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annual report
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contents
4
Financial Highlights
51
Independent Auditor’s Report
6 Message to Shareholders
9 Our Achievements in 2020
10 About Us
12 Our Brands
14 Board of Directors
Executive Leadership Team
Officers
15 Management’s
Discussion and Analysis
53 Consolidated Statements
of Financial Position
54 Consolidated Statements
of Income and Comprehensive
Income
55 Consolidated Statements of
Changes in Equity
56 Consolidated Statements
of Cash Flows
57 Notes to Consolidated
Financial Statements
50 Management’s Responsibility
for Financial Reporting
101 Corporate Information
Corus Entertainment Annual Report 2020 | 3
financial
highlights
20
20
$1,511
million
consolidated revenue
$296
million
free cash flow
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0
Total Bank Debt ($b)
(-$480 million)
(-$230 million)
August 31
2018
August 31
2019
August 31
2020
$506
million
consolidated segment profit
3.18x
net debt to
segment profit
as at August 31
$1,506
million
total bank debt
as at August 31
4 | Corus Entertainment Annual Report 2020
ANNUAL SELECTED FINANCIAL INFORMATION(1)
The following table presents summary financial information for Corus for each of the listed years ended August 31:
(in millions of Canadian dollars, except per share amounts)
Revenues
Segment profit (2)
Net income (loss) attributable to shareholders
Adjusted net income attributable to shareholders (2)
Basic earnings (loss) per share
Adjusted basic earnings per share (2)
Diluted earnings (loss) per share
Free cash flow(2)
Total assets
Total bank debt
Cash dividends declared per share
Class A Voting
Class B Non-Voting
2020
1,511.2
505.8
(625.4)
158.1
$(2.98)
$0.75
$(2.98)
296.2
3,970.9
1,506.1
$0.2350
$0.2400
2019
1,687.5
585.1
156.1
181.0
$0.74
$0.85
$0.74
310.0
4,672.3
1,731.7
$0.1763
$0.1800
Notes:
(1) For further information, refer to the Management’s Discussion and Analysis on page 15.
(2) Segment profit, adjusted net income attributable to shareholders, adjusted basic earnings per share, and free cash flow do not have
standardized meanings prescribed by IFRS. The Company believes these non-IFRS measures are frequently used as key measures to
evaluate performance. For definitions, explanations and reconciliations refer to the “Key Performance Indicators” section of Management’s
Discussion and Analysis on page 27.
FISCAL 2020 FINANCIAL PROFILE
Business Segment
Revenues
Sources of Revenue
Business
Segment Profit
television
93%
advertising
61%
television
97%
radio
7%
merchandising,
distribution
and other
7%
subscriber
32%
radio
3%
Corus Entertainment Annual Report 2020 | 5
message to
shareholders
1. Transforming how we sell television. We have been
successful in advancing our advertising technology roadmap
and as an industry have come together to adopt common
audience segments, an emerging best practice to optimize
the effectiveness of advertising campaigns. This industry
initiative is unique to Canada and reaches nearly 90% of
English-language television viewers.
2. Putting more content in more places as we pursue new and
emerging digital platforms. STACKTV is a runaway hit, now
with 300,000 subscribers since its launch in June 2019.
3. International content licensing with our ever-expanding
slate of great content is fueling growth and revenue
diversification.
4. Maintaining financial strength with sufficient liquidity to
navigate challenging times. We remain intensely focused
on free cash flow, enabling us to pay down our bank debt to
create financial flexibility, advance our strategic priorities, and
support our dividend.
As we turn the corner on fiscal 2020 we have delivered strong
results with:
• Consolidated revenues of $1,511 million;
• Consolidated segment profit of $506 million;
• Resilient free cash flow of $296 million; and
• Improved financial flexibility with bank debt repayments of
$230 million this past year.
our strategic plan
Corus has a rigorous strategic planning discipline that was
maintained in 2020 despite the year’s challenges. We are
confident that this plan will deliver consolidated revenue growth
year over year.
Our plan consists of five strategic priorities:
Create a Great Place to Work – People and culture bring ideas
to life and will drive our long-term success. This is
our foundation and it’s integrated into our strategic
thinking. We aspire to build an even stronger,
diverse and more inclusive high-performance
culture that attracts and retains talented people,
supports local communities, and creates opportunities for
innovation and growth.
Fiscal 2020, our 20th year as a public
company, was a year like no other. We were
off to a promising start with a strong first
half. Then, the COVID-19 pandemic arrived
and turned the year on its head.
As we rapidly pivoted to serve our stakeholders in new ways,
we were particularly reminded of the critical role that our news
organization plays in society. Our team executed extremely
well as they provided essential services to Canadians and
maintained business continuity.
At the outset of the pandemic, we experienced immediate
wide-spread cancellations of advertising campaigns which
significantly impacted our advertising revenues, followed
by a period of stabilization and then recovery, which is well
underway. Our latest chapter of this story “Up and to the Right”
is characterized not only by advertising recovery, it also reflects
our outlook for overall, consolidated revenue.
No matter what the chapter, our resilient team at Corus has
been there to serve the needs of our audiences and local
communities, and to help our advertising clients navigate the
challenging environment.
Importantly, we have not lost strategic focus and are well
positioned to emerge stronger. We made great strides in 2020
as we create future growth opportunities by further advancing
our strategic priorities and achieving our financial objectives
during this most unusual time.
These steps are creating a “new” Corus focused on revenue
diversification and delivering future financial flexibility, and include:
6 | Corus Entertainment Annual Report 2020
Build a Content Powerhouse – Great content is truly at the
Operate with Discipline – Every single day we bring rigour and
heart of our success. We aspire to acquire and
create more of it. This means deepening strategic
studio partnerships as we work to create two-
way content relationships. We continue to secure
long-term access to multi-platform rights such as
the acquisition of exclusive rights to NBCUniversal’s Peacock
Originals. As a content creator, through Nelvana and Corus
Studios, we are already benefitting from the insatiable global
demand for premium video content. We secured increased
sales during the pandemic as more and more distributors
discover our high quality shows. By creating content that
delights audiences on our networks in Canada, we set ourselves
up for success with international licensing sales, where
countless opportunities abound.
Connect with Audiences – Our audiences are in control of
when, where and how they want to consume
content and we need to be where they are. We have
seen impressive subscriber gains since launching
STACKTV in June 2019 and are successfully
reaching new audiences outside of the traditional
cable bundle. This business has become incredibly valuable,
almost overnight it seems, and we are intensely focused on
accelerating its growth trajectory.
We continue to improve our value proposition for subscribers
that access our networks through traditional television service
providers. This year we launched our expanded Global TV App,
putting our great content in more places. Now available on iOS,
Android, Chromecast, Amazon Fire TV, Apple TV and Roku
streaming devices, we are working to make the Global TV App
even more accessible to those inside the cable bundle. Our
focus on these and other ad-supported digital initiatives and
platforms will serve the changing needs of audiences, create
new advertising inventory and accelerate our revenue growth in
the years to come.
Help Brands Grow – Advertising will always play a critical role in
media. At Corus, we are transforming how television
is sold. Our portfolio of innovative, client-centric
solutions is continually adapting to meet the needs
of our advertisers. As mentioned earlier, Canada’s
largest broadcasters announced this year the
adoption of common audience segments, breaking new ground
globally in the TV advertising industry. We believe this common
audience segment standard will catalyze the reallocation of
a portion of advertising dollars from digital back to television,
something we experienced in the pre-pandemic era with TV
advertising revenue growth of 7% in 2019. This upcoming year’s
exciting news is the long awaited scaling of CYNCH, our automated
buying platform, which allows our advertisers to buy audience
segments in an automated self-service fashion. We are confident
that these solutions will transform how TV is sold and increase
its value through better targeting and ease of use, offering a
compelling alternative to what is offered by our digital competitors.
financial discipline to our decision-making as we
allocate capital within the business. Investments
in technology, for example, are foundational to
spur revenue growth and improve productivity. We
are seeing a meaningful adoption by advertisers
of common audience segment selling. The next stage of our
technological transformation is a significant upgrade to our
internal systems and processes. This will establish a significant
competitive advantage for Corus in the years to come. Lastly, we
have a demonstrable track record of expense control discipline
and emerging learnings from this pandemic will benefit our cost
structure as the quarters unfold in the year ahead.
consistent overall revenue growth
in the years ahead
We have a lot of conviction in this plan to achieve consistent
overall revenue growth in the years ahead.
We will deliver advertising revenue growth by:
• Further expanding common and custom audience segment
selling;
• Scaling CYNCH, our automated advertising buying platform;
• Rolling out additional advanced advertising solutions; and
• Expanding our presence across digital platforms.
We will achieve growth in subscriber revenue as we more than
offset gradual declines in the traditional television distribution
system with accelerating growth in new platforms such as
STACKTV.
We will deliver double-digit growth in our Content business.
Our ambition is to create and accelerate sales from our slate of
owned content at Nelvana and Corus Studios.
We will remain intensely focused and disciplined as to how we
manage and deliver strong cash flow to reduce bank debt,
fund dividends and provide the necessary financial flexibility to
pursue our strategic priorities.
Our team is also doing meaningful work in positioning our
company to be a stronger, purpose led organization, which is
epitomized by our commitment to shared value creation for all
of our stakeholders. We recognize the importance of enhancing
our performance as a responsible corporate citizen and as an
essential service.
Our intense focus on minimizing our impact on the environment,
giving back to our communities, delivering strong governance,
and embracing a strong commitment to diversity and inclusion is
central to the philosophy at Corus. Creating a great place to work
for our team is part of our future and it is how we will further build
our competitive advantage in the years to come.
Doug Murphy
Heather Shaw
President and CEO
Executive Chair
Corus Entertainment Annual Report 2020 | 7
One
great
show
after
another.
8 | Corus Entertainment Annual Report 2020
our achievements in
We have made great strides in 2020, our 20th year as a public company, as we
position Corus for future growth, further advancing our strategic priorities and
achieving our financial objectives during this most unusual time.
20
20
transform how we
sell television
put more
content
in more
places
• Industry leading portfolio of advanced
advertising solutions
• Industry solution reaches over 90% of English-
language TV with 19 common audience
segments
• Automated buying platform CYNCH is slated
for full scale launch in fiscal 2021
• Global TV is broadly available through mobile
apps, the web and connected TVs. The Global
TV app includes Global TV plus up to eight
Specialty services and ten 24/7 Global News
live streams
• STACKTV has attracted 300,000 subscribers
since launch in June 2019
• Actively pursuing advertising-supported video
on demand (AVOD) opportunities
pursue global
content sales
maximize financial
strength and flexibility
• International content licensing with Corus
Studios and Nelvana’s ever-expanding slate of
great content is fueling growth and revenue
diversification
• Multi-season lifestyle, factual reality and
children’s series are sold in the U.S. and around
the world
Invest in the
Future
Pay Down
Debt
Return Cash to
Shareholders
• We remain intensely focused on free cash flow
• Our balanced capital allocation policy has been
designed to pay down our bank debt to create
financial flexibility, invest in the future and
support our dividend
Corus Entertainment Annual Report 2020 | 9
Strategic Pillars and Priorities
Create
a great place
to work
Build
a content
powerhouse
Connect
with
audiences
Help
brands
grow
Operate
with
discipline
Create engaging
content and brand
experiences
approach to
everything we do
Take a client-centric
Embrace technology
Create a diverse
and inclusive culture
Build the capability
and career �exibility
of our people
Foster employee
engagement and
well-being
Secure long-term
access to
multiplatform
rights from studio
partners
Extend our
leadership role in
creating original
Canadian content
Reach and interact
with consumers on
new platforms
Build and deliver
innovative advertising
solutions
Develop a unified
view of audiences
and their behavior
Become a trusted
authority in marketing
effectiveness
Grow our slate of
owned content for
international sales
about
to support revenue
growth and improve
productivity
Bring rigor and
financial discipline to
decision making
Challenge regulatory
barriers that inhibit
growth
our strategic plan
We committed to emerging from the COVID-19 pandemic stronger, and, in doing so, have taken a long look
inward at our culture, and outward at the global forces we can harness to grow and thrive in an extremely
dynamic media landscape. Our plan consists of five strategic priorities:
Create
a great place
to work
Build
a content
powerhouse
Connect
with
audiences
Help
brands
grow
Operate
with
discipline
corporate social
responsibility
Corus Entertainment has a long and
successful track record of corporate social
responsibility (CSR) that encompasses four
pillars which include people, communities,
industry and the environment.
PEOPLE
COMMUNITIES
INDUSTRY
ENVIRONMENT
Support the engagement
and well-being of our
people in a values-based
inclusive culture where
diversity is embraced and
all people have opportunity
to develop their potential
Strengthen the
communities where
we live with a focus on
supporting the health
and well-being of
families and children
Strengthen the media
and entertainment
industry in Canada -
supporting Canadian
content creators
with a focus on
underrepresented
groups
Build a green,
sustainable
environment for
our people, and the
guests and clients
we welcome into our
workplaces
10 | Corus Entertainment Annual Report 2020
creating a great place to work
Corus is committed to creating a culture where employees can grow, thrive
and excel. This includes an even greater commitment and action plan to
foster an inclusive culture that celebrates diversity and encourages innovation
and collaboration. Through well-being initiatives, employee engagement
opportunities, volunteerism, strong leadership, a commitment to diversity and
inclusion, and a high-performance workplace, our people continue to foster
an award-winning corporate culture. Corus was named one of Canada’s Most
Admired Corporate Cultures by Waterstone and in 2020, was recognized as one of
Canada’s Top Employers for Young People and Greater Toronto’s Top Employers.
Corus people are passionate about giving
back to our local communities and fostering
a strong and sustainable media industry
Enriching our communities through corporate donations, sponsorship and
volunteer opportunities is an integral part of our DNA. Our people have embraced
the philosophy of giving back by supporting meaningful causes locally and nationally
while working together to make a difference. Under the Corus Cares banner, our
mission is to strengthen the communities where we live with a focus on supporting
the health and well-being of families and children.
Our unique position as an integrated broadcaster, producer and distributor of
original content gives us a distinct advantage as we work with strong homegrown
Canadian talent and showcase premium original content to global audiences.
We are committed to telling diverse stories and partner with organizations that
support and celebrate the Canadian screen-based media industry through diversity
programs and focused mentorship opportunities.
in 2020, we helped raise
$21.6 million
500 charitable
for over
organizations across Canada
engaging audiences with news and entertainment
during extraordinary times
It’s at times like these that we are particularly reminded of the critical role
that our news organization plays in our society. Our Global News team
remains committed to serving audiences with accurate, timely and fact-
based information through our multiple platform offerings to ensure
Canadians have the latest information on the pandemic, and its impact on
society, health-care and the economy, offering around-the-clock news
and information across platforms when its needed the most.
we’re committed to environmental initiatives
to ensure a more sustainable future
Corus’ commitment to environmental initiatives continues
to ensure a sustainable future through the implementation
of green practices at all of our offices across the country.
The Company’s executive headquarters, with its LEED®
Gold Certification, is designed to reduce power and water
consumption, with energy efficient lighting, a five-storey bio-
wall for air filtration, a green roof, a rainwater collection system
and the use of local and recycled materials in its design.
*Some images used in this report were taken before the COVID-19 pandemic.
Corus Entertainment Annual Report 2020 | 11
Corus Television
Conventional Stations
B.C.
Okanagan
Lethbridge
Calgary
Edmonton
Saskatoon
Regina
Winnipeg
Toronto
Durham
Peterborough
Kingston
Montreal
New Brunswick
Halifax
*
Lifestyle
Drama
Kids
Original Content
Multi-Platform Presence
premium
VOD
12 | Corus Entertainment Annual Report 2020
12 | Corus Entertainment Annual Report 2020
*Channel to be discontinued effective December 31, 2020
Corus Radio
Vancouver, British Columbia
CHMJ-AM
AM730 All Traffic
All The Time
CKNW-AM
Global News Radio
980 CKNW
Calgary, Alberta
Edmonton, Alberta
CHQR-AM
Global News Radio
770 CHQR
CFGQ-FM
Q107 Rock’s
Greatest Hits
CFOX-FM
The World
Famous CFOX
CFMI-FM
Rock 101
Vancouver’s
Greates Hits
CKRY-FM
Country 105
Today’s Country
CHED-AM
630 CHED
CHQT-AM
Global News Radio
880 Edmonton
CISN-FM
CISN Country
103.9
CKNG-FM
92.5 The CHUCK
Winnipeg, Manitoba
CJOB-AM
Global News Radio
680 CJOB
Barrie/Collingwood, Ontario
CJGV-FM
Peggy @ 99.1
CJKR-FM
Power 97
CHAY-FM
Fresh 93.1
CIQB-FM
Big 101
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 CHML
CING-FM
Energy 95.3
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 FM
Toronto, Ontario
CFMJ-AM
Global News Radio
640 Toronto
CFNY-FM
102.1 the Edge
CILQ-FM
Q107
Corus Entertainment Annual Report 2020 | 13
Corus Entertainment Annual Report 2020 | 13
board of
directors
Heather Shaw
Chair of the Board of Directors
Doug Murphy
Fernand Bélisle
Independent Lead Director
Member of the Human Resources and
Compensation Committee
Michael Boychuk
Member of the Audit Committee
Member of the Human Resources and Compensation
Committee
Alex Carloss
Stephanie Coyles
Michael D’Avella
Member of the Audit Committee
Member of the Corporate Governance Committee
Sameer Deen
Mark Hollinger
Chair of the Corporate Governance Committee
Member of the Audit Committee
Barry James
Chair of the Audit Committee
Catherine Roozen
Chair of the Human Resources and
Compensation Committee
Julie Shaw
Vice Chair of the Board of Directors
Member of the Corporate Governance Committee
executive
leadership
team
Doug Murphy
President and Chief Executive Officer
Colin Bohm
Executive Vice President,
Content and Corporate Strategy
Cheryl Fullerton
Executive Vice President,
People and Communications
John Gossling, FCPA, FCA
Executive Vice President and Chief Financial Officer
Shawn Kelly
Executive Vice President, Technology
Greg McLelland
Executive Vice President and Chief Revenue Officer
Sabah Mirza*
Executive Vice President and General Counsel
Troy Reeb
Executive Vice President Broadcast Networks
officers
Heather Shaw
Executive Chair
Executive Leadership Team
All members of the Executive Leadership Team
are Officers of the Company.
* Sabah Mirza replaced Dale Hancocks as Executive Vice President
and General Counsel effective November 23, 2020. Dale Hancocks
remained an Officer of the Company until December 11, 2020
14 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis of the financial position and results of operations for the year ended
August 31, 2020 is prepared at October 21, 2020. The following should be read in conjunction with the Company’s
August 31, 2020 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 (“IASB”) 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, segment profit margin, adjusted segment profit, adjusted net
income attributable to shareholders, 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 the Key Performance Indicators
section of 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”). These forward-looking statements relate to, among
other things, our objectives, goals, strategies, intentions, plans, estimates and outlook, including our anticipation
of generating sufficient free cash flow to sustain our dividend through fiscal 2021, advertising, distribution,
merchandise and subscription revenues, operating costs and tariffs, taxes and fees, currency value fluctuations
and interest rates, and can generally be identified by the use of words such as “believe”, “anticipate”, “expect”,
“intend”, “plan”, “will”, “may” and other similar expressions. The forward looking information contained in this
document includes, but is not limited to: expected timing for certain legislative changes; Corus’ anticipated
indebtedness and pro forma leverage and dividend yield targets. 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, 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 “Critical Accounting
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, our ability to source desirable content, currency
value fluctuations, technology developments and assumptions regarding the stability of laws and governmental
regulation and policies and the interpretation or application of those laws, regulations and policies, 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 cable networks; our ability to recoup production costs, the availability of tax credits
and the existence of co-production treaties; our ability to compete in any of the industries in which we do
business; the opportunities (or lack thereof) that may be presented to and pursued by us; conditions in the
entertainment, information and communications industries and technological developments therein; changes
Corus Entertainment Annual Report 2020 | 15
MANAGEMENT’S DISCUSSION AND ANALYSIS
in laws, regulations and policies or the interpretation or application of those laws, regulations and policies; our
ability to integrate and realize anticipated benefits from our acquisitions and to effectively manage our growth;
our ability to successfully defend ourselves against litigation matters arising out of the ordinary course of
business; failure to meet covenants under our senior credit facility; epidemics, pandemics or other public health
crises, including the ongoing novel coronavirus (“COVID-19”) outbreak; and changes in accounting standards.
Additional information about these factors and about the material assumptions underlying such forward-looking
information 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.
When relying on our forward-looking information to make decisions with respect to Corus, investors and others
should carefully consider the foregoing factors and other uncertainties and potential events. Unless otherwise
specified, all forward-looking information in this document speaks as of the date of this document. Unless
otherwise required by applicable securities laws, Corus disclaims any intention or obligation to publicly update
or revise any forward-looking information whether as a result of new information, events or circumstances that
arise after the date thereof or otherwise.
The following discussion describes the significant changes in the consolidated results from operations.
OVERVIEW
Corus 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 34 specialty television networks, 15 conventional television
stations, 39 radio stations, digital assets, a social media digital agency, a social media creator network, and a
global content business, book publishing, animation software, and 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 34 specialty television networks, 15 conventional television stations,
digital assets, a social media digital agency, a social media creator network, technology and media services, and
the Corus content business, which includes the production and distribution of films and television programs,
merchandise licensing, book publishing, and animation software. On December 31, 2019, Corus ceased operation
of the FYI channel. On September 30, 2019, Corus ceased operation of the Cosmo TV and IFC channels. On
March 22, 2019, Corus sold its interest in the Telelatino (“TLN”) group of seven networks.
Revenues for the specialty television networks are generated from both advertising and subscribers, while
revenues from the conventional television stations are derived primarily from advertising. Revenues for the
content business are generated from the licensing of proprietary films and television programs, merchandise
licensing, book publishing, and animation software. Media and technology services revenues are generated
principally from the provision of services. 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, mobile
apps and connected TVs. 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.
16 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
KEY FINANCIAL INFORMATION
The following table presents key summary financial information for Corus, its operating segments, and a reconciliation of
segment profit to net income for each of the listed years ended August 31:
(in millions of Canadian dollars, except per share amounts)
2020
2019
Revenues
Television
Radio
Consolidated revenues
Segment profit (loss) (1)
Television
Radio
Corporate
Consolidated segment profit (1)
Depreciation and amortization
Interest expense
Broadcast license and goodwill impairment
Gain on debt modification
Business acquisition, integration and restructuring costs
Other expense (income), net
Income (loss) before income taxes
Income tax expense
Net income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interest
Net income (loss) for the year
Adjusted net income attributable to shareholders (1)
Basic earnings (loss) per share
Adjusted basic earnings per share (1)
Diluted earnings (loss) per share
Free cash flow (1)
Total assets
Total bank debt
Cash dividends declared per share
Class A Voting
Class B Non-Voting
Notes:
(1) As defined in “Key Performance Indicators” section.
