annual report 2017
table of contents
message to shareholders 5
television 8
news and radio 12
owned and original content 14
fiscal 2017 significant events 16
our brands 18
board of directors 20
officers 21
Corus values 22
management’s discussion and analysis 23
management’s responsibility for 57
financial reporting
independent auditors’ report 58
consolidated statements of financial position 59
consolidated statements of income and 60
comprehensive income
consolidated statements of changes in equity 61
consolidated statements of cash flows 62
notes to consolidated financial statements 63
corporate information 109
Corus Entertainment Annual Report 2017 | 3
4 | Corus Entertainment Annual Report 2017
i
d
r
o
F
e
k
M
y
b
o
t
o
h
P
message to
shareholders
What better theme to reflect our
extraordinary first year as the new Corus.
Over the past 12 months, we completed our
transformational journey, merging the legacy Corus
and Shaw Media businesses with incredible speed and
efficiency. Our newly combined team has brought together
the best of both companies to position Corus for the
future, as we build on our strong foundation of powerful
brands, great content and carefully articulated strategic
priorities. Led by the voices and feedback of our people,
we have also reframed our corporate values to define our
new culture, reflecting both the company we are today
and what we aspire to become.
The industrial logic of combining the two companies has
been validated in our first year. With our new scale and
scope, we have further differentiated our brands and
increased our audience share across Conventional TV,
Specialty TV, and News and Radio.
In fact, Corus had the largest share of viewing in English
Canadian commercial television for the 2016/2017
broadcast year.1 Global delivered its best performance
in a decade,2 and our powerful portfolio of specialty
television brands continue to be a leading destination
for Women, Families, and Kids.3 Furthermore, we have
reorganized our television content team to focus on
the verticals of Kids, Lifestyle, and Drama to ensure
alignment with our growth strategies.
Our presence in local markets has been strengthened
by the combination of Global Television and Corus Radio
in markets where they co-exist. As we anticipated, the
opportunity to share content and cross-promote our local
brands proved effective. The powerful combination of
television and radio also enabled us to rollout new bundled
offerings for local advertisers, creating incremental
revenue opportunities.
New distribution technologies and regulations continue
to introduce an increased level of consumer choice
into the TV marketplace. The final phase of “pick and
pay” was implemented this year following the Canadian
Radio-Television and Telecommunications Commission’s
(“CRTC”) Let’s Talk TV process. In this new environment, we
have proven that our strong television brands continue to
be valued by subscribers.
As viewing habits evolve, we believe there is an opportunity
to engage audiences in new ways. We anticipated, back in
2015, that we must start to think and operate as a retailer
of our products, with an increased focus on understanding
our audiences, leveraging data, and building a two-way
relationship. Today, we have millions of Canadians with
whom we dialogue on a regular basis.
In the midst of the changing landscape, the Canadian
government began a review of the Canadian culture
sector in 2016. In September 2017, its vision was set out
in a document called Creative Canada, which included a
directive to the CRTC to review the Broadcasting Act in the
1. Numeris PPM Data, Total Canada, Broadcast Year 16-17 vs. Broadcast Year 15-16 (8/29/2016 to 8/27/2017 vs. 8/31/2015 to 8/28/2016) - confirmed data, M-Su 2a-2a, Share % of English Canadian
Commercial TV stations, Corus English, Bell English, Rogers Media English, excludes Canadian Pay, U.S. & 4K stations
2. Numeris PPM Data, Total Canada, Share% of Canadian Conventional English TV, (Mo-Su 7-11p & 8p-11p, Broadcast Year 2007-2008 to Broadcast Year 2016-2017), Adults 25-54
3. Numeris PPM data, Total TV Broadcast Year 16-17 (8/29/2016 to 8/27/2017), Adults 25-54 Average Minute Audience (000) Canadian English Specialty stations - excludes sports stations
Corus Entertainment Annual Report 2017 | 5
coming year. As we continue to evolve our business today and for the future, we need predictability and a strong regulatory
framework that acknowledges the competition we are facing from unregulated global players, one that removes barriers
so we may compete effectively both domestically and globally. We have a long track record as successful creators
and exporters of Canadian content that resonates with audiences in more than 160 countries, and have a growing
international presence across multiple content platforms. In Canada, we are focused on providing content to consumers
wherever they are, and supporting communities with local news and information programming that matters most to them.
In the midst of these changes in landscape and all of our integration activities, we continued to drive forward many
important initiatives that support the advancement of our strategic priorities, which are to:
1. Own and control more content;
2. Engage our audiences;
3. Expand into new and adjacent markets.
Our strategy to own more of the content we produce remains an important part of Corus’ future. This content drives
our audiences in Canada and provides a growing revenue stream internationally. Moreover, our strategy to control more
content from leading content partners to bolster the competitiveness of our channel portfolio was evidenced this year
with the launch of Cooking Channel (Canada). This great addition is a result of further deepening our partnership with
Scripps Networks Interactive.
In fiscal 2017, we almost doubled the production of original Kids content through our globally renowned Nelvana
animation studio, unveiling an exciting slate of new properties; and we more than doubled the size of our Corus Studios
lifestyle content slate for sale in the international market.
We will continue to grow our slate of owned content for export into the global marketplace in the coming year. As a
producer, we are proud of the great content we create, and it is resonating with audiences worldwide. In addition to our
original productions, we have forged strong partnerships with the Canadian production community and international
content companies, enabling us to more quickly develop franchise properties with built-in distribution opportunities.
Owning more content also supports our strategic priority of expanding into new and adjacent markets so that we may
grow our revenue in the large global content marketplace.
Engaging our audiences, at its core, means that we are focused on offering the best content that delights our viewers
and listeners. Increasingly, an important new dimension of this strategic priority relates to data analytics and advanced
advertising so that we can continue to improve the viewer and listener experience, as well as deliver increased value to
our advertisers. In this regard, we significantly expanded our advanced advertising capabilities as we realize the benefits of
combining the power and reach of television with the insights and targeting of data. Client interest has been extraordinary,
with more than 100 advertisers now participating in this groundbreaking initiative.
In fiscal 2018, we will double our investment in data analytics and advanced advertising. Our recent appointment of a
dedicated team in this area demonstrates our commitment to driving this important initiative forward and underscores
our commitment to becoming a more data-driven consumer-centric company.
This year, we have seen many exciting technology announcements from our distribution partners, such as the rollout
of the new X1 platform and the upcoming upgrades to IPTV platforms across Canada. We believe these developments
will be a game-changer for both television viewers in the way that they consume content, and for advertisers in the way
that they approach their advertising campaigns. These platforms will facilitate the deployment and adoption of advanced
6 | Corus Entertainment Annual Report 2017
advertising technologies, such as dynamic ad insertion and local addressable advertising. By working with our distribution
partners on their future platform roadmaps and conducting trials, we can refine our abilities to monetize these platforms.
Corus is firmly committed to staying on the leading edge of advertising technology innovation.
On the financial front, we were challenged in the beginning of the year with headwinds on our advertising revenues.
As the year progressed, however, we delivered consecutive quarters of sequential improvements in television advertising
revenues, consistent with our expectations—and importantly, we delivered on all of our financial priorities for fiscal 2017.
Annual cost synergies in excess of our goal of $40 to $50 million were captured more quickly than originally anticipated,
resulting in a greatly improved cost structure. Our intense focus on free cash flow enabled us to reach our deleveraging
target of 3.5 times net debt to segment profit one quarter earlier than anticipated. In fact, we delivered $293 million in free
cash flow this year, above our expectations. As promised, we also maintained our commitment to an annual dividend of
$1.14 per Class B Non-Voting Share.
In 2018, we remain resolute in our focus to further strengthen our balance sheet. Our commitment to deliver value to our
shareholders continues. Our team has a firm mandate to manage costs and drive free cash flow to de-lever and return
cash via our dividend. Future investments will be targeted to building strength in advertising through data and technology
and providing new content for our audiences.
In closing, as we look back on our incredible accomplishments this year, we see the result of the talent, hard work and drive
of the remarkable team of people in all of our locations across Canada and around the world. Their inspiration to build a
stronger Corus was evident in our many achievements, and we thank them for their unrelenting commitment to serving
each other, our audiences and our partners.
With the heavy lifting of our year-one integration squarely behind us, our company is intensely future focused. We compete
in a dynamic, rapidly changing marketplace for audiences and advertisers, and we are ready to respond to challenges along
the way. Corus has a clear set of strategic priorities, and an outstanding team of leaders who will Make It Happen. We remain
confident that Corus’ improved financial flexibility and clear strategic roadmap positions us well for continued success.
Doug Murphy
President and CEO
Heather Shaw
Executive Chair
Corus Entertainment Annual Report 2017 | 7
television
we had the largest share of viewing in
English Canadian commercial television
for the 2016/2017 broadcast year1.
Global
Bolstered by our new cross-promotional heft, Global—which reached more than 16 million viewers every week2 in 2017—
had its strongest year in over a decade.3 What’s more, Global increased its presence in the top 20 prime-time shows year over
year in fall, spring and summer.4
103 top
of
208 top
of
Seal Team: A new fall show on Global, Seal Team, starring David Boreanaz, follows an elite unit of Navy SEALs as they train, plan, and execute the most dangerous, high-stakes
new shows on
missions that America can ask of them.
conventional
overall on
conventional
16 million
viewers every
strongest
16 million
year
viewers every
in over
a decade
week
week
strongest
year
in over
a decade
2
3
1. Numeris PPM Data, Total Canada, Broadcast Year 16-17 vs. Broadcast Year 15-16 (8/29/2016 to 8/27/2017 vs. 8/31/2015 to 8/28/2016) - confirmed data, M-Su 2a-2a, Share % of English
Canadian Commercial TV stations, Corus English, Bell English, Rogers Media English, excludes Canadian Pay, U.S. & 4K stations
2. Numeris PPM data, Broadcast Year 2016/2017 (Aug29/16 - Aug27/17), Total Canada, Average Weekly Reach (000), Individuals 2+
3. Numeris PPM Data, Total Canada, Share% of Canadian Conventional English, (Mo-Su 7-11p & 8p-11p, Broadcast Year 2007-2008 to Broadcast Year 2016-2017), Adults 25-54
4. Numeris PPM Data. Fall 2015(Sept 14-Dec 20/15) vs. Fall 2016(Sept 12–Dec 18/16), Spring 2016(Jan 4-May 29/16) vs. Spring 2017(Jan 2-May 28/17), Summer 2016(May 30-Sept 11/16)
vs. Summer 2017(May 29-Sept 10/17). Total Canada/Average Minute Audience (000). Conventional National rankers, based on 3+ airings. Adults 25-54. Excludes NFL Playoffs, NHL Playoffs,
World Cup of Hockey and Rio Paralympics
8 | Corus Entertainment Annual Report 2017
in over
a decade
in over
a decade
The Bachelor Canada: In W Network’s Canadian version of this smash-hit romance reality series, Chris Leroux, a former Major League Baseball player, searches for the
woman of his dreams—and hopefully his bride-to-be.
specialty television
Our beloved specialty brands continue to shine. With a decisive focus and smart programming in our Kids, Drama, and Lifestyle
verticals, Corus now owns the #1 Entertainment Specialty station in each of our Adults., Women, and Kids demographics.5
We lead the rankers with more entertainment stations in the top 20 than any other broadcaster.5 And we reach more women in
large households than any other media company6 in Canada—a coveted demographic with advertisers.
7
8
9
5. Numeris PPM data, Total TV Broadcast Year 2016-2017 (8/29/2016 to 8/27/2017), Adults 25-54, Women 25-54 Average Minute Audience (000) Canadian English Specialty stations - excludes sports stations.
Kids 2-11 rankers based on Canadian Kids English Specialty stations only
6. Numeris - TV Meter –Consolidated – 2016-2017 (8/29/2016 to 8/27/2017), Total Canada, M-Su 2a-2a. Female skew based on % of Female 25-54 of Adults / Females 25-54 in Large Households (5+) as a percentage
of total Adult 25-54 audience indexed to the population base. Specialty Stations only
7. Numeris PPM data, Total TV Broadcast Year 2016-2017 (8/29/2016 to 8/27/2017), Adults 25-54 Average Minute Audience (000) Canadian English Specialty stations - excludes sports stations
8. Numeris PPM data, Total TV Broadcast Year 2016-2017 (8/29/2016 to 8/27/2017), Women 25-54 Average Minute Audience (000) Canadian English Specialty stations - excludes sports stations
9. Numeris PPM data, Total TV Broadcast Year 2016-2017 (8/29/2016 to 8/27/2017), Kids 2-11 Average Minute Audience (000) Canadian English Kids Specialty stations only
we are leading innovation in advertising.
Corus is emerging as a leader in data analytics and advanced advertising. We are breaking new ground with a progressive,
test-and-learn approach to innovation.
Through an ongoing focus on data, we are developing a rich understanding of our audiences and their interaction with
our content. Our goal is to provide a more engaging viewer and listener experience, and more targeted and effective
campaigns to our advertisers.
In Canada, we were the first to launch a broad range of new products that enhance the value proposition to our
advertisers—from advanced audience segmentation to dynamic ad insertion in video-on-demand content.
10 | Corus Entertainment Annual Report 2017
74%
In fiscal 2017, Corus had a
74% increase in the number
of advertisers using advanced
audience segmentation
We became the first major
Canadian broadcaster to
offer standalone first-party
digital data to advertisers
new
We created a dedicated team
to further focus our efforts on
data analytics and advanced
advertising
We are the first broadcaster in
Canada to announce development
of innovative programmatic TV
advertising solutions
Corus Entertainment Annual Report 2017 | 11
This leading positon is set to continue in 2018 with the planned
launch of Programmatic TV in an exclusive closed-beta trial.
Our objective is to automate and streamline our advertisers’
experience when it comes to planning, executing, optimizing,
and reporting television advertising campaigns. We are also
exploring the potential of artificial intelligence with leading
industry partners, leveraging data and machine learning to
develop a more audience-centric approach to marketing our
content and brands.
To continue our momentum, we have created a dedicated Data
and Advanced Advertising team, and are committed to doubling
our investment in advanced advertising in 2018.
news and
radio
we deliver
excellence in
local markets.
When we created the new Corus, we knew that
the combination of our radio and Global Television
news teams would strengthen our presence in local
markets where our brands co-exist.
This past year, we proved this theory to be true,
significantly increasing the number of local
accounts that advertise on both radio and Global
Television while also increasing their total spend.
Our team is successfully driving innovation and
efficiencies throughout our news and radio
operations. This includes sharing local content,
integrating digital operations, cross-promoting
brands and programming, sharing talent, and
deploying innovative technologies and processes.
The next important stage of our evolution began to
occur in 2017—we are extending the Global News
brand to all of our Corus news-talk radio stations.
Global News: Jackson Proskow, Washington Bureau Chief for Global National,
covers the flooding in Houston, Texas caused by Hurricane Harvey.
12 | Corus Entertainment Annual Report 2017
In fiscal 2017, Global News
was the top news program in
most time slots in Vancouver,
Calgary and Edmonton1
We are rolling out the Global
News brand across all of our
Corus news-talk radio stations
We participated in the launch of the
Radioplayer app in fiscal 2017—an
industry solution to capture growing
interest in streamed audio content
Globalnews.ca became the #2 news
site in Canada, up 36% YOY2
1. Numeris PPM Data, Broadcast Year
2016-2017(Aug29/16-Aug27/17) – confirmed data,
Vancouver/Victoria EM/Calgary EM/Edmonton EM, 3+
airings, based on Adults 25-54 rating %
2. comScore Media Metrix, Multi-Platform data, Base: Total
Canada, All Locations, 2+ digital audience, Sept 2017
The Morning Show (top): Global TV’s The Morning Show hosts Jeff McArthur and Carolyn MacKenzie are
joined by Canadian music superstar Shania Twain. Corus Radio’s CKNW (bottom): Jon McComb, host of
CKNW’s The Jon McComb Show in Vancouver, is joined by Global National Anchor Dawna Friesen.
news
We are redefining the way news is delivered. Our Global News Multi-Market
Content (MMC) product centralizes the anchoring of many of our local
late-night and weekend newscasts, which enables more of a focus on
frontline news gathering in local markets.
This initiative was awarded this year with the Radio, Television and Digital
News Association (RTDNA) Edward R. Murrow Award for Excellence in
Innovation, an international recognition for building a centralized news
model that set a precedent for news organizations worldwide.
radio
In radio, we made notable progress in improving our rankings in many large
markets across Canada. Our radio division also contributed segment profit
growth for the year, in large part due to a streamlined cost structure, and
the benefits of content sharing and cross-promotion synergies with our
local television stations.
Corus Entertainment Annual Report 2017 | 13
owned and original content
our content is prized domestically and
around the world.
Nelvana
Nelvana almost doubled the number of episodes it produced this past year compared to the prior year with a number of
exciting new properties in children’s content, including The ZhuZhus, Mysticons, and Hotel Transylvania: The Series.
