FISCAL 2017 THIRD QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues of $1.98 billion, a 5%
increase compared to $1.89 billion in the prior year
- Income (loss) from continuing
operations was break-even, compared to ($128) million in the prior
year
- Digital Real Estate Services segment
contributed to strong growth in Total Segment EBITDA; Total Segment
EBITDA was $215 million compared to ($122) million in the prior
year, which included the NAM Group settlement charge of $280
million
- Reported EPS were ($0.01) compared
to ($0.26) in the prior year – Adjusted EPS were $0.07 compared to
$0.04 in the prior year
- Realtor.com® achieved
record traffic in the quarter with 55 million average monthly
unique users
News Corporation (“News Corp” or the “Company”) (NASDAQ: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended March 31, 2017.
Commenting on the results, Chief Executive Robert Thomson
said:
"In the third quarter, we saw particular progress in our quest
to be more digital and global, while there was tangible improvement
in operating efficiencies. We posted solid revenue growth and
substantial earnings growth, highlighted by momentum in Digital
Real Estate Services, where realtor.com® continued to expand
traffic, revenue and profitability.
At News and Information Services, while print advertising
remains volatile, we saw some moderation this quarter. Overall, the
segment was a source of growth this quarter – in both revenues and
profitability – driven by, in particular, the robust performance of
in-store product at News America Marketing, digital subscriber
gains of more than 300,000 at the Wall Street Journal and the
benefits of ongoing cost control.
The quarter was also characterized by an intensifying social and
commercial debate over the dysfunctionality of the digital duopoly,
and the lack of transparency in audience and advertising metrics.
With brands in search of authenticated audiences and trusted
advertising environments, we firmly believe that our mastheads
offer veracity and value, and we are rapidly developing a new
digital ad platform to offer clearly defined demographics from
across our range of prestigious properties.”
THIRD QUARTER RESULTS
The Company reported fiscal 2017 third quarter total revenues of
$1.98 billion, compared to $1.89 billion in the prior year period.
Reported revenues reflect growth at the News and Information
Services segment, driven by News America Marketing and the
acquisitions of Australian Regional Media (“ARM”) and Wireless
Group plc (“Wireless Group”), partially offset by lower print
advertising revenues, as well as continued strong performance at
the Digital Real Estate Services and Book Publishing segments.
Adjusted Revenues (which exclude the impact of foreign currency,
acquisitions and divestitures as defined in Note 1) increased 3%
compared to the prior year.
Income (loss) from continuing operations for the quarter was
break-even as compared to ($128) million in the prior year.
Reported results were driven by higher Total Segment EBITDA, as
discussed below, which reflects the absence of a one-time pre-tax
charge of $280 million for the settlement of litigation and related
claims at News America Marketing in the prior year (the “NAM Group
settlement charge”). The growth was partially offset by higher tax
expense and the absence of a $107 million tax benefit in the prior
year related to the NAM Group settlement charge, lower contribution
from Other, net and lower equity earnings of affiliates, primarily
driven by costs related to Foxtel’s shutdown of Presto and the loss
resulting from the change in the fair value of Foxtel’s investment
in Ten Network Holdings.
The Company reported third quarter Total Segment EBITDA of $215
million, compared to ($122) million in the prior year, which
included the NAM Group settlement charge mentioned above. Adjusted
Total Segment EBITDA (as defined in Note 1) was 30% higher compared
to the prior year, primarily due to the continued growth in the
Digital Real Estate Services segment and at News America Marketing,
as well as an adjustment to the deferred consideration accrual
related to the acquisition of Unruly, partially offset by a
one-time corporate charge of $11 million associated with a change
in the Company’s executive management.
Loss per share from continuing operations available to News
Corporation stockholders was ($0.01) as compared to ($0.26) in the
prior year.
Adjusted EPS (as defined in Note 3) were $0.07 compared to $0.04
in the prior year.