1,408.2
103.0
1,511.2
508.7
16.0
(18.9)
505.8
158.5
115.2
786.8
—
19.1
(8.1)
(565.7)
41.9
(607.7)
(625.4)
17.7
(607.7)
158.1
$(2.98)
$0.75
$(2.98)
296.2
3,970.9
1,506.1
1,544.9
142.6
1,687.5
573.5
34.6
(23.1)
585.1
182.4
117.7
—
(3.9)
26.3
10.5
252.1
71.4
180.7
156.1
24.6
180.7
181.0
$0.74
$0.85
$0.74
310.0
4,672.3
1,731.7
$0.2350
$0.2400
$0.1763
$0.1800
Corus Entertainment Annual Report 2020 | 17
MANAGEMENT’S DISCUSSION AND ANALYSIS
FISCAL 2020 COMPARED TO FISCAL 2019
For a discussion on the Company’s results of operations for the fourth quarter of fiscal 2020, we refer you to
Corus’ Fourth Quarter 2020 Report to Shareholders filed on SEDAR on October 22, 2020.
The following discussion describes the significant changes in the consolidated results from operations for the
year ended August 31, 2020 compared to the prior year.
REVENUES
Consolidated revenues for the year ended August 31, 2020 of $1,511.2 million decreased 10% from $1,687.5
million in the prior year. On a consolidated basis, advertising revenues decreased 16%, subscriber revenues
decreased 1%, while merchandising, distribution and other revenues increased by 11% from the prior year. The
decrease in advertising revenues was isolated to the back half of the fiscal year and arose from the market-wide
contraction of demand from COVID-19 restrictions resulting in campaign cancellations or deferrals. Revenues
decreased 9% in Television and 28% in Radio compared to the prior year. Further analysis of revenues is provided
in the discussion of segmented results.
DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Direct cost of sales, general and administrative expenses for the year ended August 31, 2020 of $1,005.4 million
were down 9% from $1,102.4 million in the prior year. On a consolidated basis, direct cost of sales decreased
4%, employee costs decreased 13% and other general and administrative costs decreased 15% from the prior
year. The decrease in direct cost of sales was driven by decreases in amortization of program rights and other
cost of sales, offset by increases in amortization of film investments. The decrease in employee costs was
primarily due to estimated Canadian Emergency Wage Subsidy (“CEWS”) funding of approximately $34.9 million,
lower commission costs and share-based compensation expense. Other general and administrative expenses
were lower as a result of curtailed discretionary costs such as advertising and marketing, travel, entertainment,
reductions in rent expenses as a result of the implementation of IFRS 16 - Leases as issued by the IASB that
reduced rent expenses charged through operating costs (refer to Impact of New Accounting Policies section of
this report for further details), as well as relief on Part 1 Canadian Radio-television and Telecommunications
Commission (“CRTC”) fees, partially offset by higher estimated credit losses, consulting fees and incremental
COVID-19 costs. Further analysis of expenses is provided in the discussion of segmented results.
SEGMENT PROFIT
Consolidated segment profit for the year ended August 31, 2020 of $505.8 million was down 14% from $585.1
million in the prior year. Segment profit margin of 33% for the year ended August 31, 2020 was down from 35%
in the prior year. Further analysis is provided in the discussion of segmented results.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the year ended August 31, 2020 was $158.5 million, a decrease from
$182.4 million in the prior year. Decreases for the year resulted from lower amortization of brands of $33.7 million
and other intangible assets of $2.0 million, offset by increases in amortization of capital assets of $11.8 million,
principally from capitalization and amortization of lease costs as required by the implementation of IFRS 16.
Amortization of brands has decreased significantly from the prior year as a result of accelerated amortization
related to a change in estimate in fiscal 2019 of the useful life of the Action brand that was retired in April 2019.
INTEREST EXPENSE
Interest expense for the year ended August 31, 2020 of $115.2 million was down from $117.7 million in the
prior year. The decrease results from lower interest on bank debt of $14.8 million and total return swaps of
$0.6 million, offset by higher imputed interest of $11.2 million on long-term liabilities associated with program
rights, trade marks and right-of-use assets, as well as $1.7 million lower amortization of a deferred gain from
other comprehensive income on interest rate swaps settled on November 28, 2017. Interest on bank debt is
lower due to lower debt levels.
The effective interest rate on bank loans for the year ended August 31, 2020 was 4.0% compared to 4.3% in
the prior year. The decrease in the effective interest rate for fiscal 2020 is due to a lower interest rate margin
resulting from reduced leverage.
BROADCAST LICENCE AND GOODWILL IMPAIRMENT
Broadcast licences 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. In the third quarter of fiscal 2020, management
identified indicators of impairment at the enterprise level, notably a significant decline in the Company’s share
price from August 31, 2019, which resulted in the Company’s carrying value being significantly greater than
18 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
its current market enterprise value. Accordingly, interim goodwill impairment testing was required for both
the Television and Radio cash generating units (“CGUs”). As a result of these tests, the Company recorded a
non-cash goodwill impairment charge of $673.0 million and $46.0 million in the Television and Radio operating
segments, respectively, in the third quarter of fiscal 2020 (refer to note 11 of the audited consolidated financial
statements for further details).
In addition, the pervasive economic impact of COVID-19 on Radio revenues meant that certain Radio markets
had actual results and revised financial projections that fell well short of previous estimates, indicating that
interim broadcast licence impairment testing was required. As a result of these tests, the Company recorded
non-cash broadcast licence impairment charges of $67.8 million in the Radio segment in the third quarter of
fiscal 2020 (refer to note 11 of the audited consolidated financial statements for further details).
The Company has completed its annual impairment testing of broadcast licences and goodwill and determined
that there were no additional impairment charges required or recoveries as at August 31, 2020.
GAIN ON DEBT MODIFICATION
The gain on debt refinancing of $3.9 million in fiscal 2019 relates to the amendment of the Company’s long-term
credit facility agreement on May 31, 2019 (refer to note 14 of the audited consolidated financial statements for
further details).
INTEGRATION, RESTRUCTURING AND OTHER COSTS
For the year ended August 31, 2020, the Company incurred $19.2 million of integration, restructuring and
other costs compared to $26.3 million in the prior year. The current fiscal year costs relate to restructuring
costs associated with employee exits, as well as certain costs associated with the shut-down of the FYI
channel, continued transmitter decommissioning and system integration costs. The prior year costs relate to
restructuring costs associated with employee exits, as well as onerous lease provision costs for office space
vacated in Vancouver, additional asset retirement obligations for the former Shaw Media headquarters in
Toronto, costs associated with the rebranding of the Action channel to the Adult Swim channel, and costs to
decommission certain transmitter sites. These charges are excluded from the determination of segment profit.
OTHER EXPENSE (INCOME), NET
Other income for the year ended August 31, 2020 was $8.1 million compared to other expense of $10.5 million in
the prior year. In the current year, other income includes foreign exchange gains of $4.3 million and income of $3.8
million from short-term investments, rental income, gains related to the sale of property in Woodstock, Ontario,
a scientific research and experimental development tax credit refund and miscellaneous interest income. In the
prior year, other expense includes an impairment charge related to an investment in an associate of $8.7 million,
equity losses from associates of $0.9 million, a net foreign exchange loss of $0.9 million, and a $0.3 million loss
on the disposition of TLN, offset by income from insurance proceeds and miscellaneous interest income. For
the year ended August 31, 2020, forward foreign exchange contracts resulted in unrealized foreign exchange
loss of $2.9 million (2019 - gain of $2.2 million), which offset foreign exchange gains recorded related to the
period end revaluation of U.S. dollar denominated long term liabilities. Further discussion of this can be found
in the Liquidity and Capital Resources section of this report under the heading Derivative Financial Instruments.
INCOME TAX EXPENSE
The effective tax rate for the year ended August 31, 2020 was a recovery of 7.4% as compared with the
Company’s 26.5% statutory tax rate. The lower effective tax rate for the year ended August 31, 2020 is a result
of the impairment recorded on goodwill in the television and radio operating segments in the third quarter. The
effective tax rate for the year ended August 31, 2019 was 28.3% compared to the Company’s 26.5% statutory
rate. The significant difference in the statutory rates and effective tax rate in the prior year resulted primarily
from the Company’s disposition of its interest in TLN.
NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS AND EARNINGS (LOSS) PER SHARE
Net loss attributable to shareholders for the year ended August 31, 2020 was $625.4 million ($2.98 loss per
share basic), as compared to net income attributable to shareholders of $156.1 million ($0.74 per share basic)
in the prior year. Net loss attributable to shareholders for fiscal 2020 includes broadcast license and goodwill
impairments of $786.8 million ($3.66 per share) and integration, restructuring and other costs of $19.2 million
($0.07 per share). Adjusting for the impact of these items results in an adjusted net income attributable to
shareholders of $158.1 million ($0.75 per share basic) for the current fiscal year. Net income attributable to
shareholders for the year ended August 31, 2019 include integration, restructuring and other costs of $26.3
million ($0.09 per share), an impairment on an investment in associates of $8.7 million ($0.03 per share), a gain
on debt modification of $3.9 million ($0.01 per share), and a loss on the disposition of TLN of $0.3 million ($nil
Corus Entertainment Annual Report 2020 | 19
MANAGEMENT’S DISCUSSION AND ANALYSIS
per share). Adjusting for the impact of these items results in an adjusted net income attributable to shareholders
of $181.0 million ($0.85 per share basic) for the prior year period.
The weighted average number of basic shares outstanding for the year ended August 31, 2020, was 209,769,000
compared to 211,997,000 in the prior year. The average number of shares outstanding in the current year
decreased as a result of the purchase and cancellation of Class B Non-Voting Participating Shares under the
Company’s normal course issuer bid (“NCIB”), which commenced on November 12, 2019.
OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX
Other comprehensive loss for the year ended August 31, 2020 was $5.6 million, compared to $43.0 million
in the prior year. For the year ended August 31, 2020, other comprehensive loss includes an unrealized loss
on the fair value of cash flow hedges of $15.5 million and an unrealized loss from foreign currency translation
adjustments of $0.1 million, offset by an actuarial gain on the remeasurement of post-employment benefit
plans of $8.9 million and an unrealized gain on the fair value of financial assets of $1.1 million. The prior year
other comprehensive loss includes an unrealized loss on the fair value of cash flow hedges of $31.5 million, an
actuarial loss on the remeasurement of post-employment benefit plans of $9.3 million, and an unrealized loss
on the fair value of financial assets of $2.4 million, offset by an unrealized gain from foreign currency translation
adjustments of $0.3 million.
TELEVISION
The Television segment is comprised of 34 specialty television services (35 prior to December 31, 2019; 37 prior
to September 30, 2019; 44 prior to March 22, 2019), 15 conventional television stations, digital assets, a social
media digital agency, a social media creator network, technology and media services, and the Corus content
business, which consists of the production and distribution of films and television programs, merchandise
licensing, book publishing, and animation software.
FINANCIAL HIGHLIGHTS
(thousands of Canadian dollars)
Revenues
Advertising
Subscriber
Merchandising, distribution and other
Total revenues
Expenses
Segment profit (1)
Segment profit margin (1)
(1) As defined in the “Key Performance Indicators” section
Year ended August 31,
2020
2019
823,448
490,985
93,805
1,408,238
899,523
508,715
36%
966,983
496,447
81,462
1,544,892
971,368
573,524
37%
Revenues for the year ended August 31, 2020 were down 9% from the prior year. Decreases of 15% in advertising
revenues and 1% in subscriber revenues were offset by a 15% ($12.3 million) increase in merchandising,
distribution and other revenues. The decrease in advertising revenues was isolated to the back half of the fiscal
year and arose from the market-wide contraction of demand from COVID-19 restrictions resulting in campaign
cancellations or deferrals. The Company has worked closely with its advertisers and agencies to create relevant
and innovative marketing and advertising opportunities, which has meant that revenue declines in the fourth
quarter are not as pronounced as they were when strict quarantine measures were in place during the third
quarter. Subscriber revenues were up slightly on a proforma basis when adjusting for the impact of the TLN
disposal in the prior year. The increase in merchandising, distribution and other revenues was primarily driven
by licensing activity of Nelvana and Corus Studios, back end revenue participations on Corus Studio series, as
well as higher merchandising revenues, partially offset by a decline in publishing revenues.
Total expenses for the year ended August 31, 2020 were down 7% from the prior year. Direct cost of sales (which
includes amortization of program rights and film investments, and other cost of sales) decreased 3% from the
prior year, while general and administrative expenses were down by 13% from the prior year. Amortization of
program rights decreased by 4% from the prior year, other cost of sales decreased 14% ($4.4 million) and was
offset by higher film amortization expense of 36% ($5.1 million). The decrease in amortization of program rights
was driven predominantly by lower amortization arising from a larger number of repeats and fewer new episodes
on all networks, the shut-down of three specialty television services (Cosmo and IFC in September 2019, and FYI
20 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
in December 2019), as well as the sale of TLN in March 2019, offset by higher costs from the renewals of certain
U.S. output deals and the Adult Swim channel deal, which commenced in April 2019. The increase in amortization
of film investments was principally due to an increased production slate, while the decrease in other cost of sales
was principally a result of costs associated with certain sales initiatives. Employee costs decreased 13% due
to the estimated CEWS funding of $27.8 million, lower commission costs and lower short-term compensation
accruals. Other general and administrative expenses were 13% lower as a result of curtailed discretionary costs
such as travel, entertainment, advertising and marketing, lower transmission costs, reductions in rent expenses
resulting from the implementation of IFRS 16 (refer to Impact of New Accounting Policies section of this report
for further details), as well as relief on Part 1 CRTC fees, lower variable trade mark fees, and tariff royalties levied
under the Copyright Act that are positively correlated with movements in revenues, partially offset by increases
in consulting costs.
Segment profit(1) was down 11% in fiscal 2020 as a result of decreases in revenues exceeding decreases in direct
cost of sales and general and administrative expenses. Segment profit margin(1) for the year ended August 31,
2020 was 36%, down slightly from the prior year at 37%.
In the third quarter of Fiscal 2020, the Company recorded a non-cash goodwill impairment of $673.0 million
with respect to the Television segment. The impairment charge resulted from the estimated recoverable
amount being lower than the carrying amount. The non-cash goodwill impairment charge is excluded from the
determination of segment profit (refer to note 11 of the consolidated financial statements for further details).
(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,
2019
2020
142,590
102,998
107,944
86,975
34,646
16,023
16%
24%
For the year ended August 31, 2020, revenues decreased 28% compared to the prior year. Advertising revenues
in the back half of the year were significantly impacted by market-wide contraction of demand from COVID-19
restrictions resulting in outright cancellations or campaign deferrals in the latter half of fiscal 2020. The Company
has worked closely with its advertisers and agencies to create relevant and innovative marketing and advertising
opportunities, which has meant that revenue declines in the fourth quarter are not as pronounced as they were
when strict quarantine measures were in place during the third quarter.
Direct cost of sales, general and administrative expenses were down 19% in fiscal 2020. The decreases were
principally from lower employee costs as a result of estimated CEWS funding of $4.7 million, decreased rent
costs resulting from the implementation of IFRS 16 on September 1, 2019, relief on Part 1 CRTC fees and
reductions on tariff royalties levied under the Copyright Act that are positively correlated with movements in
revenues, as well as a halt in discretionary spending on advertising and promotions, partially offset by modest
increases for estimated credit losses.
For the year ended August 31, 2020, segment profit(1) decreased $18.6 million and segment profit margin(1) of
16% was down from 24% in the prior year.
In the third quarter of Fiscal 2020, the Company recorded non-cash impairment charges in broadcast licenses
of $67.8 million and goodwill of $46.0 million. The impairment charges resulted from the estimated recoverable
amounts of five Radio CGUs and the Radio segment CGU to be lower than the carrying amounts. The non-cash
broadcast license and goodwill impairment charges are excluded from the determination of segment profit (refer
to note 11 of the consolidated financial statements for further details).
(1) As defined in the “Key Performance Indicators” section
Corus Entertainment Annual Report 2020 | 21
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,
2019
5,347
17,738
2020
4,269
14,630
18,899
23,085
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 decrease in share-based compensation expense for the year ended August 31, 2020 reflects the decline
in the Company’s share price from August 31, 2019, partially offset by the change in the fair value of the total
return swaps (refer to the Liquidity and Capital Resources section of this report for further details on this swap
arrangement).
Other general and administrative costs for fiscal 2020 decreased 18% from the prior year. The decrease is
principally related to lower employee costs as a result of $2.3 million in estimated CEWS funding, decreased
short-term compensation accruals, decreased share-based compensation accruals, decreased rent costs
resulting from the implementation of IFRS 16 on September 1, 2019, and lower Directors fees resulting from
fewer Directors throughout the year, partially offset by increased COVID-19 related facilities costs as well as
consulting and legal costs.
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 highest and second and fourth quarter results tend to be the lowest in a fiscal year. In fiscal 2020, the impact
of COVID-19 and measures to prevent its spread have significantly affected advertising revenues which have
deviated from historical distribution patterns with the third quarter of fiscal 2020 being lower than both the first
and second quarters, which has resulted in a downward trend in the second half of the year. The same pattern is
observable in segment profit. 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, 2020. 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, 2020 and August 31, 2019, except as disclosed in note 3 of the consolidated financial statements.
22 | Corus Entertainment Annual Report 2020
(thousands of Canadian dollars, except per share amounts)
Revenues (1)
Segment
profit (1)(2)
Net
income (loss)
attributable to
shareholders
Adjusted
net income
attributable to
shareholders (1)
MANAGEMENT’S DISCUSSION AND ANALYSIS
Earnings (loss) per share (2)
Diluted Adjusted (1)
Free
cash
flow (1)(2)
Basic
2020
4th quarter
3rd quarter
2nd quarter
1st quarter
2019
4th quarter
3rd quarter
2nd quarter
318,396
348,967
375,995
94,502
111,313
115,909
30,278
(752,280)
18,524
33,181 $ 0.15
18,996 $
(3.61)
25,900 $ 0.09
$ 0.15 $
$
(3.61) $
$ 0.09 $
467,878
184,115
78,116
79,980 $ 0.37
$ 0.37 $
0.16
0.09
0.12
87,353
90,773
65,073
0.38
53,048
377,479
458,417
384,115
109,776
170,523
113,148
22,947
66,378
6,344
27,930 $ 0.11
66,077 $ 0.31
15,733 $ 0.03
$ 0.11 $
$ 0.31 $
$ 0.03 $
0.13
0.31
0.07
93,554
90,101
83,909
467,471
1st quarter
(1) As defined in “Key Performance Indicators”.
(2) Effective September 1, 2019, the Company adopted IFRS 16. There has been no restatement of prior periods. Refer to Impact of New
70,111 $ 0.28
$ 0.28 $
191,638
60,415
0.33
42,406
Accounting Policies section of this report for more information.
SIGNIFICANT ITEMS CAUSING VARIATIONS IN QUARTERLY RESULTS
• Segment profit and free cash flow in the fourth quarter of fiscal 2020 were positively impacted by IFRS 16 by
approximately $3.3 million and $3.8 million, respectively; however the impact on net income attributable to
shareholders was not material. Net income attributable to shareholders for the fourth quarter of fiscal 2020
was negatively impacted by integration, restructuring and other costs of $4.0 million ($0.01 per share).
• Segment profit and free cash flow in the third quarter of fiscal 2020 were positively impacted by IFRS 16 by
approximately $3.3 million and $4.1 million, respectively; however, the impact on net income attributable to
shareholders was not material. Net loss attributable to shareholders for the third quarter of fiscal 2020 was
negatively impacted by non-cash radio broadcast license and television and radio goodwill impairment charges
of $786.8 million ($3.69 per share) and integration, restructuring and other costs of $2.6 million ($0.01 per
share).
• Segment profit and free cash flow in the second quarter of fiscal 2020 were positively impacted by IFRS 16 by
approximately $3.4 million and $4.2 million, respectively; however, the impact on net income attributable to
shareholders was not material. Net income attributable to shareholders for the second quarter of fiscal 2020
was negatively impacted by integration, restructuring and other costs of $10.0 million ($0.03 per share).
• Segment profit and free cash flow in the first quarter of fiscal 2020 were positively impacted by the
implementation of IFRS 16 by approximately $3.4 million and $3.9 million, respectively; however, the impact
on net income attributable to shareholders was not material. Net income attributable to shareholders for the
first quarter of fiscal 2020 was negatively impacted by integration, restructuring and other costs of $2.5 million
($0.01 per share).
• Net income attributable to shareholders for the fourth quarter of fiscal 2019 was negatively impacted by
additional amortization from a change in estimate for the useful lives of television brand assets of $16.7 million
($0.06 per share) and integration, restructuring and other costs of $6.8 million ($0.02 per share).
• Net income attributable to shareholders for the third quarter of fiscal 2019 was negatively impacted by
additional amortization from a change in estimate for the useful lives of television brand assets of $16.7 million
($0.06 per share), integration, restructuring and other costs of $2.3 million ($0.01 per share) and a $0.3 million
($nil per share) loss on disposal of the Company’s 50.5% interest in TLN, offset by a gain on debt modification
of $3.9 million ($0.01 per share).
• Net income attributable to shareholders for the second quarter of fiscal 2019 was negatively impacted by
additional amortization from a change in estimate for the useful lives of television brand assets of $34.9 million
($0.12 per share), integration, restructuring and other costs of $4.0 million ($0.01 per share) and an impairment
on an investment in an associate of $8.7 million ($0.03 per share).
• Net income attributable to shareholders for the first quarter of fiscal 2019 was negatively impacted by additional
amortization from a change in estimate for the useful lives of television brand assets of $34.9 million ($0.12
per share) and integration, restructuring and other costs of $13.2 million ($0.05 per share).
Corus Entertainment Annual Report 2020 | 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL POSITION
Total assets at August 31, 2020 were $4.0 billion compared to $4.7 billion at August 31, 2019. The following
discussion describes the significant changes in the consolidated statements of financial position since August
31, 2019.
Effective September 1, 2019, the Company adopted the new lease accounting standard IFRS 16 with a modified
retrospective application. This method of application does not result in the retrospective adjustment of amounts
reported for periods prior to fiscal 2020 as the cumulative effect of the initial application of the new standard was
recognized at the date of initial application, September 1, 2019. The most significant effect of the new standard
is the lessee’s recognition of the initial present value of unavoidable future lease payments as right-of-use lease
assets and lease liabilities, including those for most leases that would have previously been accounted for as
operating leases. This results in depreciation of right-of-use lease assets and financing costs arising from lease
liabilities, rather than as part of general and administrative expenses. The adoption of the new standard has
resulted in an increase to property, plant and equipment of approximately $138.4 million and other long-term
liabilities of approximately $157.8 million as at September 1, 2019. The right-of-use assets have been reduced
for accrued rents of $18.6 million, which arose under IAS 17. However, the implementation of IFRS 16 does not
have any impact on lease economics or lease cash flows. Further discussion of the change in accounting policy
for leases can be found in the Impact of New Accounting Policies section of this report.
Current assets at August 31, 2020 were $360.6 million, down $128.1 million from August 31, 2019.
Cash and cash equivalents decreased by $36.7 million from August 31, 2019. Refer to the discussion of cash
flows in the next section.
Accounts receivable, which includes $22.1 million related to the estimated CEWS funding at August 31, 2020,
decreased $75.2 million from August 31, 2019. The accounts receivable balance is subject to seasonal trends.
