.0
2014
2016 over 2015
2015 over 2014
43.7
48.3
(2.1)
(4.3)
833.0
289.6
150.4
150.3
$ 1.77
$ 1.77
$ 1.76
2,784.6
874.3
$1.1350
$1.1400
$1.1142
$1.1192
$1.0558
$1.0608
22 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
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)
2016
2015
2016 over 2015
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
Intangible impairment
Business acquisition, integration and restructuring costs
Gain on disposition
Other expense (income), net
Income before income taxes
Income tax expense
Net income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interest
Net income (loss) for the year
(1) As defined in Key Performance Indicators section
1,015,609
155,705
1,171,314
611,384
119,546
29,370
760,300
404,225
36,159
(29,370)
411,014
73,969
110,862
—
61,248
—
57,198
(86,151)
8,752
185,136
41,575
143,561
125,931
17,630
143,561
653,770
161,545
815,315
393,641
124,538
19,949
538,128
260,129
37,007
(19,949)
277,187
24,057
50,936
130,000
—
51,786
19,032
—
(10,117)
11,493
30,993
(19,500)
(25,154)
5,654
(19,500)
55.3
(3.6)
43.7
55.3
(4.0)
47.2
41.3
55.4
(2.3)
47.2
48.3
600.6
211.8
836.2
FISCAL 2016 COMPARED TO FISCAL 2015
For a discussion on the Company’s results of operations for the fourth quarter of fiscal 2016, we refer you to Corus’
Fourth Quarter 2016 Report to Shareholders filed on SEDAR on October 19, 2016.
The following discussion describes the significant changes in the consolidated results from operations for the year
ended August 31, 2016 compared to the prior year.
Commencing April 1, 2016, 100% of the operating results of Shaw Media, as well as its assets and liabilities have
been fully consolidated as a business combination in accordance with IFRS 3 – Business Combinations and, as a
result, Shaw Media has been accounted for by applying the acquisition method as of that date. Shaw Media has
been reported as part of the Television segment (refer to note 27 of the Company’s audited consolidated financial
statements for the year ended August 31, 2016 for further details).
For fiscal 2016, certain of Corus’ Pay Television business’ (“Pay TV”) assets and liabilities were reclassified as held for
disposal effective November 19, 2015 as a consequence of meeting the definition of assets held for sale under IFRS
5 – Non-current Assets Held for Sale and Discontinued Operations. The Company’s business activities are conducted
through two operating segments, Television and Radio. The disposal group, Pay TV, is not a separate operating
Corus Entertainment Annual Report 2016 | 23
Management’s Discussion and Analysis
segment, but it is included as part of the Television operating segment. Accordingly, the disposal group, Pay TV,
did not qualify for discontinued operations presentation and, as a result, its operating results remain in continuing
operations in the consolidated statement of income and comprehensive income for the year ended August 31, 2016.
However, intangible assets classified as held for disposal ceased being amortized effective November 19, 2015 and
as a consequence, amortization of program and film rights in the Television segment for the year ended August 31,
2016 is lower, by approximately $15.6 million, than it would have been had amortization on these assets not ceased.
On February 29, 2016, the Pay TV disposition was completed and the related proceeds and gain associated with this
disposal group were recognized (refer to note 27 of the Company’s audited consolidated financial statements for
the year ended August 31, 2016 for further details).
REVENUES
For the year ended August 31, 2016, consolidated revenues of $1,171.3 million were up 44% from $815.3 million in
the prior year. On a consolidated basis, advertising revenues, subscriber revenues, and merchandising, distribution
and other revenues increased by 70%, 19% and 23%, respectively. Revenues increased in Television by 55%, but
decreased in Radio by 4% in the current year compared to the prior year. The significant increase in revenues is
mainly attributable to the Acquisition, which is included in the Television segment as of April 1, 2016, offset by
the shutdown of the Pay TV business effective February 29, 2016. Shaw Media contributed $407.3 million in total
revenues for the five months ended August 31, 2016.
Further analysis of revenues is provided in the discussions of segmented results.
DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended August 31, 2016, direct cost of sales, general and administrative expenses of $760.3 million
were up 41% from $538.1 million in the prior year. On a consolidated basis, direct costs of sales increased 35%,
other general and administrative expenses increased 38%, and employee costs increased 56%. For the year ended
August 31, 2016, direct cost of sales excludes amortization not taken on Pay TV program and film right assets of
$15.6 million that were part of the disposal group.
The significant increase in direct cost of sales, general and administrative expenses for the year ended August 31,
2016 is mainly attributable to the Acquisition, effective April 1, 2016.
Further analysis of expenses is provided in the discussion of segmented results.
SEGMENT PROFIT
For the year ended August 31, 2016, consolidated segment profit was $411.0 million, up 48% from $277.2 million
last year, however, this excludes amortization of disposed Pay TV program and film rights of $15.6 million. Adjusting
for this, segment profit would be $395.4 million, up 43% from last year.
The significant increase in segment profit for the year ended August 31, 2016 is mainly attributable to the
Acquisition, effective April 1, 2016. Further analysis is provided in the discussions of segmented results.
DEPRECIATION AND AMORTIZATION
For the year ended August 31, 2016, depreciation and amortization expense was $74.0 million, up from $24.1 million
in the prior year. The increase in the year arises from higher amortization of intangible assets, specifically trade
marks from new long-term licensing agreements that commenced in fiscal 2016 as well as incremental depreciation
and amortization associated with assets acquired from the Acquisition.
INTEREST EXPENSE
Interest expense for the year ended August 31, 2016, was $110.9 million, up from $50.9 million, in the prior year.
The increase is due to higher imputed interest costs and higher interest on long-term debt. The increase in
imputed interest costs of $30.8 million for the fiscal year is attributable to new long-term licensing agreements that
commenced in fiscal 2016 and from incremental long-term obligations assumed with the Acquisition. The increase
in interest on long-term debt of $28.8 million for the fiscal year is attributable to increased bank debt associated
with the financing of the Acquisition.
The effective interest rate on bank loans and notes for the year ended August 31, 2016 was 4.6% compared to 4.1%,
in the prior year. The higher effective rates for the fiscal year are attributable to the Company’s newly established
syndicated senior secured credit facilities effective April 1, 2016 in connection with the Acquisition and the resulting
higher leverage.
24 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
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. The Company has completed its annual impairment
testing of broadcast licenses and goodwill and determined that there were no impairment charges required at
August 31, 2016.
In the second quarter of fiscal 2015, 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 in the radio segment. As a result of those tests, the Company recorded broadcast license impairment
charges of $23.0 million and a goodwill impairment charge of $107.0 million in its Radio segment. These charges are
excluded from the determination of segment profit.
DEBT REFINANCING COSTS
The debt refinancing costs of $61.2 million in fiscal 2016 related to a redemption premium of $52.6 million
associated with the redemption on April 18, 2016 of the outstanding $550.0 million 4.25% senior unsecured
guaranteed notes due 2020 and $8.6 million of unamortized financing charges and bridge loan commitment fees
associated with financing the Acquisition. Further discussion is provided in note 14 of the Company’s audited
consolidated financial statements for the period ended August 31, 2016. These charges are excluded from the
determination of segment profit.
INTANGIBLE IMPAIRMENTS
In the third quarter of fiscal 2015, the Company undertook a strategic, in-depth review of its television programming
slate to determine what programming would best position its services in the new regulatory environment. Programs
that were not delivering adequate audience ratings were considered impaired and were written down accordingly.
In addition, certain equity film investments were also considered impaired and written down accordingly. These
film investments primarily related to equity film investments made by the Pay TV vertical, and certain boys action
properties from Nelvana which were no longer supported by merchandising sales, as the lifecycles of the toy
properties had ended. As a result, the Company recorded non-cash impairment charges in program rights and film
investments of $51.8 million. These charges are excluded from the determination of segment profit.
BUSINESS ACQUISITION, INTEGRATION AND RESTRUCTURING COSTS
For the year ended August 31, 2016, the Company incurred $57.2 million of business acquisition, integration and
restructuring costs compared to $19.0 million last year. The current year costs were attributable to acquisition and
integration related costs in the Corporate segment relating to the Acquisition, as well as restructuring provisions
resulting from organizational change across the Company. These charges are excluded from the determination of
segment profit.
GAIN ON DISPOSITION
On February 29, 2016, the Company disposed of certain assets and related liabilities of its Pay TV business, which
resulted in a gain of $86.2 million. The Company received cash proceeds of $211.0 million from Bell Media Inc. (“Bell”)
to cease operations of its Pay TV business. Further detail is provided in the discussion of the segmented results as
well as note 27 of the Company’s audited consolidated financial statements for the year ended August 31, 2016.
OTHER EXPENSE (INCOME), NET
Other expense for the year ended August 31, 2016 was $8.8 million compared to income of $10.1 million in the
prior year. The expense in fiscal 2016 includes equity loss from associates of $5.9 million, offset by a venture fund
distribution of $0.5 million, a gain on a sale of an investment of $0.7 million, interest income of $0.8 million, and
foreign exchange gains of $0.3 million. In the prior year, other income includes cash proceeds of $18.5 million from
a venture investment, of which $1.5 million related to a return of capital resulting in a gain of $17.0 million in the
second quarter of fiscal 2015. This was offset by equity loss from associates of $3.3 million and foreign exchange
losses of $5.0 million.
INCOME TAX EXPENSE
The effective tax rate for the year ended August 31, 2016 was 22.5% compared to the Company’s 26.5% statutory
rate. The lower effective tax rate is primarily a result of the non-taxable portion of capital gains associated with the
disposition of certain Pay TV assets in the second quarter of fiscal 2016.
The effective tax rate for the year ended August 31, 2015 was a 270.0% compared to the Company’s 26.5%
statutory rate. This higher effective tax rate is primarily the result of the $107.0 million goodwill impairment charge
recorded in the year, which is not a tax-deductible expense.
Corus Entertainment Annual Report 2016 | 25
Management’s Discussion and Analysis
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
Net income attributable to shareholders for the year ended August 31, 2016 was $125.9 million ($0.96 earnings per
share), as compared to a net loss of $25.2 million ($0.29 loss per share) in the prior year. Net income attributable
to shareholders for fiscal 2016 includes business acquisition, integration and restructuring costs of $57.2 million
($0.35 per share), debt refinancing costs of $61.2 million ($0.34 per share), a gain relating to the discontinuation of
the Pay TV business and the disposal of certain assets of $86.2 million ($0.58 per share), and excludes amortization
of disposed of Pay TV program and film rights of $15.6 million ($0.09 per share). Adjusting for the impact of these
items results in an adjusted net income attributable to shareholders of $129.0 million ($0.98 per share basic) for
the current fiscal year. Net loss attributable to shareholders for the year ended August 31, 2015 includes Radio
broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), intangible asset impairment
charges of $51.8 million ($0.44 per share), and business acquisition, integration and restructuring costs of $19.0
million ($0.15 per share), offset by a gain on disposition of an equity investment of $17.0 million ($0.17 per share).
Adjusting for the impact of these items results in an adjusted net income attributable to shareholders of $135.9
million ($1.57 per share basic) for the prior fiscal year.
The weighted average number of basic shares outstanding for the year ended August 31, 2016, was 131,783,000,
and has increased significantly in the current fiscal year due to the issuance of 71,364,853 Class B Non-Voting
Shares to Shaw as part of the purchase consideration for the Acquisition and, in connection with the Acquisition,
the issuance of 32,770,000 Class B Non-Voting Shares as a result of a public Equity Offering and Concurrent Private
Placement completed April 1, 2016. The number of shares outstanding also increased from the issuance of shares
from treasury under the Company’s dividend reinvestment plan.
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAXES
Other comprehensive loss for the year ended August 31, 2016 was $14.4 million, compared to income of $4.3
million in the prior year. For the year ended August 31, 2016, the loss includes an unrealized loss associated with
remeasuring the fair value of cash flow hedges of $10.3 million, actuarial losses on post-employment benefit plans
of $3.5 million, and the reclassification to income of $0.6 million in mark-to-market gains associated with an equity
investment. The prior year income includes an unrealized gain from foreign currency translation adjustments of $4.2
million, a gain on actuarial valuation on post-employment benefit plans of $0.7 million, offset by unrealized losses
associated with remeasuring the fair value of cash flow hedges of $0.3 million, and mark-to-market adjustments of
equity investments of $0.3 million.
TELEVISION
The Television segment is comprised of 45 specialty television networks, 15 conventional television stations and
the Corus content business, which consists of the production and distribution of films and television programs,
merchandise licensing, children’s book publishing, animation software, and technology and media services. On
February 29, 2016, the Company discontinued its Pay TV business. On April 1, 2016, the Company acquired 100% of
Shaw Media from Shaw, which included 19 specialty television networks, 12 Global Television branded conventional
television stations (“Global Television”), Global News, globalnews.ca, and HistoryGO and GlobalGO mobile apps.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Revenues
Expenses
Segment profit (1)
Amortization of Pay TV assets
Adjusted segment profit (1)
Year ended August 31,
2016
1,015,609
611,384
404,225
15,585
388,640
2015
653,770
393,641
260,129
—
260,129
(1) As defined in the “Key Performance Indicators” section
For the year ended August 31, 2016, total revenues increased 55% from the prior year, with advertising revenues
up 116%, subscriber revenues up 19% and merchandising, distribution and other revenues up 26% compared to
the prior year. The significant increase in total revenues for the fiscal year was mainly attributable to the Acquisition
effective April 1, 2016, offset by the shutdown of the Pay TV business in western Canada effective February 29,
2016. Shaw Media contributed $407.3 million in total revenues for the five months ended August 31, 2016.
26 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
The following discussion highlights revenues for fiscal 2016 on a pro forma basis, after adjusting the prior year
operating results for the inclusion of Shaw Media and exclusion of the Pay TV results for both fiscals 2015 and 2016.
On a pro forma basis, total revenues were down 2% in fiscal 2016 compared to the prior year. Advertising revenues
were down 8% in fiscal 2016 compared to the prior year, as a result of several factors including soft advertising
market conditions, the timing of agency contract renewals as well as a number of major sporting events which
occurred during the fourth quarter of fiscal 2016 (and were broadcast on competitors’ networks). Both conventional
and specialty television networks were negatively impacted in the current year by the summer Olympics and Euro
2016. In addition, Global Television faced tougher comparables to the prior year, as the prior year results benefited
from the Federal election coverage, a stronger summer schedule on Global, and more advertising support for
blockbuster theatrical releases. This was offset by growth in the subscription video-on-demand market.
On a pro forma basis, total subscriber revenues increased 8% in fiscal 2016 compared to the prior year, driven by
the launch of the Company’s suite of Disney channels earlier in the year and from the renewal of certain carriage
agreements in the fourth quarter.
On a pro forma basis, merchandising, distribution and other revenues increased 6% in fiscal 2016 reflecting growth
in distribution revenues from content licensing deals in the subscription video-on-demand market.
For the year ended August 31, 2016, total expenses increased 55% compared to the prior year. Direct cost of sales
(which includes amortization of program rights and film investments, and other cost of sales) were 36% higher than
the prior year, driven by additional programming costs related to the acquired Shaw Media services and the Disney
and Nickelodeon program licensing agreements, partially offset by reduced programming amortization costs as a
result of the shutdown of Pay TV. General and administrative expenses increased 91% from the prior year, driven
by the incremental operating costs of the acquired Shaw Media services, offset by the realization of cost synergies.
For the year ended August 31, 2016, segment profit increased 55% and segment profit margin was 40%. However,
this excludes the amortization of disposed Pay TV program and film rights in the amount of $15.6 million.
For fiscal 2016, certain of Corus’ Pay TV assets and liabilities were reclassified as held for disposal effective November
19, 2015 as a consequence of meeting the definition of assets held for sale under IFRS 5 – Non-current Assets
Held for Sale and Discontinued Operations. The disposal group, Pay TV, did not qualify for discontinued operations
presentation and, as a result, its operating results remain in continuing operations. Intangible assets reclassified
as held for disposal ceased being amortized effective November 19, 2015 and, as a consequence, amortization of
program and film rights in the Television segment for the year ended August 31, 2016 is lower by approximately
$15.6 million than it would have been had amortization on these assets not ceased. Adjusting for this, segment
profit for the year ended August 31, 2016 would be $388.6 million and adjusted segment profit margin was 38%.
Further discussion is provided in note 27 of the Company’s audited consolidated financial statements for the year
ended August 31, 2016.
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,
2016
155,705
119,546
36,159
2015
161,545
124,538
37,007
For the year ended August 31, 2016, revenues decreased 4% compared to the prior year. The majority of the revenue
decline came from Western Canada, driven by soft economic conditions in Alberta. This was offset by growth in
Ottawa and Vancouver and steady performance in Toronto.
Corus Entertainment Annual Report 2016 | 27
Management’s Discussion and Analysis
Direct cost of sales, general and administrative expenses decreased 4% for the fiscal year ended August 31, 2016.
Variable expenses decreased 10% for the year, driven mainly by lower costs directly related to revenue. Fixed costs,
which represent a much higher proportion of the cost structure, decreased 2% for the year. The declines were
driven mainly by lower employee-related costs and programming research, offset by higher premises costs.
For the year ended August 31, 2016, segment profit decreased 2% compared to the prior year and segment profit
margin was 23%, consistent with the prior year. On April 1, 2016, in conjunction with the Shaw Media acquisition,
the Company announced a new organizational structure that benefits from the combined power of the Company’s
radio operations and its conventional television stations to create a strong presence in local markets – across radio,
TV and digital. Accordingly, the fiscal year results reflect the realization of cost synergies derived from these efforts.
Subsequent to the year end, the Summer PPM audience ratings were released. Highlights include: Calgary’s
Country 105 rebounded from the Spring PPM and regained the number one ranked position in the A25-54
demographic segment; in Edmonton, CISN Country 103.9 continued to gain audience, climbing two ranked
positions to number two, in the A25-54 demographic segment; Vancouver’s CFOX jumped to the number three
ranked position while Rock 101 settled in at number five in the A25-54 demographic segment; Toronto’s 102.1
the Edge and Q107 held their positions and maintained the number six and seven ranked position, respectively,
in the A25-54 demographic segment.
CORPORATE
The Corporate results are comprised of the incremental cost of corporate overhead in excess of the amount
allocated to the operating divisions.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Share-based compensation
Other general and administrative costs
Year ended August 31,
2016
4,085
25,285
29,370
2015
2,723
17,226
19,949
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.
Higher share-based compensation expense for the year ended August 31, 2016 reflects an expanded number of
participants in the long-term incentive plans and an increase in the number of units estimated to hit vesting targets,
partially offset by a lower share price in the current year.
For the year ended August 31, 2016, other general and administrative costs increased, primarily due to higher costs
related to short-term performance incentive plans in the current year and lower costs related to the Corus Quay
facility incurred in the prior year.
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
SEASONAL FLUCTUATIONS
Corus’ operating results are subject to seasonal fluctuations that can significantly impact quarter-to-quarter
operating results. The Company’s advertising revenues are dependent on general advertising revenues and retail
cycles associated with consumer spending activity, accordingly the first and third quarter results tend to be the
strongest and second and fourth quarter results tend to be the weakest in a fiscal year. The Company’s merchandising
and distribution revenues are dependent on the number and timing of film and television programs delivered as well
as the timing and level of success achieved of associated merchandise licensed in the market, which cannot be
predicted with certainty. Consequently, the Company’s results may fluctuate materially from period-to-period and
the results of any one period are not necessarily indicative of results for future periods.
The following table sets forth certain unaudited data derived from the Company’s interim condensed consolidated
financial statements for each of the eight most recent quarters ended August 31, 2016. In Management’s opinion,
these unaudited interim condensed consolidated financial statements have been prepared on a basis consistent
with the audited consolidated financial statements for the year ended August 31, 2015.
