TIDMNCRA
RNS Number : 3202X
News Corporation
06 February 2013
News Corporation
EARNINGS RELEASE FOR THE QUARTER ENDED DECEMBER 31, 2012
NEWS CORPORATION REPORTS SECOND QUARTER EARNINGS PER SHARE OF
$1.01 ON NET INCOME ATTRIBUTABLE TO STOCKHOLDERS OF $2.38
BILLION
TOTAL SEGMENT OPERATING INCOME INCREASES 6% TO $1.58 BILLION ON
REVENUE OF $9.43 BILLION
NEW YORK, NY, February 6, 2013 - News Corporation (NASDAQ: NWS,
NWSA; ASX: NWS, NWSLV) today reported $9.43 billion of total
revenue for the three months ending December 31, 2012, a $450
million or 5% increase over the $8.98 billion of revenue reported
in the prior year quarter. The revenue increase was led by $398
million or 18% growth at the Company's Cable Network Programming
segment.
The Company reported second quarter total segment operating
income(1) of $1.58 billion compared to $1.50 billion reported a
year ago. The improvement was led by operating income improvements
at the Company's Cable Network Programming and Television segments.
The second quarter results included $56 million of costs related to
the ongoing investigations initiated upon the closure of The News
of the World as compared to $87 million in the corresponding period
of the prior year. This year's second quarter results also included
$23 million of costs related to the proposed separation of the
Company's entertainment and publishing businesses. Excluding these
costs from both years, second quarter adjusted total segment
operating income of $1.66 billion increased $75 million or 5% from
$1.58 billion reported in the second quarter of the prior year.
The Company reported quarterly net income attributable to
stockholders of $2.38 billion ($1.01 per share), compared to $1.06
billion ($0.42 per share) reported in the corresponding period of
the prior year. This quarter's pre-tax results included $1.40
billion of income in Other, net, principally related to gains on
the acquisitions of additional ownership stakes in FOX SPORTS
Australia and Fox Star Sports Asia (formerly ESPN Star Sports), as
well as a $131 million gain from the Company's participation in
British Sky Broadcasting's ("BSkyB") share repurchase program,
which is reflected in Equity earnings of affiliates. These gains
were partially offset by $65 million of restructuring and
impairment charges, primarily related to the Company's
international newspaper businesses. Excluding the net income
effects of these items, the costs related to the investigations in
the U.K. and the proposed separation of the Company's entertainment
and publishing businesses, along with comparable items in both
years, second quarter adjusted earnings per share(2) was $0.44
compared with the adjusted prior year quarter result of $0.39.
Commenting on the results, Chairman and Chief Executive Officer
Rupert Murdoch said:
"News Corporation's fiscal second quarter performance reflects
our strong momentum. Double-digit gains in our Cable and Television
businesses, along with improvements in our Publishing segment,
drove revenue and earnings growth even as we seized opportunities
to invest in our core businesses for long-term and sustainable
growth.
"The strategies we executed against in the quarter continue to
bolster News Corporation's competitive position and enhance our
ability to benefit from global demand for content, especially
sports programming. As we make progress toward the proposed
separation of our entertainment and publishing businesses later
this year, I am confident in the future prospects for both
businesses."
(1) Total segment operating income is a non-GAAP financial
measure. See page 12 for a description of total segment operating
income and for a reconciliation of total segment operating income
to income before income tax expense.
(2) See page 15 for a reconciliation of reported net income and
earnings per share to adjusted net income and adjusted earnings per
share.
REVIEW OF SEGMENT OPERATING RESULTS
Total Segment Operating
Income (Loss) 3 Months Ended 6 Months Ended
December 31, December 31,
2012 2011 2012 2011
---------- ------ ---------- ------
US $ Millions
Cable Network Programming $ 945 $ 882 $ 1,898 $1,657
Filmed Entertainment 383 393 783 740
Television 224 189 380 322
Direct Broadcast Satellite
Television (20) 6 3 125
Publishing 234 218 291 328
Other (186) (191) (397) (290)
------ ----- ------ -----
Total Segment Operating
Income * $ 1,580 $1,497 $ 2,958 $2,882
====== ===== ====== =====
* The three months ended December 31, 2012 and 2011 include $56
million and $87 million, respectively, of costs related to the
ongoing investigations in the U.K. The three months ended December
31, 2012 include $23 million of costs related to the proposed
separation of the Company's entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $1,659 and $1,584 million in the three months
ended December 31, 2012 and 2011, respectively.