Typically, the balance of trade receivables is higher at the end of the first and third quarters and lower at the end
of the second and fourth quarters as a result of the broadcast advertising revenue seasonality; however this year
seasonal trends have been significantly impacted by the COVID-19 pandemic and may not be representative of
historical results (see the Seasonal Fluctuations under the Quarterly Consolidated Financial Information section
of this report for further details). The Company carefully monitors the aging and collection performance of
its accounts receivable and as collection uncertainties have increased for small to medium sized businesses,
the Company has increased its estimated credit losses related to those accounts, which resulted in modest
additional provisions for collection risk.
Tax credits receivable increased $1.7 million from August 31, 2019 as a result of accruals relating to film
productions exceeding tax credit receipts.
Investments and other assets increased $7.7 million from August 31, 2019, primarily as a result of an increase
in the net asset position of certain post employment benefit plans and unrealized gains related to the fair value
remeasurement of the investment in venture funds, offset by a decrease in unrealized gains related to forward
foreign exchange contracts.
Property, plant and equipment increased $107.8 million from August 31, 2019 as a result of additions, principally
the addition of right-of-use lease assets upon adoption of IFRS 16, exceeding depreciation expense.
Program rights increased $129.9 million from August 31, 2019, as additions of acquired rights of $629.5 million
were offset by amortization of $495.8 million and a $3.8 million write-off of certain program rights related to the
FYI channel shut-down on December 31, 2019.
Film investments decreased $8.4 million from August 31, 2019, as film additions (net of tax credit accruals) of
$11.5 million were offset by film amortization of $20.1 million.
Intangibles decreased $87.2 million from August 31, 2019, primarily as a result of amortization of finite life
intangibles and impairment charges recorded on certain Radio broadcast licenses of $67.8 million in the third
quarter, offset by additions related to trade mark licenses and computer software. Goodwill decreased $719.0
million as a result of impairment charges related to the Television and Radio segments in the third quarter.
Accounts payable and accrued liabilities increased $22.2 million from August 31, 2019, principally as a result
of higher program rights payable, trade marks payable, short-term lease liabilities, unremitted sales taxes and
other accrued liabilities, which include other working capital accruals, offset by decreases to trade accounts
payable, short-term compensation accruals, capital asset purchases, accruals related to third party back-end
participations, unearned revenues, film production accruals and dividends payable.
24 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
Provisions, including the long-term portion, at August 31, 2020 of $18.1 million were consistent with the
prior year at August 31, 2019 as a result of restructuring related payments being comparable to additions and
additional provisions for asset retirement obligations.
Bank debt, including the current portion, as at August 31, 2020 was $1,506.1 million compared to $1,731.7
million as at August 31, 2019. As at August 31, 2020, the $76.3 million classified as the current portion of bank
debt reflects the mandatory repayments in the following 12 months. During the year ended August 31, 2020,
the Company repaid bank debt of $229.5 million and amortized $4.1 million of deferred financing charges.
Other long-term liabilities increased $214.8 million from August 31, 2019, primarily from increases in lease
liabilities related to the implementation of IFRS 16, long-term program rights payable, trade marks payable,
adjustments to the fair value of interest rate swap derivatives, and increases to long-term employee obligations,
offset by reductions in deferred rent accruals related to the implementation of IFRS 16, the long-term portion
of tangible benefit obligations, as well as liabilities related to merchandising and other intangible rights.
Share capital decreased by $14.3 million from August 31, 2019 as a result of 3.6 million shares repurchased under
the NCIB. Contributed surplus decreased by $1.5 million primarily as a result of the repurchases under the NCIB,
offset by share-based compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Overall, the Company’s cash and cash equivalents position decreased by $36.7 million from the prior year end.
Free cash flow for the year ended August 31, 2020 decreased to $296.2 million, from $310.0 million in the prior
year. Free cash flow for the year was positively impacted by CEWS receipts of $16.1 million and income tax
deferrals of $17.2 million. A reconciliation of free cash flow to the consolidated statements of cash flows is
provided in the Key Performance Indicators section.
Cash provided by operating activities for the year ended August 31, 2020 was $313.3 million, compared to
$343.6 million in the prior year. The decrease of $30.3 million from the prior year arises from lower cash flow
from operations of $52.4 million, which includes higher spend on program rights of $9.5 million, offset by higher
cash provided by working capital of $22.1 million.
Cash used in investing activities for the year ended August 31, 2020 was $19.0 million, compared to $30.2 million
in the prior year. In the current year, the Company had additions to property, plant, equipment of $15.4 million,
and net cash outflows of $3.9 million for intangibles, investments and other assets. The prior year includes
additions to property, plant and equipment of $30.1 million, $6.0 million paid for the acquisition of certain KIN
Canada assets, and net cash outflows of $6.7 million for intangibles, investments and other assets, offset by
the proceeds from the disposal, net of divested cash and prepaid revenue from certain service arrangements, of
$12.5 million for the sale of TLN, net of divested cash and prepaid revenue from certain service arrangements.
Cash used in financing activities for the year ended August 31, 2020 was $330.9 million, compared to $325.6
million in the prior year. In the current year, the Company repaid bank debt of $229.5 million, paid dividends of
$70.4 million to shareholders and non-controlling interests, repurchased shares of $16.9 million, made payments
related to right-of-use leases of $15.9 million, and made payments of $3.6 million for software license liabilities,
offset by equity funding of a non-controlling interest of $5.4 million. In the prior year, the Company repaid bank
debt of $250.0 million, paid financing costs of $3.4 million to amend credit facilities, paid dividends of $68.5
million to shareholders and non-controlling interests and made capital lease payments of $3.7 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 total bank debt less cash and cash equivalents.
The Company manages its capital structure in accordance with changes in economic conditions. In order to
maintain or adjust its capital structure, the Company may elect to issue or repay 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.
Corus Entertainment Annual Report 2020 | 25
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Company monitors capital using several key performance metrics, including: net debt to segment profit ratio
and dividend yield. The Company’s stated long-term objectives are a leverage target (net debt to segment profit
ratio) below 3.0 times and to maintain a dividend yield in excess of 2.5%. In the short term, the Company may
permit the long-term leverage 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.
As at August 31, 2020, the Company’s leverage ratio was 3.18 times net debt to segment profit, up from 2.82
times at August 31, 2019. In fiscal 2020 the increase in net debt and net debt to segment profit reflects increased
debt for lease liabilities and a full twelve months of segment profit that excludes operating leases costs as
prescribed by the new lease accounting standards IFRS 16. Fiscal 2019 net debt and net debt to segment profit
does not reflect increased debt levels for leases liabilities nor does it remove from segment profit operating
lease costs as this was prior to the adoption of IFRS 16 on September 1, 2019. Further discussion on this is
contained in the Impact of New Accounting Policies section.
As at August 31, 2020, the Company had a net cash balance of $45.9 million and had available approximately
$300.0 million under the Revolving Facility, all of which could be drawn. The Company was in compliance with all
loan covenants. 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 following 12 months.
For further details on the credit facilities most recently amended on May 31, 2019, refer to note 14 of the
Company’s audited consolidated financial statements for the year ended August 31, 2020.
TOTAL CAPITALIZATION
As at August 31, 2020, total capitalization was $2,657.2 million compared to $3,391.4 million at August 31,
2019, a decrease of $734.2 million. The reduction in total capitalization is principally related to the non-cash
broadcast license and goodwill impairment charges of $786.8 million recorded in the third quarter of fiscal 2020
which increased the accumulated deficit, lower bank debt of $225.7 million, a reduction in share capital as a result
of the purchase and cancellation of 3.6 million shares under the NCIB which commenced November 12, 2019,
and a decrease in cash of $36.7 million, offset by an increase in equity attributable to non-controlling interest
of $3.1 million.
OFF-BALANCE SHEET ARRANGEMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
On November 28, 2017, the Company terminated the swap agreements that fixed the interest rate on $1,871.0
million of its outstanding term loan facilities. As a result, the Company received $24.6 million, net of interest, in
cash upon settlement of these swaps, which was the fair value upon termination. The $24.6 million was recorded
in other comprehensive income and is being amortized as non-cash interest income in the consolidated
statements of income (refer to note 19 of the audited consolidated financial statements for further details).
The Company has entered into Canadian interest rate swap agreements to fix the interest rate on a portion
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 as at August 31, 2020 was $26.3 million (2019 – $11.6 million), which has been recorded in the
consolidated statements of financial position as a long-term liability (refer to note 15 of the audited consolidated
financial statements for further details).
As at August 31, 2020, the Company has a series of forward foreign exchange contracts totalling $48.3 million
U.S. dollar, to fix the foreign exchange rate and therefore cash flows related to a portion of the Company’s U.S.
dollar denominated liabilities. The forward contracts are not designated as hedges for accounting purposes;
they are measured at fair value at each reporting date by reference to prices provided by the counterparty. The
counterparty of the forward contracts is a highly rated financial institution and the Company does not anticipate
any non-performance. The estimated fair value of future cash flows of the U.S. dollar forward contract derivatives
change with fluctuations in the foreign exchange rate of U.S. dollar to Canadian dollars. The estimated fair value
of these agreements as at August 31, 2020 was $3.1 million (2019 – $6.0 million), which has been recorded in
the consolidated statements of financial position as a long-term other asset (refer to note 5 of the audited
consolidated financial statements for further details), and within other expense (income), net in the consolidated
statements of income (loss) and comprehensive income (loss) (refer to note 20 of the audited consolidated
financial statements for further details).
On November 28, 2018, the Company initiated total return swap agreements on 1,868,500 share units to
offset its exposure to changes in the fair value of certain cash settled share-based compensation awards. The
estimated fair value of these Level 1 financial instruments will fluctuate with the market price of the Company’s
26 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
shares. The counterparties of these swap agreements are highly rated financial institutions and the Company
does not anticipate any non-performance. The estimated fair value of these agreements as at August 31, 2020
was a liability of $3.3 million (2019 – asset of $0.3 million), which has been recorded in the consolidated statement
of financial position in other long-term liabilities and within employee expenses in the consolidated statement of
income (loss) and comprehensive income (loss) (refer to note 18 of the audited consolidated financial statements
for further details).
CONTRACTUAL COMMITMENTS
The Company has the following undiscounted contractual obligations at August 31, 2020:
(thousands of Canadian dollars)
Total debt (1)
Purchase obligations (2)
Lease liabilities (3)
Other obligations (4)
1,528,614
1,103,643
351,985
942,672
396,678
58,280
76,339
586,074
30,289
Total Within 1 year
509,603
120,891
55,380
2 - 3 years
110,690
220,481
89,782
20,009
4 - 5 years More than 5 years
—
—
208,036
—
Total contractual obligations
(1) Principal repayments
(2) Purchase obligations are contractual obligations under contracts relating to program rights, satellite and signal transport costs and
1,508,320
3,204,723
705,883
782,484
208,036
various other operating expenditures, that the Company has committed to for periods ranging from one to five years.
(3) Lease liabilities relate to right-of-use assets which include land and buildings related to telelvision and radio operations.
(4) Other obligations included financial liabilities, trade marks, other intangibles, CRTC commitments and forward foreign exchange
contracts.
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 2020, the Company incurred interest on bank debt of $67.5 million (2019
– $82.3 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 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, 2020
derived primarily from three areas: advertising 61%, subscriber fees 32% and merchandising, distribution and
other 7% (2019 – 65%, 30%, and 5%, respectively).
Corus Entertainment Annual Report 2020 | 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
licence fees; and, selling, general administration which includes overhead costs. For the year ended August 31,
2020, consolidated direct cost of sales, and general and administrative expenses were comprised of direct cost
of sales 54%, employee remuneration 28%, and general and administrative expenses 18% (2019 – 51%, 30%,
and 19%, 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 (loss) and comprehensive income (loss). Segment
profit and segment profit margin may be calculated and presented for an individual operating segment, a line
of business, or for the consolidated Company. The Company believes these are important measures as they
allow 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
licence impairment; significant intangible and other asset impairment; debt refinancing; non-cash gains or
losses; integration, restructuring and other 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.
(thousands of Canadian dollars, except percentages)
Revenues
Direct cost of sales, general and administrative expenses
Segment profit
Segment profit margin
2020
1,511,236
1,005,397
505,839
33.0%
2019
1,687,482
1,102,397
585,085
35.0%
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 investment community that measures the Company’s ability to repay debt, finance strategic
business acquisitions and investments, pay dividends, and repurchase shares. Free cash flow does not have any
standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by
other companies. Free cash flow should not be considered in isolation or as a substitute for cash flows prepared
in accordance with IFRS as issued by the IASB.
(thousands of Canadian dollars)
Cash provided by (used in):
Operating activities
Investing activities
Add back: cash used for business combinations and strategic investments (1)
Deduct: net proceeds from disposition
Free cash flow
(1) Strategic investments are comprised of investments in venture funds and associated companies.
2020
2019
313,272
(19,005)
294,267
1,980
—
296,247
343,553
(30,215)
313,338
9,161
(12,529)
309,970
28 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
ADJUSTED NET INCOME AND ADJUSTED BASIC EARNINGS PER SHARE
Management uses adjusted net income attributable to shareholders and adjusted basic earnings per share as a
measure of enterprise-wide performance. Adjusted net income attributable to shareholders 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 (loss) attributable to shareholders
Adjustments, net of income tax:
Impairment of investment in associates
Broadcast licences and goodwill impairment
Gain on debt modification
Loss from disposition of the Telelatino Network
Integration, restructuring and other costs
Adjusted net income attributable to shareholders
Basic earnings (loss) per share
Adjustments, net of income tax:
Impairment of investment in associates
Broadcast licences and goodwill impairment
Gain on debt modification
Loss from disposition of the Telelatino Network
Integration, restructuring and other costs
Adjusted basic earnings per share
2020
(625,362)
—
769,338
—
—
14,081
158,057
2019
156,084
7,565
—
(2,856)
814
19,399
181,006
$(2.98)
$0.74
—
$3.66
—
—
$0.07
$0.75
$0.03
—
($0.01)
—
$0.09
$0.85
NET DEBT
Net debt is calculated as total bank debt plus lease liabilities, 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
Lease liabilities
Cash and cash equivalents
Net debt
2020
1,506,089
148,580
(45,900)
1,608,769
2019
1,731,745
—
(82,568)
1,649,177
Corus Entertainment Annual Report 2020 | 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
NET DEBT TO SEGMENT PROFIT
Net debt to segment profit is calculated as net debt divided by segment profit. It is one of the key metrics used by
the investing community to measure the Company’s ability to repay debt through ongoing operations. Net debt
to segment profit does not have any standardized meaning prescribed by IFRS and is not necessarily comparable
to similar measures presented by other companies.
(thousands of Canadian dollars)
2019
1,649,177
Net debt (numerator)
Segment profit (denominator) (1)
585,085
2.82
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
Information” section. Effective September 1, 2019, the Company adopted IFRS 16. There has been no restatement of segment profit
for the fiscal 2019 quarters prior to adoption. Refer to Impact of New Accounting Policies section of this report for more information.
2020
1,608,769
505,839
3.18
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; in turn, Corus also aims to take advantage
of opportunities that may emerge.
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 FRAMEWORK
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
business risks that impact the Company. The RMC is comprised of various senior managers from across the
organization, with all key operating segments and functions represented. The Committee meets on a quarterly
basis to review financial, hazard, operational and strategic risks to the Company. The likelihood and impact of
30 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
these risks are ranked on a high, medium and low basis. These risks are reviewed by the Company’s Disclosure
Committee, the Executive Leadership Team, and finally, with the Board as part of the quarterly risk review process.
RISKS AND UNCERTAINTIES
This section provides a summary description of the principal risks and uncertainties that could have a material
adverse effect on the business and financial results of the Company. This discussion is not exhaustive and any
discussion about risks should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking
Information”.
A. GENERAL RISKS
ECONOMIC CONDITIONS
The Company’s operating performance is affected by general Canadian and worldwide economic conditions.
Changes in economic conditions or economic uncertainty may affect discretionary consumer and business
spending, resulting in increased or decreased demand for Corus’ product offerings. These factors may adversely
affect the Company through reduced advertising, lower demand for the Company’s products and services or
decreased profitability. 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 (see PANDEMICS).
COMPETITION AND TECHNOLOGICAL DEVELOPMENTS
Corus operates in an open and highly competitive marketplace. 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 the Company’s radio stations, music formats, talent, television programs or networks
because the revenues derived from such services and products 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. Corus’ failure to compete in these areas could materially
adversely affect Corus’ results of operations.
Corus also faces competition from both regulated and unregulated players using existing, new or evolving
technologies and from illegal services. The rapid deployment of evolving technologies, services, products
and strategic partnerships have reduced the traditional lines between internet and broadcast services and
further expanded the competitive landscape. The Company may also be affected by changes in customer
discretionary spending patterns, which in turn are dependent on consumer confidence, disposable consumer
income and general economic conditions. 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, connected
TVs, virtual multichannel programming distributors, audio streaming platforms, digital radio services, satellite
radio, podcasting 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 and are creating consumer demand for mobile, portable or free content. These
technologies and business models may increase audience fragmentation, reduce subscribers to Corus’ services,
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’ specialty television services depend on obtaining revenues from advertising
and subscribers, while Corus’ conventional television services depend primarily on obtaining revenues from
advertising. These services are also 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.
Corus Entertainment Annual Report 2020 | 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
i) Advertising and Subscriber Revenues
The conventional and specialty television business and the advertising markets the Company operates in are
highly competitive. Numerous broadcast and specialty television networks, 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 compete with Corus for advertising and subscriber revenues. The CRTC also 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. 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.
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. 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 (see PANDEMICS).
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. A failure to select and obtain content demanded by viewers or otherwise a 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 and PANDEMICS).
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 also 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 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 or that Corus will be able to increase or maintain
penetration of broadcast schedules (see PANDEMICS).
32 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 (derived from interest in on-air talent, music formats, and other intangible factors). 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’ stations could be adversely 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, podcasting 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)
or through daily, weekly and free-distribution newspapers, outdoor billboard advertising, magazines, other
print media, direct mail marketing, 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.
B. BUSINESS RISKS
PANDEMICS
Pandemics, epidemics and other health risks could occur, which could adversely affect the Company’s ability
to maintain operations, as well as the ability of suppliers to provide products and services needed to operate
the business. Pandemics, epidemics and other health risks could also have an adverse effect on the economy
and financial markets resulting in a declining level of retail and commercial activity, which could have a negative
impact on the demand for, and prices of, the Company’s products and services.
The COVID-19 pandemic continues to significantly impact the well-being of individuals and the Canadian
and global economies. The Company has implemented a specific response plan, informed by measures
recommended by public health agencies, to continue providing its essential services and support to customers
while safeguarding the health and safety of employees. Appropriate business continuity measures have been
taken to ensure uninterrupted service of the Company’s television, digital and radio operations.
Restrictions have been reintroduced in some provinces to tackle recent surges of COVID-19 cases which will
impact various sectors and businesses; however, the Company continues to operate with more than 70%
of its workforce working remotely and will not rush to return people to their worksites. The Company has
adopted an “ease back” approach to ensure that the health of its people and the communities they work in
are protected. Development of company-wide principles and guidelines, informed by public health authorities’
recommendations, and site-specific plans have been made and continue to be adjusted as necessary on a
location-by-location basis. Site-specific plans may include reduced occupancy at some sites, or modification
of workspaces to provide the right level of protection to the Company’s employees.
The Company continues to update employees on a regular basis to provide information on the situation and on
the continuing necessary precautions to be taken.
The impact of COVID-19 and measures to prevent its spread have affected the Company in a number of ways.
Most significantly, advertising sales continue to be materially impacted by businesses that remain shut-down or
have severely cut back on discretionary spending, merchandising sales are impacted by reduced spend at retail
and publishing sales are impacted by a retraction in spend in the institutional school markets, which has resulted
in a decrease in the Company’s consolidated revenues of 20% for the six months ended August 31, 2020. While
COVID-19 continues to drive market-wide contraction in advertising demand, the rate of decline has improved
in the Company’s fourth quarter compared to its third quarter. The Company continues to work closely with its
advertisers and agencies to create relevant and innovative marketing and advertising opportunities, which has
meant that revenue declines are not as pronounced as they were when strict quarantine measures were in place.
This has resulted in a decrease in consolidated advertising revenues of 31% for the six months ended August
31, 2020 compared to the prior year. However, the Company has seen a modest bounce back of merchandising,
distribution and other revenues in the year, principally in the fourth quarter. Increases in distribution revenues
arose from licensing activity with U.S. broadcasters and streaming services.
Corus Entertainment Annual Report 2020 | 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
The government imposed restrictions and closure of many businesses has increased accounts receivable
collection uncertainty for small to medium size businesses and as a result, the Company has increased its
estimated credit losses related to those accounts, which resulted in small additional provisions for collections
risk in its radio business.
In addition, there have been disruptions in the production and availability of content, including suspension
of production of most film and television content. This has led to a larger number of repeats and fewer new
episodes on all networks that has resulted in lower programming costs. For Canadian original programming,
the Company continues to work with industry groups to safely restart Canadian productions successfully and
to manage incremental costs associated with enhanced COVID-19 precautions. Scarcity of producers, cast,
crew, and studio space, together with the costs of personal protective equipment and insurance, are currently
estimated to increase the cost of productions by up to 15%.
The shut-down and slow restart of Canadian productions has also meant that the Company’s ability to meet
its current year regulatory requirements on Canadian programming expenditure (“CPE”) has been significantly
hampered.
Further, the Company anticipates substantial challenges in meeting these requirements in fiscal 2021, also
likely in fiscal 2022 and possibly in fiscal 2023. Although the Company’s current production partners restarted
productions prior to August 31, 2020, producers still remain challenged to find efficiencies to shoot faster with
a smaller crew complement as well as reducing costs to remain within production budgets to offset COVID-19
costs, which has resulted in some shows that were slated to air in fiscal 2021 now set to deliver in fiscal 2022.
In addition, the new original programming content development pipeline was slowed down in the back half of
fiscal 2020 as the Company worked with its production partners on getting shows that had been in production
back up and running. The Company is ramping up original programming new content development, however will
continue to be challenged to meet CPE requirements, more so if productions are shut-down again as a result of
a second wave of COVID-19. Corus is currently assessing its obligations and the potential implications of not
fulfilling its CRTC obligations in light of the ongoing pandemic. The Company is exploring relief in respect of its
CRTC obligations and is encouraged that the CRTC launched a public consultation on September 17, 2020 to
consider possible regulatory flexibility measures for licenced broadcasters in response to COVID-19. In its initial
Notice of Consultation document, the CRTC expressed willingness to determine broadcasters’ compliance with
certain requirements based on whether they have fulfilled those obligations over “a more protracted period of
time.” The Company expects this issue to be resolved through this CRTC consultation process in the coming
months but is unable to predict the outcome at this time. The CRTC has already provided relief to broadcasters
on Part 1 fees from April 2020 through to March 2021, which has reduced the Company’s payments with respect
to these fees by approximately $1.8 million in fiscal 2020 and will reduce payments by approximately $1.8 million
in the first half of fiscal 2021.
