EX-99.1 2 d527792dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

NEWS CORPORATION REPORTS THIRD QUARTER EARNINGS PER

SHARE OF $1.22 ON NET INCOME ATTRIBUTABLE TO STOCKHOLDERS

OF $2.85 BILLION

TOTAL SEGMENT OPERATING INCOME INCREASES 4% TO $1.36

BILLION ON REVENUE OF $9.54 BILLION

NEW YORK, NY, May 8, 2013 – News Corporation (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) today reported $9.54 billion of total revenue for the three months ending March 31, 2013, a $1.14 billion or 14% increase over the $8.40 billion of revenue reported in the prior year quarter. Approximately 55% of the revenue increase reflects growth at the Cable Network Programming, Filmed Entertainment and Television segments, partially offset by lower revenues at the Publishing segment. The balance of the growth primarily relates to the inclusion of Sky Deutschland AG (“Sky Deutschland”) and Fox Sports Australia revenues.

The Company reported third quarter total segment operating income(1) of $1.36 billion, as compared to $1.31 billion reported a year ago. The improvement was led by operating income growth at the Company’s Cable Network Programming, Filmed Entertainment and Television segments. The third quarter results included $42 million of costs related to the ongoing investigations initiated upon the closure of The News of the World as compared to $63 million in the corresponding period of the prior year. This year’s third quarter results also included $25 million of costs related to the proposed separation of the Company’s entertainment and publishing businesses. Excluding these costs from both years, third quarter adjusted total segment operating income of $1.43 billion increased $54 million or 4% from $1.38 billion reported in the third quarter of the prior year.

The Company reported quarterly net income attributable to stockholders of $2.85 billion ($1.22 per share), as compared to $937 million ($0.38 per share) reported in the corresponding period of the prior year. This quarter’s pre-tax results included $2.43 billion of income in Other, net, principally related to gains on the acquisition of an additional ownership stake in Sky Deutschland and the sale of the ownership stake in SKY Network Television in New Zealand, as well as a $11 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 $56 million of restructuring 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, third quarter adjusted earnings per share(2) was $0.36 versus the adjusted prior year quarter result of $0.37.

Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch said:

“In our fiscal third quarter News Corp. achieved organic growth across our cable, film and television segments and, through the consolidation of Sky Deutschland and sale of stakes in SKY New Zealand and Phoenix Satellite Television, we advanced our strategic agenda to simplify our global portfolio. We also announced our plans to broaden our core cable business with the unveiling of our national sports channel Fox Sports 1 and our third branded FX channel, FXX. Both initiatives underscore our strategy of maximizing existing assets and leadership positions to drive sustainable growth and long-term value.

“We are on target to complete the proposed separation of our businesses near the end of our fiscal year. As we prepare to launch two new industry leaders with new News Corporation and 21st Century Fox, I am more confident than ever of the long-term value the separation will unlock for the Company and its shareholders.”

 

(1)

Total segment operating income is a non-GAAP financial measure. See page 11 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 14 for a reconciliation of reported net income and earnings per share to adjusted net income and adjusted earnings per share.

 

Page 1


LOGO   News Corporation
 

EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

REVIEW OF SEGMENT OPERATING RESULTS

 

Total Segment Operating Income (Loss)   

3 Months Ended

March 31,

   

9 Months Ended

March 31,

 
     2013     2012     2013     2012  
     US $ Millions  

Cable Network Programming

   $ 993     $ 846     $ 2,891     $ 2,503  

Filmed Entertainment

     289       272       1,072       1,012  

Television

     196       171       576       493  

Direct Broadcast Satellite Television

     (11     40       (8     165  

Publishing

     85       130       376       458  

Other

     (190     (147     (587     (437
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment Operating Income *

   $ 1,362     $ 1,312     $ 4,320     $ 4,194  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*

The three months ended March 31, 2013 and 2012 include $42 million and $63 million, respectively, of costs related to the ongoing investigations in the U.K. The three months ended March 31, 2013 include $25 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 $1,429 and $1,375 million in the three months ended March 31, 2013 and 2012, respectively.