The six months ended December 31, 2012 and 2011 include $123
million and $104 million, respectively, of costs related to the
ongoing investigations in the U.K. The six months ended December
31, 2012 include $28 million of costs related to the proposed
separation of the Company's entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $3,109 and $2,986 million in the six months
ended December 31, 2012 and 2011, respectively.
CABLE NETWORK PROGRAMMING
Cable Network Programming reported quarterly segment operating
income of $945 million, a $63 million or 7% increase over the prior
year quarter, driven by an 18% increase in revenue. Operating
income contributions from the domestic channels increased 9%.
Double-digit revenue growth at the Regional Sports Networks
("RSNs"), Fox News Channel, FX Network and National Geographic
Channels was partially offset by increased programming costs,
including expanded college football and Ultimate Fighting
Championship ("UFC") coverage, as well as higher costs at the RSNs
related to the benefit recognized in the prior year as a result of
the National Basketball Association ("NBA") lockout. The Company's
international cable channels' quarterly earnings contributions
increased 3% from the same period a year ago, reflecting strong
operating profit growth at the non-sports channels at Fox
International Channels ("FIC") and STAR, partially offset by the
costs associated with the inaugural broadcasts of BCCI cricket and
the adverse impact of the strengthened U.S. dollar.
Affiliate revenue grew 13% and 42% at the domestic and
international cable channels, respectively. Domestic network growth
reflects higher rates across all networks, led by growth at the Fox
News Channel and RSNs. Approximately 40% of the international
affiliate revenue increase reflects strong local currency growth at
the non-sports channels at FIC and STAR. The balance of the growth
was principally from the inclusion of Fox Pan American Sports
("FPAS") and Fox Star Sports Asia, partially offset by the impact
of the strengthened U.S. dollar.
Advertising revenue at the domestic cable channels grew 8% in
the quarter over the prior year period driven by growth across most
networks. The international cable channels' advertising revenue
improved 29% from the prior year quarter. Nearly two-thirds of the
international cable revenue increase reflects strong local currency
growth at the non-sports channels at FIC and STAR. The balance of
the growth was from the inclusion of FPAS and Fox Star Sports Asia,
partially offset by the impact of the strengthened U.S. dollar.
Expenses at Cable Network Programming grew 26% in the quarter
over the corresponding period in the prior year due to increased
sports programming costs, including increased rights costs at the
RSNs related to the timing benefit in the prior year resulting from
the NBA lockout, rights fees for BCCI cricket in India, expanded
college football coverage, UFC rights fees, as well as expenses
associated with the consolidation of the FPAS and Fox Star Sports
Asia networks. These increases were partially offset by reduced
National Hockey League rights costs at the RSNs resulting from this
season's lockout.
FILMED ENTERTAINMENT
Filmed Entertainment reported quarterly segment operating income
of $383 million, as compared to the $393 million reported in the
same period a year ago. Quarterly results reflect the successful
worldwide theatrical performances of Taken 2, which has grossed
approximately $375 million in worldwide box office to date, and
Life of Pi, which has grossed over $500 million in worldwide box
office and is nominated for eleven Academy Awards including Best
Picture. In aggregate, the Fox film studios garnered thirty-one
Academy Award nominations, the most of any studio. In addition, the
quarterly results include the successful worldwide home
entertainment performance of Ice Age: Continental Drift. Prior year
second quarter film results included the successful worldwide home
entertainment performances of Rio, Rise of the Planet of the Apes
and X-Men: First Class.
TELEVISION
Television reported quarterly segment operating income of $224
million, an increase of $35 million or 19% versus the same period a
year ago. This increase reflects a more than doubling of
retransmission consent revenues and increased local advertising at
the Fox Television Stations driven by political advertising
revenues. These improvements were partially offset by lower
national advertising revenues, primarily reflecting lower primetime
ratings at the Fox Broadcast Network and three fewer World Series
games in the current year, as well as increased costs associated
with expanded college football coverage.