28 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
[thousands of Canadian dollars, except per share amounts]
Segment
profit(1)
Net income (loss)
attributable to
shareholders
Adjusted net
income
attributable to
shareholders
Earnings per share
Basic
Diluted
Adjusted
105,371
130,186
79,579
95,878
55,493
68,699
59,719
93,276
25
(15,766)
102,232
41,320
17,835
(8,109)
(86,786)
51,906
14,535
52,950
20,944
42,484
23,967
31,550
28,499
51,906
$ 0.00
$ (0.10)
$ 1.17
$ 0.47
$ 0.21
$ (0.09)
$ (1.01)
$ 0.60
$ 0.00
$ (0.10)
$ 1.17
$ 0.47
$ 0.21
$ (0.09)
$ (1.01)
$ 0.60
$ 0.07
$ 0.34
$ 0.24
$ 0.49
$ 0.28
$ 0.36
$ 0.33
$ 0.60
Revenues
384,467
360,824
197,705
228,318
193,599
203,121
191,484
227,111
2016
4th quarter
3rd quarter
2nd quarter
1st quarter
2015
4th quarter
3rd quarter
2nd quarter
1st quarter
(1)As defined in “Key Performance Indicators”
SIGNIFICANT ITEMS CAUSING VARIATIONS IN QUARTERLY RESULTS
• Net income attributable to shareholders for the fourth quarter of fiscal 2016 was negatively impacted by
business acquisition, integration and restructuring costs of $19.6 million ($0.07 per share).
• Revenues, segment profit and net income attributable to shareholders were positively impacted by the Acquisition
and inclusion of its operating results effective April 1, 2016; however, they were negatively impacted by the
shutdown of the Pay TV business effective February 29, 2016. Net income attributable to shareholders for the
third quarter of fiscal 2016 was also negatively impacted by business acquisition, integration and restructuring
costs of $29.3 million ($0.15 per share) and debt refinancing costs of $61.2 million ($0.29 per share).
• Net income attributable to shareholders for the second quarter of fiscal 2016 was positively impacted by a
gain of $86.2 million ($0.87 per share) resulting from a gain on disposition of assets relating to the Pay TV
business, amortization ceasing on certain programming assets disposed of at the end of the quarter of $14.2
million ($0.12 per share), and negatively impacted by restructuring costs of $6.0 million ($0.06 per share).
Segment profit was also positively impacted by the cessation of amortization on the aforementioned Pay TV
programming assets by $14.2 million.
• Net income attributable to shareholders for the first quarter of fiscal 2016 was negatively impacted by business
acquisition, integration and restructuring costs of $2.4 million ($0.03 per share) and positively impacted by
amortization ceasing on certain programming assets reclassified as held for disposal of $1.4 million ($0.01 per
share).
• Net income attributable to shareholders for the fourth quarter of fiscal 2015 was negatively impacted by
restructuring costs of $8.3 million ($0.07 per share).
• Net income attributable to shareholders for the third quarter of fiscal 2015 was negatively impacted by
non-cash impairment charges in program rights and film investments of $51.8 million ($0.44 per share) and
restructuring costs of $2.7 million ($0.02 per share).
• Net income attributable to shareholders for the second quarter of fiscal 2015 was negatively impacted by non-
cash radio broadcast license and goodwill impairment charges of $130.0 million ($1.44 per share), restructuring
costs of $8.0 million ($0.07 per share) and positively impacted by a gain of $17.0 million ($0.17 per share)
resulting from a gain on disposition of investment.
FINANCIAL POSITION
The major change in the Company’s consolidated results arises from the consolidation of 100% interest in Shaw
Media commencing April 1, 2016 as a consequence of completing the Acquisition. As a result, its assets and
liabilities have been fully consolidated as a business combination in accordance with IFRS 3 – Business Combinations,
as of that date. Final valuations of certain items are not yet complete due to the inherent complexity associated
with valuations. Therefore, the purchase price allocation is preliminary and subject to adjustment on completion
of the valuation process and analysis of resulting income tax effects (refer to note 27 of the Company’s audited
consolidated financial statements for the year ended August 31, 2016 for further discussion).
Corus Entertainment Annual Report 2016 | 29
Management’s Discussion and Analysis
On February 29, 2016, the Company ceased operation of its Pay TV business. Accordingly, certain assets and
liabilities that were reclassified on November 19, 2015 as held for sale as a consequence of meeting the definition of
assets held for sale under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations were written down
(refer to note 27 of the Company’s audited consolidated financial statements for the period ended August 31, 2016
for further discussion).
Total assets at August 31, 2016 and August 31, 2015 were $6.1 billion and $2.6 billion, respectively. The
following discussion describes the significant changes in the consolidated statements of financial position
since August 31, 2015.
Current assets at August 31, 2016 were $470.1 million, up $ 241.7 million from August 31, 2015.
Cash and cash equivalents increased by $33.9 million. Refer to the discussion of cash flows in the next section.
Accounts receivable increased $215.3 million during the year, of which $243.5 million relates to the Acquisition,
offset by higher cash collections during fiscal 2016. The accounts receivable balance is subject to seasonal trends.
Typically, the balance is higher in the first and third quarters and lower in the second and fourth quarters as a result
of the broadcast revenue seasonality. The Company carefully monitors the aging of its accounts receivable.
Tax credits receivable decreased $6.1 million during the year as a result of tax credit receipts exceeding accruals
related to film and interactive productions.
Investments and other assets increased $3.8 million during the year, primarily as a result of additional investments
in Venture funds and associates offset by equity loss from associates.
Property, plant and equipment increased $143.0 million during the year, of which $160.9 million relates to the
Acquisition, offset during the year by depreciation expense exceeding additions for fiscal 2016.
Program and film rights increased $366.4 million during the year, of which $287.6 million relates to the Acquisition.
As well, additions of acquired rights of $460.7 million were offset by disposal of certain Pay TV assets of $68.7
million and amortization of $313.3 million during fiscal 2016.
Film investments increased $8.6 million during the year, as film spending (net of tax credit accruals and impairment
recoveries) of $31.3 million were offset by film amortization of $22.7 million.
Intangibles increased $1,101.6 million during the year, of which $1,065.8 million relates to the Acquisition. As
well, additions of trade marks and exclusive rights associated with new licensing agreements that commenced
in fiscal 2016 were offset by amortization of finite life intangibles and disposal of certain Pay TV intangible
assets and associated broadcast license of $53.1 million related to the cessation of the Pay TV business. Further
discussion is contained in note 27 of the Company’s audited consolidated financial statements for the period
ended August 31, 2016.
Goodwill increased by $1,562.8 million from August 31, 2015, primarily as a result of the Acquisition, offset
by decreases related to the cessation of the Pay TV business. Further discussion is contained in note 27 of the
Company’s audited consolidated financial statements for the year ended August 31, 2016.
Accounts payable and accrued liabilities increased $182.4 million during the year, as the Acquisition added $216.0
million, offset by the disposal of $43.6 million of liabilities associated with the cessation of operations of the Pay
TV business. The remaining increase is primarily a result of higher program rights payable offset by lower film
investment accruals and capital lease obligations. Further discussion is provided in note 27 to the Company’s
audited consolidated financial statements for the period ended August 31, 2016.
Provisions have increased $12.5 million during the year, of which $0.7 million relates to the Acquisition, as well as
accruals exceeding payments made during the year.
Long-term debt, including current portion, at August 31, 2016 was $2,196.0 million compared to $801.0 million at
August 31, 2015. On February 3, 2016, the $150.0 million Term Facility (categorized as the current portion of long-
term debt at August 31, 2015) matured and was repaid in full. On April 1, 2016, in connection with the Acquisition,
the Company drew the full amount of its new Term Facility of $2.3 billion and repaid all amounts then outstanding
against its Revolving Facility. In relation to the bank financing, the Company incurred deferred financing fees of
$23.6 million. On April 18, 2016, the Company redeemed its $550.0 million, 4.25% senior unsecured guaranteed
notes (the “Notes”) and wrote off previously deferred financing fees of $5.6 million. As of August 31, 2016, the
$115.0 million classified as the current portion of long-term debt reflects the mandatory repayment on the debt in
the next twelve months. During the year, amortization of deferred financing charges of $4.0 million was recorded.
30 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
Further discussion of the Company’s debt instruments is contained below in the Liquidity and Capital Resources
section as well as in note 14 of the Company’s audited consolidated financial statements for the period ended
August 31, 2016.
Other long-term liabilities increased by $400.8 million during the year, of which $164.1 million relates to the
Acquisition. In addition, there were increases in long-term program rights payable, intangible liabilities associated
with new licensing agreements that commenced in fiscal 2016, fair value of interest rate swap agreements, and
asset retirement obligations. This was partially offset by the disposal of certain other long-term liabilities related to
the cessation of operation of the Pay TV business.
Share capital increased $1,174.0 million, as a result of the issuance of $60.7 million of shares from treasury under
the Company’s dividend reinvestment plan, and from the issuance of 71,364,853 Class B Non-Voting Shares
to Shaw as part of the purchase consideration for the Acquisition and, in connection with the acquisition, the
issuance of 32,770,000 Class B Non-Voting Shares as a result of a public Equity Offering and Concurrent Private
Placement completed April 1, 2016. Further discussion is contained below in the Liquidity and Capital Resources
section as well as in notes 16 and 27 of the Company’s audited consolidated financial statements for the period
ended August 31, 2016.
Contributed surplus increased $1.0 million due to share-based compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Overall, the Company’s cash and cash equivalents position increased by $33.9 million over the prior year end. Free
cash flow for the year ended August 31, 2016 was $188.2 million, compared to free cash flow of $201.2 million in
the prior year. In the prior year, free cash flow benefited from the disposition of an investment for proceeds of
$18.5 million. A reconciliation of free cash flow to the consolidated statements of cash flows is provided in the Key
Performance Indicators section.
Cash provided by operating activities in the year ended August 31, 2016 was $200.2 million, compared to $204.5
million last year. The increase of $4.3 million arises from higher net income from operations (adjusted for non-cash
items) of $107.6 million, higher cash provided by working capital of $24.9 million, lower film investment additions of
$5.3 million, offset by higher payments on program rights of $142.1 million.
Cash used by investing activities in the year ended August 31, 2016 was $1,658.4 million, compared to $23.0
million in the prior year. The current year includes cash consideration from Bell, net of certain fees, of $209.5 million
relating to the shutdown of the Pay TV business and from a venture fund distribution of $1.7 million, offset by the
cash portion of the consideration paid for the Shaw Media acquisition of $1,824.9 million net of acquired cash, net
cash outflows for intangibles, investments and other assets of $19.6 million, and additions to property, plant and
equipment of $22.6 million. The prior year includes cash proceeds from a venture investment of $18.5 million, offset
by net cash outflows for intangibles, investments and other assets of $24.8 million and additions to property, plant
and equipment of $16.7 million.
Cash provided by financing activities in the year ended August 31, 2016 was $1,492.1 million, compared to cash used
of $155.6 million in the prior year. In the current year, the Company increased bank debt by $1,959.2 million, raised
$276.5 million from the issuance of subscription receipts, redeemed Notes for $605.7 million (inclusive of the
redemption premium), paid dividends of $109.5 million, incurred financing fees of $23.6 million, and made capital
lease payments of $4.8 million. In the prior year, the Company paid down bank debt by $74.7 million, paid dividends of
$81.8 million, made capital lease payments of $4.0 million and received $5.7 million from issuance of shares under
the stock option plan.
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 to provide returns to its shareholders. The Company
defines capital as the aggregate of its shareholders’ equity and total bank 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 bank 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.
Corus Entertainment Annual Report 2016 | 31
Management’s Discussion and Analysis
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 a leverage target (net debt to segment profit
ratio) of 3.0 to 3.5 times, and to maintain a dividend yield in excess of 2.5%. In the short term, the Company may
permit the long-term range to be exceeded (for long-term investment opportunities), but endeavours to return
to the leverage target 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 above these internally imposed objectives as a result of the Acquisition and is committed to
bringing the leverage target back within the target range by the end of fiscal 2018.
As at August 31, 2016, the Company had available approximately $300.0 million under its revolving facility and was
in compliance with all loan covenants. As at August 31, 2016, the Company had a cash balance of $71.4 million.
For further details on the credit facilities established on April 1, 2016 refer to the credit facilities section below and
note 14 of the Company’s audited consolidated financial statements for the year ended August 31, 2016.
With the changes to the credit facilities on April 1, 2016, 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 twelve months.
NET DEBT TO SEGMENT PROFIT
As at August 31, 2016, net debt was $2,124.7 million, up from $763.6 million at August 31, 2015. Net debt to
segment profit at August 31, 2016 was 3.7 times on a proforma basis, after adjusting segment profit to include the
Acquisition and exclude Pay TV for the prior twelve months. This compares to 2.8 times at August 31, 2015. Further
discussion on this is contained in the Key Performance Indicators section.
TOTAL CAPITALIZATION
At August 31, 2016, total capitalization was $4,601.0 million, an increase of $2,617.5 million from August 31, 2015.
The increase is attributable to increased debt and shares to finance the Acquisition.
On April 1, 2016, the Company acquired the shares of Shaw Media from Shaw for approximately $2.65 billion,
subject to certain post-closing adjustments, satisfied by the Company through a combination of: a) $1.85 billion
of cash consideration; and b) the issuance by the Company to Shaw of 71,364,853 Class B Non-Voting Shares
(the “Class B Shares”) at an agreed value per share of $11.21 per share, for an aggregate value of $800.0 million.
These shares, were valued for accounting purposes at $11.68 per share, the opening price of the Company’s
stock on April 1, 2016.
The cash consideration for the Acquisition as well as the re-financing of existing indebtedness of the Company and
the redemption of the 4.25% senior unsecured guaranteed notes due February 11, 2020 (the “Notes”), of which
$550.0 million principal (plus accrued and unpaid interest) was outstanding, was financed through a combination
of the debt from the Term Facility (as defined above) and equity from the net proceeds of the Equity Offering (as
defined below) and the Concurrent Private Placement (as defined below).
CLASS B SHARE SUBSCRIPTION RECEIPTS
In connection with the Acquisition, on February 3, 2016, Corus completed a public equity offering (the “Equity
Offering”) of 25,400,000 subscription receipts of Corus (the “Subscription Receipts”) at a price of $9.00 per
Subscription Receipt, for gross proceeds of approximately $228.6 million. On February 5, 2016, the underwriters
in the Equity Offering exercised their option to purchase an additional 3,810,000 Subscription Receipts at a price
of $9.00 per Subscription Receipt, for additional gross proceeds of approximately $34.3 million, representing total
gross proceeds from the Equity Offering of $262.9 million. Concurrently with the closing of the Equity Offering, on
February 3, 2016, the Shaw family also purchased 3,560,000 Subscription Receipts on a private placement basis
(the “Concurrent Private Placement”) from Corus at a price of $9.00 per Subscription Receipt, for gross proceeds of
$32.0 million. Issuance costs, net of income taxes, of $8.9 million and a subscription receipt adjustment payment of
$6.2 million were incurred, resulting in net proceeds of $279.8 million.
The Class B Shares underlying the Subscription Receipts were issued on April 1, 2016 in connection with the
completion of the Acquisition and the net proceeds from the Equity Offering and the Concurrent Private
Placement (including accrued interest thereon) were applied by Corus to partially fund the cash consideration
for the Acquisition.
32 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
CREDIT FACILITIES
In connection with the closing of the Acquisition, Corus established syndicated senior secured credit facilities in the
aggregate amount of $2.6 billion, consisting of $2.3 billion in term loans (the “Term Facility”), all of which was drawn
at closing, and a $300.0 million revolving facility (the “Revolving Facility”) which was not drawn on as part of closing.
The Term Facility and Revolving Facility replace Corus’ previous credit facilities and were established pursuant to a
fourth Amended and Restated Credit Agreement dated as of April 1, 2016.
At the time it agreed to enter into the Acquisition, Corus obtained commitments from a Canadian chartered bank
for: (i) an aggregate of $2.3 billion in new credit facilities; and (ii) a $300.0 million non-revolving, non-amortizing
unsecured term facility (the “Debt Bridge Facility”) which Corus intended to replace or repay with a proposed
offering of senior unsecured notes. Prior to the closing of the Acquisition, Corus determined not to proceed with
the offering of senior unsecured notes, and accordingly increased the size of the Term Facility by $300.0 million and
cancelled the Debt Bridge Facility.
TERM FACILITY
The Term Facility consists of two tranches, with the first tranche being in the initial amount of $766.7 million and
maturing on April 1, 2019, and the second tranche being in the initial amount of $1,533.3 million and maturing on
April 1, 2021. The Term Facility was available in a single Canadian dollar drawdown, and net proceeds from the Term
Facility, after deducting related fees and expenses, were used (together with the net proceeds from the Equity
Offering and the Concurrent Private Placement) to finance the Acquisition, to prepay the amount outstanding
under its existing credit facilities and to redeem the Senior Notes.
Advances under the Term Facility may be outstanding in the form of either prime loans or bankers’ acceptance
and bear interest at the applicable reference rate plus an applicable margin depending on the type of advance and
Corus’ total debt to cash flow ratio.
Voluntary prepayments on the amount outstanding under the Term Facility are permitted at any time without
penalty, subject to payment of customary breakage costs, if applicable, and provided that advances in the form
of bankers’ acceptances may only be paid on their maturity. Each tranche of the Term Facility will be subject to
mandatory repayment equal to 1.25% per quarter at the end of each fiscal quarter of Corus, increasing to 1.875%
per quarter commencing with the November 30, 2017 instalment and, in the case of the second tranche, to 2.5%
per quarter commencing with the November 30, 2019 instalment.
REVOLVING FACILITY
The $300.0 million Revolving Facility matures on April 1, 2020. The Revolving Facility is available on a revolving basis
to finance permitted acquisitions and capital expenditures and for general corporate purposes. Amounts owing
under the Revolving Facility will be payable in full at maturity. The Revolving Facility permits full or partial cancellation
of the facility and, if applicable, concurrent prepayment of the amounts drawn thereunder at any time without
penalty, subject to payment of customary breakage costs, if applicable, and provided that advances in the form of
bankers’ acceptances may only be paid on their maturity.
Advances under the Revolving Facility may be drawn in Canadian dollars as either a prime rate loan, bankers’
acceptance or Canadian dollar denominated letters of credit (to a sub-limit of $50.0 million total), or in U.S. dollars
as either a base rate loan, U.S. LIBOR loan or U.S. dollar denominated letters of credit (to a sub-limit of $50.0
million total). Amounts drawn under the Revolving Facility will bear interest at the applicable reference rate plus an
applicable margin depending on the type of advance and Corus’ total debt to cash flow ratio. A standby fee will also
be payable on the unutilized amount of the Revolving Facility.
The full text of the Amended Credit Agreement governing the Term Facility and the Revolving Facility is filed on
SEDAR at www.sedar.com.
REDEMPTION OF 4.25% SENIOR UNSECURED GUARANTEED NOTES DUE 2020
On April 18, 2016, the Company redeemed all of its outstanding $550.0 million 4.25% senior unsecured guaranteed
notes due 2020 (the “2020 Notes”). The redemption included accrued and unpaid interest on the 2020 Notes up
to, but excluding the redemption date and a redemption premium totaling $52.6 million. In addition, the Company
wrote-off associated unamortized financing charges of $4.8 million.
OFF-BALANCE SHEET ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
During the third quarter of fiscal 2016, the Company entered into Canadian interest rate swap agreements to fix
Corus Entertainment Annual Report 2016 | 33
Management’s Discussion and Analysis
the interest rate on the majority of its outstanding term loan facilities. The counterparties of the swap agreements
are highly rated financial institutions and the Company does not anticipate any non-performance. The fair value of
future cash flows of interest rate swap derivatives change with fluctuations in market interest rates. The estimated
fair value of these agreements at August 31, 2016 is $14.4 million, which has been recorded in the consolidated
statements of financial position as a liability.
In the second quarter of fiscal 2016, the Company’s term loan facility of $150.0 million was repaid, and the Canadian
interest rate swap agreement that fixed the interest rate on this facility was concluded.