SEGMENT REVIEW
For the three months ended For the nine
months ended March 31, March 31, 2017 2016 % Change
2017 2016 % Change (in millions)
Better/(Worse)
(in millions)
Better/(Worse)
Revenues: News and Information Services $ 1,263 $
1,231 3 % $ 3,788 $ 3,921 (3 ) % Book Publishing 374 358 4 % 1,229
1,213 1 % Digital Real Estate Services 219 194 13 % 687 593 16 %
Cable Network Programming 122 107 14 % 354 337 5 % Other -
1 ** 1 2
(50 ) %
Total Revenues $ 1,978 $ 1,891 5
% $ 6,059 $ 6,066 - %
Segment
EBITDA: News and Information Services(a) $ 123 $ (187 ) ** $
311 $ 54 ** Book Publishing 37 36 3 % 160 135 19 % Digital Real
Estate Services(b) 75 39 92 % 237 169 40 % Cable Network
Programming 34 34 - % 99 101 (2 ) % Other (54 ) (44 )
(23 ) % (137 ) (136 ) (1 ) %
Total Segment
EBITDA $ 215 $ (122 ) ** $ 670 $ 323
** ** - Not meaningful (a) News
and Information Services Segment EBITDA for the nine months ended
March 31, 2017 includes transaction related costs of $5 million
associated with the acquisition of Wireless Group. News and
Information Services Segment EBITDA for the three and nine months
ended March 31, 2016 includes the NAM Group settlement charge of
$280 million. News and Information Services Segment EBITDA for the
nine months ended March 31, 2016 also includes transaction related
costs of $5 million related to the acquisition of Unruly. (b)
Digital Real Estate Services Segment EBITDA for the three and nine
months ended March 31, 2016 includes transaction costs of $7
million related to the acquisition of iProperty.
News and Information Services
Revenues in the quarter increased $32 million, or 3%, compared
to the prior year. Adjusted Revenues increased 1% compared to the
prior year.
Advertising revenues increased 4% due to higher in-store product
revenues at News America Marketing, primarily driven by an increase
in client spending and, to a lesser extent, timing-related
benefits. Advertising revenues also benefited by $21 million from
the acquisition of Wireless Group and $20 million from the
acquisition of ARM. These factors were partially offset by weakness
in the print advertising market.
Circulation and subscription revenues decreased 1%, but
increased 3% excluding an $18 million impact from negative foreign
currency fluctuations, due to higher subscription pricing and
selected cover price increases, partially offset by lower print
volume.
Segment EBITDA for the quarter was $123 million compared to
($187) million in the prior year. Fiscal 2016 third quarter Segment
EBITDA would have been $93 million, excluding the NAM Group
settlement charge of $280 million. Excluding that settlement
charge, Fiscal 2017 third quarter Segment EBITDA would have
increased $30 million, or 32%, as compared to the prior year. The
increase was driven by higher revenues at News America Marketing,
lower expenses across the businesses due to lower print volume and
ongoing cost efficiencies, as well as a $12 million adjustment to
the deferred consideration accrual related to the acquisition of
Unruly.
Digital revenues represented 24% of segment revenues in the
quarter, compared to 23% in the prior year; for the quarter,
digital revenues for Dow Jones and the newspaper mastheads
represented 29% of their revenues. 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 March 31, 2017 were
1,198,000, compared to 893,000 in the prior year (Source: Internal
data)
- Closing digital subscribers at News
Corp Australia’s mastheads as of March 31, 2017 were 333,400
(including ARM), compared to 261,500 in the prior year (Source:
Internal data; adjusted for divested mastheads)
- The Times and Sunday Times closing
digital subscribers as of March 31, 2017 were 185,000, compared to
174,000 in the prior year (Source: Internal data)
- The Sun’s digital offering reached more
than 80 million global monthly unique users in March 2017, compared
to 36 million in the prior year, based on ABCe (Source:
Omniture)
Book Publishing
Revenues in the quarter increased $16 million, or 4%, compared
to the prior year, primarily due to strong sales from Hidden
Figures by Margot Lee Shetterly, the continued popularity of
Hillbilly Elegy by J.D. Vance and the release of Carve the Mark by
Veronica Roth, as well as the continued expansion of HarperCollins’
global footprint. Digital sales increased 7% compared to the prior
year and represented 22% of Consumer revenues for the quarter.
Segment EBITDA for the quarter increased $1 million, or 3%, as
compared to the prior year.
Digital Real Estate Services
Revenues in the quarter increased $25 million, or 13%, compared
to the prior year, primarily due to the continued growth at REA
Group and Move. The growth was partially offset by the $9 million
and $4 million impact from REA Group’s divestiture of its European
business and Move’s sale of its TigerLead® product, respectively.
