FISCAL 2015 SECOND QUARTER KEY
FINANCIAL HIGHLIGHTS
- Revenues of $2.28 billion compared
to $2.24 billion in the prior year
- Reported Total Segment EBITDA of
$328 million compared to $327 million in the prior year
- Adjusted EPS were $0.26 compared to
$0.31 in the prior year – Reported EPS were $0.24 compared to $0.26
in the prior year
News Corporation (“News Corp” or the “Company”)
(NASDAQ:NWS)(NASDAQ:NWSA)(ASX:NWS)(ASX:NWSLV) today reported
financial results for the three months ended December 31, 2014.
Commenting on the results, Chief Executive Robert Thomson
said:
“The development of the new News Corp continued apace in the
second quarter as we began the transformation of the just acquired
realtor.com®, which has certainly exceeded our expectations in
traffic growth in recent weeks. We were clearly buffeted by
currency headwinds, but the strength of our brands, the breadth of
our reach, the intensifying focus on cost discipline and the power
of our portfolio meant that we saw continued growth in revenue and
increasing upside in our long-term prospects. Our digital
personality has evolved quickly, with realtor.com® having given us
a new and influential platform, digital subscribers on the rise at
our news mastheads, robust growth at REA, and healthy e-book sales
at HarperCollins. The vision we outlined for the company is
becoming a reality, and while we have much work ahead, the
foundations we have laid over the past 18 months put us in a strong
position for enduring success and increased shareholder value.”
SECOND QUARTER RESULTS
The Company reported fiscal 2015 second quarter total revenues
of $2.28 billion, a 2% increase as compared to prior year second
quarter revenues of $2.24 billion. The majority of the revenue
increase reflects strength in the Book Publishing and Digital Real
Estate Services segments, partially offset by lower advertising
revenues at the News and Information Services segment and negative
foreign currency fluctuations. Adjusted revenues (as defined in
Note 1) were flat compared to the prior year.
The Company reported second quarter Total Segment EBITDA of $328
million compared to $327 million in the prior year. These results
include $13 million and $19 million in fees and costs – net of
indemnification – related to the U.K. Newspaper Matters (as defined
below) in the three months ended December 31, 2014 and 2013,
respectively, as well as $16 million of one-time transaction costs
in the second quarter of fiscal 2015 related to the acquisition of
Move, Inc. (“Move”). Strong revenue performances in the Book
Publishing and Digital Real Estate Services, combined with lower
expenses related to the capitalization of Amplify Learning’s
software development costs, were offset by declines at the News and
Information Services segment and negative foreign currency
fluctuations. Adjusted Total Segment EBITDA (as defined in Note 1)
increased 4% compared to the prior year.
Net income available to News Corporation stockholders was $142
million as compared to $150 million in the prior year, primarily
due to a higher effective tax rate and lower interest income.
Adjusted net income available to News Corporation stockholders (as
defined in Note 3) was $154 million compared to $179 million in the
prior year. Impairment and restructuring charges were $17 million
and $36 million in the three months ended December 31, 2014 and
2013, respectively.
Net income available to News Corporation stockholders per share
was $0.24 as compared to $0.26 in the prior year. Adjusted EPS (as
defined in Note 3) were $0.26 compared to $0.31 in the prior
year.
Free cash flow available to News Corporation improved by $58
million in the six months ended December 31, 2014 to $275
million.
SEGMENT REVIEW
For the three months ended For the six months
ended December 31, December 31, 2014 2013 % Change
2014 2013 % Change (in millions) (in millions)
Revenues: News and Information Services $ 1,523 $ 1,612 (6 )
% $ 2,974 $ 3,107 (4 ) % Book Publishing 469 391 20 % 875 719 22 %
Cable Network Programming 112 110 2 % 251 242 4 % Digital Real
Estate Services 154 103 50 % 266 193 38 % Digital Education 22 22 -
% 64 49 31 % Other - - **
- - **
Total
Revenues $ 2,280 $ 2,238 2 % $ 4,430
$ 4,310 3 %
Segment EBITDA: News
and Information Services $ 216 $ 255 (15 ) % $ 321 $ 388 (17 ) %
Book Publishing 77 68 13 % 132 111 19 % Cable Network Programming
54 53 2 % 86 82 5 % Digital Real Estate Services(a) 57 55 4 % 114
99 15 % Digital Education (24 ) (44 ) 45 % (48 ) (95 ) 49 %
Other(b) (52 ) (60 ) 13 % (107 )
(117 ) 9 %
Total Segment EBITDA $ 328 $ 327
- % $ 498 $ 468 6 % ** -
Not meaningful
(a)
Digital Real Estate Services Segment EBITDA for the three
and six months ended December 31, 2014 includes transaction related
costs of $16 million and $18 million, respectively, related to the
acquisition of Move.