DIRECT BROADCAST SATELLITE TELEVISION
SKY Italia generated a quarterly segment operating loss of $20
million, compared to operating income of $6 million reported in the
same period a year ago. The decline was driven by higher
programming expenses, including nearly $30 million of rights costs
primarily associated with expanded UEFA Champions and Europa League
coverage. Although reported U.S. dollar revenue declined reflecting
the impact of the strengthened U.S. dollar, quarterly local
currency revenue was essentially in line with the corresponding
period of the prior year. SKY Italia experienced a net reduction of
approximately 28,000 subscribers during the quarter, bringing total
subscribers to 4.83 million.
PUBLISHING
Publishing reported quarterly segment operatingincome of $234
million, a $16 million improvement from the $218 million reported
in the same period a year ago. Increased contributions from the
U.K. newspapers which benefitted from the launch of the Sunday
edition of The Sun in February 2012, integrated marketing services
driven by higher custom publishing revenues, and book publishing
businesses related to the acquisition of Thomas Nelson, Inc., a
Christian book publisher, more than offset lower advertising
revenues at the Australian newspapers.
OTHER
The Other segment quarterly operating loss of $186 million
improved slightly from the $191 million reported the same period a
year ago. The current year quarterly results included $56 million
of costs related to the ongoing investigations initiated upon the
closure of The News of the World, as compared to $87 million of
comparable costs included in the prior year quarterly results, as
well as $23 million of costs related to the proposed separation of
the Company's entertainment and publishing businesses. As a result
of the Company's acquisition of Consolidated Media Holdings in
November, the second quarter results also included a benefit from
the consolidation of FOX SPORTS Australia. This benefit was largely
offset by an increased operating loss at Amplify, the Company's
education business, reflecting increased product development
costs.
OTHER ITEMS
Eredivisie Media & Marketing
In November 2012, the Company acquired a controlling 51%
ownership stake in Eredivisie Media & Marketing CV ("EMM") for
approximately $350 million, of which $325 million was cash and $25
million was contingent consideration. EMM is a media company that
holds the collective media and sponsorship rights of the Dutch
Premier League. The remaining 49% of EMM is owned by the Dutch
Premier League and the global TV production company Endemol.
Fox Star Sports Asia (formerly ESPN Star Sports)
In November 2012, the Company acquired the remaining 50%
interest in ESPN Star Sports ("ESS") that it did not already own
for approximately $220 million, net of cash acquired. Accordingly,
the results of ESS are included the Company's consolidated results
of operations beginning in November 2012. Subsequent to its
acquisition, the Company rebranded the ESS channel group Fox Star
Sports Asia.
Consolidated Media Holdings
In November 2012, the Company acquired Consolidated Media
Holdings Ltd. ("CMH"), a media investment company that operates in
Australia, for approximately $2.2 billion which consisted of cash
of $2 billion and assumed debt of $235 million. CMH had a 25%
interest in Foxtel and a 50% interest in FOX SPORTS Australia. The
remaining 50% of Foxtel is owned by Telstra Corporation Limited,
one of Australia's leading telecommunications companies. The
acquisition doubled the Company's stakes in FOX SPORTS Australia
and Foxtel to 100% and 50%, respectively. Accordingly, the results
of FOX SPORTS Australia are included the Company's consolidated
results of operations beginning in November 2012. Prior to November
2012, the Company accounted for its investment in FOX SPORTS
Australia under the equity method of accounting. The Company's
investment in Foxtel was and continues to be accounted for under
the equity method of accounting.
YES Network & Sports Time Ohio
In December 2012, the Company acquired a 49% equity interest in
the Yankees Entertainment and Sports Network ("YES"), a New York
City-based RSN, for $584 million. In addition, simultaneous with
the closing of this transaction, the Company paid approximately
$250 million of upfront costs on behalf of YES. Under the purchase
agreement, after three years, News Corporation may acquire an
additional 31% stake in the YES Network that could bring its total
ownership stake to 80%.
