RNS Number:6333O
News Corporation Ld
13 August 2003
FOX REPORTS FOURTH QUARTER OPERATING INCOME OF $430 MILLION, A $242 MILLION
INCREASE, ON REVENUE GROWTH OF 15%
FOURTH QUARTER OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION GROWS
59% TO $505 MILLION
RECORD FULL YEAR OPERATING INCOME OF $1.8 BILLION ON REVENUE GROWTH OF 13%.
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION GROWS TO RECORD $2.1
BILLION
QUARTER HIGHLIGHTS
* Television Broadcast Network operating income before depreciation and
amortization improves $89 million as prime-time ratings growth drives
advertising revenues.
* Operating income before depreciation and amortization at Television Stations
up 10% on higher advertising revenues from ratings growth across most
dayparts.
* Cable Network Programming operating income before depreciation and
amortization more than doubles on strong ratings and advertising growth at
Fox News Channel and Regional Sports.
* Continued success of theatrical releases and robust home entertainment
sales of film and television titles increase Filmed Entertainment operating
income before depreciation and amortization by 14%.
FULL YEAR HIGHLIGHTS
* Record operating income before depreciation and amortization from
Filmed Entertainment, Cable Network Programming and Television Stations
segments.
* Completed strategic acquisition of television station WPWR-TV in Chicago,
giving the Company duopolies in the top three television markets in the
country.
* Announced agreement to acquire 34% of Hughes Electronics, including
its leading DTH provider DirecTV, for approximately $6.6 billion in cash and
stock.
NEW YORK, NY, August 13, 2003 - The Fox Entertainment Group (NYSE: FOX) today
reported fourth quarter consolidated revenues of $2.8 billion, a 15% increase
over the $2.4 billion in prior year, and full year revenues of $11.0 billion, an
increase of 13% over the $9.7 billion reported a year ago.
Operating income before depreciation and amortization(1) for the fourth quarter
was $505 million, up 59% over the $318 million reported a year ago. For the
full year, operating income before depreciation and amortization was a record
$2.1 billion, an increase of $1.7 billion over the $413 million reported in
fiscal 2002, which included the provision for the Company's national sports
contracts. The Company achieved this robust quarterly and full year growth on
the strength of double-digit increases across all operating segments. Operating
income, as a result of the factors discussed above, increased in the fourth
quarter to $430 million compared to $188 million a year ago and for the full
year increased to $1.8 billion, $1.9 billion higher than fiscal 2002.
Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch
said:
"The dramatic growth we achieved during our fourth quarter was a fitting
conclusion to a record-breaking year: record profits at our film, television
stations and cable segments; record cash flow from operations; and record
ratings and market share growth at our broadcast and cable properties. It was a
year in which we made enormous progress, not only financially but strategically
- particularly with our pending acquisition of a 34-percent interest in Hughes
Electronics and its leading pay-TV platform, DirecTV.
"This past year was not without its challenges, including the costs associated
with covering the war in Iraq. Our strong results in the face of such obstacles
are clear testimony to both the fundamental strength of our Company and the
resilience of our underlying businesses. At the same time, we took prompt steps
to improve businesses we felt were not delivering on their full potential. We
addressed head-on the ratings weakness at the FOX network during the first half
of the year, and as a result FOX finished the broadcast season with two straight
sweeps victories, vastly improved revenues and significantly higher earnings.
"Overall, we are extremely pleased with the performance of all our businesses
during the past year, and we are determined to build on our success in fiscal
2004. Certainly the indications are promising: the exceptionally strong
broadcast and cable upfronts; the growing popularity of our television and print
products; and the continued health of the advertising market. All of these
factors, as well as the momentum we have achieved across our key businesses,
give us confidence that fiscal 2004 will be another year of operational
excellence and healthy profitability."
Consolidated Operating Income (Loss)
3 Months Ended 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
US $ Millions US $ Millions
Filmed Entertainment $ 92 $ 77 $ 662 $ 485
Television Stations 245 189 921 598
Television Broadcast Network 29 (60) (100) (283)
Cable Network Programming 64 (18) 300 6
Provision for Sports Contracts - - - (909)
Consolidated operating income (loss) $ 430 $ 188 $ 1,783 $ (103)
Consolidated Operating Income (Loss) Before Depreciation and Amortization(1)
3 Months Ended 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
US $ Millions US $ Millions
Filmed Entertainment $ 105 $ 92 $ 717 $ 544
Television Stations 260 237 983 798
Television Broadcast Network 34 (55) (81) (263)
Cable Network Programming 106 44 472 243
Provision for Sports Contracts - - - (909)
Consolidated operating income (loss) before $ 505 $ 318 $ 2,091 $ 413
depreciation and amortization
_____________________________________________________________________________________________________________________
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
fourth quarter of fiscal 2003 was zero as compared with $57 million in the
fourth quarter a year ago and full year amortization was $7 million compared
with $229 million in fiscal 2002.