(b)
Other Segment EBITDA for the three and six months ended December
31, 2014 includes fees and costs, net of indemnification, related
to the U.K. Newspaper Matters of $13 million and $27 million,
respectively. Other Segment EBITDA for the three and six months
ended December 31, 2013 includes fees and costs, net of
indemnification, related to the U.K. Newspaper Matters of $19
million and $36 million, respectively.
News and Information Services
Revenues for the second quarter of fiscal 2015 decreased $89
million, or 6%, compared to the prior year. Australian newspapers
revenues declined 8% due to negative foreign currency fluctuations
and modest advertising revenue declines. Total segment advertising
revenues declined 9%, driven primarily by weaknesses in the UK
print advertising market, lower revenue from free-standing insert
products at News America Marketing and negative foreign currency
fluctuations. The declines were partially offset by higher
advertising revenues at Dow Jones, across the Wall Street Journal
franchise. Circulation and subscription revenues declined 3%, due
to the decline in professional information business revenues at Dow
Jones and lower print circulation volume, partially offset by
higher subscription pricing, cover price increases and higher
digital subscription volume. Adjusted revenues declined 3% compared
to the prior year.
Segment EBITDA decreased $39 million in the quarter, or 15%, as
compared to the prior year. Results were impacted by lower
advertising revenue at News UK and News America Marketing, $8
million of dual rent and other facility costs related to the
relocation of the Company’s London operations, and $9 million of
higher legal expenses at News America Marketing, partially offset
by an increase at News Corp Australia due to lower expenses.
Adjusted Segment EBITDA decreased 12% compared to the prior
year.
Book Publishing
Revenues in the quarter increased $78 million, or 20%, compared
to the prior year driven by the inclusion of the results of
Harlequin Enterprises Limited (“Harlequin”) and strong performances
in Children’s and General Books resulting from higher backlist
sales during the holiday season, which largely offset the lower
revenues from the Divergent series. E-book revenues improved by 14%
versus the prior year period, driven by Harlequin, and represented
17% of consumer revenues. Segment EBITDA increased $9 million, or
13%, from the prior year due to the higher revenues as discussed
above, coupled with ongoing operational efficiencies and higher
contribution to profits from e-books, offset in part by the lower
contribution from the Divergent series. Adjusted revenues were flat
and Adjusted Segment EBITDA decreased 4%, compared to the prior
year.
Cable Network Programming
In the second quarter of fiscal 2015, revenues increased $2
million, or 2%, compared to the prior year primarily due to higher
affiliate pricing and increased subscribers. Segment EBITDA in the
quarter increased $1 million, or 2%, due to higher revenues,
partially offset by negative foreign currency fluctuations and
higher programming rights and production costs. Adjusted revenues
increased 11% and Adjusted Segment EBITDA increased 9%, compared to
the prior year.
Digital Real Estate Services
Revenues in the quarter increased $51 million, or 50%, compared
to the prior year, primarily driven by the inclusion of the results
of Move, coupled with higher residential listing depth product
penetration and higher pricing at REA Group Limited (“REA Group”).
Segment EBITDA in the quarter increased $2 million, or 4%, compared
to the prior year primarily due to the increased revenues noted
above, partially offset by $16 million of one-time transaction
costs related to the acquisition of Move. Excluding the
contributions from Move, divestitures and foreign currency
fluctuations, Adjusted revenues and Adjusted Segment EBITDA
increased 26% and 38%, respectively, compared to the prior year. In
the second quarter, based on Move’s internal data, average monthly
unique users of realtor.com®’s web and mobile sites grew 26%
year-over-year to over 28 million, which was driven by more than
60% growth in mobile users; traffic accelerated in January to 37
million monthly unique users, or 33% growth year-over-year.
