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Corus Entertainment, Inc. (CJR)

F2Q10 Earnings Call

October 22, 2009 2:00 pm ET


John M. Cassaday – President, Chief Executive Officer & Director

Thomas C. Peddie – Chief Financial Officer & Senior Vice President

Paul W. Robertson – President Television


Adam Shine – National Bank Financial

Scott Cuthbertson – TD Newcrest

David McFadgen – Cormark Securities

Dvai Ghose – Genuity Capital Markets

Drew McReynolds – RBC Capital Markets

Ben Mogil – Thomas Weisel Partners

Eric Bernofsky – Desjardins Securities



Welcome to the Corus Entertainment Q4 analyst call. During the presentation all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. (Operator Instructions) As a reminder, this conference is being recorded Thursday, October 22, 2009. I would like now to turn the conference over to John Cassaday, President and Chief Executive Officer.

John M. Cassaday

It’s John Cassaday, welcome to Corus Entertainment fourth quarter and yearend report and analyst call. First of all, thank you for joining us today. Before I read the standard cautionary statement, I’d like to remind everyone that there are a series of PowerPoint slides that accompany this call. The slides can be found on our website in the investor relations section. I will now run through the standard cautionary statement.

This discuss contains forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1955. Some of these statements may involve risks and uncertainties. Actual results may be materially different than those contained in such forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the company’s filings with the US Securities & Exchange Commission.

I’d like to introduce you to the Corus Entertainment team available on this call. Tom Peddie, our Senior Vice President and Chief Financial Officer and Paul Robertson, President of Corus Television will be here to help answer any of your questions. So to begin, we are very pleased with the strong results that we delivered in fiscal 2009. As Slides Three and Four show, our revenues for the full year were $788.7 million and our consolidated segment profit for the year was $251.2 million. Both our revenues and segment profit for the year were essentially flat with those of fiscal 2008. We are very proud of these results. We also delivered $93.4 million in free cash flow which bettered our estimates for the year.

Turning to Slide Five, overall television revenues for the year were up 6% and segment profit was up 5%. While overall ad revenues for the division were down 6% for the year, our women’s ad revenue finished the year incredibly strong up double digit. Overall, the revenue for our women’s portfolio were up more than 25% on the continued strength of W, Cosmopolitan Television and the successful launch of VIVA which of course targets boomer women.

Moving to our pay business, the HBO launch drove strong movie central growth and we finished the year with 953,000 subscribers resulting in a 7% growth rate versus last year. We’d like to take this opportunity to thank our cable and satellite partners for their commitment to the growth of pay TV. Our kid’s business also held its own this past year with soft advertising revenues offset by subscriber growth across all of our kid’s channels and a very strong year from a merchandising perspective led by our Bakugan brand.

Turning to our radio division, fiscal 2009 proved to be a challenging year with revenues declining 10%. We do however, have tremendous confidence that the results in fiscal 2009 are due to a cyclical decline in ad revenues. Our radio business enjoys strong ratings which it is worth noting are proving even stronger with the industry switch to PPM. The adjustments that we have made to our cost base position us to take full advantage of an anticipated economic recovery in fiscal 2010.

In summary, fiscal 2009 was a strong year for Corus. We took an innovative approach to seizing growth opportunities and to aggressively cutting costs. We thank all of our employees for their tremendous effort over the past year. As we look to 2010, we will continue to drive growth with the addition of services like Nickelodeon, W Movies and a rebranded Drive-In Classics. We also plan to continue our disciplined approach to managing our costs.

As we discussed at our annual investor day last month we did an excellent job at controlling costs in fiscal 2009 and we will maintain this focus in 2010. We would like now to provide you with some comments on our outlook for Q1 but before we do that if you turn to Slide Six we would like to take this opportunity to update you on the Part II license fee resolution.

On October 7th the Honorable James Moore, Minister of Canadian Heritage and Official Languages announced the settlement between the government of Canada and members of the broadcasting industry on Part II license fees. Corus has treated Part II fees as a disputed regulatory tax and it was excluded from segment profit. This agreement will result in Corus reversing its accruals for fiscal 2007 to 2009 which will have a positive gain to the company’s Q1 fiscal 2010 net income. It will have no effect on segment profit. The amount of this accrual is approximately $16 million.

For fiscal 2010, the newly agreed upon fee will be treated as an operating expense which will impact segment profit but will not change our fiscal 2010 segment profit guidance of between $255 million to $270 million as we announced at our investor day on September 29th. Corus is very pleased with the agreement and would like to commend the government of Canada for their leadership in resolving this dispute. We now have certainty on fees going forward and these fees are below historical levels.

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