We have started off fiscal 2018 with a new Nelvana/Discovery Communications venture to produce a pipeline of content
for the kids’ market in Latin America, Canada and around the world, increasing Nelvana’s production and distribution
business on a global scale.
Backyard Builds: Corus Studios’ Backyard Builds
follows contractor Brian McCourt and designer Sarah
Keenleyside as they deliver customized backyard
spaces to homeowners.
The Branch: Kids Can Press’ acclaimed novel
The Branch explores a young child’s experience with
loss and renewal.
Hotel Transylvania: Nelvana’s new animated series
Hotel Transylvania: The Series focuses on the teenage
years of Dracula’s daughter, Mavis.
Corus Studios
Our Corus Studios has been producing and distributing original lifestyle content globally since 2015. In fiscal 2017,
we grew our revenues and markedly increased our slate of properties for sale in the international marketplace.
Kids Can Press
It was a marquee year for our Kids Can Press (KCP). Among its successes, the division launched KCP Loft, a new young
adult imprint focused entirely on readers ages 14 and up—with crossover appeal to adult readers—creating a new market
for its content. On the awards front, KCP earned the prestigious title of Children’s Publisher of the Year, North America, at
the annual Bologna Children’s Book Fair, one of the most highly regarded international prizes in children’s publishing. And,
in a prominent literacy partnership initiative, KCP secured a deal with McDonald’s Canada to offer some of its most popular
Canadian children’s books inside McDonald’s Happy Meals. The deal means more than eight million KCP mini-books will be
distributed to children across Canada.
14 | Corus Entertainment Annual Report 2017
Nelvana’s content is
distributed in more than
160 countries worldwide
Corus Studios content is available
in more than 100 territories
around the world
Kids Can Press launched
KCP Loft, a new adult imprint
Home to Win: Corus Studios’ Home to Win unites
renovation stars Scott McGillivray and Bryan Baeumler
with other reno celebrities to create the ultimate
home for one family to win.
Q1
September | October | November
Q2
December | January | February
Launched Cooking Channel (Canada)
Global News announced
the expansion of its
flagship newscast,
Global National to
additional TV stations
Launched a newly refreshed
direct-to-consumer
Treehouse App
Global TV became the most-watched network
in prime time for premiere week1
Nelvana entered into a partnership
with Sesame Workshop to produce
Esme and Roy
Nelvana announced an exciting brand refresh
featuring a new logo and a slate of highly
anticipated new series in development including
Hotel Transylvania: The Series, Bravest Warriors,
Mysticons and Esme and Roy
Recognized as one of Canada’s
Top 100 Employers for 2017
Launch of HISTORY VAULTTM,
HISTORY®’s direct-to-consumer
subscription video-on-demand service
Recognized as one of
Greater Toronto’s Top
Employers for 2017
Launched
Peggy @ 99.1
in Winnipeg
Recognized as one of
Canada’s Top Employers
for Young People for 2017
Launched a new native
advertising offering across
all of our online properties
Toon Boom Animation introduced Toom Boom
Producer, a new product designed for animation
studios and production companies
16 | Corus Entertainment Annual Report 2017
1. Numeris confirmed data , Total Canada, Individuals 2+ Average Minute Audience (000), premiere week
2016 (Sept 19-25), National program schedule 8-11p, growth vs. premiere week 2015 (Sept 21-27)
new
Q3
March | April | May
Kids Can Press entered
into the young adult book
market with the launch of
its KCP Loft imprint
Q4
June | July | August
Corus Studios and Nelvana’s
premium original content is now
available in more than 100 countries
and/or territories around the world
Nelvana partnered with Discovery Kids to bring its
hit animated series The ZhuZhus to kids and families
throughout Latin America and the Caribbean
Kids Can Press with McDonald’s Canada
launched a new book program for Happy Meals
All Corus TV licenses renewed
by the CRTC for a five-year term
commencing September 1, 2017
Corus joins leading
Canadian broadcasters
in the launch of the
Radioplayer Canada app
Global unveiled its fiscal 2018
primetime lineup featuring
six new dramas and four new
comedies
Corus announced multi-
year licensing agreement
with The Walt Disney
Studios for Star Wars
fiscal 2017
significant events
Corus Entertainment Annual Report 2017 | 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
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
positive
negative
Lifestyle
positive
positive
negative
negative
CMYK: 47 | 72 | 0 | 0
†
Drama
Kids
Original Content
studios
†
*
18 | Corus Entertainment Annual Report 2017
* Corus Entertainment owns less than a 50% equity position
† On October 18, 2017, the Company announced that it had entered into an agreement with Bell Media Inc. to sell Historia and Séries+.
The sale is pending approval by the Canadian Radio-television and Telecommunications Commission and the Competition Bureau.
Corus Radio
Vancouver, British Columbia
CHMJ-AM
AM730 All Traffic
All The Time
CKNW-AM
Global News Radio
980 CKNW
CFMI-FM
Rock 101
CFOX-FM
The World
Famous CFOX
Calgary, Alberta
Edmonton, Alberta
CHQR-AM
Global News Radio
770 CHQR
CFGQ-FM
Q107
CKRY-FM
Country 105
CHED-AM
630 CHED
CHQT-AM
iNews880
CISN-FM
CISN COUNTRY 103.9
CKNG-FM
92.5 Fresh Radio
Winnipeg, Manitoba
CJOB-AM
Global News Radio
680 CJOB
CJGV-FM
Peggy @ 99.1
CJKR-FM
Power 97
Barrie/Collingwood, Ontario
CHAY-FM
93.1 Fresh Radio
CIQB-FM
101.1 BIG FM
CKCB-FM
95.1 The Peak FM
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
Global News Radio
900 Hamilton
CING-FM
95.3 Fresh Radio
CJXY-FM
Y108
London/Woodstock, Ontario
CFPL-AM
Global News Radio
980 CFPL
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
Global News Radio
640 Toronto
CFNY-FM
102.1 The Edge
CILQ-FM
Q107
Corus Entertainment Annual Report 2017 | 19
board of directors
Heather Shaw
Chair of the Board of Directors
Chair of the Executive Committee
Doug Murphy
Member 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
Mark Hollinger
Chair of the Corporate
Governance Committee
Member of the Executive Committee
Barry James
Chair of the Audit Committee
Member of the Executive
Committee
Catherine Roozen
Chair of the Human Resources and
Compensation Committee
Member of the Executive Committee
Terrance Royer
Member of the Human Resources
and Compensation Committee
Member of the Audit Committee
Julie Shaw
Vice Chair of the Board of Directors
Member of the Corporate
Governance Committee
20 | Corus Entertainment Annual Report 2017
officers
Heather Shaw
Executive Chair
Doug Murphy
President and Chief
Executive Officer
Judy Adam, CPA, CA
Senior Vice President, Finance
John Gossling, FCPA, FCA
Executive Vice President
and Chief Financial Officer
Dale Hancocks
Executive Vice President
and General Counsel
Gary Maavara
Corporate Secretary
Greg McLelland
Executive Vice President and
Chief Revenue Officer
Barbara Williams
Executive Vice President and
Chief Operating Officer
Corus Entertainment Annual Report 2017 | 21
think beyond
• Challenge assumptions, imagine what’s possible.
• Invent opportunities, create new solutions.
• Boldly set big goals and take smart risks.
learn every day
• Be curious and look broadly for answers.
• Try new things and learn from mistakes.
• Be flexible, embrace change as a way to grow.
win together
• Be approachable and actively help others succeed.
• Openly share information, offer ideas, debate options.
• Celebrate great results, appreciate each other.
make it happen
• Focus on priorities, take ownership to deliver.
• Find ways to simplify and remove barriers.
• Be energetic, positive and persistent.
show we care
• Support each other’s personal well-being.
• Deeply understand and serve our audiences.
• Make a positive difference in our communities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of the financial position and results of operations for the year ended
August 31, 2017 is prepared at November 17, 2017. The following should be read in conjunction with the
Company’s August 31, 2017 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 which is available on
Corus’ website at www.corusent.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
To the extent any statements made in this document 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 information”). Forward-looking information relates 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. The forward-looking information contained in this document includes, but is not
limited to: statements regarding Corus’ leverage and dividend yield targets; sufficiency of financial resources to
fund operations and dividend payments; and intentions to have substantially paid restructuring charges relating
to changes in management structure and business operations by fiscal 2018. Forward-looking information is
predictive in nature 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 may be considered forward-looking
information.
Although Corus believes that the expectations reflected in such forward-looking information are reasonable,
such statements involve assumptions and risks and uncertainties and undue reliance should not be placed on
such statements. Certain material factors or assumptions are applied with respect to the forward-looking
information above, including without limitation: the estimates and judgments set out under the heading “Use
of Estimates and Judgments”, in this document; factors and assumptions regarding general market conditions
and general outlook for the industry, interest rates, stability of the advertising, distribution, merchandise and
subscription markets, operating costs and tariffs, taxes and fees, currency value fluctuations and interest rates,
technology developments and assumptions regarding the stability of laws and governmental regulation and
policies and the interpretation or application of those laws and regulations, consistent application of accounting
policies, segment profit growth rates, future levels of capital expenditures, expected future cash flows and
discount 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 and subscriber 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
Corus Entertainment Annual Report 2017 | 23
Management’s Discussion and Analysis
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 are set out under the heading “Risks and
Uncertainties” in this document and under the heading “Risk Factors” in our Annual Information Form. Corus
cautions that the foregoing list of important factors that may affect future results is not exhaustive.
The following discussion describes the significant changes in the consolidated results from operations.
OVERVIEW
Corus Entertainment Inc. (“Corus” or the “Company”) is a diversified 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, book publishing, animation software, media and technology services.
Corus operates through two reporting 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 unscripted lifestyle 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
the Corus content business, which includes the production and distribution of films and television programs,
merchandise licensing, book 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 Inc. (“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 (the “Acquisition”).
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 licensing of proprietary films and television programs, merchandise
licensing, book publishing, 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.
24 | Corus Entertainment Annual Report 2017
ANNUAL SELECTED FINANCIAL INFORMATION
The following table presents summary financial information for Corus for each of the listed years ended August 31:
Management’s Discussion and Analysis
% Increase (Decrease)
2017 over
2016
43.3
40.7
2016 over
2015
43.7
48.3
(in millions of Canadian dollars, except percentages and per share amounts)
Revenues
Segment profit (1)
Net income 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
Class B Non-Voting
Notes:
(1) As defined in “Key Performance Indicators” section.
2017
1,679.0
578.1
191.7
220.5
$0.95
$1.10
$0.95
6,067.8
2,091.6
2016
1,171.3
411.0
125.9
129.0
$0.96
$0.98
$0.96
2015
815.3
277.2
(25.2)
135.9
$(0.29)
$1.57
$(0.29)
6,093.4 2,632.1
801.0
2,196.0
$1.1350 $1.1350 $1.1142
$1.1400 $1.1400 $1.1192
Corus Entertainment Annual Report 2017 | 25
Management’s Discussion and Analysis
RESULTS OF OPERATIONS
The following table presents summary financial information for Corus’ operating segments and a reconciliation
of segment profit to net income for each of the listed years ended August 31:
(in thousands of Canadian dollars, except percentages)
2017
2016
% Increase (Decrease)
2017 over 2016
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
Debt refinancing
Business acquisition, integration and restructuring costs
Gain on disposition
Other expense (income), net
Income before income taxes
Income tax expense
Net income for the year
Net income for the year attributable to:
Shareholders
Non-controlling interest
Net income for the year
(1) As defined in Key Performance Indicators section
50.6
(4.2)
43.3
57.9
(8.2)
(12.1)
44.8
39.6
9.3
(12.1)
40.7
1,529,792
149,216
1,679,008
1,015,609
155,705
1,171,314
965,425
109,689
25,811
1,100,925
564,367
39,527
(25,811)
578,083
91,750
156,716
—
31,983
—
(8,953)
306,587
82,498
224,089
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
191,665
32,424
224,089
125,931
17,630
143,561
52.2
83.9
56.1
FISCAL 2017 COMPARED TO FISCAL 2016
For a discussion on the Company’s results of operations for the fourth quarter of fiscal 2017, we refer you to
Corus’ Fourth Quarter and Year-End 2017 Report to Shareholders filed on SEDAR on October 18, 2017.
The following discussion describes the significant changes in the consolidated results from operations for the
year ended August 31, 2017 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 annual consolidated
financial statements for the year ended August 31, 2017, filed on SEDAR, 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, 2016 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, was not a
separate operating segment, but was 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
26 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
results remained 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 $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 annual consolidated financial statements for the year ended August 31, 2017, filed on
SEDAR, for further details).
These transactions contributed to the significant year-over-year variances in the consolidated operating results
for the fiscal year, as the prior year includes only five months of the operating results of the Shaw Media business,
while the Pay TV business was shut down on February 29, 2016. In the prior year, the Shaw Media business
generated revenues and segment profit of $1,017.8 million and $293.2 million, respectively, while the Pay TV
business generated revenues and segment profit of $67.8 million and $49.3 million, respectively.
Free cash flow for the year ended August 31, 2017 was $292.7 million compared to $188.2 million in the prior year.
FISCAL 2017 OBJECTIVES
Following the acquisition of Shaw Media in fiscal 2016, Corus met its three key objectives for fiscal 2017 as
follows:
Complete Shaw Media integration and Lower Operating Costs
The Company completed its integration of Shaw Media and lowered its operating costs through the capture of
annualized cost synergies which were greater than Corus’ target of $40 to $50 million.
Improve Competitive Position
The Company’s position in the marketplace was improved through increased competitive share of audience in
its specialty and conventional television markets as well as certain radio markets, the expansion of offerings for
advertisers and further progress in growing Corus’ slate of owned content.
Increase Free Cash Flow
Free cash flow was significantly increased to $293 million in fiscal 2017 from $188 million in fiscal 2016. This
enabled the Company to achieve its goal of deleveraging to 3.5 times net debt to segment profit by the end of
fiscal 2017 while maintaining its annual dividend of $1.14 per Class B Non-Voting Share and making targeted
investments to further advance Corus’ strategic priorities.
The achievement of these objectives, combined with an on-going focus on operational efficiencies, have
resulted in an improved cost structure and enhanced ability to compete in the evolving media landscape.
REVENUES
For the year ended August 31, 2017, consolidated revenues of $1,679.0 million were up 43% from $1,171.3
million in the prior year. On a consolidated basis, advertising revenues and subscriber revenues increased 63%
and 25%, respectively, while merchandising, distribution and other revenues decreased by 12%. Revenues
increased in Television by 51%, but decreased in Radio by 4% in the current year compared to the prior year. The
significant increase in consolidated revenues is mainly attributable to the Acquisition, offset by the shutdown
of the Pay TV business effective February 29, 2016, as well as a decrease in the Radio revenues. On a pro forma
basis, including Shaw Media and excluding Pay TV for the year ended August 31, 2016, total revenues declined
2% in 2017 compared to the prior year. Further analysis of revenue is provided in the discussions of segmented
results.
DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended August 31, 2017, direct cost of sales, general and administrative expenses of $1,100.9 million
were up 45% from $760.3 million in the prior year. On a consolidated basis, direct cost of sales increased 57%,
employee costs increased 40%, and other general and administrative expenses increased 26%. For the year
ended August 31, 2016, direct cost of sales excludes amortization not taken on Pay TV program 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, 2017 is mainly attributable to the Acquisition, offset by the shutdown of the Pay TV business as discussed
above. On a pro forma basis, including Shaw Media and excluding Pay TV for the year ended August 31, 2016,
total direct cost of sales, general and administrative expenses declined by 5% compared to the prior year.
Further analysis of expenses is provided in the discussion of segmented results.
Corus Entertainment Annual Report 2017 | 27
Management’s Discussion and Analysis
SEGMENT PROFIT
For the year ended August 31, 2017, consolidated segment profit was $578.1 million, up 41% from $411.0 million
last year. On a pro forma basis, including Shaw Media and excluding Pay TV for the year ended August 31, 2016,
segment profit increased 4% compared to the prior year. Segment profit margin of 34% for the year ended
August 31, 2017 was down from 35% in the prior year (as reported) and up from 32% on a pro forma basis.
Further analysis is provided in the discussion of segmented results.
DEPRECIATION AND AMORTIZATION
For the year ended August 31, 2017, depreciation and amortization expense was $91.8 million, up from $74.0
million in the prior year. The increase in the year arises from incremental depreciation and amortization
associated with property, plant and equipment and intangible assets acquired as a result of the Acquisition.
INTEREST EXPENSE
Interest expense for the year ended August 31, 2017, was $156.7 million up from $110.9 million in the prior year.
The increase is due to higher interest on long-term debt of $39.7 million attributable to increased bank debt
associated with the financing of the Acquisition and increased imputed interest costs of $6.1 million attributable
to incremental long-term obligations assumed with the Acquisition.