Digital Education
Revenues in the quarter were $22 million, which were flat
compared with the prior year, as higher subscription revenues at
Amplify Insight and higher revenues at Amplify Access were offset
by lower Amplify Insight consulting revenues and lower revenues at
Amplify Learning, related to the early grade print and hybrid
learning products. Segment EBITDA in the quarter improved $20
million, or 45%, from the prior year, primarily due to the impact
of the capitalization of Amplify Learning’s software development
costs of $14 million and lower expenses.
Other
Segment EBITDA in the quarter improved by $8 million compared to
the prior year, primarily due to lower fees and costs, net of
indemnification, related to the claims and investigations arising
out of certain conduct at The News of the World (the “U.K.
Newspaper Matters”) of approximately $6 million.
The net expense related to the U.K. Newspaper Matters was $13
million for the three months ended December 31, 2014 as compared to
$19 million for the three months ended December 31, 2013.
REVIEW OF EQUITY EARNINGS OF AFFILIATES’ RESULTS
Quarterly equity earnings from affiliates were $16 million
compared to $17 million in the prior year.
For the three months ended For the six months ended
December 31, December 31,
2014
2013 2014 2013 (in millions) (in millions)
Foxtel(a) $
15
$
17
$
40
$
30
Other equity affiliates, net 1 -
1 - Total equity earnings of affiliates $ 16
$ 17 $ 41 $ 30
(a)
The Company amortized $14 million and $30 million related to
excess cost over the Company’s proportionate share of its
investment’s underlying net assets allocated to finite-lived
intangible assets during the three and six months ended December
31, 2014, respectively, and $15 million and $31 million in the
corresponding periods of fiscal 2014, respectively. Such
amortization is reflected in Equity earnings of affiliates in the
Statements of Operations.
On a U.S. GAAP basis, Foxtel revenues, for the three months
ended December 31, 2014, decreased $59 million to $680 million from
$739 million in the prior year period due to adverse foreign
currency fluctuations. Foxtel EBITDA decreased $12 million to $198
million from $210 million due to adverse foreign currency
fluctuations. In local currency, Foxtel revenues were flat and
EBITDA grew 2%. Total closing subscribers were approximately 2.7
million as of December 31, 2014, a 5% increase compared to the
prior year period, as a result of higher subscriber sales,
partially driven by the new pricing and packaging strategy that was
implemented in November 2014, and lower churn. In the quarter,
cable and satellite churn improved to 11.8% from 12.8% in the prior
year.
Foxtel operating income for the three months ended December 31,
2014 and 2013 after depreciation and amortization of $80 million
and $85 million, respectively, was $118 million and $125 million,
respectively. Operating income decreased as a result of adverse
foreign currency fluctuations. Foxtel’s net income of $59 million
decreased from $64 million in the prior year period as a result of
adverse foreign currency fluctuations, partially offset by improved
operating performance and lower tax expense.
FREE CASH FLOW AVAILABLE TO NEWS CORPORATION
Free cash flow available to News Corporation is a non-GAAP
financial measure defined as net cash provided by operating
activities, less capital expenditures, and REA Group free cash
flow, plus cash dividends received from REA Group.
The Company considers free cash flow available to News
Corporation to provide useful information to management and
investors about the amount of cash generated by the business after
capital expenditures, which can then be used for strategic
opportunities including, among others, investing in the Company’s
business, strategic acquisitions, strengthening the Company’s
balance sheet, 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.