Segment EBITDA in the quarter increased $36 million, or 92%,
compared to the prior year, primarily due to the higher revenues
noted above, $13 million of lower legal costs at Move and the
absence of $7 million of transaction costs related to iProperty in
the prior year, partially offset by increased costs related to
higher revenues and increased marketing expenses. Adjusted Revenues
and Adjusted Segment EBITDA increased 15% and 68%,
respectively.
In the quarter, revenues at REA Group increased 10% to $117
million from $106 million in the prior year due to an increase in
Australian residential depth revenue, driven by favorable product
mix and pricing increases, and a $6 million impact from favorable
foreign currency fluctuations. The growth was partially offset by a
$9 million, or 9%, decline in revenue resulting from the sale of
REA Group’s European business in December 2016.
Move’s revenues in the quarter increased 15% to $100 million
from $87 million in the prior year, primarily due to the continued
growth in its ConnectionSM for Buyers product and non-listing Media
revenues. The growth was partially offset by a $4 million decline
in revenue associated with the sale of TigerLead® in November 2016.
Based on Move’s internal data, average monthly unique users of
realtor.com®’s web and mobile sites for the fiscal third quarter
grew 9% year-over-year to approximately 55 million; traffic in
March grew 13% year-over-year to over 58 million monthly unique
users.
Cable Network Programming
Revenues in the quarter increased $15 million, or 14%, compared
to the prior year primarily due to the acquisition of Sky News and
favorable foreign currency fluctuations. Segment EBITDA in the
quarter was flat compared to the prior year. Adjusted Revenues and
Adjusted Segment EBITDA, which exclude the impact from favorable
foreign currency fluctuations and Sky News, increased 1% and 3%,
respectively.
REVIEW OF EQUITY (LOSSES) EARNINGS OF AFFILIATES’
RESULTS
Equity (losses) earnings of affiliates for the third quarter
were ($23) million compared to $2 million in the prior year.
For the three months ended For the nine months
ended March 31, March 31, 2017 2016 2017 2016 (in
millions) (in millions) Foxtel $ (16 ) $ 4 $ (260 ) $ 26
Other equity affiliates, net (7 ) (2 ) (16 )
(1 ) Total equity (losses) earnings of affiliates $ (23 ) $
2 $ (276 ) $ 25
On a U.S. GAAP basis, Foxtel revenues for the third quarter
increased $13 million, or 2%, to $591 million from $578 million in
the prior year period. In local currency, Foxtel revenues decreased
3%. Foxtel’s total closing subscribers were 2.8 million as of March
31, 2017, with closing cable and satellite subscribers 1% lower
compared to the prior year period. In the third quarter, cable and
satellite churn was 16.1% compared to 14.3% in the prior year.
Churn was at a more normalized level of 13.5% in March.
Foxtel’s net income was nil, compared to $32 million in the
prior year period, primarily due to $21 million in losses related
to Foxtel management’s decision to cease Presto operations in
January 2017 and a $14 million loss resulting from the change in
the fair value of Foxtel’s investment in Ten Network Holdings.
Equity (losses) earnings of affiliates for Foxtel of ($16) million
and $4 million for the three months ended March 31, 2017 and 2016,
respectively, reflect the Company's share of Foxtel's net income,
less the Company's amortization of $16 million and $12 million,
respectively, related to the Company's excess cost over its share
of Foxtel's finite-lived intangible assets.
Foxtel EBITDA decreased $13 million, or 9%, to $131 million from
$144 million in the prior year. In local currency, Foxtel EBITDA
decreased 13%, primarily due to lower revenues and planned
increases in programming costs, specifically investments in sports.
Foxtel operating income for the three months ended March 31, 2017
and 2016 was $79 million and $85 million, respectively, after
depreciation and amortization of $52 million and $59 million,
respectively. Operating income decreased primarily as a result of
the lower revenues and increased programming spend noted above,
partially offset by lower depreciation cost and the positive impact
of foreign currency fluctuations.