Equity earnings of affiliates for the fourth quarter improved $26 million versus
the same period a year ago, principally due to higher contributions at the
National Geographic Channel - Domestic resulting from an increase in the
subscriber base. For the full year, equity earnings of affiliates was $143
million higher than fiscal 2002 principally due to the absence of losses at Fox
Family Worldwide and increased subscriber revenues at the National Geographic
Channel - Domestic. Also contributing to the improvement was lower amortization
expense due to the adoption of SFAS 142.
Fourth quarter net income increased to $258 million ($0.29 per share) as
compared to net income of $40 million ($0.05 per share) in the prior year. Full
year net income grew to $1.031 billion ($1.17 per share) compared with $581
million ($0.69 per share) a year ago. Fourth quarter and full year increases
were primarily due to higher consolidated operating income before depreciation
and amortization and improved equity in affiliates results as well as the impact
of the adoption of SFAS 142 during fiscal 2002. Weighted average shares
outstanding increased during the year reflecting the issuance of 50 million
shares in a public offering during November 2002.
FILMED ENTERTAINMENT
The Filmed Entertainment segment reported fourth quarter operating income before
depreciation and amortization of $105 million versus $92 million in the same
period a year ago. The 14% increase reflects the record-breaking worldwide
theatrical release of X2: X-Men United and the continued worldwide home
entertainment and pay-TV success of Ice Age and catalog titles. Additionally,
several domestic home entertainment releases, including Drumline and
Transporter, contributed to the quarter's growth. These contributions were
partially offset by the marketing costs for several successful spring and summer
theatrical releases, including Phone Booth, 28 Days Later, and League of
Extraordinary Gentlemen. The fourth quarter a year ago included the worldwide
theatrical performance of Ice Age and the domestic home entertainment release of
Behind Enemy Lines. Operating income in the quarter increased to $92 million
versus $77 million in the fourth quarter a year ago reflecting the factors
described above.
For the year, Filmed Entertainment reported record operating income before
depreciation and amortization of $717 million, which was $173 million higher
than a year ago. The 32% increase was primarily driven by the worldwide home
entertainment performances of Ice Age, Shallow Hal and Behind Enemy Lines
combined with a string of successful theatrical releases during the year,
including X2: X-Men United, Daredevil, One Hour Photo, Brown Sugar, Drumline,
Just Married and Phone Booth. Operating income for the full year of $662
million increased $177 million compared with $485 million in fiscal 2002
reflecting the factors described above.
Twentieth Century Fox Television (TCFTV) also contributed to the Filmed
Entertainment fourth quarter and full year earnings increases, primarily
reflecting higher syndication profits from King of the Hill, The Simpsons and
X-Files as well as continued momentum in home entertainment sales, most notably
from The Simpsons, Buffy the Vampire Slayer, 24 and Dark Angel. For the
upcoming broadcast season TCFTV will once again be a leading supplier of
prime-time series with 24 shows scheduled across five broadcast networks,
including twelve new series.
TELEVISION STATIONS
Fox Television Stations (FTS) fourth quarter operating income before
depreciation and amortization grew 10% over the fourth quarter a year ago
reflecting ratings strength at the FOX network-affiliated stations in
conjunction with stable operating cost trends. Ratings growth was across most
dayparts, including continued momentum in primetime from the ratings improvement
at the FOX network. For the full year, strong advertising market growth in
conjunction with a 1.4 percentage point increase in market share drove FTS
revenue up 13% and operating income before depreciation and amortization up 23%
versus fiscal 2002. Current year earnings growth was also fueled by margin
expansion primarily from cost reductions achieved through FTS' integration of
its duopoly stations. Operating income in the fourth quarter increased to $245
million versus $189 million in the fourth quarter a year ago and full year
operating income increased to $921 million compared to $598 million in fiscal
2002 reflecting the factors described above as well as the reduction in
amortization expense as a result of the Company's adoption of SFAS 142.
TELEVISION BROADCAST NETWORK
At the FOX Broadcasting Company (FBC), fourth quarter operating income before
depreciation and amortization improved by $89 million compared to a year ago,
largely the result of 25% ratings growth in primetime compared with the same
period a year ago. The substantial ratings improvement was fueled by the
success of American Idol as well as 24, The Simpsons, That 70's Show and Bernie
Mac and resulted in FBC's second consecutive sweeps victory among Adults 18-49.
