Fiscal 2014 First Quarter Key Financial
Highlights
- Revenues of $2.07 billion compared
to $2.13 billion in the prior year
- Reported Total Segment EBITDA of
$141 million compared to $89 million in the prior year
- Reported Net Income of $38 million
compared to a Net Loss of ($83) million in the prior year
- Diluted EPS were $0.05 compared to
($0.16) in the prior year
News Corporation (“News Corp” or the “Company”)
(NASDAQ:NWS)(NASDAQ:NWSA)(ASX:NWS)(ASX:NWSLV) today reported
financial results for the three months ended September 30,
2013.
Commenting on the results, Chief Executive Robert Thomson
said:
“Our first quarter as the new News was the beginning of a
journey in the digital development of the company. There are
certainly headwinds in Australia, magnified by inauspicious foreign
currency movements, but we have been consistently cost conscious
and are transforming our publishing operations longer-term into
multi-platform businesses. We are vigorously pursuing a strategy to
improve our revenue prospects and we look forward to updating all
in future quarters.”
The Company reported fiscal 2014 first quarter total revenues of
$2.07 billion, a 3% decrease as compared to the prior year revenues
of $2.13 billion. The majority of the revenue decline reflects
lower advertising revenues at the News and Information Services
segment, foreign exchange fluctuations and the sale of the Dow
Jones Local Media Group (“LMG”), partially offset by the inclusion
of FOX SPORTS Australia, which News Corp began consolidating in
November 2012 following the Consolidated Media Holdings (“CMH”)
acquisition, and continued strength in the Digital Real Estate
Services segment. Excluding the impact of acquisitions,
divestitures and foreign exchange fluctuations, Revenues1 declined
4% compared to the prior year.
The Company reported first quarter Total Segment EBITDA2 of $141
million, a 58% increase as compared to $89 million in the prior
year. This improvement was mainly due to the consolidation of FOX
SPORTS Australia and lower costs at News and Information Services
as well as for the claims and investigations arising out of certain
conduct at The News of the World (the “U.K. Newspaper Matters”),
partially offset by higher losses at Amplify and foreign exchange
fluctuations. Excluding all costs related to the U.K. Newspaper
Matters and the impact of acquisitions, divestitures and foreign
exchange fluctuations, Total Segment EBITDA1 declined 5% compared
to the prior year.
________________________________
1 Adjusted Revenues and Adjusted Total Segment EBITDA are
non-GAAP financial measures. See “Note 1 – Adjusted Revenues,
Adjusted Total Segment EBITDA and Adjusted Segment EBITDA” for a
description of Adjusted Revenues and Adjusted Total Segment EBITDA
as well as for reconciliations from reported revenues to Adjusted
Revenues and from reported Total Segment EBITDA to Adjusted Total
Segment EBITDA.
2 Total Segment EBITDA is a non-GAAP financial measure. See
“Note 2 – Total Segment EBITDA” for a description of Total Segment
EBITDA and for reconciliations from revenues to Total Segment
EBITDA and from Total Segment EBITDA to net income (loss).
Net income was $38 million as compared to a net loss of ($83)
million in the prior year. Adjusted net income attributable to News
Corporation stockholders3 was $17 million compared to $37 million
in the prior year.
Diluted net income per share attributable to News Corporation
stockholders was $0.05 as compared to a net loss per share of
($0.16) in the prior year. Adjusted EPS3 were $0.03 compared to
$0.06 in the prior year.
Free cash flow available to News Corporation4 improved by $145
million in the quarter to ($10) million, from ($155) million in the
prior year.