CONTRACTUAL COMMITMENTS
The Company has the following undiscounted contractual obligations at August 31, 2016:
(thousands of Canadian dollars)
Total
Within 1 year
2 - 3 years
4 - 5 years
More than 5 years
Total debt(1)
Purchase obligations(2)
Operating leases(3)
Other obligations(4)
Financing leases
2,218,054
1,071,060
467,924
254,506
2,406
115,000
548,811
39,755
77,713
1,586
931,021
330,654
65,765
84,646
820
1,172,033
131,813
56,411
64,809
—
Total contractual obligations
4,013,950
782,865
1,412,906
1,425,066
—
59,782
305,993
27,338
—
393,113
(1) Principal repayments and interest payments
(2) Purchase obligations are contractual obligations under contracts relating to program rights, satellite and signal transport costs, and various
other operating expenditures, that the Company has committed to for periods ranging from one to ten years.
(3) Operating leases included office, equipment and automobile leases.
(4) Other obligations included financial liabilities, trade marks, other intangibles and CRTC commitments.
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 2016, the Company incurred interest on bank debt of $47.1 million
(2015 – $10.8 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
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.
The Company’s sources of revenue are well diversified, with revenue streams for the year ended August 31, 2016
derived primarily from three areas: advertising 56%, subscriber 35% and merchandising, distribution and other 9%
(2015 – 48%, 42% and 10%, 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 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
34 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
work, publishing, marketing (research and advertising costs); employee remuneration; regulatory license fees; and
selling, general administration and overhead costs. For the year ended August 31, 2016, consolidated direct cost
of sales, general and administrative expenses were comprised of direct cost of sales 47%, employee remuneration
31%, and general and administrative expenses 22% (2015 – 49%, 26%, and 25%, 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 lines 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; significant intangible asset impairment; debt
refinancing; non-cash gains or losses; business acquisition, integration and restructuring costs; and certain other
income and expenses as included in note 20 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 22 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.
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. The following tables reconcile those
key performance indicators that are not in accordance with IFRS measures:
ADJUSTED SEGMENT PROFIT AND ADJUSTED SEGMENT PROFIT MARGIN
Adjusted segment profit is calculated as segment profit less amortization of Pay TV programming assets as if they
had not been reclassified as held for sale as at November 19, 2015. Adjusted segment profit margin is calculated
by dividing adjusted 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
Amortization not taken on Pay TV assets disposed of
Adjusted segment profit
Segment profit margin
Adjusted segment profit margin
2016
1,171,314
760,300
411,014
(15,585)
395,429
35%
34%
2015
815,315
538,128
277,187
—
277,187
34%
34%
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 and deducting net proceeds from dispositions. 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 International Accounting Standards Board (“IASB”).
Corus Entertainment Annual Report 2016 | 35
Management’s Discussion and Analysis
(thousands of Canadian dollars)
Cash provided by (used in):
Operating activities
Investing activities
Add back: cash used for business combinations and strategic investments (1)
Deduct: net proceeds from disposition
Free cash flow
2016
2015
200,227
(1,658,427)
(1,458,200)
1,855,839
(209,474)
188,165
204,458
(23,010)
181,448
19,765
—
201,213
(1) Strategic investments are comprised of investments in venture funds and associated companies.
Free cash flow in the current year reflects the inclusion of Shaw Media business and operating results effective
April 1, 2016. In the prior year, free cash flow benefited from the proceeds associated with the disposition of a
venture investment of $18.5 million.
ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS PER SHARE
In addition to disclosing results in accordance with IFRS as issued by the IASB, the Company also provides
supplementary non-IFRS measures as a method of evaluating the Company’s performance. 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 are useful measures that
facilitate period-to-period operating comparisons. Adjusted net income and adjusted basic earnings per share do
not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures
presented by other companies. Adjusted net income and adjusted basic 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.
(thousands of Canadian dollars)
Net income (loss) attributable to shareholders
Adjustments, net of income taxes:
Gain on disposal of Pay TV assets
Amortization of certain Pay TV assets
Business acquisition, integration and restructuring costs
Debt refinancing costs
Gain from disposition of investment
Intangible asset impairment charge
Broadcast license and goodwill impairment charges
Adjusted net income attributable to shareholders
(per share amounts)
Basic earnings (losses) per share
Adjustments, net of income taxes:
Gain on disposal of Pay TV assets
Amortization of certain Pay TV assets
Business acquisition, integration and restructuring costs
Debt refinancing costs
Gain from disposition of investment
Intangible asset impairment charge
Broadcast license and goodwill impairment charges
Adjusted basic earnings per share
2016
125,931
(76,631)
(11,455)
46,171
45,017
—
—
—
129,033
2016
$0.96
(0.58)
(0.09)
0.35
0.34
—
—
—
$0.98
2015
(25,154)
—
—
13,753
—
(14,716)
38,055
123,984
135,922
2015
$ (0.29)
—
—
0.15
—
(0.17)
0.44
1.44
$1.57
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.
36 | Corus Entertainment Annual Report 2016
(thousands of Canadian dollars)
Total bank debt and notes
Cash and cash equivalents
Net debt
Management’s Discussion and Analysis
2016
2,196,020
(71,363)
2,124,657
as at August 31,
2015
801,002
(37,422)
763,580
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)(1)
Net debt to segment profit
2016
2,124,657
411,014
5.2
As at August 31,
2015
763,580
277,187
2.8
(1) Reflects aggregate amounts for the most recent four quarters, as detailed in the table in the “Quarterly Consolidated Financial Information”
section and only includes the segment profit from the Shaw Media business from the date of acquisition, five months rather than a full twelve
months.
As at August 31, 2016, net debt was $2,124.7 million, up from $763.6 million at August 31, 2015. Net debt to
segment profit at August 31, 2016 was 5.2 times compared to 2.8 times at August 31, 2015. Segment profit for
the net debt to segment profit calculation reflects aggregate amounts as reported by the Company for the most
recent four quarters; however, does not include segment profit from the Shaw Media business prior to April 1, 2016.
The increase in net debt and net debt to segment profit reflects increased debt to finance the Shaw Media business
but does not include a full twelve months of segment profit of the Shaw Media business. Adjusting segment profit
to include the Acquisition and exclude Pay TV for the last twelve months, would result in net debt to segment
profit of 3.7 times.
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 potential 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 Corporate Governance Committee, which is responsible for maintaining and monitoring the Company’s
governance processes, including its Code of Conduct;
Corus Entertainment Annual Report 2016 | 37
Management’s Discussion and Analysis
• The Executive Leadership 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 Leadership 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 various 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.
A. 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,
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 and specialty television undertakings rely upon licenses under the Copyright
Act (Canada) in order to make use of the music component of the programming and other uses of works used
or distributed by these undertakings. Under these licenses, Corus is required to pay a range of tariff royalties
established by the Copyright Board pursuant to the requirements of the Copyright Act to collectives (which
represent the copyright owners) and individual copyright owners. These royalties are paid by these undertakings in
the normal course of their business.
The levels of the tariff 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
38 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
Copyright Act to implement Canada’s international treaty obligations and for other purposes. Any such amendments
could result in Corus’ broadcasting undertakings being required to pay additional royalties for these licenses.
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.
A series of CRTC policy statements and substantive decisions under the overall mantle known as “Let’s Talk TV”
have introduced several changes to the regulatory framework governing Broadcasting Distribution Undertakings
(“BDUs”) and Broadcasting Undertakings. Some of these could affect the Company.
What follows is a précis of pending and proposed changes that could affect the Company.
On January 29, 2015, the CRTC asked the industry to examine the process of simultaneous substitution of
US network stations by Canadian stations carrying the same program at the same time. The Commission also
proposed a prohibition on simultaneous substitution of the NFL Super Bowl starting in 2017. This ban has been
subject to a legal challenge by the Canadian rights holder network CTV which supplies three of the Company’s local
conventional stations with programming as of August 30, 2015, and the matter is currently pending a decision by
the Federal Court.
On March 12, 2015, the CRTC eliminated genre protection, which allows the Company to adapt the nature of
service for its television services according to market conditions. The Commission also established on this date an
open entry licensing system, with Canadian ownership status and carriage in more than 200,000 subscriber homes
being effectively the only conditions required to be licensed as a Broadcasting Undertaking. The Commission also
proposed an open entry system for video on demand services that meet certain criteria.
In March, 2015, the CRTC issued revised carriage rules for BDUs by amending its distribution regulations, which
created an obligation starting March 1, 2016 for BDUs to offer an entry level basic service of local broadcast stations
and certain mandatory distribution specialty services at a maximum price of C$25 retail a month.
The Commission also grouped all services into three license categories: basic; discretionary; and on-demand services.
Starting March 1, 2016, BDUs were required to offer all discretionary services on an à la carte basis, or “build your
own package” or in theme pack packages of 10 services.
On December 1, 2016, BDUs will be required to expand consumer choice to pure à la carte.
However, the BDU can offer, and a consumer can maintain, their status quo packages. The Commission also finalized
its code in January 2016, which circumscribes wholesale pricing and negotiations related thereto.
The Commission also proposed changes to the level of linear Canadian Content requirements to commence in
2017. This would reduce the Canadian Content obligations of the Company’s services.
On January 7, 2016, the Commission published the new Television Service Provider Code of Conduct. This code
mandates clear language on customer agreements, transparency in charges, promotion of new packaging rules,
service call scheduling and rebates for service outages.
On June 15, 2016, the CRTC issued its new policy for local and community television. The CRTC created new
obligations for exhibition and expenditures for “locally reflective content”. It also created new funding mechanisms
that allows vertically integrated companies to redirect community television expenditures to local television stations.
On June 15, 2016, the Commission announced that the Group Based Licensing hearings for all large English- and
French-language ownership groups will be held in November 2016. The main issues of the hearing are the Canadian
Programming Expenditure requirements and expenditure obligations toward programming of public national
Corus Entertainment Annual Report 2016 | 39
Management’s Discussion and Analysis
interest. The Company will also be seeking to remove all the vestiges of legacy conditions of license given the open
licensing environment created by the CRTC.
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 the Company’s financial results.
More information can be found at www.crtc.gc.ca
DIGITAL TRANSITION AND REPURPOSING OF SPECTRUM
In July 2009, the CRTC identified the major markets where it expected conventional television broadcasters to
convert their full-power OTA analog transmitters to digital transmitters by August 31, 2011. The conversion from
analog to digital liberated spectrum for government auction to mobile providers. Shaw Media completed the
digital transition in all mandatory markets with a view to completion in 2016, a condition of the CRTC’s approval
of the Canwest Global acquisition. On December 18, 2014, Industry Canada (now known as Innovation, Science
and Economic Development Canada) launched a consultation to consider repurposing some of the 600 MHz
spectrum band currently used by the Company’s conventional television stations and other broadcasters for OTA
transmission. At the same time, Industry Canada introduced a moratorium on applications to modify existing
television broadcasting certificates and on any new licensing in the spectrum band pending the consultations
and related processes. The Company has, accordingly, requested from the CRTC an extension of the time line to
complete the full slate of analog to digital conversions.
On August 14, 2015, Industry Canada confirmed its intent to proceed with repurposing some of the 600 MHz
spectrum band for commercial mobile use and to jointly establish a new allotment plan in collaboration with the
United States. Accommodating this change will require the Company to install new equipment or reconfigure
existing equipment at affected sites and may have an impact on signal quality and coverage. Industry Canada (now
known as Innovation, Science and Economic Development Canada) has not yet decided whether broadcasters will
be reimbursed for their costs of facilitating this transition, stating that this decision is the first step in a multi-year
repurposing process and that consideration of compensation to broadcasters was not a part of this phase.
B. 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.
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 television
networks and conventional television stations 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, digital 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
40 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
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 television business depends on obtaining revenues from advertising and
subscribers, while Corus’ conventional television business depends on obtaining revenues from advertising. As
well, these services are dependent on the effective management of 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 increases 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. Moreover, increasingly, Corus’ specialty 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’ specialty and conventional
television services to compete effectively 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.
iii) News
Global News’ primary directive is to report accurate, balanced, timely and comprehensive news and information
in the public interest. Independence is a fundamental Global News value and, accordingly, Global News will resist
attempts at censorship or pressure to alter news content, real or apparent. Integrity, fairness and transparency
are at the foundation of the Company’s newsgathering process, and Global News is committed to reporting news
without distortion or misrepresentation.
In support of this directive, the Company has promulgated and has in effect a comprehensive set of Journalistic
Principles and Practices setting out guidelines and standards for all news staff in their dealings with frequently
asked editorial, ethical and legal, and professional conduct questions. These Journalistic Principles and Practices
adhere closely to, amongst other things, the Radio Television Digital News Association Canada’s Code of Ethics and
Professional Standards, the Canadian Association of Broadcasters’ Code of Ethics and the Canadian Association of
Journalists Ethics Guidelines.
Due to the unique nature of news-gathering and news-reporting, a number of risks may arise in the ordinary course
of Global News investigation and reporting on the activities of individuals, corporations and governments. These
include legal and ethical risks such as claims in respect of defamation, invasion of privacy, misrepresentation,
and infringement of other rights (for example, Intellectual Property Rights and Piracy). A significant part of news-
gathering and reporting arises in the context of court proceedings. Certain mandatory publication bans apply to
criminal proceedings and, in addition, a court may impose a discretionary publication ban or sealing order in respect
of the proceedings or materials used or related to investigations leading to a criminal charge. Where Global News
has not otherwise successfully overturned or reduced the scope of a publication ban or sealing order through
proper legal process, its policy is to fully comply with court-ordered publication bans and sealing orders. However,
because there is no formalized publication ban notice system in place in most provinces, and because publication
bans can often be subject to different interpretations, there is no assurance that Global News will not inadvertently
breach a publication ban or sealing order, and, if that happens, there is a risk that Global News may be held to be
in contempt of court. Similarly, Global News’ policy is to resist production orders, warrants and subpoenas for its
footage and other materials through proper legal process but, where this is not successful, Global News will comply
with production orders, warrants and subpoenas of proper scope and detail.
Corus Entertainment Annual Report 2016 | 41
Management’s Discussion and Analysis
Due to Global News’ strong commitment to editorial independence, certain news-reporting may pose a risk to the
Company’s advertising revenue streams if advertisers are displeased with their portrayal in news programming and,
as a result, choose to reduce or withdraw entirely, their advertising business with the Company.
The deliberate deployment of journalists to dangerous and hostile environments may expose employees and the
Company to risks related to kidnapping, injury and death, as well as costs related to medical care and emergency
repatriation of employees.
The Journalistic Principles and Practices articulate appropriate ways to deal with the above risks and describes
proper protocol when such risks arise. In addition, news staff are provided with regular training to mitigate these
risks and the Company carries customary and appropriate insurance to further mitigate risks.
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.
C. 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, revenues 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.
Revenues 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.
42 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
D. 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 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.
E. 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.
F. 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.
G. 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 compete for programming and audiences. As well, mobile devices like smartphones and tablets allow
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.
H. 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 gaining regulatory approval, realizing the anticipated benefits,
incur unanticipated expenses and/or have difficulty incorporating or integrating the acquired business, the
occurrence of which could have a materially adverse effect on the Company.
I. INTEGRATION OF THE SHAW MEDIA BUSINESS
Corus’ ability to maintain and successfully execute its business depends upon the judgment and project execution
skills of its senior professionals. Any management disruption or difficulties in integrating Corus’ and Shaw Media’s
management and operations staff could significantly affect Corus’ business and results of operations. The success
of the Acquisition will depend, in large part, on the ability of management to realize the anticipated benefits and
cost synergies from integration of the businesses of Corus and Shaw Media. The integration of the businesses
may result in significant challenges, and management may be unable to accomplish the integration smoothly,
Corus Entertainment Annual Report 2016 | 43
Management’s Discussion and Analysis
or successfully, in a timely manner or without spending significant amounts of money. It is possible that the
integration process could result in the loss of key employees, the disruption of the respective ongoing businesses
or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of management
to maintain relationships with business partners such as agencies and content providers or employees or to achieve
the anticipated benefits of the Acquisition.
The integration of Shaw Media requires the dedication of substantial effort, time and resources on the part of
management, which may divert management’s focus and resources from other strategic opportunities and from
operational matters during this process. There can be no assurance that the Company will be able to integrate
the operations of each of the businesses successfully or achieve any of the synergies or other benefits that are
anticipated as a result of the Acquisition. The extent to which synergies are realized and the timing of such cannot be
assured. Any inability of the Company to successfully integrate the operations of Corus and Shaw Media, including,
but not limited to, information technology, financial reporting and other operating systems, could have a material
adverse effect on the business, financial condition and results of operations of Corus.
J. UNEXPECTED COSTS OR LIABILITIES RELATED TO THE ACQUISITION
Although the Company has conducted what it believes to be a prudent and thorough level of investigation in
connection with the Acquisition and has negotiated indemnities with Shaw in the Acquisition Agreement to
cover certain potential future liabilities, such indemnities may be limited and an unavoidable level of risk remains
regarding any undisclosed or unknown liabilities of, or issues concerning, Shaw Media. There may be liabilities
that the Company failed to discover or was unable to quantify accurately or at all in the due diligence review that it
conducted prior to the execution of the Acquisition Agreement, and the Company may not be indemnified for some
or all of these liabilities or the indemnification may be subject to limitations set forth in the Acquisition Agreement.
The discovery of any material liabilities, or the inability to obtain full indemnification for such liabilities, could have a
materially adverse effect on the Company’s business, financial condition or future prospects.
While the Company has estimated these potential liabilities for the purposes of making its decision to enter into
the Acquisition Agreement, there can be no assurance that any resulting liability will not exceed the Company’s
estimates. The amount of such liability could have a materially adverse effect on the Company’s financial position.
Furthermore, subsequent to the Acquisition, the Company may discover that it has acquired substantial undisclosed
liabilities.
In addition, Corus may be unable to retain Shaw Media’s customers or employees subsequent to the Acquisition.
The continuing and collaborative efforts of Shaw Media’s senior management and employees are important to its
success and its business would be harmed if it were to lose their services. The existence of undisclosed liabilities
and the Company’s inability to retain Shaw Media’s customers or employees could have an adverse impact on the
Company’s business, financial condition and results of operations.
K. DISTRIBUTION
Corus enters into long-term agreements with various BDUs, including cable, Internet protocol television (“IPTV”),
satellite and multipoint distribution systems (“MDS”) 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.
L. ECONOMIC CONDITIONS
The Company’s operating performance depends on Canadian and worldwide economic conditions. Economic
uncertainty could impact demand for Corus’ advertising airtime and other offerings across its platforms as
companies reduce their advertising spending. There can be no assurance that an economic decline will not adversely
affect the Company’s operating results.
M. 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 materially adverse
effect on the Company’s ability to raise or refinance debt.
N. FINANCIAL RISKS
The Company is exposed to various risks related to its financial assets and liabilities that include credit risk, interest
rate risk, foreign currency risk and leverage risk. These risk exposures are managed on an ongoing basis:
44 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
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 Company’s trade receivables and allowance for doubtful accounts balances at August 31, 2016 were $383.2
million and $3.4 million, respectively.
Interest rate risk
The Company utilizes long-term financing extensively in its capital structure, which includes a banking facility, as
more fully described in note 14 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 the maintenance of a balance of fixed rate
and floating rate debt. As at August 31, 2016, 83% (2015 – 87%) 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 currency risk
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 2016 (2015 – 5%) 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.
Leverage risk
The Company’s leverage has increased as a result of the Acquisition, which is higher than its stated leverage target
of 3.0 to 3.5 times. The Company’s maintenance of increased levels of debt could adversely affect its financial
condition and results of operations. In addition, increased debt service payments could adversely impact cash
flows from operating activities, thereby reducing the amount of cash flows available for working capital, capital
expenditures, acquisitions, future business opportunities, and other general corporate purposes, as well as limiting
the Company’s ability to pay dividends at current levels.
O. UNIONIZED LABOUR
Approximately 29% of the Company’s employees are employed under one of seven collective agreements
represented by three unions. Renegotiating collective bargaining agreements could result in higher labour costs,
project delays and work disruptions. If work disruptions occur, it is possible that large numbers of employees may be
involved and that the Company’s business may be disrupted, causing negative effect to the Company’s operations
and/or financial results.
