Interim Results - Fox Ent Grp
February 13 2003 - 2:02AM
UK Regulatory
RNS Number:4318H
News Corporation Ld
12 February 2003
FOX REPORTS SECOND QUARTER EBITDA GROWTH OF 69% TO $577 MILLION
REVENUES INCREASE 15% TO $3.2 BILLION
QUARTER HIGHLIGHTS
* Television Stations EBITDA up 24% on higher advertising revenues.
* Strong ratings and advertising growth at Fox News Channel and FX as
well as higher affiliate rates at the Regional Sports Networks drive
EBITDA up 81% at Cable Network Programming.
* Filmed Entertainment EBITDA more than doubles primarily on success of
Ice Age worldwide home entertainment sales.
* Fox Entertainment Group, Inc. issues an additional 50 million shares
for net cash proceeds of approximately $1.2 billion.
NEW YORK, NY, February 12, 2003 - The Fox Entertainment Group (NYSE: FOX) today
reported second quarter consolidated revenues of $3.2 billion, a 15% increase
over the $2.7 billion in prior year and operating profit before depreciation and
amortization (EBITDA) of $577 million, a 69% increase over the $342 million
(before provision for sports contracts) reported a year ago. The year-on-year
growth was driven by substantial increases in the Filmed Entertainment,
Television Stations and Cable Network Programming segments.
Consolidated EBITDA(1) 3 Months Ended 6 Months Ended
December 31, December 31,
2002 2001 2002 2001
US $ Millions US $ Millions
Filmed Entertainment $ 274 $ 135 $ 392 $ 272
Television Stations 320 259 544 388
Television Broadcast Network (149) (125) (152) (163)
Cable Network Programming 132 73 260 116
$ 577 $ 342 $ 1,044 $ 613
Provision for Sports Contracts - (909) - (909)
Consolidated EBITDA $ 577 $ (567) $ 1,044 $ (296)
Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch
said:
"We are delighted with the 69 percent EBITDA growth we achieved in the second
quarter. Such robust earnings growth is a reflection of the strong operating
leverage and momentum we have at most of our businesses. Double-digit revenue
gains at our cable and television station operations have translated into even
stronger double-digit operating income growth as tight cost management resulted
in improved operating margins. And our film business continues to thrive from
its string of successful theatrical releases and from strong growth in the home
entertainment market. Although we were disappointed with the performance of the
FOX network in the second quarter, the worst is clearly behind it. Indeed, the
unprecedented ratings surge we have delivered following the quarter positions us
to end this television season equal to or better than last year's numbers - a
remarkable turnaround. Our second quarter results underscore the popularity of
our media products and our continuing focus on cost-containment and a healthy
balance sheet."
During the first quarter of fiscal 2002, the Company adopted Statement of
Financial Accounting Standard ("SFAS") 142, "Goodwill and Other Intangible
Assets" which eliminates the requirement to amortize both goodwill and
identifiable intangible assets that have indefinite useful lives. It does
require that goodwill and identifiable intangibles with indefinite lives be
tested for impairment annually. As a result of SFAS 142, amortization expense
has been reduced significantly as the Company no longer amortizes goodwill and
identifiable intangibles with indefinite lives. Amortization expense for the
second quarter of fiscal 2003 is zero as compared with $57 million in the second
quarter a year ago.
Losses in equity of affiliates for the quarter of $12 million improved $46
million versus the same period a year ago principally due to the absence of
losses associated with Fox Family Worldwide which was sold in October 2001 and
an increase in subscribers at the National Geographic Channel partially offset
by a player compensation charge at the Fox Sports Cable Networks associates.
Also contributing to the improvement was lower amortization expense due to the
adoption of SFAS 142.
Second quarter net income decreased to $283 million ($0.32 per share) as
compared to net income of $455 million ($0.54 per share) in the prior year,
which included gains from the sale of the Company's interest in Fox Family
Worldwide and its interest in Outdoor Life partially offset by a write-down of
the Company's national sports contracts. Excluding the effect of these items
and assuming the Company adopted SFAS 142 at the beginning of fiscal 2002,
income before the cumulative effect of accounting change for the second quarter
a year ago would have been $84 million ($0.10 per share).