SEGMENT REVIEW
For the three months ended September 30, 2013 2012
% Change (in millions)
Revenues: News and
Information Services $ 1,495 $ 1,666 (10)% Cable Network
Programming 132 - ** Digital Real Estate Services 90 81 11% Book
Publishing 328 352 (7)% Other 27 34
(21)%
Total Revenues $ 2,072 $ 2,133 (3)%
Segment EBITDA: News and Information Services $ 133 $
126 6% Cable Network Programming 29 - ** Digital Real Estate
Services 44 35 26% Book Publishing 43 40 8% Other (108 )
(112 ) (4)%
Total Segment EBITDA $ 141 $ 89
58% ** - Not meaningful
News and Information Services
Revenues for the first quarter of fiscal 2014 decreased $171
million, or 10%, compared to the prior year. Australian newspapers
revenues declined 22% and accounted for the majority of the revenue
decline compared to the prior year. Total segment advertising
revenues declined 12%, driven by weakness in Australia and
moderating declines at Dow Jones and News UK versus the prior year,
offset by continued growth at News America Marketing driven by
improving sales performance from its in-store business. Circulation
and subscription revenues declined 6%, due to lower print volume
and a decline in Institutional revenues at Dow Jones, partially
offset by cover price increases at the U.K. and Australian
newspapers as well as improvements at The Wall Street Journal and
WSJ.com. Foreign exchange fluctuations had a 4% negative impact on
advertising revenues and a 3% negative impact on circulation and
subscription revenues. Excluding the impact of divestitures and
foreign exchange fluctuations, Segment revenues declined 6%.
_______________________________
3 Adjusted Net Income attributable to News Corporation
stockholders and Adjusted EPS are non-GAAP financial measures. See
“Note 3 – Adjusted Net Income Attributable to News Corporation
Stockholders and Adjusted EPS” for reconciliations of reported net
income (loss) attributable to News Corporation stockholders and
diluted earnings (loss) per share attributable to News Corporation
stockholders to Adjusted Net Income attributable to News
Corporation stockholders and Adjusted EPS. Adjusted figures exclude
costs related to U.K. Newspaper Matters, impairment and
restructuring charges and Other, net. Restructuring charges consist
of $27 million and $115 million in the three months ended September
30, 2013 and 2012, respectively.
4 Free cash flow available to News Corporation is a non-GAAP
financial measure. See “Free Cash Flow Available to News
Corporation” section below for a description of free cash flow
available to News Corporation and for a reconciliation from Net
cash provided by (used in) operating activities to free cash flow
available to News Corporation.
Segment EBITDA increased $7 million in the quarter, or 6%, as
compared to the prior year. Results were driven by positive
contributions at News UK, News America Marketing and the absence of
losses from The Daily more than offsetting continued weakness in
Australia. Total operating expenses declined 12% driven in part by
the impact of cost savings initiatives, ongoing operational
efficiencies and lower production costs, as well as the sale of
LMG. Excluding the impact of divestitures and foreign exchange
fluctuations, Segment EBITDA increased 12%.
Cable Network Programming
In the first quarter of fiscal 2014, revenues were $132 million
and Segment EBITDA was $29 million reflecting the consolidation of
FOX SPORTS Australia in November 2012. On a stand-alone basis5,
strong growth in advertising revenues from improved ratings and
increased government election spending, coupled with higher
subscription revenues, was offset by foreign exchange fluctuations,
leading to revenues being flat versus the prior year. Segment
EBITDA declined 31% on a stand-alone basis, primarily driven by the
timing of higher expenses associated with the National Rugby League
rights contract which began in March 2013. Excluding the impact of
foreign exchange fluctuations, revenues increased 14% from the
prior year and Segment EBITDA decreased 21%.
Digital Real Estate Services
Revenues in the quarter increased $9 million, or 11%, compared
to the prior year reflecting increased revenues from listing depth
penetration. Segment EBITDA in the quarter increased $9 million, or
26%, compared to the prior year, primarily due to the increased
revenues as noted above. Excluding the impact of foreign exchange
fluctuations, revenues and Segment EBITDA increased 23% and 43%,
respectively.