The nine months ended March 31, 2013 and 2012 include $165 million and $167 million, respectively, of costs related to the ongoing investigations in the U.K. The nine months ended March 31, 2013 include $53 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 $4,538 and $4,361 million in the nine months ended March 31, 2013 and 2012, respectively.

CABLE NETWORK PROGRAMMING

Cable Network Programming reported quarterly segment operating income of $993 million, a $147 million or 17% increase over the prior year quarter, driven by a 17% increase in revenue. Operating income contributions from the domestic channels increased 16%. Revenue growth across all domestic channels, led by strong growth at the Company’s regional sports networks (“RSNs”) and FX Networks, was partially offset by increased programming and marketing costs at the Company’s FX Networks and National Geographic Channels. The Company’s international cable channels’ quarterly earnings contributions increased 21% from the same period a year ago, reflecting strong operating profit growth at the Fox International Channels (“FIC”), partially offset by the adverse impact of the strengthened U.S. dollar.

Affiliate revenue grew 11% and 42% at the domestic and international cable channels, respectively. Domestic network growth reflects higher rates across all networks, led by growth at the RSNs, Fox News Channel and FX Networks. Approximately 60% 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 attributable to the new sports channels, including Fox Star Sports Asia and Eredivisie Media & Marketing CV (“EMM”), partially offset by the impact of the strengthened U.S. dollar.

Advertising revenue at the domestic cable channels grew 2% in the quarter over the prior year period driven by double-digit growth at the FX Networks and National Geographic Channels, partially offset by lower advertising revenues at the Fox News Channel, due to the absence of the presidential primaries which occurred in the prior year, and at the RSNs, due to the broadcast of fewer National Basketball Association (“NBA”) games. Nearly two-thirds of the international cable channels’ 30% advertising revenue improvement reflects strong local currency growth at the non-sports channels at FIC and STAR. The balance of the growth was attributable to the new sports channels, including Fox Star Sports Asia and EMM networks, partially offset by the impact of the strengthened U.S. dollar.

Expenses at Cable Network Programming grew 17% in the quarter over the corresponding period in the prior year. More than two-thirds of this increase was attributable to the new international sports networks at FIC and STAR, including the investment in BCCI cricket rights in India. The balance of the increase was due to higher programming and marketing costs at the FX Networks and National Geographic Channels, partially offset by reduced NBA rights costs at the RSNs resulting from the broadcast of fewer games.

 

Page 2


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

FILMED ENTERTAINMENT

Filmed Entertainment reported quarterly segment operating income of $289 million, as compared to $272 million reported in the same period a year ago. Quarterly results reflect the successful worldwide theatrical and domestic home entertainment performances of Life of Pi, which has grossed more than $600 million in worldwide box office and was the winner of 4 Academy Awards, the most for any film this year. The quarter also included the successful worldwide home entertainment performances of Taken 2 and Ice Age: Continental Drift and theatrical release costs for the successful release of The Croods, the first feature in our DreamWorks Animation distribution deal which has grossed more than $500 million in worldwide box office to date. Prior year third quarter film results included the successful worldwide theatrical and domestic home entertainment performance of Alvin and the Chipmunks: Chipwrecked and pay-television availability of Rio.

TELEVISION

Television reported quarterly segment operating income of $196 million, an increase of $25 million or 15% versus the same period a year ago. This increase reflects a near doubling of retransmission consent revenues and lower programming costs at the Fox Broadcasting Company. These improvements were partially offset by lower national and local advertising revenues, primarily reflecting lower primetime ratings driven by declines at American Idol, now in its twelfth season.

DIRECT BROADCAST SATELLITE TELEVISION (“DBS”)

DBS generated a quarterly segment operating loss of $11 million, compared to operating income of $40 million reported in the same period a year ago. The decline was driven by the consolidation of Sky Deutschland results, following the Company’s acquisition of an additional 5% ownership stake in this entity in January 2013, as well as lower contributions from SKY Italia. Revenues increased $377 million versus the same period a year ago, reflecting the inclusion of Sky Deutschland revenues. Sky Deutschland grew net subscribers by approximately 42,000 during the quarter, bringing total direct subscribers to 3.41 million. Quarterly local currency revenue at SKY Italia declined slightly from the corresponding period of the prior year. SKY Italia experienced a net reduction of approximately 51,000 subscribers during the quarter, bringing total subscribers to 4.78 million.

