Fiscal 2014 Second Quarter Key
Financial Highlights
- Revenues of $2.24 billion compared
to $2.32 billion in the prior year
- Reported Total Segment EBITDA of
$327 million compared to $300 million in the prior year
- Diluted EPS were $0.26 compared to
$2.42 in the prior year, which included a non-taxable gain on the
CMH transaction
- Adjusted EPS were flat at $0.31
compared to 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 December 31, 2013.
Commenting on the results, Chief Executive Robert Thomson
said:
“The earnings report demonstrates a measure of progress as we
navigate a challenging advertising market. We are continuing to be
disciplined on costs, while making opportunistic investments that
will extend our revenue reach. The digital transformation is
certainly underway, as the acquisition of Storyful and the robust
growth in digital sales at HarperCollins attest. Digital
subscriptions and website traffic are on the rise at most of our
sites, and revenue at REA, the online real estate company,
continues to expand encouragingly.”
SECOND QUARTER RESULTS
The Company reported fiscal 2014 second quarter total revenues
of $2.24 billion, a 4% decrease as compared to the prior year
second quarter revenues of $2.32 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 following the Consolidated Media Holdings (“CMH”)
acquisition in November 2012, and strength in the Digital Real
Estate Services and Book Publishing segments. Excluding the impact
of acquisitions, divestitures and foreign exchange fluctuations,
revenues were relatively flat with the prior year.
The Company reported second quarter Total Segment EBITDA of $327
million, a 9% increase as compared to $300 million in the prior
year. This improvement was mainly due to the consolidation of FOX
SPORTS Australia, stronger performances in the Digital Real Estate
and Book Publishing segments, and lower costs 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, declines at the News and Information Services
segment and foreign exchange fluctuations. Excluding all costs
related to the U.K. Newspaper Matters in both years and the impact
of acquisitions, divestitures and foreign exchange fluctuations,
Total Segment EBITDA declined 1% compared to the prior year.
Net income available to News Corporation stockholders was $150
million as compared to $1,399 million in the prior year, which
included a non-taxable gain of approximately $1.3 billion related
to the acquisition of CMH in November 2012. Adjusted net income
available to News Corporation stockholders, which excludes costs
related to the U.K. Newspaper Matters, impairment and restructuring
charges and Other, net, was $179 million compared to $178 million
in the prior year. Impairment and restructuring charges were $36
million and $62 million in the three months ended December 31, 2013
and 2012, respectively.
Diluted net income per share available to News Corporation
stockholders was $0.26 as compared to $2.42 in the prior year.
Adjusted EPS were flat at $0.31 compared to the prior year.
Free cash flow available to News Corporation improved by $393
million in the six months ended December 31, 2013 to $217 million,
from ($176) million in the prior year.
SEGMENT REVIEW
For the three months ended
For the six months ended December 31, December 31, 2013
2012 % Change 2013 2012 % Change (in
millions) (in millions)
Revenues: News and Information
Services $ 1,612 $ 1,772 (9 ) % $ 3,107 $ 3,438 (10 ) % Cable
Network Programming 110 53 ** 242 53 ** Digital Real Estate
Services 103 87 18 % 193 168 15 % Book Publishing 391 377 4 % 719
729 (1 ) % Other 22 32 (31 ) %
49 66 (26 ) %
Total Revenues $ 2,238
$ 2,321 (4 ) % $ 4,310 $ 4,454 (3 ) %
Segment EBITDA: News and Information Services $ 255 $
292 (13 ) % $ 388 $ 418 (7 ) % Cable Network Programming 53 19 **
82 19 ** Digital Real Estate Services 55 46 20 % 99 81 22 % Book
Publishing 68 51 33 % 111 91 22 % Other(a) (104 )
(108 ) (4 ) % (212 ) (220 ) (4 ) %
Total Segment
EBITDA $ 327 $ 300 9 % $ 468 $ 389
20 % ** - Not meaningful (a)
Other Segment EBITDA for the three and six months ended December
31, 2013 includes fees and costs, net of indemnification, related
to the U.K. Newspaper Matters of $19 million and $36 million,
respectively. Other Segment EBITDA for the three and six months
ended December 31, 2012 includes fees and costs related to the U.K.