Book Publishing
Revenues in the quarter decreased $24 million, or 7%, compared
to the prior year as improved e-book sales were more than offset by
the divestiture of the Women of Faith live events business, the
decision to exit the third party distribution business in the U.S.
and softness in the Christian publishing marketplace as compared to
the prior year. E-book sales improved by over 30% versus the prior
year period and represented 22% of revenues, up from 15% in the
prior year. Segment EBITDA increased $3 million, or 8%, from the
prior year benefiting from the higher contribution to profits from
e-books and ongoing operational efficiencies, which were partially
offset by the weaker top-line this quarter. Excluding the impact of
acquisitions, divestitures, and foreign exchange fluctuations,
revenues decreased 5% and Segment EBITDA increased 8%.
_______________________________
5 For the three months ended September 30, 2012, on a
stand-alone basis, FOX SPORTS Australia had revenues of $132
million, operating income of $39 million, depreciation of $3
million and Segment EBITDA of $42 million. Excluding the impact of
foreign exchange fluctuations of $18 million on revenues and $4
million on Segment EBITDA, revenues and Segment EBITDA would have
been $150 million and $33 million, respectively, for the three
months ended September 30, 2013.
Other
Revenues in the quarter decreased $7 million, or 21%, compared
to the prior year, primarily due to the divestiture of the
Company’s Australian digital businesses during fiscal 2013. Segment
EBITDA in the quarter improved $4 million, primarily due to
decreased fees and costs related to the U.K. Newspaper Matters of
approximately $44 million, partially offset by higher expenses of
$29 million at Amplify primarily resulting from increased product
development, $6 million incurred by the corporate Strategy and
Creative Group and increased corporate overhead expenses of $8
million compared to an allocated basis used for fiscal 2013.
Prior to the separation, the Company’s Statement of Operations
included allocations of general corporate expenses for certain
support functions that were provided on a centralized basis by 21st
Century Fox. For the three months ended September 30, 2013, the
Company’s Statement of Operations reflects actual corporate
overhead costs incurred by the Company as it performs these
functions using its own resources or purchased services from either
third parties or 21st Century Fox.
In the first quarter of fiscal 2014, News Corp incurred gross
fees and costs of $40 million related to the U.K. Newspaper Matters
compared to $61 million incurred in the prior year. The net impact
on Segment EBITDA after indemnification from 21st Century Fox was
$17 million in the current quarter.
REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’
RESULTS
Quarterly equity earnings from affiliates were $13 million
compared to $26 million in the prior year. The lower contribution
primarily reflects the absence of the Company’s 44% stake in SKY
Network Television Ltd. which was sold in March 2013 and the
consolidation of FOX SPORTS Australia in November 2012. Partially
offsetting this decline was a higher contribution from Foxtel due
mainly to the Company’s increased ownership to 50% from 25% in
November 2012.
For the three months ended September
30, 2013 2012 (in millions) Foxtel(a) $ 13 $ 5
Pay television and cable network
programming equity affiliates(b)
- 22 Other equity affiliates - (1 ) Total Equity
earnings of affiliates $ 13 $ 26
(a)
The Company owned 25% of Foxtel through
November 2012. In November 2012, the Company increased its
ownership in Foxtel to 50% as a result of the CMH acquisition. The
Company amortized $16 million related to excess cost over the
Company’s proportionate share of its investment’s underlying net
assets allocated to finite-lived intangible assets during the three
months ended September 30, 2013. Such amortization is reflected in
Equity earnings of affiliates in the Statements of Operations.
(b)
Includes equity earnings of FOX SPORTS
Australia and SKY Network Television Ltd. The Company acquired the
remaining interest in FOX SPORTS Australia in November 2012 as a
result of the CMH acquisition and sold its investment in SKY
Network Television Ltd. in March 2013. The results of FOX SPORTS
Australia have been included within the Cable Network Programming
segment in the Company’s consolidated results of operations since
November 2012.