The following table presents a reconciliation of net cash
provided by operating activities to free cash flow available to
News Corporation:
For the six months ended
December 31,
2014 2013 (in millions) Net cash provided by
operating activities $ 492 $ 407 Less: Capital expenditures
(183 ) (147 ) 309 260 Less: REA Group free cash flow (60 )
(62 ) Plus: Cash dividends received from REA Group 26
19 Free cash flow available to News Corporation $ 275
$ 217
Free cash flow available to News Corporation in the six months
ended December 31, 2014 improved by $58 million to $275 million
from $217 million in the prior year. The increase was primarily due
to the overall improvement in Total Segment EBITDA and improved
working capital of a combined $86 million, lower restructuring
payments of $61 million, lower payments for fees and costs related
to the U.K. Newspaper Matters of $24 million, coupled with
increased dividends received from cost method investments of $21
million. The increases were partially offset by the absence of net
receipts related to the foreign tax refund of $81 million received
during the six months ended December 31, 2013 and higher tax
payments of $26 million in the second quarter of fiscal 2015,
coupled with an increase in capital expenditures, which included
$41 million related to the relocation of the Company’s operations
in London and $29 million related to Amplify’s curriculum
products.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted revenues, Adjusted Total Segment EBITDA, Total Segment
EBITDA, Adjusted net income 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. This information is provided in order to allow
investors to make meaningful comparisons of the Company’s operating
performance between periods and 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 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
4:30pm EST on February 5, 2015. 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)(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, cable network programming in
Australia, digital real estate services, digital education, 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 share
and per share amounts)
For the three months ended For the six months
ended December 31, December 31, 2014 2013 2014 2013
Revenues: Advertising $ 1,038 $ 1,080 $ 1,958 $ 2,038
Circulation and Subscription 656 661 1,339 1,340 Consumer 448 377
838 688 Other 138 120 295
244 Total Revenues 2,280 2,238 4,430 4,310
Operating expenses (1,266 ) (1,274 ) (2,580 ) (2,569 )
Selling, general and administrative (686 ) (637 ) (1,352 ) (1,273 )
Depreciation and amortization (135 ) (138 ) (266 ) (279 )
Impairment and restructuring charges (17 ) (36 ) (21 ) (63 ) Equity
earnings of affiliates 16 17 41 30 Interest, net 13 16 30 33 Other,
net 10 (231 ) 58 (672 )
Income (loss) before income tax (expense) benefit 215 (45 ) 340
(483 ) Income tax (expense) benefit (52 ) 211
(89 ) 687 Net income 163 166 251 204 Less: Net
income attributable to noncontrolling interests (20 )
(15 ) (43 ) (26 ) Net income attributable to News
Corporation stockholders $ 143 $ 151 $ 208 $ 178 Less: Adjustments
to Net income attributable to News Corporation stockholders –
Redeemable Preferred Stock Dividends (1 ) (1 )
(1 ) (1 ) Net income available to News Corporation
stockholders $ 142 $ 150 $ 207 $ 177
Weighted average shares outstanding: Basic 580 579 580 579
Diluted 583 580 581 580 Net income available to News
Corporation stockholders per share: Basic and diluted $ 0.24 $ 0.26
$ 0.36 $ 0.31
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions)
As of December 31,
As of June 30,
2014
2014
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 1,918 $
3,145
Amounts due from 21st Century Fox 55 66 Receivables, net 1,450
1,388 Other current assets 629 671
Total current assets 4,052 5,270
Non-current assets: Investments 2,466 2,609 Property, plant and
equipment, net 2,809 3,009 Intangible assets, net 2,379 2,137
Goodwill 3,547 2,782 Other non-current assets 717
682 Total assets $ 15,970 $ 16,489
LIABILITIES AND EQUITY Current liabilities: Accounts
payable $ 320 $ 276 Accrued expenses 1,136 1,188 Deferred revenue
412 369 Other current liabilities 461 431
Total current liabilities 2,329 2,264
Non-current liabilities: Retirement benefit
obligations 273 272 Deferred income taxes 274 224 Other non-current
liabilities 307 310 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
12,421 12,390 Retained earnings 444 237 Accumulated other
comprehensive income (261 ) 610 Total News
Corporation stockholders' equity 12,610 13,243 Noncontrolling
interests 157 156 Total equity
12,767 13,399 Total liabilities and equity $
15,970 $ 16,489
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
For the six months ended December 31, 2014
2013
Operating activities: Net Income $ 251 $ 204
Adjustments to reconcile net income to cash provided by
operating activities: Depreciation and amortization 266 279 Equity
earnings of affiliates (41 ) (30 ) Cash distributions received from
affiliates 68 47 Foreign tax refund payable to 21st Century Fox -
148 Foreign tax refund receivable, net of applicable taxes - (140 )
Impairment charges, net of tax - 12 Other, net (58 ) (49 ) Deferred
income taxes and taxes payable 42 85 Change in operating assets and
liabilities, net of acquisitions: Receivables and other assets (64
) (244 ) Inventories, net 66 51 Accounts payable and other
liabilities (26 ) 65 Pension and postretirement benefit plans
(12 ) (21 ) Net cash provided by operating activities
492 407
Investing activities: Capital
expenditures (183 ) (147 ) Acquisitions, net of cash acquired
(1,183 ) (26 ) Investments in equity affiliates and other (246 ) (2
) Proceeds from dispositions 114 100
Net cash used in investing activities (1,498 ) (75 )
Financing activities: Net transfers from 21st Century
Fox and affiliates - 217 Repayment of borrowings acquired in the
Move acquisition (129 ) - Dividends paid (17 ) (13 ) Other, net
(10 ) - Net cash (used in) provided by
financing activities (156 ) 204
Net
(decrease) increase in cash and cash equivalents (1,162 ) 536
Cash and cash equivalents, beginning of period 3,145 2,381 Exchange
movement on opening cash balance (65 ) (9 )
Cash
and cash equivalents, end of period $ 1,918 $ 2,908
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”) 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 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 and six months ended December 31, 2014
and 2013.