The effective interest rate on bank loans and notes for the year ended August 31, 2017 was 4.7% compared to
4.6%, in the prior year. The higher effective rate for the fiscal year is attributable to the Company’s syndicated
senior secured credit facilities effective April 1, 2016 in connection with the Acquisition being in place for the
full year in fiscal 2017 compared to five months in the prior year, offset by the redemption of the 4.25% senior
unsecured guaranteed notes due 2020 mid way through the third quarter of the prior year as discussed below.
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, 2017.
DEBT REFINANCING
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 of Shaw Media.
BUSINESS ACQUISITION, INTEGRATION AND RESTRUCTURING COSTS
For the year ended August 31, 2017, the Company incurred $32.0 million of business acquisition, integration
and restructuring costs compared to $57.2 million last year. The current fiscal year costs were attributable to
ongoing integration activities, as well as an onerous premise lease provision of approximately $7.0 million for the
previous Shaw Media offices in Toronto, which were fully vacated during the first quarter of fiscal 2017. These
costs are decreasing year-over-year as a result of completing integration activities. 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 consolidated financial statements for the year ended August 31, 2017.
OTHER EXPENSE (INCOME), NET
Other income for the year ended August 31, 2017 was $9.0 million compared to expense of $8.8 million in the
prior year. In the current year, other income includes foreign exchange gain of $12.2 million primarily reflecting
translation of USD denominated payables, a venture fund distribution of $2.9 million, and interest income of
$1.0 million, offset by equity losses from associates of $2.6 million and impairment charges related to certain
investments of $5.3 million. In the prior year, other expense 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.
28 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
INCOME TAX EXPENSE
The effective tax rate for the year ended August 31, 2017 was 26.9% consistent with the Company’s 26.5%
statutory rate. 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 in the prior year 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.
NET INCOME ATTRIBUTABLE TO SHAREHOLDERS AND EARNINGS PER SHARE
Net income attributable to shareholders for the year ended August 31, 2017 was $191.7 million ($0.95 per
share basic), as compared to $125.9 million ($0.96 per share basic) in the prior year. Net income attributable to
shareholders for fiscal 2017 includes business acquisition, integration and restructuring costs of $32.0 million
($0.12 per share) and investment impairments of $5.3 million ($0.03 per share). Adjusting for the impact of these
items results in an adjusted net income attributable to shareholders of $220.5 million ($1.10 per share basic) for
the current fiscal year. Net income attributable to shareholders for the year ended August 31, 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 prior year.
The weighted average number of basic shares outstanding for the year ended August 31, 2017, was 201,065,000
compared to 131,783,000 in the prior year. The number of shares outstanding increased from the issuance of
shares from treasury under the Company’s dividend reinvestment plan and the Acquisition.
OTHER COMPREHENSIVE INCOME (LOSS), NET OF INCOME TAX
Other comprehensive income for the year ended August 31, 2017 was $33.4 million, compared to a loss of $14.4
million in the prior year. For the year ended August 31, 2017, comprehensive income includes an unrealized
gain associated with remeasuring the fair value of cash flow hedges of $27.4 million, an actuarial gain on
post-employment benefit plans of $6.9 million, offset by an unrealized loss from foreign currency translation
adjustments of $0.6 million, and an unrealized loss in the fair value of a venture fund investment of $0.3 million.
The prior year income 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.
Corus Entertainment Annual Report 2017 | 29
Management’s Discussion and Analysis
TELEVISION
The Television segment is comprised of 45 specialty television services, 15 conventional television stations and
the Corus content business, which consists of the production and distribution of films and television programs,
merchandise licensing, book publishing, animation software, media and technology 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 Communications Inc., which included 19 specialty services, 12 Global Television branded
conventional television stations, Global News and globalnews.ca, and the HistoryGO and GlobalGO apps.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Revenues
Advertising
Subscriber
Merchandising, distribution and other
Total revenues
Expenses
Segment profit (1)
Amortization of disposed assets (2)
Adjusted segment profit (1)
Adjusted segment profit margin (1)
(1) As defined in the “Key Performance Indicators” section
Year ended August 31,
2016
2017
939,843
506,666
83,283
1,529,792
965,425
564,367
—
564,367
37%
515,182
405,728
94,699
1,015,609
611,384
404,225
(15,585)
388,640
38%
(2) 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-currentAssets 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 rights in the Television segment for the year ended August 31, 2016 was lower by $15.6
million than it would have been had amortization on these assets not ceased. Adjusting for this, segment profit and segment profit
margin for fiscal 2016 would have been $388.6 million and 38%, respectively. Further discussion is provided in note 27 of the Company’s
consolidated financial statements for the year ended August 31, 2017.
For the year ended August 31, 2017, total revenues increased 51% from the prior year as a result of an
82% increase in advertising revenues, a 25% increase in subscriber revenues, offset by a 12% decrease in
merchandising, distribution and other revenues. The Acquisition and the shutdown of the Pay TV business
contributed to the significant variance in the full fiscal year operating results for the Television segment. The
prior fiscal year includes the operating results of the Shaw Media business for the last five months and the
operating results of the Pay TV business for the first six months of fiscal 2016. In the prior fiscal year, the Shaw
Media business generated revenues and segment profit of $1,017.8 million and $293.2 million, respectively, while
the Pay TV business generated revenues and segment profit of $67.8 million and $49.3 million, respectively.
On a pro forma basis, which adjusts the prior year operating results for the inclusion of Shaw Media and exclusion
of Pay TV results for the full fiscal year, total revenues for the year ended August 31, 2017 decreased 2% as a
result of a 3% decrease in advertising revenues, a 3% increase in subscriber revenues and a decrease of 14%
in merchandising, distribution and other revenues. Television advertising revenues were soft in the first half
of the 2017 fiscal year as a result of the timing of agency contract renewals, particularly the loss in calendar
2016 of a major agency deal, and the non-recurrence of federal election spending which occurred in the prior
year. However, there was sequential improvement in 2017 as the quarters progressed, particularly in the third
and fourth quarters, benefitting from the impact of a stronger program schedule and renewal of calendar year
advertising agency contracts.
On a pro forma basis, subscriber revenues increased 3% for the year, reflecting continued positive impact from
the launch of the Company’s suite of Disney branded channels in fiscal 2016, as well as wholesale fee increases
in certain carriage agreements.
On a pro forma basis, merchandising, distribution and other revenues decreased 14% for the year due to several
multi-year subscription video-on-demand licensing deals of approximately $15.3 million in the prior year.
On a pro forma basis for the year, total expenses decreased by 4% as a result of a 1% decrease in direct cost of
sales and a 9% decrease in general and administrative expenses. The decrease in direct cost of sales reflects
lower amortization of program rights due to timing of program investments and lower cost of sales due to
30 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
a lower level of service work at Nelvana, offset by higher amortization of film investments due to increased
deliveries at Nelvana. General and administrative expenses decreased 9% for the year, primarily reflecting the
realization of cost synergies from the Acquisition.
Segment profit(1) on a pro forma basis increased 3% for the year. Segment profit margin(1) was 37% for the year
compared to 40% in the prior year or 35% on a pro forma basis.
(1) As defined in the “Key Performance Indicators” section
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)
Segment profit margin (1)
(1) As defined in the “Key Performance Indicators” section
Year ended August 31,
2016
155,705
119,546
36,159
2017
149,216
109,689
39,527
26%
23%
For the year ended August 31, 2017, revenues decreased 4% compared to the prior year. The majority of the
decline came from western Canada, driven by soft economic conditions in Alberta and ratings challenges in
Winnipeg. This was partially offset by growth in Ottawa, Kitchener and Vancouver.
Direct cost of sales, general and administrative expenses decreased 8% for the year ended August 31, 2017.
The significant decrease in general and administrative costs is mainly attributable to the realization of cost
synergies discussed below.
For the year ended August 31, 2017, segment profit increased 9% and segment profit margin of 26% was
an improvement compared to 23% in 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 2017 results reflect the realization of cost synergies
derived from these efforts.
Corus Entertainment Annual Report 2017 | 31
Management’s Discussion and Analysis
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
2017
8,266
17,545
25,811
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.
The increase in share-based compensation expense for the year ended August 31, 2017 reflects an expanded
number of participants in the long-term incentive plans, an increase in the number of units estimated to hit
vesting targets, and a higher share price in the current year.
Other general and administrative costs were lower in fiscal 2017, reflecting realization of cost synergies related
to corporate centralized services that support operating divisions such as information technology, facilities,
human resources and finance.
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, 2017. In Management’s
opinion, these unaudited interim condensed consolidated financial statements have been prepared on a basis
consistent with the audited consolidated financial statements in the Company’s Annual Report for the years
ended August 31, 2017 and August 31, 2016.
(thousands of Canadian dollars, except per share amounts)
Revenues
Segment
profit (1)
Net income (loss)
attributable to
shareholders
Adjusted net income
attributable to
shareholders
Earnings per share
Basic
Diluted
Adjusted
2017
4th quarter
3rd quarter
2nd quarter
1st quarter
2016
4th quarter
3rd quarter
2nd quarter
381,212
461,628
368,187
107,601
175,813
102,683
467,981
191,986
384,467
360,824
197,705
105,371
130,186
79,579
1st quarter
228,318
95,878
(1) As defined in “Key Performance Indicators”.
28,919
66,719
24,881
71,146
25
(15,766)
102,232
41,320
43,944
70,141
25,577
80,826
$
$
$
$
0.14
0.33
0.12
0.36
$
$
$
$
0.14
0.33
0.12
0.36
14,535
52,950
20,944
$ —
(0.10)
$
1.17
$
$ —
(0.10)
$
1.17
$
42,484
$
0.47
$
0.47
$
$
$
$
$
$
$
$
0.22
0.35
0.13
0.41
0.07
0.34
0.24
0.49
32 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
SIGNIFICANT ITEMS CAUSING VARIATIONS IN QUARTERLY RESULTS
• Net income attributable to shareholders for the fourth quarter of fiscal 2017 was negatively impacted by
business acquisition, integration and restructuring costs of $13.3 million ($0.05 per share) and investment
impairments of $5.3 million ($0.03 per share).
• Net income attributable to shareholders for the third quarter of fiscal 2017 was negatively impacted by business
acquisition, integration and restructuring costs of $4.6 million ($0.02 per share).
• Net income attributable to shareholders for the second quarter of fiscal 2017 was negatively impacted by
business acquisition, integration and restructuring costs of $0.9 million ($0.01 per share).
• Net income attributable to shareholders for the first quarter of fiscal 2017 was negatively impacted by business
acquisition, integration and restructuring costs of $13.2 million ($0.05 per share).
• 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 for the third quarter of fiscal 2016 was
positively impacted by the Acquisition and inclusion of its operating results effective April 1, 2016; however,
it was 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 the 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).
• 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).
FINANCIAL POSITION
Total assets at August 31, 2017 remained consistent with August 31, 2016 at $6.1 billion. The following discussion
describes the significant changes in the consolidated statements of financial position since August 31, 2016.
Current assets at August 31, 2017 were $525.4 million, down $55.3 million from August 31, 2016.
Cash and cash equivalents increased by $22.3 million. Refer to the discussion of cash flows in the next section.
Accounts receivable increased $28.6 million during the year. 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 $1.7 million during the year as a result of tax credit receipts exceeding accruals
related to film and interactive productions.
Investments and other assets increased $17.8 million during the year, primarily as a result of additional
investments in Venture funds and unrealized gains on interest rate swaps, offset by equity losses from associates
and impairment charges on certain investments.
Property, plant and equipment decreased $22.0 million during the year, as a result of depreciation expense
exceeding additions for the year ended August 31, 2017.
Program and film rights decreased $33.9 million during the year, as additions of acquired rights of $476.8 million
were offset by amortization of $510.7 million.
Film investments decreased $4.4 million during the year, as film amortization of $24.0 million was offset by film
spending (net of tax credit accruals) of $19.6 million.
Intangibles decreased $30.4 million during the year, primarily as a result of amortization of finite life intangibles
exceeding additions. Goodwill decreased $3.0 million from August 31, 2016 as a result of the working capital
settlement on the Acquisition.
Accounts payable and accrued liabilities increased $22.3 million during the year, primarily as a result of higher
accruals for program rights, film production, trade mark liabilities, and dividends payable, offset by lower accrued
liabilities. The decrease in accrued liabilities relate primarily to the reduction in the short-term portion of tangible
benefits, other working capital accruals, offset by higher short-term compensation accruals.
Corus Entertainment Annual Report 2017 | 33
Management’s Discussion and Analysis
Provisions, including the long-term portion, at August 31, 2017 was $27.5 million compared to $30.3 million at
August 31, 2016. The decrease of $2.8 million from August 31, 2016 is a result of payments made related to
restructuring exceeding additions, which included the addition of an onerous premise lease provision during
fiscal 2017.
Long-term debt, including the current portion, as at August 31, 2017 was $2,091.6 million compared to $2,196.0
million as at August 31, 2016. As at August 31, 2017 the $172.5 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
ended August 31, 2017, the Company repaid bank loans of $110.8 million and amortized $6.3 million of deferred
financing charges.
Other long-term liabilities decreased by $88.4 million during the year, primarily from decreases in long-term
program rights payable, registered and non-registered pension obligations, the fair value of the interest
rate swaps, intangible liabilities, and CRTC benefit obligations, offset by an increase in long-term employee
obligations and unearned revenues.
Share capital increased $123.3 million, primarily as a result of the issuance of shares from treasury under
the Company’s dividend reinvestment plan. 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 $22.3 million over the prior year.
Free cash flow for the year ended August 31, 2017 was $292.7 million, compared to $188.2 million last year. 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, 2017 was $298.1 million, compared to $200.2
million last year. The increase from the prior year arises from higher cash flow from operations, primarily as a
result of the Acquisition, offset by lower cash provided by working capital.
Cash used in investing activities in the year ended August 31, 2017 was $20.9 million, compared to $1,658.4
million in the prior year. The decrease from the prior year is primarily due to the significant corporate development
activity in the prior year, specifically, the acquisition of Shaw Media for cash of $1.8 billion, offset by the net cash
proceeds received from Bell relating to the shutdown of the Pay TV business of $209.5 million.
Cash used in financing activities in the year ended August 31, 2017 was $254.9 million, compared to $1,492.1
million in the prior year. In fiscal 2017, the Company decreased bank debt by $110.7 million, paid cash dividends
of $141.1 million and made capital lease payments of $3.2 million. In fiscal 2016, primarily as a result of the
Acquisition, 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 cash
dividends of $109.5 million, incurred debt refinancing costs of $55.7 million, incurred financing fees of $23.6
million, and made capital lease payments of $4.8 million.
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 long-term debt less cash and cash equivalents.
The Company manages its capital structure in accordance with changes in economic conditions. In order to
maintain or adjust its capital structure, the Company may elect to issue or repay long-term debt, issue shares,
repurchase shares through a normal course issuer bid, pay dividends or undertake any other activities as deemed
appropriate under the specific circumstances.
The Company monitors capital using several key performance metrics, including: net debt to segment profit
ratio and dividend yield. The Company’s stated long-term objectives are 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 within these internally imposed objectives.
34 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
As at August 31, 2017 the Company had available approximately $300.0 million under the Revolving Facility (as
defined below), all of which could be drawn, and was in compliance with all loan covenants. As at August 31, 2017,
the Company had a net cash balance of $93.7 million.
For further details on the credit facilities established on April 1, 2016 refer to note 14 of the Company’s audited
consolidated financial statements for the year ended August 31, 2017.
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, 2017, net debt was $1,997.9 million, down from $2,124.7 million at August 31, 2016. Net debt
to segment profit at August 31, 2017 was 3.46 times, down from 5.17 times (3.83 times on a pro forma basis at
August 31, 2016). Further discussion on this is contained in the Key Performance Indicators section.
TOTAL CAPITALIZATION
At August 31, 2017, total capitalization was $4,597.4 million, a decrease of $3.6 million from August 31, 2016.
The decrease is attributable to higher net debt resulting from the repayment of debt of $104.4 million, offset
by the increase in cash of $22.3 million and the issuance of $123.1 million of shares from treasury under the
Company’s dividend reinvestment plan.
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, although valued at $11.21 per share, 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 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 below) 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 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 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.
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 replaced 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
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
Corus Entertainment Annual Report 2017 | 35
Management’s Discussion and Analysis
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 2020 Notes (as defined below).
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 approximately $52.6 million. In
addition, the Company wrote-off associated unamortized financing charges of approximately $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 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, 2017 is $23.0 million, which has been recorded
in the consolidated statements of financial position in other assets.
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.