FILMED ENTERTAINMENT
The Filmed Entertainment segment reported second quarter EBITDA of $274 million,
a $139 million improvement over the $135 million reported in the same period a
year ago. This substantial increase was primarily driven by record-breaking
worldwide home entertainment sales led by the performance of Ice Age as well as
contributions from Star Wars Episode II: Attack of the Clones, Behind Enemy
Lines, Like Mike and catalog titles. These contributions were partially offset
by the impact of marketing costs for several successful second and third quarter
theatrical releases. Prior-year results were primarily driven by the worldwide
home entertainment performance of Planet of the Apes and Dr. Dolittle 2.
Twentieth Century Fox Television (TCFTV) contributions increased versus the
second quarter a year ago primarily reflecting higher syndication profits from
King of the Hill and The X-Files as well as increased network license fees for
The Practice. Additionally, continued momentum in home entertainment sales,
most notably from The Simpsons and 24, contributed to the year-on-year growth.
During the quarter, several of TCFTV's new shows, including Cedric the
Entertainer on FOX and Still Standing on CBS, sustained solid ratings, while a
number of returning shows, including The Simpsons, 24, King of the Hill and
Malcolm in the Middle, continued to perform extremely well, ranking number one
in their time slots among adults 18-49.
TELEVISION STATIONS
At the Fox Television Stations (FTS) second quarter EBITDA grew $61 million over
a year ago largely as a result of stronger advertising revenue. The advertising
market was buoyed by increased spending particularly among the automotive, fast
food, movie and telecommunication categories, while also benefiting from strong
political advertising. Additionally, current-year earnings growth continued to
be fueled by margin expansion primarily from cost reductions achieved through
FTS' integration of its duopoly stations.
TELEVISION BROADCAST NETWORK
At the Fox Broadcasting Company, second quarter EBITDA losses increased compared
to a year ago. Higher advertising revenues were more than offset by a rise in
primetime programming costs reflecting the cancellation of several new series as
well as increased promotional spending for the current season. Following the
end of the quarter, the network premiered several shows that are handily winning
their time slots among all key demographics, including American Idol 2, the
highest rated show on network television among Adults 18-49 and Joe Millionaire,
the number one new show of the 2002-2003 season.
CABLE NETWORK PROGRAMMING
Cable Network Programming, comprising the Fox News Channel (FNC), Fox Sports
Networks (including the Regional Sports Networks (RSNs), the FX Channel (FX) and
Speed Channel), the Los Angeles Dodgers and other cable-related businesses,
reported second quarter EBITDA of $132 million, an improvement of $59 million
over last year's results. This success reflects strong growth across all of the
Company's primary cable television channels.
The Fox News Channel more than tripled its EBITDA versus the second quarter a
year ago due to strong ad sales growth in conjunction with relatively flat
operating costs. FNC finished the calendar year with its fourth consecutive
quarter as the most watched cable news network - fiscal second quarter
viewership was 29% greater than that of its nearest competitor on a 24-hour
basis and 33% higher in primetime.
Fox Sports Networks' EBITDA improved 56% during the quarter, driven primarily by
double-digit revenue growth at both the RSNs and FX. The revenue increase at the
RSNs was largely due to higher affiliate rates and an increase in the number of
DTH subscribers. The growth at FX was the result of increases in both
advertising and affiliate revenues that were fueled by strong ratings gains,
higher pricing and a 6% increase in subscribers over the past year. Subsequent
to quarter-end, FX debuted the second season of The Shield, which premiered with
the highest second season ratings in basic cable history, in addition to winning
Golden Globes for Best Drama Series and Best Actor in a Drama Series.
(1) Operating Income Before Depreciation and Amortization is defined as
operating income (loss) plus depreciation and amortization and amortization of
cable distribution investments. Depreciation and amortization expense includes
the amortization of acquired intangible assets. Amortization of cable
distribution investments represents a reduction against revenues over the term
of a carriage arrangement and as such it is excluded from Operating Income
Before Depreciation and Amortization.