On a full year basis, operating income before depreciation and amortization
improved by $182 million over fiscal 2002 as the network posted a 16% increase
in primetime ratings combined with higher pricing. Operating income in the
fourth quarter increased to $29 million compared with an operating loss of $60
million in the fourth quarter a year ago and full year operating loss of $100
million improved $183 million versus an operating loss of $283 million in fiscal
2002 reflecting the factors described above.
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
fourth quarter operating income before depreciation and amortization of $106
million, an improvement of $62 million over last year's results, and record full
year operating income before depreciation and amortization of $472 million,
nearly double fiscal 2002. This success reflects strong revenue growth across
all of the Company's primary cable television channels, slightly offset by the
impact of war coverage at Fox News and higher programming and marketing costs at
FX. Year-ago results included a $30 million charge related to the bankruptcy of
Adelphia Communications. Operating income in the fourth quarter increased to
$64 million compared with an operating loss of $18 million in the fourth quarter
a year ago and full year operating income increased to $300 million versus $6
million in fiscal 2002 reflecting the factors described above as well as the
reduction in amortization expense as a result of the Company's adoption of SFAS
142.
The Fox News Channel (FNC) reported robust operating income growth in the fourth
quarter and full year as strong revenue growth, primarily from increased ad
sales, more than offset pre-emptions and higher costs associated with continuing
war coverage. Viewership in the fourth quarter increased 92% in primetime and
108% on a 24-hour basis, while for the year primetime was up 47% and total day
increased 53% compared to a year ago. Over the past year FNC achieved the
highest ratings growth among all cable news channels, increasing its lead over
the competition by a greater than two to one margin and solidifying its #1
position in cable news.
Fox Cable Networks' operating profit increased dramatically for the quarter and
full year, primarily driven by higher revenues at both the RSNs and FX. The
revenue growth at the RSNs was largely due to an increase in DTH subscribers and
affiliate rates 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 higher advertising pricing and increased subscribers over the past year.
During the quarter FX's revenue growth was offset by higher marketing costs for
original programming, including several new series, most notably Nip/Tuck, which
premiered to the highest ratings for any new basic cable series this season, and
the FX original movie 44 Minutes, which premiered to the highest ratings in the
network's history.
OTHER MATTERS
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) Based upon recent SEC guidance, Fox Entertainment Group (FEG) will no longer
use the acronym previously referred to as "EBITDA" or "earnings before interest,
taxes, depreciation and amortization" and instead will now use the phrase "
operating income before depreciation and amortization". This is a change in
name only and FEG has not changed the way it calculates current or prior results
for this measure. 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. FEG reconciles this non-GAAP
measure to operating income in our supplemental data beginning on page 10 of
this release.
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 fourth quarter and full
year results can be heard live on the Internet at 8:30 a.m. Eastern Daylight
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 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues $ 2,801 $ 2,431 $ 11,002 $ 9,725
Expenses
Operating 1,929 1,773 7,693 7,226
Selling, general and administrative 398 372 1,343 1,293
Depreciation and amortization 44 98 183 400
Other operating charge - - - 909
Operating income (loss) 430 188 1,783 (103)
Other income (expense):
Interest expense, net (16) (49) (136) (241)
Equity earnings (losses) of affiliates 17 (9) (1) (144)
Minority interest in subsidiaries (8) (8) (29) (37)
Other, net - (45) - 1,540
Income before provision for income taxes and 423 77 1,617 1,015
cumulative effect of accounting change
Provision for income tax expense on (165) (37) (586) (408)
stand-alone basis
Income before cumulative effect of accounting 258 40 1,031 607
change, net of tax
Cumulative effect of accounting change, net - - - (26)
Net income $ 258 $ 40 $ 1,031 $ 581
Basic and diluted earnings per share before $ 0.29 $ 0.05 $ 1.17 $ 0.72
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 $ 0.29 $ 0.05 $ 1.17 $ 0.69
Basic and diluted weighted average number of 900 850 881 838
common equivalent shares outstanding
SEGMENT INFORMATION