36 | Corus Entertainment Annual Report 2017
CONTRACTUAL COMMITMENTS
The Company has the following undiscounted contractual obligations at August 31, 2017:
Management’s Discussion and Analysis
Total Within 1 year
2 - 3 years
4 - 5 years More than 5 years
(thousands of Canadian dollars)
Total debt (1)
Purchase obligations (2)
Operating leases (3)
Other obligations (4)
Financing leases
2,127,500
1,009,032
432,158
173,469
4,815
172,500
504,897
38,786
44,093
2,526
920,000
352,771
59,181
71,611
2,289
1,035,000
147,122
56,418
56,984
—
—
4,242
277,773
781
—
282,796
Total contractual obligations
3,746,974
762,802
1,405,852
1,295,524
(1) Principal repayments
(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 2017, the Company incurred interest on bank debt of $103.1 million
(2016 – $48.7 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, 2017
derived primarily from three areas: advertising 64%, subscriber fees 30% and merchandising, distribution and
other 6% (2016 – 56%, 35%, and 9%, respectively).
DIRECT COST OF SALES, AND GENERAL AND ADMINISTRATIVE EXPENSES
Direct cost of sales, and general and administrative expenses include amortization of program 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 work, book publishing, marketing (research and advertising costs); employee remuneration; regulatory
license fees; and, selling, general administration which includes overhead costs. For the year ended August 31,
2017, consolidated direct cost of sales, and general and administrative expenses were comprised of direct cost
of sales 51%, employee remuneration 30%, and general and administrative expenses 19% (2016 – 47%, 31%,
and 22%, 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
Corus Entertainment Annual Report 2017 | 37
Management’s Discussion and Analysis
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
and other asset impairment; debt refinancing; non-cash gains or losses; business acquisition, integration and
restructuring costs; gain (loss) on disposition; 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
For fiscal 2016, 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
2017
1,679,008
1,100,925
578,083
—
578,083
34.0%
34.0%
2016
1,171,314
760,300
411,014
(15,585)
395,429
35.0%
34.0%
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”).
(thousands of Canadian dollars)
Cash provided by (used in):
Operating activities
Investing activities
Add back: cash used for business combinations and strategic investments (1)(2)
Free cash flow
(1) Strategic investments are comprised of investments in venture funds and associated companies.
(2) Adjusted to remove the impact of disposing the Pay TV business.
2017
2016
298,133
(20,908)
277,225
15,435
292,660
200,227
(1,658,427)
(1,458,200)
1,646,365
188,165
38 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
Free cash flow in fiscal 2017 reflects the inclusion of the Shaw Media business for the full fiscal year, while the
prior year includes the Shaw Media business from the acquisition date of April 1, 2016.
ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS PER SHARE
Management uses adjusted net income and adjusted basic earnings per share as a measure of enterprise-wide
performance. Adjusted net income and adjusted basic earnings per share are defined as net income and basic
earnings per share before items such as: non-recurring gains or losses related to acquisitions and/or dispositions
of investments; costs of debt refinancing; non-cash impairment charges; and business acquisition, integration
and restructuring costs. Management believes that adjusted net income and adjusted basic earnings per share
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 and basic earnings
per share prepared in accordance with IFRS as issued by the IASB.
(thousands of Canadian dollars, except per share amounts)
Net income attributable to shareholders
Adjustments, net of income tax:
Gain on disposal of Pay TV assets
Amortization of Pay TV assets
Investment in associates impairment
Business acquisition, integration and restructuring costs
Debt refinancing costs
Adjusted net income attributable to shareholders
Basic earnings per share
Adjustments, net of income tax:
Gain on disposal of Pay TV assets
Amortization of Pay TV assets
Investment in associates impairment
Business acquisition, integration and restructuring costs
Debt refinancing costs
Adjusted basic earnings per share
NET DEBT
2017
191,665
—
—
5,250
23,573
—
220,488
$0.95
—
—
0.03
0.12
—
$1.10
2016
125,931
(76,631)
(11,455)
—
46,171
45,017
129,033
$0.96
(0.58)
(0.09)
—
0.35
0.34
$0.98
Net debt is calculated as long-term debt less cash and cash equivalents as reported in the consolidated
statements of financial position. Net debt is an important measure as it reflects the principal amount of debt
owing by the Company as at a particular date. Net debt does not have any standardized meaning prescribed by
IFRS and is not necessarily comparable to similar measures presented by other companies.
(thousands of Canadian dollars)
Total bank debt
Cash and cash equivalents
Net debt
2017
2,091,580
(93,701)
1,997,879
2016
2,196,020
(71,363)
2,124,657
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.
Corus Entertainment Annual Report 2017 | 39
Management’s Discussion and Analysis
2016
(thousands of Canadian dollars)
2,124,657
Net debt (numerator)
Segment profit (denominator) (1)
411,014
5.17
Net debt to segment profit
(1) Reflects aggregate amounts for the most recent four quarters, as detailed in the table in the “Quarterly Consolidated Financial
2017
1,997,879
578,083
3.46
Information” section.
As at August 31, 2017, net debt was $1,997.9 million, down from $2,124.7 million as at August 31, 2016. Net
debt to segment profit as at August 31, 2017 was 3.46 times compared to 5.17 times as at August 31, 2016.
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, fiscal 2016 does not include segment profit from Shaw
Media prior to April 1, 2016. The decrease from the prior year in net debt reflects debt repayments of $110.7
million made during fiscal 2017. Adjusting segment profit in fiscal 2016 to include the Acquisition and exclude
Pay TV for the year would result in net debt to segment profit of 3.83 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 Company’s Board of Directors has overall responsibility for risk governance and ensures that there are
processes in place to effectively identify, assess, monitor, and manage principal business risks to which the
Company is exposed. 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;
• 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, officers and certain other employees 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 and provides the Audit Committee
and management with objective evaluations of the Company’s risk and control environment.
ENTERPRISE RISK MANAGEMENT
The Company has established an Enterprise Risk Management Framework (“ERM”) which includes identifying,
assessing, managing, monitoring and communicating the principal business 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 principal business risks facing the Company and their potential impact on the achievement of the
Company’s strategic objectives. 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 principal risks
that impact the Company. The RMC is comprised of various senior managers from across the organization, with
40 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
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.
RISK 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. Any discussion about risks should be read in conjunction with
the “Cautionary Statement Regarding Forward-Looking Statements”.
A. REGULATORY RISKS
IMPACT OF REGULATION
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 licences to operate radio and television stations. The Company’s
CRTC licences must be renewed from time to time and cannot be transferred without regulatory approval.
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 exhibition (number of hours broadcast) for
Canadian Content, Canadian Content spending levels, access obligations (i.e. closed captioning or descriptive
video) and other obligations. Any failure by the Company to comply with conditions of a licence could result in
a revocation or forfeiture of the licence or imposition of mandatory orders from the Federal Court that could
lead to the imposition of fines.
Canadian Content programming is also subject to certification by various agencies of the federal government.
If programming fails to so qualify, the Company’s television licensees would not be able to use the programs to
meet its Canadian Content programming obligations and Corus’ Nelvana operations might not qualify for certain
Canadian tax credits and industry incentives.
Corus’ radio, conventional television and specialty television undertakings rely upon blanket licences held by
rights-holding collectives 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 licences, 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 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 licences.
Refer also to the Canadian Communications Industry – Regulatory Environment section of the Company’s
Annual Information Form for further information.
CRTC POLICY REVIEW
A series of CRTC policy statements in 2015 and 2016 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. The reader should review the CRTC source
documents at www.CRTC.gc.ca for a complete understanding of the proposed changes.
On May 15, 2017, the Canadian Radio-Television and Telecommunications Commission (“CRTC “) issued its
license renewal decisions for TV licenses held by Corus. The Canadian Programming Expenditure (“CPE”)
requirement for Corus’ English-language services were set at 30% and expenditures towards programs of
national interest (“PNI”) were set at 5%, while the CPE for Corus’ French-language group of services were set
at 26% and the PNI requirement was set at 15%.
Following the Group Based License (”GBL”) renewal decisions in May 2017, a number of parties in the creative
community appealed the decisions to Cabinet.
Corus Entertainment Annual Report 2017 | 41
Management’s Discussion and Analysis
On August 30, 2017, the CRTC requested that the large media groups file information and/or amend their
original applications. The rehearing is expected sometime in 2018 with decisions to be issued prior to the 2018-
2019 broadcast year. The CRTC clarified that for the 2017-2018 broadcast year, the May 2017 GBL decisions
will apply without modification.
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.
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 over-the-air (“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, Innovation, Science and
Economic Development Canada (“ISED”) 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 timeline
to complete the full slate of analog to digital conversions.
On August 14, 2015, the Government of Canada confirmed its intent to proceed with repurposing some of the
600 MHz spectrum band and to jointly establish a new allotment plan in collaboration with the United States.
ISED has aligned with the US Federal Communications Commission to participate in a spectrum redistribution
plan that will require broadcasters to vacate spectrum in TV channels 37-51 (608-692 MHz), as that will be
consumed by mobile use. Accommodating this change will require Corus to install new equipment or reconfigure
existing equipment at affected sites and may have an impact on signal quality and coverage. ISED 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. Corus is working with the Canadian Association
of Broadcasters on getting funding from the proceeds of the spectrum auction to pay for costs related to
repurposing the 600MHz spectrum.
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.
ANTI-SPAM / PRIVACY PROTECTION LEGISLATION
Canada’s anti-spam legislation (together with the related regulations, “CASL”) sets out a comprehensive
regulatory regime regarding online commerce, including requirements to obtain consent prior to sending
commercial electronic messages and installing computer programs. CASL is administered primarily by the CRTC,
and non-compliance may result in fines of up to $10 million. Corus has in place a compliance program with
respect to CASL including electronic communications guidelines to minimize risk of non-compliance.
The Personal Information Protection and Electronic Documents Act (“PIPEDA”), sets out the standard for obtaining
consent for the collection, use and retention of personal information. Privacy protection of personal information
is an area of law that is fast evolving in order to keep pace with technological and business model changes. Corus
takes reasonable, prudent steps to ensure its activities are compliant with PIPEDA, including, appointing a Chief
Privacy Officer to manage all privacy issues relating to Corus’ business activities and ensuring that Corus is
compliant with PIPEDA and other applicable privacy legislation.
PROPOSED PROHIBITIONS ON FOOD ADVERTISING TO CHILDREN
Bill S-228, an Act to amend the Food and Drugs Act (prohibiting food and beverage marketing directed at children),
is private member legislation that seeks to prohibit unhealthy food and beverage marketing directed at persons
17 years of age and under. On October 6, 2017, Bill S-228, an Act to amend the Food and Drugs Act (prohibiting
food and beverage marketing directed at children), passed through the Senate and received First Reading in the
House of Commons. It will next proceed to Second Reading in the House, and be referred to a House Committee.
It remains to be seen what the final legislation and related regulations will look like or if they come into force at
all. If they do, some constraints on some types of advertising may be the result.
42 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
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 and 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.
TECHNOLOGICAL DEVELOPMENTS
Corus operates in an open and highly competitive marketplace. Corus faces competition from both regulated
and unregulated players using existing or new technologies and from illegal services. In addition, the rapid
deployment of new technologies, services and products has reduced the traditional lines between internet and
broadcast services and further expands the competitive landscape. 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 with, or
may in the future compete with, Corus’ services 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 Corus’ linear television and radio ratings or
have an adverse effect on advertising revenues from local and national audiences. Technological developments
may also disrupt traditional distribution platforms by enabling content owners to provide content directly to
consumers, thus bypassing traditional content aggregators. While Corus invests in infrastructure, technology
and programming to maintain its competitive position, there can be no assurance that these investments will
be sufficient to maintain Corus’ market share or performance in the future.
TELEVISION – BROADCAST BUSINESS
The financial success of Corus’ discretionary television services depend on obtaining revenues from advertising
and subscribers, while Corus’ basic television services depend on obtaining revenues from advertising. As
well, these services are dependent on the effective management of programming costs. Any failure by Corus’
discretionary and basic television services to compete effectively could materially adversely affect Corus’ results
of operations.
i) ADVERTISING AND SUBSCRIBER REVENUES
The basic and discretionary television business and the advertising markets in which they operated are highly
competitive. Numerous broadcast and specialty television networks, as well as online advertising platforms
and website, and “over-the-top” digital distribution services compete with Corus for advertising and subscriber
revenues. Corus’ ability to compete successfully depends on a number of factors, including its ability to secure
popular television and other programming rights for all platforms, including traditional linear broadcast rights
and non-linear rights, in order to achieve audience acceptance, high distribution levels and attract advertising.
Corus’ ability to continue to attract advertising customers also depends on its ability to meet the evolving
expectations of its advertising customers.
The CRTC no longer requires the licensing of new discretionary services. These services can be launched at any
time using the CRTC’s exemption order 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, as well as online advertising platforms and websites,
and “over-the-top” digital distribution services that are not regulated by the CRTC (see TECHNOLOGICAL
DEVELOPMENTS). This competition is for both supply of programming and also for audiences and 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. Accordingly, there can be no assurance that Corus’ television
services will be able to maintain or increase their current share of audience and advertising revenues as well as
maintain or increase current levels of subscriber distribution and penetration.
Corus Entertainment Annual Report 2017 | 43
Management’s Discussion and Analysis
ii) PROGRAMMING EXPENDITURES / AUDIENCE ACCEPTANCE
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 premium content and/or increase the cost of programming content which could have a material
adverse effect on Corus’ operations and/or financial results.
In addition, programming content may be purchased or commissioned for broadcast one or two years in advance,
making it more difficult to predict how such content will perform in terms of audience acceptance. Audience
acceptance cannot be accurately predicted. The success of a program also depends on the type and extent of
promotional and marketing activities, the quality and acceptance of competing programs, general economic
conditions and other intangible factors, all of which can rapidly change and many of which are beyond Corus’
control. The lack of audience acceptance of Corus’ television programming could have a material adverse effect
on Corus’ operations and/or financial results.
Commission of original 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
independent production partners and cause cost overruns and delay or hamper completion of a production
(see RELIANCE ON KEY SUPPLIERS AND CUSTOMERS).
TELEVISION – CONTENT BUSINESS
The production and distribution of 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 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.
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 at any
time 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 media, such as television, outdoor advertising, print
and internet as well as alternative media technologies, such as satellite, music streaming and music downloading
services. Potential advertisers can substitute advertising through the broadcast television system (which can
offer concurrent exposure on a number of networks to enlarge the potential audience), daily, weekly and free-
distribution newspapers, outdoor billboard advertising, magazines, other print media, direct mail marketing,
the Internet and mobile advertising. Competing media commonly target the customers of their competitors,
and advertisers regularly shift dollars from radio to these competing media and vice versa. In markets near the
U.S. border, such as Kingston, Ontario, Corus also competes with U.S. radio stations. Accordingly, there can be
no assurance that Corus’ radio stations will be able to maintain or increase their current audience share and
advertising revenue share.
44 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
C. RELIANCE ON KEY SUPPLIERS AND CUSTOMERS
Corus procures its content from a limited number of key suppliers some of whom are global in scale and have
significant negotiating leverage. While Corus may have alternate sources of content, the loss of a key supplier
may adversely affect Corus’ operations and/or its financial results.
Corus enters into long-term agreements with various BDUs for the distribution of its television services. Corus
derives most of its subscriber revenue from its relationships with a small number of the largest BDUs. As these
contracts expire, there could be negative effect on Corus’ operations and/or its financial results if Corus is unable
to renew them on acceptable terms, including revenues per subscriber and packaging that affects the networks’
subscriber reach. Similarly, the majority of Corus’ advertising revenues are derived from a small number of
large advertising agency “upfront commitments”. Any significant change in volume, rates and/or other terms
associated with these sales commitments may have a positive or negative effect on Corus’ operations and/or
financial results.
Corus relies on certain information technology providers, telecommunications carriers and certain utilities to
conduct Corus’ business. Any disruption to the services provided by these suppliers, including labour strikes and
other work disruptions, bankruptcies, technical difficulties or other events affecting the business operations of
these information technology providers, telecommunications carriers and utilities may affect Corus’ ability to
operate and therefore have a negative impact on its operations and/or its financial results.
D. 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.
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.
Corus Entertainment Annual Report 2017 | 45
Management’s Discussion and Analysis
E. 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.
F. 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.
G. INTELLECTUAL PROPERTY RIGHTS / PIRACY
Corus’ owned and licensed trade marks, copyrights and other proprietary rights are important to the Company’s
competitive position.
TELEVISION /RADIO – BROADCAST BUSINESS
Corus pays significant licence fees to acquire rights to content and branding on an exclusive basis.
From time to time, various third parties may contest or infringe upon these owned or licensed rights. Any such
infringement, including increasingly rampant online piracy and illegal distribution of copyrighted television
content, may have a material adverse impact on Corus’ operations and financial results. Corus takes commercially
reasonable efforts to minimize these risks including negotiating and enforcing protective covenants in its
content licensing agreements.