CASH FLOW
The following table presents net cash provided by continuing
operating activities and a reconciliation to free cash flow
available to News Corporation:
For the nine months endedMarch 31,
2017 2016 (in millions) Net cash provided by
continuing operating activities $ 224 $ 589 Less: Capital
expenditures (168 ) (180 ) 56 409 Less: REA Group
free cash flow (128 ) (92 ) Plus: Cash dividends received from REA
Group 53 45 Free cash flow available to
News Corporation $ (19 ) $ 362
Net cash provided by continuing operating activities decreased
by $365 million for the nine months ended March 31, 2017 as
compared to the prior year period, which was primarily due to
higher NAM Group settlement payments of $234 million during the
period, lower dividends received of $30 million, as well as higher
working capital due to timing.
Free cash flow available to News Corporation in the nine months
ended March 31, 2017 was ($19) million compared to $362 million in
the prior year period. The decrease was primarily due to lower cash
provided by continuing operating activities as discussed above
along with higher REA Group free cash flow, partially offset by
lower capital expenditures.
Free cash flow available to News Corporation is a non-GAAP
financial measure defined as net cash 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.
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 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
5:30pm EDT on May 9, 2017. To listen to the call, please visit
http://investors.newscorp.com.
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, NWSA; ASX: NWS,
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 monthsended
For the nine monthsended
March 31, March 31, 2017 2016 2017 2016
Revenues: Advertising $ 705 $ 671 $ 2,123 $ 2,222 Circulation and
subscription 618 615 1,834 1,875 Consumer 359 343 1,183 1,164 Real
estate 168 145 525 450 Other 128 117
394 355 Total Revenues 1,978
1,891 6,059 6,066 Operating expenses (1,101 ) (1,084 )
(3,384 ) (3,476 ) Selling, general and administrative (662 ) (649 )
(2,005 ) (1,987 ) NAM Group settlement charge - (280 ) - (280 )
Depreciation and amortization (109 ) (126 ) (349 ) (370 )
Impairment and restructuring charges (33 ) (24 ) (409 ) (63 )
Equity (losses) earnings of affiliates (23 ) 2 (276 ) 25 Interest,
net 8 11 30 34 Other, net (13 ) 33 127
32 Income (loss) from continuing operations
before income tax (expense) benefit 45 (226 ) (207 ) (19 ) Income
tax (expense) benefit (45 ) 98 (12 )
140 Income (loss) from continuing operations - (128 )
(219 ) 121 (Loss) income from discontinued operations, net of tax
- (2 ) - 20 Net income (loss) -
(130 ) (219 ) 141 Less: Net income attributable to noncontrolling
interests (5 ) (19 ) (90 ) (52 ) Net (loss) income
attributable to News Corporation stockholders $ (5 ) $ (149 ) $
(309 ) $ 89 Less: Adjustments to Net (loss) income attributable to
News Corporation stockholders – Redeemable preferred stock
dividends - - (1 ) (1 )
Net (loss) income available to News Corporation stockholders $ (5 )
$ (149 ) $ (310 ) $ 88 Weighted average shares
outstanding: Basic 582 580 581 581 Diluted 582 580 581 583
(Loss) income from continuing operations available to News
Corporation stockholders per share - basic and diluted $ (0.01 ) $
(0.26 ) $ (0.53 ) $ 0.12 (Loss) income from discontinued operations
available to News Corporation stockholders per share - basic and
diluted $ - $ - $ - $ 0.03 Net (loss)
income available to News Corporation stockholders per share - basic
and diluted $ (0.01 ) $ (0.26 ) $ (0.53 ) $ 0.15
NEWS CORPORATION CONSOLIDATED BALANCE SHEETS
(in millions)
As of March 31,2017
As of June 30,2016
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 1,850 $ 1,832 Restricted cash - 315 Receivables, net
1,326 1,229 Other current assets 586 513
Total current assets 3,762 3,889
