RNS Number:0290L
News Corporation Ld
13 May 2003
FoX REPORTS THIRD QUARTER EBITDA Growth of 39% to $542 Million
Operating income IncreaseS $202 million to $464 million
Revenues Increase 9% to $2.7 Billion
QUARTER HIGHLIGHTS
* EBITDA improves $82 million at the Television Broadcast Network as
primetime ratings growth in the quarter of 32% drives advertising revenues.
* Television Stations EBITDA up 3% on higher advertising revenues as a
result of the prime-time ratings success at the broadcast network.
* Strong ratings and advertising growth at Fox News Channel and FX as
well as higher affiliate revenues at the Regional Sports Networks lift EBITDA
28% at Cable Network Programming despite the cost of covering the war.
* Robust home entertainment sales of film and television titles and the
continued success of theatrical releases result in EBITDA growth of 22% at
Filmed Entertainment.
NEW YORK, NY, May 13, 2003 - The Fox Entertainment Group (NYSE: FOX) today
reported third quarter consolidated revenues of $2.7 billion, a 9% increase over
the $2.5 billion in prior year and EBITDA(1) of $542 million, a 39% increase
over the $391 million reported a year ago. The year-on-year growth was driven
primarily by substantial increases in the Filmed Entertainment, Television
Broadcast Network and Cable Network Programming segments.
Consolidated EBITDA(1) 3 Months Ended 9 Months Ended
March 31, March 31,
2003 2002 2003 2002
US $ Millions US $ Millions
Filmed Entertainment $ 220 $ 180 $ 612 $ 452
Television Stations 179 173 723 561
Television Broadcast Network 37 (45) (115) (208)
Cable Network Programming 106 83 366 199
Provision for Sports Contracts - - - (909)
Consolidated EBITDA $ 542 $ 391 $ 1,586 $ 95
Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch
said:
"We are extremely pleased with our third quarter results, which continued the
financial and operating momentum we achieved throughout the first half of the
fiscal year. Revenue and EBITDA growth of 9% and 39%, respectively, despite the
economic impact of the war in Iraq, speaks to the underlying strength of our
core assets. Our cable networks, led by the ratings dominance of Fox News, and
our television businesses, led by the impressive ratings turnaround at the
broadcast network, each delivered double-digit operating income growth and
greatly strengthened their competitive positions. And our film business,
including our home entertainment products, continued its success.
"The financial and operational momentum of our businesses has provided us with
the opportunity to build on our distribution strengths. With our recently
announced agreement to purchase a 34% interest in Hughes Electronics, we have
the opportunity to elevate a leading multi-channel television platform to more
profitable levels while at the same time enhancing the value of our existing
assets. The continued success of our core businesses, complemented by the
rapid development of acquired and emerging platforms, will allow us to prosper
in both the near and long-term."
During the first quarter of fiscal 2003, 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
third quarter of fiscal 2003 is $1 million as compared with $56 million in the
third quarter a year ago.
Equity in losses of affiliates for the quarter of $8 million improved $18
million versus the same period a year ago principally due to cost savings at the
Metro Channels, improved results at the Rainbow Regional Sports Networks and an
increase in subscribers at the National Geographic Channel. Also contributing
to the improvement was lower amortization expense due to the adoption of SFAS
142.
Third quarter net income increased to $276 million ($0.31 per share) as compared
to net income of $108 million ($0.13 per share) in the prior year primarily due
to higher consolidated EBITDA. Weighted average shares outstanding increased to
900 million shares reflecting the issuance of 50 million shares in a public
offering during November 2002.
FILMED ENTERTAINMENT
The Filmed Entertainment segment reported third quarter EBITDA of $220 million
versus $180 million reported in the same period a year ago. The 22% increase
was driven by the continued worldwide home entertainment performance of Ice Age
as well as several strong domestic home entertainment performances, including
Brown Sugar, One Hour Photo, Swimfan and The Banger Sisters. These
contributions were partially offset by the marketing costs for several
successful third and fourth quarter theatrical releases including Just Married
and Daredevil, both of which opened at number one at the box office, and X2:
X-Men United, which brought in a record-breaking $155 million worldwide in its
first weekend and has grossed over $271 million worldwide since its release.
Prior-year results included the worldwide home entertainment performance of
Moulin Rouge and the domestic home entertainment release of Kiss of the Dragon.
Twentieth Century Fox Television (TCFTV) contributions increased compared to the
third quarter a year ago, primarily reflecting higher syndication profits from
The X-Files and Dharma & Greg. Additionally, continued momentum in home
entertainment sales, most notably from The Simpsons and Buffy the Vampire
Slayer, contributed to the year-on-year growth. During this broadcast season,
several of TCFTV's shows have achieved solid ratings, including 24, The
Simpsons, King of the Hill, Bernie Mac and Reba, which have achieved
double-digit growth among Adults 18-49.