PUBLISHING

Publishing reported quarterly segment operating income of $85 million, a $45 million decrease from the $130 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, were more than offset by lower advertising revenues at the Australian newspapers and integrated marketing services businesses.

OTHER

The Other segment quarterly operating loss of $190 million increased from the $147 million reported in the same period a year ago. The current quarter included an increased operating loss at Amplify, the Company’s education business, reflecting higher product development costs. The increased operating loss was partially offset by a benefit from the consolidation of FOX SPORTS Australia, net of non-cash amortization, related to the acquisition of the additional ownership stake in the prior quarter. The current year quarterly results also included $42 million of costs related to the ongoing investigations initiated upon the closure of The News of the World, as compared to $63 million of comparable costs included in the prior year quarterly results, as well as $25 million of costs related to the proposed separation of the Company’s entertainment and publishing businesses.

 

Page 3


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

OTHER ITEMS

Sky Deutschland

In January 2013, the Company reached an agreement with Sky Deutschland and its new bank syndicate to support both a new financing structure and the issuance of €438 million (approximately $585 million) of new equity, which includes the outstanding €144 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 €410 million (approximately $550 million). As a result of these transactions, the results of Sky Deutschland have been included in the Company’s consolidated results of operations in the fiscal third quarter of 2013. The carrying amount of the Company’s previously held equity interest in Sky Deutschland was revalued to fair value as of the acquisition date, resulting in a gain of approximately $2.1 billion which was included in Other, net in the unaudited consolidated statements of operations.

In addition, the Company has guaranteed Sky Deutschland’s new €300 million (approximately $400 million) five-year bank credit facility, which replaces Sky Deutschland’s existing bank debt facilities. Additionally, the Company 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. The Company has also agreed to extend the maturity of existing shareholder loans.

SKY Network Television (New Zealand)

In March 2013, the Company sold its 44% equity interest in SKY Network Television Ltd. for approximately $675 million, net of fees and commissions, and recorded a gain of approximately $321 million which was included in Other, net in the unaudited consolidated statements of operations.

Phoenix Satellite Television

In March 2013, the Company sold a portion of its interest in Phoenix Satellite Television (“Phoenix”), for approximately $90 million in cash. The Company decreased its interest in Phoenix to approximately 12% from the 18% it owned at June 30, 2012. The Company recorded a gain of approximately $81 million on this transaction which was included in Other, net in the unaudited consolidated statements of operations.

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 May 7, 2013, the Company has purchased more than $6.6 billion of Class A common stock under the program, at an average price of $19.50 per share. As a result of the stock repurchase program, diluted weighted Class A shares outstanding of 2,330 million in this year’s quarter declined 6% from 2,475 million in the same period a year ago.

Intent to pursue separation of entertainment and publishing businesses

On June 28, 2012, News Corporation announced its intent to pursue the separation of its business into two separate independent companies, one of which will hold the Company’s global media and entertainment businesses and the other which will hold the businesses comprising the Company’s newspapers, information services and integrated marketing services, digital real estate services, book publishing, digital education and sports programming and pay-TV distribution in Australia. 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. There can be no assurances given that the separation of the Company’s businesses as described will occur.

 

Page 4


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’ RESULTS

Quarterly earnings from affiliates were $157 million as compared to $204 million in the same period a year ago. The decreased contributions from affiliates are primarily due to lower contributions from BSkyB, resulting from the Company’s pre-tax gain related to the its participation in BSkyB’s share repurchase declining from $111 million gain in the corresponding period of the prior year to $11 million in the current quarter. This decrease was partially offset by the absence of Sky Deutschland operating losses resulting from its consolidation in the quarter.