P. PENSION AND OTHER EMPLOYEE BENEFIT OBLIGATIONS
Economic fluctuations could adversely impact the funding and expenses associated with pension and other
employee benefit obligations and there can be no assurance that these pension and employee benefit obligations
will not increase materially in the future, thereby negatively impacting the Company’s income or cash flow.
Q. 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.
In addition, an inability to protect the Company’s systems, applications and information repositories against cyber
threats, which include cyber attacks such as, but not limited to, hacking, computer viruses, denial of service attacks,
industrial espionage, unauthorized access to confidential, proprietary or sensitive information or other breaches
of network of IT security could have an adverse impact on the Company’s business operations and could harm
the Company’s brand, reputation and customer relationships. Although the Company has taken steps to reduce
these risks, there can be no assurance that future cyber threats, if to occur, will not have an adverse effect on the
Company’s operating results.
Corus Entertainment Annual Report 2016 | 45
Management’s Discussion and Analysis
R. 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.
S. DIVIDEND PAYMENTS
The Company currently pays monthly share dividends on both its Class A Voting Shares and Class B Non-Voting
Shares in amounts approved quarterly by the Board of Directors. While the Company expects to generate sufficient
free cash flow in fiscal 2017 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.
T. 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, 2016, 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.
TRANSACTIONS WITH RELATED PARTIES
Related party transactions are reviewed by Corus’ Corporate Governance Committee, the majority of whom are
independent directors. The following sets forth certain transactions in which the Company is involved.
CONTROL OF THE COMPANY BY THE SHAW FAMILY
As at October 31, 2016, 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 Living Trust” or “SFLT”) own approximately 84% 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 except in limited circumstances as described in the Company’s Annual Information Form. All
of the Class A Voting Shares held by SFLT are voted as determined by JR Shaw. Accordingly, SFLT 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.
SFLT is also the controlling shareholder of Shaw Communications Inc., and as a result, both Shaw and Corus are
subject to common voting control.
SHAW COMMUNICATIONS INC. (“SHAW”)
The Company and Shaw are subject to common voting control. During the year, the Company entered into the
following transactions with Shaw:
Acquisition of Shaw Media
On April 1, 2016, the Company acquired the shares of Shaw Media from Shaw for approximately $2.65 billion,
subject to certain post-closing adjustments, satisfied by the Company through a combination of: a) $1.85 billion
of cash consideration; and b) the issuance by the Company to Shaw of 71,364,853 Class B Non-Voting Shares (the
“Consideration Shares”) at a value per share of $11.21 per share for an aggregate value of $800.0 million. These
shares were valued for accounting purposes at $833.5 million, which reflects the opening price of the Company’s
stock on April 1, 2016 of $11.68 per share.
The Acquisition was a business combination between entities under common control and was accounted for by
the Company using the acquisition method. As at August 31, 2016, the Company has not completed the valuation
of assets acquired and liabilities to be assumed, therefore the purchase price allocation is preliminary and subject
to adjustment on completion of the valuation process and resulting income tax effects (refer to note 27 of the
Company’s audited consolidated financial statements for the year ended August 31, 2016 for further discussion).
46 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
Special transactions
The acquisition of Shaw Media from Shaw constituted a related party transaction outside the normal course of
operations. To ensure appropriate safeguards for the interest of the holders of the Class B Non-Voting Shares,
Corus’ Board of Directors (the “Board”) established a Corus Special Committee (the “Special Committee”) with the
authority to, among other matters review, direct and supervise the process to be carried out by management and
its professional advisors in assessing the potential acquisition (including the preparation of any formal valuation
required), review and consider the proposed structure, terms and conditions of a possible acquisition and to make a
recommendation to the Board with respect to any such transaction.
The Special Committee, throughout the process, consisted entirely of directors who were “independent”, within
the meaning of applicable securities laws. The Special Committee met a total of 28 times in exercising its mandate
and supervision over the course of the transaction negotiation process that followed, prior to the announcement
of the Acquisition on January 13, 2016. The Board established the Special Committee to, among other things,
supervise the preparation of the formal valuation required under Multilateral Instrument (“MI”) 61-101 and assess,
review and to make recommendations to the Board regarding the Acquisition. The Special Committee engaged
Barclays Capital Canada Inc. (“Barclays”) as an independent valuator as required under MI 61-101 in connection with
the purchase and sale of the issued and outstanding shares of Shaw Media and to provide the Barclays Valuation and
Fairness Opinion. Additionally, the Company’s financial advisors, RBC Dominion Securities Inc. (“RBC”), presented
to the Board, including the members of the Special Committee, an opinion on the financial consideration which
would be payable under the Acquisition (the “RBC Fairness Opinion”).
Having undertaken a review of, and carefully considering the Acquisition, the Barclays Valuation and Fairness
Opinion, the RBC Fairness Opinion, information concerning Corus, Shaw Media, the proposed Acquisition and the
alternatives available to the Company, including consultation with its financial and legal advisors and such other
matters as it considered relevant, the Special Committee unanimously determined that the Acquisition was in
the best interests of the Company and accordingly recommended that the Board approve the Acquisition and
recommended that the Board recommend that the holders of each of the Class A Shares and Class B Shares vote in
favour of the resolutions set out for the approval of the Acquisition.
Governance and Investor Rights Agreement
Concurrent with the closing of the Acquisition and following the issuance of the Consideration Shares to Shaw,
Corus and Shaw entered into the Governance and Investor Rights Agreement (“GIRA”), pursuant to which Corus
granted certain rights to Shaw.
The following is a summary of the principal terms of the GIRA. This summary does not purport to be complete and
is qualified in its entirety by reference to the GIRA which has been filed on SEDAR at www.sedar.com.
Corus Board Composition and Shaw Nominees
Pursuant to the GIRA, Shaw has the right to nominate individuals to be elected or appointed to the Board (each,
a “Shaw Nominee”). Corus and Shaw agreed that the Board would immediately appoint three Shaw Nominees to
serve on the Board until the next annual general meeting of Corus shareholders following closing of the Acquisition.
Shaw’s nominees consisted of Michael D’Avella, Trevor English and Peter Bissonnette.
Until such time that Shaw beneficially owns less than 10% of the outstanding Shares, Shaw will be entitled to appoint
Shaw Nominees to the Board as follows: (a) for so long as Shaw beneficially owns at least 30% of the outstanding
Shares, Shaw will have the right to appoint up to three Shaw Nominees; (b) for so long as Shaw beneficially owns
at least 20% but less than 30% of the outstanding Shares, Shaw will have the right to appoint up to two Shaw
Nominees; and (c) for so long as Shaw beneficially owns at least 10% but less than 20% of the outstanding Shares,
Shaw will have the right to appoint one Shaw Nominee. If at any time Shaw beneficially owns less than 10% of the
outstanding Shares, Shaw will not be entitled to any Shaw Nominees and Shaw will use its commercially reasonable
efforts to, unless requested otherwise by Corus, cause any Shaw Nominees on the Board to resign forthwith.
Each Shaw Nominee must be “Canadian” as defined in the Direction to the CRTC (Ineligibility of Non-Canadians)
and satisfy Corus’s general eligibility criteria for director candidates. In addition, Shaw agreed that no less than two
(one, if Shaw is only entitled to two Shaw Nominees) of the three Shaw Nominees must meet the independence
criterion set forth in Section 1.4 of National Instrument 52-110 – Audit Committee, provided that the independence
criteria is not applicable in the event Shaw is only entitled to one Shaw Nominee. At least one of the three Shaw
Nominees must meet the requirements of National Instrument 52-110 – Audit Committee to sit on the Corus audit
committee. Shaw has nominated Mr. D’Avella who satisfies the independence criterion of applicable securities law
and the requirements of National Instrument 52-110 - Audit Committee.
Corus Entertainment Annual Report 2016 | 47
Management’s Discussion and Analysis
Corus has agreed that in respect of every meeting of Shareholders at which the election of Corus directors is to be
considered, so long as such Shaw Nominees satisfy Corus’ applicable director eligibility criteria, management of
Corus will recommend the Shaw Nominees identified in Corus’ proxy materials for election to the Board and vote
their Class A Shares and any Class A Shares in respect of which management has been granted a discretionary proxy
in favour of the election of such Shaw Nominees.
Committee Appointments
Pursuant to the GIRA, Corus has agreed to provide Shaw the right to appoint one individual to the executive
committee of Corus so long as Shaw beneficially owns Class B Shares representing at least 15% of the
outstanding Shares.
For so long as Shaw beneficially owns Class B Shares representing at least 15% of the outstanding Shares it will
also have the right to appoint one individual to any special committee or similarly constituted committee formed to
evaluate regulatory issues, strategic initiatives or material transactions involving Corus or its subsidiaries. However,
a Shaw Nominee may not serve on a special committee if Shaw or an affiliate of Shaw is (or is likely to become) an
“interested party” (as such term is defined in MI 61-101) in respect of the applicable issue or transaction.
Restrictions on Transfer of the Consideration Shares
As of August 31, 2016, Shaw held approximately 37% of the aggregate outstanding Class B Shares as a result of
Consideration Shares issued pursuant to the Acquisition. Shaw has agreed to certain transfer restrictions during
a specified hold period pursuant to which Shaw will not, without prior written consent of Corus, sell, offer to sell,
grant any option, right or warrant for the sale of, or otherwise lend, transfer, assign or dispose of the Consideration
Shares or any other securities issued by Shaw convertible, exchangeable or exercisable into Consideration Shares
or agree to do any of the foregoing or publicly announce any intention to do any of the foregoing, subject to certain
exceptions. Such transfer restrictions apply to all the Consideration Shares until the date that is: (a) 12 months
following the Closing Date, at which time such restrictions will be lifted from one-third of the Consideration
Shares; (b) 18 months following the Closing Date, at which time the restriction will be lifted from two-thirds of
the Consideration Shares; and (c) 24 months following the Closing Date, at which all restrictions on transfer of the
Consideration Shares will be lifted.
Dividend Reinvestment Plan Enrollment
Shaw agreed that it would, upon the closing of the Acquisition, enroll all of the Consideration Shares in Corus’
existing DRIP. Shaw will continue to participate in the Corus DRIP until the earlier of: (a) September 1, 2017; and (b)
the date such Consideration Shares are no longer subject to hold restrictions under the Governance and Investor
Rights Agreement. Subject to applicable laws, from the Closing Date until the date that is 24 months following
the Closing Date, Corus has agreed that no amendments will be made to the share price discount under the DRIP
(currently a 2% share price discount). Shares issued to Shaw pursuant to the DRIP will not be subject to restrictions
on transfer.
Registration Rights
The GIRA provides that, subject to certain exceptions, upon the written request of Shaw, Corus will use commercially
reasonable efforts, subject to compliance with applicable securities laws and stock exchange requirements, to file
such documents and take such steps as may be necessary under applicable securities laws to qualify for distribution
to the public all or any whole number of Class B Shares held by Shaw which are not then subject to any restrictions
on transfer pursuant to the Governance and Investor Rights Agreement (the “Demand Registration Rights”).
If Corus proposes to make a distribution or sale of Shares to the public for cash by means of a prospectus, other
than by way of a bought deal, Corus will promptly give written notice of the distribution to Shaw, including proposed
pricing. Upon written request of Shaw, Corus will use its commercially reasonable efforts to cause to be qualified in
such distribution the applicable number of Class B Shares of Shaw requested by Shaw to be included (the “Piggy-
Back Registration Rights”). In addition, subject to certain customary exceptions, Corus will use commercially
reasonable efforts to include a proportional number of Class B Shares held by Shaw in any bought deal offering.
The Demand Registration Rights and the Piggy-Back Registration Rights granted to Shaw will terminate at such
time that Shaw no longer beneficially owns Class B Shares representing at least 5% of the outstanding Shares.
Pre-Emptive Rights
Subject to certain exceptions, provided that Shaw beneficially owns Class B Shares representing at least 10% of the
outstanding Shares, if Corus proposes to offer to issue any equity or participating securities or securities convertible
or exchangeable into equity or participating securities, Shaw will be entitled to participate in such issuance on a pro
48 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
rata basis, but only to the extent necessary to maintain its then proportional fully-diluted equity interest in Corus.
In the event that such proposed issuance consists of the issuance of Class A Shares, then Shaw will be entitled to
acquire that number of Class B Shares that allow it to maintain its then proportional fully-diluted equity interest in
Corus. At least five Business Days prior to the closing of any such proposed offering, Corus will deliver to Shaw a
notice in writing offering Shaw the opportunity to subscribe for a pro rata number of such securities and Shaw will be
entitled, upon written notice to Corus, to participate in the issuance by way of private placement at the same price
and on the same terms offered by Corus to any party.
Termination
The GIRA will terminate upon Shaw beneficially owning less than 5% of the outstanding Shares.
Normal course transactions
The Company has transacted business in the normal course with Shaw. 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.
During the year, the Company received cable subscriber, programming and advertising fees of $112.6 million
(2015 - $111.4 million), and production and distribution revenues of $4.8 million (2015 – $0.3 million) from Shaw.
In addition, the Company paid cable and satellite system distribution access fees of $8.7 million (2015 - $5.7
million) and administrative and other fees of $4.7 million (2015 - $2.7 million) to Shaw. During the year, the
Company issued dividends of $34.4 million to Shaw, which were reinvested in additional Corus Class B shares
under Corus’ dividend reinvestment plan. As at August 31, 2016, the Company had $26.7 million (2015 - $21.4
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.
Non-wholly owned specialty networks
The Company has transacted business in the normal course with entities over which the Company exercises
significant influence and joint control. During the year, the Company received administrative and other fees of $8.7
million (2015 - $5.0 million) from its non-wholly owned specialty networks including CMT (Canada), Cosmopolitan
TV, Food Network Canada, HGTV Canada, National Geographic, Nat Geo Wild, and TLN. At August 31, 2016, the
Company had $1.3 million (2015 - $0.1 million) receivable from these entities.
OUTSTANDING SHARE DATA
As at October 31, 2016, 3,425,792 Class A Voting Shares and 194,779,895 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
There were no accounting standards issued by the IASB that took effect in fiscal 2016.
RECENT ACCOUNTING PRONOUNCEMENTS
PENDING ACCOUNTING CHANGES
IFRS 9 — Financial Instruments: Classification and Measurement
In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments, which reflects all phases of the financial
instrument project and replaces IAS 39 – Financial Instruments: Recognition and Measurement and all previous
versions of IFRS 9. The standard introduces new requirements for recognition and measurement impairment, and
hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application
permitted. Retrospective application is required, but comparative information is not compulsory. Early application
of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before February
1, 2015. The Company is in the process of reviewing the standard to determine the impact on the consolidated
financial statements.
Corus Entertainment Annual Report 2016 | 49
Management’s Discussion and Analysis
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, 2018, which will be September 1, 2018 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 has reviewed these standards and
determined there is no material impact on the consolidated financial statements.
IFRS 16 — Leases
On January 13, 2016, the IASB published a new standard, IFRS 16 – Leases. The new standard will eliminate the
distinction between operating and finance leases and will bring most leases onto the balance sheet for lessees. This
standard is effective for annual reporting periods beginning on or after January 1, 2019, which will be September
1, 2019 for Corus and is to be applied retrospectively. The Company has not yet determined the impact on its
consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company’s significant accounting policies are described in note 3 to the fiscal 2016 audited consolidated
financial statements and notes thereto, which have been prepared in accordance with IFRS. The preparation of
these fiscal 2016 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 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.
50 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
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
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.
The Company has completed its annual impairment testing of goodwill and indefinite lived intangible assets in
the fourth quarter of fiscal 2016 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 Statements of Financial Position and Consolidated Statements
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.
Corus Entertainment Annual Report 2016 | 51
Management’s Discussion and Analysis
POST-EMPLOYMENT BENEFIT PLANS
The Company has various registered defined benefit plans for certain unionized and non-unionized employees
and supplementary executive non-registered retirement plans which provide pension benefits to certain of its
key senior executives. The amounts reported in the financial statements relating to the defined benefit pension
plans are determined using actuarial valuations that are based on several assumptions including the discount
rate, rate of compensation increase, trend in healthcare costs, and expected average remaining years of service
of employees. While the Company believes these assumptions are reasonable, differences in actual results or
changes in assumptions could affect employee benefit obligations and the related income statement impact. The
differences between actual and assumed results are immediately recognized in other comprehensive income/loss.
The most significant assumption used to determine the present value of the future cash flows that is expected will
be needed to settle employee benefit obligations and is also used to calculate the interest income on plan assets.
It is based on the yield of long-term, high-quality corporate fixed income investments closely matching the term of
the estimated future cash flows and is reviewed and adjusted as changes are required. The following table illustrates
the increase on the accrued benefit obligation and pension expense of a 1% decrease in the discount rate:
(thousands of Canadian dollars)
Weighted average discount rate – registered plans
Weighted average discount rate – non-registered plans
Impact of: 1% decrease – registered plans
Impact of: 1% decrease – non-registered plans
Accrued benefit
obligation at end of
fiscal 2016
Pension expense
fiscal 2016
3.50%
3.55%
$233,288
$6,347
3.90%
3.90%
$1,236
$ 306
The significant assumptions used on the benefit obligation are disclosed in note 28 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
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
Management, under the supervision of the President and Chief Executive Officer (“CEO”) and Executive Vice
President and Chief Financial Officer (“CFO”), is responsible for establishing and maintaining disclosure controls
and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim
Filings, 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.
Management evaluated, under the supervision of and with the participation of the CEO and CFO, the effectiveness
of the Company’s disclosure controls and procedures. The CEO and CFO have limited the scope of their design and
evaluation of the Company’s disclosure controls and procedures to exclude the disclosure controls and procedures
of Shaw Media, which was acquired on April 1, 2016. Shaw Media’s contribution to the overall consolidated financial
statements of Corus for the year ended August 31, 2016 was approximately 35% of consolidated revenues and
57% of consolidated net income attributable to shareholders. Additionally, as at August 31, 2016, Shaw Media’s
current assets and current liabilities were approximately 68% and 28% of consolidated current assets and current
52 | Corus Entertainment Annual Report 2016
Management’s Discussion and Analysis
liabilities, respectively, and its non-current assets and non-current liabilities were approximately 46% and 15% of
consolidated non-current assets and non-current liabilities, respectively. The design of Shaw Media’s disclosure
controls and procedures will be completed for the third quarter of fiscal 2017.
Based on that evaluation, which excluded Shaw Media’s disclosure controls and procedures, the CEO and CFO
concluded that the Company’s disclosure controls and procedures were effective as at August 31, 2016.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined by National Instrument 52-109 – Certification of Disclosure in
Issuers’ Annual and Interim Filings, and have designed such internal control over financial reporting (or caused it to
be designed under their supervision) to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the consolidated financial statements in accordance with IFRS.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
on a timely basis. Also, projections of any of the effectiveness of internal control are subject to the risk that the
controls or that the degree of compliance with the policies and procedures may deteriorate. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to the financial statement
preparation and presentation.
Management evaluated, under the supervision of and with the participation of the CEO and CFO, the effectiveness
of the Company’s internal control over financial reporting, as of August 31, 2016, based on the criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”).
The CEO and CFO have limited the scope of their design and evaluation of the Company’s internal control over
financial reporting to exclude the internal control over financial reporting of Shaw Media, which was acquired on
April 1, 2016.
Based on that evaluation, which excluded Shaw Media’s internal control over financial reporting, the CEO and CFO
concluded that the Company’s internal control over financial reporting was effective as at August 31, 2016.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting that occurred during fiscal 2016
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.
Corus Entertainment Annual Report 2016 | 53
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 (“IFRS”). 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.
Management, under the supervision of the President and Chief Executive Officer (“CEO”) and Executive Vice-
President and Chief Financial Officer (“CFO”) of Corus, is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined by National Instrument 52-109 - Certification of Disclosure in
issuers’ Annual and Interim Filings, and have designed such internal control over financial reporting (or caused it to
be designed under their supervision) to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the consolidated financial statements in accordance with IFRS.