TELEVISION STATIONS
Fox Television Stations (FTS) third quarter EBITDA grew 3% over the prior year
despite the current quarter impact of pre-emptions for war coverage and the
benefit a year ago from the Fox Broadcasting Company's (FBC) broadcast of Super
Bowl XXXVI. Current-year results were driven by stronger advertising revenue
primarily as a result of FBC's primetime success during the quarter and FTS'
ratings growth in local news programming. The revenue growth was partially
offset by higher promotional costs during the February sweeps.
TELEVISION BROADCAST NETWORK
At the Fox Broadcasting Company, third quarter EBITDA improved by $82 million
compared to a year ago, largely the result of substantial ratings growth in
primetime. Additionally, the prior year's results included losses related to
the broadcast of Super Bowl XXXVI. The 32% ratings improvement in the quarter
compared to a year ago was fueled by the success of American Idol 2, Joe
Millionaire and 24 and included FBC's first-ever sweeps victory among Adults
18-49. This revenue growth from these higher ratings as well as stronger
pricing was slightly offset by higher promotional costs for mid-season
replacements.
CABLE NETWORK PROGRAMMING
Cable Network Programming, comprising the Fox News Channel, Fox Cable Networks
(including the Regional Sports Networks (RSNs), the FX Channel (FX) and SPEED
Channel), the Los Angeles Dodgers and other cable-related businesses, reported
third quarter EBITDA of $106 million, an improvement of $23 million or 28% over
last year's results. This success reflects strong revenue growth across all of
the Company's primary cable television channels, mitigated by the impact of war
coverage at Fox News.
At the Fox News Channel (FNC), double-digit revenue growth, primarily from
increased ad sales, more than offset significant pre-emptions and higher costs
associated with covering the war. FNC finished the quarter as the highest-rated
basic cable channel in primetime, making it the first news channel to achieve
this distinction since 1991. Viewership during the quarter increased 80% in
primetime and 92% on a 24-hour basis compared to a year ago as FNC achieved the
highest 24-hour ratings growth among all cable news channels.
The Fox Cable Networks' achieved double-digit revenue growth at both the RSNs
and FX. The revenue increase at the RSNs was largely due to an increase in the
number of DTH subscribers and higher advertising sales versus a year ago. The
growth at FX was the result of increases in both advertising and affiliate
revenues - fueled by ratings gains, higher advertising pricing and a 6% increase
in subscribers over the past year. During the quarter, FX debuted the second
season of The Shield, which increased its ratings in Adults 18-49 and Adults
18-34 versus its first season, in addition to winning Golden Globes for Best
Drama Series and Best Actor in a Drama Series.
OTHER
On April 9, the Company announced a definitive agreement to acquire 34% of
Hughes Electronics from News Corporation in exchange for $4.5 billion in
promissory notes and approximately 74.2 million shares. News Corporation's
acquisition of the shares of Hughes Electronics is subject to a number of
conditions, including approval by General Motors shareholders, a favorable
ruling from the Internal Revenue Service and regulatory clearance. This
transaction will increase News Corporation's ownership interest in the Company
from 80.6% to approximately 82%.
(1) EBITDA 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 EBITDA.
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 conference call with analysts on the third quarter results can
be heard live on the Internet at 9:00 a.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 9 Months Ended
March 31, March 31,
2003 2002 2003 2002
(Unaudited) (Unaudited)
Revenues $ 2,707 $ 2,488 $ 8,201 $ 7,294
Expenses
Operating 1,882 1,815 5,764 5,453
Selling, general and administrative 314 312 945 921
Depreciation and amortization 47 99 139 302
Other operating charge - - - 909
Operating income (loss) 464 262 1,353 (291)
Other income (expense):
Interest expense, net (25) (54) (120) (192)
Equity losses of affiliates (8) (26) (18) (135)
Minority interest in subsidiaries (5) (7) (21) (29)
Other, net - - - 1,585
Income before provision for income taxes and 426 175 1,194 938
cumulative effect of accounting change
Provision for income tax expense on stand-alone (150) (67) (421) (371)
basis
Income before cumulative effect of accounting 276 108 773 567
change, net of tax
Cumulative effect of accounting change, net - - - (26)
Net income $ 276 $ 108 $ 773 $ 541