The Company’s share of equity earnings (losses) of affiliates is as follows:

 

           3 Months Ended
March 31,
    9 Months Ended
March 31,
 
     % Owned     2013     2012     2013     2012  
           US $ Millions  

BSkyB

     39 %(1)    $ 160     $ 262     $ 667     $ 577  

Other affiliates

     Various (2)      (3     (58     (146     (110
    

 

 

   

 

 

   

 

 

   

 

 

 

Total equity earnings of affiliates

     $ 157     $ 204     $ 521     $ 467  
    

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Please refer to BSkyB’s earnings releases for detailed information.

(2) 

Primarily comprised of Sky Deutschland (consolidated as of January 2013), 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  
     March 31,  
     2013      2012  

Australian Dollar/U.S. Dollar

     1.04        1.06  

U.K. Pounds Sterling/U.S. Dollar

     1.55        1.57  

Euro/U.S. Dollar

     1.32        1.31  

 

Page 5


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

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 third quarter results can be heard live on the Internet at 4:30 p.m. Eastern Daylight Savings 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

Joe Dorrego, Investor Relations

212-852-7856

 

310-369-0773

Nathaniel Brown, Press Inquiries

212-852-7746

Dan Berger, Press Inquiries

310-369-1274

 

Page 6


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

     3 Months Ended
March 31,
    9 Months Ended
March 31,
 
     2013     2012     2013     2012  
     US $ Millions (except share related amounts)  

Revenues

   $ 9,538     $ 8,402     $ 27,099     $ 25,336  

Operating expenses

     (6,114     (5,216     (16,831     (15,552

Selling, general and administrative expenses

     (1,705     (1,580     (4,981     (4,721

Depreciation and amortization

     (357     (294     (967     (869

Impairment and restructuring charges

     (56     (27     (273     (154

Equity earnings of affiliates

     157       204       521       467  

Interest expense, net

     (276     (258     (809     (773

Interest income

     32       26       100       91  

Other, net

     2,431       27       5,206       22  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income tax expense

     3,650       1,284       9,065       3,847  

Income tax expense

     (741     (281     (1,402     (931
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     2,909       1,003       7,663       2,916  

Less: Net income attributable to noncontrolling interests

     (55     (66     (195     (184
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to News Corporation stockholders

   $ 2,854     $ 937     $ 7,468     $ 2,732  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares:

     2,330       2,475       2,348       2,534  

Net income attributable to News Corporation stockholders per share:

   $ 1.22     $ 0.38     $ 3.18     $ 1. 08   

 

Page 7


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

CONSOLIDATED BALANCE SHEETS

 

      March  31,
2013
     June  30,
2012
 
       
     US $ Millions  
Assets:   

Current assets:

     

Cash and cash equivalents

   $ 9,324      $ 9,626  

Receivables, net

     7,136        6,608  

Inventories, net

     3,476        2,595  

Other

     857        619  
  

 

 

    

 

 

 

Total current assets

     20,793        19,448  
  

 

 

    

 

 

 

Non-current assets:

     

Receivables

     431        387  

Investments

     6,622        4,968  

Inventories, net

     5,002        4,596  

Property, plant and equipment, net

     5,984        5,814  

Intangible assets, net

     8,331        7,133  

Goodwill

     20,139        13,174  

Other non-current assets

     1,188        1,143  
  

 

 

    

 

 

 

Total assets

   $ 68,490      $ 56,663  
  

 

 

    

 

 

 

Liabilities and Equity:

     

Current liabilities:

     

Borrowings

   $ 157      $ 273  

Accounts payable, accrued expenses and other current liabilities

     6,030        5,405  

Participations, residuals and royalties payable

     1,915        1,691  

Program rights payable

     1,776        1,368  

Deferred revenue

     1,175        880  
  

 

 

    

 

 

 

Total current liabilities

     11,053        9,617  
  

 

 

    

 

 

 

Non-current liabilities:

     

Borrowings

     16,317        15,182  

Other liabilities

     4,279        3,650  

Deferred income taxes

     2,947        2,388  

Redeemable noncontrolling interests

     645        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

     15,902        16,140  

Retained earnings and accumulated other comprehensive income

     14,139        8,521  
  

 

 

    

 

 

 

Total News Corporation stockholders’ equity

     30,064        24,684  

Noncontrolling interests

     3,185        501  
  

 

 

    

 

 

 

Total equity

     33,249        25,185  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 68,490      $ 56,663  
  