Revenues Total Segment EBITDA For the three
months ended December 31, For the three months ended December 31,
2014 2013 Difference 2014 2013
Difference (in millions) (in millions)
As reported $
2,280 $ 2,238 $ 42 $
328
$ 327 $ 1 Impact of acquisitions (122 ) - (122 ) 4 - 4
Impact of divestitures (1 ) (5 ) 4 - - - Impact of
foreign currency fluctuations 72 - 72 16 - 16 Net impact of
U.K. Newspaper Matters - - - 13 19 (6 )
As
adjusted $ 2,229 $ 2,233 $ (4 ) $ 361 $
346 $ 15 Revenues Total Segment EBITDA
For the six months ended December 31, For the six months ended
December 31, 2014 2013 Difference 2014 2013
Difference (in millions) (in millions)
As
reported $ 4,430 $ 4,310 $ 120 $ 498 $ 468 $ 30 Impact
of acquisitions (182 ) - (182 ) 5 - 5 Impact of divestitures
(1 ) (42 ) 41 - (4 ) 4 Impact of foreign currency
fluctuations 32 - 32 13 - 13 Net impact of U.K. Newspaper
Matters - - - 27 36 (9 )
As adjusted $
4,279 $ 4,268 $ 11 $ 543 $ 500 $
43
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and six months ended December 31, 2014 and 2013 are as
follows:
For the three months ended December 31, 2014 2013
% Change (in millions)
Adjusted Revenues: News
and Information Services $ 1,564 $ 1,608 (3 ) % Book Publishing 392
391 - % Cable Network Programming 122 110 11 % Digital Real Estate
Services 129 102 26 % Digital Education 22 22 - % Other -
- - %
Total Adjusted Revenues $
2,229 $ 2,233 - %
Adjusted Segment
EBITDA: News and Information Services $ 225 $ 255 (12 ) % Book
Publishing 65 68 (4 ) % Cable Network Programming 58 53 9 % Digital
Real Estate Services 76 55 38 % Digital Education (24 ) (44 ) 45 %
Other (39 ) (41 ) 5 %
Total Adjusted
Segment EBITDA $ 361 $ 346 4 %
For the six months ended December 31, 2014 2013 % Change (in
millions)
Adjusted Revenues: News and Information
Services $ 2,981 $ 3,070 (3 ) % Book Publishing 735 715 3 % Cable
Network Programming 259 242 7 % Digital Real Estate Services 240
192 25 % Digital Education 64 49 31 % Other -
- - %
Total Adjusted Revenues $ 4,279 $
4,268 - %
Adjusted Segment EBITDA: News
and Information Services $ 329 $ 384 (14 ) % Book Publishing 118
111 6 % Cable Network Programming 90 82 10 % Digital Real Estate
Services 134 99 35 % Digital Education (48 ) (95 ) 49 % Other
(80 ) (81 ) 1 %
Total Adjusted Segment
EBITDA $ 543 $ 500 9 %
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 December 31, 2014 and
2013.
For the three months ended December 31, 2014
Impact of
Net Impact
Foreign
of U.K.