Management evaluated, under the supervision of and with the participation of the CEO and CFO, the effectiveness
of the Company’s internal control over financial reporting as at August 31, 2016, based on the criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
The CEO and CFO have limited the scope of their design and evaluation of the Company’s internal control over
financial reporting to exclude the internal control over financial reporting of Shaw Media Inc. (“Shaw Media”), which
was acquired on April 1, 2016. Shaw Media’s contribution to the overall consolidated financial statements of Corus
for the year ended August 31, 2016 was approximately 35% of consolidated revenues and 57% of consolidated net
income attributable to shareholders. Additionally, as at August 31, 2016, Shaw Media’s current assets and current
liabilities were approximately 68% and 28% of consolidated current assets and current liabilities, respectively, and
its non-current assets and non-current liabilities were approximately 46% and 15% of consolidated non-current
assets and non-current liabilities, respectively.
Based on that evaluation, which excluded Shaw Media’s internal control over financial reporting, the CEO and CFO
concluded that the Company’s internal control over financial reporting was effective as at August 31, 2016.
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.
Douglas D. Murphy
President and
Chief Executive Officer
John Gossling, FCPA, FCA
Executive Vice President
and Chief Financial Officer
54 | Corus Entertainment Annual Report 2016
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, 2016 and 2015, 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, 2016 and 2015, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada,
November 14, 2016
Chartered Professional Accountants
Licensed Public Accountants
Corus Entertainment Annual Report 2016 | 55
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
ASSETS
Current
Cash and cash equivalents
Accounts receivable (note 4)
Income taxes recoverable (note 21)
Prepaid expenses and other
Total current assets
Tax credits receivable
Investments and other assets (note 5)
Property, plant and equipment (note 6)
Program and film rights (note 7)
Film investments (note 8)
Intangibles (notes 9 and 11)
Goodwill (notes 10 and 11)
Deferred income tax assets (note 21)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities (note 12)
Current portion of long-term debt (note 14)
Income taxes payable (note 21)
Provisions (note 13)
Total current liabilities
Long-term debt (note 14)
Other long-term liabilities (note 15)
Deferred income tax liabilities (note 21)
Total liabilities
Share capital (note 16)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss) (note 17)
Total equity attributable to shareholders
Equity attributable to non-controlling interest
Total shareholders’ equity
Commitments, contingencies and guarantees (notes 14 and 28)
See accompanying notes
As at August 31,
2016
As at August 31,
2015
71,363
379,861
—
18,835
470,059
19,860
46,759
282,105
682,268
45,164
2,076,237
2,390,652
80,281
6,093,385
393,367
115,000
1,982
21,390
531,739
2,081,020
539,672
464,607
3,617,038
2,168,543
10,444
142,499
(3,569)
2,317,917
158,430
2,476,347
6,093,385
37,422
164,600
12,439
13,855
228,316
25,958
42,958
139,140
315,899
36,549
974,615
827,859
40,815
2,632,109
210,971
150,000
—
8,930
369,901
651,002
138,833
252,462
1,412,198
994,571
9,471
191,182
7,353
1,202,577
17,334
1,219,911
2,632,109
56 | Corus Entertainment Annual Report 2016
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 18)
Depreciation and amortization (notes 6 and 9)
Interest expense (note 19)
Broadcast license and goodwill impairment (notes 9, 10 and 11)
Debt refinancing (note 14)
Intangible impairment (notes 7 and 8)
Business acquisition, integration and restructuring costs (notes 13 and 27)
Gain on disposition (note 27)
Other (income) expense, net (note 20)
Income before income taxes
Income tax expense (note 21)
Net income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interest
Earnings (loss) per share attributable to shareholders:
Basic
Diluted
Net income (loss) for the year
2016
1,171,314
760,300
73,969
110,862
—
61,248
—
57,198
(86,151)
8,752
185,136
41,575
143,561
125,931
17,630
143,561
$ 0.96
$ 0.96
2015
815,315
538,128
24,057
50,936
130,000
—
51,786
19,032
—
(10,117)
11,493
30,993
(19,500)
(25,154)
5,654
(19,500)
$ (0.29)
$ (0.29)
Other comprehensive income (loss), net of income taxes: (note 17)
143,561
(19,500)
Items that may be reclassified subsequently to 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 (note 14)
Actuarial (loss) gain on post-employment benefit plans
(49)
(620)
(10,253)
(3,489)
(14,411)
4,158
(306)
(266)
686
4,272
Comprehensive income (loss) for the year
129,150
(15,228)
Comprehensive income (loss) attributable to:
Shareholders
Non-controlling interest
See accompanying notes
111,520
17,630
129,150
(20,882)
5,654
(15,228)
Corus Entertainment Annual Report 2016 | 57
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
(note 17)
Total equity
attributable to
shareholders
(in thousands of Canadian dollars)
At August 31, 2015
Comprehensive income
Dividends declared
Issuance of shares under public
equity offering (note 16)
Issuance of shares to
related party (note 27)
Existing non-controlling ownership
interest from acquisition (note 27)
Issuance of shares under dividend
reinvestment plan
Actuarial gain on post-retirement
benefit plans
Share-based compensation expense
994,571
—
—
279,762
833,541
—
60,669
9,471
—
—
191,182
125,931
(171,125)
7,353
(14,411)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
973
(3,489)
—
3,489
—
Non-
controlling
interest Total equity
17,334
17,630
(19,824)
1,219,911
129,150
(190,949)
—
—
279,762
833,541
1,202,577
111,520
(171,125)
279,762
833,541
—
143,290
143,290
60,669
—
973
—
—
—
60,669
—
973
At August 31, 2016
2,168,543
10,444
142,499
(3,569)
2,317,917
158,430
2,476,347
At August 31, 2014
Comprehensive income
Dividends declared
Issuance of shares under
stock option plan
Issuance of shares under dividend
reinvestment plan
Actuarial gain on post-retirement
benefit plans
Share-based compensation expense
967,330
—
—
8,385
—
—
313,361
(25,154)
(97,711)
6,741
(1,090)
20,500
—
—
—
—
2,176
—
—
686
—
3,767
4,272
—
—
—
(686)
—
1,292,843
(20,882)
(97,711)
17,283
5,654
(5,603)
1,310,126
(15,228)
(103,314)
5,651
20,500
—
2,176
—
—
—
—
5,651
20,500
—
2,176
At August 31, 2015
994,571
9,471
191,182
7,353
1,202,577
17,334
1,219,911
See accompanying notes
58 | Corus Entertainment Annual Report 2016
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended August 31,
(in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income (loss) for the year
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Amortization of program and film rights (notes 7 and 18)
Amortization of film investments (notes 8 and 18)
Depreciation and amortization (notes 6 and 9)
Broadcast license and goodwill impairment (notes 9, 10, and 11)
Deferred income taxes (note 21)
Intangible asset impairment (recovery) (note 8)
Share-based compensation expense (note 16)
Imputed interest (note 19)
Debt refinancing costs (note 14)
Gain on disposition of investment (note 5)
Gain on assets held for disposal (note 27)
CRTC benefit payments
Other
Net change in non-cash working capital balances related to operations (note 25)
Payment of program and film rights
Net additions to film investments
Cash provided by operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment
Net proceeds from disposition (note 27)
Business combinations, net of acquired cash (note 27)
Proceeds from disposition of investment
Net cash flows for intangibles, investments and other assets
Cash used in investing activities
FINANCING ACTIVITIES
Increase (decrease) in bank loans
Redemption of notes
Debt refinancing costs
Financing fees
Share subscription, net of issuance costs
Issuance of shares under stock option plan
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 25)
See accompanying notes
2016
2015
143,561
(19,500)
313,300
22,690
73,969
—
(22,554)
(822)
973
45,429
61,248
(1,210)
(86,151)
(25,740)
6,776
43,229
(344,855)
(29,616)
200,227
(22,550)
209,474
(1,827,452)
1,684
(19,583)
(1,658,427)
1,959,209
(550,000)
(55,671)
(23,595)
276,529
—
(89,702)
(19,824)
(4,805)
1,492,141
33,941
37,422
71,363
213,457
27,851
24,057
130,000
(2,970)
51,786
2,176
14,620
—
(16,964)
—
(5,905)
5,360
18,183
(202,728)
(34,965)
204,458
(16,671)
—
—
18,490
(24,829)
(23,010)
(74,670)
—
—
(750)
—
5,651
(76,228)
(5,603)
(4,011)
(155,611)
25,837
11,585
37,422
Corus Entertainment Annual Report 2016 | 59
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 Canadian-based integrated media and content 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 specialty television networks, pay
television services (ceased operations February 29, 2016) and conventional television stations; the operation
of radio stations; and the Corus content business which consists of the production and distribution of films and
television programs, merchandise licensing, children’s book publishing, the production and distribution of animation
software, and technology and media services.
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 issue in accordance with a resolution from the
Board of Directors on November 14, 2016.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements have been prepared on a cost basis, except for derivative financial instruments
and certain 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 associate 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 arrangement, which exists only when decisions about the relevant activities require unanimous consent of the
parties sharing control.
60 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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 associate. 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 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 identifiable 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 purchase consideration 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, net of agency commissions, are recognized in the period in which the advertising is
aired on the Company’s television and radio stations or posted on various websites and when collection is
reasonably assured.
Subscriber 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.
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
Corus Entertainment Annual Report 2016 | 61
Notes to Consolidated Financial Statements
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 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.
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
62 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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 co-producers’ 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.
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
Corus Entertainment Annual Report 2016 | 63
Notes to Consolidated Financial Statements
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.
CGUs for broadcast license impairment testing
For the Television segment, the Company has determined that there are two CGUs: (1) Managed Brands consisting
of conventional television stations, specialty television networks and pay television services (ceased operations
February 29, 2016) 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 and overhead costs are allocated amongst the cluster and have
independent cash inflows at the cluster level.
64 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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.
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
Corus Entertainment Annual Report 2016 | 65
Notes to Consolidated Financial Statements
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.
CRTC BENEFIT OBLIGATIONS
The fair value of CRTC benefit obligations committed as part of business acquisitions are initially recorded at the
present value of amounts to be paid net of any expected incremental cash inflows. The obligation is subsequently
adjusted for the incurrence of related expenditures, the passage of time and for revisions to the timing of the cash
flows. Changes in the obligation due to the passage of time are recorded as accretion of long-term liabilities and
interest expense.
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.
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
• Cash and cash
equivalents
Loans and receivables
Available-for-sale
Other financial liabilities
Derivatives
• Accounts receivable
• Loans and other
receivables included in
“investments and other
assets”
• Other portfolio
investments included in
“investments and other
assets”
• Third-party-produced
equity film investments
• Accounts payable,
accrued liabilities and
provisions
• Long-term debt
• Other long-term
financial liabilities
included in “Other long-
term liabilities”
• Derivatives that are part
of a cash flow hedging
relationship
66 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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 and forward currency contracts, are initially presented at their fair value on the date the derivative
contract is entered into and are subsequently remeasured at fair value. Gains or losses arising from the revaluation
are 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 or foreign currency
risks 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, cancelled or expires.
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:
Corus Entertainment Annual Report 2016 | 67
Notes to Consolidated Financial Statements
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”) were classified within Level 2
because they were traded, however, in what was 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 are not reliably measured because their fair value is neither evidenced
by a quoted price in an active market for an identical asset nor based on a valuation technique that uses only data
from unobservable markets. Given the early stage nature of the underlying investments of the venture funds, they
are measured at cost.
Both bank credit facilities and interest rate swap agreements are classified within Level 2, as their fair value is
determined by observable market data. The carrying value of bank credit facilities approximates fair value as the
debt bears interest at rates that fluctuate with market rates. The fair value of interest rate swap agreements is
calculated by way of discounted cash flows, using market interest rates and applicable credit spreads.
HEDGES
Hedge accounting is applied to interest rate swap agreements to fix the interest rate on the term facility and forward
currency contracts to fix its exposure to foreign currency risk for certain U.S. dollar denominated contracts. 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.
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 certain 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.
68 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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 with a corresponding charge to liability. 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. DSUs , PSUs 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 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 the Company’s 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 BENEFIT PLANS
The Company maintains capital accumulation (defined contribution), post-retirement benefit plans, and defined
benefit employee benefit plans. Company contributions to capital accumulation plans and post-retirement benefit
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 based on changes in discount rates. 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
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
Corus Entertainment Annual Report 2016 | 69
Notes to Consolidated Financial Statements
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 11 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 11 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.
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 consolidated 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:
70 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
• fair value assessments on acquired identifiable assets and obligations;
• 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, pension plan assets, and accrued supplemental post-employment benefit
plan obligations;
• the estimated useful lives of assets; and
• income tax provisions and uncertain income 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 consolidated financial statement notes;
• identifying CGUs;
• the allocation of net assets, including shared corporate and administrative assets, to the Company’s CGUs
when determining their carrying amounts;
• determining that broadcast licenses have indefinite lives;
• determining control for purposes of consolidation of an investment; and
• determining income tax rates 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
There have been no standards issued by the IASB that took effect in the current year.
PENDING ACCOUNTING CHANGES
IFRS 9 — Financial Instruments: Classification and Measurement
In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments, which reflects all phases of the
financial instrument project and replaces IAS 39 – Financial Instruments: Recognition and Measurement and all
previous versions of IFRS 9. The standard introduces new requirements for recognition and measurement
impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018,
which will be September 1, 2018 for Corus, with early application permitted. Retrospective application is required,
but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and
2013) is permitted if the date of initial application is before February 1, 2015. The Company is in the process of
reviewing the standard to determine the 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, 2018, which will be September 1, 2018 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 has reviewed these standards and
determined there is no material impact on the consolidated financial statements.
IFRS 16 – Leases
On January 13, 2016, the IASB published a new standard, IFRS 16 – Leases. The new standard will eliminate the
distinction between operating and finance leases and will bring most leases on to the balance sheet for lessees. This
standard is effective for annual reporting periods beginning on or after January 1, 2019, which will be September
1, 2019 for Corus and is to be applied retrospectively. The Company has not yet determined the impact on its
consolidated financial statements.
Corus Entertainment Annual Report 2016 | 71
Notes to Consolidated Financial Statements
4. ACCOUNTS RECEIVABLE
Trade
Other
Less allowance for doubtful accounts
5. INVESTMENTS AND OTHER ASSETS
Balance - August 31, 2014
Increase in investment
Equity loss in associates (note 20)
Return of capital from venture funds
Fair value adjustment
Balance - August 31, 2015
Increase in investment
Equity loss in associates (note 20)
Return of capital
Dispositions
Fair value adjustment
Balance - August 31, 2016
2016
357,503
25,734
383,237
3,376
379,861
Investments in
associates
Other assets
8,587
10,884
(3,299)
—
—
16,172
5,244
(5,933)
—
—
—
15,483
22,060
7,717
—
(2,569)
(422)
26,786
6,919
—
(1,684)
(697)
(48)
31,276
2015
155,232
12,523
167,755
3,155
164,600
Total
30,647
18,601
(3,299)
(2,569)
(422)
42,958
12,163
(5,933)
(1,684)
(697)
(48)
46,759
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:
KIN (formerly Digital Entertainment Company of America)
KIN is a digital media production company structured around digital video content, its creators, and the platforms
that enable the creation and distribution of content. KIN owns and operates KIN Community, a women-targeted
multi-channel network on YouTube, KIN Studios and a portfolio of brands.
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.
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:
Assets
Liabilities
Net assets
(for the years ended August 31)
Revenues
Expenses
Net loss for the year
72 | Corus Entertainment Annual Report 2016
2016
19,833
4,350
15,483
2016
8,834
14,767
(5,933)
2015
18,372
2,200
16,172
2015
4,397
7,696
(3,299)
Notes to Consolidated Financial Statements
OTHER
Other is primarily comprised of investments in venture funds totaling $26,968 (2015 — $21,194). These venture
funds invest in early stage growth companies that are pursuing opportunities in technology, mobile media and
consumer sectors. These investments are carried at cost, since reliable estimates of fair value are not determinable.
6. PROPERTY, PLANT AND EQUIPMENT
Broadcasting
and computer
equipment
Buildings and
leasehold
improvements
Land
Furniture and
fixtures
Other
Total
Cost
Balance - August 31, 2014
Additions
Disposals and retirements
Balance - August 31, 2015
Additions
Acquisitions (note 27)
Disposals and retirements
5,539
—
—
5,539
—
29,876
—
146,290
11,014
(32,059)
125,245
14,369
76,666
(506)
107,071
3,797
(686)
110,182
5,985
46,355
(1,546)
Balance - August 31, 2016
35,415
215,774
160,976
18,759
388
(1,377)
17,770
664
5,016
(78)
23,372
4,560
1,727
(215)
6,072
1,900
2,962
(72)
282,219
16,926
(34,337)
264,808
22,918
160,875
(2,202)
10,862
446,399
Accumulated depreciation
Balance - August 31, 2014
Depreciation
Disposals and retirements
Balance - August 31, 2015
Depreciation
Disposals and retirements
Balance - August 31, 2016
Net book value
August 31, 2015
August 31, 2016
Broadcasting
and computer
equipment
Buildings and
leasehold
improvements
Land
Furniture and
fixtures
Other
Total
—
—
—
—
—
—
—
96,057
12,241
(31,039)
77,259
28,384
(1,014)
104,629
29,877
5,297
(461)
34,713
8,588
(454)
42,847
11,365
2,453
(1,335)
12,483
2,666
(47)
15,102
1,302
63
(152)
1,213
550
(47)
1,716
138,601
20,054
(32,987)
125,668
40,188
(1,562)
164,294
5,539
47,986
75,469
35,415
111,145
118,129
5,287
8,270
4,859
9,146
139,140
282,105
Included in property, plant and equipment are assets under finance lease with a cost of $26,167 at August 31, 2016
(2015 — $26,526) and accumulated depreciation of $21,501 (2015 — $19,489).
7. PROGRAM AND FILM RIGHTS
Balance - August 31, 2014
Additions
Transfers from film investments (note 8)
Impairment charges
Amortization
Balance - August 31, 2015
Additions
Transfers from film investments (note 8)
Acquisitions (note 27)
Disposals (note 27)
Amortization
Balance - August 31, 2016
Cost
Accumulated amortization
Net book value
330,437
222,586
7,011
(30,678)
(213,457)
315,899
454,824
5,897
287,631
(68,683)
(313,300)
682,268
2015
1,021,096
705,197
315,899
2016
1,059,392
377,124
682,268
Corus Entertainment Annual Report 2016 | 73
Notes to Consolidated Financial Statements
The Company expects that approximately 40% of the net book value of program and film rights will be amortized
during the year ending August 31, 2017. The Company expects the net book value of program and film rights to be
amortized by September 2023.
During the third quarter of fiscal 2015, the Company undertook a strategic, in depth review of the television
programming slate to determine what programming will best position the Company’s television services in the
new regulatory environment. Programs that were not delivering adequate audience ratings were considered
impaired and were written down accordingly. As a result, the Company recorded non-cash impairment charges in
program rights of $30,678 in the third quarter of fiscal 2015. These charges are excluded from the determination
of segment profit.
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 - August 31, 2014
Additions
Tax credit accrual
Transfer to program and film rights (note 7)
Impairment charges
Amortization
Balance - August 31, 2015
Additions
Tax credit accrual
Transfer to program and film rights (note 7)
Impairment recovery (note 20)
Amortization
Balance - August 31, 2016
Cost
Accumulated amortization
Net book value
63,455
43,650
(14,586)
(7,011)
(21,108)
(27,851)
36,549
39,208
(2,828)
(5,897)
822
(22,690)
45,164
2015
981,341
944,792
36,549
2016
997,931
952,767
45,164
The Company expects that approximately 29% of the net book value of film investments will be amortized during
the year ending August 31, 2017. The Company expects the net book value of film investments to be fully amortized
by August 2025.