FREE CASH FLOW AVAILABLE TO NEWS CORPORATION
Free cash flow available to News Corporation is a non-GAAP
financial measure defined as net cash provided by (used in)
operating activities, less payments for property, plant and
equipment, net of acquisitions, and REA Group free cash flow, plus
cash dividends received from REA Group.
The Company considers free cash flow available to News
Corporation to provide useful information to management and
investors about the amount of cash generated by the business after
the acquisition of property and equipment, which can then be used
for strategic opportunities including, among others, investing in
the Company’s business, acquisitions, strengthening the Company’s
balance sheet, dividend payouts and repurchasing stock. A
limitation of free cash flow available to News Corporation is that
it does not represent the total increase or decrease in the cash
balance for the period. Management compensates for the limitation
of free cash flow available to News Corporation by also relying on
the net change in cash and cash equivalents as presented in the
Company’s consolidated and combined statements of cash flows
prepared in accordance with GAAP which incorporates all cash
movements during the period.
The following table presents a reconciliation of net cash
provided by (used in) operating activities to free cash flow
available to News Corporation:
For the three months ended September 30, 2013
2012 (in millions) Net cash provided by (used
in) operating activities $ 59 $ (87 ) Less: Property, plant and
equipment, net of acquisitions (67 ) (64 ) (8 ) (151
) Less: REA Group free cash flow (21 ) (21 ) Plus: Cash dividends
received from REA Group 19 17 Free cash
flow available to News Corporation $ (10 ) $ (155 )
Free cash flow available to News Corporation in the three months
ended September 30, 2013 improved by $145 million from $(155)
million in the prior year. This was driven by lower restructuring
payments of $71 million, the inclusion of Cable Network Programming
Segment EBITDA in the current period of $29 million, lower tax
payments of $27 million and lower payments for fees and costs
related to the U.K. Newspaper Matters of $25 million. These
increases in net cash provided by operating activities were
partially offset by the absence of cash distributions of $16
million received in the prior year primarily from SKY Network
Television Ltd. as the Company sold its investment in SKY Network
Television Ltd. in March 2013.
OTHER MATTERS
The Company previously filed refund claims for certain losses,
pertaining to periods prior to the separation, in a foreign
jurisdiction that had been subject to litigation. In the first
quarter of fiscal 2014, the foreign tax authority determined that
it would not appeal a favorable court ruling received by the
Company in July 2013 and therefore, a portion of the uncertain
matter has been resolved in the quarter. As a result, the Company
received a refund of taxes plus interest in October 2013.
Pursuant to the Tax Sharing and Indemnification Agreement with
21st Century Fox, refunds received related to these matters, net of
applicable taxes paid by the Company, are to be remitted to 21st
Century Fox. Accordingly, the Company recorded an income tax
benefit and a corresponding expense to Other, net of $483 million
for the payable to 21st Century Fox in the Statements of Operations
for the three months ended September 30, 2013.
Conference call
News Corporation’s earnings conference call can be heard live at
4:30pm Eastern Standard Time on November 11, 2013. To listen to the
call, please visit http://investors.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.
About News Corporation
News Corporation (NASDAQ: NWS, NWSA; ASX: NWS,
NWSLV) is a global, diversified media and information services
company focused on creating and distributing authoritative and
engaging content to consumers throughout the world. The
company comprises businesses across a range of media, including:
news and information services, cable network programming in
Australia, digital real estate services, book publishing, digital
education, and pay-TV distribution in Australia. Headquartered
in New York, the activities of News Corporation are conducted
primarily in the United States, Australia, and the United Kingdom.
More information is available at: www.newscorp.com.
