FISCAL 2017 FIRST QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues of $1.97 billion compared
to $2.01 billion in the prior year
- Digital Real Estate Services segment
revenue grew 18% compared to the prior year
- Digital revenues increased to 24% of
News and Information Services segment revenues, compared to 20% in
the prior year
- Income from continuing operations
was nil compared to $143 million in the prior year
- Total Segment EBITDA of $130 million
compared to $165 million in the prior year
- EPS were ($0.03) compared to $0.22
in the prior year – Adjusted EPS were ($0.01) compared to $0.05 in
the prior year
- Company successfully completed the
acquisition of Wireless Group plc
News Corporation (“News Corp” or the “Company”) (NASDAQ: NWS)
(NASDAQ: NWSA) (ASX: NWS) (ASX: NWSLV) today reported financial
results for the three months ended September 30, 2016.
Commenting on the results, Chief Executive Robert Thomson
said:
“News Corp made real progress as it continued to drive higher
digital revenues and position the Company for long-term growth.
While the quarter presented some obvious challenges, particularly
in print advertising and the weakness of the Pound Sterling, our
revenues were relatively stable, underscoring the strength and
scale of our portfolio and shift to digital.
Our Digital Real Estate Services segment posted another strong
quarter with an 18% year-over-year revenue increase and is on a
clear path to reshape the character of News Corp. At Realtor.com®,
we generated solid revenue growth even as we retooled our product
offerings. We expect that momentum to accelerate this year and to
contribute meaningfully to EBITDA.
Book Publishing extended its gains from last quarter with
healthy EBITDA growth despite the prior year comparison with Go Set
a Watchman. A strong roster of titles and improvement in religious
publishing should augur well for the coming quarters.
At our News and Information Services segment, the print
advertising challenges were partially offset by higher digital
revenues and disciplined cost initiatives. We continue to push
digital, which accounted for 24% of segment revenues this quarter,
up from 20% in the prior year. While we invest in high quality,
premium content, this will be balanced with ongoing cost
initiatives, as is evident from Dow Jones’ planned strategic
reduction in spending and its focus on growing digital
subscribers.
Despite ongoing political and economic uncertainty, particularly
in U.S. and U.K. markets, we remain focused on expanding revenues
and driving higher long-term value for investors.”
FIRST QUARTER RESULTS
The Company reported fiscal 2017 first quarter total revenues of
$1.97 billion, compared to $2.01 billion in the prior year period.
Reported revenues reflect a negative impact from foreign currency
fluctuations of $36 million. Adjusted Revenues for both periods
(which exclude the foreign currency impact and acquisitions as
defined in Note 1) were equivalent to reported revenues, as growth
in the Digital Real Estate Services segment was more than offset by
lower advertising revenues at the News and Information Services
segment.
Income from continuing operations for the quarter was nil as
compared to $143 million in the prior year. The decrease was
primarily due to the absence of a $106 million tax benefit related
to the release of valuation allowances resulting from the disposal
of Amplify in fiscal 2016, lower Total Segment EBITDA, as discussed
below, and lower equity earnings of affiliates, primarily driven by
the announced closure of Foxtel’s Presto service in January
2017.
The Company reported first quarter Total Segment EBITDA of $130
million compared to $165 million in the prior year. Adjusted Total
Segment EBITDA (as defined in Note 1) was 11% lower compared to the
prior year, primarily due to the weak print advertising market and
increased programming rights costs at the Cable Network Programming
segment, partially offset by continued growth in the Digital Real
Estate Services and Book Publishing segments.
(Loss) income per share from continuing operations available to
News Corporation stockholders was ($0.03) as compared to $0.22 in
the prior year.
Adjusted EPS (as defined in Note 3) were ($0.01) compared to
$0.05 in the prior year.
SEGMENT REVIEW
For the three months ended September 30, 2016
2015 % Change (in millions) Better/(Worse)
Revenues: News and Information Services $ 1,222 $ 1,290 (5)%
Book Publishing 389 409 (5)% Digital Real Estate Services 226 191
18% Cable Network Programming 128 124 3% Other - - **
Total Revenues $ 1,965 $ 2,014 (2)%
Segment
EBITDA: News and Information Services(a) $ 46 $ 83 (45)% Book
Publishing 48 42 14% Digital Real Estate Services 67 57 18% Cable
Network Programming 14 28 (50)% Other (45) (45) **
Total Segment EBITDA $ 130 $ 165 (21)% ** - Not
meaningful (a) News and Information Services Segment EBITDA
for the three months ended September 30, 2016 includes transaction
related costs of $5 million associated with the acquisition of
Wireless Group.