During the third quarter of fiscal 2015, the Company undertook a strategic, in depth review of film investments
and, as a result, certain film investments were considered impaired and written down accordingly. These film
investments, primarily related to equity film investments made by the Pay TV business, and certain boys action
properties from Nelvana which are no longer supported by merchandising sales as the current lifecycle of the toy
properties had ended. As a result, the Company recorded non-cash impairment charges in program rights and film
investments of $21,108 in the third quarter of fiscal 2015. These charges are excluded from the determination of
segment profit.
74 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
9. INTANGIBLES
Intangible assets are comprised of broadcast licenses, software, patents, customer lists, brand names, trade marks
and digital rights.
The changes in the book value of intangibles for the year ended August 31, 2016, were as follows:
Broadcast(1)
Licenses
Other(2)
Intangibles
Balance - August 31, 2014
Increase in investment
Impairments (note 11)
Amortization
Balance - August 31, 2015
Net additions
Acquisitions (note 27)
Disposals (note 27)
Amortization
Balance - August 31, 2016
979,984
—
(23,000)
—
956,984
—
78,300
(50,395)
—
984,889
(1) Broadcast licenses are located in Canada.
(2) Other intangibles are comprised of brands, trade marks and software.
At August 31, 2016, other intangibles with a finite life consisted of:
Cost
Accumulated amortization
Net book value
16,983
8,070
—
(7,422)
17,631
122,621
987,540
(2,662)
(33,782)
Total
996,967
8,070
(23,000)
(7,422)
974,615
122,621
1,065,840
(53,057)
(33,782)
1,091,348
2,076,237
2016
247,483
82,933
164,550
2015
37,719
20,089
17,630
The Company expects that 25% of the net book value of intangible assets will be amortized during the year ending
August 31, 2017. The Company expects the net book value of intangible assets with a finite life to be amortized by
August 2022.
Indefinite life intangibles, such as broadcast licenses, are tested for impairment annually as at August 31 or more
frequently if events or changes in circumstances indicate that they may be impaired. At August 31, 2016, the
Company performed its annual impairment test for fiscal 2016 and determined that there were no impairments for
the year then ended on indefinite life intangibles.
During the second quarter of fiscal 2015, the Company concluded that an interim test for the Radio segment and a
broadcast license impairment test for certain CGUs in Radio were required. As a result of these tests, the Company
recorded broadcast license impairment charges of $23,000 in the second quarter of fiscal 2015, as certain radio
clusters had actual results that fell short of previous estimates and the outlook for these markets was less robust.
10. GOODWILL
The changes in the book value of goodwill for the year ended August 31, 2016, were as follows:
Balance - August 31, 2014
Impairments (note 11)
Balance - August 31, 2015
Acquisitions (note 27)
Dispositions (note 27)
Balance - August 31, 2016
Total
934,859
(107,000)
827,859
1,617,304
(54,511)
2,390,652
Goodwill is located primarily in Canada.
Goodwill is tested for impairment annually as at August 31, or more frequently if events or changes in circumstances
indicate that it may be impaired. At August 31, 2016, the Company performed its annual impairment test for fiscal
2016 and determined that there were no impairments for the year then ended.
Corus Entertainment Annual Report 2016 | 75
Notes to Consolidated Financial Statements
During the second quarter of fiscal 2015, the Company concluded that an interim impairment test was required for
goodwill for the Radio segment CGU. As a result of this test, the Company recorded a goodwill impairment charge
of $107,000 in fiscal 2015, as the Radio CGU had actual results that fell short of previous estimates and the outlook
for the market was less robust.
11. 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 three 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.
• 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.
76 | Corus Entertainment Annual Report 2016
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:
Notes to Consolidated Financial Statements
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
2016
2015
11.0% — 13.0%
3.9% — 8.7%
2.0%
11.0% — 13.0%
3.4% — 6.8%
2.0%
13.0% — 16.0%
0.0% — 10.6%
2.0%
11.0% — 13.0%
1.0% — 11.3%
2.0%
11.0% — 13.0%
1.0% — 11.3%
2.0%
13.0% — 16.0%
0.0% — 5.3%
2.0%
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 the higher of FVLCS and VIU, 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.
The Company has completed its annual impairment testing of goodwill and intangible assets for fiscal 2016. There
were no 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.
In the second quarter of fiscal 2015, operating results in the Radio segment fell below previous estimates, as the
Radio segment experienced a soft advertising market and ratings 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 an interim impairment assessment needed to be done on certain broadcast licenses, as well as goodwill in
the Radio segment group of CGUs overall. The Company determined that there were broadcast license impairments
in three Radio CGUs in Ontario and one in British Columbia. For three CGUs, the Company used VIU to determine the
recoverable amount, which resulted in an impairment charge of $19,500, while FVLCS was used for the remaining CGU,
which resulted in an impairment charge of $3,500 that reduced the carrying value 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 which resulted in an impairment charge of $107,000 based on the conclusions stated in the preceding paragraph.
The recoverable amount of these CGUs after the impairment charges was $246,600.
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 not have resulted in a material change in either the broadcast license or goodwill
impairment in the Radio segment.
Corus Entertainment Annual Report 2016 | 77
Notes to Consolidated Financial Statements
The carrying amounts of goodwill and broadcast licenses allocated to each CGU and/or group of CGUs are set out
in the following tables:
Broadcast licenses
Television
Managed brands (note 27)
Other
Radio
Calgary
Edmonton
Toronto
Vancouver
Other(1)
Goodwill
Television (note 27)
Radio
2016
2015
852,905
7,424
31,341
21,851
21,775
21,303
28,290
825,000
7,424
31,341
21,851
21,775
21,303
28,290
984,889
956,984
2016
2015
2,323,553
67,099
2,390,652
760,760
67,099
827,859
(1) Broadcast licenses for Other consist of all other Radio CGUs combined. There is no individual Radio CGU that comprises more than 10% of the
total broadcast license balance.
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are comprised of the following:
Trade accounts payable and accrued liabilities
Program rights payable
Trade marks and distribution rights
Film investment accruals
Dividends payable
Financing lease accruals
2016
183,141
155,393
15,833
98
37,316
1,586
393,367
2015
77,640
107,842
3,006
2,752
16,561
3,170
210,971
13. PROVISIONS
The Company recorded business acquisition, integration and restructuring charges of $57,198 (2015 – $19,032)
primarily related to severance and employee related costs as a result of changes to the management structure
and business operations. The Company anticipates that the balance at August 31, 2016 will be substantially
paid by fiscal 2017.
The continuity for provisions is as follows:
Restructuring
Balance, beginning of year
Additions
Payments
Total restructuring provision
Other
Total current provision balance, end of year
2016
2015
10,324
29,093
(18,611)
20,806
584
21,390
5,295
17,432
(14,003)
8,724
206
8,930
78 | Corus Entertainment Annual Report 2016
14. LONG-TERM DEBT
Bank loans
Senior unsecured guaranteed notes (“Notes”)
Unamortized financing fees
Less: current portion of bank loans
Notes to Consolidated Financial Statements
2016
2,218,055
—
(22,035)
2,196,020
(115,000)
2,081,020
2015
258,968
550,000
(7,966)
801,002
(150,000)
651,002
Interest rates on the balance of the bank loans fluctuate with Canadian bankers’ acceptances and/or LIBOR. As at
August 31, 2016, the weighted average interest rate on the outstanding bank loans and Notes was 4.7% (2015 –
3.9%). Interest on the bank loans and Notes averaged 4.6% for fiscal 2016 (2015 – 4.1%).
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 Amended and Restated Credit Agreement dated April 1, 2016 (the “Facility”).
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, 2016.
CREDIT FACILITIES
A syndicate of lenders has provided Corus with a senior secured revolving facility (the “Revolving Facility”) and a
senior secured term credit facility (the “Term Facility”) under the Facility.
In connection with the closing of the acquisition of Shaw Media Inc. (the “Acquisition” or “Shaw Media”) described
in note 27, Corus established syndicated senior secured credit facilities in the aggregate amount of $2.6 billion
consisting of $2.3 billion in term loans (the “Term Facility”), all of which was fully drawn at closing, and a $300.0
million revolving facility (the “Revolving Facility”), which was not drawn on as part of closing. The Term Facility and
Revolving Facility replace Corus’ previous credit facilities and were established pursuant to a fourth amended and
restated credit agreement dated as of April 1, 2016.
Term Facility
The Term Facility consists of two tranches, with the first tranche being in the initial amount of $766.7 million and
having a maturity of April 1, 2019, and the second tranche being in the initial amount of $1,533.3 million and having
a maturity of April 1, 2021. The Term Facility was available in a single Canadian dollar drawdown, and net proceeds
from the Term Facility, after deducting related fees and expenses, were used (together with the net proceeds from
the public equity offering and the concurrent private placement) to finance the Acquisition, to prepay the amount
outstanding under its existing credit facilities and to redeem the Notes.
Advances under the Term Facility may be outstanding in the form of either prime loans or bankers’ acceptances
and bear interest at the applicable reference rate plus an applicable margin depending on the type of advance and
Corus’ total debt to cash flow ratio.
Voluntary prepayments on the amount outstanding under the Term Facility are permitted at any time without
penalty, subject to payment of customary breakage costs, if applicable, and provided that advances in the form
of bankers’ acceptances may only be paid on their maturity. Each tranche of the Term Facility will be subject to
mandatory repayment equal to 1.25% per quarter at the end of each fiscal quarter of Corus, increasing to 1.875%
per quarter commencing with the November 30, 2017 instalment and, in the case of the second tranche, to 2.5%
per quarter commencing with the November 30, 2019 instalment.
Revolving Facility
The $300.0 million Revolving Facility matures on April 1, 2020. The Revolving Facility is available on a revolving basis
to finance permitted acquisitions and capital expenditures and for general corporate purposes. Amounts owing
under the Revolving Facility will be payable in full at maturity. The Revolving Facility permits full or partial cancellation
of the facility and, if applicable, concurrent prepayment of the amounts drawn thereunder at any time without
penalty, subject to payment of customary breakage costs, if applicable, and provided that advances in the form of
bankers’ acceptances may only be paid on their maturity.
Advances under the Revolving Facility may be drawn in Canadian dollars as either a prime rate loan, bankers’
acceptance or Canadian dollar denominated letters of credit (to a sub-limit of $50.0 million total), or in U.S. dollars
Corus Entertainment Annual Report 2016 | 79
Notes to Consolidated Financial Statements
as either a base rate loan, U.S. LIBOR loan or U.S. dollar denominated letters of credit (to a sub-limit of $50.0
million total). Amounts drawn under the Revolving Facility will bear interest at the applicable reference rate plus an
applicable margin depending on the type of advance and Corus’ total debt to cash flow ratio. A standby fee will also
be payable on the unutilized amount of the Revolving Facility. As at August 31, 2016, $300.0 million of the Revolving
Facility was available.
Previous Credit Facilities
On February 25, 2015, the Company’s credit agreement was amended to extend the maturity date of the Revolving
Facility which consisted of a committed credit of $500.0 million from February 11, 2017 to February 25, 2019.
On February 3, 2014, the Company’s credit agreement was amended and restated to establish a two year $150.0
million Term Facility, which was incremental to the existing $500.0 million Revolving Facility. The $150.0 million Term
Facility matured on February 3, 2016 and was repaid in full on that date.
The previous credit facilities, as noted above, were replaced by the Term Facility and Revolving Facility under the
Amended and Restated Credit Agreement dated April 1, 2016.
SWAP AGREEMENTS
On May 31, 2016, the Company entered into Canadian interest rate swap agreements to fix the interest rate on
$457.0 million and $1,414.0 million of its outstanding term loan facilities at 1.076% and 1.195%, respectively,
plus applicable margins to February 28, 2019 and February 26, 2021. The notional value of these swaps reduces
concurrently with the mandatory repayments of the Term Facility. The counterparties of the swap agreements are
highly rated financial institutions and the Company does not anticipate any non-performance. 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. As an effective hedge, unrealized gains or losses on the interest rate
swap agreements are recognized in other comprehensive income. The estimated fair value of these agreements at
August 31, 2016 is $14.4 million, which has been recorded in the consolidated statements of financial position as a
liability. The effectiveness of the hedging relationship is reviewed on a quarterly basis.
On February 3, 2014, the Company entered into Canadian dollar interest rate swap agreements to fix the interest
rate on the $150.0 million Term Facility at 1.375%, plus an applicable margin, to February 3, 2016. This hedge was
wound up on February 3, 2016.
REDEMPTION OF 4.25% SENIOR UNSECURED GUARANTEED NOTES DUE 2020
On April 18, 2016, the Company redeemed all of its outstanding $550.0 million 4.25% senior unsecured guaranteed
notes due 2020 (the “2020 Notes”). This redemption included accrued and unpaid interest on the 2020 Notes up to,
but excluding the redemption premium of $52.6 million as well as the write-off of unamortized financing charges of
$4.8 million.
15. OTHER LONG-TERM LIABILITIES
Program rights payable
Trademark liabilities
Long-term employee obligations
Public benefits associated with acquisitions
Merchandising and intangibles liabilities
Deferred leasehold inducements
Derivative fair value (note 14)
Unearned revenue
Asset retirement obligations
Finance lease accrual
2016
303,779
76,127
61,111
22,464
26,290
18,164
14,383
8,519
8,015
820
539,672
2015
54,094
3,006
27,092
26,116
3,073
16,730
435
6,147
—
2,140
138,833
80 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
16. 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 the Company or other distribution of assets of the Company
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 the Company 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.
No Class A Preferred Shares, Class 1 Preferred Shares or Class 2 Preferred Shares are outstanding at August 31, 2016.
CLASS B SHARE SUBSCRIPTION RECEIPTS
In connection with the Acquisition (note 27), on February 3, 2016, Corus completed a public equity offering (the
“Equity Offering”) of 25.40 million subscription receipts of Corus (the “Subscription Receipts”) at a price of $9.00
per Subscription Receipt, for gross proceeds of approximately $228.6 million. On February 5, 2016, the underwriters
in the Equity Offering exercised their option to purchase an additional 3.81 million Subscription Receipts at a price
of $9.00 per Subscription Receipt, for additional gross proceeds of approximately $34.3 million, representing total
gross proceeds from the Equity Offering of $262.9 million. Concurrently with the closing of the Equity Offering, on
February 3, 2016, the Shaw family also purchased 3.56 million Subscription Receipts on a private placement basis
(the “Concurrent Private Placement”) from Corus at a price of $9.00 per Subscription Receipt, for gross proceeds
of $32.0 million. Issuance costs, net of tax of $8.9 million and a subscription receipt adjustment payment of $6.2
million were incurred, resulting in net proceeds of $279.8 million.
The Class B Non-Voting Shares underlying the Subscription Receipts were issued on April 1, 2016 in connection
with the completion of the Acquisition and the net proceeds from the Equity Offering and the Concurrent Private
Placement (including accrued interest thereon) were applied by Corus to partially fund the cash consideration for
the Acquisition.
Corus Entertainment Annual Report 2016 | 81
Notes to Consolidated Financial Statements
ISSUED AND OUTSTANDING
Balance – August 31, 2014
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
Balance - August 31, 2015
Issuance of shares under public equity
offering, net of issuance costs (note 27)
Issuance of shares to related party (note 27)
Issuance of shares under dividend
reinvestment plan
Class A Voting Shares
Class B Non-Voting Shares
#
$
#
$
Total
$
3,428,292
26,549
82,335,593
940,781
967,330
(2,500)
—
—
(20)
—
—
2,500
320,200
1,096,494
20
6,741
20,500
—
6,741
20,500
3,425,792
26,529
83,754,787
968,042
994,571
—
—
—
—
—
—
32,770,000
71,364,853
279,762
833,541
279,762
833,541
5,108,359
60,669
60,669
Balance - August 31, 2016
3,425,792
26,529
192,997,999
2,142,014
2,168,543
EARNINGS (LOSSES) PER SHARE
The following is a reconciliation of the numerator and denominator (in thousands) used for the computation of the
basic and diluted earnings (losses) per share amounts:
2016
2015
Net income (loss) attributable to shareholders (numerator)
125,931
(25,154)
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
131,783
75
131,858
86,441
38
86,479
The calculation of diluted earnings (losses) per share for fiscal 2016 excluded 2,509 (2015 – 2,161) weighted
average Class B Non-Voting Shares issuable under the Company’s Stock Option Plan because these options were
not “in-the-money”.
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 on the TSX 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:
Number of
options
(#)
Weighted average
exercise price per share
($)
2,561,373
742,600
(320,200)
(422,900)
2,560,873
1,293,400
(100,400)
3,753,873
21.33
22.86
17.66
22.95
21.97
10.63
15.31
18.24
Outstanding - August 31, 2014
Granted
Exercised
Forfeited or expired
Outstanding - August 31, 2015
Granted
Forfeited or expired
Outstanding - August 31, 2016
82 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
As at August 31, 2016, the options outstanding and exercisable consist of the following:
Range of excercise price ($)
10.38 - 11.50
11.51 - 20.80
20.81 - 22.16
22.17 - 23.47
23.48 - 25.40
Options outstanding
Options exercisable
Number
outstanding (#)
Weighted average
remaining
contractual life
(years)
Weighted average
exercise price ($)
Number
outstanding (#)
Weighted average
exercise price ($)
1,117,300
669,673
595,900
708,200
662,800
3,753,873
6.9
3.6
3.2
4.1
3.9
4.6
10.38
17.64
22.00
22.91
23.72
18.24
—
485,323
446,925
373,475
331,400
1,637,123
—
19.13
22.00
22.60
23.72
21.63
The fair value of each option granted has been 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 2016, the Company has recorded share-based compensation expense of $973 (2015 –
$2,176). This charge has been credited to contributed surplus. Unrecognized share-based compensation expense
at August 31, 2016 related to the Plan was $679 (2015 – $1,159).
The fair value of each option granted in fiscals 2016 and 2015 was estimated on the date of the grant using the
Black-Scholes option pricing model with the following assumptions:
Granted in the fourth quarter of fiscal 2016 and vesting in fiscal:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
Granted in the second quarter of fiscal 2016 and vesting in fiscal:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
Granted in the third quarter of fiscal 2015 and vesting in fiscal:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
Granted in the first quarter of fiscal 2015 and vesting in fiscal:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
2017
$ 0.79
0.7%
9.0%
27.0%
6
2017
$ 0.24
0.9%
10.9%
21.4%
6
2016
$ 1.21
1.0%
6.5%
21.8%
6
2016
$ 2.63
1.6%
4.7%
22.5%
6
2018
$ 0.79
0.7%
9.0%
27.0%
6
2018
$ 0.36
0.9%
10.9%
24.9%
6
2017
$ 1.20
1.0%
6.5%
21.8%
6
2017
$ 2.80
1.6%
4.7%
23.4%
6
2019
$ 0.48
0.7%
9.0%
22.1%
6
2019
$ 0.25
0.9%
10.9%
22.3%
7
2018
$ 1.43
1.0%
6.5%
24.0%
7
2018
$ 3.03
1.6%
4.7%
24.7%
6
2020
$ 0.88
0.6%
9.0%
27.6%
5
2020
$ 0.28
1.0%
10.9%
23.3%
7
2019
$ 1.79
1.1%
6.5%
27.2%
7
2019
$ 3.31
1.6%
4.7%
26.2%
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 20, 2016, the Company granted a further 1,613,000 options for Class B Non-Voting Shares to eligible
officers and employees of the Company. These options are exercisable at $11.60 per share.
Corus Entertainment Annual Report 2016 | 83
Notes to Consolidated Financial Statements
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 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.