NEWS CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF
OPERATIONS
(Unaudited; in millions, except share
and per share amounts)
For the three months ended September 30, 2013
2012 Revenues: Advertising $ 958 $ 1,041 Circulation and
Subscription 679 608 Consumer 311 326 Other 124
158 Total Revenues 2,072 2,133
Operating expenses (1,295 ) (1,334 ) Selling, general and
administrative (636 ) (710 ) Depreciation and amortization (141 )
(125 ) Impairment and restructuring charges (27 ) (115 ) Equity
earnings of affiliates 13 26 Interest, net 17 11 Other, net
(441 ) 3 Loss before income tax benefit (438 ) (111 )
Income tax benefit 476 28 Net income
(loss) 38 (83 ) Less: Net income attributable to noncontrolling
interests (11 ) (9 ) Net income (loss) attributable
to News Corporation stockholders $ 27 $ (92 )
Weighted average shares outstanding: Basic 579 579 Diluted 580 579
Net income (loss) attributable to News Corporation
stockholders per share Basic and diluted $ 0.05 $ (0.16 )
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions)
As ofSeptember 30,2013
As of June 30,2013
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 2,688 $ 2,381 Amounts due from 21st Century Fox - 247
Receivables, net 1,426 1,335 Taxes receivable 584 29 Other current
assets 532 651 Total current assets 5,230
4,643 Non-current assets: Investments 2,571 2,499
Property, plant and equipment, net 3,012 2,992 Intangible assets,
net 2,174 2,186 Goodwill 2,739 2,725 Other non-current assets
617 598 Total assets $ 16,343 $ 15,643
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 238 $ 242 Accrued expenses 1,107 1,108 Amounts due to 21st
Century Fox, net 413 - Deferred revenue 414 389 Other current
liabilities 473 432 Total current liabilities
2,645 2,171 Non-current liabilities: Retirement
benefit obligations 268 345 Deferred income taxes 185 152 Other
non-current liabilities 286 279 Commitments and
contingencies Redeemable preferred stock 20 20
Equity: Class A common stock 4 4 Class B common stock 2 2
Additional paid-in capital 12,299 12,281 Retained Earnings 27 -
Accumulated other comprehensive income 489 271 Total
News Corporation stockholders' equity 12,821 12,558 Noncontrolling
interests 118 118 Total equity 12,939
12,676 Total liabilities and equity $ 16,343 $ 15,643
NEWS CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF
CASH FLOWS
(Unaudited; in millions)
For the three months ended September 30, 2013
2012
Operating activities: Net Income (loss) $ 38 $
(83 ) Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities: Depreciation and
amortization 141 125 Equity earnings of affiliates (13 ) (26 ) Cash
distributions received from affiliates - 16 Foreign tax refund
payable to 21st Century Fox, net 483 - Foreign tax refund
receivable, net of applicable taxes (483 ) - Other, net (42 ) (3 )
Deferred income taxes and taxes payable 5 (57 ) Change in operating
assets and liabilities, net of acquisitions: Receivables and other
assets (74 ) (25 ) Inventories, net 32 (21 ) Accounts payable and
other liabilities (22 ) (12 ) Pension and postretirement benefit
plans (6 ) (1 ) Net cash provided by (used in) operating
activities 59 (87 )
Investing
activities: Property, plant and equipment, net of acquisitions
(67 ) (64 ) Acquisitions, net of cash acquired (2 ) (228 )
Investments in equity affiliates - (2 ) Proceeds from dispositions
96 - Net cash provided by (used in)
investing activities 27 (294 )
Financing activities: Net transfers from 21st Century Fox
and affiliates 217 255 Dividends paid (12 ) (11 ) Net
cash provided by financing activities 205 244
Net increase (decrease) in cash and cash
equivalents 291 (137 ) Cash and cash equivalents, beginning of
period 2,381 1,133 Exchange movement on opening cash balance
16 14
Cash and cash equivalents, end of
period $ 2,688 $ 1,010
NOTE 1 – ADJUSTED REVENUES, ADJUSTED TOTAL SEGMENT EBITDA AND
ADJUSTED SEGMENT EBITDA
The Company uses revenues, Total Segment EBITDA and Segment
EBITDA excluding the impact of acquisitions, divestitures, costs
associated with the U.K. Newspaper Matters and foreign exchange
fluctuations (“Adjusted Revenues, Adjusted Total Segment EBITDA and
Adjusted Segment EBITDA”) 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 Revenues, Adjusted Total Segment EBITDA and Adjusted
Segment EBITDA 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
Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA
are not measures of performance under generally accepted accounting
principles and should not be construed as substitutes for amounts
determined under GAAP as measures 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 table reconciles reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three months ended September 30, 2013 and
2012.