In December 2012, the Company also acquired Sports Time Ohio, a
RSN serving the Cleveland, Ohio market, for an estimated total
purchase price of approximately $270 million, of which $130 million
was paid in cash. The balance of the purchase price represents the
fair value of deferred payments and payments that are contingent
upon achievement of certain performance objectives.
Sky Deutschland
In January 2013, the Company reached an agreement with Sky
Deutschland AG ("Sky Deutschland") and its new bank syndicate to
support both a new financing structure and the issuance of EUR438
million (approximately $585 million) of new equity, which includes
the outstanding EUR144 million (approximately $195 million) of
equity under the capital measures announced by Sky Deutschland in
February 2012. Sky Deutschland finalized the equity offering in
early February 2013 and the Company acquired, through a combination
of a private placement and a rights offering, approximately 92
million additional shares of Sky Deutschland increasing its
ownership to approximately 55%. The aggregate cost of the shares
acquired by the Company was approximately EUR410 million
(approximately $550 million). As a result of these transactions,
the results of Sky Deutschland will be included in the Company's
consolidated results of operations in the fiscal third quarter of
2013. In addition, the Company has committed to guarantee Sky
Deutschland's new EUR300 million (approximately $400 million)
five-year bank credit facility, which will replace Sky
Deutschland's existing bank debt facilities (to be repaid in full).
Additionally, News Corporation will act as guarantor to the German
Football League for Sky Deutschland's Bundesliga broadcasting
license for the 2013/14 to 2016/17 seasons in an amount up to 50%
of the license fee per season. News Corporation has also agreed to
extend the maturity of existing shareholder loans.
Share repurchases
On May 9, 2012, News Corporation announced that its Board of
Directors approved an increase to the previously authorized stock
repurchase program from $5 billion to $10 billion. Through February
5, 2013, the Company has purchased nearly $6.3 billion of Class A
common stock under the program, at an average price of $19.13 per
share. As a result of the stock repurchase program, diluted
weighted Class A shares outstanding of 2,346 million in this year's
quarter declined 7% from 2,515 million in the same period a year
ago.
Dividends
The Company has declared a dividend of $0.085 per Class A and
Class B share. This dividend is payable on April 17, 2013 with a
record date for determining dividend entitlements of March 13,
2013.
Intent to pursue separation of entertainment and publishing
businesses
On June 28, 2012, News Corporation announced that it intends to
pursue the separation of its publishing and its media and
entertainment businesses into two distinct publicly traded
companies. The global publishing company that would be created
through the proposed transaction would consist of the Company's
publishing businesses, its education division and other Australian
assets. The global media and entertainment company would consist of
the Company's cable and television assets, filmed entertainment,
and direct satellite broadcasting businesses. Following the
separation, each company would maintain two classes of common
stock: Class A Common and Class B Common Voting Shares. The
separation is expected to be completed in approximately one year
from the date of announcement. In addition to final approval from
the Board of Directors and stockholder approval of certain
amendments to the Company's Restated Certificate of Incorporation,
the completion of the separation will be subject to receipt of
regulatory approvals, opinions from tax counsel and favorable
rulings from certain tax jurisdictions regarding the tax-free
nature of the transaction to the Company and to its stockholders,
further due diligence as appropriate, the execution of certain
agreements relating to the distribution, and the filing and
effectiveness of appropriate filings with the SEC. On December 21,
2012, New Newscorp LLC filed an initial Form 10 registration
statement and News Corporation filed a preliminary proxy statement
with the Securities and Exchange Commission in connection with the
separation. The Company has also applied for certain regulatory
approvals and tax rulings required to enable the separation to be
completed as described. There can be no assurances given that the
separation of the Company's businesses as described will occur.
REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES' RESULTS
Quarterly earnings from affiliates were $174 million as compared
to $142 million in the same period a year ago. The increased
contributions from affiliates are primarily due to higher
contributions from BSkyB, including the Company's $131 million
pre-tax gain related to the its participation in BSkyB's share
repurchase, partially offset by one-time costs resulting from
Hulu's purchase of Providence Equity Partners' ownership stake and
the absence of contributions from NDS, which was sold in July
2012.