There are systems in place to track proper registration and renewal of Corus’ owned trademark portfolio, and
to have notice of third-party applications that may potentially conflict with Corus’ trademarks, all with a view to
ensuring that the Corus’ registrable intellectual property is afforded the maximum protection under applicable law.
Upon notice of a potential infringement of its owned or licensed intellectual property, Corus reviews these
matters to determine what, if any, steps may be required or should be taken to protect its rights, including legal
action, negotiated settlement and/or seeking remedies from intellectual property licensors. There can be no
assurance that the steps that Corus takes to establish and protect its intellectual property will be adequate to
46 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
prevent or eliminate infringement of its intellectual property and protect Corus’ ability to competitively market
and brand its television and digital services and/or be the exclusive distribution source of key licensed content
in Canada.
Corus’ linear television and digital platforms and services broadcast, make available, distribute and may
contain many forms of content including licensed audio-visual programming, text, news, graphics, databases,
photographs, recipes, audio files (music or otherwise) and rich interactive content, blog content, and user-
generated content including story comments, and internal and external links. Corus takes steps to ensure that
procedures are in place to clear rights and to monitor user-generated 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 an exposure to liability for third-party claims.
TELEVISION – CONTENT BUSINESS
Corus must be able to protect its trademarks, copyrights and other proprietary rights to competitively produce,
distribute and licence its television programs and published materials and market its merchandise. Accordingly,
Corus devotes the Company’s resources to the establishment and protection of trademarks, 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 trademarks, 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 trademarks, copyrights and
proprietary rights.
Moreover, there can be no assurance that others will not assert rights in, or ownership of, the Company’s
trademarks, 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.
H. PEOPLE
EMPLOYEE RETENTION, RECRUITMENT AND ENGAGEMENT
Corus’ operations depend on the expertise, efforts and engagement of its employees. The industry is
competitive in attracting and retaining a skilled workforce. The loss of key employees, through attrition or
retirement or any deterioration in overall employee morale and engagement resulting from organizational
changes, unresolved collective agreements or other events could have an adverse impact on Corus’ operations
and/or financial results. As well, failure to establish an effective succession plan could impair operations until
qualified replacements are found.
UNIONIZED LABOUR
As at August 31, 2017, 30% 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.
I. INFORMATION SYSTEMS AND INTERNAL BUSINESS PROCESSES
The day-to-day operations of Corus 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 Corus’ ability to produce accurate and timely invoices, manage operating expenses and produce
accurate and timely financial reports. Although Corus 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 Corus operations and/or its financial 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 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 2017 | 47
Management’s Discussion and Analysis
J. ECONOMIC CONDITIONS
The Company’s operating performance depends on Canadian and worldwide economic conditions. Changes
in economic conditions may affect discretionary consumer and business spending, resulting in increased or
decreased demand for Corus’ product offerings. Current or future events caused by volatility in domestic or
international economic conditions or a decline in economic growth may have a material adverse effect on Corus,
its operations and/or its financial results.
K. 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.
L. 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:
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.
As at August 31, 2017, the Company’s trade receivables and allowance for doubtful accounts balances were
$387.6 and $4.7 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 or through the use of interest rate swap contracts to fix the interest rate on its floating
rate debt. As at August 31, 2017, 81% (2016 – 83%) of the Company’s consolidated long-term debt was fixed
with respect to interest rates.
FOREIGN CURRENCY RISK
A portion of the Company’s revenues and expenses are in currencies other than Canadian dollars and, therefore,
are subject to fluctuations in exchange rates. Approximately 3% of Corus’ total revenues in fiscal 2017 (2016 –
4%) were in foreign currencies, the majority of which was U.S. dollars. Approximately $194.1 million of Corus’
total payables for fiscal 2017 (2016 – $134.3 million) were in foreign currencies, the majority of which was U.S.
dollars. Accordingly, fluctuations in the Canadian dollar - U.S. dollar exchange rate may adversely affect Corus’
financial results.
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 increased in fiscal 2016 as a result of the Acquisition, but has now returned to the
top end of the stated leverage target range of 3.0 to 3.5 times net debt to segment profit. 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.
M. POST-EMPLOYMENT BENEFIT OBLIGATIONS
Economic fluctuations could adversely impact the funding and expenses associated with post-employment
benefit obligations and there can be no assurance that these obligations will not increase materially in the future,
thereby negatively impacting the Company’s financial results.
48 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
N. ACQUISITIONS AND OTHER STRATEGIC TRANSACTIONS
The Company may, from time to time, make strategic acquisitions which involve significant risks and
uncertainties. As such, the Company may experience difficulties in realizing the anticipated benefits, incur
unanticipated expenses and/or have difficulty incorporating or integrating the acquired business, the occurrence
of which could have a material adverse effect on the Company.
O. 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.
P. 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 2018 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.
Q. 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, 2017, 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.
TRANSACTION WITH RELATED PARTIES
Related party transactions are reviewed by Corus’ Corporate Governance Committee, the majority of whom
are independent directors. The following sets forth the certain transactions in which the Company is involved.
CONTROL OF THE COMPANY BY THE SHAW FAMILY
As at October 31, 2017, 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 85% 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 fiscal 2016, 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.
Corus Entertainment Annual Report 2017 | 49
Management’s Discussion and Analysis
The Acquisition was a business combination between entities under common control and was accounted for
by the Company using the acquisition method. Final valuation of certain items were completed in fiscal 2017,
therefore the purchase price allocation was finalized as at February 28, 2017 (refer to note 27 of the Company’s
consolidated financial statements for the year ended August 31, 2017).
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 Voting Shares (“Class
A Shares”) and Class B Non-Voting Shares (“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’ 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
50 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
independence criterion set forth in Section 1.4 of National Instrument 52-110 – Audit Committees, 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 Committees
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 Committees.
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
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 time all restrictions on transfer of the Consideration Shares will be lifted.
As of August 31, 2017, Shaw held approximately 40% of the aggregate outstanding Class B Shares.
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. As at September 1, 2017, Shaw ceased its participation in the Corus DRIP.
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.
Corus Entertainment Annual Report 2017 | 51
Management’s Discussion and Analysis
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 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 $131.4 million
(2016 – $112.6 million), and production and distribution revenues of $1.1 million (2016 – $4.8 million) from Shaw.
In addition, the Company paid cable and satellite system distribution access fees of $13.1 million (2016 – $8.7
million) and administrative and other fees of $2.3 million (2016 – $4.7 million) to Shaw. As at August 31, 2017, the
Company had $34.6 million (2016 – $26.7 million) receivable and $0.4 million (2016 – $0.1 million) payable to Shaw.
Shaw holds a 40% interest in the Company, as a result dividends of $88.0 million (2016 – $34.4 million) were paid
to Shaw for the year ended August 31, 2017.
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.
OUTSTANDING SHARE DATA
As at October 31, 2017, 3,421,792 Class A Voting Shares and 203,378,931 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
IAS 16 – PROPERTY, PLANT AND EQUIPMENT AND IAS 38 – INTANGIBLES
The Company has adopted 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, effective September 1, 2016. Previously the Company used the individual-
film-forecast-computation method to determine amortization of film investments, which is a revenue based
amortization model. The Company has segregated its film investments into two categories: current productions
and library or acquired productions. Current productions are considered library productions immediately
subsequent to their initial availability for licensing as they are considered completed. Film investments are
categorized as intangible assets by the Company, and therefore will continue to be presented in the statements
of financial position as long-term assets.
Current productions have been amortized using a declining balance method at rates ranging from 50 – 75% at
the time the episode becomes available for delivery and at annual rates ranging from 15 – 25% thereafter. Library
and acquired content is amortized using a declining balance method at rates ranging from 10 – 25% annually.
These amendments have been applied prospectively and resulted in no material impact on the consolidated
financial statements.
52 | Corus Entertainment Annual Report 2017
Management’s Discussion and Analysis
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.
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 2017 audited consolidated
financial statements and notes thereto, which have been prepared in accordance with IFRS. The preparation
of these fiscal 2017 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.
Corus Entertainment Annual Report 2017 | 53
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 2017 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.
54 | Corus Entertainment Annual Report 2017
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 two 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
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 and comprehensive
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 calculated 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 incremental 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 2017
Pension expense
Fiscal 2017
3.60%
3.60%
$38,462
$6,574
3.60%
3.63%
$2,927
$115
The significant assumptions used on the benefit obligation are disclosed in note 29 of the audited consolidated
financial statements.
SHARE-BASED COMPENSATION
In the evaluation of the fair value of stock options, Deferred Share Units (“DSUs”), Performance Share Units
(“PSUs”), and Restricted Share Units (“RSUs”) granted to eligible officers, directors and employees, the Company
makes estimates and assumptions. Critical estimates and assumptions related to stock options include their
expected life, the risk-free interest rate and the expected volatility of the market price of the shares. Critical
estimates and assumptions related to DSUs, PSUs and RSUs include number of units expected to vest, the
estimated dividend equivalents, and the achievement of specific vesting conditions. The Company believes
that the assumptions used 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 as of the end of the period covered by
these annual filings, and have concluded that, as of August 31, 2017, the Company’s disclosure controls and
procedures were effective.
Corus Entertainment Annual Report 2017 | 55
Management’s Discussion and Analysis
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 cause 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, 2017, based on the criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). Based on its evaluation under this framework, management concluded that
the Company’s internal control over financial reporting was effective as at August 31, 2017
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting that occurred during fiscal
2017 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.
56 | Corus Entertainment Annual Report 2017
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Corus Entertainment Inc. (“Corus” or the “Company”)
and all of 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.
Corus maintains systems of internal accounting and administrative controls of high quality, consistent with
reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is
relevant, reliable and accurate, and that the Company’s assets are appropriately accounted for and adequately
safeguarded. During the past year, management has maintained the operating effectiveness of internal control
over external financial reporting. As at August 31, 2017, the Company’s Chief Executive Officer and Chief Financial
Officer evaluated, or caused an evaluation of, under their direct supervision, the design and operation of the
Company’s internal controls over financial reporting (as defined in National Instrument 52-109 - Certification of
Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that the Company’s
internal controls over financial reporting were appropriately designed and operating effectively.
The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting, and
is ultimately responsible for reviewing and approving the consolidated financial statements. The Board carries
out this responsibility through its Audit Committee (the “Committee”).
The Committee is appointed by the Board, and all of its members are independent unrelated directors. The
Committee meets periodically with management, as well as with the internal and external auditors, to discuss
internal controls over the financial reporting process, auditing matters and financial reporting items, to
satisfy itself that each party is properly discharging its responsibilities, and to review the Annual Report, the
consolidated financial statements and the external auditors’ report. The Committee reports its findings to the
Board for consideration when approving the consolidated financial statements for issuance to the shareholders.
The Committee also considers, for review by the Board and approval by the shareholders, the engagement or
re-appointment of the external auditors.
The consolidated financial statements have been audited by Ernst & Young LLP, the external auditors on behalf
of the shareholders. Ernst & Young LLP has full and free access to the Committee.
Douglas D. Murphy
President and
Chief Executive Officer
John R. Gossling, FCPA, FCA
Executive Vice President
and Chief Financial Officer
Corus Entertainment Annual Report 2017 | 57
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, 2017 and 2016, 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, 2017 and 2016, and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada,
November 17, 2017
Chartered Professional Accountants
Licensed Public Accountants
58 | Corus Entertainment Annual Report 2017
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars)
ASSETS
Current
Cash and cash equivalents
Accounts receivable (note 4)
Income taxes recoverable
Prepaid expenses and other
Total current assets
Tax credits receivable
Investments and other assets (note 5)
Property, plant and equipment (note 6)
Program 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)
Provisions (note 13)
Current portion of long-term debt (note 14)
Income taxes payable
Total current liabilities
Long-term debt (note 14)
Other long-term liabilities (note 15)
Provisions (note 13)
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,
2017
As at August 31,
2016
93,701
408,443
1,388
21,870
525,402
18,172
64,559
260,068
648,346
40,728
2,045,813
2,387,652
77,104
6,067,844
415,661
15,791
172,500
—
603,952
1,919,080
442,349
11,707
491,235
3,468,323
2,291,814
11,449
114,492
22,938
2,440,693
158,828
2,599,521
6,067,844
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
21,390
115,000
1,982
531,739
2,081,020
530,767
8,905
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
Corus Entertainment Annual Report 2017 | 59
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)
Debt refinancing
Business acquisition, integration and restructuring costs (notes 13 and 27)
Gain on disposition (note 27)
Other expense (income), net (note 20)
Income before income taxes
Income tax expense (note 21)
Net income for the year
Net income attributable to:
Shareholders
Non-controlling interest
Earnings per share attributable to shareholders:
Basic
Diluted
Net income for the year
Other comprehensive income (loss), net of income taxes (note 17):
Items that may be subsequently reclassified to income:
Unrealized change in fair value of cash flow hedges
Unrealized change in fair value of available-for-sale investments
Unrealized foreign currency translation adjustment
Items that will not be reclassified to income:
Actuarial gain (loss) on post-employment benefit plans
Comprehensive income for the year
Comprehensive income attributable to:
Shareholders
Non-controlling interest
See accompanying notes
2017
1,679,008
1,100,925
91,750
156,716
—
31,983
—
(8,953)
306,587
82,498
224,089
2016
1,171,314
760,300
73,969
110,862
61,248
57,198
(86,151)
8,752
185,136
41,575
143,561
191,665
32,424
224,089
125,931
17,630
143,561
$0.95
$0.95
$0.96
$0.96
224,089
143,561
27,448
(298)
(643)
26,507
6,874
33,381
257,470
225,046
32,424
257,470
(10,253)
(620)
(49)
(10,922)
(3,489)
(14,411)
129,150
111,520
17,630
129,150
60 | Corus Entertainment Annual Report 2017
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands of Canadian dollars)
At August 31, 2016
Comprehensive income
Dividends declared
Issuance of shares under stock option
plan
—
—
154
Issuance of shares under dividend
reinvestment plan
123,117
Actuarial gain on post-retirement
benefit plans
Share-based compensation expense
Reallocation of equity interest (note
27)
—
—
—
Share
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
(note 17)
Total equity
attributable
to
shareholders
Non-
controlling
interest Total equity
2,168,543
10,444
142,499
(3,569)
2,317,917
158,430
2,476,347
— 191,665
— (231,046)
33,381
225,046
32,424
257,470
— (231,046)
(35,026)
(266,072)
—
—
—
1,005
—
—
6,874
—
—
4,500
—
—
(6,874)
—
—
154
123,117
—
1,005
—
—
—
—
154
123,117
—
1,005
4,500
3,000
7,500
At August 31, 2017
2,291,814
11,449
114,492
22,938
2,440,693
158,828
2,599,521
At August 31, 2015
994,571
9,471
191,182
7,353
1,202,577
17,334
1,219,911
—
—
279,762
833,541
—
60,669
Comprehensive income (loss)
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 loss on post-retirement
benefit plans
Share-based compensation expense
At August 31, 2016
See accompanying notes
— 125,931
— (171,125)
(14,411)
111,520
17,630
129,150
— (171,125)
(19,824)
(190,949)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (3,489)
973
—
3,489
—
279,762
833,541
—
—
279,762
833,541
—
143,290
143,290
60,669
—
973
—
—
—
60,669
—
973
2,168,543
10,444
142,499
(3,569)
2,317,917
158,430
2,476,347
Corus Entertainment Annual Report 2017 | 61
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended August 31,
(in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income for the year
Adjustments to reconcile net income to cash provided by operating activities:
2017
2016
224,089
143,561
Amortization of program rights (notes 7 and 18)
Amortization of film investments (notes 8 and 18)
Depreciation and amortization (notes 6 and 9)
Deferred income taxes (recovery) (note 21)
Intangible and other assets impairment (recovery) (note 5 and 8)
Share-based compensation expense (note 16)
Imputed interest (note 19)
Debt refinancing costs (note 14)
Gain on disposition (note 27)
Payment of program rights
Net additions to film investments
CRTC benefit payments
Other
Cash flow from operations
Net change in non-cash working capital balances related to operations (note 25)
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 non-controlling interest
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
510,716
23,958
91,750
17,109
5,250
1,005
51,519
—
—
(509,979)
(24,579)
(29,740)
2,969
364,067
(65,934)
298,133
(26,989)
—
3,000
5,250
4,122
(6,291)
(20,908)
(110,706)
—
—
—
—
154
(106,062)
(35,026)
(3,247)
(254,887)
22,338
71,363
93,701
313,300
22,690
73,969
(22,554)
(822)
973
45,429
61,248
(86,151)
(344,855)
(29,616)
(25,740)
5,566
156,998
43,229
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
62 | Corus Entertainment Annual Report 2017
1. CORPORATE INFORMATION
Corus Entertainment Inc. (the “Company” or “Corus”) is a diversified 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, conventional television stations, and pay television services (ceased operations February 29,
2016); the operation of radio stations; and the Corus content business, which consists of the production
and distribution of films and television programs, merchandise licensing, book publishing and the production
and distribution of animation software, media and technology 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 17, 2017.