The Company has determined it is eligible and has made an application for the Government of Canada CEWS
for the periods commencing April 11 through August 29, 2020. The estimated CEWS of approximately $34.9
million for fiscal 2020 has been recorded principally as a reduction of employee costs in the consolidated financial
statements. The Company has also availed itself of permitted payment deferrals on Canadian income tax
installments of $17.2 million in order to preserve cash (Canadian income tax installments have been remitted
as of September 30, 2020). In addition to government programs, the Company has also initiated other operating
expense savings measures to safeguard its financial position and preserve cash which include: agreement from
the Board of Directors to receive Deferred Share Units in lieu of cash Directors’ fees; pausing the buying back
of shares under the Company’s NCIB; scaling back capital investments; suspending new non-critical employee
hiring; suspending travel and non-critical spending; and continuing to evaluate and apply for other government
programs where applicable. The Company has continued to make applications for the CEWS periods subsequent
to its fiscal year and will continue to do so under the extended program as long as it continues to meet the
eligibility requirements.
It is too soon to gauge the medium to long-term impacts of the current outbreak, given the many unknowns
related to COVID-19. These include the duration, severity and the impact of a resurgence of the outbreak as
emergency measures are eased or reintroduced. COVID-19 is altering business and consumer activity in many
ways. The global response to the COVID-19 pandemic has resulted in, among other things, border closures,
severe travel restrictions, the temporary shut-down of non-essential services and extreme fluctuations in
financial and commodity markets. Restrictive measures may be re-implemented by one or more governments in
jurisdictions where the Company operates. Labour shortages due to illness, Company or government imposed
isolation programs, or restrictions on the movement of personnel or possible supply chain disruptions could
result in a reduction or cessation of all or a portion of the Company’s operations. The extent to which COVID-19
and any other pandemic or public health crisis impacts the Company’s business, affairs, operations, financial
34 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
condition, liquidity, availability of credit and results of operations will depend on future developments that are
highly uncertain and cannot be predicted with any meaningful precision, including new information which may
emerge concerning the severity of the COVID-19 virus and the actions required to continue to contain the
COVID-19 virus or remedy its impact, among others.
The actual and threatened spread of COVID-19 globally could also have a material adverse effect on the regional
economies in which the Company operates, could continue to negatively impact stock markets, including the
trading price of its Class B Non-Voting Shares, could adversely impact its ability to raise capital, could cause
continued interest rate volatility and movements that could make obtaining financing or renegotiating the terms
of its existing financing more challenging or more expensive. Potential impacts include, but are not limited to, an
impairment of long-lived assets, an impairment of investments in venture funds and a change in the estimated
credit loss on accounts receivable.
Any of these developments, and others, could have a material adverse effect on the Company’s business,
financial condition, operations and results of operations. In addition, because of the severity and global nature
of the COVID-19 pandemic, it is possible that estimates in the Company’s financial statements will change in
the near term and the effect of any such changes could be material, which could result in, among other things,
an impairment of long-lived assets, impairments of investments in venture funds and a change in the estimated
credit losses on accounts receivable.
The Company’s financial priorities remain unchanged. Importantly the Company remains committed to
increasing its financial flexibility over the longer term. In this environment, however, the Company believes it is
prudent to conserve cash out of an abundance of caution. The Company is constantly evaluating the situation
and monitoring any impacts or potential impacts to its business.
RELIANCE ON KEY SUPPLIERS AND CUSTOMERS
Corus procures its content from a limited number of key third party suppliers, some of whom are global in scale,
have significant negotiating leverage and are launching their own direct-to-consumer business in Canada.
While Corus may have alternate sources of content, there can be no assurance that Corus would be able to
source alternate content desirable to the Company’s viewers. The loss of a key supplier may adversely affect
Corus’ operations and/or its financial results. Suppliers may also experience business difficulties, privacy and/
or security incidents, restructure their operations, be consolidated with other suppliers, discontinue products
or sell their operations or products to other vendors, which could affect the future development and support
of the Company’s services (see PANDEMICS).
Corus enters into long-term agreements with various Broadcasting Distribution Undertakings (“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 an adverse effect on Corus’
operations and/or its financial results if Corus is unable to renew them on acceptable terms or at all, 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 adverse 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 an adverse impact on its operations and/or its financial results.
INFORMATION SYSTEMS AND INTERNAL BUSINESS PROCESSES
The day-to-day operations of Corus are highly dependent on information technology systems and internal
business processes and the ability of Corus and its service providers to protect the Company’s networks and
information technology systems. 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.
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, unauthorized
access to corporate or network information technology systems or other breaches of security could result in
Corus Entertainment Annual Report 2020 | 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
service disruptions to, or 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. Establishing response strategies and business continuity protocols to
maintain operations if any disruptive event materializes is critical to the Company. A failure to complete planned
and sufficient testing, maintenance or replacement of the Company’s networks, equipment and facilities as
appropriate, could disrupt the Company’s operations or require significant resources.
The Company uses several cloud-based systems in the operation of its business. The Company depends on
these cloud-based technology system providers to provide uninterrupted system access as well as to ensure
the Company’s data, which resides in those systems, is appropriately protected and safeguarded. An inability to
have continuous access to these systems could result in Corus’ inability to generate accurate and timely financial
data. The third party cloud-based system providers may also be subject to cyber attacks which could result in
the loss of data and/or reputational damage. There can be no assurance that the steps Corus takes to reduce
the risk of service outages or cyber attacks will be adequate to prevent them in the future.
INTELLECTUAL PROPERTY RIGHTS / PIRACY
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 trade mark portfolio, and
to have notice of third-party applications that may potentially conflict with Corus’ trade marks, all with a view to
ensuring that 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
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 trade marks, 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 trade marks, copyrights and
other proprietary rights on a worldwide basis.
From time to time, various third parties may contest or infringe upon the Company’s intellectual property rights.
The Company reviews these matters to determine what, if any, actions may be required or should be taken,
including legal action or negotiated settlement. There can be no assurance that the Company’s actions to
establish and protect trade marks, copyrights and other proprietary rights will be adequate to prevent imitation
or unauthorized reproduction of the Company’s products by others or prevent third parties from seeking to block
sales, licensing or reproduction of these products as a violation of their trade marks, copyrights and proprietary
rights. Moreover, there can be no assurance that others will not assert rights in, or ownership of, the Company’s
trade marks, copyrights and other proprietary rights, or that the Company will be able to successfully resolve
these conflicts. In addition, the laws of certain foreign countries may not protect proprietary rights to the same
extent as do the laws of the United States or Canada.
36 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 news gathering 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 also 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. However, there
can be no assurances that the Journalistic Principles and Practices comprehensively mitigate such risks. Events
out of the Company’s control may affect the Company’s ability to operate and therefore have an adverse impact
on its operations and/or its financial results.
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 (see
PANDEMICS).
Financial risks exist in productions relating to tax credits and co-production treaties. The aggregate amount
of federal and provincial tax credits a qualifying production may receive can constitute a material portion of a
production budget and typically can be as much as 30% to 40% of the Canadian production budget. 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
Corus Entertainment Annual Report 2020 | 37
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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.
PEOPLE
Employee Retention, Recruitment, Engagement and Diversity
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.
The Company’s broadcasting assets in television and radio are federally regulated by statute and by related
policies governing on air depiction and employment diversity. The Company is committed to building and
maintaining a diverse workforce and inclusive work environment throughout the organization. To this end the
Company has created a Diversity and Inclusion Council that provides feedback and ideas about diversity and
inclusion priorities, monitors the implementation of the triennial Employment Equity Plan and the Diversity and
Inclusion Plan.
Although Corus was recognized nine times, most recently in 2019, as one of Canada’s Best Diversity Employers
by Mediacorp Canada Inc, the Company continues to re-examine its diversity and inclusion plans and business
processes as they pertain to recruitment. The Company recognizes that an essential element of building a
strong and successful company is having and hiring people with the right capabilities, experiences, character
and mind-set, which has a direct impact on evolving the diversity of its workforce. In fiscal 2020, the Company
developed and delivered a presentation about anti-Black racism to raise awareness about the lived experiences
of the Black community, particularly Black employees, and to share steps to create an inclusive work environment.
To further support its commitment to diversity and inclusion, the Company engaged the services of DiversiPro to
conduct a systemic review to identify barriers to inclusion for Black, Indigenous and other racialized employees.
The recommendations of the report will be integrated into the diversity and inclusion action plan and the
Company will ensure focus on priority areas for maximum impact. Failure to address systemic racism could
have an adverse impact on Corus’ reputation, operations and/or financial results.
38 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
Unionized Labour
As at August 31, 2020, 27% of the Company’s employees were employed under one of six collective agreements
represented by two unions. Renegotiating collective bargaining agreements could result in higher labour costs
and be challenging in the context of a declining workload due to transformation, a maturing footprint and
improved efficiencies. During the bargaining process there may be project delays and work disruptions, including
work stoppages or work slowdowns, which could have an adverse impact on Corus’ operational and/or financial
results.
ENVIRONMENTAL
Global climate change could exacerbate certain of the threats facing the Company, including the frequency and
severity of weather-related events. Corus’ operations, service performance, reputation and business continuity
depend on how well we and our contracted service providers, protect networks and IT systems, as well as other
infrastructure and facilities, from events such as fire, natural disaster (including, without limitation, seismic and
severe weather-related events such as ice, snow and wind storms, wildfires, flooding, extended heat waves, and
tornadoes), power loss, building cooling loss and other events. Climate change could heighten the occurrence of
the above-mentioned environmental risks. Establishing response strategies and business continuity protocols
to maintain service consistency if any disruptive event materializes is critical to the achievement of continued
operations and could require significant resources and result in significant remediation costs.
The Company also owns or leases a variety of properties, including its transmitter sites. Some or all of these sites
may contain fuel storage systems for backup power generation. Leaks or spills from any of these storage tanks
may pose an environmental risk or result in adverse environmental conditions that could result in liability for the
Company. Failure to recognize and adequately respond to changing governmental and public expectations on
environmental matters could result in fines, remedial costs, missed opportunities, additional regulatory scrutiny
or harm Corus’ brand and reputation.
Any of the above mentioned events could have an adverse effect on Corus’ operational and/or financial results.
C. FINANCIAL RISKS
LEVERAGE RISK
The Company’s stated long-term objectives are a leverage target (net debt to segment profit ratio) below
3.0 times and to maintain a dividend yield in excess of 2.5%. In the short-term, the Company may permit the
long-term leverage 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’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.
DIVIDEND PAYMENTS
Payment of dividends on the Company’s Class A Voting Shares and Class B Non-Voting Shares is dependent on
the cash flow of the Company and subject to change. Beginning in fiscal 2019, the Company’s annual dividend
rate was $0.24 per Class B Non-Voting Share and $0.235 per Class A Voting Share and dividend payments have
been made quarterly since December 2018. Declarations and payments of dividends are subject to the approval
of the Board of Directors. While the Company expects to generate sufficient free cash flow in fiscal 2021 to fund
the Company’s annual dividend rate for fiscal 2021, actual results may differ from the Company’s expectations
and there can be no assurance that the Company will be able to continue dividend payments at the currently
anticipated rate or at all in the future. A reduction or cessation of the payment of dividends could materially
affect the trading price of the Class B Non-Voting Shares.
MARKET VOLATILITY
The market price for the Class B Non-Voting Shares may be volatile and subject to fluctuations in response to
numerous factors, many of which may be beyond Corus’ control. Financial markets have experienced significant
price and volume fluctuations that have been particularly affected by the market prices of equity securities
of companies and that have often been unrelated to the operating performance, underlying asset values or
prospects of such companies. The market price for the Company’s Class B Non-Voting Shares may decline in
the future, even if the Company’s operating results, underlying asset values or prospects have not changed
(see PANDEMICS).
Corus Entertainment Annual Report 2020 | 39
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 lending practices or the availability of capital,
could have a materially adverse effect on the Company’s ability to raise or refinance debt. There can be no
assurances that additional financing could be available to the Company when needed or on terms that are
acceptable. The Company’s inability to raise or refinance capital when required to fund on-going operations or
capital expenditures could limit growth and may have a material adverse effect on Corus, its operations and/or
its financial results (see PANDEMICS).
TAXES
Corus’ business is subject to various tax laws, changes to tax laws and the adoption of new tax laws, regulations
thereunder and interpretations thereof, which may have adverse tax consequences to the Company. While Corus
believes it has adequately provided for all income and commodity taxes based on information that is currently
available, the calculation and the applicability of taxes in many cases require significant judgment in interpreting
tax rules and regulations. In addition, Corus’ tax filings are subject to government audits which could result in
material changes in the amount of current and deferred income tax assets and liabilities and other liabilities
which may, in certain circumstances, result in the assessment of interest and penalties.
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. As such, Corus is exposed to risk
on the interest rate of the Company’s debt.
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, 2020, 92% (2019 – 86%) of the Company’s consolidated long-term debt was fixed
with respect to interest rates for at least the next year. Increases in interest rates could materially increase the
cost of its financing and have a material adverse effect on the Company’s financial performance.
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 (see PANDEMICS).
As at August 31, 2020, the Company’s trade receivables and allowance for doubtful accounts balances were
$264.9 million and $5.7 million, respectively.
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 4% of Corus’ total revenues in fiscal 2020 (2019 –
4%) were in foreign currencies, the majority of which was U.S. dollars. The Company had U.S. dollar denominated
payables of approximately $325.2 million at August 31, 2020 (2019 – $154.1 million in U.S. dollar). Accordingly,
fluctuations in the Canadian dollar - U.S. dollar exchange rate may adversely affect Corus’ financial results.
The Company manages its exposure to foreign exchange risk on U.S. dollar payments through the use of foreign
exchange forward contracts to fix the exchange rate on a portion of its U.S. denominated payables. As at August
31, 2020, $48.3 million (2019 – $68.6 million in U.S. dollar) of the Company’s U.S. denominated payables were
fixed with respect to foreign exchange rates.
The impact of foreign exchange gains and losses are described in note 24 to the audited consolidated financial
statements in the Risk Management section.
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.
40 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 the 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.
D. OWNERSHIP RISK
CONTROL OF CORUS BY THE SHAW FAMILY
A majority of the outstanding Class A Voting Shares of the Company are held by Shaw Family Living Trust (“SFLT”)
and its subsidiaries. As at August 31, 2020, SFLT and its subsidiaries hold 2,885,530 Class A Voting Shares,
representing approximately 85% of the outstanding Class A Voting Shares, for the benefit of descendants of the
late JR Shaw and Carol Shaw. The sole trustee of SFLT is a private company controlled by a board comprised of
seven directors, including, as at August 31, 2020, Heather Shaw, Julie Shaw, three other members of their family
and two independent directors. The Class A Voting Shares are the only shares entitled to vote in all shareholder
matters except in limited circumstances as described in the Company’s Annual Information Form. Accordingly,
SFLT is, and as long as it holds 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 the controlling shareholder of Shaw Communications Inc. (“Shaw”), and as a result, Shaw and Corus are
subject to common voting control.
E. 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. Accordingly,
Corus’ results of operations could be adversely affected by changes in regulations, policies and decisions by the
CRTC. These changes may relate to, or may have an impact on, among other matters, licencing, licence renewal,
competition, the television programming services the Company must distribute, infrastructure access and the
potential for new or increased fees or costs, described below. In addition, the costs of providing services may be
increased from time to time as a result of compliance with industry or legislative initiatives to address consumer
protection concerns or Internet-related issues such as copyright infringement, unsolicited commercial e-mail,
cybercrime, and lawful access. There can be no assurance that future regulatory requirements will not be
imposed on Corus. Any changes in the regulatory regime could have a material adverse effect on Corus and its
reputation, as well as Corus’ results of operations and future prospects.
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 Radiocommunication Act and regulations
promulgated under the Broadcasting Act.
The CRTC imposes a range of obligations upon licencees, including exhibition (number of hours broadcast)
requirements for Canadian content, Canadian content expenditure requirements and access obligations (i.e.
closed captioning or descriptive video). Any failure by the Company to comply with the 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 Canadian federal
government. If programming fails to so qualify, the Company’s television licencees 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 (Canada)
(the “Copyright Act”) to collectives (which represent the copyright owners) and individual copyright owners.
Corus Entertainment Annual Report 2020 | 41
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 BDUs and
Broadcasting Undertakings.
Corus recommends that readers review the CRTC source documents at www.CRTC.gc.ca for a complete
understanding of the changes. Information contained on, or accessible through, third party websites is not
deemed to form a part of, or be incorporated by reference into, this MD&A.
On May 15, 2017, the CRTC issued its licence renewal decisions for TV licences held by Corus. All Corus
English-language and French-language television services were given new five-year licence terms, which began
on September 1, 2017 and will end on August 31, 2022. The CPE requirements for Corus’ English-language
services were set at 30% and expenditures towards programming of public 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%. The CRTC also removed the vestiges of legacy conditions of licence in accordance with the
Commission’s Let’s Talk TV policy.
Following the Group Based Licence (”GBL”) renewal decisions in May 2017, a number of parties in the creative
community appealed the decisions to the Cabinet of the Canadian federal government. In particular, these
parties focused on the level of PNI expenditure obligations and contributions to original French-language
programming and music programming.
On August 30, 2017, the CRTC requested that the large media groups file information and/or amend their
original applications. The Commission decided to forego an oral hearing and make a decision based on the
written record. The CRTC clarified that for the 2017-2018 broadcast year, the May 2017 GBL decisions would
apply without modification.
On August 30, 2018, the CRTC published its reassessed baseline spending requirements for PNI expenditures
for English-language services. The CRTC increased the PNI expenditure requirements for the Company to 8.5%
which applies from September 1, 2018 through to August 31, 2022. The CRTC also increased the minimum
threshold for French-language services on CPE to 50% for the period September 1, 2018 through August 31,
2019 and to 75% for the remaining years of the licence term (September 1, 2019 to August 31, 2022).
The Company has concluded that the impact of these amendments to its television broadcast licences and
compliance has no material adverse impact to Corus’ business, results of operations, prospects and financial
condition.
More information can be found at www.crtc.gc.ca. Information contained on, or accessible through, third party
websites is not deemed to form a part of, or be incorporated by reference into, this MD&A.
Telecommunications Act, Radiocommunication Act, and Broadcasting Act Review
In September 2017, the Minister of Canadian Heritage directed the CRTC to prepare a report on the future
of programming and distribution models. The CRTC launched a two-phase consultation process to gather
input from the public. Phase I was completed in December 2017 and Phase II in February 2018. Following this
consultation, the CRTC released its report titled, “Harnessing Change” on May 31, 2018. On June 5, 2018,
the Government of Canada launched a review of the Broadcasting Act, the Telecommunications Act and the
Radiocommunication Act. The review was conducted by a panel of seven independent experts (the “BTLR Panel”).
The CRTC’s Harnessing Change report formed part of the record of that process. The BTLR Panel released its
interim report on June 26, 2019 and delivered its final report titled “Canada’s communication future: Time to
act” on January 29, 2020. It will ultimately fall to the federal government to determine whether to implement any
of the BTLR Panel’s recommendations to amend the Broadcasting Act. It is anticipated that any amendments to
the Broadcasting Act will be tabled in Parliament in 2020-2021.
42 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
The potential outcome of this process is difficult to predict and as such, the impact is not determinable at this
time but could adversely affect the Company’s results of operations and financial performance.
More information can be found at www.canada.ca.
Copyright Act Requirements
The Company’s radio, conventional television and specialty television undertakings rely upon licences issued
under the Copyright Act to make use of the music component of the programming and other uses of works
used or distributed by these undertakings. Under these licences, the Company 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 the Company are subject to change upon application by the
collective 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.
Two parliamentary committees conducted parallel studies of the Copyright Act in 2018 - 2019 in which they heard
from a number of witnesses representing industry, academia and consumers. Corus supported the advocacy
of the broadcasting industry and submitted briefs to the Committees. The Committees delivered reports with
recommendations in June 2019. The federal government will be responsible for making amendments to the
Copyright Act, if any. The timing of those amendments is uncertain. The potential outcome of this process
is difficult to predict and as such, the impact is not determinable at this time but could adversely affect the
Company’s results of operations and financial performance.
DIGITAL TRANSITION AND REPURPOSING OF SPECTRUM
The technical aspects of the operation of radio and television stations in Canada are also subject to the licensing
requirements and oversight of Innovation, Science and Economic Development Canada (“ISED”), a Ministry
of the Government of Canada. More information can be found at www.ic.gc.ca/eic/site/icgc.nsf/eng/home.
Information contained on, or accessible through, third party websites is not deemed to form a part of, or be
incorporated by reference into, this Annual Management’s Discussion and Analysis.
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. Of the Company’s 92 over-the-air television (“OTA”) transmitters, 44 are identified in
the government’s channel re-allotment plan, but only 17 of these will ultimately be impacted. The Company has
decommissioned some of the 44 broadcasting transmitters, which will include a number of transmitters that
would otherwise be forced to transition out of the 600 MHz band. Accommodating these changes will require
Corus to install new equipment or reconfigure existing equipment at affected sites and may have an impact on
signal quality and coverage. The first 11 impacted Corus transmitters have been successfully transitioned on
schedule. In the next phases, the Company will have four transmitters scheduled to be transitioned by the end
of fiscal 2021 and two in fiscal 2022.
The Company has concluded that the impact of migrating the remaining six transmitter sites in fiscal 2021 and
fiscal 2022 will not materially impact Corus’ business, results of operations, prospects and financial condition.
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
believes it takes reasonable and prudent steps to comply with PIPEDA and other privacy legislation, including
having appointed a Privacy Officer to manage all privacy issues relating to Corus’ business activities.
Corus Entertainment Annual Report 2020 | 43
MANAGEMENT’S DISCUSSION AND ANALYSIS
There can be no assurance that the Company’s compliance procedures will prevent a non-compliance event,
which could materially adversely impact Corus’ results of operations.
RESTRICTIONS ON NON-CANADIAN OWNERSHIP AND CONTROL
The Company is subject to Canadian ownership and control restrictions, including restrictions on the ownership
of the Class A Voting Shares and Class B Non-Voting Shares under the Broadcasting Act. Although the Company
believes it to be in compliance with the relevant legislation, there can be no assurance that a future CRTC
determination, or events beyond the Company’s control, will not result in Corus ceasing to be in compliance
with the relevant legislation. If such a development were to occur, the ability of Corus’ subsidiaries to operate
as Canadian carriers under the Broadcasting Act could be jeopardized and the Company’s business could be
materially adversely affected.
F. CONTINGENCIES
The Company and its subsidiaries are involved in litigation arising in the ordinary course and conduct of its
business from time to time. The Company recognizes liabilities for contingencies when a loss is probable and
capable of being estimated. As at August 31, 2020, 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. Should any litigation in which
the Company becomes involved be determined against the Company, such a decision could adversely affect the
Company’s ability to continue operating as well as the trading price of the Class B Non-Voting Shares.
TRANSACTIONS WITH RELATED PARTIES
Related party transactions are reviewed by Corus’ Corporate Governance Committee, the majority of whom
are independent directors. The following sets forth the certain transactions in which the Company is involved.