Non-current assets: Investments 2,010 2,270 Property, plant
and equipment, net 1,961 2,405 Intangible assets, net 2,316 2,207
Goodwill 3,859 3,714 Deferred income tax assets 536 602 Other
non-current assets 442 396 Total assets
$ 14,886 $ 15,483
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 229 $ 217
Accrued expenses 1,214 1,371 Deferred revenue 435 388 Other current
liabilities 583 466 Total current
liabilities 2,461 2,442
Non-current liabilities: Borrowings 273 369 Retirement benefit
obligations 305 350 Deferred income tax liabilities 82 171 Other
non-current liabilities 328 349 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 12,397 12,434 Retained earnings (219 )
150 Accumulated other comprehensive loss (1,045 )
(1,026 ) Total News Corporation stockholders' equity 11,139 11,564
Noncontrolling interests 278 218 Total
equity 11,417 11,782 Total liabilities
and equity $ 14,886 $ 15,483
NEWS
CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions) For the nine months
ended March 31, 2017 2016
Operating activities: Net
(loss) income $ (219 ) $ 141 Less: Income from discontinued
operations, net of tax - 20 (Loss)
income from continuing operations (219 ) 121 Adjustments to
reconcile (loss) income from continuing operations to cash provided
by operating activities: Depreciation and amortization 349 370
Equity losses (earnings) of affiliates 276 (25 ) Cash distribution
received from affiliates 1 31 Impairment charges 321 - Other, net
(127 ) (32 ) Deferred income taxes and taxes payable (76 ) (217 )
Changes in operating assets and liabilities, net of acquisitions:
Receivables and other assets (126 ) (12 ) Inventories, net (8 ) (37
) Accounts payable and other liabilities 89 132 NAM Group
settlement (256 ) 258 Net cash provided by operating
activities from continuing operations 224 589 Net cash used in
operating activities from discontinued operations (5 )
(66 ) Net cash provided by operating activities 219
523
Investing activities:
Capital expenditures (168 ) (180 ) Changes in restricted cash for
Wireless Group acquisition 315 - Acquisitions, net of cash acquired
(345 ) (486 ) Investments in equity affiliates and other (93 ) (62
) Proceeds from dispositions 232 4 Other, net 10 21
Net cash used in investing activities from continuing
operations (49 ) (703 ) Net cash provided by investing activities
from discontinued operations - 15 Net
cash used in investing activities (49 ) (688 )
Financing activities: Borrowings - 342 Repayment of
borrowings acquired in the Wireless Group acquisition (23 ) -
Repurchase of shares - (41 ) Dividends paid (93 ) (88 ) Other, net
(36 ) (9 ) Net cash (used in) provided by financing
activities from continuing operations (152 ) 204 Net cash used in
financing activities from discontinued operations -
- Net cash (used in) provided by financing activities
(152 ) 204 Net increase in cash and
cash equivalents 18 39 Cash and cash equivalents, beginning of
period 1,832 1,951 Exchange movement on opening cash balance
- (18 ) Cash and cash equivalents, end of period $
1,850 $ 1,972
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, the NAM Group
settlement charge, where applicable, 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. The Company calculates the impact of foreign currency
fluctuations for businesses reporting in currencies other than the
U.S. dollar by multiplying the results for each quarter in the
current period by the difference between the average exchange rate
for that quarter and the average exchange rate in effect during the
corresponding quarter of the prior year and totaling the impact for
all quarters in the current period.
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 tables reconcile reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three and nine months ended March 31, 2017
and 2016.