Date of record
September 15, 2015
October 15, 2015
November 16, 2015
December 15, 2015
January 15, 2016
February 15, 2016
March 15, 2016
April 15, 2016
May 16, 2016
June 15, 2016
July 15, 2016
August 15, 2016
Dividend yield of Class B shares
Date of record
September 15, 2014
October 15, 2014
November 14, 2014
December 15, 2014
January 15, 2015
February 13, 2015
March 16, 2015
April 15, 2015
May 15, 2015
June 15, 2015
July 15, 2015
August 17, 2015
Dividend yield of Class B shares
Date paid
September 30, 2015
October 30, 2015
November 30, 2015
December 30, 2015
January 29, 2016
February 29, 2016
March 31, 2016
April 29, 2016
May 31, 2016
June 30, 2016
July 29, 2016
August 31, 2016
Date paid
September 30, 2014
October 31, 2014
November 28, 2014
December 30, 2014
January 30, 2015
February 27, 2015
March 31, 2015
April 30, 2015
May 29, 2015
June 30, 2015
July 31, 2015
August 31, 2015
Class A
Amount paid
Class B
Amount paid
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$1.134996
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$1.140000
9.28%
Class A
Amount paid
Class B
Amount paid
$0.090417
$0.090417
$0.090417
$0.090417
$0.090417
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$0.094583
$1.114166
$0.090833
$0.090833
$0.090833
$0.090833
$0.090833
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$0.095000
$1.119165
7.83%
The total amount of dividends declared in fiscal 2016 was $171,125 (2015 - $97,711).
On October 19, 2016, the Company declared dividends of $0.094583 per Class A Voting Share and $0.095000 per
Class B Non-Voting Share payable on each of November 30, 2016, December 30, 2016 and January 31, 2017 to the
shareholders of record at the close of business on November 15, 2016, December 15, 2016 and January 16, 2017,
respectively.
84 | Corus Entertainment Annual Report 2016
SHARE-BASED COMPENSATION
The following table provides additional information on the employee PSUs, DSUs and RSUs:
Notes to Consolidated Financial Statements
Balance - August 31, 2014
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2015
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2016
PSUs
#
954,464
351,465
48,906
(89,453)
(309,486)
955,896
392,777
86,865
(76,713)
(332,891)
DSUs
#
861,302
104,979
49,217
(217,233)
(57,927)
740,338
144,744
143,118
—
(25,833)
1,025,934
1,002,367
RSUs
#
142,313
60,595
—
(7,320)
(46,020)
149,568
165,660
13,275
(47,667)
(43,353)
237,483
Share-based compensation expense recorded for the fiscal year in respect of these plans was $3,223 (2015
– $1,147). As at August 31, 2016, the carrying value of these units at the end of the fiscal year that have vested
multiplied by the closing share price at the end of the year was $20,869 (2015 – $19,820).
DIVIDEND REINVESTMENT PLAN (“DRIP”)
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 the fiscal 2016, the Company issued 5,108,360
Class B Non-Voting Shares, resulting in an increase in share capital of $60,669.
On April 1, 2016, as part of the Shaw Media acquisition (the “Acquisition”), the Company issued 71,364,853 Class B
Non-Voting Shares (the “Consideration Shares”) to Shaw Communications Inc. (“Shaw”) (refer to note 27). As part
of the Acquisition, Shaw had agreed that it would, upon the closing of the Acquisition, enroll all of the Consideration
Shares in Corus’ existing DRIP. Shaw will continue to participate in the Corus DRIP until the earlier of: (a) September
1, 2017; and (b) the date such Consideration Shares are no longer subject to hold restrictions under the Governance
and Investor Rights Agreement. Subject to applicable laws, from the Closing Date until the date that is 24 months
following the Closing Date, Corus has agreed that no amendments will be made to the share price discount under
the DRIP (currently a 2% share price discount). Shares issued to Shaw pursuant to the DRIP will not be subject to
restrictions on transfer.
Corus Entertainment Annual Report 2016 | 85
Notes to Consolidated Financial Statements
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
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
gains (losses)
on defined
benefit plans
Total
Balance - August 31, 2014
Items that may be subsequently reclassified
to income:
Amount
Income tax
Items that will never be subsequently
reclassified to income:
Amount
Income tax
Transfer to retained earnings
Balance - August 31, 2015
Items that may be subsequently reclassified
to income:
Amount
Income tax
Transfer to net income
Items that will never be subsequently
reclassified to income:
Amount
Income tax
Transfer to retained earnings
2,987
4,158
—
4,158
—
—
—
—
7,145
(49)
—
7,096
—
—
—
—
—
832
(52)
—
3,767
(422)
116
(306)
—
—
—
—
(362)
96
(266)
—
—
—
—
—
—
—
934
(248)
686
(686)
3,374
212
3,586
934
(248)
686
(686)
526
(318)
—
7,353
(40)
17
503
(597)
—
—
—
—
(13,950)
3,697
(10,571)
—
—
—
—
—
—
—
—
—
(14,039)
3,714
(2,972)
(597)
(4,746)
1,257
(4,746)
1,257
(3,489)
(3,489)
3,489
3,489
Balance - August 31, 2016
7,096
(94)
(10,571)
—
(3,569)
18. DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Direct cost of sales
Amortization of program and film rights(1)
Amortization of film investments
Other cost of sales
General and administrative expenses
Employee costs
Other general and administrative
2016
2015
313,300
22,690
22,450
232,583
169,277
760,300
213,457
27,851
24,802
149,182
122,836
538,128
(1) Certain of Corus’ Pay Television business (“Pay TV”) assets and liabilities were reclassified as held for disposal effective November 19, 2015.
The Pay TV operating results remained in operations, however, amortization of program rights ceased on that date and as a consequence,
amortization is lower for the year ended August 31, 2016 by $15.6 million.
86 | Corus Entertainment Annual Report 2016
19. INTEREST EXPENSE
Interest on long-term debt
Imputed interest on long-term liabilities
Other
20. OTHER EXPENSE (INCOME), NET
Interest income
Foreign exchange loss (gain)
Equity loss of associates
Film investment recovery
Venture fund distribution
Other
Notes to Consolidated Financial Statements
2016
63,340
45,429
2,093
110,862
2016
(827)
(339)
5,933
(822)
(533)
5,340
8,752
2015
34,558
14,620
1,758
50,936
2015
(225)
5,034
3,299
—
(16,964)
(1,261)
(10,117)
During the first quarter of 2016, the Company received cash proceeds of $1,684 relating to the disposal of an
investment, of which $1,151 relates to a return on capital, resulting in a gain of $533.
During the second quarter of 2015, the Company received cash proceeds of $18,490 relating to the disposal of an
investment, of which $1,526 related to a return on capital, resulting in a gain of $16,964.
21. INCOME TAXES
The significant components of income tax expense are as follows:
Current income tax expense
Deferred income tax expense:
Resulting from temporary differences
Resulting from the recognition of tax losses
Resulting from tax rate changes
Resulting from the creation (reversal) of various future tax reserves
Other
Income tax expense reported in the consolidated statements of income
and comprehensive income
2016
64,129
(13,625)
(9,626)
(90)
898
(111)
41,575
2015
33,963
1,168
(4,673)
442
98
(5)
30,993
A reconciliation of income tax computed at the statutory tax rates to income tax expense is as follows:
Income tax at combined federal and provincial rates:
Difference from statutory rates relating to:
(Income)/loss subject to income tax at less than statutory rates
Non-taxable portion of capital gains
Goodwill
Transaction costs
Increase (recovery) of various tax reserves
Increase in deferred taxes from statutory rate changes
Miscellaneous differences
2016
%
$
2015
%
$
48,998
26.5%
3,047
26.5%
8
(27,945)
14,402
4,445
235
(90)
1,522
0.0%
(15.1%)
7.8%
2.4%
0.1%
0.0%
0.8%
41,575
22.5%
1,902
(2,236)
28,394
(465)
(1,570)
442
1,479
30,993
16.5%
(19.5%)
247.0%
(4.1%)
(13.7%)
3.8%
12.9%
269.7%
Corus Entertainment Annual Report 2016 | 87
Notes to Consolidated Financial Statements
The movement in the net deferred tax asset (liability) was as follows:
Broadcast
licenses
and other
intangibles
$
Accrued
compen-
sation
$
Fixed
assets and
film assets
$
Program
rights
$
Non-
capital
loss carry
forwards
$
Invest-
ments
$
Financing
and debt
retire-ment
$
Other
$
Total
$
Balance -
August 31, 2014
Recognized in profit or
loss
Recognized in OCI
Recognized in equity
Balance -
August 31, 2015
Recognized in profit or
loss
Recognized in OCI
Recognized in equity
Acquisitions
Balance -
August 31, 2016
(262,505)
12,465
13,916
8,712
4,360
(597)
2,045
7,078
(214,526)
4,277
—
—
(1,503)
(248)
—
900
—
—
(2,575)
—
—
4,672
—
—
(1,613)
116
—
(1,313)
96
—
126
—
(56)
2,971
(36)
(56)
(258,228)
10,714
14,816
6,137
9,032
(2,094)
828
7,148
(211,647)
12,719
—
—
(263,487)
3,081
1,258
—
7,665
3,451
—
—
(2,673)
(12,992)
—
—
40,198
9,626
—
—
40
1,352
104
—
—
8,758
3,696
3,230
—
(3,441)
—
—
14,736
22,554
5,058
3,230
(203,521)
(508,996)
22,718
15,594
33,343
18,698
(638)
16,512
18,443
(384,326)
At August 31, 2016, the Company had approximately $80,903 (2015 – $46,398) of non-capital loss carryforwards
available which expire between the years 2026 and 2035. A deferred income tax asset of $18,698 (2015 –
$9,032) has been recognized in respect of these losses and an income tax benefit of $1,478 (2015 – $1,754)
has not been recognized.
At August 31, 2016, the Company had approximately $35,945 (2015— $28,922) 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
income 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 2016 or 2015, by the
Company to its shareholders.
22. BUSINESS SEGMENT INFORMATION
The Company’s business activities are conducted through two segments: Television and Radio.
TELEVISION
The Television segment is comprised of 45 specialty television networks, pay television services (ceased operations
February 29, 2016), 15 conventional television stations, and the Corus content business, which consists of the
production and distribution of films and television programs, merchandise licensing, children’s book publishing,
animation software, and technology and media services. Revenues are generated from advertising, subscribers and
the licensing of proprietary films and television programs, merchandise licensing, publishing, animation software,
and technology and media service 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 and amortization, interest expense, debt
refinancing costs, restructuring, impairments and certain other income and expenses.
88 | Corus Entertainment Annual Report 2016
REVENUES AND SEGMENT PROFIT
Year ended August 31, 2016
Revenues
Direct cost of sales, general
and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Debt refinancing costs
Business acquisition, integration and restructuring costs
Gain on disposition
Other expense, net
Income before income taxes
Year ended August 31, 2015
Revenues
Direct cost of sales, general
and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Intangible asset impairment
Business acquisition, integration and restructuring costs
Other income, net
Income before income taxes
Notes to Consolidated Financial Statements
Television
Radio
Corporate
Consolidated
1,015,609
155,705
—
1,171,314
611,384
404,225
119,546
36,159
29,370
(29,370)
760,300
411,014
73,969
110,862
61,248
57,198
(86,151)
8,752
185,136
Television
Radio
Corporate
Consolidated
653,770
161,545
—
815,315
393,641
260,129
124,538
37,007
19,949
(19,949)
538,128
277,187
24,057
50,936
130,000
51,786
19,032
(10,117)
11,493
The following tables present further details on the operating segments within the Television and Radio segments:
Revenues are derived from the following areas:
Advertising
Subscribers
Merchandising, distribution and other
2016
661,818
405,728
103,768
1,171,314
Revenues are derived from the following geographical sources, by location of customer:
2015
390,295
340,320
84,700
815,315
2015
773,044
42,271
815,315
2016
1,125,769
45,545
1,171,314
Canada
International
SEGMENT ASSETS AND LIABILITIES
Assets
Television
Radio
Corporate
Liabilities
Television
Radio
Corporate
2016
2015
5,581,543
266,239
245,603
6,093,385
1,240,959
56,092
2,319,987
3,617,038
2,167,342
264,730
200,037
2,632,109
460,800
72,976
878,422
1,412,198
Corus Entertainment Annual Report 2016 | 89
Notes to Consolidated Financial Statements
Assets and liabilities are located primarily within Canada.
CAPITAL EXPENDITURES BY SEGMENT
Television
Radio
Corporate
2016
16,293
4,395
1,862
22,550
2015
5,101
9,895
1,675
16,671
Property, plant and equipment are located primarily within Canada.
23. 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:
Total bank debt and notes
Cash and cash equivalents
Net debt
Shareholders’ equity
2016
2,196,020
(71,363)
2,124,657
2,476,347
4,601,004
2015
801,002
(37,422)
763,580
1,219,911
1,983,491
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 long-term objectives are a leverage target (net debt to segment profit ratio) of 3.0 times
to 3.5 times, and to maintain a dividend yield in excess of 2.5%. In the short-term, the Company may permit the
long-term range (for long-term investment opportunities) to be exceeded, 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 above these internally imposed objectives as a result of the Acquisition and is committed to bringing the
leverage target back within the target range by the end of fiscal 2018.
Net debt to segment profit at August 31, 2016 was 5.2 times compared to 2.8 times at August 31, 2015. Segment
profit for the net debt to segment profit calculation reflects aggregate amounts as reported by the Company for the
most recent four quarters; however, does not include segment profit from the Shaw Media business prior to April
1, 2016. The increase in net debt and net debt to segment profit reflects increased debt to finance the Acquisition
(note 27) but does not include a full twelve months of segment profit of the Shaw Media business (note 27).
90 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
24. FINANCIAL INSTRUMENTS
The following tables set out the classification of financial and non-financial assets and liabilities.
As at August 31, 2016
Cash and cash equivalents
Accounts receivable
Investments
Intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities
Other liabilities
Total liabilities
As at August 31, 2015
Cash and cash equivalents
Accounts receivable
Investments and intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities
Other liabilities
Total liabilities
Fair value
through profit
or loss
Loans and
receivables
Available-
for-sale
Other financial
liabilities
Non-
financial
Total carrying
amount
71,363
—
—
—
—
71,363
—
—
—
—
—
—
379,861
—
—
—
379,861
—
—
—
—
—
—
—
29,968
—
—
29,968
—
—
—
—
—
—
—
—
16,791
2,076,237
3,519,165
71,363
379,861
46,759
2,076,237
3,519,165
5,612,193
6,093,385
—
—
—
—
—
416,739
2,196,020
498,999
—
—
—
40,673
464,607
416,739
2,196,020
539,672
464,607
3,111,758
505,280
3,617,038
Fair value
through profit
or loss
37,422
—
—
—
37,422
Loans and
receivables
Available-for-
sale
Other financial
liabilities
Non-financial
Total carrying
amount
—
164,600
—
—
164,600
—
—
24,940
—
24,940
—
—
—
—
—
—
—
35,649
2,369,498
37,422
164,600
60,589
2,369,498
2,405,147
2,632,109
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
219,901
801,002
135,325
—
—
—
3,508
252,462
219,901
801,002
138,833
252,462
1,156,228
255,970
1,412,198
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 April 1, 2016, the Company’s bank loans were amended and, as
a result, the Company had estimated the fair value of its bank debt to be approximately equal to its carrying amount
as at August 31, 2016.
Periodically, the Company enters 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 was based on the trading price of the Notes, which takes into account
the Company’s own credit risk. At August 31, 2015, the Company has estimated the fair value of its Notes to be
$521,125. These notes were retired in fiscal 2016.
Corus Entertainment Annual Report 2016 | 91
Notes to Consolidated Financial Statements
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.
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, 2016
Assets
Cash and cash equivalents
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities carried at fair value
As at August 31, 2015
Assets
Cash and cash equivalents
Investments
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities 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)
71,363
71,363
—
—
—
—
14,383
14,383
—
—
—
—
Quoted prices in active markets
for identical assets or liabilities
(level 1)
Significant other
observable inputs
(level 2)
Significant
unobservable inputs
(level 3)
37,422
—
37,422
—
—
—
746
746
435
435
—
—
—
—
—
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.
92 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
The following table sets out the details of the aging for accounts receivable and allowance for doubtful accounts as
at August 31 as follows:
2016
2015
Trade
Current
One to three months past due
Over three months past due
Other
Less allowance for doubtful accounts
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
163,454
149,283
44,766
357,503
25,734
383,237
3,376
379,861
2016
3,155
3,153
1,768
(4,700)
3,376
84,201
54,052
16,979
155,232
12,523
167,755
3,155
164,600
2015
5,800
1,155
—
(3,800)
3,155
The Company invoices 10% of its revenues to one related party (2015 – 14%). This related party comprises 7% of
the accounts receivable balance as at August 31, 2016 (2015 – 13%).
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated
with 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, 2016 was $300,000 (2015 – $390,000). Further information with respect to the Company’s
long-term debt facility is provided in note 14.
The following table sets out the undiscounted contractual obligations as at August 31, 2016:
Total debt(1)
Accounts payable
Other obligations (2)
Total
2,218,054
393,367
628,480
Less than
one year
115,000
393,367
59,704
One to
three years
931,021
—
297,772
Beyond
three years
1,172,033
—
271,004
(1) Principal repayments and interest payments.
(2) Other obligations include program rights, CRTC benefit commitments, and other financial liabilities.
In fiscal 2016, the Company incurred interest on bank loans, swaps on credit facilities and Notes of $63,340
(2015 – $34,558).
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 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 expense, net
2016
(247)
(339)
(586)
2015
80
5,034
5,114
Corus Entertainment Annual Report 2016 | 93
Notes to Consolidated Financial Statements
An assumed 10% increase or decrease in exchange rates as at August 31, 2016 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,
2016 would have had a material impact on net income for the year. As a result of the Company’s exposure to this risk
it has entered into interest rate swap agreements, as described in note 14, to minimize its exposure to changes in
floating rates on bankers’ acceptances.
Other considerations
The Company does not engage in trading or other speculative activities with respect to derivative financial
instruments.
25. CONSOLIDATED STATEMENT OF CASH FLOWS
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
2016
34,773
7,543
35,275
16,539
(53,659)
2,758
43,229
Interest paid, interest received and income taxes paid and classified as operating activities are as follows:
Interest paid
Interest received
Income taxes paid
2016
66,722
827
42,778
2015
20,188
(821)
(2,844)
(2,471)
(11,916)
16,047
18,183
2015
36,175
225
27,676
26. GOVERNMENT FINANCING AND ASSISTANCE
Revenues include $3,201 (2015 – $4,414) 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 $879 (2015 – $1,001) 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%.
27. BUSINESS COMBINATIONS AND DIVESTITURES
ACQUISITION OF SHAW MEDIA FROM A RELATED PARTY
On April 1, 2016, the Company acquired the shares of Shaw Media from Shaw for $2.65 billion, subject to certain
post-closing adjustments, satisfied by Corus through a combination of: a) $1.85 billion of cash consideration; and
b) the issuance by the Company to Shaw of 71,364,853 Class B Non-Voting Shares (the “Class B Shares”) at a value
per share of $11.21 per share for an aggregate value of $800.0 million. These shares were valued for accounting
purposes at $833.5 million, which reflects the opening price of Corus’ stock on April 1, 2016 of $11.68 per share.
Shaw Media operates Global Television and 19 of the country’s specialty channels, and their online companions,
including Food Network Canada, HGTV Canada, HISTORY, Slice, National Geographic Channel and Showcase.
Shaw Media also offers viewers local and national news programming from coast to coast. The Acquisition will be a
business combination between entities under common control and will be accounted for by the Company using the
acquisition method. The Company has not completed the valuation of assets acquired and liabilities to be assumed.
94 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
PURCHASE PRICE ALLOCATION
Final valuations of certain items are not yet complete due to the inherent complexity associated with valuations.
Therefore, the purchase price allocation is preliminary and subject to adjustment on completion of the valuation
process and analysis of resulting tax effects. The Company determined the preliminary fair values based on
discounted cash flows, market information, independent valuations and management’s estimates.