To receive a copy of this press release through the Internet, access Fox's
corporate Web site located at http://www.fox.com
Audio from Fox's meeting with analysts on the second quarter results can be
heard live on the Internet at 4:45 p.m. Eastern Standard Time today. To listen
to the call, visit http://www.fox.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.
CONTACTS:
Reed Nolte, Investor Relations Andrew Butcher, Press Inquiries
212-852-7092 212-852-7070
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for per share amounts)
3 Months Ended 6 Months Ended
December 31, December 31,
2002 2001 2002 2001
(Unaudited) (Unaudited)
Revenues $ 3,150 $ 2,741 $ 5,494 $ 4,806
Expenses
Operating 2,296 2,123 3,882 3,638
Selling, general and administrative 309 304 631 609
Depreciation and amortization 45 100 92 203
Provision for sports contracts - 909 - 909
Operating income (loss) 500 (695) 889 (553)
Other income (expense):
Interest expense, net (49) (66) (95) (138)
Equity earnings (losses) of affiliates (12) (58) (10) (109)
Minority interest in subsidiaries (7) (11) (16) (22)
Other items, net - 1,585 - 1,585
Income before provision for income taxes and 432 755 768 763
cumulative effect of accounting change
Provision for income tax expense on (149) (300) (271) (304)
stand-alone basis
Income before cumulative effect of accounting 283 455 497 459
change, net of tax
Cumulative effect of accounting change, net - - - (26)
Net income $ 283 $ 455 $ 497 $ 433
Basic and diluted earnings per share before $ 0.32 $ 0.54 $ 0.58 $ 0.56
cumulative effect of accounting change
Basic and diluted cumulative effect of - - - (0.04)
accounting change, net of tax, per share
Basic and diluted earnings per share $ 0.32 $ 0.54 $ 0.58 $ 0.52
Basic and diluted weighted average number of 874 847 862 827
common equivalent shares outstanding
SEGMENT INFORMATION
(in millions)
3 Months Ended 6 Months Ended
December 31, December 31,
2002 2001 2002 2001
(Unaudited) (Unaudited)
Revenues
Filmed Entertainment $ 1,338 $ 1,117 $ 2,221 $ 2,056
Television Stations 593 526 1,107 922
Television Broadcast Network 749 722 1,173 1,042
Cable Network Programming 470 376 993 786
Total Revenues(1) $ 3,150 $ 2,741 $ 5,494 $ 4,806
EBITDA
Filmed Entertainment $ 274 $ 135 $ 392 $ 272
Television Stations 320 259 544 388
Television Broadcast Network (149) (125) (152) (163)
Cable Network Programming 132 73 260 116
$ 577 $ 342 $ 1,044 $ 613
Provision for Sports Contracts - (909) - (909)
Total EBITDA $ 577 $ (567) $ 1,044 $ (296)
Operating Income
Filmed Entertainment $ 260 $ 121 $ 365 $ 244
Television Stations 305 206 514 284
Television Broadcast Network (154) (130) (162) (173)
Cable Network Programming 89 17 172 1
$ 500 $ 214 $ 889 $ 356
Provision for Sports Contracts - (909) - (909)
Total Operating Income $ 500 $ (695) $ 889 $ (553)
(1) In January 2002, the Company adopted EITF No. 01-09 "Accounting for the
Consideration Given by a Vendor to a Customer or a Reseller of the Vendors'
Products" and as a result has reclassified the amortization of cable
distribution investments against revenue as detailed in the following table:
3 Months Ended 6 Months Ended
December 31, December 31,
2002 2001 2002 2001
US $ Millions US $ Millions
Gross Revenues $ 3,182 $ 2,769 $ 5,557 $ 4,860
Amortization of cable distribution investments (32) (28) (63) (54)
Revenues $ 3,150 $ 2,741 $ 5,494 $ 4,806
This information is provided by RNS
The company news service from the London Stock Exchange
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