 

 

    

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     9 Months Ended March 31,  
     2013     2012  
     US $ Millions  

Operating activities:

    

Net Income

   $ 7,663     $ 2,916  

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     967       869  

Amortization of cable distribution investments

     67       69  

Equity earnings of affiliates

     (521     (467

Cash distributions received from affiliates

     311       313  

Impairment charges, net of tax

     35       10  

Other, net

     (5,206     (22

Change in operating assets and liabilities, net of acquisitions:

    

Receivables and other assets

     (295     (551

Inventories, net

     (1,043     (577

Accounts payable and other liabilities

     785       161  
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,763       2,721  
  

 

 

   

 

 

 

Investing activities:

    

Property, plant and equipment, net of acquisitions

     (627     (651

Acquisitions, net of cash acquired

     (2,746     (532

Investments in equity affiliates

     (618     (14

Other investments

     (63     (198

Proceeds from dispositions

     2,670       408  
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,384     (987
  

 

 

   

 

 

 

Financing activities:

    

Borrowings

     1,277       —    

Repayment of borrowings

     (989     (32

Issuance of shares

     170       87  

Repurchase of shares

     (1,834     (3,294

Dividends paid

     (384     (323

Purchase of subsidiary shares from noncontrolling interests

     (9     —    

Other, net

     70       —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,699     (3,562
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (320     (1,828

Cash and cash equivalents, beginning of period

     9,626       12,680  

Exchange movement on opening cash balance

     18       (166
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 9,324     $ 10,686  
  

 

 

   

 

 

 

 

Page 9


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

SEGMENT INFORMATION

 

     3 Months Ended
March 31,
    9 Months Ended
March 31,
 
     2013     2012     2013     2012  
     US $ Millions  

Revenues

        

Cable Network Programming

   $ 2,782     $ 2,375     $ 7,790     $ 6,656  

Filmed Entertainment

     2,014       1,722       5,826       5,563  

Television

     1,225       1,208       3,716       3,651  

Direct Broadcast Satellite Television

     1,300       923       3,007       2,792  

Publishing

     1,938       2,025       6,105       6,224  

Other

     279       149       655       450  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

   $ 9,538     $ 8,402     $ 27,099     $ 25,336  
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment Operating Income (Loss)

        

Cable Network Programming

   $ 993     $ 846     $ 2,891     $ 2,503  

Filmed Entertainment

     289       272       1,072       1,012  

Television

     196       171       576       493  

Direct Broadcast Satellite Television

     (11     40       (8     165  

Publishing

     85       130       376       458  

Other

     (190     (147     (587     (437
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment Operating Income *

   $ 1,362     $ 1,312     $ 4,320     $ 4,194  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*

The three months ended March 31, 2013 and 2012 include $42 million and $63 million, respectively, of costs related to the ongoing investigations in the U.K. The three months ended March 31, 2013 include $25 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 $1,429 and $1,375 million in the three months ended March 31, 2013 and 2012, respectively.

The nine months ended March 31, 2013 and 2012 include $165 million and $167 million, respectively, of costs related to the ongoing investigations in the U.K. The nine months ended March 31, 2013 include $53 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 $4,538 and $4,361 million in the nine months ended March 31, 2013 and 2012, respectively.

 

Page 10


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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

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.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

The following table reconciles segment operating income before depreciation and amortization to income from continuing operations before income tax expense.

 

     3 Months Ended
March 31,
    9 Months Ended
March 31,
 
     2013     2012     2013     2012  
     US $ Millions  

Segment Operating income before depreciation and amortization

   $ 1,742     $ 1,628     $ 5,354     $ 5,132  

Depreciation and amortization

     (357     (294     (967     (869

Amortization of cable distribution investments

     (23     (22     (67     (69
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment Operating income

     1,362       1,312       4,320       4,194  

Impairment and restructuring charges

     (56     (27     (273     (154

Equity earnings of affiliates

     157       204       521       467  

Interest expense, net

     (276     (258     (809     (773

Interest income

     32       26       100       91  

Other, net

     2,431       27       5,206       22  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income tax expense