Fair value recognized on acquisition date:
April 1, 2016
Assets
Cash
Accounts receivable
Prepaid expenses and other
Property, plant and equipment
Program and film rights
Intangibles
Total assets
Liabilities
Accounts payable and accrued liabilities
Other long-term liabilities
Deferred income tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition(1)
Value of non-controlling ownership interest
Purchase price
Class B non-voting share consideration
Cash consideration
13,153
243,534
12,512
160,875
287,631
1,065,840
1,783,545
215,971
164,058
203,521
583,550
1,199,995
1,614,965
(143,290)
2,671,670
(833,541)
1,838,129
(1) Goodwill arises principally from the ability to leverage media content, the reputation of assembled workforce and future growth. Goodwill is not
deductible for tax purposes.
PROFORMA DISCLOSURES
The following pro forma supplemental information presents certain results of operations as if the transaction noted
above had been completed at the beginning of the fiscal period presented.
For the year ended August 31, 2016:
(in thousands of dollars except per share amounts)
Revenues
Net income attributable to shareholders
As currently
reported(1)
Pro forma
(unaudited)(2)
407,293
69,370
1,781,793
192,438
(1) Revenues of $407.3 million and net income attributable to shareholders of $69.4 million 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, 2016, reflect the Shaw Media assets as if they were acquired September 1, 2015.
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.
DISPOSITION OF CERTAIN PAY TELEVISION ASSETS (“PAY TV”)
On November 19, 2015, the Company entered into an agreement with Bell Media Inc. (“Bell”) to cease operations
of its Pay TV business (Movie Central, Encore and HBO Canada) and facilitate certain contractual and other
arrangements, and take certain other actions, that were necessary or desirable in connection with Bell’s intent to
expand the Bell premium pay television services so that they would be available on a national basis. The Company
received from Bell $211.0 million in consideration to support Bell’s national expansion.
Corus Entertainment Annual Report 2016 | 95
Notes to Consolidated Financial Statements
On November 19, 2015, the Company determined that the carrying value of certain programming assets, broadcast
licenses, and goodwill, along with some directly associated program rights liabilities formed a disposal group, whose
value would not be recovered principally through continuing use. Accordingly, at that date the disposal group was
presented separately in the statements of financial position as held for disposal in accordance with IFRS 5 – Non-
current Assets Held for Sale and Discontinued Operations, measured at the lower of carrying value and fair value less
costs to sell, and amortization on such assets has ceased. As a result, amortization in the Television segment for
the twelve months ended August 31, 2016 is approximately $15.6 million lower than it would have been had these
assets continued to be amortized.
The results of the operations of the Company’s Pay TV business were included in the Television segment until
February 29, 2016, as Bell launched its national service on March 1, 2016. A gain of $86.2 million was recorded, which
resulted from cash proceeds of $211.0 million less the carrying value of the disposal group.
ACQUISITION OF ASSETS OF FAST FILE MEDIA SERVICES INC. (“FAST FILE”)
On September 16, 2015, the Company acquired certain assets of the Fast File business for a purchase price of $2.5
million. These assets were accounted for at their fair value. These assets are included in the Television segment
effective September 16, 2015. The purchase price equation was accounted for using the purchase method.
28. COMMITMENTS, CONTINGENCIES AND GUARANTEES
LEASES
The Company enters into operating leases for the use of facilities and equipment. During fiscal 2016, rental expenses
in direct cost of sales, general and administrative expenses totalled approximately $29,884 (2015 – $21,344). Future
minimum rentals 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
2016
39,755
122,175
305,994
467,924
2015
28,965
106,460
335,258
470,683
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 at rates varying
from 2.1% to 8.0%. Future minimum lease payments under finance leases together with the present value of the
net minimum lease payments are as follows:
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
2016
2015
Minimum
payments
Present value
of payments
Minimum
payments
Present value
of payments
1,702
888
2,590
184
2,406
1,586
820
2,406
—
2,406
3,387
2,315
5,702
392
5,310
3,170
2,140
5,310
—
5,310
PURCHASE COMMITMENTS
The Company has entered into various purchase commitments at August 31, 2016 as detailed in the following table:
Purchase obligations(1)
Other obligations(2)
Total contractual obligations
Total
1,071,060
254,506
1,325,566
Within
1 year
548,811
77,713
626,524
2 – 3
years
330,654
84,646
415,300
4 – 5
years
131,813
64,809
196,622
More than
5 years
59,782
27,338
87,120
(1) Purchase obligations are contractual obligations relating to program rights, satellite and signal transportation costs, and various other operating
expenditures, that the Company has committed to for periods ranging from one to ten years.
(2) Other obligations include financial liabilities, trade marks, other intangibles and CRTC commitments.
Generally, it is not the Company’s policy to issue guarantees to non-controlled affiliates or third parties, with limited
exceptions.
96 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
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, 2016, 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.
29. EMPLOYEE BENEFIT PLANS
DEFINED CONTRIBUTION PENSION PLANS
The Company has various defined contribution plans for qualifying full-time employees. Under these plans, the
Company contributes up to 6% (2015 – 6%) of an employee’s earnings, not exceeding the limits set by the Income
Tax Act (Canada). The amount contributed in fiscal 2016 related to the defined contribution plans was $6,152
(2015 – $6,003). The amount contributed is approximately the same as the expense included in the consolidated
statements of income and comprehensive income.
NON-REGISTERED DEFINED BENEFIT PENSION PLANS
The Company provides supplemental executive retirement plans (“SERP” and “CEO SERP”, which relates to
the former CEO) which are non-contributory, unfunded defined benefit pension plans for certain of its senior
executives that are included in long-term employee obligations (note 15). Benefits under these plans are based on
the employees’ length of service and their highest three-year average rate of pay 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 table below shows the change in the benefit obligation for these plans.
Accrued benefit obligation and plan deficit, beginning of year
Current service costs
Past service cost
Interest cost
Payment of benefits
Remeasurements:
Effect of changes in financial assumptions
Effect of experience adjustments
Accrued benefit obligation and liability, end of year
2016
15,017
854
122
606
(484)
1,551
(4)
17,662
2015
14,189
1,116
—
567
(202)
(227)
(426)
15,017
The weighted average duration of the defined benefit obligation of the supplemental executive retirement plans at
August 31, 2016 is 17.3 years.
Corus Entertainment Annual Report 2016 | 97
Notes to Consolidated Financial Statements
The significant weighted-average assumptions used to measure the pension obligation and costs for this plan are
as follows:
Accrued benefit obligation
Discount rate
Rate of compensation increase
Benefit cost for the year
Discount rate
Rate of compensation increase
2016
3.50%
3.00%
2016
4.10%
3.00%
2015
4.10%
3.00%
2015
4.00%
3.00%
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2016 and the
pension expense for the fiscal year then ended, with respect to the three key factors in determining the benefit
obligation:
Sensitivity analysis
Discount rate - 1% decrease
Salary increase - 1% increase
Mortality - one year increase in the expected future lifetime
Benefit obligation at
August 31, 2016
Pension expense for
fiscal 2016
3,052
582
496
175
99
43
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the present
value of the defined benefit obligation has been calculated using the projected benefit method which is the
same method that is applied in calculating the defined benefit liability recognized in the statement of financial
position. The sensitivity analysis presented above may not be representative of the actual change in the accrued
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some
assumptions may be correlated.
The net pension benefit plan expense, which is included in employee salaries and benefits expense, is comprised of
the following components:
Current service cost
Past service cost
Interest cost
Pension expense
2016
854
122
606
1,582
2015
1,116
—
567
1,683
98 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
REGISTERED PENSION PLANS
The Company has a number of funded defined benefit pension plans which provide pension benefits to certain
unionized and non-unionized employees in its conventional television operations. Benefits under these plans
are based on the employee’s length of service and final average salary. These plans are regulated by the Office
of the Superintendent of Financial Institutions, Canada in accordance with the provisions of the Pension Benefits
Standards Act and Regulations. The regulations set out minimum standards for funding the plans.
The table below shows the change in the benefit obligations, change in fair value of plan assets and the funded
status of these defined benefit plans.
Accrued benefit obligation, beginning of year
Defined benefit obligation arising from Acquisition
Current service cost
Interest cost
Employee contributions
Payment of benefits
Remeasurements:
Effect of changes in financial assumptions
Effect of experience adjustments
Accrued benefit obligation, end of year
Fair value of plan assets, beginning of year
Fair value of plan assets upon Acquisition
Employer contributions
Employee contributions
Interest income
Payment of benefits
Administrative expenses paid from plan assets
Return on plan assets, excluding interest income
Fair value of plan assets, end of year
Accrued benefit liability and plan deficit, end of year
2016
9,570
182,723
2,411
3,359
433
(3,088)
12,264
424
208,096
2016
9,978
173,827
5,083
433
3,212
(3,088)
(760)
11,449
200,134
7,962
The weighted average duration of the defined benefit obligation at August 31, 2016 is 16.96 years.
The plan assets at August 31, 2016 are comprised of investments in pooled funds as follows:
Equity - Canadian
Equity - Foreign
Fixed income - Canadian
2016
53,445
28,882
117,807
200,134
2015
9,951
—
144
408
73
(601)
—
(405)
9,570
2015
9,638
—
519
73
389
(601)
(41)
1
9,978
(408)
2015
5,663
—
4,315
9,978
The underlying securities in the pooled funds have quoted prices in an active market.
The significant weighted average assumptions used to measure the pension obligation and cost for these plans are
as follows:
Accrued benefit obligation
Discount rate
Rate of compensation increase
Benefit cost for the year
Discount rate
Rate of compensation increase
2016
3.50%
3.00%
2016
3.90%
3.00%
2015
4.30%
2.50%
2015
4.30%
2.50%
Corus Entertainment Annual Report 2016 | 99
Notes to Consolidated Financial Statements
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2016 and the
pension expense for the fiscal year then ended, with respect to the three key factors in determining the benefit
obligation:
Sensitivity analysis
Discount rate - 1% decrease
Salary increase - 1% increase
Weighted average duration of defined benefit obligation in years
Effective discount rate 1% decrease
Benefit obligation at
August 31, 2016
Pension expense
Fiscal 2016
233,288
203,515
16.96
1,236
361
16.20
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the present
value of the defined benefit obligation has been calculated using the projected benefit method which is the
same method that is applied in calculating the defined benefit liability recognized in the statements of financial
position. The sensitivity analysis presented above may not be representative of the actual change in the accrued
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some
assumptions may be correlated.
The net pension benefit plan expense, which is included in employee salaries and benefits expense, is comprised of
the following components:
Current service cost
Interest cost
Pension expense
2016
2,411
679
3,090
2015
144
42
186
OTHER BENEFIT PLANS
The Company provides supplemental post-retirement non-pension benefit plans that provide post-retirement
health and life insurance coverage to certain employees and are funded on a pay-as-you-go basis. The table below
shows the change in the accrued post-retirement obligation which is recognized in the statement of financial
position.
The change in the benefit obligation for these plans is as follows:
Accrued benefit obligation and plan deficit, beginning of year
Defined benefit obligation arising from Acquisition
Current service costs
Interest cost
Payment of benefits
Remeasurements:
Effect of demographic assumptions
Effect of changes in financial assumptions
Effect of experience adjustments
Accrued benefit obligation and liability, end of year
2016
797
20,108
327
345
(338)
(3,156)
836
(2,090)
16,829
2015
841
—
—
26
(88)
—
18
—
797
The weighted average duration of the defined benefit obligation of the post-retirement plans at August 31, 2016 is
18.5 years.
The significant weighted-average assumptions used to measure the pension obligation and costs for this plan are
as follows:
Accrued benefit obligation
Discount rate
Salary increase
Benefit cost for the year
Discount rate
Salary increase
100 | Corus Entertainment Annual Report 2016
2016
3.60%
3.00%
2016
3.90%
3.00%
2015
3.00%
0.00%
2015
0.00%
0.00%
Notes to Consolidated Financial Statements
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2016
and the pension expense for the fiscal year then ended, with respect to the two key factors in determining the
benefit obligation:
Sensitivity analysis
Discount rate
1% decrease
Health care cost trend rate
1% increase
Benefit obligation at
August 31, 2016
Service and interest
costs fiscal 2016
3,295
2,812
131
339
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the present
value of the defined benefit obligation has been calculated using the projected benefit method which is the
same method that is applied in calculating the defined benefit liability recognized in the statement of financial
position. The sensitivity analysis presented above may not be representative of the actual change in the accrued
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some
assumptions may be correlated.
The net pension benefit plan expense, which is included in employee salaries and benefits expense, is comprised of
the following components:
Current service cost
Interest cost
Pension expense
2016
327
345
672
2015
—
26
26
30. RELATED PARTY TRANSACTIONS
CONTROLLING SHAREHOLDER
A majority of the outstanding Class A participating shares of the Company are held by entities owned by the Shaw
Family Living Trust (“SFLT”) for the benefit of decedents of JR Shaw and Carol Shaw. The sole trustee of SFLT is a
private company owned by JR Shaw and having a board comprised of seven directors, including as at August 31,
2016, JR Shaw as chair and five other members of his family. The Class A Voting Shares are the only shares entitled to
vote in all shareholder matters, except in limited circumstances as described in the Company’s Annual Information
Form. Accordingly, SFLT 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 Corus and to control the vote on matters submitted to a vote of Corus’
Class A shareholders. SFLT is represented as Directors of the Company.
SFLT is also the controlling shareholder of Shaw Communications Inc., and as a result, Shaw and Corus are subject
to common voting control.
SPECIAL TRANSACTIONS
The acquisition of Shaw Media from Shaw constituted a related party transaction outside the normal course of
operations. To ensure appropriate safeguards for the interest of the holders of the Class B Shares, Corus’ Board
of Directors (the “Board”) established a Corus Special Committee (the “Special Committee”) with the authority to,
among other matters, review, direct and supervise the process to be carried out by management and its professional
advisors in assessing the potential acquisition (including the preparation of any formal valuation required), review
and consider the proposed structure, terms and conditions of a possible acquisition and to make a recommendation
to the Board with respect to any such transaction.
The Special Committee, throughout the process, consisted entirely of directors who were “independent”, within the
meaning of applicable securities laws. The Special Committee met a total of 28 times in exercising its mandate and
supervision over the course of the transaction negotiation process that followed, prior to the announcement of the
Acquisition on January 13, 2016. The Board established the Special Committee to, among other things, supervise
the preparation of the formal valuation required under Multilateral Instrument (“MI”) 61-101 and assess, review
and to make recommendations to the Board regarding the Acquisition. The Special Committee engaged Barclays
Capital Canada Inc. (“Barclays”) as an independent valuator, as required under MI 61-101, in connection with the
purchase and sale of the issued and outstanding shares of Shaw Media and to provide the Barclays Valuation and
Corus Entertainment Annual Report 2016 | 101
Notes to Consolidated Financial Statements
Fairness Opinion. Additionally, the Company’s financial advisors, RBC Dominion Securities Inc. (“RBC”), presented
to the Board, including the members of the Special Committee, an opinion on the financial consideration which
would be payable under the Acquisition (the “RBC Fairness Opinion”).
Having undertaken a review of, and carefully considered the Acquisition, the Barclays Valuation and Fairness
Opinion, the RBC Fairness Opinion, information concerning Corus, Shaw Media, the proposed Acquisition and the
alternatives, including consultation with its financial and legal advisors and such other matters as it considered
relevant, the Special Committee unanimously determined that the Acquisition was in the best interests of the
Company and accordingly recommended that the Board approve the Acquisition and recommended that the Board
recommend that the holders of each of the Class A Shares and Class B Shares vote in favour of the resolutions set
out for the approval of the Acquisition.
NORMAL COURSE 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.
During the year, the Company received subscriber, programming licensing and advertising revenues of $112,626
(2015 – $111,384), and $4,803 (2015 – $260) of production and distribution revenues from Shaw. In addition, the
Company paid cable and satellite system distribution access fees of $8,696 (2015 – $5,670) and administrative
and other fees of $4,685 (2015 – $2,720) to Shaw. During the year, the Company issued dividends of $34.4 million
to Shaw, which were reinvested in additional Corus Class B shares under Corus’ dividend reinvestment plan. At
August 31, 2016, the Company had $26,691 (2015 – $21,441) 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.
Non-wholly owned specialty networks
During the year, the Company received administrative and other fees of $8,682 (2015 — $4,945) from its non-
wholly owned specialty networks including BBC, CMT (Canada), Cosmopolitan TV, Food Network Canada, HGTV
Canada, National Geographic, Nat Geo Wild and TLN. At August 31, 2016, the Company had $1,398 (2015 — $93)
receivable from these entities.
SIGNIFICANT SUBSIDIARIES
The following table includes the significant subsidiaries of the Company:
Name
Corus Media Holdings Inc.
(formerly Shaw Media Inc.)
Corus Media Global Inc.
(formerly Shaw Media Global Inc.)
Corus Premium Television Ltd.
Corus Radio Company
Food Network Canada Inc.
History Television Inc.
HGTV Canada Inc.
Nelvana Limited
Showcase Television Inc.
TELETOON Canada Inc.
W Network Inc.
YTV Canada Inc.
Equity interest
Jurisdiction
2016
2015
Alberta
Canada
Canada
Nova Scotia
Canada
Canada
Canada
Ontario
Canada
Canada
Canada
Canada
100%
100%
100%
100%
71%
100%
67%
100%
100%
100%
100%
100%
—
—
100%
100%
—
—
—
100%
—
100%
100%
100%
102 | Corus Entertainment Annual Report 2016
Notes to Consolidated Financial Statements
KEY MANAGEMENT PERSONNEL
Key management personnel consist of the Board of Directors and the Executive Leadership Team who have the
authority and responsibility for planning, directing and controlling the activities of the Company. Several members
of the Executive Leadership Team are also officers of the Company.
Key management personnel compensation, including the Executive Leadership Team, officers and directors of the
Company, is as follows:
Salaries and benefits
Post-employment benefits
Share-based compensation (note 16)
2016
9,518
2,360
730
12,608
2015
7,022
1,683
2,852
11,557
Except for the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer
and the Executive Vice President, Special Advisor to the CEO and Chief Integration officer, no 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 and officers of the Company, other than the President and Chief Executive Officer,
the Executive Vice President and Chief Financial Officer, due to their employment agreements with the Company,
and the Executive Vice President, Special Advisor to the CEO and Chief Integration Officer, due to a contractual
agreement with the Company, would be determined in accordance with applicable common law requirements.
Long-term incentive plans, such as stock options, are exercisable if vested, while DSUs, PSUs, RSUs and SERP,
would be payable if vested pursuant to the terms of the plans.
31. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously presented
to conform to the presentation of the 2016 consolidated financial statements.
Corus Entertainment Annual Report 2016 | 103
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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
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 11, 2017
2 p.m. MT/4 p.m. ET
The Westin Calgary
Bow Valley Room
320 4 Avenue S.W.
Calgary, Alberta T2P 2S6
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, 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 and
the Charter of the Board of Directors
may be found 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 the Company’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 email your request to
investor.relations@corusent.com.
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
Vice President, Communications at
416.479.7000.
Photographs: PAGE 4, Heather Shaw: David Leyes; PAGE 6, Doug Murphy: Anya Chibis; PAGE 11, W Network’s The Bachelorette
Canada: Courtesy of W Network; PAGE 13 (clockwise from left to right), Global News Edmonton at Fort McMurray wildfire 2016:
Dean Twardzik; AM640’s Tasha Kheiriddin: Ryan Faubert; Global’s Dawna Friesen with Prime Minister, Justin Trudeau: Graeme
McRanor; Global’s The Morning Show with Jeff McArthur and Food Network Canada celebrity chef, Lynn Crawford: Lisa Fuoco;
Q107 Toronto’s John Derringer: Ryan Faubert; Live Fort McMurray Wildfire coverage: Courtesy of Global News Edmonton; PAGE
15 (clockwise from top left), Hotel Transylvania: The Television Series: Courtesy of Nelvana Studio; Masters of Flip: Courtesy of
W Network; Buying the View: Courtesy of W Network; Mysticons: Courtesy of Nelvana Studio; Home to Win: Courtesy of HGTV
Canada, Kids Can Press’ The Most Magnificent Thing: Ashley Spires; and Ranger Rob: Courtesy of Nelvana Studio.
Corus Entertainment Annual Report 2016 | 105
24 | Corus Entertainment Annual Report 2016