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 as a separate component 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.
Corus Entertainment Annual Report 2017 | 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands of Canadian dollars, except per share information) 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 in the consolidated
statements of income and comprehensive income.
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 fee revenues are recognized monthly based on estimated subscriber levels for the period-end,
which are based on the preceding month’s actual subscribers as submitted by the broadcast distribution
undertakings.
64 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
The Company’s revenues related to production and distribution revenues from the distribution and licensing
of film rights; royalties from merchandise licensing, publishing and music contracts; sale of licenses,
customer support, training and consulting related to the animation software business; revenues from
customer support; and sale of books are recognized when the significant risks and rewards of ownership have
transferred to the buyer; the amount of revenue can be measured reliably; it is probable that the economic
benefits associated with the transaction will flow to the entity; the stage of completion of the transaction at
the end of the reporting period can be measured reliably; the costs incurred for the transaction and the costs
to complete the transaction can be measured reliably; and the Company does not retain either continuing
managerial involvement or effective control.
Customer advances on contracts are recorded as unearned revenue until all of the foregoing revenue
recognition conditions have been met.
Non-refundable advances, whether recoupable or non-recoupable, on royalties are recognized when the
license period has commenced and collection is reasonably assured, unless there are future performance
obligations associated with the royalty advance for which, in that case, revenue recognition is deferred
and recognized when the performance obligations are discharged. Refundable advances are deferred and
recognized as revenue as the performance obligations are discharged.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term deposits with maturities of less than three months
at the date of purchase. Cash that is held in escrow, or otherwise restricted from use, is 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.
Corus Entertainment Annual Report 2017 | 65
Notes to Consolidated Financial Statements
PROGRAM RIGHTS
Program rights represent contract rights acquired from third parties to broadcast television programs,
feature films and radio programs. The assets and liabilities related to these rights are recorded when the
Company controls the asset, the expected future economic benefits are probable and the cost is reliably
measurable. The Company generally considers these criteria to be met and records the assets and liabilities
when the license period has begun, the program material is accepted by the Company and the material
is available for airing. Long-term liabilities related to these rights are recorded at the net present value
of future cash flows, using an appropriate discount rate. These costs are amortized over the contracted
exhibition period as the programs or feature films are aired. Program and film rights are carried at cost less
accumulated amortization. At each reporting date, the Company assesses its program rights for indicators
of impairment and, if any exist, the Company estimates the asset’s or cash generating unit’s (“CGUs”)
recoverable amount.
The amortization period and the amortization method for program rights are reviewed at least at the end
of each reporting period. Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the assets are accounted for by changing the amortization period
or method, as appropriate, and are treated as changes in accounting estimates. Amortization of program
rights is included in direct cost of sales, general and administrative expenses and has been disclosed
separately in the consolidated statements of cash flows.
FILM INVESTMENTS
Film investments represent the costs of projects in development, projects in process, the unamortized
costs of proprietary films and television programs that have been produced by the Company or for which the
Company has acquired distribution rights, and third-party-produced equity film investments. Such costs
include development and production expenditures and attributed studio and other costs that are expected
to benefit future periods. Costs are capitalized upon project greenlight for produced and acquired films
and television programs. The Company has segregated its film investments into two categories: current
productions and library or acquired productions. Current productions are considered library productions
immediately subsequent to their initial availability for licensing as they are considered completed.
Current productions have been amortized using a declining balance method at rates ranging from 50 – 75%
at the time of initial episodic delivery and at annual rates ranging from 15 – 25% thereafter. Library and
acquired content is amortized using a declining balance method at rates ranging from 10 – 20% annually.
The amortization period and the amortization method for film investments 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.
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.
66 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements GOODWILL AND INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired
in a business combination are measured at fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less accumulated amortization and accumulated impairment charges, if
any. Internally generated intangible assets such as goodwill, brands and customer lists, excluding capitalized
program and film development costs, are not capitalized and expenditures are reflected in the consolidated
statements of income and comprehensive income in the year in which the expenditure is incurred.
Intangible assets are recognized separately from goodwill when they are separable or arise from contractual
or other legal rights and their fair value can be measured reliably. The useful lives of intangible assets are
assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment
whenever there is an indication that the intangible assets may be impaired. The amortization period and
the amortization method for intangible assets with finite useful lives are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the assets are accounted for by changing the amortization period or
method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on
intangible assets with finite lives is recognized in the consolidated statements of income and comprehensive
income in the expense category, consistent with the function of the intangible assets.
Amortization is recorded on a straight-line basis over the estimated useful life of the asset as follows:
Brand names, trade marks and digital rights
Software, patents and customer lists
Agreement term
3 – 5 years
Intangible assets with indefinite useful lives are not amortized. Broadcast licenses are considered to have
an indefinite life based on management’s intent and ability to renew the licenses without significant cost
and without material modification of the existing terms and conditions of the license. The assessment of
indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If
not, the change in useful life from indefinite to finite is made on a prospective basis.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and
the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities
assumed. If this consideration is lower than the fair value of the net identifiable assets of the subsidiary
acquired, the difference is recognized in the consolidated statements of income and comprehensive income.
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.
Corus Entertainment Annual Report 2017 | 67
Notes to Consolidated Financial Statements
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.
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 performs the test at the operating segment level. This is the lowest
level at which management monitors goodwill for internal management purposes.
Other intangible assets
Gains or losses on 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.
68 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation. The Company establishes provisions related to tax
uncertainties, where appropriate, based on its best estimate of the amount that will ultimately be paid to
or received from taxation authorities.
Deferred income tax
The Company uses the liability method of accounting for deferred income taxes. Under this method,
the Company recognizes deferred income tax assets and liabilities for future income tax consequences
attributable to temporary differences between the financial statement carrying amounts of assets and
liabilities and their respective income tax bases, and on unused tax losses and tax credit carryforwards.
The deferred tax assets and liabilities related to intangible assets with indefinite useful lives have been
measured based on the Company’s expectation that these assets will be recovered through use. The
Company measures deferred income taxes using tax rates and laws that have been enacted or substantively
enacted at the reporting date and are expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled.
The Company recognizes deferred income tax assets only to the extent that it is probable that future taxable
profits will be available against which the deductible temporary differences as well as unused tax losses
and tax credit carryforwards can be utilized. Deferred income tax assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent
that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. The
Company recognizes the effect of a change in income tax rates in the period of enactment or substantive
enactment.
Deferred income taxes are not recognized if they arise from the initial recognition of goodwill, nor are they
recognized on temporary differences arising from the initial recognition of an asset or liability in a transaction
that is not a business combination and that affects neither accounting nor taxable profit nor loss. Deferred
income taxes are also not recognized on temporary differences relating to investments in subsidiaries to the
extent that it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the
same taxation authority.
To determine the provision for income taxes, certain assumptions are made, including filing positions
on certain items and the ability to realize deferred tax assets. In the event the outcome differs from
management’s assumptions and estimates, the effective tax rate in future periods could be affected.
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.
Corus Entertainment Annual Report 2017 | 69
Notes to Consolidated Financial Statements 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
Loans and receivables Available-for-sale
Other financial liabilities
Derivatives
• Cash and cash
equivalents.
• 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.
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 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.
70 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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 or 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:
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.
Corus Entertainment Annual Report 2017 | 71
Notes to Consolidated Financial Statements
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 the 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.
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.
72 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements 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 certain 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 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.
Corus Entertainment Annual Report 2017 | 73
Notes to Consolidated Financial Statements
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 assessed 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:
• fair value assessments on acquired identifiable assets and obligations;
• 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;
• determining fair value of share-based compensation;
• the recoverability of long-lived assets including property, plant and equipment, program rights, film
investments, goodwill, broadcast licenses and intangible assets;
• 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;
74 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements • 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
IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible Assets
The Company has adopted 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, effective September 1, 2016. Previously the Company
used the individual-film-forecast-computation method to determine amortization of film investments,
which is a revenue-based amortization model. The Company has segregated its film investments into two
categories: current productions and library or acquired productions. Current productions are considered
library productions immediately subsequent to their initial availability for licensing as they are considered
completed. Film investments are categorized as intangible assets by the Company, and therefore will
continue to be presented in the statements of financial position as long-term assets.
Current productions have been amortized using a declining balance method at rates ranging from 50 – 75%
at the time the episode becomes available for delivery and at annual rates ranging from 15 – 25% thereafter.
Library and acquired content is amortized using a declining balance method at rates ranging from 10 – 25%
annually. These amendments have been applied prospectively and resulted in no material impact on the
consolidated financial statements.
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 – Revenue 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.
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.
Corus Entertainment Annual Report 2017 | 75
Notes to Consolidated Financial Statements
4. ACCOUNTS RECEIVABLE
Trade
Other
Less allowance for doubtful accounts
2017
387,581
25,533
413,114
4,671
408,443
5. INVESTMENTS AND OTHER ASSETS
Investments in associates
Other assets
Balance - August 31, 2015
Increase in investment
Equity loss in associates
Return of capital from venture funds (note 20)
Dispositions
Fair value adjustment
Balance - August 31, 2016
Increase in investment
Equity loss in associates
Return of capital from venture funds (note 20)
Investment impairment
Derivative fair value (note 14)
Balance - August 31, 2017
INVESTMENTS IN ASSOCIATES
16,172
5,244
(5,933)
—
—
—
15,483
—
(2,675)
—
(2,250)
—
10,558
26,786
6,919
—
(1,684)
(697)
(48)
31,276
3,982
—
(1,218)
(3,000)
22,961
54,001
2016
357,503
25,734
383,237
3,376
379,861
Total
42,958
12,163
(5,933)
(1,684)
(697)
(48)
46,759
3,982
(2,675)
(1,218)
(5,250)
22,961
64,559
In assessing the level of control or influence that the Company has over an investment, management con-
siders 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
children 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:
76 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
Assets
Liabilities
Net assets
2017
11,340
782
10,558
2016
19,833
4,350
15,483
2016
(for the years ended August 31,)
8,834
Revenues
14,767
Expenses
Net loss for the year (1)
(5,933)
(1) The Company’s share of income and other comprehensive income reflect the weighted average proportion of its investment in
2017
6,544
9,219
(2,675)
associates.
OTHER
Other is primarily comprised of investments in venture funds totaling $30,289 (2016 – $26,968), as well as
the fair value of interest rate swaps of $22,961 (2016 – liability of $14,383). 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
Cost
Balance - August 31, 2015
Additions
Acquisitions (note 27)
Disposals and retirements
Balance - August 31, 2016
Additions
Disposals and retirements
Balance - August 31, 2017
Accumulated depreciation
Balance - August 31, 2015
Depreciation
Disposals and retirements
Balance - August 31, 2016
Depreciation
Disposals and retirements
Balance - August 31, 2017
Net book value
Balance - August 31, 2016
Balance - August 31, 2017
Broadcasting
and computer
equipment
Buildings and
leasehold
improvements
Furniture
and fixtures
Other
Total
125,245
110,182
17,770
6,072 264,808
14,369
76,666
(506)
5,985
46,355
(1,546)
664
1,900
22,918
5,016
2,962 160,875
(78)
(72)
(2,202)
Land
5,539
—
29,876
—
35,415
215,774
160,976
23,372
10,862 446,399
—
—
12,179
(1,002)
1,798
(144)
2,011
10,883
26,871
(664)
(65)
(1,875)
35,415
226,951
162,630
24,719
21,680 471,395
—
—
—
—
—
—
—
77,259
28,384
(1,014)
104,629
32,353
(414)
136,568
34,713
12,483
1,213 125,668
8,588
(454)
2,666
550
40,188
(47)
(47)
(1,562)
42,847
15,102
1,716 164,294
11,593
3,232
1,709
48,887
(5)
(627)
(808)
(1,854)
54,435
17,707
2,617 211,327
35,415
35,415
111,145
90,383
118,129
108,195
8,270
9,146 282,105
7,012
19,063 260,068
Included in property, plant and equipment are assets under finance lease with a cost of $26,060 at
August 31, 2017 (2016 – $26,167) and accumulated depreciation of $23,108 (2016 – $21,501).
Corus Entertainment Annual Report 2017 | 77
Notes to Consolidated Financial Statements
7. PROGRAM RIGHTS
Balance - August 31, 2015
Additions
Transfers from film investments (note 8)
Acquisitions (note 27)
Disposals (note 27)
Amortization
Balance - August 31, 2016
Additions
Transfers from film investments (note 8)
Amortization
Balance - August 31, 2017
Cost
Accumulated amortization
Net book value
315,899
454,824
5,897
287,631
(68,683)
(313,300)
682,268
470,078
6,716
(510,716)
648,346
2016
1,059,392
377,124
682,268
2017
1,044,532
396,186
648,346
The Company expects that approximately 42% of the net book value of program and film rights will be
amortized during the year ended August 31, 2018. The Company expects the net book value of program
and film rights to be amortized by September 2023.
8. FILM INVESTMENTS
Balance - August 31, 2015
Additions
Tax credit accrual
Transfer to program rights (note 7)
Investment recovery
Amortization
Balance - August 31, 2016
Additions
Tax credit accrual
Transfer to program rights (note 7)
Amortization
Balance - August 31, 2017
Cost
Accumulated amortization
Net book value
36,549
39,208
(2,828)
(5,897)
822
(22,690)
45,164
40,921
(14,683)
(6,716)
(23,958)
40,728
2016
997,931
952,767
45,164
2017
1,011,336
970,608
40,728
The Company expects that approximately 17% of the net book value of film investments will be amortized
during the year ended August 31, 2018. The Company expects the net book value of film investments to
be fully amortized by August 2022.
78 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
9. INTANGIBLES
Balance - August 31, 2015
Additions
Acquisitions (note 27)
Disposals (note 27)
Amortization
Balance - August 31, 2016
Additions
Amortization
Balance - August 31, 2017
Broadcast
Licenses (1)
956,984
—
78,300
(50,395)
—
984,889
—
—
984,889
Other (2)
17,631
122,621
987,540
(2,662)
(33,782)
1,091,348
12,439
(42,863)
1,060,924
Total
974,615
122,621
1,065,840
(53,057)
(33,782)
2,076,237
12,439
(42,863)
2,045,813
(1) Broadcast licenses are located in Canada.
(2) Other intangibles are comprised of brands, trade marks and software.
At August 31, 2017, other intangibles with a finite life consisted of:
Cost
Accumulated amortization
Net book value
2017
258,246
124,125
134,121
2016
247,483
82,933
164,550
The Company expects that approximately 29% of the net book value of intangible assets with a finite life
will be amortized during the year ended August 31, 2018. The Company expects the net book value of
intangible assets with a finite life to be fully 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,
2017, the Company performed its annual impairment test for fiscal 2017 and determined that there were
no impairments for the year then ended on indefinite life intangibles.
10. GOODWILL
Balance - August 31, 2015
Acquisitions (note 27)
Disposals (note 27)
Balance - August 31, 2016
Acquisitions (note 27)
Balance - August 31, 2017
Total
827,859
1,617,304
(54,511)
2,390,652
(3,000)
2,387,652
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. As at August 31, 2017, the Company performed its annual
impairment test for fiscal 2017 and determined that there were no impairments for the year then ended.
11. IMPAIRMENT TESTING
At each reporting date, the Company is required to assess its indefinite life 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.
Corus Entertainment Annual Report 2017 | 79
Notes to Consolidated Financial Statements
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 five 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 companies 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 key 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) and discount rates.
Segment profit growth rates 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. 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
ranges of values for each CGU or group of CGUs.
The pre-tax discount and growth rates used by the Company for the purpose of its VIU calculations
performed for each of the following groups of CGUs in the following years were:
2017
2016
Television
Managed brands
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
Other
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
Radio
Pre-tax discount rate
Earnings growth rate
Terminal growth rate
11.0% — 13.0%
-0.5% — 2.0%
2.0%
11.0% — 13.0%
-7.3% — 2.0%
2.0%
13.0 — 16.0%
0.7% — 4.3%
2.0%
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%
If the recoverable amount of a CGU or group of CGUs 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 in the CGU or group of CGUs pro rata on the
80 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
basis of the carrying amount for each asset in the CGU or group of CGUs. The individual assets in the CGU
cannot be written down below their FVLCS, 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 2017.
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.
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 broadcast license and goodwill impairment tests, would not have resulted in a material
change in either the broadcast license or goodwill impairment in the Radio segment.
The carrying amount 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)
2017
2016
852,905
7,424
31,341
21,851
21,775
21,303
28,290
984,889
852,905
7,424
31,341
21,851
21,775
21,303
28,290
984,889
2017
2016
Goodwill
Television (note 27)
Radio
2,323,553
67,099
2,390,652
(1) Broadcast licenses for Other consist of all other Radio CGUs combined. There is no individual Radio CGU that comprises more than
2,320,553
67,099
2,387,652
10% of the total broadcast license balance.