(in millions)
3 Months Ended 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues
Filmed Entertainment $ 1,106 $ 927 $ 4,498 $ 4,048
Television Stations 545 518 2,115 1,875
Television Broadcast Network 513 453 2,244 2,048
Cable Network Programming 637 533 2,145 1,754
Total Revenues(1) $ 2,801 $ 2,431 $ 11,002 $ 9,725
Operating Income (Loss) Before Depreciation and
Amortization
Filmed Entertainment $ 105 $ 92 $ 717 $ 544
Television Stations 260 237 983 798
Television Broadcast Network 34 (55) (81) (263)
Cable Network Programming 106 44 472 243
Provision for Sports Contracts - - - (909)
Total Operating Income (Loss) Before $ 505 $ 318 $ 2,091 $ 413
Depreciation and Amortization
Operating Income (Loss)
Filmed Entertainment $ 92 $ 77 $ 662 $ 485
Television Stations 245 189 921 598
Television Broadcast Network 29 (60) (100) (283)
Cable Network Programming 64 (18) 300 6
Provision for Sports Contracts - - - (909)
Total Operating Income (Loss) $ 430 $ 188 $ 1,783 $ (103)
(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 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
$ Millions $ Millions
Gross revenues $ 2,832 $ 2,463 $ 11,127 $ 9,841
Amortization of cable distribution investments (31) (32) (125) (116)
Revenues $ 2,801 $ 2,431 $ 11,002 $ 9,725
SUPPLEMENTAL FINANCIAL DATA
Operating income before depreciation and amortization, 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, operating income
before depreciation and amortization is a non-GAAP measure it should be
considered in addition to, not as a substitute for, operating income, net
income, cash flow and other measures of financial performance reported in
accordance with GAAP. Operating income before depreciation and amortization
does not reflect cash available to fund requirements, and the items excluded
from operating income before depreciation and amortization, such as depreciation
and amortization, are significant components in assessing the Company's
financial performance. Management believes that operating income before
depreciation and amortization is an appropriate measure for evaluating the
operating performance of the consolidated Company and its business segments.
Operating income before depreciation and amortization, which is the information
reported to and used by the Company's chief decision maker for the purpose of
making decisions about the allocation of resources to segments and assessing
their performance, provides management, investors and equity analysts a measure
to analyze operating performance and enterprise value against historical and
competitors' data.
The following table reconciles operating income before depreciation and
amortization to the presentation of operating income.
3 Months Ended 12 Months Ended
June 30, June 30,
2003 2002 2003 2002
$ Millions $ Millions
Operating income (loss) $ 430 $ 188 $ 1,783 $ (103)
Depreciation and amortization 44 98 183 400
Amortization of cable distribution 31 32 125 116
investments
Operating income (loss) before $ 505 $ 318 $ 2,091 $ 413
depreciation and amortization
For the Three Months Ended June 30, 2003
($ Millions)
Operating Depreciation Amortization of Operating
Income and cable income (loss)
(loss) Amortization distribution before
investments depreciation
and
amortization
Filmed Entertainment $ 92 $ 13 $ - $ 105
Television Stations 245 15 - 260
Television Broadcast Network 29 5 - 34
Cable Network Programming 64 11 31 106
Consolidated Total $ 430 $ 44 $ 31 $ 505
SUPPLEMENTAL FINANCIAL DATA (continued)
For the Three Months Ended June 30, 2002
($ Millions)
Operating Depreciation Amortization of Operating
Income and cable income (loss)
(loss) Amortization distribution before
investments depreciation
and
amortization
Filmed Entertainment $ 77 $ 15 $ - $ 92
Television Stations 189 48 - 237
Television Broadcast Network (60) 5 - (55)
Cable Network Programming (18) 30 32 44
Consolidated Total $ 188 $ 98 $ 32 $ 318
For the Twelve Months Ended June 30, 2003
($ Millions)
Operating Depreciation Amortization of Operating
Income and cable income (loss)
(loss) Amortization distribution before
investments depreciation
and
amortization
Filmed Entertainment $ 662 $ 55 $ - $ 717
Television Stations 921 62 - 983
Television Broadcast Network (100) 19 - (81)
Cable Network Programming 300 47 125 472
Consolidated Total $ 1,783 $ 183 $ 125 $ 2,091
For the Twelve Months Ended June 30, 2002
($ Millions)
Operating Depreciation Amortization of Operating
Income and cable income (loss)
(loss) Amortization distribution before
investments depreciation
and
amortization
Filmed Entertainment $ 485 $ 59 $ - $ 544
Television Stations 598 200 - 798
Television Broadcast Network (283) 20 - (263)
Cable Network Programming 6 121 116 243
Provision for Sports (909) - - (909)
Contracts
Consolidated Total $ (103) $ 400 $ 116 $ 413
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UOAOROORWAAR