As
Impact of
Impact of
Currency
Newspaper
As
Reported
Acquisitions
Divestitures
Fluctuations
Matters
Adjusted
(in millions)
Revenues: News and Information Services
$ 1,523 $ (6 ) $ - $
47
$
-
$ 1,564 Book Publishing 469 (82 ) - 5 - 392 Cable Network
Programming 112 - - 10 - 122 Digital Real Estate Services 154 (34 )
(1 ) 10 - 129 Digital Education 22 - - - - 22 Other -
- - - -
-
Total Revenues $ 2,280 $ (122 ) $ (1
) $ 72 $ - $ 2,229
Segment
EBITDA: News and Information Services $ 216 $ 3 $ - $ 6 $ - $
225 Book Publishing 77 (12 ) - - - 65 Cable Network Programming 54
- - 4 - 58 Digital Real Estate Services 57 13 - 6 - 76 Digital
Education (24 ) - - - - (24 ) Other (52 ) -
- - 13 (39 )
Total Segment EBITDA $ 328 $ 4 $ - $ 16
$ 13 $ 361 For the three months
ended December 31, 2013
Impact of
Net Impact
Foreign
of U.K.
As
Impact of
Impact of
Currency
Newspaper
As
Reported
Acquisitions
Divestitures
Fluctuations
Matters
Adjusted
(in millions)
Revenues: News and Information Services
$ 1,612 $ - $ (4 ) $ - $ - $ 1,608 Book Publishing 391 - - - - 391
Cable Network Programming 110 - - - - 110 Digital Real Estate
Services 103 - (1 ) - - 102 Digital Education 22 - - - - 22 Other
- - - -
- -
Total Revenues $ 2,238
$ - $ (5 ) $ - $ - $ 2,233
Segment EBITDA: News and Information Services $ 255 $
- $ - $ - $ - $ 255 Book Publishing 68 - - - - 68 Cable Network
Programming 53 - - - - 53 Digital Real Estate Services 55 - - - -
55 Digital Education (44 ) - - - - (44 ) Other (60 )
- - - 19
(41 )
Total Segment EBITDA $ 327 $ - $ -
$ - $ 19 $ 346
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the six months ended December 31, 2014 and 2013.
For the six months ended December 31, 2014
Impact of
Net Impact
Foreign
of U.K.
As
Impact of
Impact of
Currency
Newspaper
As
Reported
Acquisitions
Divestitures
Fluctuations
Matters
Adjusted
(in millions)
Revenues: News and Information Services
$ 2,974 $ (8 ) $ - $
15
$
-
$ 2,981 Book Publishing 875 (140 ) - - - 735 Cable Network
Programming 251 - - 8 - 259 Digital Real Estate Services 266 (34 )
(1 ) 9 - 240 Digital Education 64 - - - - 64 Other -
- - - -
-
Total Revenues $ 4,430 $ (182 ) $ (1
) $ 32 $ - $ 4,279
Segment
EBITDA: News and Information Services $ 321 $ 4 $ - $ 4 $ - $
329 Book Publishing 132 (14 ) - - - 118 Cable Network Programming
86 - - 4 - 90 Digital Real Estate Services 114 15 - 5 - 134 Digital
Education (48 ) - - - - (48 ) Other (107 ) -
- - 27 (80 )
Total Segment EBITDA $ 498 $ 5 $ - $ 13
$ 27 $ 543 For the six months
ended December 31, 2013
Impact of
Net Impact
Foreign
of U.K.
As
Impact of
Impact of
Currency
Newspaper
As
Reported
Acquisitions
Divestitures
Fluctuations
Matters
Adjusted
(in millions)
Revenues: News and Information Services
$ 3,107 $ - $ (37 ) $ - $ - $ 3,070 Book Publishing 719 - (4 ) - -
715 Cable Network Programming 242 - - - - 242 Digital Real Estate
Services 193 - (1 ) - - 192 Digital Education 49 - - - - 49 Other
- - - -
- -
Total Revenues $ 4,310
$ - $ (42 ) $ - $ - $ 4,268
Segment EBITDA: News and Information Services $ 388 $
- $ (4 ) $ - $ - $ 384 Book Publishing 111 - - - - 111 Cable
Network Programming 82 - - - - 82 Digital Real Estate Services 99 -
- - - 99 Digital Education (95 ) - - - - (95 ) Other (117 )
- - - 36
(81 )
Total Segment EBITDA $ 468 $ - $
(4 ) $ - $ 36 $ 500
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, impairment and
restructuring charges, equity 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
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 following table reconciles
Total Segment EBITDA to net income.