CONTROL OF THE COMPANY BY THE SHAW FAMILY
A majority of the outstanding Class A Voting Shares of the Company are held by Shaw Family Living Trust (“SFLT”)
and its subsidiaries. As at August 31, 2020, SFLT and its subsidiaries hold 2,885,530 Class A Voting Shares,
representing approximately 85% of the outstanding Class A Voting Shares, for the benefit of descendants of the
late JR Shaw and Carol Shaw. The sole trustee of SFLT is a private company controlled by a board comprised of
seven directors, including, as at August 31, 2020, Heather Shaw, Julie Shaw, three other members of their family
and two independent directors. The Class A Voting Shares are the only shares entitled to vote in all shareholder
matters except in limited circumstances as described in the Company’s Annual Information Form. Accordingly,
SFLT is, and as long as it holds 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. (“Shaw”), and as a result, both Shaw and
Corus are subject to common voting control.
SHAW COMMUNICATIONS INC.
The Company has transacted business in the normal course with Shaw and its subsidiaries. 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 $142.4 million
(2019 – $153.9 million), and production and distribution revenues of $2.5 million (2019 – $2.4 million) from Shaw.
In addition, the Company paid cable and satellite system distribution access fees of $8.6 million (2019 – $12.0
million), administrative and other fees of $1.8 million (2019 – $2.0 million) to Shaw and received non-monetary
advertising services from Shaw valued at $4.0 million (2019 – $7.7 million). As at August 31, 2020, the Company
had $21.1 million (2019 – $25.7 million) receivable and $1.9 (2019 – nil) payable to Shaw.
As of May 31, 2019, Shaw no longer held any interest in the Company. No dividends were paid to Shaw for the
year ended August 31, 2020 (2019 - $9.7 million).
OUTSTANDING SHARE DATA
As at October 21, 2020, 3,412,392 Class A Voting Shares and 204,954,666 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.
44 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
IMPACT OF NEW ACCOUNTING POLICIES
NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN FISCAL 2020
The Company has adopted new amendments to the following accounting standards effective for its annual
consolidated financial statements commencing September 1, 2019. The effects of these pronouncements on
the Company’s results and operations are described below.
IFRS 16 – LEASES (“IFRS 16”)
Effective September 1, 2019, the Company adopted IFRS 16, which supersedes previous accounting standards
for leases, including IAS 17 – Leases (“IAS 17”) and International Financial Reporting Interpretations Committee
4 – Determining Whether an Arrangement Contains a Lease (“IFRIC 4”). The standard sets out the principles for
the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most
leases under a single on-balance sheet model. The new standard eliminates the distinction between operating
and finance leases. Lessor accounting is substantially unchanged from IAS 17. Lessors will continue to classify
leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have
an impact for leases where Corus is the lessor.
The Company has adopted IFRS 16 on a modified retrospective basis, subject to permitted and elected practical
expedients. Comparative information has not been restated and continues to be reported under IAS 17.
When applying IFRS 16, the Company applied the following practical expedients:
• maintained the Company’s lease assessments made under IAS 17 and IFRIC 4 for existing contracts;
• applied a single discount rate to a portfolio of leases with similar characteristics;
• excluded initial direct costs from measuring the right-of-use assets as at September 1, 2019;
• used hindsight in determining the lease term where the contract contains purchase, extension or termination
options; and
• relied upon the Company’s assessment of whether leases are onerous under the requirements of IAS 37 –
Provisions, Contingent Liabilities and Contingent Assets as at August 31, 2019 as an alternative to reviewing
the Company’s right-of-use assets for impairment.
On transition, the Company elected the recognition exemptions on short-term leases, with lease terms less than
12 months, or low-value leases; however, the Company may choose to not elect the recognition exemptions on
a class-by-class basis for new classes, and lease-by-lease basis, respectively, in the future.
Upon adoption of IFRS 16 on September 1, 2019, the Company recognized right-of-use lease assets within
property, plant and equipment of $138.4 million and lease liabilities within other long-term liabilities of $157.8
million. The difference between the right-of-use asset and associated liability of $18.6 million relates to accrued
rents, which arose under IAS 17. For leases that were classified as operating leases under IAS 17, lease liabilities
at transition have been measured at the present value of the remaining lease payments discounted at the related
incremental borrowing rate as at September 1, 2019. The weighted average borrowing rate applied was 4.7%.
The right-of-use asset at transition has been measured at an amount equal to the lease liabilities less previously
accrued rent relating to the leases.
Set out below is the Company’s new accounting policy upon adoption of IFRS 16, which has been applied from
the date of initial application.
The Company assesses whether a contract is or contains a lease at the inception of the contract. The Company
recognizes a lease liability with a corresponding right-of-use asset for all lease agreements in which it is the
lessee, except for short-term leases and leases of low value assets. The lease liability is initially measured at the
present value of the lease payments that are not paid at the commencement date, discounted by using the rate
implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The lease liability is subsequently measured by increasing its carrying amount to reflect accretion on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments
made. The right-of-use asset is depreciated over the shorter of the lease term and the useful life of the underlying
asset. The Company applies IAS 36 – Impairment of Assets, to determine whether the asset is impaired and
account for any identified impairment loss.
The Company has elected not to recognize right-of-use assets and lease liabilities for leases that have a lease
term of 12 months or less and do not contain a purchase option or for leases related to low value assets. Lease
payments on short-term leases and lease of low value assets are recognized as general and administrative
expenses in the condensed consolidated statements of income (loss) and comprehensive income (loss).
Corus Entertainment Annual Report 2020 | 45
MANAGEMENT’S DISCUSSION AND ANALYSIS
After transition, right-of-use assets are measured at cost, comprised of the initial measurement of the
corresponding lease liabilities, lease payments made at or before the commencement date of any initial direct
costs. They are subsequently depreciated on a straight-line basis over their expected useful lives and reduced
by impairment losses. Right-of-use assets are tested for impairment if indicators of impairment exist.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability
and the right-of-use asset. The related payments are recognized as an expense in the period in which the event
or condition that triggers those payments occurs and are presented as such in the consolidated statements of
income (loss) and comprehensive income (loss).
Right-of-use assets are included in property, plant and equipment on the consolidated statement of financial
position. The current portion of lease liabilities are included in accounts payable and accrued liabilities on the
consolidated statement of financial position, while the long-term portion is included in other long-term liabilities.
IFRIC 23 – UNCERTAINTY OVER INCOME TAX TREATMENTS (“IFRIC 23”)
Effective September 1, 2019, the Company adopted IFRIC 23, which clarifies how to apply the recognition
and measurement requirements of IAS 12 - Income Taxes for taxable profit (tax loss), tax bases, unused tax
losses, unused tax credits and tax rates to determine current or deferred tax asset or liability when there is
uncertainty over income tax treatments. There was no impact to the consolidated financial statements as a
result of adopting this standard.
PENDING ACCOUNTING PRONOUNCEMENTS
IFRS 3 – BUSINESS COMBINATIONS (“IFRS 3”)
In October 2018, the IASB amended IFRS 3 seeking to clarify whether an acquisition transaction results in the
acquisition of an asset or the acquisition of a business. The amendments are effective for business combinations
for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
January 1, 2020, although earlier application is permitted. The Company will apply the standard prospectively
from September 1, 2020. The effects, if any, of the amended standard on the Company’s financial performance
and disclosure will be dependent on the facts and circumstances of any future acquisition transactions.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company’s significant accounting policies are described in note 3 to the fiscal 2020 audited consolidated
financial statements and notes thereto, which have been prepared in accordance with IFRS. The preparation of
these fiscal 2020 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 programming and 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.
IMPAIRMENT OF LONG-LIVED ASSETS
At each reporting date, the Company assesses its long-lived assets, including property, plant and equipment,
program 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
46 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 licences, 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 licences 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 licences
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.
In the third quarter of fiscal 2020, the Company recorded non-cash goodwill impairment charges of $673.0
million and $46.0 million in the Television and Radio operating segments, respectively. Concurrently, the
Company recorded a non-cash impairment charge of $67.8 million in the Radio segment related to broadcast
licences. Due to the uncertainty related to COVID-19, the Company has noted there is significant estimation
uncertainty related to the Company’s growth rates and future cash flow estimates, which could change in the
near term and the effect of such changes could be material. 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 licence and both the television and
radio goodwill impairment tests, would have resulted in no additional incremental goodwill impairment charge
or broadcast impairment charge.
A significant portion of the Company’s total assets are long-lived intangible assets and goodwill. As at August 31,
2020, 62% of the Company’s total assets were long-lived intangible assets. The Company records impairment
losses on its long-lived assets when it believes that their carrying value may not be recoverable. Recoverability
is highly dependent on the projected operating results of the Company. There can be no assurance that the
Company will not record impairment charges in the future that could materially adversely impact Corus’ financial
results.
The Company has completed its annual impairment testing of goodwill and indefinite lived intangible assets in
the fourth quarter of fiscal 2020 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
Corus Entertainment Annual Report 2020 | 47
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 (loss). 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.
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 consolidated 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 calculate the interest income on plan assets. It is based on the yield of long-term, high-quality
corporate fixed income investments closely matching the term of the estimated future cash flows and is reviewed
and adjusted as changes are required. The following table illustrates the 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 August 31, 2020
2.70%
Pension expense for the
year ended August 31, 2020
3.00%
2.63%
$45,544
$6,136
2.87%
$3,103
$29
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, DSUs, PSUs, and 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.
48 | Corus Entertainment Annual Report 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2020, the Company’s disclosure controls and
procedures were effective.
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
have caused it to be designed under their supervision) to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of the consolidated financial statements in accordance with IFRS.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements
on a timely basis. Also, projections of any of the effectiveness of internal control are subject to the risk that the
controls or that the degree of compliance with the policies and procedures may deteriorate. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to the financial
statement preparation and presentation.
Management evaluated, under the supervision of and with the participation of the CEO and CFO, the effectiveness
of the Company’s internal control over financial reporting, as of August 31, 2020, 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, 2020.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting that occurred during fiscal
2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
The design of any system of controls and procedures is based in part upon certain assumptions about the
likelihood of certain events. There can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions, regardless of how remote.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Annual Information Form, can be found on SEDAR
at www.sedar.com.
Corus Entertainment Annual Report 2020 | 49
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, 2020, 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
50 | Corus Entertainment Annual Report 2020
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Corus Entertainment Inc.
Opinion
We have audited the consolidated financial statements of Corus Entertainment Inc. and its subsidiaries (the
Group), which comprise the consolidated statements of financial position as at August 31, 2020 and August
31, 2019, and the consolidated statements of income (loss) and comprehensive income (loss), consolidated
statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes
to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the
consolidated financial position of the Group as at August 31, 2020 and August 31, 2019, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have
fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis; and
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not and
will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on
the work we will perform on this other information, we conclude there is a material misstatement of other
information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements
in accordance with IFRS, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Corus Entertainment Annual Report 2020 | 51
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Martin Lundie.
Toronto, Canada
October 21, 2020
Chartered Professional Accountants
Licensed Public Accountants
52 | Corus Entertainment Annual Report 2020
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at August 31,
(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 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
Accumulated deficit
Accumulated other comprehensive income (deficit) (note 17)
Total equity attributable to shareholders
Equity attributable to non-controlling interest
Total equity
Commitments, contingencies and guarantees (notes 14 and 28)
See accompanying notes
2020
2019
45,900
297,585
—
17,112
360,597
26,745
59,424
333,762
637,819
44,891
1,789,018
664,958
53,668
3,970,882
451,682
8,621
76,339
12,698
549,340
1,429,750
492,956
9,494
440,923
2,922,463
816,189
1,511,325
(1,425,432)
(2,258)
899,824
148,595
1,048,419
3,970,882
82,568
372,828
13,772
19,557
488,725
25,035
51,707
225,927
507,913
53,336
1,876,235
1,383,958
59,463
4,672,299
429,483
10,331
76,339
—
516,153
1,655,406
278,117
7,686
472,700
2,930,062
830,477
1,512,818
(758,757)
12,187
1,596,725
145,512
1,742,237
4,672,299
Corus Entertainment Annual Report 2020 | 53
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
For the years ended August 31,
(in thousands of Canadian dollars, except per share amounts)
Revenues (note 22 and note 26)
Direct cost of sales, general and administrative expenses (note 18 and note 26)
Depreciation and amortization (notes 6 and 9)
Interest expense (note 19)
Broadcast licences and goodwill impairment (notes 9, 10 and 11)
Gain on debt modification (note 14)
Integration, restructuring and other costs (note 13)
Other expense (income), net (note 20)
Income (loss) before income taxes
Income tax expense (note 21)
Net income (loss) for the year
Other comprehensive income (loss), net of income taxes (note 17):
Items that may be subsequently reclassified to income (loss):
Unrealized change in fair value of cash flow hedges
Unrealized foreign currency translation adjustment
Items that will not be reclassified to income (loss):
Unrealized change in fair value of financial assets
Actuarial gain (loss) on post-retirement benefit plans
Other comprehensive loss, net of income taxes
Comprehensive income (loss) for the year
Net income (loss) attributable to:
Shareholders
Non-controlling interest
Comprehensive income (loss) attributable to:
Shareholders
Non-controlling interest
2020
1,511,236
1,005,397
158,549
115,185
786,790
—
19,155
(8,077)
(565,763)
41,944
(607,707)
(15,466)
(87)
(15,553)
1,108
8,871
9,979
(5,574)
(613,281)
(625,362)
17,655
(607,707)
(630,936)
17,655
(613,281)
2019
1,687,482
1,102,397
182,354
117,718
—
(3,889)
26,316
10,474
252,112
71,445
180,667
(31,538)
309
(31,229)
(2,440)
(9,295)
(11,735)
(42,964)
137,703
156,084
24,583
180,667
113,120
24,583
137,703
Earnings (loss) per share attributable to shareholders:
Basic
Diluted
See accompanying notes
($2.98)
($2.98)
$0.74
$0.74
54 | Corus Entertainment Annual Report 2020
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands of Canadian dollars)
As at August 31, 2019
Comprehensive income (loss)
Dividends declared
Shares repurchased under
normal course issuer bid
(“NCIB”)
Actuarial gain on post-retirement
benefit plans
Share-based compensation
expense
Equity funding by a non-
controlling interest
—
—
—
Share
capital
(note 16)
Contributed
surplus
(note 16)
830,477
1,512,818
—
—
—
—
Accumulated
deficit
(758,757)
(625,362)
(50,184)
Accumulated
other
comprehensive
income (loss)
(note 17)
Total equity
attributable
to
shareholders
12,187
(5,574)
1,596,725
(630,936)
Non-
controlling
interest Total equity
145,512
1,742,237
17,655
(613,281)
—
(50,184)
(19,983)
(70,167)
(14,288)
(2,605)
—
—
(16,893)
—
8,871
(8,871)
—
—
—
—
(16,893)
—
1,112
1,112
—
—
—
—
—
1,112
—
5,411
5,411
As at August 31, 2020
816,189
1,511,325
(1,425,432)
(2,258)
899,824
148,595
1,048,419
As at August 31, 2018, as
previously presented
IFRS 9 transitional adjustment
IFRS 15 transitional
adjustment
Adjusted balance as at
September 1, 2018
2,330,477
12,119
(856,668)
36,460
1,522,388
154,415
1,676,803
—
—
—
—
—
9,396
9,396
1,985
—
1,985
—
—
9,396
1,985
2,330,477
12,119
(854,683)
45,856
1,533,769
154,415
1,688,184
Comprehensive income (loss)
Dividends declared
—
—
—
—
156,084
(50,863)
Reduction of stated capital
(1,500,000)
1,500,000
Share-based compensation
expense
Actuarial loss on post-retirement
benefit plans
Divestiture of subsidiary with a
non-controlling equity interest
—
—
—
699
—
—
(42,964)
—
—
—
—
—
(9,295)
9,295
—
—
113,120
(50,863)
24,583
(28,366)
137,703
(79,229)
—
699
—
—
—
—
—
—
699
—
(5,120)
(5,120)
As at August 31, 2019
830,477
1,512,818
(758,757)
12,187
1,596,725
145,512
1,742,237
See accompanying notes
Corus Entertainment Annual Report 2020 | 55
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended August 31,
(in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income (loss) for the year
Adjustments to reconcile net income (loss) to cash provided by operating activities:
2020
2019
(607,707)
180,667
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 (note 21)
Broadcast licences and goodwill impairment (note 11)
Gain on debt modification (notes 14 and 19)
Impairment of investment in associate
Share-based compensation expense (note 16)
Imputed interest (note 19)
Payment of program rights
Net spend on 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 (note 22)
Proceeds from sale of property
Business divestiture, net of divested cash (note 27)
Business acquisition (note 27)
Net cash flows for intangibles, investments and other assets
Cash used in investing activities
FINANCING ACTIVITIES
Decrease in bank loans
Deferred financing costs
Shares repurchased under NCIB (note 16)
Payments of lease liabilities (note 6)
Equity funding by a non-controlling interest
Dividends paid
Dividends paid to non-controlling interest
Other
Cash 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
495,814
20,063
158,549
(23,992)
786,790
—
—
1,112
52,371
(547,486)
(43,178)
(2,448)
(1,658)
288,230
25,042
313,272
(15,385)
314
—
—
(3,934)
(19,005)
(229,514)
—
(16,893)
(15,945)
5,411
(50,399)
(19,983)
(3,612)
(330,935)
(36,668)
82,568
45,900
516,431
16,035
182,354
(10,166)
—
(3,889)
8,720
699
41,209
(537,954)
(45,029)
(2,561)
(5,921)
340,595
2,958
343,553
(30,055)
—
12,529
(6,011)
(6,678)
(30,215)
(249,949)
(3,440)
—
—
—
(38,150)
(30,365)
(3,667)
(325,571)
(12,233)
94,801
82,568
56 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
1. CORPORATE INFORMATION
Corus Entertainment Inc. (the “Company” or “Corus”) is a diversified Canadian-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, the operation of radio stations; the operation of digital assets and media and
technology services; 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.
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 October 21, 2020.
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.
The Company continues to closely monitor the evolution of the novel coronavirus (“COVID-19”) situation. As the
COVID-19 pandemic continues to significantly impact the wellbeing of individuals and the Canadian and global
economies, the Company has implemented a specific response plan, informed by measures recommended by
public health agencies, to continue providing its essential services and support to customers while safeguarding
the health and safety of employees. Appropriate business continuity measures have been taken to ensure
uninterrupted service of the Company’s television, digital and radio operations.
It is too soon to gauge the medium to long-term impacts of the current outbreak, given the many unknowns
related to COVID-19. These include the duration, severity and possible resurgence of the outbreak as emergency
measures are eased. The extent to which COVID-19 and any other pandemic or public health crisis impacts
the Company’s business, affairs, operations, financial condition, liquidity, availability of credit and results of
operations will depend on future developments that are highly uncertain and cannot be predicted with any
meaningful precision, including new information which may emerge concerning the severity of the COVID-19
virus and the actions required to continue to contain the COVID-19 virus or remedy its impact, among others.
Any of these developments, and others, could have a material adverse effect on the Company’s business,
financial condition, operations and results of operations. In addition, because of the severity and global nature
of the COVID-19 pandemic, it is possible that estimates in the Company’s financial statements will change in
the near term and the effect of any such changes could be material, which could result in, among other things, an
impairment of long-lived assets, an impairment of investments in venture funds and a change in the estimated
credit losses on accounts receivable. The Company is constantly evaluating the situation and monitoring any
impacts or potential impacts to its business.
Corus Entertainment Annual Report 2020 | 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 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.
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 (loss)
and other comprehensive income (loss) (“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 (loss) and comprehensive income (loss).
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.
58 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 (loss) and comprehensive income (loss).
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration which is deemed to be a financial
asset or liability will be recognized in accordance with International Financial Reporting Standard (“IFRS”)
9 – Financial Instruments: Classification 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
The Company derives revenue from the transfer of goods and services. Revenue recognition is based on the
delivery of performance obligations and an assessment of when control is transferred to the customer. Revenue
is recognized either when the performance obligation in the contract has been performed (“point in time”
recognition) or “over time” as control of the performance obligation is transferred to the customer.
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 or other digital assets 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.
Customer contracts can have a wide variety of performance obligations, from production contracts to distribution
activities, training and support services. For these contracts each performance obligation is identified and
evaluated. Under IFRS 15 – Revenue from Contracts with Customers, the Company needs to evaluate if a licence
represents a right to access the content (revenue recognized over time) or represents a right to use the content
(revenue recognized at a point in time). The Company has determined that most licence revenues are satisfied
at a point in time due to there being limited ongoing involvement in the use of the licence following its transfer
to the customer. The Company has determined that most service revenues are satisfied over a period of time as
project milestones are met and the Company has an enforceable right to payment for performance completed
to date.
The Company’s production and distribution revenues from the distribution and licensing of film rights; royalties
from merchandise licensing, publishing and music contracts; sale of licences, 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 and the Company has a present right to payment for the good or service;
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.
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.
Corus Entertainment Annual Report 2020 | 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 (loss) and comprehensive income (loss) as incurred.
Leases and right-of-use assets
The Company assesses whether a contract is, or contains a lease at the inception of the contract. The Company
recognizes a lease liability with a corresponding right-of-use asset for all lease agreements in which it is the
lessee, except for short-term leases and leases of low value assets. The lease liability is initially measured at the
present value of the lease payments that are not paid at the commencement date, discounted by using the rate
implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The lease liability is subsequently measured by increasing its carrying amount to reflect accretion on the lease
liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments
made. The right-of-use asset is depreciated over the shorter of the lease term and the useful life of the underlying
asset. The Company applies IAS 36 – Impairment of Assets, to determine whether the asset is impaired and
account for any identified impairment loss.
The Company has elected not to recognize right-of-use assets and lease liabilities for leases that have a lease
term of 12 months or less and do not contain a purchase option or for leases related to low value assets. Lease
payments on short-term leases and lease of low value assets are recognized as general and administrative
expenses in the condensed consolidated statements of income (loss) and comprehensive income (loss).
After transition, right-of-use assets are measured at cost, comprised of the initial measurement of the
corresponding lease liabilities and lease payments made at or before the commencement date of any initial
direct costs. They are subsequently depreciated on a straight-line basis over their expected useful lives and
reduced by impairment losses. Right-of-use assets are tested for impairment if indicators of impairment exist.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability
and the right-of-use asset. The related payments are recognized as an expense in the period in which the event
or condition that triggers those payments occurs and are presented as such in the consolidated statements of
income (loss) and comprehensive income (loss).
Right-of-use assets are included in property, plant and equipment on the consolidated statements of financial
position. The current portion of lease liabilities are included in accounts payable and accrued liabilities on the
consolidated statement of financial position, while the long-term portion is included in other long-term liabilities.
Operating lease commitments, for which lease payments are recognized as an expense in the consolidated
statements of income (loss) and comprehensive income (loss), are recognized on a straight-line basis over the
lease term.
60 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Depreciation
Depreciation is recorded on a straight-line basis over the estimated useful lives of the property, plant and
equipment and right-of-use assets as follows:
Land and assets not available for use
Equipment
Broadcasting
Computer
Leasehold improvements
Right-of-use assets
Buildings
Structure
Components
Furniture and fixtures
Other
Not depreciated
5 – 10 years
3 – 5 years
Lease term
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 (loss) and comprehensive income
(loss) when the asset is derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at least annually and the
depreciation charge is adjusted prospectively, if appropriate.