Revenues Total Segment EBITDA For the
three months ended September 30, For the three months ended
September 30, 2013 2012 Difference 2013
2012 Difference (in millions) (in
millions)
As reported $ 2,072 $ 2,133 $ (61 ) $ 141 $
89 $ 52 Impact of acquisitions (134 ) - (134 ) (29 ) - (29 )
Impact of divestitures (33 ) (59 ) 26 (4 ) (8 ) 4 Net
impact of U.K. Newspaper Matters - - - 17 61 (44 ) Impact of
foreign exchange fluctuations 80 - 80 10 - 10
As adjusted $ 1,985 $ 2,074 $ (89 ) $ 135
$ 142 $ (7 )
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months ended September 30, 2013 and 2012 are as follows:
For the three months ended September 30, 2013
2012 % Change (in millions)
Adjusted Revenues: News and Information Services $
1,533 $ 1,624 (6)% Cable Network Programming - - ** Digital Real
Estate Services 100 81 23% Book Publishing 325 342 (5)% Other
27 27 -%
Total Adjusted Revenues
$ 1,985 $ 2,074 (4)%
Adjusted Segment
EBITDA: News and Information Services $ 133 $ 119 12% Cable
Network Programming - - ** Digital Real Estate Services 50 35 43%
Book Publishing 43 40 8% Other (91 ) (52 ) 75%
Total Adjusted Segment EBITDA $ 135 $ 142 (5)%
** - Not meaningful
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the three months ended September 30, 2013 and
2012.
For the three months ended September 30, 2013
Impact of Impact of
Foreign U.K. As Impact of Impact of Exchange
Newspaper As Reported Acquisitions Divestitures Fluctuations
Matters Adjusted (in millions)
Revenues: News and
Information Services $ 1,495 $ - $ (28 ) $ 66 $ - $ 1,533 Cable
Network Programming 132 (132 ) - - - - Digital Real Estate Services
90 - - 10 - 100 Book Publishing 328 (2 ) (5 ) 4 - 325 Other
27 - - - -
27
Total Revenues $ 2,072 $ (134 ) $ (33 ) $
80 $ - $ 1,985
Segment EBITDA: News and
Information Services $ 133 $ - $ (4 ) $ 4 $ - $ 133 Cable Network
Programming 29 (29 ) - - - - Digital Real Estate Services 44 - - 6
- 50 Book Publishing 43 - - - - 43 Other (108 ) -
- - 17 (91 )
Total
Segment EBITDA $ 141 $ (29 ) $ (4 ) $ 10 $ 17 $ 135
For the three months ended September 30, 2012
Impact of
Impact of Foreign U.K. As Impact of Impact of
Exchange Newspaper As Reported Acquisitions Divestitures
Fluctuations Matters Adjusted (in millions)
Revenues:
News and Information Services $ 1,666 $ - $ (42 ) $ - $ - $ 1,624
Cable Network Programming - - - - - - Digital Real Estate Services
81 - - - - 81 Book Publishing 352 - (10 ) - - 342 Other 34
- (7 ) - - 27
Total Revenues $ 2,133 $ - $ (59 ) $ - $ - $ 2,074
Segment EBITDA: News and Information Services
$ 126 $ - $ (7 ) $ - $ - $ 119 Cable Network Programming - - - - -
- Digital Real Estate Services 35 - - - - 35 Book Publishing 40 - -
- - 40 Other (112 ) - (1 ) - 61
(52 )
Total Segment EBITDA $ 89 $ - $ (8 ) $ -
$ 61 $ 142
NOTE 2 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses
and selling, general and administrative expenses. Segment EBITDA
does not include: Depreciation and amortization, impairment and
restructuring charges, equity earnings of affiliates, interest,
net, other, net, income tax benefit and net income attributable to
noncontrolling interests. Management believes that Segment EBITDA
is an appropriate measure for evaluating the operating performance
of the Company’s business segments because it is the primary
measure used by the Company’s chief operating decision maker to
evaluate the performance and allocate resources within the
Company’s businesses. Segment EBITDA provides management, investors
and equity analysts a measure to analyze operating performance of
each of the Company’s business segments and its enterprise value
against historical data and competitors’ data, although historical
results may not be indicative of future results (as operating
performance is highly contingent on many factors, including
customer tastes and preferences).