News and Information Services
Revenues in the quarter were lower by $68 million, or 5%,
compared to the prior year. Adjusted Revenues were 4% lower
compared to the prior year.
Advertising revenues decreased 11%, or 10% excluding a $6
million impact from negative foreign currency fluctuations,
primarily due to the weakness in the print advertising market. The
decrease was partially offset by higher in-store product revenues
at News America Marketing and growth in digital advertising
revenues.
Circulation and subscription revenues decreased 4%, but
increased 1% excluding a $24 million impact from negative foreign
currency fluctuations, due to higher subscription pricing, selected
cover price increases in the U.K. and Australia and higher paid
digital subscribers, partially offset by lower print volume.
Segment EBITDA decreased $37 million in the quarter, or 45%, as
compared to the prior year, and Adjusted Segment EBITDA decreased
27%. The reported decrease was driven by the lower advertising
revenues noted above, $12 million of investment spending in
connection with Checkout 51, as well as transaction related costs
of $5 million associated with the acquisition of Wireless
Group.
Digital revenues represented 24% of segment revenues in the
quarter, compared to 20% in the prior year. At Dow Jones, digital
revenues represented 55% of total revenues in the quarter. Digital
subscribers and users across key properties within the News and
Information Services segment are summarized below:
- The Wall Street Journal average daily
digital subscribers in the three months ended September 30, 2016
were 967,000, compared to 819,000 in the prior year (Source:
Internal data)
- Closing digital subscribers at News
Corp Australia’s mastheads as of September 30, 2016 were 283,800,
compared to 246,400 in the prior year (Source: Internal data)
- The Times and Sunday Times closing
digital subscribers as of September 30, 2016 were 181,000, compared
to 169,000 in the prior year (Source: Internal data)
- The Sun’s digital offering reached 46
million global monthly unique users in September 2016, based on
ABCe (Source: Omniture)
Book Publishing
Revenues in the quarter decreased $20 million, or 5%, compared
to the prior year, primarily due to the absence of revenues from Go
Set a Watchman by Harper Lee, partially offset by the continued
expansion of HarperCollins’ global footprint and the popularity of
front-list titles such as The Black Widow by Daniel Silva,
Hillbilly Elegy by J.D. Vance and Jesus Always by Sarah Young.
Digital sales represented 20% of Consumer revenues for the quarter.
Segment EBITDA for the quarter increased $6 million, or 14%, from
the prior year due to the mix of titles.
Digital Real Estate Services
Revenues in the quarter increased $35 million, or 18%, compared
to the prior year, primarily due to the continued growth at REA
Group and Move, as well as $10 million from the acquisitions of
iProperty and Diakrit. Segment EBITDA in the quarter increased $10
million, or 18%, compared to the prior year. The increase in
Segment EBITDA was primarily due to higher revenues, partially
offset by higher marketing expenses at both REA Group and Move.
In the quarter, revenues at REA Group increased 22%, or 16%
excluding a $5 million impact from favorable foreign currency
fluctuations, due to an increase in Australian residential depth
revenue, as favorable product mix offset lower listing volumes, and
the acquisition of iProperty.
Move’s revenues in the quarter increased 9% to $93 million from
$85 million in the prior year, primarily due to the continued
growth in its Connection for Co-BrokerageSM product and non-listing
Media revenues. Based on Move’s internal data, average monthly
unique users of realtor.com®’s web and mobile sites for the fiscal
first quarter grew 15% year-over-year to approximately 53 million.
Mobile continues to drive audience growth and represents more than
half of all unique users.
Cable Network Programming
Revenues in the quarter increased $4 million, or 3%, compared to
the prior year due to higher advertising revenues. Adjusted
Revenues increased 1%. Segment EBITDA in the quarter decreased $14
million, or 50%, compared with the prior year. Adjusted Segment
EBITDA decreased 29% due to higher programming rights costs
primarily related to the NRL simulcast and certain one-time cricket
rights.