BORROWING COSTS
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of
the cost of the asset. All other borrowing costs are expensed in the period they are incurred.
PROGRAM RIGHTS
Program rights represent contract rights acquired from third parties to broadcast television programs, feature
films and radio programs. The assets and liabilities related to these rights are recorded when the Company
controls the asset, the expected future economic benefits are probable and the cost is reliably measurable. The
Company generally considers these criteria to be met and records the assets and liabilities when the licence
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.
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.
Corus Entertainment Annual Report 2020 | 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 are amortized using a declining balance method of 50% at the time of initial episodic
delivery and at annual rates ranging from 15 – 25% thereafter. Library content is amortized using a declining
balance method at rates ranging from 15 – 25% annually. Acquired rights are amortized using a straight-line
method.
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.
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 (loss) and comprehensive income (loss)
only when the investment is fully recouped.
Amortization of film investments is included in direct cost of sales, general and administrative expenses and has
been disclosed separately in the consolidated statements of cash flows.
GOODWILL AND INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired
in a business combination are measured at fair value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less accumulated amortization and accumulated impairment charges, if any.
Internally 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 (loss) and comprehensive income (loss) 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 (loss) and comprehensive income (loss) 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
3 – 20 years
3 – 5 years
Intangible assets with indefinite useful lives are not amortized. Broadcast licences are considered to have an
indefinite life based on management’s intent and ability to renew the licences without significant cost and without
material modification of the existing terms and conditions of the licence. The assessment of an 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.
62 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Goodwill is initially measured at 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 (loss) and comprehensive income (loss).
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to a cash
generating unit (“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 licences, indefinite life intangible assets 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 licences and indefinite life intangible assets 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 licence and indefinite life intangible asset impairment testing.
CGUs for broadcast licence and indefinite life intangible asset impairment testing
For the Television segment, the Company has determined that the CGU is the combined group of the conventional
television stations and specialty television networks, the operating segment level. This is the lowest level at
which management monitors broadcast licenses for internal management purposes and have independent
cash inflows.
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 (loss) and
comprehensive income (loss) 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 licence
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.
Corus Entertainment Annual Report 2020 | 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
In fiscal 2020, the Company determined that it was eligible for the Canada Emergency Wage Subsidy. Funding
from this program provides a reimbursement for a portion of salaries paid out to employees during the COVID-19
pandemic and is recorded as a reduction of salary expense when eligible expenditures are made and there is
reasonable assurance of realization.
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 (loss) and comprehensive income
(loss).
INCOME TAXES
Income tax expense is comprised of current and deferred income taxes. Income tax expense is recognized in the
consolidated statements of income (loss) and comprehensive income (loss), unless it relates to items recognized
outside the consolidated statements of income (loss) and comprehensive income (loss). Income tax expense
relating to items recognized outside of the consolidated statements of income (loss) and comprehensive income
(loss) is recognized in correlation to the underlying transaction in either OCI or equity.
Current income tax
The Company records current income tax expense or recovery based on taxable income earned or loss incurred
for the period in each tax jurisdiction where it operates, and for any adjustment to taxes payable in respect of
previous years, using tax laws that are enacted or substantively enacted at the consolidated statements of
financial position date.
Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation. The Company establishes provisions related to tax
uncertainties, where appropriate, based on its best estimate of the amount that will ultimately be paid to or
received from taxation authorities.
Deferred income tax
The Company uses the liability method of accounting for deferred income taxes. Under this method, the
Company recognizes deferred income tax assets and liabilities for future income tax consequences attributable
to temporary differences between the financial statement carrying amounts of assets and liabilities and their
respective income tax bases, and on unused tax losses and tax credit carryforwards. The deferred income 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 income 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 income 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.
64 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 income tax assets and deferred income 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 income 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 Canadian Radio-television and Telecommunications Commission (“CRTC”) benefit obligations
committed as part of business acquisitions are initially recorded at the present value of amounts to be paid net
of any expected incremental cash inflows. The obligation is subsequently adjusted for the incurrence of related
expenditures, the passage of time and for revisions to the timing of the cash flows. Changes in the obligation
due to the passage of time are recorded as accretion of long-term liabilities and interest expense.
PROVISIONS
Provisions are recognized if the Company has a present legal or constructive obligation as a result of past events,
if it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can
be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation as of the date of the consolidated statements of financial position, taking into account the risks and
uncertainties surrounding the obligation. In some situations, external advice may be obtained to assist with
the estimates.
Provisions are discounted and measured at the present value of the expenditure expected to be required to
settle the obligation, using an after-tax discount rate that reflects the current market assessments of the time
value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is
recognized as interest expense. Future information could change the estimates and thus impact the Company’s
financial position and results of operations.
FINANCIAL INSTRUMENTS
The Company’s financial assets and liabilities (financial instruments) include cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities, long-term debt and derivative financial instruments. All
financial instruments are recorded at fair value at recognition. Financial instruments are measured by grouping
them into classes upon initial recognition, based on the purpose of the individual instruments. All financial
instruments are measured at fair value plus, in the case of the Company’s financial instruments not classified
as fair value through profit and loss (“FVTPL”) or fair value through other comprehensive income (“FVTOCI”),
transaction costs that are directly attributable to the acquisition or issuance of the financial instruments. The
classifications and methods of measurement subsequent to initial recognition of the Company’s financial assets
and financial liabilities are as follows:
Corus Entertainment Annual Report 2020 | 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Financial instrument
Financial assets
Cash and cash equivalents
Accounts receivable
Investments, in venture funds
Financial liabilities
Accounts payable and accrued liabilities
Long-term debt
Other long-term liabilities
Derivatives (2)
Interest rate swap agreements (3)
Foreign exchange forward contracts (4)
Total return swap agreements (5)
Classification and measurement method
FVTPL
Amortized cost
FVTOCI with no reclassification to net income (1)
Amortized cost
Amortized cost
Amortized cost
FVTOCI
FVTPL
FVTPL
(1) Subsequently measured at fair value with changes recongized in the FVTOCI investment reserve.
(2) Derivatives can be in an asset or liability position at a point in time historically or in the future. For derivatives designated as cash flow
hedges for accounting purposes, the effective portion of the hedge is recognized in accumulated other comprehensive income and
the ineffective portion of the hedge is recognized immediately into net income. Derivatives not designated as hedges for accounting
purposes are recognized directly in profit and loss.
(3) Debt derivatives related to the Company’s credit facility have been designated as hedges for accounting purposes and are measured
at FVTOCI.
(4) Subsequent chages are offset against other expense (income), net.
(5) Subsequent chages are offset against stock-based compensation expense or recovery in operating costs.
Investments in venture funds
The Company’s investments in venture funds consist primarily of investments in common shares of a venture
fund which invests in common and preferred shares of entities in the media and entertainment industry recorded
using trade date accounting. Equity securities of venture funds are designated as fair value through OCI pursuant
to the irrevocable election under IFRS 9 - Financial Instruments (“IFRS 9”). Changes in the fair value of equity
securities are permanently recognized in OCI and are not reclassified to profit or loss.
Derivative instruments and hedge accounting
The Company uses derivative financial instruments (primarily swaps and forward contracts) to manage exposure
to fluctuations in interest rates, foreign currency exchange rates, and certain share-based payment awards.
The Company recognizes all derivative financial instruments in the consolidated financial statements at fair
value and they are classified based on contractual maturity. Derivative instruments are classified as either
hedges of highly probable forecasted transactions (cash flow hedges) or non-hedge derivatives. Derivatives
designated as a cash flow hedge that are expected to be highly effective in achieving offsetting changes in cash
flows are assessed on an ongoing basis to determine that they have actually been highly effective throughout
the financial reporting periods for which they were designated. Derivative assets and derivative liabilities are
shown separately in the consolidated statements of financial position unless there is a legal right of offset and
intent to settle on a net basis.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges are recognized in OCI. The gain or loss relating to the ineffective portion, if any, is recognized in the gain
on derivative financial statements line item of the consolidated statements of income. Amounts deferred in OCI
are reclassified when the hedged transaction has occurred.
Hedge accounting is applied to interest rate swap agreements that fix the interest rate on the term facility. In
order to apply hedge accounting, a high correlation (which indicates effectiveness) is required in the offsetting
changes in the values of the financial instruments (the hedging items) used to establish the designated
hedging relationships at inception and actual effectiveness for each reporting period thereafter. A designated
hedging relationship is assessed at inception for its anticipated effectiveness and actual effectiveness for each
66 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
reporting period thereafter. Any ineffectiveness is reflected in the consolidated statements of income (loss) and
comprehensive income (loss) as financing costs within other expense (income), net.
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 (loss) and comprehensive
income (loss). 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 foreign exchange forward contracts is based on net discounted future cash flows using projected market
rates, which are observable inputs provided by banks and available in other public data sources and are classified
within Level 2.
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 Company’s investments in venture funds consist primarily of investments in common shares of a venture
fund that invests in common and preferred shares of entities in the media and entertainment industry, which
have little to no market actively. As a result, these investments are classified within Level 3.
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.
Corus Entertainment Annual Report 2020 | 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
SHARE-BASED COMPENSATION
The Company has a stock option plan, two Deferred Share Units (“DSUs”) plans, a Performance Share Units
(“PSUs”) plan and a Restricted Share Units (“RSUs”) plan, with units under such plans awarded to certain
employees and directors.
The fair value of the stock options granted that 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 increase to
the 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 generally 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 and deemed dividend equivalents
determined by achievement of vesting conditions. The cost of share-based compensation is included in direct
cost of sales, general and administrative expenses.
EMPLOYEE BENEFIT PLANS
The Company maintains capital accumulation (defined contribution), post-retirement benefit plans and defined
benefit employee benefit plans. Company contributions to capital accumulation plans and post-retirement
benefit plans are expensed as incurred.
The defined benefit plans are unfunded plans for 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 (loss) and comprehensive income (loss). 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 transferred to 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
68 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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.
Broadcast licences and indefinite life intangible assets
Broadcast licences and indefinite life intangible assets are reviewed for impairment annually or more frequently
if there are indications that impairment may have occurred.
Broadcast licences and indefinite life intangible assets 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 licences and
indefinite life intangible assets.
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.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are calculated using the weighted average number of common shares outstanding
during the year. The computation of diluted earnings (loss) 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.
Corus Entertainment Annual Report 2020 | 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
USE OF ESTIMATES AND JUDGMENTS
The preparation of these 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 and disclosure of contingent assets and liabilities as 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:
• the recoverability of long-lived assets including property, plant and equipment, right-of-use assets,
program rights, film investments, goodwill, broadcast licences and intangible assets; 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 estimated useful lives of assets and right-of-use assets;
• determining discount rates used to measure lease liabilities; and
• income tax provisions and uncertain income tax positions in each of the jurisdictions in which the
Company operates.
The most significant judgments made by management in the preparation of the Company’s consolidated
financial statements include judgments related to:
• assessments about whether line items are sufficiently material to warrant separate presentation in
the primary financial statements and, if not, whether they are sufficiently material to warrant separate
presentation in the consolidated financial statement notes;
• identifying CGUs;
• the allocation of net assets, including shared corporate and administrative assets, to the Company’s
CGUs when determining their carrying amounts;
• determining that broadcast licences have indefinite lives;
• inclusion of renewal periods covered by options to extend lease terms included in the measurement of
right-of-use assets and liabilities;
• determining control for purposes of consolidation of an investment; and
• determining income tax rates for recognition of deferred income tax on broadcast licences.
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
IFRS 16 – LEASES (“IFRS 16”)
On January 13, 2016, the IASB published a new standard, IFRS 16. The new standard will eliminate the distinction
between operating and finance leases and will bring most leases onto the balance sheet for lessees. Lessees
must recognize a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other
non-financial assets and depreciated accordingly, and the liability accrues interest. The lease liability is initially
measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit
in the lease. Lessees are permitted to make an accounting policy election, by class of underlying asset, to apply
a method like IAS 17 - Leases (“IAS 17”) operating lease accounting and not recognize lease assets and lease
liabilities for leases with a lease term of 12 months or less, and on a lease-by-lease basis, to apply a method
similar to current operating lease accounting to leases for which the underlying asset is of low value. IFRS 16
supersedes IAS 17 and its related interpretations, and is effective for the period beginning on or after January
1, 2019, which was September 1, 2019 for the Company.
70 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
The Company applied the standard retrospectively, with the cumulative effect of the initial application of the
new standard at the date of initial application, September 1, 2019, subject to permitted and elected practical
expedients; such method of application did not result in the retrospective adjustment of amounts reported for
periods prior to fiscal 2020. The nature of the transition method selected is such that the lease population as at
September 1, 2019, and the discount rates determined contemporaneously, were the basis for the cumulative
effects recorded as of that date.
As a transitional practical expedient permitted by the new standard, the Company did not reassess whether
contracts were, or contain, leases as at September 1, 2019, applying the criteria of the new standard as at
September 1, 2019. Only contracts that were previously identified as leases applying IAS 17 and IFRS 4 -
Determining whether an Arrangement Containing a Lease, are part of the transition to the new standard. Only
contracts entered into (or changed) subsequent to September 1, 2019 have been assessed for being, or
containing, leases applying the criteria of the new standard.
Upon adoption of IFRS 16, the Company recognized right-of-use lease assets within property, plant and
equipment of $138.4 million and lease liabilities within other long-term liabilities of $157.8 million. The
right-of-use assets have been reduced for accrued rents of $18.6 million, which arose under IAS 17. For leases
that were classified as operating leases under IAS 17, lease liabilities at transition have been measured at the
present value of the remaining lease payments discounted at the related incremental borrowing rate as at
September 1, 2019. The weighted average incremental borrowing rate applied was 4.7%.
The Company recorded a right-of-use asset and a lease liability at the date of transition. The lease liability was
initially measured at the present value of lease payments that remain to be paid at the date of the transition.
Upon transition, the right-of-use asset was measured at the amount of the lease liability, adjusted by the amount
of any prepaid or accrued lease payments relating to that lease recognized in the consolidated statements of
financial position immediately before the date of initial application.
After transition, the right-of-use asset will initially be recorded at the lease commencement date and will be
measured at cost consisting of:
• the initial amount of the lease liability, adjusted for any lease payments made at or before the
commencement date; plus
• any initial direct costs incurred; and
• an estimate of costs to dismantle and remove the underlying asset or restore the site on which it is
located; less
• any lease incentives received.
The right-of-use asset will typically be depreciated on a straight-line basis over the lease term, unless the
Company expects to obtain ownership of the leased asset at the end of the lease. The lease term will consist of:
• the non-cancellable period of the lease;
• periods covered by options to extend the lease, where the Company is reasonably certain to exercise
the option; and
• periods covered by options to terminate the lease, where the Company is reasonably certain not to
exercise the option.
INTERNATIONAL FINANCIAL REPORTING INTERPRETATIONS COMMITTEE 23 – UNCERTAINTY OVER INCOME
TAX TREATMENTS (“IFRIC 23”)
IFRIC 23 provides guidance when there is uncertainty over income tax treatments including (but not limited to)
whether uncertain tax treatments should be considered separately; assumptions made about the examination
of tax treatments by tax authorities; the determination of taxable profit, tax bases, unused tax losses, unused
tax credits, and tax rates; and the impact of changes in facts and circumstances.
The new interpretation is effective for annual periods beginning on or after January 1, 2019 and was adopted by
the Company effective September 1, 2019. The Company has determined that the application of this standard
had no significant impact on its consolidated financial statements.
Corus Entertainment Annual Report 2020 | 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
PENDING ACCOUNTING PRONOUNCEMENTS
IFRS 3 – BUSINESS COMBINATIONS (“IFRS 3”)
In October 2018, the IASB amended IFRS 3 seeking to clarify whether an acquisition transaction results in the
acquisition of an asset or the acquisition of a business. The amendments are effective for business combinations
for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
January 1, 2020, although earlier application is permitted. The Company will apply the standard prospectively
from September 1, 2020. The effects, if any, of the amended standard on the Company’s financial performance
and disclosure will be dependent on the facts and circumstances of any future acquisition transactions.
4. ACCOUNTS RECEIVABLE
Trade
Other (1)
Less allowance for doubtful accounts (note 24)
(1) Includes $22.1 million related to the estimated CEWS funding at August 31, 2020
5. INVESTMENTS AND OTHER ASSETS
2020
264,852
38,463
303,315
5,730
297,585
Balance - August 31, 2018
IFRS 9 transitional adjustment
Adjusted balance as at September 1, 2019
Increase (decrease) in investments
Equity loss of associates (note 20)
Fair value adjustment through OCI with no
reclassification to net income (note 17)
Investment impairment (note 20)
Post-retirement plan asset change (note 29)
Derivative fair value change (note 14)
Balance - August 31, 2019
Increase (decrease) in investments
Equity gain of associates (note 20)
Fair value adjustment through OCI with no
reclassification to net income (note 17)
Post-retirement plan asset change (note 29)
Derivative fair value change (note 14)
Balance - August 31, 2020
INVESTMENTS IN ASSOCIATES
Investments in
associates
Investments
in venture
funds
9,000
—
9,000
658
(923)
—
(8,720)
—
—
15
—
7
—
—
—
22
35,977
10,849
46,826
365
—
(3,189)
—
—
—
44,002
492
—
1,498
—
—
45,992
Other
assets
37,236
—
37,236
(16)
—
—
—
(8,551)
(20,979)
7,690
(14)
—
—
8,631
(2,897)
13,410
2019
354,899
22,594
377,493
4,665
372,828
Total
82,213
10,849
93,062
1,007
(923)
(3,189)
(8,720)
(8,551)
(20,979)
51,707
478
7
1,498
8,631
(2,897)
59,424
In assessing the level of control or influence that the Company has over an investment, management considers
ownership percentages, board representation, as well as other relevant provisions in shareholder agreements.
The associates that the Company exercises significant influence over have been accounted for using the equity
method.
72 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
INVESTMENT IN VENTURE FUNDS
Upon adoption of IFRS 9, the Company made the irrevocable election to designate all of its investments in
venture funds as financial assets at fair value through OCI and measured at fair value. The Company considers
this to be an appropriate classification because these investments are strategic in nature and not held for
trading. Changes in fair value of venture funds are permanently recognized in OCI and will not be reclassified
into profit and loss.
OTHER ASSETS
Other assets is comprised of derivative financial instruments and net asset position of registered pension plans.
6. PROPERTY, PLANT AND EQUIPMENT AND LEASE LIABILITIES
Cost
Balance - August 31, 2018
Additions
Disposals and
retirements
Balance - August 31, 2019
IFRS 16 - Leases
transitional amount
Additions
Disposals and
retirements
Balance - August 31, 2020
Land
34,555
—
—
34,555
—
—
—
34,555
Accumulated depreciation
Balance - August 31, 2018
Depreciation
Disposals and
retirements
Balance - August 31, 2019
Depreciation
Disposals and
retirements
Balance - August 31, 2020
Net book value
Balance - August 31, 2019
Balance - August 31, 2020
—
—
—
—
—
—
—
34,555
34,555
Broadcasting
and computer
equipment
Buildings and
leasehold
improvements
Furniture
and
fixtures
Right-of-
use assets
Other
Total
239,723
9,690
(8,603)
240,810
—
23,683
(2,341)
262,152
158,328
22,263
(7,471)
173,120
22,423
(1,835)
193,708
67,690
68,444
167,245
2,124
15,373
186
— 11,587 468,483
28,914
— 16,914
(640)
168,729
(88)
15,471
—
(9,731)
(400)
— 28,101 487,666
—
3,639
—
732
138,390
177
— 138,390
16,123
(12,108)
(644)
171,724
(278)
15,925
(788)
(5,279)
137,779 14,765 636,900
(1,228)
65,496
8,643
10,533
1,153
—
—
2,934 237,291
32,996
937
(634)
73,505
7,812
(66)
11,620
1,051
—
—
12,564
(377)
(8,548)
3,494 261,739
44,845
995
(73)
81,244
(47)
12,624
(272)
12,292
(1,219)
(3,446)
3,270 303,138
95,224
90,480
3,851
3,301
— 24,607 225,927
125,487 11,495 333,762
Corus Entertainment Annual Report 2020 | 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Leases and right-of-use assets
The Company has the right-of-use of land and buildings under leases. The Company primarily leases land and
buildings related to its television and radio operations. The non-cancellable contract period for the Company’s
leases typically range from 2 to 23 years for offices and 5 to 30 years for transmitter sites.
Variable lease payments included in operating costs was $13.0 million in fiscal 2020. Total rent expense in fiscal
2019 was $28.0 million.
Lease liabilities
Below is a summary of the activity related to lease liabilities for the year ended August 31, 2020.
As at Septemer 1, 2019 - IFRS 16 transitional amount
Additions
Lease terminations
Interest expense
Payments
As at August 31, 2020
Less current portion of lease liabilities (note 12)
Long-term portion of lease liabilities (note 15)
For the year ended August 31,
Interest expense on lease liabilities
Variable lease payment expenses not included in the measurement of lease liabilities
Expenses for leases of low value assets
Expenses for short-term leases
Rental income from subleasing activities
7. PROGRAM RIGHTS
Balance - August 31, 2018
Additions
Transfers from film investments (note 8)
Disposals (note 27)
Impairment charges
Amortization (note 18)
Balance - August 31, 2019
Additions
Transfers from film investments (note 8)
Impairment charges
Amortization (note 18)
Balance - August 31, 2020
157,800
177
(557)
7,105
(15,945)
148,580
(14,260)
134,320
2020
7,105
12,992
1,431
1,648
2,618
538,357
485,302
7,468
(4,976)
(1,807)
(516,431)
507,913
611,568
17,900
(3,748)
(495,814)
637,819
The Company expects that approximately 35% of the net book value of program rights will be amortized
during the year ending August 31, 2021. The Company expects the net book value of program rights to be
fully amortized by August 2027.
74 | Corus Entertainment Annual Report 2020
8. FILM INVESTMENTS
Balance - August 31, 2018
Additions
Tax credit accrual
Transfer to program rights (note 7)
Amortization (note 18)
Balance - August 31, 2019
Additions
Tax credit accrual
Transfer to program rights (note 7)
Amortization (note 18)
Balance - August 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
43,424
55,803
(22,388)
(7,468)
(16,035)
53,336
53,763
(24,245)
(17,900)
(20,063)
44,891
The Company expects that approximately 25% of the net book value of film investments will be amortized
during the year ending August 31, 2021. The Company expects the net book value of film investments to be
fully amortized by August 2024.
9. INTANGIBLES
Balance - August 31, 2018
Additions
Acquisitions (note 27)
Disposition (note 27)
Amortization
Balance - August 31, 2019
Additions
Impairment (note 11)
Amortization
Balance - August 31, 2020
(1) Broadcast licences are located in Canada.
(2) Other intangibles are comprised principally of computer software.