The Company's share of equity earnings (losses) of affiliates is
as follows:
3 Months Ended 6 Months Ended
December 31, December 31,
% Owned 2012 2011 2012 2011
---------- ---------- ------ ---------- ------
US $ Millions
BSkyB 39%(1) $ 298 $ 174 $ 507 $ 315
Other affiliates Various(2) (124) (32) (143) (52)
------ ----- ------ -----
Total equity earnings
of affiliates $ 174 $ 142 $ 364 $ 263
====== ===== ====== =====
(1) Please refer to BSkyB's earnings releases for detailed
information.
(2) Primarily comprised of Sky Deutschland, Hulu, Australian and
STAR equity affiliates, as well as NDS in the prior year.
Foreign Exchange Rates
Average foreign exchange rates used in the quarter-to-date
profit results are as follows:
3 Months Ended
December 31,
2012 2011
------- -------
Australian Dollar/U.S. Dollar 1.04 1.01
U.K. Pounds Sterling/U.S. Dollar 1.61 1.57
Euro/U.S. Dollar 1.30 1.35
To receive a copy of this press release through the Internet,
access News Corporation's corporate Web site located at
http://www.newscorp.com.
Audio from News Corporation's conference call with analysts on
the second quarter results can be heard live on the Internet at
4:30 p.m. Eastern Standard Time today. To listen to the call, visit
http://www.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.
CONTACTS:
Reed Nolte, Investor Relations Julie Henderson, Press Inquiries
212-852-7092 212-852-7070
Joe Dorrego, Investor Relations Nathaniel Brown, Press Inquiries
212-852-7856 212-852-7746
Dan Berger, Press Inquiries
310-369-1274
CONSOLIDATED STATEMENTS OF
OPERATIONS
3 Months Ended 6 Months Ended
December 31, December 31,
2012 2011 2012 2011
----------- -------- --------- ---------
US $ Millions (except share related
amounts)
Revenues $ 9,425 $ 8,975 $ 17,561 $ 16,934
Operating expenses (5,869) (5,583) (10,717) (10,336)
Selling, general and administrative
expenses (1,666) (1,614) (3,276) (3,141)
Depreciation and amortization (310) (281) (610) (575)
Impairment and restructuring
charges (65) (36) (217) (127)
Equity earnings of affiliates 174 142 364 263
Interest expense, net (266) (257) (533) (515)
Interest income 37 29 68 65
Other, net 1,400 125 2,775 (5)
------- ------- -------- --------
Income from continuing operations
before income tax expense 2,860 1,500 5,415 2,563
Income tax expense (402) (373) (661) (650)
------- ------- -------- --------
Net income 2,458 1,127 4,754 1,913
Less: Net income attributable
to
noncontrolling interests (77) (70) (140) (118)
------- ------- -------- --------
Net income attributable to
News Corporation stockholders $ 2,381 $ 1,057 $ 4,614 $ 1,795
======= ======= ======== ========
Weighted average shares: 2,346 2,515 2,358 2,563
Net income attributable to
News Corporation stockholders
per share: $ 1.01 $ 0.42 $ 1.96 $ 0.70
December
CONSOLIDATED BALANCE SHEETS 31, June 30,
2012 2012
-------- --------
Assets: US $ Millions
Current assets:
Cash and cash equivalents $ 7,806 $ 9,626
Receivables, net 7,760 6,608
Inventories, net 3,282 2,595
Other 896 619
------- -------
Total current assets 19,744 19,448
------- -------
Non-current assets:
Receivables 449 387
Investments 7,441 4,968
Inventories, net 5,024 4,596
Property, plant and equipment, net 5,857 5,814
Intangible assets, net 7,149 7,133
Goodwill 15,875 13,174
Other non-current assets 1,206 1,143
------- -------
Total assets $ 62,745 $ 56,663
======= =======
Liabilities and Equity:
Current liabilities:
Borrowings $ 273 $ 273
Accounts payable, accrued expenses and other
current liabilities 5,260 5,405
Participations, residuals and royalties
payable 1,899 1,691
Program rights payable 1,665 1,368
Deferred revenue 1,163 880
------- -------