REVIEW OF EQUITY (LOSSES) EARNINGS OF AFFILIATES’
RESULTS
Equity (losses) earnings of affiliates for the first quarter
were $(15) million compared to $8 million in the prior year.
For the three months ended September 30, 2016
2015 (in millions) Foxtel $ (11 ) $ 9 Other equity
affiliates, net (4 ) (1 ) Total equity (losses)
earnings of affiliates $ (15 ) $ 8
On a U.S. GAAP basis, Foxtel revenues for the first quarter
increased $31 million, or 5%, to $618 million from $587 million in
the prior year period. In local currency, Foxtel revenues increased
1% due to higher subscribers. Foxtel’s total closing subscribers
were approximately 2.9 million as of September 30, 2016, with
closing cable and satellite subscribers up 1% compared to the prior
year period. In the first quarter, cable and satellite churn
increased to 15.5% from 10.1% in the prior year, which was
primarily related to customers under no-contract offers during
fiscal 2016.
Foxtel’s net income of $16 million decreased from $42 million in
the prior year period, primarily due to the $21 million loss
resulting from Foxtel management’s decision to cease Presto
operations in January 2017. Presto had approximately 130,000 paying
subscribers as of September 30, 2016, who will be invited to
transition to the new Foxtel Play packages. Equity (losses)
earnings of affiliates for Foxtel of $(11) million and $9 million
for the three months ended September 30, 2016 and 2015,
respectively, reflect the Company's share of Foxtel's net income,
less the Company's amortization of $19 million and $12 million,
respectively, related to the Company's excess cost over its share
of Foxtel's finite-lived intangible assets.
Foxtel EBITDA increased $3 million to $143 million from $140
million in the prior year. In local currency, Foxtel EBITDA was
relatively flat, primarily due to increased investment in
programming, which offset the higher revenues noted above. Foxtel
operating income for the three months ended September 30, 2016 and
2015 was $91 and $85 million, respectively, after depreciation and
amortization of $52 million and $55 million, respectively.
Operating income increased as a result of the higher revenues noted
above and the positive impact of foreign currency fluctuations,
offset by the increased programming spend noted above.
CASH FLOW
The following table presents net cash (used in) provided by
continuing operating activities and a reconciliation to free cash
flow available to News Corporation:
For the three months ended
September 30,
2016 2015 (in millions) Net cash (used in) provided
by continuing operating activities $ (268 ) $ 141 Less: Capital
expenditures (49 ) (63 ) (317 ) 78 Less: REA Group
free cash flow (28 ) (35 ) Plus: Cash dividends received from REA
Group 28 24 Free cash flow available to
News Corporation $ (317 ) $ 67
Net cash (used in) provided by continuing operating activities
decreased $409 million for the three months ended September 30,
2016 as compared to the prior year period, which was primarily due
to the NAM Group’s settlement payments of $250 million during the
quarter and higher working capital due to timing, as well as lower
Total Segment EBITDA.
Free cash flow available to News Corporation in the three months
ended September 30, 2016 was ($317) million compared to $67 million
in the prior year period. The decrease was primarily due to lower
cash provided by continuing operating activities as discussed
above, partially offset by lower capital expenditures.
Free cash flow available to News Corporation is a non-GAAP
financial measure defined as net cash (used in) provided by
continuing operating activities, less capital expenditures (“free
cash flow”), less REA Group free cash flow, plus cash dividends
received from REA Group. Free cash flow available to News
Corporation excludes cash flows from discontinued operations.
The Company considers free cash flow available to News
Corporation to provide useful information to management and
investors about the amount of cash that is available to be used to
strengthen the Company’s balance sheet and for strategic
opportunities including, among others, investing in the Company’s
business, strategic acquisitions, dividend payouts and repurchasing
stock. A limitation of free cash flow available to News Corporation
is that it does not represent the total increase or decrease in the
cash balance for the period. Management compensates for the
limitation of free cash flow available to News Corporation by also
relying on the net change in cash and cash equivalents as presented
in the Company’s consolidated statements of cash flows prepared in
accordance with GAAP which incorporates all cash movements during
the period.