Broadcast
licences (1)
971,197
—
—
(7,424)
—
963,773
—
(67,790)
—
895,983
Brands and
trade marks
1,025,589
11,854
—
—
(137,523)
899,920
83,419
—
(103,827)
879,512
Other (2)
15,300
6,071
3,006
—
(11,835)
12,542
10,858
—
(9,877)
13,523
Total
2,012,086
17,925
3,006
(7,424)
(149,358)
1,876,235
94,277
(67,790)
(113,704)
1,789,018
The Company expects that approximately 12% of the net book value of brands and trade marks with a finite life
will be amortized during the year ending August 31, 2021. The Company expects the net book value of brands
and trade marks with a finite life to be fully amortized by August 2038.
Indefinite life intangibles, such as broadcast licences, are tested for impairment annually as at August 31 or
more frequently if events or changes in circumstances indicate that they may be impaired. In the third quarter
of fiscal 2020 a $67.8 million impairment charge was recorded with respect to certain radio CGUs (refer to note
11 for further details). As at August 31, 2020, the Company performed its annual impairment test for fiscal 2020
and determined that there were no further impairments for the year then ended on indefinite life intangibles.
Corus Entertainment Annual Report 2020 | 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
10. GOODWILL
Balance - August 31, 2018
Acquisitions (note 27)
Disposals (note 27)
Balance - August 31, 2019
Impairment (note 11)
Balance - August 31, 2020
Total
1,387,652
3,006
(6,700)
1,383,958
(719,000)
664,958
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. In the third quarter of fiscal 2020 a $719.0 million impairment
charge was recorded with respect to the TV CGU (refer to note 11 for further details). As at August 31, 2020,
the Company performed its annual impairment test for fiscal 2020 and determined that there were no further
impairments for the year then ended.
11. IMPAIRMENT TESTING
The test for impairment of either an intangible asset or goodwill is to compare the recoverable amount of the
asset or CGU or groups of CGUs to the carrying value. The recoverable amount is the higher of an asset’s or
CGU’s or groups of CGUs FVLCS and its VIU. 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.
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 or groups of CGU’s operations beyond the projected period using a
perpetual 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 or groups of CGUs operates. The projections are prepared separately for each of the Company’s
CGUs or groups of 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 or groups of 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 of the
TV group of CGUs generally range from 12% to 13% (2019 – 10% to 12%) and nil to 1% (2019 – nil to 1%),
respectively. The pre-tax discount and growth rates included in the VIU calculation of the Radio groups of CGUs
generally range from 14% to 16% (2019 – 13% to 16%) and nil to 1% (2019 – 1% to 3%), respectively.
As a result of the broadcast license impairment testing in the third quarter of fiscal 2020 of certain Radio CGUs,
the Company determined that there were broadcast license impairments in four Radio CGUs in Ontario and
two in Alberta. For each of the Radio CGUs, the Company used VIU to determine the recoverable amount, which
resulted in an impairment charge of $67.8 million that reduced the carrying value of broadcast licenses within
these CGUs to their recoverable amount.
76 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
As a result of the goodwill impairment testing in the third quarter of fiscal 2020, the Company recorded a goodwill
impairment charge of $673.0 million in the Television segment and $46.0 million in the Radio segment.
The Company has completed its annual impairment testing of goodwill and intangible assets for fiscal 2020.
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
Due to the uncertainty related to COVID-19, the Company has noted there is significant estimation uncertainty
related to the Company’s growth rates and future cash flow estimates, which could change in the near term
and the effect of such changes could be material. 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 both the Television and Radio
goodwill impairment tests, would have resulted in no additional incremental goodwill impairment charge or
broadcast license impairment charge.
The carrying amount of goodwill and broadcast licences allocated to each CGU and/or group of CGUs are set
out in the following tables:
Broadcast licences
Television
Radio
Calgary
Edmonton
Toronto
Vancouver
Other (1)
Goodwill
Television
Radio
2020
2019
852,905
852,905
—
—
21,775
21,303
—
895,983
2020
643,859
21,099
31,341
21,851
21,775
21,303
14,598
963,773
2019
1,316,859
67,099
1,383,958
(1) Broadcast licences for Other consist of all other Radio CGUs combined. There is no individual Radio CGU that comprises more than 10%
664,958
of the total broadcast licence balance.
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Program rights payable
Trade accounts payable and accrued liabilities
Trade marks and distribution rights
Short-term portion of lease liabilities (note 6)
Dividends payable
Software license liabilities
Film investment accruals
2020
254,833
113,754
53,383
14,260
12,486
2,144
822
451,682
2019
219,011
160,088
35,166
—
12,713
1,431
1,074
429,483
Corus Entertainment Annual Report 2020 | 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
13. PROVISIONS
The Company recorded integration, restructuring and other costs of $19,155 (2019 – $26,316) associated with
employee exits, as well as certain costs associated with the shut-down of the FYI channel, continued transmitter
decommissioning costs and system integration costs.
Balance - August 31, 2018
Additions (reductions)
Interest
Payments
Balance – August 31, 2019
Additions (reductions)
Interest
Payments
Balance – August 31, 2020
Current
Long-term
Balance – August 31, 2020
14. LONG-TERM DEBT
Bank loans
Deferred financing charges
Total bank loans
Less current portion of bank loans
Restructuring
11,660
13,870
—
(17,776)
7,754
19,155
—
(20,167)
6,742
5,405
1,337
6,742
Onerous lease
obligation
—
5,995
305
(3,606)
2,694
(238)
—
(422)
2,034
Asset retirement
obligations
6,731
1,986
169
(1,497)
7,389
1,619
216
(65)
9,159
2,034
—
2,034
1,002
8,157
9,159
Other
Total
585
18,976
(405)
21,446
474
—
— (22,879)
180
18,017
—
20,536
216
—
— (20,654)
18,115
180
180
—
180
8,621
9,494
18,115
2020
1,516,159
(10,070)
1,506,089
(76,339)
1,429,750
2019
1,745,175
(13,430)
1,731,745
(76,339)
1,655,406
Interest rates on the balance of the bank loans fluctuate with Canadian bankers’ acceptances and/or LIBOR. As
at August 31, 2020, the weighted average interest rate on the outstanding bank loans was 3.9% (2019 – 4.2%).
The effective interest rate on the bank loans averaged 4.0% for fiscal 2020 (2019 – 4.3%).
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, 2020.
CREDIT FACILITIES
In connection with the closing of the acquisition of Shaw Media in 2016, Corus established syndicated senior
secured credit facilities in the aggregate amount of $2.6 billion consisting of $2.3 billion in term loans (the “Term
Facility”), all of which was fully drawn at closing, and a $300.0 million revolving facility (the “Revolving Facility”),
which was not drawn on as part of closing.
Effective May 31, 2019, the Company’s credit agreement was amended. The principal amendment effected was
the extension of the maturity for the Term Facility and the Revolving Facility. The amendment was accounted
for as a debt modification in accordance with IFRS 9, resulting in a $3.9 million gain on debt modification in the
consolidated statements of income (loss) and comprehensive income (loss). The gain resulted from the change
in the net present value of the future modified cash flows compared to the net present value of the original
cash flows at the time of closing the amendment, using the effective interest rate prior to the modification. In
connection with the amendment, the Company incurred $3.4 million of deferred financing costs, which have
reduced the carrying value of the modified Term Facility. The carrying value of the debt is accreted using the
effective interest rate method over the remaining term of the Term Facility with the accretion recognized within
Interest expense on the consolidated statements of income (loss) and comprehensive income (loss) (note 19).
78 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Term Facility
As at August 31, 2020, the Term Facility was composed of three tranches, with the first tranche in the amount
of $606.7 million and having a maturity date of May 31, 2024, the second tranche in the amount of $824.7 million
and having a maturity date of May 31, 2023, and the third tranche in the amount of $97.2 million and having a
maturity date of November 30, 2021.
Advances under the Term Facility may be outstanding in the form of either prime loans or bankers’ acceptances
and bear interest at the applicable reference rate plus an applicable margin depending on the type of advance
and Corus’ total debt to cash flow ratio.
Voluntary prepayments on the amount outstanding under the Term Facility are permitted at any time without
penalty, subject to payment of customary breakage costs, if applicable, and provided that advances in the form
of bankers’ acceptances may only be paid on their maturity. The first and second tranches 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.
Revolving Facility
The Revolving Facility matures on May 31, 2023. 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. As at August 31, 2020, all of the Revolving
Facility was available and could be drawn.
INTEREST RATE SWAP AGREEMENTS
On November 28, 2017, the Company terminated the Canadian interest rate swap agreements that fixed the
interest rate on $1,871.0 million of its outstanding term loan facilities. As a result, the Company received a cash
payment, net of accrued interest, of $24.6 million in settlement of these interest rate swaps, which was the fair
value upon termination. The fair value of $24.6 million was recorded in OCI and is being amortized over the life
of the original swap agreements as non-cash interest income in the consolidated statements of income (loss)
and comprehensive income (loss) (note 19).
The Company has entered into Canadian interest rate swap agreements to fix the interest rate on a portion
of its outstanding term loan facilities. The notional value of these swaps reduces concurrently with the
mandatory repayments of the Term Facility. The current notional value of the interest rate swap agreements
are $906.0 million and $503.0 million of its outstanding term loan facilities at 1.947% and 2.004%, respectively,
plus applicable margins to August 31, 2021 and August 31, 2022. 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 OCI. The estimated fair value of these agreements as at
August 31, 2020 is $26.3 million (2019 – $11.6 million), which has been recorded in the consolidated statements
of financial position as a long-term liability (note 15). The effectiveness of the hedging relationship is reviewed
on a quarterly basis.
Corus Entertainment Annual Report 2020 | 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
TOTAL RETURN SWAPS
The Company initiated total return swap agreements on 1,868,500 share units to offset its exposure to changes
in the fair value of certain cash settled share-based compensation awards. The estimated fair value of these
Level 1 financial instruments will fluctuate with the market price of the Company’s shares. The counterparties
of these swap agreements are highly rated financial institutions and the Company does not anticipate any
non-performance. The estimated fair value of these agreements as at August 31, 2020 is $3.3 million (2019 –
asset of $0.3 million), which has been recorded in the consolidated statements of financial position as an other
long-term liability and within employee costs in the consolidated statements of income (loss) and comprehensive
income (loss) (note 18).
FORWARD CONTRACTS
The Company entered into a series of foreign exchange forward contracts to fix the foreign exchange rate and
cash flows related to a portion of the Company’s U.S. dollar denominated long-term liabilities. The forward
contracts are not designated as hedges for accounting purposes; they are measured at fair value at each
reporting date. The counterparty of the forward contracts is a highly rated financial institution and the Company
does not anticipate any non-performance. The estimated fair value of future cash flows of the U.S. dollar forward
contract derivatives change with fluctuations in the foreign exchange rate of U.S. dollar to Canadian dollars.
The estimated fair value of these agreements as at August 31, 2020 is $3.1 million (2019 – $6.0 million), which
has been recorded in the consolidated statements of financial position as a long-term other asset (note 5) and
within other expense (income), net, in the consolidated statements of income (loss) and comprehensive income
(loss) (note 20).
15. OTHER LONG-TERM LIABILITIES
Program rights payable
Right-of-use lease liabilities (note 6)
Trade mark liabilities
Long-term employee obligations
Derivative fair value (note 14)
Post employment benefit plans
Unearned revenues
Merchandising and intangibles liability
Software license liability
Deferred leasehold inducements (note 3)
Long-term portion of tangible benefits
16. SHARE CAPITAL
AUTHORIZED
2020
188,134
134,320
71,265
35,432
26,270
14,506
11,943
7,862
3,224
—
—
492,956
2019
127,459
—
43,147
30,777
11,620
15,058
10,075
14,205
—
20,929
4,847
278,117
The Company is authorized to issue, upon approval of holders of no less than two-thirds of the existing Class
A shares, an unlimited number of Class A participating shares (“Class A Voting Shares”), as well as an unlimited
number of Class B non-voting participating shares (“Class B Non-Voting Shares”), Class A Preferred Shares, and
Class 1 and Class 2 Preferred Shares.
Class A Voting Shares are convertible at any time into an equivalent number of Class B Non-Voting Shares.
The Class B Non-Voting Shares are convertible into an equivalent number of Class A Voting Shares in limited
circumstances.
The Class A Preferred Shares are redeemable at any time at the demand of Corus and retractable at any time at
the demand of a holder of a Class A Preferred Share for an amount equal to the consideration received by Corus
at the time of issuance of such Class A Preferred Shares. Holders of Class A Preferred Shares are entitled to
receive a non-cumulative dividend at such rate as Corus’ Board of Directors may determine on the redemption
amount of the Class A Preferred Shares. Each of the Class 1 Preferred Shares, the Class 2 Preferred Shares,
the Class A Voting Shares and the Class B Non-Voting Shares rank junior to and are subject in all respects to
80 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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, 2020.
ISSUED AND OUTSTANDING
Balance - August 31, 2018
Conversion of Class A Voting Shares to Class B
Non-Voting Shares
Reduction of stated capital (1)
Balance - August 31, 2019
Conversion of Class A Voting Shares to Class B
Non-Voting Shares
Shares repurchased under NCIB
Class A Voting Shares Class B Non-Voting Shares
#
3,419,392
$
#
26,479 208,577,666
(6,200)
—
3,413,192
(38)
(17,000)
6,200
—
9,441 208,583,866
Total
$
2,303,998 2,330,477
$
38
—
(1,483,000) (1,500,000)
830,477
821,036
(800)
—
(2)
—
800
2
—
(3,630,000)
(14,288)
(14,288)
806,750
Balance - August 31, 2020
(1) Reduction in stated capital approved at the Company’s Annual and Special Meeting of shareholders on January 16, 2019.
9,439 204,954,666
3,412,392
816,189
EARNINGS (LOSS) PER SHARE
The following is a reconciliation of the numerator and denominator (in thousands) used for the computation
of the basic and diluted earnings (loss) per share amounts:
Net income (loss) 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
2020
2019
(625,362)
156,084
209,769
—
209,769
211,997
38
212,035
The calculation of diluted earnings (loss) per share for fiscal 2020 excluded 6,753 (2019 – 5,235) weighted
average Class B Non-Voting Shares issuable under the Company’s Stock Option Plan because these options
were anti-dilutive.
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 2020 | 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
A summary of the changes to the stock options outstanding is presented as follows:
Outstanding - August 31, 2018
Granted
Forfeited or expired
Outstanding - August 31, 2019
Granted
Forfeited or expired
Outstanding - August 31, 2020
Number of options
(#)
6,057,375
1,512,700
(1,592,150)
5,977,925
1,142,000
(849,475)
6,270,450
Weighted average
exercise price per share
($)
15.31
5.08
16.75
12.34
5.43
18.57
10.23
As at August 31, 2020, the options outstanding and exercisable consist of the following:
Range of exercise price ($)
4.88 – 5.34
5.35 – 8.21
8.22 – 10.99
11.00 – 12.02
12.03 – 23.67
Options outstanding
Weighted average
remaining
contractual life
(years)
5.6
6.5
2.9
3.4
3.0
4.3
Weighted
average
exercise price
($)
4.90
5.57
10.38
11.60
16.68
10.23
Number
outstanding
(#)
1,241,900
1,239,400
888,100
1,262,500
1,638,550
6,270,450
Options exercisable
Number
outstanding
(#)
297,200
67,375
888,100
978,125
1,220,950
3,451,750
Weighted
average
exercise price
($)
4.88
6.03
10.38
11.60
18.13
12.91
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 2020, the Company recorded share-based compensation expense of $1,112
(2019 – $699). This charge has been credited to contributed surplus. Unrecognized share-based compensation
expense at August 31, 2020 related to the Plan was $1,003 (2019 – $924).
The fair value of each option granted in fiscals 2020 and 2019 was estimated on the date of the grant using the
Black-Scholes option pricing model with the following assumptions:
Grant date
Fair value
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected time until exercise (years)
November
2019
$1.21
1.5%
4.4%
36.4%
October
2019
$1.04
1.5%
4.6%
33.7%
February
2019
$1.07
1.8%
4.0%
31.7%
6
6
6
6
October
2018
$0.91
2.4%
4.9%
31.7%
The expected life of the options is based on historical data and current expectations and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical
volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily
be the actual outcome.
82 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
SHARE-BASED COMPENSATION
The following table provides a summary of the changes in the number of units for the PSUs, DSUs and RSUs
as follows:
Balance - August 31, 2018
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2019
Additions
Deemed dividend equivalents
Forfeitures
Payments
Balance - August 31, 2020
PSUs
1,424,404
928,950
53,277
(543,667)
—
1,862,964
724,750
125,625
(621,927)
—
2,091,412
DSUs
1,206,809
408,410
45,138
(26,100)
(80,091)
1,554,166
462,205
122,121
—
(58,081)
2,080,411
RSUs
517,392
468,860
31,692
(34,050)
(142,554)
841,340
382,743
58,095
(70,865)
(196,874)
1,014,439
Share-based compensation expense recorded for the fiscal year in respect of these plans was $3,157 (2019 –
$4,648). As at August 31, 2020, the carrying value of the liability for PSU, DSU and RSU units was $9,094 (2019
– $10,086).
NORMAL COURSE ISSUER BID (“NCIB”)
On November 8, 2019, the Company announced that the TSX had accepted the notice filed by the Company of
its intention to make an NCIB for its Class B Non-Voting Participating Shares through the facilities of the TSX,
and/or other alternative Canadian trading systems. The Company may purchase for cancellation a maximum
of 9,913,940 Class B Non-Voting Participating Shares during the period from November 12, 2019 through
November 11, 2020.
The shares purchased and cancelled since November 12, 2019 are as follows:
November 2019
December 2019
January 2020
February 2020
March 2020
April 2020
#
674,600
1,000,000
305,400
500,000
1,100,000
50,000
3,630,000
Average per
share
$
5.74
5.51
5.48
4.68
3.07
2.58
4.65
$
3,870
5,508
1,674
2,338
3,374
129
16,893
During fiscal 2020, the total cash consideration paid exceeded the carrying value of the shares repurchased by
$2,605, which was charged to contributed surplus.
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
Corus Entertainment Annual Report 2020 | 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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.
The total amount of dividends declared in fiscal 2020 was $50,184 (2019 – $50,863).
DIVIDEND REINVESTMENT PLAN (“DRIP”)
There is a DRIP that does not currently provide for a discount for the Class B Non-Voting Shares and shares are
open market purchases to satisfy the Company’s delivery obligations pursuant to its DRIP.
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized change in fair value of
cash flow hedges
Gains
(losses)
arising
Prior period
gains (losses)
transferred
to net income
Total
Unrealized
foreign
currency
translation
adjustment
Unrealized
change in
fair value
of financial
assets
Actuarial
gains (losses)
on defined
benefit plans
Total
—
—
—
— 29,793
—
—
— 29,793
7,177
—
7,177
(510)
9,396
8,886
(34,834)
9,231
(25,603)
(8,075)
(42,909)
2,140 11,371
309
—
—
—
(5,935)
(1,745)
7,486
8,886
— 36,460
—
9,396
— 45,856
— (42,600)
— 11,371
— 14,627
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,745)
7,486
(3,189)
749
(2,440)
—
6,446
(12,646) (15,835)
3,351
4,100
(9,295) (11,735)
9,295
9,295
— 12,187
(14,649)
3,882
(10,767)
(6,393)
(21,042)
1,694
5,576
(87)
—
—
—
(4,699)
(17,211)
7,399
6,446
— (21,129)
—
5,576
—
(3,366)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (17,211)
7,399
1,498
(390)
1,108
—
7,554
12,069 13,567
(3,198)
(3,588)
8,871
9,979
(8,871)
(8,871)
—
(2,258)
Balance - August 31, 2018
September 1, 2018 IFRS 9 adjustment
Adjusted balance as at September 1, 2018
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, 2019
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, 2020
84 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
18. DIRECT COST OF SALES, GENERAL AND ADMINISTRATIVE EXPENSES
2020
2019
Direct cost of sales
Amortization of program rights (note 7)
Amortization of film investments (note 8)
Other cost of sales
General and administrative expenses
Employee costs (note 26) (1)
Other general and administrative
495,814
20,063
29,495
281,177
178,848
1,005,397
(1) The estimated CEWS of approximately $34.9 million has been recorded principally as a reduction of employee costs.
19. INTEREST EXPENSE
Interest on long-term debt
Imputed interest on long-term liabilities
Deferred gain amortization on settled interest rate swap (note 14 and 17)
Other expense
2020
67,477
52,371
(6,393)
1,730
516,431
16,035
34,808
323,479
211,644
1,102,397
2019
82,288
41,209
(8,075)
2,296
20. OTHER EXPENSE (INCOME), NET
Foreign exchange loss (gain)
Other income (notes 6 and 7)
Equity loss (income) of associates
Impairment of investment in associate (note 5)
21. INCOME TAXES
The significant components of income tax expense are as follows:
Current income tax expense
Deferred income tax expense (recovery)
Resulting from temporary differences
Resulting from the utilization of tax losses
Resulting from tax rate changes
Resulting from the creation of various future tax reserves
Other
115,185
117,718
2020
(4,250)
(3,820)
(7)
—
(8,077)
2020
65,936
(26,887)
2,242
313
135
205
2019
952
(121)
923
8,720
10,474
2019
81,611
(15,143)
4,305
184
656
(168)
Income tax expense reported in the consolidated statements of income (loss) and
comprehensive income (loss)
41,944
71,445
Corus Entertainment Annual Report 2020 | 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
A reconciliation of income tax computed at the statutory tax rates to income tax expense is as follows:
Income tax at combined federal and provincial rates
Differences from statutory rates relating to:
Goodwill impairment
Miscellaneous differences
Increase in deferred taxes from statutory rate changes
Non-deductible (taxable) portion of capital losses (gains)
Increase of various tax reserves
Transaction costs
Loss (income) subject to tax at less than statutory rates
($)
(150,302)
191,012
1,146
313
183
170
(223)
(355)
41,944
2020
(%)
26.6
(33.8)
(0.2)
—
—
—
—
—
(7.4)
($)
66,991
—
1,145
184
1,744
1,009
215
2019
(%)
26.6
—
0.5
—
0.7
0.4
0.1
157
71,445
—
28.3
The movement in the net deferred income tax asset (liability) was as follows:
Broadcast
Accrued
Fixed
Non-capital
Financing
licences and
compen-
assets and
Program
loss carry-
Invest-
and debt
other intangibles
sation
film assets
rights
forwards
ments
retirement
Other
Total
Balance - August 31, 2018
(508,452)
10,853
17,959
14,819
15,884
308
417
8,341
(439,871)
Recognized in profit or loss
27,754
739
(3,819)
(1,216)
(4,305)
(1,500)
(9,772)
2,285
Recognized in OCI
Acquisitions (dispositions)
—
3,351
1,953
—
—
—
—
—
—
—
(704)
11,371
369
—
—
128
10,166
14,018
2,450
Balance - August 31, 2019
(478,745)
14,943
14,140
13,603
11,579
(1,527)
2,016
10,754
(413,237)
Recognized in profit or loss
35,857
(4,766)
4,552
Recognized in OCI
—
(3,198)
—
167
—
(2,242)
—
712
(390)
(3,972)
(6,316)
23,992
5,578
—
1,990
Balance - August 31, 2020
(442,888)
6,979
18,692
13,770
9,337
(1,205)
3,622
4,438
(387,255)
At August 31, 2020, the Company had approximately $45,895 (2019 – $56,627) of non-capital loss carryforwards
available, which expire between the years 2027 and 2040. A deferred income tax asset of $9,337 (2019 – $11,579)
has been recognized in respect of these losses and an income tax benefit of $1,600 (2019 – $1,486) has not
been recognized.