Total Segment EBITDA is a non-GAAP measure and should be
considered in addition to, not as a substitute for, net income
(loss), cash flow and other measures of financial performance
reported in accordance with GAAP. In addition, this measure does
not reflect cash available to fund requirements and excludes items,
such as depreciation and amortization and impairment and
restructuring charges, which are significant components in
assessing the Company’s financial performance. The following table
reconciles Total Segment EBITDA to net income (loss).
For the three
months ended September 30, 2013 2012 Change % Change
(in millions)
Revenues $ 2,072 $ 2,133 $ (61 ) (3)% Operating
expenses (1,295 ) (1,334 ) 39 (3)% Selling, general and
administrative (636 ) (710 ) 74 (10)%
Total Segment EBITDA 141 89 52 58% Depreciation and
amortization (141 ) (125 ) (16 ) 13% Impairment and restructuring
charges (27 ) (115 ) 88 (77)% Equity earnings of affiliates 13 26
(13 ) (50)% Interest, net 17 11 6 55% Other, net (441 )
3 (444 ) ** Net loss before income tax benefit
(438 ) (111 ) (327 ) ** Income tax benefit 476
28 448 **
Net income (loss) $ 38
$ (83 ) $ 121 ** ** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME ATTRIBUTABLE TO NEWS CORPORATION
STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income attributable to News Corporation
stockholders and diluted earnings per share (“EPS”) excluding
Segment EBITDA adjustments, Impairment and restructuring charges,
and “Other, net”, net of tax (“adjusted net income attributable to
News Corporation stockholders and adjusted EPS”) 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 attributable to News Corporation
stockholders and adjusted EPS 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 attributable to News Corporation stockholders
and adjusted EPS are not measures of performance under generally
accepted accounting principles and should not be construed as
substitutes for consolidated or combined net income (loss)
attributable to News Corporation stockholders and net income (loss)
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 (loss)
attributable to News Corporation stockholders and reported diluted
EPS to adjusted net income attributable to News Corporation
stockholders and adjusted EPS for the three months ended September
30, 2013 and 2012.
3 Months Ended 3 Months Ended September 30,
2013 September 30, 2012 Net income Net income
attributable (loss) to EPS attributable EPS stockholders to
stockholders (in millions, except per share
data)
As reported $ 27 $ 0.05 $ (92 ) $ (0.16 )
U.K. Newspaper Matters 17 0.03 61 0.11 Impairment and
restructuring charges 27 0.05 115 0.20 Other, net (a) 441
0.76 (3 ) (0.01 ) Tax impact on items above (b) (495 ) (0.86
) (44 ) (0.08 )
As adjusted $ 17 $
0.03 $ 37 $ 0.06
(a)
Other, net for the three months ended
September 30, 2013 primarily includes foreign tax refund payable to
21st Century Fox offset by a gain on third party pension
contribution.
(b)
Tax impact on items above for the three
months ended September 30, 2013 primarily includes a foreign tax
refund receivable of $483 million which has an offsetting payable
to 21st Century Fox included within Other, net above.
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorAshley Huston, 212-416-2025Corporate
Communicationsahuston@newscorp.com
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