OTHER ITEMS
During the three months ended September 30, 2016, the Company
reclassified its listing revenues generated primarily from agents,
brokers and developers from advertising revenue to real estate
revenue to better reflect the Company’s revenue mix and how
management reviews the performance of the Digital Real Estate
Services segment.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted Revenues, Total Segment EBITDA, Adjusted Total Segment
EBITDA, adjusted net income from continuing operations available to
News Corporation stockholders, Adjusted EPS and free cash flow
available to News Corporation are non-GAAP financial measures
contained in this earnings release. The Company believes these
measures are important tools for investors and analysts to use in
assessing the Company’s underlying business performance and to
provide for more meaningful comparisons of the Company’s operating
performance between periods. These measures also allow investors
and analysts to view the Company’s business from the same
perspective as Company management. These non-GAAP measures may be
different than similar measures used by other companies and should
be considered in addition to, not as a substitute for, measures of
financial performance calculated in accordance with GAAP.
Reconciliations for the differences between non-GAAP measures used
in this earnings release and comparable financial measures
calculated in accordance with U.S. GAAP are included in Notes 1, 2
and 3 and the reconciliation of net cash (used in) provided by
continuing operating activities to free cash flow available to News
Corporation is included above.
Conference call
News Corporation’s earnings conference call can be heard live at
5:00pm EST on November 7, 2016. To listen to the call, please visit
http://investors.newscorp.com.
Annual Meeting of Stockholders
News Corporation will provide a live audio webcast of its 2016
Annual Meeting of Stockholders to be held in Los Angeles,
California on November 10, 2016, beginning at 3:00pm PST. The
webcast will be available via
http://newscorp.com/annual-meeting-information. A replay will be
available at the same location for a period of time following the
meeting.
Cautionary Statement Concerning Forward-Looking
Statements
This document contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management’s views and
assumptions regarding future events and business performance as of
the time the statements are made. Actual results may differ
materially from these expectations due to changes in global
economic, business, competitive market and regulatory factors. More
detailed information about these and other factors that could
affect future results is contained in our filings with the
Securities and Exchange Commission. The “forward-looking
statements” included in this document are made only as of the date
of this document and we do not have any obligation to publicly
update any “forward-looking statements” to reflect subsequent
events or circumstances, except as required by law.
About News Corporation
News Corporation (NASDAQ: NWS) (NASDAQ: NWSA) (ASX: NWS)
(ASX: NWSLV) is a global, diversified media and information
services company focused on creating and distributing authoritative
and engaging content to consumers throughout the world. The
company comprises businesses across a range of media, including:
news and information services, book publishing, digital real estate
services, cable network programming in Australia, and pay-TV
distribution in Australia. Headquartered in New York, the
activities of News Corporation are conducted primarily in the
United States, Australia, and the United Kingdom. More information
is available at: www.newscorp.com.
NEWS CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited; in millions, except per share
amounts) For the three months ended
September 30,
2016
2015 Revenues: Advertising $ 670 $ 735 Circulation
and subscription 621 639 Consumer 374 392 Real estate 172 145 Other
128 103 Total Revenues 1,965
2,014 Operating expenses (1,157 ) (1,199 ) Selling, general
and administrative (678 ) (650 ) Depreciation and amortization (120
) (121 ) Restructuring charges (20 ) (17 ) Equity (losses) earnings
of affiliates (15 ) 8 Interest, net 7 12 Other, net 17
5
(Loss) income from continuing operations
before income tax benefit
(1 ) 52 Income tax benefit 1 91 Income
from continuing operations - 143 Income from discontinued
operations, net of tax - 46 Net income - 189
Less: Net income attributable to noncontrolling interests
(15 ) (14 ) Net (loss) income available to News Corporation
stockholders $ (15 ) $ 175 Weighted average shares
outstanding: Basic 581 581 Diluted 581 583
(Loss) income from continuing operations
available to News Corporationstockholders per share - basic and
diluted
$ (0.03 ) $ 0.22
Income from discontinued operations
available to News Corporation stockholdersper share - basic and
diluted
$ - $ 0.08