Revenues Total Segment EBITDA For the three
months ended For the three months ended March 31, March 31, 2017
2016 Difference 2017 2016 Difference
(in millions) (in millions)
As reported $ 1,978 $
1,891 $ 87 $ 215 $ (122 ) $ 337 Impact of acquisitions (74 )
- (74 ) - 7 (7 ) Impact of divestitures - (23 ) 23 - (1 ) 1
Impact of foreign currency fluctuations 21 - 21 - - -
Net impact of U.K. Newspaper Matters - - - 2 3 (1 ) NAM
Group settlement charge - - - - 280 (280 )
As adjusted $ 1,925 $ 1,868 $ 57 $ 217
$ 167 $ 50 Revenues Total Segment EBITDA
For the nine months ended
For the nine months ended
March 31,
March 31,
2017 2016 Difference 2017 2016 Difference (in millions) (in
millions)
As reported $ 6,059 $ 6,066 $ (7 ) $ 670 $
323 $ 347 Impact of acquisitions (154 ) - (154 ) 14 7 7
Impact of divestitures (37 ) (70 ) 33 1 (5 ) 6 Impact
of foreign currency fluctuations 110 - 110 2 - 2 Net impact
of U.K. Newspaper Matters - - - 6 15 (9 ) NAM Group
settlement charge - - - - 280 (280 )
As
adjusted $ 5,978 $ 5,996 $ (18 ) $ 693 $ 620
$ 73
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and nine months ended March 31, 2017 and 2016 are as
follows:
For the three months ended March 31, 2017
2016 % Change (in millions) Better/(Worse)
Adjusted Revenues: News and Information Services $ 1,235 $
1,221 1 % Book Publishing 373 358 4 % Digital Real Estate Services
209 181 15 % Cable Network Programming 108 107 1 % Other -
1 **
Total Adjusted Revenues $
1,925 $ 1,868 3 %
Adjusted Segment
EBITDA: News and Information Services $ 124 $ 94 32 % Book
Publishing 36 36 - % Digital Real Estate Services 74 44 68 % Cable
Network Programming 35 34 3 % Other (52 ) (41 ) (27 )
%
Total Adjusted Segment EBITDA $ 217 $ 167 30
% For the nine months ended
March 31, 2017 2016 % Change (in millions)
Adjusted Revenues: News and Information Services $ 3,789 $
3,891 (3 ) % Book Publishing 1,232 1,213 2 % Digital Real Estate
Services 622 553 12 % Cable Network Programming 334 337 (1 ) %
Other 1 2 (50 ) %
Total Adjusted
Revenues $ 5,978 $ 5,996 - %
Adjusted Segment EBITDA: News and Information Services $ 329
$ 336 (2 ) % Book Publishing 161 135 19 % Digital Real Estate
Services 231 169 37 % Cable Network Programming 103 101 2 % Other
(131 ) (121 ) 8 %
Total Adjusted Segment
EBITDA $ 693 $ 620 12 % ** - 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 March 31, 2017 and 2016.
For the three months ended March 31, 2017 As
Reported
Impact ofAcquisitions
Impact ofForeignCurrencyFluctuations
Net Impactof U.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,263 $ (54 ) $ 26 $ - $ 1,235 Book
Publishing 374 (7 ) 6 - 373 Digital Real Estate Services 219 (4 )
(6 ) - 209 Cable Network Programming 122 (9 ) (5 ) - 108 Other
- - - - -
Total Revenues $ 1,978 $ (74 ) $ 21 $ -
$ 1,925
Segment EBITDA: News and Information
Services $ 123 $ (2 ) $ 3 $ - $ 124 Book Publishing 37 (1 ) - - 36
Digital Real Estate Services 75 2 (3 ) - 74 Cable Network
Programming 34 1 - - 35 Other (54 ) - -
2 (52 )
Total Segment EBITDA $ 215
$ - $ - $ 2 $ 217
For the three months ended March 31, 2016 As Reported
Impact ofAcquisitions
Impact ofDivestitures
Net Impactof U.K.NewspaperMatters
NAM GroupSettlement
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,231 $ - $ (10 ) $ - $ - $ 1,221 Book
Publishing 358 - - - - 358 Digital Real Estate Services 194 - (13 )
- - 181 Cable Network Programming 107 - - - - 107 Other 1
- - - - 1
Total Revenues $ 1,891 $ - $ (23 ) $ - $ - $ 1,868
Segment EBITDA: News and Information Services
$ (187 ) $ - $ 1 $ - $ 280 $ 94 Book Publishing 36 - - - - 36
Digital Real Estate Services 39 7 (2 ) - - 44 Cable Network
Programming 34 - - - - 34 Other (44 ) - -
3 - (41 )
Total Segment EBITDA $
(122 ) $ 7 $ (1 ) $ 3 $ 280 $ 167
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the nine months ended March 31, 2017 and 2016.