   $ 3,650     $ 1,284     $ 9,065     $ 3,847  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     For the Three Months Ended March 31, 2013
(US $ Millions)
 
     Segment Operating
income (loss)
before

depreciation and
amortization
    Depreciation
and
amortization
    Amortization of
cable distribution
investments
    Segment
Operating income
(loss)
 
        

Cable Network Programming

   $ 1,069     $ (53   $ (23   $ 993  

Filmed Entertainment

     321       (32     —          289  

Television

     219       (23     —          196  

Direct Broadcast Satellite Television

     90       (101     —          (11

Publishing

     203       (118     —          85  

Other

     (160     (30     —          (190
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 1,742     $ (357   $ (23   $ 1,362  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     For the Three Months Ended March 31, 2012
(US $ Millions)
 
     Segment Operating
income (loss)
before

depreciation and
amortization
    Depreciation
and
amortization
    Amortization of
cable distribution
investments
    Segment
Operating  income
(loss)
 
        

Cable Network Programming

   $ 910     $ (42   $ (22   $ 846  

Filmed Entertainment

     305       (33     —          272  

Television

     192       (21     —          171  

Direct Broadcast Satellite Television

     116       (76     —          40  

Publishing

     236       (106     —          130  

Other

     (131     (16     —          (147
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 1,628     $ (294   $ (22   $ 1,312  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

     For the Nine Months Ended March 31, 2013  
     (US $ Millions)  
     Segment Operating
income (loss)
before

depreciation and
amortization
    Depreciation
and
amortization
    Amortization of
cable  distribution
investments
    Segment
Operating  income
(loss)
 

Cable Network Programming

   $ 3,098     $ (140   $ (67   $ 2,891  

Filmed Entertainment

     1,170       (98     —          1,072  

Television

     642       (66     —          576  

Direct Broadcast Satellite Television

     241       (249     —          (8

Publishing

     724       (348     —          376  

Other

     (521     (66     —          (587
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 5,354     $ (967   $ (67   $ 4,320  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     For the Nine Months Ended March 31, 2012  
     (US $ Millions)  
     Segment Operating
income (loss)
before

depreciation and
amortization
    Depreciation
and
amortization
    Amortization of
cable distribution
investments
    Segment
Operating income
(loss)
 

Cable Network Programming

   $ 2,689     $ (117   $ (69   $ 2,503  

Filmed Entertainment

     1,107       (95     —          1,012  

Television

     556       (63     —          493  

Direct Broadcast Satellite Television

     393       (228     —          165  

Publishing

     777       (319     —          458  

Other

     (390     (47     —          (437
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 5,132     $ (869   $ (69   $ 4,194  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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LOGO   News Corporation
 

EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2013

 

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 March 31, 2013 and 2012.

 

     3 Months Ended
March 31, 2013
    3 Months Ended
March 31, 2012
 
     Net income
attributable to
stockholders
    EPS     Net income
attributable to
stockholders
    EPS  
     (in US$ millions, except per share data)  

As reported

   $ 2,854     $ 1.22     $ 937     $ 0.38  

Segment operating profit adjustments (net of provision for income taxes of $15 and $19 for the three months ended March 31, 2013 and 2012, respectively)(a)

     52       0.02       44       0.02  

Impairment and restructuring charges (net of provision for income taxes of $15 and $4 for the three months ended March 31, 2013 and 2012, respectively)

     41       0.02       23       0.01  

Equity affiliate adjustments (net of provision for income taxes of $3 and $45 for the three months ended March 31, 2013 and 2012, respectively)(b)

     (8     —         (66     (0.03

Other, net (net of provision for income taxes of $325 and $10 for the three months ended March 31, 2013 and 2012)

     (2,106     (0.90     (17     (0.01

Other/Rounding

     1        
  

 

 

   

 

 

   

 

 

   

 

 

 

As adjusted

   $ 834     $ 0.36     $ 921     $ 0.37  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Segment operating profit for the three months ended March 31, 2013 and 2012 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 March 31, 2013 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 March 31, 2013 and 2012 was adjusted to exclude from BSkyB results News Corporation’s gain on the BSkyB repurchase program.

 

Page 14