For the three months ended December 31, 2014 2013
Change % Change
(in millions)
Revenues $ 2,280 $ 2,238 $ 42 2 % Operating expenses
(1,266 ) (1,274 ) 8 1 % Selling, general and administrative
(686 ) (637 ) (49 ) (8 ) %
Total Segment
EBITDA 328 327 1 - % Depreciation and amortization (135 ) (138
) 3 2 % Impairment and restructuring charges (17 ) (36 ) 19 53 %
Equity earnings of affiliates 16 17 (1 ) (6 ) % Interest, net 13 16
(3 ) (19 ) % Other, net 10 (231 ) 241
** Income (loss) before income tax (expense)
benefit 215 (45 ) 260 ** Income tax (expense) benefit (52 )
211 (263 ) **
Net income
$ 163 $ 166 $ (3 ) (2 ) % ** - Not meaningful
For the six months ended December 31, 2014 2013 Change %
Change
(in millions)
Revenues $ 4,430 $ 4,310 $ 120 3 % Operating expenses
(2,580 ) (2,569 ) (11 ) - % Selling, general and administrative
(1,352 ) (1,273 ) (79 ) (6 ) %
Total
Segment EBITDA 498 468 30 6 % Depreciation and amortization
(266 ) (279 ) 13 5 % Impairment and restructuring charges (21 ) (63
) 42 67 % Equity earnings of affiliates 41 30 11 37 % Interest, net
30 33 (3 ) (9 ) % Other, net 58 (672 )
730 ** Income (loss) before income tax
(expense) benefit 340 (483 ) 823 ** Income tax (expense) benefit
(89 ) 687 (776 ) **
Net income $ 251 $ 204 $ 47 23 %
** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME AVAILABLE TO NEWS CORPORATION
STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income available to News Corporation
stockholders and diluted earnings per share (“EPS”) excluding
expenses related to U.K. Newspaper Matters, Impairment and
restructuring charges, and “Other, net”, net of tax (“adjusted net
income available to News Corporation stockholders and adjusted
EPS”) 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 income
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 income 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 income available to
News Corporation stockholders and reported diluted EPS to adjusted
net income available to News Corporation stockholders and adjusted
EPS for the three and six months ended December 31, 2014 and
2013.
For the three months ended For the three months ended
December 31, 2014 December 31, 2013
Net income
Net income
available to
EPS
available to
EPS
stockholders
stockholders
(in millions, except per share data)
As reported $
142 $ 0.24 $ 150 $ 0.26 U.K. Newspaper Matters 13 0.02 19
0.03 Impairment and restructuring charges 17 0.03 36 0.06
Other, net (a) (10 ) (0.02 ) 231 0.40 Tax impact on
items above(b) (11 ) (0.02 ) (257 ) (0.44 ) Impact of
noncontrolling interest on items included in Other, net above 3
0.01 - -
As adjusted $ 154 $ 0.26 $ 179 $ 0.31
(a)
Other, net for the three months ended December 31, 2013
primarily includes a foreign tax refund payable to 21st Century
Fox.
(b)
Tax impact on items above for the three months ended December 31,
2013 primarily includes a foreign tax refund receivable of $238
million which has an offsetting payable to 21st Century Fox
included within Other, net above. For the six months
ended For the six months ended December 31, 2014 December
31, 2013
Net income
Net income
available to
EPS
available to
EPS
stockholders
stockholders
(in millions, except per share data)
As reported $
207 $ 0.36 $ 177 $ 0.31 U.K. Newspaper Matters 27 0.04 36
0.06 Impairment and restructuring charges 21 0.03 63 0.11
Other, net (a) (58 ) (0.10 ) 672 1.16 Tax impact on
items above(b) (2 ) - (752 ) (1.30 ) Impact of
noncontrolling interest on items included in Other, net above 11
0.02 - -
As adjusted $ 206 $ 0.35 $ 196 $ 0.34
(a)
Other, net for the six months ended December 31, 2014
primarily includes a gain on the sale of marketable securities and
dividends received from cost method investments. Other, net for the
six months ended December 31, 2013 primarily includes a foreign tax
refund paid or payable to 21st Century Fox, offset by a gain on a
third party pension contribution.
(b)
Tax impact on items above for the six months ended December 31,
2013 primarily includes a foreign tax refund of $721 million which
has an offsetting payable to 21st Century Fox included within
Other, net above.
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorJim Kennedy, 212-416-4064Corporate
Communicationsjkennedy@newscorp.com
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