Total current liabilities 10,260 9,617
------- -------
Non-current liabilities:
Borrowings 16,184 15,182
Other liabilities 4,200 3,650
Deferred income taxes 2,447 2,388
Redeemable noncontrolling interests 649 641
Commitments and contingencies
Equity:
Class A common stock, $0.01 par value 15 15
Class B common stock, $0.01 par value 8 8
Additional paid-in capital 15,898 16,140
Retained earnings and accumulated other
comprehensive income 12,231 8,521
------- -------
Total News Corporation stockholders' equity 28,152 24,684
Noncontrolling interests 853 501
------- -------
Total equity 29,005 25,185
------- -------
Total liabilities and equity $ 62,745 $ 56,663
======= =======
CONSOLIDATED STATEMENTS OF CASH FLOWS
6 Months Ended December
31,
2012 2011
---------- ----------
US $ Millions
Operating activities:
Net Income $ 4,754 $ 1,913
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 610 575
Amortization of cable distribution investments 44 47
Equity earnings of affiliates (364) (263)
Cash distributions received from affiliates 306 253
Impairment charges, net of tax 35 -
Other, net (2,775) 5
Change in operating assets and liabilities,
net of acquisitions:
Receivables and other assets (986) (1,202)
Inventories, net (920) (758)
Accounts payable and other liabilities 267 26
---------- ----------
Net cash provided by operating activities 971 596
---------- ----------
Investing activities:
Property, plant and equipment, net of acquisitions (370) (485)
Acquisitions, net of cash acquired (2,830) (488)
Investments in equity affiliates (610) (37)
Other investments (46) (158)
Proceeds from dispositions 1,860 321
---------- ----------
Net cash used in investing activities (1,996) (847)
---------- ----------
Financing activities:
Borrowings 987 -
Repayment of borrowings (235) (32)
Issuance of shares 139 15
Repurchase of shares (1,434) (2,477)
Dividends paid (297) (305)
Purchase of subsidiary shares from noncontrolling
interests (8) -
Other, net 8 -
---------- ----------
Net cash used in financing activities (840) (2,799)
---------- ----------
Net decrease in cash and cash equivalents (1,865) (3,050)
Cash and cash equivalents, beginning of
period 9,626 12,680
Exchange movement on opening cash balance 45 (198)
---------- ----------
Cash and cash equivalents, end of period $ 7,806 $ 9,432
========== ==========
SEGMENT INFORMATION 3 Months Ended 6 Months Ended
December 31, December 31,
2012 2011 2012 2011
------- ------- -------- --------
US $ Millions
Revenues
Cable Network Programming $ 2,559 $ 2,161 $ 5,008 $ 4,281
Filmed Entertainment 2,067 2,063 3,812 3,841
Television 1,532 1,520 2,491 2,443
Direct Broadcast Satellite
Television 890 947 1,707 1,869
Publishing 2,149 2,130 4,167 4,199
Other 228 154 376 301
------ ------ ------- -------
Total Revenues $ 9,425 $ 8,975 $ 17,561 $ 16,934
====== ====== ======= =======
Segment Operating Income (Loss)
Cable Network Programming $ 945 $ 882 $ 1,898 $ 1,657
Filmed Entertainment 383 393 783 740
Television 224 189 380 322
Direct Broadcast Satellite
Television (20) 6 3 125
Publishing 234 218 291 328
Other (186) (191) (397) (290)
------ ------ ------- -------
Total Segment Operating Income
* $ 1,580 $ 1,497 $ 2,958 $ 2,882
====== ====== ======= =======
* The three months ended December 31, 2012 and 2011 include $56
million and $87 million, respectively, of costs related to the
ongoing investigations in the U.K. The three months ended December
31, 2012 include $23 million of costs related to the proposed
separation of the Company's entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $1,659 and $1,584 million in the three months
ended December 31, 2012 and 2011, respectively.