Basic and diluted earnings per share before $ 0.31 $ 0.13 $ 0.88 $ 0.68
cumulative effect of accounting change
Basic and diluted cumulative effect of - - - (0.03)
accounting change, net of tax, per share
Basic and diluted earnings per share $ 0.31 $ 0.13 $ 0.88 $ 0.65
Basic and diluted weighted average number of 900 850 875 835
common equivalent shares outstanding
SEGMENT INFORMATION
(in millions)
3 Months Ended 9 Months Ended
March 31, March 31,
2003 2002 2003 2002
(Unaudited) (Unaudited)
Revenues
Filmed Entertainment $ 1,171 $ 1,065 $ 3,392 $ 3,121
Television Stations 463 435 1,570 1,357
Television Broadcast Network 558 553 1,731 1,595
Cable Network Programming 515 435 1,508 1,221
Total Revenues(1) $ 2,707 $ 2,488 $ 8,201 $ 7,294
EBITDA
Filmed Entertainment $ 220 $ 180 $ 612 $ 452
Television Stations 179 173 723 561
Television Broadcast Network 37 (45) (115) (208)
Cable Network Programming 106 83 366 199
Provision for Sports Contracts - - - (909)
Total EBITDA $ 542 $ 391 $ 1,586 $ 95
Operating Income
Filmed Entertainment $ 205 $ 164 $ 570 $ 408
Television Stations 162 125 676 409
Television Broadcast Network 33 (50) (129) (223)
Cable Network Programming 64 23 236 24
Provision for Sports Contracts - - - (909)
Total Operating Income $ 464 $ 262 $ 1,353 $ (291)
(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 9 Months Ended
March 31, March 31,
2003 2002 2003 2002
US $ Millions US $ Millions
Gross revenues $ 2,738 $ 2,518 $ 8,295 $ 7,378
Amortization of cable distribution investments (31) (30) (94) (84)
Revenues $ 2,707 $ 2,488 $ 8,201 $ 7,294
SUPPLEMENTAL FINANCIAL DATA
EBITDA, defined as operating income (loss) plus depreciation and amortization
and the amortization of cable distribution investments, eliminates the variable
effect across all business segments of non-cash depreciation and amortization.
Since, EBITDA is a non-GAAP measure it should be considered in addition to, not
as a substitute for, operating income (loss), net income (loss), cash flow and
other measures of financial performance reported in accordance with GAAP.
EBITDA does not reflect cash available to fund requirements, and the items
excluded from EBITDA, such as depreciation and amortization, are significant
components in assessing the Company's financial performance. Management
believes that EBITDA is an appropriate measure for evaluating the operating
performance of the consolidated Company and its business segments. EBITDA
provides management, investors and equity analysts a measure to analyze
operating performance and enterprise value against historical and competitors'
data.
The following table reconciles EBITDA to the presentation of operating income as
required under US-GAAP.
3 Months Ended 9 Months Ended
March 31, March 31,
2003 2002 2003 2002
US $ Millions US $ Millions
Operating income (loss) $ 464 $ 262 $ 1,353 $ (291)
Depreciation and amortization 47 99 139 302
Amortization of cable distribution 31 30 94 84
investments
EBITDA $ 542 $ 391 $ 1,586 $ 95
For the Three Months Ended March 31, 2003
(US $ Millions)
Operating Depreciation Amortization of EBITDA
Income and cable
(loss) Amortization distribution
investments
Filmed Entertainment $ 205 $ 15 $ - $ 220
Television Stations 162 17 - 179
Television Broadcast Network 33 4 - 37
Cable Network Programming 64 11 31 106
Consolidated Total $ 464 $ 47 $ 31 $ 542
SUPPLEMENTAL FINANCIAL DATA (continued)
For the Three Months Ended March 31, 2002
(US $ Millions)
Operating Depreciation Amortization of EBITDA
Income and cable
(loss) Amortization distribution
investments
Filmed Entertainment $ 164 $ 16 $ - $ 180
Television Stations 125 48 - 173
Television Broadcast Network (50) 5 - (45)
Cable Network Programming 23 30 30 83
Consolidated Total $ 262 $ 99 $ 30 $ 391
For the Nine Months Ended March 31, 2003
(US $ Millions)
Operating Depreciation Amortization of EBITDA
Income and cable
(loss) Amortization distribution
investments
Filmed Entertainment $ 570 $ 42 $ - $ 612
Television Stations 676 47 - 723
Television Broadcast Network (129) 14 - (115)
Cable Network Programming 236 36 94 366
Consolidated Total $ 1,353 $ 139 $ 94 $ 1,586
For the Nine Months Ended March 31, 2002
(US $ Millions)
Operating Depreciation Amortization of EBITDA
Income and cable
(loss) Amortization distribution
investments
Filmed Entertainment $ 408 $ 44 $ - $ 452
Television Stations 409 152 - 561
Television Broadcast Network (223) 15 - (208)
Cable Network Programming 24 91 84 199
Provision for Sports (909) - - (909)
Contracts
Consolidated Total $ (291) $ 302 $ 84 $ 95
This information is provided by RNS
The company news service from the London Stock Exchange
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