Net (loss) income available to News
Corporation stockholders per share - basicand diluted
$ (0.03 ) $ 0.30
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS (in millions)
As of September30, 2016
As of June 30,2016
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 1,499 $ 1,832 Restricted cash - 315 Receivables, net
1,294 1,229 Other current assets 535 513 Total
current assets 3,328 3,889 Non-current assets:
Investments 2,269 2,270 Property, plant and equipment, net 2,367
2,405 Intangible assets, net 2,381 2,207 Goodwill 3,889 3,714
Deferred income tax assets 628 602 Other non-current assets
407 396 Total assets $ 15,269 $ 15,483
LIABILITIES
AND EQUITY Current liabilities: Accounts payable $ 240 $ 217
Accrued expenses 1,136 1,371 Deferred revenue 401 388 Other current
liabilities 510 466 Total current liabilities
2,287 2,442 Non-current liabilities: Borrowings 377
369 Retirement benefit obligations 332 350 Deferred income tax
liabilities 171 171 Other non-current liabilities 336 349
Commitments and contingencies Redeemable preferred stock 20
20 Equity: Class A common stock 4 4 Class B common stock 2 2
Additional paid-in capital 12,434 12,434 Retained earnings 76 150
Accumulated other comprehensive loss (986) (1,026)
Total News Corporation stockholders' equity 11,530 11,564
Noncontrolling interests 216 218 Total equity
11,746 11,782 Total liabilities and equity $ 15,269 $ 15,483
NEWS CORPORATION CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited; in millions) For the three
months ended September 30, 2016 2015
Operating
activities: Net income $ - $ 189 Less: Income from discontinued
operations, net of tax - 46 Income from continuing
operations - 143
Adjustments to reconcile income from
continuing operations to cash (used in)provided by operating
activities:
Depreciation and amortization 120 121 Equity losses (earnings) of
affiliates 15 (8) Other, net (17) (5) Deferred income taxes and
taxes payable (35) (109) Changes in operating assets and
liabilities, net of acquisitions: Receivables and other assets (64)
(94) Inventories, net (16) 30 Accounts payable and other
liabilities (258) 74 Pension and postretirement benefit plans
(13) (11) Net cash (used in) provided by operating
activities from continuing operations (268) 141
Investing activities: Capital expenditures (49) (63) Changes
in restricted cash for Wireless Group acquisition 315 -
Acquisitions, net of cash acquired (283) (16) Investments in equity
affiliates and other (10) (14) Proceeds from dispositions 24 2
Other (8) 5 Net cash used in investing activities
from continuing operations (11) (86)
Financing activities: Repayment of borrowings acquired in
the Wireless Group acquisition (23) - Repurchase of shares - (15)
Dividends paid (18) (16) Other, net (18) (6) Net cash
used in financing activities from continuing operations (59)
(37) Net (decrease) increase in cash and cash equivalents
from continuing operations (338) 18 Net decrease in cash and cash
equivalents from discontinued operations (3) (35) Cash and cash
equivalents, beginning of period 1,832 1,951 Exchange movement on
opening cash balance 8 (36)
Cash and cash
equivalents, end of period $ 1,499 $ 1,898
NOTE 1 – ADJUSTED REVENUES, ADJUSTED TOTAL SEGMENT EBITDA AND
ADJUSTED SEGMENT EBITDA
The Company uses revenues, Total Segment EBITDA and Segment
EBITDA excluding the impact of acquisitions, divestitures, costs
associated with the U.K. Newspaper Matters and foreign currency
fluctuations (“Adjusted Revenues, Adjusted Total Segment EBITDA and
Adjusted Segment EBITDA,” respectively) to evaluate the performance
of the Company’s core business operations exclusive of certain
items that impact the comparability of results from period to
period such as the unpredictability and volatility of currency
fluctuations. Management calculates the impact of foreign currency
fluctuations for businesses reporting in currencies other than the
U.S. dollar by multiplying current period results by the difference
between the average quarterly exchange rates for the current year
period and the average quarterly exchange rates in effect during
the corresponding period of the prior year.
The calculation of Adjusted Revenues, Adjusted Total Segment
EBITDA and Adjusted Segment EBITDA may not be comparable to
similarly titled measures reported by other companies, since
companies and investors may differ as to what type of events
warrant adjustment. Adjusted Revenues, Adjusted Total Segment
EBITDA and Adjusted Segment EBITDA are not measures of performance
under generally accepted accounting principles and should not be
construed as substitutes for amounts determined under GAAP as
measures of performance. However, management uses these measures in
comparing the Company’s historical performance and believes that
they provide meaningful and comparable information to investors to
assist in their analysis of our performance relative to prior
periods and our competitors.