For the nine months ended March 31, 2017 As
Reported
Impact ofAcquisitions
Impact ofDivestitures
Impact ofForeignCurrencyFluctuations
Net Impactof U.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 3,788 $ (98 ) $ (13 ) $ 112 $ - $ 3,789 Book
Publishing 1,229 (23 ) - 26 - 1,232 Digital Real Estate Services
687 (24 ) (24 ) (17 ) - 622 Cable Network Programming 354 (9 ) -
(11 ) - 334 Other 1 - -
- - 1
Total Revenues $
6,059 $ (154 ) $ (37 ) $ 110 $ - $ 5,978
Segment EBITDA: News and Information Services $ 311 $
8 $ 3 $ 7 $ - $ 329 Book Publishing 160 (1 ) - 2 - 161 Digital Real
Estate Services 237 6 (2 ) (10 ) - 231 Cable Network Programming 99
1 - 3 - 103 Other (137 ) - -
- 6 (131 )
Total Segment EBITDA
$ 670 $ 14 $ 1 $ 2 $ 6 $ 693
For the nine months ended March 31,
2016 As Reported
Impact ofAcquisitions
Impact ofDivestitures
Net Impactof U.K.NewspaperMatters
NAM GroupSettlement
As Adjusted (in millions)
Revenues: News and
Information Services $ 3,921 $ - $ (30 ) $ - $ - $ 3,891 Book
Publishing 1,213 - - - - 1,213 Digital Real Estate Services 593 -
(40 ) - - 553 Cable Network Programming 337 - - - - 337 Other
2 - - - - 2
Total Revenues $ 6,066 $ - $ (70 ) $ - $ - $
5,996
Segment EBITDA: News and Information
Services $ 54 $ - $ 2 $ - $ 280 $ 336 Book Publishing 135 - - - -
135 Digital Real Estate Services 169 7 (7 ) - - 169 Cable Network
Programming 101 - - - - 101 Other (136 ) - -
15 - (121 )
Total Segment EBITDA
$ 323 $ 7 $ (5 ) $ 15 $ 280 $ 620
NOTE 2 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses,
selling, general and administrative expenses and the NAM Group
settlement charge. Segment EBITDA does not include: Depreciation
and amortization, impairment and restructuring charges, equity
(losses) earnings of affiliates, interest, net, other, net, income
tax (expense) benefit and net income attributable to noncontrolling
interests. 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 the 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
(loss), 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 the presentation of Total Segment EBITDA provides useful
information regarding the Company’s operations and other factors
that affect the Company’s reported results. Specifically, the
Company believes that by excluding certain one-time or non-cash
items such as impairment and restructuring charges and depreciation
and amortization, as well as potential distortions between periods
caused by factors such as financing and capital structures and
changes in tax positions or regimes, the Company provides users of
its consolidated financial statements with insight into both its
core operations as well as the factors that affect reported results
between periods but which the Company believes are not
representative of its core business. As a result, users of the
Company’s consolidated financial statements are better able to
evaluate changes in the core operating results of the Company
across different periods. The following table reconciles Total
Segment EBITDA to Income (loss) from continuing operations.
For the three months ended March 31, 2017 2016
Change % Change (in millions) Better/(Worse)
Revenues $ 1,978 $ 1,891 $ 87 5 % Operating expenses (1,101
) (1,084 ) (17 ) (2 ) % Selling, general and administrative (662 )
(649 ) (13 ) (2 ) % NAM Group settlement charge -
(280 ) 280 **
Total Segment
EBITDA 215 (122 ) 337 ** Depreciation and amortization (109 )
(126 ) 17 13 % Impairment and restructuring charges (33 ) (24 ) (9
) (38 ) % Equity (losses) earnings of affiliates (23 ) 2 (25 ) **
Interest, net 8 11 (3 ) (27 ) % Other, net (13 ) 33
(46 ) ** Income (loss) from continuing
operations before income tax (expense) benefit 45 (226 ) 271 **
Income tax (expense) benefit (45 ) 98
(143 ) **
Income (loss) from continuing operations $
- $ (128 ) $ 128 ** ** - Not meaningful
For the nine months ended March 31, 2017 2016 Change %
Change ( in millions) Better/(Worse)
Revenues $ 6,059
$ 6,066 $ (7 ) - % Operating expenses (3,384 ) (3,476 ) 92 3 %
Selling, general and administrative (2,005 ) (1,987 ) (18 ) (1 ) %
NAM Group settlement charge - (280 )
280 **
Total Segment EBITDA 670 323 347 **
Depreciation and amortization (349 ) (370 ) 21 6 % Impairment and
restructuring charges (409 ) (63 ) (346 ) ** Equity (losses)
earnings of affiliates (276 ) 25 (301 ) ** Interest, net 30 34 (4 )
(12 ) % Other, net 127 32 95
** (Loss) income from continuing operations before
income tax (expense) benefit (207 ) (19 ) (188 ) ** Income tax
(expense) benefit (12 ) 140 (152 ) **
(Loss) income from continuing operations $ (219 ) $
121 $ (340 ) ** ** - 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,
“Other, net” and the NAM Group settlement charge, 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 tables reconcile 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 and nine months ended March 31, 2017
and 2016.