The six months ended December 31, 2012 and 2011 include $123
million and $104 million, respectively, of costs related to the
ongoing investigations in the U.K. The six months ended December
31, 2012 include $28 million of costs related to the proposed
separation of the Company's entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $3,109 and $2,986 million in the six months
ended December 31, 2012 and 2011, respectively.
NOTE 1 - TOTAL SEGMENT OPERATING INCOME AND SEGMENT OPERATING
INCOME BEFORE DEPRECIATION AND AMORTIZATION
The Company evaluates the performance of its operating segments
based on segment operating income, and management uses total
segment operating income as a measure of the performance of
operating businesses separate from non-operating factors. Total
segment operating income and segment operating income before
depreciation and amortization are non-GAAP measures 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, these measures do not reflect
cash available to fund requirements. These measures exclude items,
such as impairment and restructuring charges, which are significant
components in assessing the Company's financial performance.
Segment operating income before depreciation and amortization also
excludes depreciation and amortization which are also significant
components in assessing the Company's financial performance.
Management believes that total segment operating income and
segment operating income before depreciation and amortization are
appropriate measures for evaluating the operating performance of
the Company's business and provide investors and equity analysts a
measure to analyze operating performance of the Company's business
and enterprise value against historical data and competitors' data.
Total segment operating income and segment operating income before
depreciation and amortization is the primary measure used by our
chief operating decision maker to evaluate the performance of and
allocate resources to the Company's business segments.
Total segment operating income does not include: Impairment and
restructuring charges, discontinued operations, Equity earnings of
affiliates, Interest expense, net, Interest income, Other, net,
Income tax expense and Net income attributable to noncontrolling
interests.
Segment operating income before depreciation and amortization is
defined as segment operating income plus depreciation and
amortization and the amortization of cable distribution investments
and eliminates the variable effect across all business segments of
depreciation and amortization. Depreciation and amortization
expense includes the depreciation of property and equipment, as
well as amortization of finite-lived 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 segment operating income before
depreciation and amortization.
The following table reconciles segment operating income before
depreciation and amortization to income from continuing operations
before income tax expense.
3 Months Ended 6 Months Ended
December 31, December 31,
2012 2011 2012 2011
------- ------- ------- -------
US $ Millions
Segment Operating income before
depreciation and amortization $ 1,913 $ 1,801 $ 3,612 $ 3,504
Depreciation and amortization (310) (281) (610) (575)
Amortization of cable distribution
investments (23) (23) (44) (47)
------ ------ ------ ------
Total Segment Operating income 1,580 1,497 2,958 2,882
Impairment and restructuring
charges (65) (36) (217) (127)
Equity earnings of affiliates 174 142 364 263
Interest expense, net (266) (257) (533) (515)
Interest income 37 29 68 65
Other, net 1,400 125 2,775 (5)
------ ------ ------ ------
Income from continuing operations
before income tax expense $ 2,860 $ 1,500 $ 5,415 $ 2,563
====== ====== ====== ======
For the Three Months Ended December 31, 2012
(US $ Millions)
Segment Operating
income (loss) Amortization
before Depreciation of Segment
depreciation Operating
and and cable distribution income
amortization amortization investments (loss)
------------------------- --------------- -------------------- -----------
Cable Network Programming $ 1,013 $ (45) $ (23) $ 945
Filmed Entertainment 416 (33) - 383
Television 246 (22) - 224
Direct Broadcast Satellite
Television 56 (76) - (20)
Publishing 349 (115) - 234
Other (167) (19) - (186)
---- ------------------- ---- --------- --- --------------- -------
Consolidated Total $ 1,913 $ (310) $ (23) $ 1,580
==== =================== ==== ========= === =============== =======
For the Three Months Ended December 31, 2011
(US $ Millions)
Segment Operating
income (loss) Amortization
before Depreciation of Segment
depreciation Operating
and and cable distribution income
amortization amortization investments (loss)