The following table reconciles reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three months ended September 30, 2016 and
2015.
Revenues Total Segment EBITDA For the three
months ended For the three months ended September 30, September 30,
2016 2015 Difference 2016 2015
Difference (in millions) (in millions)
As reported $
1,965 $ 2,014 $ (49 ) $ 130 $ 165 $ (35 ) Impact of
acquisitions (37 ) - (37 ) 15 - 15 Impact of foreign
currency fluctuations 36 - 36 5 - 5 Net impact of U.K.
Newspaper Matters - - - 2 5 (3 )
As adjusted
$ 1,964 $ 2,014 $ (50 ) $ 152 $ 170 $ (18 )
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months ended September 30, 2016 and 2015 are as follows:
For the three months ended September 30,
2016 2015 % Change (in millions)
Better/(Worse)
Adjusted Revenues: News and
Information Services $ 1,241 $ 1,290 (4)% Book Publishing 387 409
(5)% Digital Real Estate Services 211 191 10% Cable Network
Programming 125 124 1% Other - -
**
Total Adjusted Revenues $ 1,964 $ 2,014 (2)%
Adjusted Segment EBITDA: News and Information Services $ 61
$ 83 (27)% Book Publishing 48 42 14% Digital Real Estate Services
66 57 16% Cable Network Programming 20 28 (29)% Other (43)
(40) (8)%
Total Adjusted Segment EBITDA $ 152 $ 170
(11)% ** - Not meaningful
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the three months ended September 30, 2016 and
2015.
For the three months ended September 30, 2016
As Reported
Impact ofAcquisitions
Impact ofForeignCurrencyFluctuations
Net Impact ofU.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,222 $ (18 ) $ 37 $ - $ 1,241 Book
Publishing 389 (9 ) 7 - 387 Digital Real Estate Services 226 (10 )
(5 ) - 211 Cable Network Programming 128 - (3 ) - 125 Other
- - - - -
Total Revenues $ 1,965 $ (37 ) $ 36 $ - $
1,964
Segment EBITDA: News and Information
Services $ 46 $ 13 $ 2 $ - $ 61 Book Publishing 48 - - - 48 Digital
Real Estate Services 67 2 (3 ) - 66 Cable Network Programming 14 -
6 - 20 Other (45 ) - - 2
(43 )
Total Segment EBITDA $ 130 $ 15 $
5 $ 2 $ 152 For the three months ended
September 30, 2015 As Reported
Net Impact ofU.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,290 $ - $ 1,290 Book Publishing 409 - 409
Digital Real Estate Services 191 - 191 Cable Network Programming
124 - 124 Other - - -
Total
Revenues $ 2,014 $ - $ 2,014
Segment
EBITDA: News and Information Services $ 83 $ - $ 83 Book
Publishing 42 - 42 Digital Real Estate Services 57 - 57 Cable
Network Programming 28 - 28 Other (45 ) 5 (40
)
Total Segment EBITDA $ 165 $ 5 $ 170
NOTE 2 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses
and selling, general and administrative expenses. Segment EBITDA
does not include: Depreciation and amortization, restructuring
charges, equity (losses) earnings of affiliates, interest, net,
other, net, and income tax benefit. Management believes that
Segment EBITDA is an appropriate measure for evaluating the
operating performance of the Company’s business segments because it
is the primary measure used by the Company’s chief operating
decision maker to evaluate the performance of and allocate
resources within the Company’s businesses. Segment EBITDA provides
management, investors and equity analysts with a measure to analyze
operating performance of each of the Company’s business segments
and its enterprise value against historical data and competitors’
data, although historical results may not be indicative of future
results (as operating performance is highly contingent on many
factors, including customer tastes and preferences).
Total Segment EBITDA is a non-GAAP measure and should be
considered in addition to, not as a substitute for, net income,
cash flow and other measures of financial performance reported in
accordance with GAAP. In addition, this measure does not reflect
cash available to fund requirements and excludes items, such as
depreciation and amortization and impairment and restructuring
charges, which are significant components in assessing the
Company’s financial performance. The Company believes that
information about Total Segment EBITDA allows users of the
Company’s financial statements to evaluate changes in the operating
results of the Company separate from non-operational factors that
affect net income, thus providing insight into both operations and
the other factors that affect reported results. The following table
reconciles Total Segment EBITDA to income from continuing
operations.