At August 31, 2020, the Company had approximately $36,662 (2019 – $35,540) of capital loss carryforwards
available, which have no expiry date. No income 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 to Corus attached to the payment of dividends, in either 2020 or 2019,
by the Company to its shareholders.
86 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
22. BUSINESS SEGMENT INFORMATION
The Company’s business activities are conducted through two segments: Television and Radio.
TELEVISION
The Television segment is comprised of 34 specialty television networks (35 services prior to December 31,
2019; 37 services prior to September 30, 2019; 44 services prior to March 22, 2019), 15 conventional television
stations, digital assets, a social media digital agency, a social media creator network, and technology and media
services, and the Corus content business, which includes the production and distribution of films and television
programs, merchandise licensing, book publishing, and animation software. Revenues are generated from
advertising, subscribers and the licensing of proprietary films and television programs, merchandise licensing,
book publishing, animation software, and technology and media service sales.
RADIO
The Radio segment comprises 39 radio stations, situated primarily in 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
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 (loss) excludes depreciation and amortization, interest expense, debt
refinancing costs, integration, restructuring and other costs, impairments, gains or losses on dispositions, and
certain other income and expenses.
REVENUES AND SEGMENT PROFIT
Year ended August 31, 2020
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Broadcast licenses and goodwill impairment
Integration, restructuring and other costs
Other income, net
Loss before income taxes
Year ended August 31, 2019
Revenues
Direct cost of sales, general and administrative expenses
Segment profit (loss)
Depreciation and amortization
Interest expense
Gain on debt modification
Integration, restructuring and other costs
Other expense, net
Income before income taxes
Television
Radio Corporate Consolidated
1,408,238
102,998
—
1,511,236
899,523
508,715
86,975
16,023
18,899
1,005,397
(18,899)
505,839
Television
1,544,892
971,368
573,524
Radio
142,590
107,944
34,646
158,549
115,185
786,790
19,155
(8,077)
(565,763)
—
23,085
(23,085)
Corporate Consolidated
1,687,482
1,102,397
585,085
182,354
117,718
(3,889)
26,316
10,474
252,112
Corus Entertainment Annual Report 2020 | 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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
2020
920,849
490,985
99,402
1,511,236
Revenues are derived from the following geographical sources, by location of customer:
Canada
International
2020
1,473,768
37,468
1,511,236
2019
1,101,814
496,447
89,221
1,687,482
2019
1,639,628
47,854
1,687,482
International revenues pertain to customers in the Television segment only.
The following table includes revenue from contracts disaggregated by the timing of revenue recognition:
Products transferred at a point in time
Products and services transferred over time
SEGMENT ASSETS AND LIABILITIES
Assets
Television
Corporate
Radio
Liabilities
Television
Corporate
Radio
CAPITAL EXPENDITURES BY SEGMENT
Television
Corporate
Radio
Property, plant and equipment are located primarily within Canada.
2020
1,007,849
503,387
1,511,236
2019
1,157,680
529,802
1,687,482
2020
2019
3,526,802
319,178
124,902
3,970,882
1,127,743
1,734,254
60,466
2,922,463
2020
11,104
2,559
1,722
15,385
4,195,326
239,395
237,578
4,672,299
1,025,938
1,862,479
41,645
2,930,062
2019
19,174
8,872
2,009
30,055
88 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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 (note 14)
Lease liabilities (notes 12 and 15)
Cash and cash equivalents
Net debt
Equity
2020
1,506,089
148,580
(45,900)
1,608,769
1,048,419
2,657,188
2019
1,731,745
—
(82,568)
1,649,177
1,742,237
3,391,414
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 below 3.0 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.
As at August 31, 2020, the Company’s leverage ratio was 3.18 times net debt to segment profit, up from 2.82
times at August 31, 2019.
24. FINANCIAL INSTRUMENTS
The following tables set out the classification of financial and non-financial assets and liabilities.
As at August 31, 2020
Fair value
through profit
or loss
Amortized
cost
Fair value
through
OCI with no
reclassification
to net income
Fair value
through
OCI with
reclassification
to net income Non-financial
Total carrying
amount
Cash and cash equivalents
45,900
—
Accounts receivable
—
297,585
Investments and other assets
Goodwill and intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities and
provisions
3,364
—
—
—
—
71,636
49,264
369,221
56,060
—
—
473,001
1,506,089
19,031
418,380
—
—
56,060
—
—
—
—
38,769
—
38,769
Deferred income tax liabilities
—
—
Total liabilities
19,031
2,397,470
—
—
—
—
—
—
—
—
26,270
—
—
—
45,900
297,585
59,424
2,453,976
2,453,976
1,042,361
1,113,997
3,496,337
3,970,882
—
—
—
473,001
1,506,089
502,450
440,923
—
440,923
26,270
440,923
2,922,463
Corus Entertainment Annual Report 2020 | 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Fair value
through profit
or loss
82,568
—
6,269
—
—
88,837
Amortized
cost
—
372,828
—
—
78,371
451,199
—
—
439,814
1,731,745
17,902
218,273
—
—
17,902
2,389,832
Fair value
through
OCI with no
reclassification
to net income
Fair value
through OCI with
reclassification
to net income Non-financial
Total carrying
amount
—
—
45,438
—
—
45,438
—
—
38,008
—
38,008
—
—
—
—
—
—
—
—
11,620
—
11,620
—
—
—
82,568
372,828
51,707
3,260,193
3,260,193
826,632
905,003
4,086,825
4,672,299
—
—
—
472,700
472,700
439,814
1,731,745
285,803
472,700
2,930,062
As at August 31, 2019
Cash and cash equivalents
Accounts receivable
Investments and other assets
Goodwill and intangibles
Other assets
Total assets
Accounts payable, accrued
liabilities and provisions
Bank debt
Other long-term liabilities and
provisions
Deferred income tax liabilities
Total liabilities
FAIR VALUES
The fair values of financial instruments included in current assets and current liabilities approximate their
carrying values due to their short-term nature.
The fair value of publicly-traded shares included in investments 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.
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.
In fiscal 2018, the Company entered into U.S. dollar foreign currency forward contracts. The fair value of the
foreign currency forward contracts is calculated by way of discounted cash flows, using market foreign exchange
rates and applicable discount factors.
In fiscal 2019, the Company entered into total return swaps. The fair value of these equity instruments is based
on the quoted share price in the active market at the period end.
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:
90 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Quoted prices in active markets
for identical assets or liabilities
Significant other
observable inputs
Significant
unobservable inputs
(Level 3)
(Level 2)
(Level 1)
45,900
—
—
45,900
—
3,269
3,269
—
3,088
—
3,088
26,270
—
26,270
—
—
45,992
45,992
—
—
—
Quoted prices in active markets
for identical assets or liabilities
Significant other
observable inputs
(Level 1)
(Level 2)
Significant
unobservable inputs
(Level 3)
82,568
—
300
—
82,868
—
—
—
5,985
—
—
5,985
11,620
11,620
—
—
—
44,002
44,002
—
—
As at August 31, 2020
Assets
Cash and cash equivalents
Foreign exchange forward contracts
Investments in venture funds
Assets carried at fair value
Liabilities
Interest rate swap
Total return swap
Liabilities carried at fair value
As at August 31, 2019
Assets
Cash and cash equivalents
Foreign exchange forward contracts
Total return swap
Investments in venture funds
Assets carried at fair value
Liabilities
Interest rate swap
Liabilities carried at fair value
RISK MANAGEMENT
The Company is exposed to various risks related to its financial assets and liabilities. These risk exposures are
managed on an ongoing basis.
Credit risk
In the normal course of business, the Company is exposed to credit risk from its accounts receivable from
customers. The carrying amounts for accounts receivable are net of applicable allowances for doubtful accounts,
which are estimated based on past experience, specific risks associated with the customer and other relevant
information.
The maximum exposure to credit risk is the carrying amount of the financial assets.
The following tables set out the details of the aging for accounts receivable and allowance for doubtful accounts
as at August 31 as follows:
Trade
Current
One to three months past due
Over three months past due
Other
Less allowance for doubtful accounts
2020
2019
137,913
89,056
37,883
264,852
38,463
303,315
5,730
297,585
149,312
131,441
74,146
354,899
22,594
377,493
4,665
372,828
Corus Entertainment Annual Report 2020 | 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Balance, beginning of year
Provision for doubtful accounts
Dispositions (note 27)
Write-off of bad debts
Balance, end of year
2020
4,665
2,676
—
(1,611)
5,730
2019
4,471
1,608
(553)
(861)
4,665
The Company earned 9% of its revenues from one related party (2019 – 8%). This related party comprises 7%
of the accounts receivable balance as at August 31, 2020 (2019 – 7%) (note 30).
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, 2020 was $300,000 (2019 – $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, 2020:
Total
Less than one year
One to three years
Total debt (1)
Accounts payable
Other obligations (2)
(1) Principal repayments and interest payments.
(2) Other obligations included financial liabilities, trade marks, other intangibles, CRTC commitments and US dollar forward currency swaps.
1,528,614
451,682
220,481
76,339
451,682
89,782
110,690
942,672
—
Beyond three years
509,603
—
20,009
In fiscal 2020, the Company incurred interest on bank loans and swaps on credit facilities of $67,477 (2019 –
$82,288).
Market risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market
prices, whether those changes are caused by factors specific to the individual instrument or its issuers or factors
affecting all instruments traded in the market.
The Company is exposed to foreign exchange risk through its international content distribution operations
and U.S. dollar denominated programming purchasing. The most significant foreign currency exposure is to
movements in the U.S. dollar to Canadian dollar exchange rate and the U.S. dollar to euro exchange rate. The
impact of foreign exchange on income before income taxes and non-controlling interest is detailed in the table
below:
Direct cost of sales, general and administrative expenses
Other expense (income), net
2020
64
(4,250)
(4,186)
2019
87
952
1,039
An assumed 10% increase or decrease in exchange rates as at August 31, 2020 would have an impact of
approximately $40,800 (2019 - $17,800) on net income or OCI for the year. As a result of the Company’s exposure
to this risk, it has entered into a series of foreign exchange forward contracts, as described in note 14, to fix the
foreign exchange rate and therefore cash flows related to a portion of the Company’s U.S. dollar denominated
liabilities.
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, 2020 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.
92 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Other considerations
The Company does not engage in trading or other speculative activities with respect to derivative financial
instruments.
25. CONSOLIDATED STATEMENTS 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
Income taxes recoverable
Other long-term liabilities
Other
2020
75,151
2,353
(52,026)
(1,472)
26,470
(38,268)
12,834
25,042
2019
11,642
1,018
39,826
(844)
(10,588)
(41,046)
2,950
2,958
Interest paid, interest received and income taxes paid and classified as operating activities are as follows:
Interest paid
Interest received
Income taxes paid
2020
69,257
1,947
33,491
2019
84,097
1,926
88,850
26. GOVERNMENT FINANCING AND ASSISTANCE
Revenues include $5,177 (2019 – $3,083) of production financing obtained from government programs. This
financing provides a supplement to a production series’ Canadian licence fees and is not repayable.
As well, revenues include $1,174 (2019 – $1,069) 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%.
General and administrative expenses include $34,873, as a reduction of employee expenses, for the Canadian
Emergency Wage Subsidy (“CEWS”) for periods in which the Company qualified.
27. BUSINESS COMBINATIONS AND DIVESTITURES
Disposition of 50.5% interest in TLN
On March 22, 2019, the Company sold its 50.5% interest in TLN, a subsidiary, to TLN Media Group Inc. for cash
consideration of $19.0 million, which was received upon closing. Proceeds of $2.6 million were recorded as
deferred revenue related to a long-term services agreement with TLN Media Group Inc. The carrying value of net
identifiable assets disposed of amounted to $16.1 million as at March 22, 2019, resulting in a loss on disposal of
$0.3 million. In addition, an adjustment has been made to the carrying amounts of the non-controlling interests
in these consolidated financial statements related to the disposition of the Company’s equity interest to reflect
the disposition.
The results of the operations of TLN were included in the Television segment until March 22, 2019.
Acquisition of 100% interest in KIN Canada
On April 1, 2019, the Company acquired certain assets of KIN Canada for cash consideration of $6.0 million.
The net identifiable assets of KIN Canada were comprised of $3.0 million of intangible assets and $3.0 million
of goodwill.
Corus Entertainment Annual Report 2020 | 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
28. COMMITMENTS, CONTINGENCIES AND GUARANTEES
The Company has the following commitments at August 31, 2020 as detailed in the following table:
Total Within 1 year
4 - 5 years More than 5 years
Purchase obligations (1)
—
208,036
Lease liabilities
Other obligations (2)
—
Total contractual obligations
208,036
(1) Purchase obligations are contractual obligations under contracts relating to program rights, satellite and signal transport costs and
1,103,643
351,985
220,481
1,676,109
120,891
55,380
20,009
196,280
586,074
30,289
89,782
706,145
396,678
58,280
110,690
565,648
2 - 3 years
various other operating expenditures that the Company has committed to, for periods ranging from 1 to 10 years.
(2) Other obligations included financial liabilities, trade marks, other intangibles, CRTC commitments, and forward foreign exchange
contracts.
Generally, it is not the Company’s policy to issue guarantees to non-controlled affiliates or third parties, with
limited exceptions.
LITIGATION
The Company, its subsidiaries and joint ventures are involved in litigation matters arising out of the ordinary
course and conduct of its business. Although such matters cannot be predicted with certainty, management
does not consider the Company’s exposure to litigation to be material to these consolidated financial statements.
OTHER MATTERS
Many of the Company’s agreements, specifically those related to acquisitions and dispositions of business
assets, 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, employment
matters, litigation, taxes payable and other potential material liabilities. The maximum potential amount of
future payments that the Company could be required to make under these indemnification provisions is not
reasonably quantifiable, as certain indemnifications are not subject to a monetary limitation. As at August 31,
2020, 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% (2019 – 6%) of an employee’s earnings, not exceeding the limits set by the Income
Tax Act (Canada). The amount contributed in fiscal 2020 related to the defined contribution plans was $8,445
(2019 – $8,273). The amount contributed is approximately the same as the expense included in the consolidated
statements of income (loss) and comprehensive income (loss).
NON-REGISTERED DEFINED BENEFIT PENSION PLANS
The Company provides supplemental executive retirement plans (“SERP” and “CEO SERP,” the latter of 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
generally 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.
94 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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
2020
24,304
1,087
—
706
(810)
451
(137)
25,601
2019
19,130
1,388
256
752
(617)
2,681
714
24,304
The weighted average duration of the defined benefit obligation of the supplemental executive retirement
plans at August 31, 2020 is 15.0 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
2020
(%)
2.60
2.00
2.80
2.50
2019
(%)
2.80
2.50
3.70
2.50
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2020 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, 2020
3,838
482
Pension expense
for fiscal 2020
93
91
721
46
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 consolidated
statements of financial position. The sensitivity analysis presented above may not be representative of the
actual change in the accrued benefit obligation as it is unlikely that the change in assumptions would occur in
isolation of one another as some assumptions may be correlated.
The net pension benefit plan expense, which is included in employee costs, is comprised of the following
components:
Current service cost
Past service cost
Interest cost
Pension expense
2020
1,087
—
706
1,793
2019
1,388
256
752
2,396
Corus Entertainment Annual Report 2020 | 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
REGISTERED PENSION PLANS
The Company has a number of funded defined benefit pension plans that 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 following table 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
Current service cost
Interest cost
Employee contributions
Payment of benefits
Effect of changes in financial assumptions
Effect of experience adjustments
Accrued benefit obligation, end of year
Fair value of plan assets, beginning of year
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
Fair value of plan assets, end of year, net of asset ceiling limit
Accrued benefit asset and plan surplus, end of year
2020
237,428
6,881
6,907
811
(9,140)
1,561
513
244,961
239,738
4,984
811
6,825
(9,140)
(1,079)
13,929
256,068
(1,040)
255,028
10,067
The weighted average duration of the defined benefit obligation at August 31, 2020 is 18.6 years.
The plan assets at August 31, are comprised of investments in pooled funds as follows:
Equity - Canadian
Equity - Foreign
Fixed income - Canadian
2020
29,135
89,556
137,377
256,068
2019
204,695
6,045
7,777
836
(9,474)
30,774
(3,225)
237,428
215,648
7,412
836
8,059
(9,474)
(713)
17,970
239,738
(874)
238,864
1,436
2019
58,701
38,791
142,246
239,738
The underlying securities in the pooled funds have quoted prices in an active market.
The significant weighted average assumptions used to measure the pension obligation and cost for these
plans are as follows:
Accrued benefit obligation
Discount rate
Rate of compensation increase
2020
(%)
2.70
2.00
2019
(%)
2.90
2.50
96 | Corus Entertainment Annual Report 2020
Benefit cost for the year
Discount rate
Rate of compensation increase
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
2020
(%)
2.90
2.50
2019
(%)
3.70
2.50
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2020 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
Weighted average duration of defined benefit obligation in years
Effective discount rate 1% decrease
Benefit obligation
at August 31, 2020
45,544
9,652
Fiscal 2020
benefit cost
3,103
1,025
18.6
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 consolidated
statements of financial position. The sensitivity analysis presented above may not be representative of the
actual change in the accrued benefit obligation as it is unlikely that the change in assumptions would occur in
isolation of one another as some assumptions may be correlated.
The net pension benefit plan expense, which is included in employee costs, is comprised of the following
components:
Current service cost
Pension expense
2020
6,881
6,881
2019
4,580
4,580
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 consolidated
statements of financial position.
The change in the benefit obligation for these plans is as follows:
Accrued benefit obligation and plan deficit, beginning of year
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
2020
13,960
97
380
(472)
—
403
120
14,488
2019
15,078
315
525
(616)
(47)
1,539
(2,834)
13,960
The weighted average duration of the defined benefit obligation of the post-retirement plans at August 31,
2020 is 14.9 years.
Corus Entertainment Annual Report 2020 | 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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
2020
(%)
2.68
2.00
2020
(%)
3.00
2.50
2019
(%)
2.89
2.50
2019
(%)
3.69
3.00
The following table illustrates the incremental impact on the defined benefit obligation at August 31, 2020
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, 2020
2,274
2,191
Service and
interest costs
fiscal 2020
(64)
82
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 consolidated
statements of financial position. The sensitivity analysis presented above may not be representative of the
actual change in the accrued benefit obligation as it is unlikely that the change in assumptions would occur in
isolation of one another as some assumptions may be correlated.
The net pension benefit plan expense, which is included in employee costs, is comprised of the following
components:
Current service cost
Interest cost
Pension expense
30. RELATED PARTY TRANSACTIONS
CONTROLLING SHAREHOLDER
2020
97
380
477
2019
315
525
840
A majority of the outstanding Class A Voting Shares of the Company are held by entities owned by the Shaw
Family Living Trust (“SFLT”) and its subsidiaries. As at August 31, 2020, SFLT and its subsidiaries hold 2,885,530
Class A Voting Shares, representing approximately 85% of the outstanding Class A Voting Shares, for the
benefit of the descendants of the late JR Shaw and Carol Shaw. The sole trustee of SFLT is a private company
controlled by a board comprised of seven directors, including as at August 31, 2020, Heather Shaw, Julie Shaw,
three other members of their family and two independent directors. The Class A Voting Shares are the only
shares entitled to vote in all shareholder matters, except in limited circumstances as described in the Company’s
Annual Information Form. Accordingly, SFLT is, and as long as it holds a majority of the Class A Voting Shares,
will continue to be able to elect a majority of the Board of Directors of Corus and to control the vote on matters
submitted to a vote of Corus’ Class A shareholders.
SFLT is the controlling shareholder of Shaw Communications Inc. (“Shaw”), and as a result, Shaw and Corus are
subject to common voting control.
98 | Corus Entertainment Annual Report 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
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
$142,354 (2019 – $153,943), and $2,478 (2019 – $2,400) of production and distribution revenues from Shaw.
In addition, the Company paid cable and satellite system distribution access fees of $8,597 (2019 – $11,990),
administrative and other fees of $1,818 (2019 – $2,020), issued dividends of $nil (2019 – $9,675) to Shaw and
received non-monetary advertising services from Shaw valued at $4,004 (2019 – $7,709). At August 31, 2020,
the Company had $21,062 (2019 – $25,697) receivable from and $1,912 (2019 – $nil) payable to Shaw.
SIGNIFICANT SUBSIDIARIES
The following table includes the significant subsidiaries of the Company:
Name
Corus Limited Television Partnership
Corus Media Holdings Inc.
Corus Radio Inc.
Corus Radio Sales Inc. (1)
Corus Sales Inc.
Food Network Canada Inc.
HGTV Canada Inc.
History Television Inc.
Nelvana Limited
Showcase Television Inc.
TELETOON Canada Inc.
W Network Inc.
YTV Canada, Inc.
(1) Corus Radio Sales Inc. was vertically amalgamated into Corus Sales Inc. effective September 1, 2019.
Jurisdiction
Canada
Alberta
Canada
Canada
Canada
Canada
Canada
Canada
Ontario
Canada
Canada
Canada
Canada
2020
(%)
100
100
100
—
100
71
67
100
100
100
100
100
100
Equity interest
2019
(%)
100
100
100
100
100
71
67
100
100
100
100
100
100
KEY MANAGEMENT PERSONNEL
Key management personnel consists 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 expense (recovery) (note 16)
2020
7,936
1,793
(395)
9,334
2019
11,276
2,396
3,536
17,208
Corus Entertainment Annual Report 2020 | 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share information)
Except for the President and Chief Executive Officer and the Executive Vice President and Chief Financial
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 and the Executive Vice President and Chief Financial 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.
31. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously
presented to conform to the presentation of the 2020 consolidated financial statements.
100 | Corus Entertainment Annual Report 2020
Inside Front Cover
Inside Back Cover
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 certi�cates
• 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.ast�nancial.com/ca-en/
Dividend Information
Corporate Governance
Corus Entertainment pays its dividend
on a quarterly basis, subject to Board
approval, and all dividends are “eligible”
dividends for Canadian tax purposes
unless indicated otherwise.
For further information, including the
latest approved dividends and
historical dividend information, please
visit the Investor Relations - Dividends
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.ast�nancial.com/ca-en/ or
contact them at 1.800.387.0825.
Corporate Social Responsibility
(“CSR”)
Corus Entertainment has a long and
successful track record of corporate
social responsibility. The Company’s
approach encompasses four pillars
which include people, communities,
industry and the environment.
For more information, please visit the
Corporate Social Responsibility section
of Corus Entertainment’s website
(www.corusent.com).
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. For
further information, please visit the
Investor Relations - Corporate
Governance 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 �nancial 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 speci�c copyright information on
any images used in this Annual Report,
or speci�c source information for any
media research used in this Annual
Report, please contact the Corporate
Communications Lead at
416.479.7000.
FSC Logo
Corus Entertainment Annual Report 2020 | 101
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