Corus Entertainment Annual Report 2017 | 81
Notes to Consolidated Financial Statements
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Program rights payable
Trade accounts payable and accrued liabilities
Dividends payable
Trade marks and distribution rights
Film investment accruals
Financing lease accruals
2017
184,612
162,384
39,183
24,097
2,859
2,526
415,661
2016
155,393
183,141
37,316
15,833
98
1,586
393,367
13. PROVISIONS
The Company recorded business acquisition, integration and restructuring charges of $31,983 (2016 –
$57,198) primarily related to severance and employee related costs as a result of changes to the manage-
ment structure and business operations. The Company anticipates that the portion of the balance related
to restructuring at August 31, 2017 will be substantially paid by fiscal 2018.
Balance - August 31, 2015
Additions
Payments
Balance - August 31, 2016
Additions
Payments
Balance - August 31, 2017
Current
Long-term
Balance - August 31, 2017
Restructuring
10,324
29,982
(18,611)
21,695
24,255
(30,336)
15,614
Onerous lease
obligation
—
—
—
—
7,336
(4,444)
2,892
Asset retirement
obligation
—
8,015
—
8,015
392
—
8,407
12,314
3,300
15,614
2,892
—
2,892
—
8,407
8,407
Other
206
379
—
585
—
—
585
585
—
585
Total
10,530
38,376
(18,611)
30,295
31,983
(34,780)
27,498
15,791
11,707
27,498
14. LONG-TERM DEBT
Bank loans
Unamortized financing fees
Total debt
Less: current portion of bank loans
2017
2,107,299
(15,719)
2,091,580
(172,500)
1,919,080
2016
2,218,055
(22,035)
2,196,020
(115,000)
2,081,020
Interest rates on the balance of the bank loans fluctuate with Canadian bankers’ acceptances and/or LIBOR.
As at August 31, 2017 the weighted average interest rate on the outstanding bank loans and Notes was 3.8%
(2016 – 4.7%). Interest on the bank loans and Notes averaged 4.7% for fiscal 2017 (2016 – 4.6%).
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,
2017.
CREDIT FACILITIES
In connection with the closing of the Acquisition of Shaw Media (the “Acquisition”), Corus established syn-
dicated 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
82 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
(the “Revolving Facility”), which was not drawn on as part of closing. The Term Facility and Revolving Facility
replaced 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 senior
unsecured guaranteed notes (“Notes”).
Advances under the Term Facility may be outstanding in the form of either prime loans or bankers’ accep-
tances 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 with-
out 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 revolv-
ing 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. As at August 31, 2017, all
of the Revolving Facility was available and could be drawn.
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 oth-
er comprehensive income. The estimated fair value of these agreements as at August 31, 2017 is $23.0
million, which has been recorded in the consolidated statements of financial position in other assets. 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
Corus Entertainment Annual Report 2017 | 83
Notes to Consolidated Financial Statements 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
Trade mark liabilities
Long-term employee obligations
Post employment benefit plans
Deferred leasehold inducements
Merchandising and intangibles liabilities
Unearned revenue
Public benefits associated with acquisitions
Financing lease accrual
Derivative fair value (note 14)
16. SHARE CAPITAL
AUTHORIZED
2017
252,504
72,921
31,226
25,030
19,151
14,728
13,116
11,385
2,288
—
442,349
2016
303,779
76,127
27,637
32,584
18,164
26,290
8,519
22,464
820
14,383
530,767
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 Pre-
ferred 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, 2017.
CLASS B SHARE SUBSCRIPTION RECEIPTS
In connection with the acquisition of Shaw Media Inc. (note 27), on February 3, 2016, Corus completed a
public equity offering (the “Equity Offering”) of 25.4 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
84 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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 con-
nection with the completion of the Acquisition and the net proceeds from the Equity Offering and the Con-
current Private Placement (including accrued interest thereon) were applied by Corus to partially fund the
cash consideration for the Acquisition.
ISSUED AND OUTSTANDING
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
Balance - August 31, 2016
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, 2017
Class A Voting Shares Class B Non-Voting Shares
#
3,425,792
$
26,529
#
83,754,787
$
968,042
Total
$
994,571
—
—
—
3,425,792
(4,000)
—
—
3,421,792
—
—
32,770,000
71,364,853
279,762
833,541
279,762
833,541
—
5,108,359
26,529 192,997,999
60,669
60,669
2,142,014 2,168,543
(31)
—
4,000
14,850
31
154
—
154
—
9,818,652
26,498 202,835,501
123,117
123,117
2,265,316 2,291,814
EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator (in thousands) used for the computation
of the basic and diluted earnings per share amounts:
Net income attributable to shareholders (numerator)
Weighted average number of shares outstanding (denominator)
Weighted average number of shares outstanding - basic
Effect of dilutive securities
Weighted average number of shares outstanding - diluted
2017
2016
191,665
125,931
201,065
131,783
304
75
201,369
131,858
The calculation of diluted earnings per share for fiscal 2017 excluded 2,487 (2016 – 2,509) 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.
Corus Entertainment Annual Report 2017 | 85
Notes to Consolidated Financial Statements
A summary of the changes to the stock options outstanding is presented as follows:
Outstanding - August 31, 2015
Granted
Forfeited or expired
Outstanding - August 31, 2016
Granted
Exercised
Forfeited or expired
Outstanding - August 31, 2017
Number of options
(#)
2,560,873
1,293,400
(100,400)
3,753,873
1,613,000
(14,850)
(95,173)
5,256,850
Weighted average
exercise price per share
($)
21.97
10.63
15.31
18.24
11.60
10.38
17.55
16.24
As at August 31, 2017, the options outstanding and exercisable consist of the following:
Range of exercise price ($)
10.38 – 10.99
11.00 – 12.11
12.12 – 20.80
20.81 – 22.79
22.80 – 25.40
Options outstanding
Weighted average
remaining
contractual life
(years)
Number
outstanding
(#)
1,102,450
1,613,000
574,500
857,800
1,109,100
5,256,850
5.9
6.6
3.1
1.8
3.6
4.7
Weighted
average
exercise price
($)
10.38
11.60
17.65
22.09
23.54
16.24
Options exercisable
Number
outstanding
(#)
Weighted
average
exercise price
($)
264,475
—
439,600
857,800
720,250
2,282,125
10.38
—
18.90
22.09
23.58
20.59
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 2017, the Company has recorded share-based compensa-
tion expense of $1,005 (2016 – $973). This charge has been credited to contributed surplus. Unrecognized
share-based compensation expense at August 31, 2017 related to the Plan was $609 (2016 – $679).
The fair value of each option granted in fiscals 2017 and 2016 was estimated on the date of the grant using
the Black-Scholes option pricing model with the following assumptions:
Granted in the first quarter of fiscal 2017 and vesting in fiscal:
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
2018
$ 0.64
0.7%
10.1%
27.2%
2019
$ 0.59
0.7%
10.1%
26.7%
2020
$ 0.56
0.8%
10.1%
26.2%
5
6
6
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)
2017
$ 0.79
0.7%
9.0%
27.0%
2018
$ 0.79
0.7%
9.0%
27.0%
2019
$ 0.48
0.7%
9.0%
22.1%
6
6
6
5
2021
$ 0.51
0.8%
10.1%
26.1%
7
2020
$ 0.88
0.6%
9.0%
27.6%
86 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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)
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.
2019
$ 0.25
0.9%
10.9%
22.3%
7
2017
$ 0.24
0.9%
10.9%
21.4%
2018
$ 0.36
0.9%
10.9%
24.9%
1.0%
10.9%
23.3%
7
2020
$ 0.28
6
6
On October 19, 2017, the Company granted a further 1,170,400 options for Class B Non-Voting Shares to
eligible officers and employees of the Company. These options are exercisable at $12.43 per share.
SHARE-BASED COMPENSATION
The following table provides additional information on the employee stock options, PSUs, DSUs and RSUs :
Balance - August 31, 2015
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2016
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2017
PSUs
#
955,896
392,777
86,865
(76,713)
(332,891)
1,025,934
484,625
100,687
(15,930)
(358,485)
1,236,831
DSUs
#
740,338
144,744
143,118
—
(25,833)
1,002,367
221,940
82,521
(134,697)
(30,390)
1,141,741
RSUs
#
149,568
165,660
13,275
(47,667)
(43,353)
237,483
205,324
25,052
(17,719)
(43,440)
406,700
Share-based compensation expense recorded for the fiscal year in respect of these plans was $8,266 (2016
– $3,223). As at August 31, 2017, 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 $18,243 (2016 – $20,869).
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.
Corus Entertainment Annual Report 2017 | 87
Notes to Consolidated Financial Statements
Date of record
September 15, 2016
October 17, 2016
November 15, 2016
December 15, 2016
January 16, 2017
February 14, 2017
March 15, 2017
April 14, 2017
May 15, 2017
June 15, 2017
July 17, 2017
August 15, 2017
Dividend yield of Class B shares
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 paid
September 30, 2016
October 31, 2016
November 30, 2016
December 30, 2016
January 31, 2017
February 28, 2017
March 31, 2017
April 28, 2017
May 31, 2017
June 30, 2017
July 31, 2017
August 31, 2017
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
Class A
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
Class A
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
Class B
Amount paid
$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
8.27%
Class B
Amount paid
$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%
The total amount of dividends declared in fiscal 2017 was $231,046 (2016 – $171,125).
On October 17, 2017, 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, 2017, December 28, 2017 and January 31,
2018 to the shareholders of record at the close of business on November 15, 2017, December 14, 2017 and
January 15, 2018, respectively.
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 fiscal 2017, the Company issued
9,818,652 Class B Non-Voting Shares, resulting in an increase in share capital of $123,117.
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 was to 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
88 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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. As at
September 1, 2017, Shaw ceased to participate in the DRIP.
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
Acturial
gains (losses)
on defined
benefit plans
Balance - August 31, 2015
7,145
526
(318)
—
Items that may be subsequently reclassified to income:
Total
7,353
Amount
Income tax
Transfer to net income
Items that will not be reclassified to income:
Amount
Income tax
Transfer to retained earnings
Balance - August 31, 2016
Items that may be subsequently reclassified to income:
Amount
Income tax
Items that will not be reclassified to income:
Amount
Income tax
Transfer to retained earnings
Balance - August 31, 2017
(49)
—
7,096
—
—
—
—
—
7,096
(643)
—
6,453
—
—
—
—
6,453
(40)
17
503
(597)
—
—
—
—
(13,950)
3,697
(10,571)
—
(14,039)
3,714
(2,972)
(597)
—
—
—
—
(4,746)
(4,746)
1,257
1,257
(3,489)
(3,489)
3,489
3,489
—
—
(94)
(10,571)
—
(3,569)
—
(298)
(392)
—
—
—
—
(392)
37,344
(9,896)
16,877
—
—
—
—
—
—
36,701
(10,194)
22,938
9,352
9,352
(2,478)
(2,478)
6,874
6,874
(6,874)
(6,874)
16,877
—
22,938
18. DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Direct cost of sales
Amortization of program rights (1)
Amortization of film investments
Other cost of sales
General and administrative expenses
2017
2016
510,716
23,958
27,614
313,300
22,690
22,450
Employee costs
Other general and administrative
232,583
169,277
760,300
(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.
324,898
213,739
1,100,925
Corus Entertainment Annual Report 2017 | 89
Notes to Consolidated Financial Statements
19. INTEREST EXPENSE
Interest on long-term debt
Imputed interest on long-term liabilities
Other
20. OTHER EXPENSE (INCOME), NET
Interest income
Foreign exchange gain
Equity loss of associates
Asset impairment (recovery) (note 5)
Venture fund distribution
Other
2017
103,054
51,519
2,143
156,716
2017
(1,045)
(12,157)
2,675
5,250
(2,904)
(772)
(8,953)
2016
63,340
45,429
2,093
110,862
2016
(827)
(339)
5,933
(822)
(533)
5,340
8,752
During the fourth quarter of 2017, the Company received cash proceeds of $4,122 relating to the disposal
of an investment, of which $1,218 relates to a return on capital, resulting in a gain of $2,904.
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.
21. INCOME TAXES
The significant components of income tax expense are as follows:
Current income tax expense
Deferred income tax expense (recovery)
Resulting from temporary differences
Resulting from the utilization of tax losses
Resulting from tax rate changes
Resulting from the creation of various future tax reserves
Other
2017
65,390
24,467
(6,585)
(526)
899
(1,147)
2016
64,129
(13,625)
(9,626)
(90)
898
(111)
Income tax expense reported in the consolidated statements of income
and comprehensive income
82,498
41,575
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
Differences from statutory rates relating to:
(Income) loss subject to tax at less than statutory rates
Non-deductible (non-taxable) portion of capital losses (gains)
Goodwill related to disposition
Transaction costs
Increase of various tax reserves
Miscellaneous differences
$
81,259
2017
%
26.5%
2016
$ %
48,998
26.5%
(27)
843
—
(440)
953
(90)
(0.0%) 8
0.3%
—%
(0.1%)
0.3%
(27,945)
14,402
4,445
235
(0.0%)
1,432
82,498
26.9%
41,575
0.0%
(15.1%)
7.8%
2.4%
0.1%
0.8%
22.5%
90 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
The movement in the net deferred tax asset (liability) was as follows:
Broadcast
Accrued
Fixed
Non-capital
Financing
licenses and
compen-
assets and
Program
loss carry
Invest-
and debt
other intangibles
sation
film assets
rights
forwards
ments
retirement
Other
Total
$
$
$
$
$
$
$
$
$
Balance - August 31, 2015
(258,228)
10,714
14,816
6,137
9,032
(2,094)
828
7,148
(211,647)
Recognized in profit or loss
12,719
3,081
3,451
(12,992)
9,626
1,352
8,758
(3,441)
22,554
Recognized in OCI
Recognized in equity
—
1,258
—
—
—
—
—
—
Acquisitions (dispositions)
(263,487)
7,665
(2,673)
40,198
—
—
40
104
—
—
3,696
3,230
—
—
5,058
3,230
—
14,736
(203,521)
Balance - August 31, 2016
(508,996)
22,718
15,594
33,343
18,698
(638)
16,512
18,443
(384,326)
Recognized in profit or loss
(558)
1,159
1,804
(16,312)
6,585
170
4,697
(14,654)
(17,109)
Recognized in OCI
Recognized in equity
—
(2,478)
—
—
—
—
—
—
—
—
(298)
(9,896)
—
—
—
(24)
(12,672)
(24)
Balance - August 31, 2017
(509,554)
21,399
17,398
17,031
25,283
(766)
11,313
3,765
(414,131)
At August 31, 2017, the Company had approximately $109,941 (2016 – $80,903) of non-capital loss
carryforwards available which expire between the years 2026 and 2036. A deferred income tax asset of
$25,283 (2016 – $18,698) has been recognized in respect of these losses and an income tax benefit of $2,568
(2016 – $1,478) has not been recognized.
At August 31, 2017, the Company had approximately $36,748 (2016 – $35,945) 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 2017 or 2016, 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
includes the production and distribution of films and television programs, merchandise licensing, book
publishing, animation software, media and technology services. Revenues are generated from advertising,
subscribers fees and the licensing of proprietary films and television programs, merchandise licensing,
publishing, animation software, media and technology service sales.
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.
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, business acquisition, integration and restructuring costs, impairments and certain
other income and expenses.
Corus Entertainment Annual Report 2017 | 91
Notes to Consolidated Financial Statements
REVENUES AND SEGMENT PROFIT
Year ended August 31, 2017
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Business acquisition, integration and restructuring costs
Television
1,529,792
965,425
564,367
Other income, net
Income before income taxes
Year ended August 31, 2016
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Gain on disposition
Debt refinancing
Business acquisition, integration and restructuring costs
Other expense, net
Income before income taxes
149,216
109,689
39,527
—
25,811
(25,811)
Radio Corporate Consolidated
1,679,008
1,100,925
578,083
91,750
156,716
31,983
(8,953)
306,587
Television
1,015,609
611,384
404,225
Radio
155,705
119,546
36,159
—
29,370
(29,370)
Corporate Consolidated
1,171,314
760,300
411,014
73,969
110,862
(86,151)
61,248
57,198
8,752
185,136
The following tables present further details on the operating segments within the Television and Radio
segments:
Revenues are derived from the following areas:
Advertising
Subscriber fees
Merchandising, distribution and other
2017
1,080,929
506,666
91,413
1,679,008
Revenues are derived from the following geographical sources, by location of customer:
Canada
International
2017
1,633,466
45,542
1,679,008
2016
661,818
405,728
103,768
1,171,314
2016
1,125,769
45,545
1,171,314
92 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
SEGMENT ASSETS AND LIABILITIES
2017
2016
Assets
Television
Radio
Corporate
Liabilities
Television
Radio
Corporate
CAPITAL EXPENDITURES BY SEGMENT
Television
Radio
Corporate
5,462,897
260,573
344,374
6,067,844
1,184,239
50,989
2,233,095
3,468,323
2017
14,449
2,135
10,405
26,989
5,581,543
266,239
245,603
6,093,385
1,240,959
56,092
2,319,987
3,617,038
2016
16,293
4,395
1,862
22,550
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
Cash and cash equivalents
Net debt
Shareholders’ equity
2017
2,091,580
(93,701)
1,997,879
2,599,521
4,597,400
2016
2,196,020
(71,363)
2,124,657
2,476,347
4,601,004
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 at the high end of these internally imposed objectives and is
committed to bringing the leverage ratio back to the lower end of the target range by the end of fiscal 2018.