For the three months ended For the three months ended
March 31, 2017 March 31, 2016
Net (loss)income availableto
stockholders
EPS
Net (loss)income availableto
stockholders
EPS (in millions, except per share data)
Income (loss) from continuing operations $ - $ $ (128
) $ Less: Net income attributable to noncontrolling interests
(5 ) (19 )
Loss
from continuing operations available to News Corporation
stockholders $ (5 ) $ (0.01 ) $ (147 ) $ (0.26 ) U.K.
Newspaper Matters 2 - 3 0.01 Impairment and restructuring
charges 33 0.06 24 0.04 Other, net 13 0.03 (33 ) (0.06 )
Equity losses of affiliates (a) 10 0.02 - - NAM Group
settlement charge - - 280 0.48 Tax impact on items above (b)
(9 ) (0.02 ) (113 ) (0.19 ) Impact of noncontrolling
interest items included in Other, net above (5 ) (0.01 ) 11 0.02
As adjusted $ 39 $ 0.07 $ 25
$ 0.04 (a) Foxtel’s net income in the
three months ended March 31, 2017 included a $21 million loss
resulting from Foxtel management’s decision to cease Presto
operations in January 2017. Equity losses of affiliates were
negatively affected by $10 million, which represents the Company’s
share of that loss. (b) The tax impact on items above for the three
months ended March 31, 2016 includes a tax benefit of $107 million
related to the NAM Group settlement charge.
For the nine months ended For the nine months ended March 31, 2017
March 31, 2016
Net (loss)incomeavailable
tostockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
(Loss) income from continuing operations $ (219 ) $ $
121 $ Less: Net income attributable to noncontrolling interests (90
) (52 ) Less: Redeemable preferred stock dividends (1 )
(1 )
(Loss) income from
continuing operations available to News Corporation
stockholders $ (310 ) $ (0.53 ) $ 68 $ 0.12 U.K.
Newspaper Matters 6 0.01 15 0.03 Impairment and
restructuring charges (a) 409 0.70 63 0.11 Other, net (b)
(127 ) (0.22 ) (32 ) (0.06 ) Equity losses of affiliates (c)
248 0.43 - - NAM Group settlement charge - - 280 0.48
Tax impact on items above (d) (124 ) (0.21 ) (128 ) (0.23 )
Tax benefit (e) - - (106 ) (0.18 ) Impact of noncontrolling
interest on items included in Other, net above (b) 41 0.07 11 0.02
As adjusted $ 143 $ 0.25 $ 171
$ 0.29 (a) Impairment and restructuring
charges for the nine months ended March 31, 2017 included a
non-cash impairment charge of approximately $310 million related to
the write-down of the fixed assets at the Australian newspapers.
(b) Other, net in the nine months ended March 31, 2017 included a
pre-tax gain of $107 million resulting from the sale of REA Group’s
European business. (c) During the nine months ended March 31, 2017,
the Company recognized a $227 million non-cash write-down of the
carrying value of its investment in Foxtel to fair value. Foxtel’s
net income in the nine months ended March 31, 2017 included a $42
million loss resulting from Foxtel management’s decision to cease
Presto operations in January 2017. Equity losses of affiliates were
negatively affected by $21 million, which represents the Company’s
share of that loss. (d) The tax impact on items above for the nine
months ended March 31, 2017 includes a $121 million tax benefit
from the non-cash impairment charge and non-cash write-down noted
above. The tax impact on items above for the nine months ended
March 31, 2016 includes a tax benefit of $107 million related to
the NAM Group settlement charge. (e) 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 nine months ended March 31, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170509006730/en/
News CorporationInvestor RelationsMichael Florin,
212-416-3363mflorin@newscorp.comorCorporate CommunicationsJim
Kennedy, 212-416-4064jkennedy@newscorp.com
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