For the three months ended September 30, 2016
2015 Change % Change (in millions)
Better/(Worse)
Revenues $ 1,965 $ 2,014 $ (49 ) (2 )%
Operating expenses (1,157 ) (1,199 ) 42 4 % Selling, general and
administrative (678 ) (650 ) (28 ) (4 )%
Total Segment EBITDA 130 165 (35 ) (21 )% Depreciation and
amortization (120 ) (121 ) 1 1 % Restructuring charges (20 ) (17 )
(3 ) (18 )% Equity (losses) earnings of affiliates (15 ) 8 (23 ) **
Interest, net 7 12 (5 ) (42 )% Other, net 17 5
12 **
(Loss) income from continuing operations
beforeincome tax benefit
(1 ) 52 (53 ) ** Income tax benefit 1 91
(90 ) **
Income from continuing operations $ -
$ 143 $ (143 ) ** ** - Not meaningful
NOTE 3 – ADJUSTED NET (LOSS) INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO NEWS CORPORATION STOCKHOLDERS AND ADJUSTED
EPS
The Company uses net (loss) income from continuing operations
available to News Corporation stockholders and diluted earnings per
share from continuing operations (“EPS”) excluding expenses related
to U.K. Newspaper Matters, Impairment and restructuring charges,
and “Other, net”, net of tax, recognized by the Company or its
equity investees (“adjusted net income from continuing operations
available to News Corporation stockholders and adjusted EPS,”
respectively) to evaluate the performance of the Company’s
operations exclusive of certain items that impact the comparability
of results from period to period. The calculation of adjusted net
(loss) income from continuing operations available to News
Corporation stockholders and adjusted EPS may not be comparable to
similarly titled measures reported by other companies, since
companies and investors may differ as to what type of events
warrant adjustment. Adjusted net (loss) income from continuing
operations available to News Corporation stockholders and adjusted
EPS are not measures of performance under generally accepted
accounting principles and should not be construed as substitutes
for consolidated net income available to News Corporation
stockholders and net income per share as determined under GAAP as a
measure of performance.
However, management uses these measures in comparing the
Company’s historical performance and believes that they provide
meaningful and comparable information to investors to assist in
their analysis of our performance relative to prior periods and our
competitors.
The following table reconciles reported net (loss) income from
continuing operations available to News Corporation stockholders
and reported diluted EPS to adjusted net (loss) income from
continuing operations available to News Corporation stockholders
and adjusted EPS for the three months ended September 30, 2016 and
2015.
For the three months ended For the three months ended
September 30, 2016 September 30, 2015
Net (loss)income available
tostockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
Income from continuing operations $ - $ $ 143 $
Less: Net income attributable
tononcontrolling interests
(15 ) (14 )
(Loss) income from
continuingoperations available to NewsCorporation
stockholders
$ (15 ) $ (0.03 ) $ 129 $ 0.22 U.K. Newspaper Matters 2 - 5
0.01 Restructuring charges 20 0.04 17 0.03 Other, net
(17 ) (0.03 ) (5 ) (0.01 ) Equity losses of affiliates (a)
11 0.02 - - Tax impact on items above (7 ) (0.01 ) (8 )
(0.02 ) Tax benefit (b) - - (106 ) (0.18 )
As adjusted $ (6 ) $ (0.01 ) $ 32 $ 0.05 (a)
Foxtel’s net income in the three months ended September 30,
2016 included a $21 million loss resulting from Foxtel management’s
decision to cease Presto operations in January 2017. Equity
(losses) earnings of affiliates were negatively affected by $11
million, which represents the Company’s share of that loss. (b) The
Company recognized a tax benefit of approximately $106 million from
the release of valuation allowances resulting from the disposal of
the digital education business in the three months ended September
30, 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161107006538/en/
News CorporationMichael FlorinInvestor
Relations212-416-3363mflorin@newscorp.comorJim KennedyCorporate
Communications212-416-4064jkennedy@newscorp.com
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