------------------------- --------------- -------------------- -----------
Cable Network Programming $ 943 $ (38) $ (23) $ 882
Filmed Entertainment 416 (23) - 393
Television 210 (21) - 189
Direct Broadcast Satellite
Television 84 (78) - 6
Publishing 324 (106) - 218
Other (176) (15) - (191)
---- ------------------- ---- --------- --- --------------- -------
Consolidated Total $ 1,801 $ (281) $ (23) $ 1,497
==== =================== ==== ========= === =============== =======
For the Six Months Ended December 31, 2012
(US $ Millions)
Segment Operating
income (loss) Amortization
before Depreciation of Segment
depreciation Operating
and and cable distribution income
amortization amortization investments (loss)
------------------------ --------------- -------------------- -----------
Cable Network Programming $ 2,029 $ (87) $ (44) $ 1,898
Filmed Entertainment 849 (66) - 783
Television 423 (43) - 380
Direct Broadcast Satellite
Television 151 (148) - 3
Publishing 521 (230) - 291
Other (361) (36) - (397)
---- ------------------ ---- --------- ---- -------------- -------
Consolidated Total $ 3,612 $ (610) $ (44) $ 2,958
==== ================== ==== ========= ==== ============== =======
For the Six Months Ended December 31, 2011
(US $ Millions)
Segment Operating
income (loss) Amortization
before Depreciation of Segment
depreciation Operating
and and cable distribution income
amortization amortization investments (loss)
------------------------ --------------- -------------------- -----------
Cable Network Programming $ 1,779 $ (75) $ (47) $ 1,657
Filmed Entertainment 802 (62) - 740
Television 364 (42) - 322
Direct Broadcast Satellite
Television 277 (152) - 125
Publishing 541 (213) - 328
Other (259) (31) - (290)
---- ------------------ ---- --------- ---- -------------- -------
Consolidated Total $ 3,504 $ (575) $ (47) $ 2,882
==== ================== ==== ========= ==== ============== =======
NOTE 2 - ADJUSTED NET INCOME AND ADJUSTED EPS
The Company uses net income and earnings per share excluding
Segment operating profit adjustments, Impairment and restructuring
charges, Equity affiliate adjustments, "Other, net", and
discontinued operations, net of tax ("adjusted net income and
adjusted diluted earnings per share") 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 and adjusted diluted earnings per share 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 and adjusted
diluted earnings per share are not measures of performance under
generally accepted accounting principles and should not be
construed as substitutes for consolidated net income and earnings
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 and reported
diluted earnings per share ("EPS") to adjusted net income and
adjusted diluted earnings per share for the three months ended
December 31, 2012 and 2011.
3 Months Ended 3 Months Ended
December 31,2012 December 31,2011
Net income Net income
attributable attributable
to to
stockholders EPS stockholders EPS
----------------- --------- -------------- ---------
(in US$ millions, except per share data)
As reported $ 2,381 $ 1.01 $ 1,057 $ 0.42
Segment operating profit
adjustments (net of provision
for income taxes of $12
and $17 for the three months
ended December 31, 2012
and 2011, respectively)(a) 67 0.03 70 0.03
Impairment and restructuring
charges (net of provision
for income taxes of $19
and $10 for the three months
ended December 31, 2012
and 2011, respectively) 46 0.02 26 0.01
Equity affiliate adjustments
(net of provision for income
taxes of $4 and $10 for
the three months ended December
31, 2012 and 2011, respectively)(b) (70) (0.03) (34) (0.01)
Other, net (net of provision
for income taxes of $13
for the three months ended
December 31, 2012 and 2011) (1,387) (0.59) (138) (0.05)
Rounding (0.01)
--- ------------ -------- ---------- --------
As adjusted $ 1,037 $ 0.44 $ 981 $ 0.39
=== ============ ======== ========== ========
(a) Segment operating profit for the three months ended December
31, 2012 and 2011 was adjusted to exclude the expenses related to
the ongoing investigations initiated upon the closure of The News
of the World. The three months ended December 31, 2012 were also
adjusted to exclude the expenses related to separation of the
Company's entertainment and publishing businesses.
(b) Equity earnings of affiliates for the three months ended
December 31, 2012 and 2011 was adjusted to exclude from BSkyB
results News Corporation's gain on the BSkyB repurchase program.
The three months ended December 31, 2012 were also adjusted to
exclude from Hulu results one-time costs resulting from its
purchase of the Providence Equity Partners' ownership stake.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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