Net debt to segment profit at August 31, 2017 was 3.46 times compared to 5.17 times at August 31, 2016.
Segment profit for the net debt to segment profit calculation reflects aggregate amounts reported by the
Company for the most recent four quarters; however, the prior year does not include segment profit from
the Shaw Media business prior to April 1, 2016. The decrease in net debt and net debt to segment profit in
fiscal 2017 reflects debt repayments and higher segment profit.
Corus Entertainment Annual Report 2017 | 93
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, 2017
Fair value
through
profit or loss
Loans and
receivables
Available-
for-sale
Other
financial
liabilities Derivatives
Cash and cash equivalents
93,701
—
Accounts receivable
—
408,443
—
—
30,289
—
—
—
—
—
—
—
—
93,701
408,443
30,289
—
—
—
—
—
—
Non-
financial
—
—
—
—
Total
carrying
amount
93,701
408,443
64,559
22,961
11,309
—
—
2,045,813
2,045,813
3,455,328
3,455,328
22,961
5,512,450
6,067,844
Investments
Intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities and
provisions
Other liabilities
Total liabilities
Investments
Intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities and
provisions
Other liabilities
Total liabilities
FAIR VALUES
As at August 31, 2016
Fair value
through
profit or loss
Loans and
receivables
Available-
for-sale
Other
financial
liabilities Derivatives
Cash and cash equivalents
71,363
—
Accounts receivable
—
379,861
—
—
—
—
—
—
—
—
—
—
—
—
—
—
431,452
2,091,580
440,940
—
—
2,963,972
—
—
—
—
—
—
—
431,452
2,091,580
13,116
491,235
454,056
491,235
504,351
3,468,323
Non-
financial
—
—
16,791
Total
carrying
amount
71,363
379,861
46,759
2,076,237
2,076,237
3,519,165
3,519,165
5,612,193
6,093,385
—
—
416,739
2,196,020
—
—
—
—
—
—
416,739
2,196,020
—
—
—
—
—
—
—
—
515,985
14,383
9,304
—
—
464,607
539,672
464,607
—
3,128,744
14,383
473,911
3,617,038
—
—
29,968
—
—
—
—
—
—
—
—
—
—
—
—
71,363
379,861
29,968
—
—
—
—
—
—
—
—
—
—
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. The long-term debt is regularly repriced to
floating market interest rates and as such, the carrying value of the Company’s bank loans approximate
their fair value.
94 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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. These Notes were retired in fiscal 2016.
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, 2017
Assets
Cash and cash equivalents
Interest rate swap
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities carried at fair value
As at August 31, 2016
Assets
Cash and cash equivalents
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities carried at fair value
Quoted prices in active markets for
identical assets or liabilities
Significant other
observable inputs
(Level 1)
(Level 2)
Significant
unobservable inputs
(Level 3)
93,701
—
93,701
—
—
—
22,961
22,961
—
—
—
—
—
—
—
Quoted prices in active markets for
identical assets or liabilities
Significant other
observable inputs
(Level 1)
(Level 2)
Significant
unobservable inputs
(Level 3)
71,363
71,363
—
—
—
—
14,383
14,383
—
—
—
—
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.
Corus Entertainment Annual Report 2017 | 95
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:
2017
2016
Trade
Current
One to three months past due
Over three months past due
Other
Less allowance for doubtful accounts
173,937
135,418
78,226
387,581
25,533
413,114
4,671
408,443
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
2017
3,376
4,340
—
(3,045)
4,671
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
The Company invoiced 8% of its revenues to one related party (2016 – 10%). This related party comprises
6% of the accounts receivable balance as at August 31, 2017 (2016 – 7%).
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, 2017 was $300,000 (2016 – $300,000). 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, 2017:
Total debt (1)
Accounts payable
Other obligations (2)
Total
Less than one year
One to three years
2,127,500
415,661
609,020
172,500
415,661
324,941
920,000
—
183,719
Beyond three years
1,035,000
—
100,360
(1) Principal repayments and interest payments
(2) Other obligations included financial liabilities, trade marks, other intangibles and CRTC commitments.
In fiscal 2017 the Company incurred interest on bank loans and swaps on credit facilities of $103,054 (2016
– $63,340 which included interest on Notes, which were retired during the year).
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:
96 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
Direct cost of sales, general and administrative expenses
Other expense, net
2017
88
(12,157)
(12,069)
2016
(247)
(339)
(586)
An assumed 10% increase or decrease in exchange rates as at August 31, 2017 would have an impact of
approximately $22,000 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, 2017 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
Provisions (current portion)
Income taxes payable and recoverable
Other long-term liabilities
Other
2017
(26,488)
(3,040)
(22,027)
(5,599)
(3,370)
3,395
(8,805)
(65,934)
Interest paid, interest received and income taxes paid and classified as operating activities are as follows:
Interest paid
Interest received
Income taxes paid
2017
105,694
1,045
66,249
2016
34,773
7,543
40,141
(4,866)
16,539
(53,659)
2,758
43,229
2016
66,722
827
42,788
26. GOVERNMENT FINANCING AND ASSISTANCE
Revenues include $8,993 (2016 – $3,201) 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 $951 (2016 – $879) 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
DISPOSITION OF 29% INTEREST IN THE COOKING CHANNEL (CANADA)
On December 12, 2016, the Company sold a 29% interest in 7202377 Canada Inc. (the “Cooking Channel”), a
subsidiary, to Scripps Network LLC for $7,500, the fair value at the date of the sale. Cash proceeds of $5,250
were received upon closing. Control of this subsidiary did not change, therefore a business combination did
not occur. As such, the Company continues to consolidate the Cooking Channel, but the transaction did give
rise to a non-controlling interest in the Cooking Channel. In accordance with IFRS 10 – Consolidated Financial
Corus Entertainment Annual Report 2017 | 97
Notes to Consolidated Financial Statements
Statements, an adjustment has been made to the carrying amounts of the non-controlling interests in these
consolidated financial statements related to the reallocation of equity interest to reflect the underlying
carrying value of the net assets of the Cooking Channel.
ACQUISITION OF SHAW MEDIA FROM A RELATED PARTY
On April 1, 2016, the Company acquired the shares of Shaw Media (the “Acquisition”) from Shaw
Communications Inc. (“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 a
value per share of $11.21 per share for an aggregate value of $800.0 million. These shares, although valued
at $11.21 per share, 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.
Shaw Media operated Global Television and 19 specialty television channels, and their online companions,
including Food Network Canada, HGTV Canada, HISTORY, Slice, National Geographic Channel and
Showcase. The Acquisition was a business combination between entities under common control and was
accounted for by the Company using the acquisition method. Final valuations of certain items are now
complete, therefore, the purchase price allocation was finalized as at February 28, 2017.
Fair value of net assets acquired
Assets
Cash
Accounts receivable
Prepaid expenses and other
Property, plant and equipment
Program and film rights
Intangibles
Total assets
Liabilities
215,971
Accounts payable and accrued liabilities
164,058
Other long-term liabilities
203,521
Deferred income tax liabilities
583,550
Total liabilities
1,199,995
Total identifiable net assets at fair value
Goodwill arising on acquisition (1)
1,611,965
(143,290)
Value of non-controlling ownership interest
2,668,670
Purchase price
(833,541)
Class B Non-Voting share consideration
Cash consideration
1,835,129
(1) Goodwill arises principally from the ability to leverage media content, the reputation of assembled workforce and future growth.
13,153
243,534
12,512
160,875
287,631
1,065,840
1,783,545
Goodwill is not deductible for tax purposes.
PRO FORMA 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:
Pro forma
(unaudited) (2)
1,781,793
Revenues
Net income attributable to shareholders
192,438
(1) Revenues of $407.3 million and net income attributable to shareholders of $69.4 million are included in the consolidated statements
As currently
reported (1)
407,293
69,370
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.
98 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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 Corus’ 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.
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 ceased. As a result,
amortization in the Television segment for the year 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 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 2017, rental
expenses in direct cost of sales, general and administrative expenses totalled approximately $31,861 (2016
– $29,884). 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
2017
38,786
115,599
277,773
432,158
2016
39,755
122,175
305,994
467,924
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:
Corus Entertainment Annual Report 2017 | 99
Notes to Consolidated Financial Statements
Within one year
After one year but not more than five years
More than five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
2017
Minimum
payments
Present value
of payments
Minimum
payments
2,709
2,407
—
5,116
301
4,815
2,526
2,289
—
4,815
—
4,815
1,702
888
—
2,590
184
2,406
2016
Present value
of payments
1,586
820
—
2,406
—
2,406
PURCHASE COMMITMENTS
The Company has entered into various purchase commitments at August 31, 2017 as detailed in the
following table:
Other obligations (2)
Purchase obligations (1)
4 - 5 years More than 5 years
4,242
781
Total contractual obligations
5,023
(1) Purchase obligations are contractual obligations under contracts relating to program rights, satellite and signal transport costs, and
1,009,032
173,469
1,182,501
352,771
71,611
424,382
504,897
44,093
548,990
147,122
56,984
204,106
Total Within 1 year
2 - 3 years
various other operating expenditures that the Company has committed to, for periods ranging from one to ten years.
(2) Other obligations included 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.
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, manage-
ment 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, include 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, em-
ployment 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 pro-
visions is not reasonably quantifiable, as certain indemnifications are not subject to a monetary limitation.
As at August 31, 2017, 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% (2016 – 6%) of an employee’s earnings, not exceeding the limits set by
the Income Tax Act (Canada). The amount contributed in fiscal 2017 related to the defined contribution plans
was $7,532 (2016 – $6,152). The amount contributed is approximately the same as the expense included in
the consolidated statements of income and comprehensive income.
100 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
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 employee’s 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 for certain senior executives, 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
2017
17,662
1,405
—
609
(484)
(339)
(278)
18,575
2016
15,017
854
122
606
(484)
1,551
(4)
17,662
The weighted average duration of the defined benefit obligation of the supplemental executive retirement
plans at August 31, 2017 is 16.9 years.
The tables below show the significant weighted-average assumptions used to measure the pension
obligation and costs for this plan.
Accrued benefit obligation
Discount rate
Rate of compensation increase
Benefit cost for the year
Discount rate
Rate of compensation increase
2017
3.50%
2.50%
2017
3.60%
3.00%
2016
3.50%
3.00%
2016
4.10%
3.00%
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2017
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, 2017
3,131
569
548
Pension
expense for
fiscal 2017
179
116
311
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.
Corus Entertainment Annual Report 2017 | 101
Notes to Consolidated Financial Statements
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
REGISTERED PENSION PLANS
2017
1,405
—
609
2,014
2016
854
122
606
1,582
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
Effect of changes in demographic assumptions
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
Effect of asset ceiling limit
2017
208,297
—
6,138
7,408
825
(9,164)
2,387
(5,610)
(1,579)
208,702
200,134
—
7,532
825
7,024
(9,164)
(1,024)
(2,892)
202,435
(1,496)
Fair value of plan assets, end of year, net of asset ceiling limit
Accrued benefit liability and plan deficit, end of year
The weighted average duration of the defined benefit obligation at August 31, 2017 is 18.4 years.
The plan assets at August 31, are comprised of investments in pooled funds as follows:
200,939
7,763
Equity - Canadian
Equity - Foreign
Fixed income - Canadian
2017
51,800
33,889
116,746
202,435
The underlying securities in the pooled funds have quoted prices in an active market.
102 | Corus Entertainment Annual Report 2017
2016
9,570
182,723
2,411
3,359
433
(3,088)
—
12,264
625
208,297
9,978
173,827
5,083
433
3,212
(3,088)
(760)
11,449
200,134
—
200,134
8,163
2016
53,445
28,882
117,807
200,134
Notes to Consolidated Financial Statements
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
2017
3.60%
2.50%
2017
3.60%
3.00%
2016
3.50%
3.00%
2016
3.90%
3.00%
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2017
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 - 1% increase
As at August 31, 2017
benefit obligation
38,462
5,660
Fiscal 2017
benefit cost
2,927
930
Weighted average duration of defined benefit obligation in years
Effective discount rate 1% decrease
18.40
n/a
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 costs
Pension expense
2017
6,138
429
6,567
2016
2,411
679
3,090
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.
Corus Entertainment Annual Report 2017 | 103
Notes to Consolidated Financial Statements
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
2017
16,829
—
607
590
(568)
—
(281)
90
17,267
2016
797
20,108
327
345
(338)
(3,156)
836
(2,090)
16,829
The weighted average duration of the defined benefit obligation of the post-retirement plans at August
31, 2017 is 20.9 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
2017
3.65%
0.00%
2017
3.65%
3.00%
2016
3.00%
3.00%
2016
3.90%
3.00%
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2017
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
Trend rate - 1% increase
Benefit obligation at
August 31, 2017
3,443
3,174
Service and
interest costs
fiscal 2017
(64)
101
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
104 | Corus Entertainment Annual Report 2017
2017
607
590
1,197
2016
327
345
672
Notes to Consolidated Financial Statements
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”) and its subsidiaries for the benefit of descendants 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, 2017, JR Shaw as Chair, five other members of his
family and one independent director. 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 and its subsidiaries are, and as long as they own a majority of the Class A Voting
Shares, they 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 by two directors
on the Company’s Board.
SFLT and its subsidiaries also maintain voting control 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 in fiscal 2016 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 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 Voting Shares and Class
B Non-Voting 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
$131,381 (2016 – $112,626), and $1,081 (2016 – $4,803) of production and distribution revenues from Shaw.
In addition, the Company paid cable and satellite system distribution access fees of $13,097 (2016 – $8,696),
administrative and other fees of $2,301 (2016 – $4,685), and issued dividends of $88.0 million (2016 – $34.4
million) to Shaw. At August 31, 2017, the Company had $34,571 (2016 – $26,691) receivable from and $429
(2016 – $75) payable to Shaw.
Corus Entertainment Annual Report 2017 | 105
Notes to Consolidated Financial Statements The Company provided Shaw with interactive impressions, radio and television spots in return for television
advertising. No monetary consideration was exchanged for these transactions and no amounts were
recorded in the accounts.
SIGNIFICANT SUBSIDIARIES
The following table includes the significant subsidiaries of the Company:
Name
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
W Network Inc.
YTV Canada Inc.
Jurisdiction
Alberta
Canada
Canada
Nova Scotia
Canada
Canada
Canada
Ontario
Canada
Canada
Canada
Canada
2017
100%
100%
100%
100%
71%
100%
67%
100%
100%
100%
100%
100%
Equity interest
2016
100%
100%
100%
100%
71%
100%
67%
100%
100%
100%
100%
100%
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)
2017
15,609
1,757
5,292
22,658
2016
9,518
1,582
2,829
13,929
Except for the President and Chief Executive Officer, the Executive Vice President and Chief Financial
Officer, the Executive Vice President and Chief Operating 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, the Executive Vice President and
Chief Operating Officer, due to their employment agreements 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.
106 | Corus Entertainment Annual Report 2017
Notes to Consolidated Financial Statements
31. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously
presented to conform to the presentation of the 2017 consolidated financial statements.
32. SUBSEQUENT EVENTS
On October 18, 2017, the Company announced that it had entered into an agreement with Bell Media Inc.
(“Bell”) to sell its 100% interests in the French-language specialty channels, Historia and Séries+ s.e.nc.
(“H&S”). This transaction requires approval from the Competition Bureau and the CRTC. The total value of
the transaction is approximately $200.0 million and is subject to customary price adjustments upon closing.
The sale is pending approval by the CRTC and the Competition Bureau.
Corus Entertainment Annual Report 2017 | 107
Notes to Consolidated Financial Statements 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:
AST Trust Company (Canada)
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.astfinancial.com/ca-en/
Annual General Meeting
January 10, 2018
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”)
AST Trust Company (Canada) 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.astfinancial.com/ca-en/ 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 are
important to the proper functioning of
the Company and the enhancement of
the interests of its shareholders.
The Company’s Charter of the
Board of Directors and Management
Information Circular which includes a
Statement of Corporate Governance
Practices 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.
FSC Logo
Corus Entertainment Annual Report 2017 | 109