Newspaper Matters of $49 million and $110 million, respectively.
News and Information Services
Segment revenues for the second quarter of fiscal 2014 decreased
$160 million, or 9%, compared to the prior year. Australian
newspapers revenues declined 17%, of which 10% is related to
foreign currency, and accounted for the majority of the Segment
revenue decline compared to the prior year. Total segment
advertising revenues declined 10%, driven by the negative impact of
foreign exchange coupled with weakness in the Australian market and
the absence of results from LMG, partially offset by continued
growth at News America Marketing led by its in-store business.
Circulation and subscription revenues declined 7%, primarily due to
continued decline in Institutional revenues at Dow Jones, the
absence of results from LMG and lower print circulation volume,
partially offset by cover price increases at The Sun in the U.K.
and several Australian newspapers as well as higher subscription
pricing at The Wall Street Journal and WSJ.com. Excluding the
impact of divestitures and foreign exchange fluctuations, Segment
revenues declined 4%.
Segment EBITDA decreased $37 million in the quarter, or 13%, as
compared to the prior year. Results were impacted by continued
revenue weakness in the Australian market and Dow Jones’
Institutional business coupled with the sale of LMG, partially
offset by the absence of losses from The Daily and a favorable
arbitration ruling at News UK. Total costs declined 8% driven by
the impact of cost savings initiatives and lower production costs,
as well as the sale of LMG, partially offset by increased
promotional costs and sports rights acquisition costs. Excluding
the impact of divestitures and foreign exchange fluctuations,
Segment EBITDA decreased 8%.
Cable Network Programming
In the second quarter of fiscal 2014, revenues were $110 million
and Segment EBITDA was $53 million. The increases relative to the
prior year primarily reflect the consolidation of FOX SPORTS
Australia beginning in November 2012.
On a stand-alone basis, revenues declined 3% versus the prior
year revenues of $113 million, as advertising market share gains,
an increase in digital platform subscribers and higher affiliate
pricing were more than offset by adverse foreign exchange
fluctuations. Segment EBITDA increased 20% on a stand-alone basis,
compared to the prior year Segment EBITDA of $44 million, primarily
driven by lower programming costs, which were impacted by the
absence of domestic cricket rights compared to the prior year.
Excluding the impact of foreign exchange fluctuations of $13
million and $6 million on revenues and Segment EBITDA,
respectively, revenues increased 9% from the prior year and Segment
EBITDA increased 34%.
For the three months ended December 31, 2012, on a stand-alone
basis, FOX SPORTS Australia had operating income of $42 million and
depreciation of $2 million.
Digital Real Estate Services
Revenues in the quarter increased $16 million, or 18%, compared
to the prior year reflecting increased residential listing depth
product penetration. Segment EBITDA in the quarter increased $9
million, or 20%, 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 32%
and 33%, respectively.
Book Publishing
Revenues in the quarter increased $14 million, or 4%, compared
to the prior year driven by strong performance in Children’s and
General Books resulting from sales of the Divergent series by
Veronica Roth, following the launch of Allegiant in October 2013,
The Pioneer Woman Cooks: A Year of Holidays by Ree Drummond and The
First Phone Call from Heaven by Mitch Albom. The revenue increase
was partially offset by the divestiture of the Women of Faith live
events business and the decision to exit the third party
distribution business in the U.S. E-book revenues improved by 39%
versus the prior year period and represented 17% of revenues, up
from 14% in the prior year. Segment EBITDA increased $17 million,
or 33%, from the prior year benefiting from the higher contribution
to profits from e-books and ongoing operational efficiencies
coupled with higher revenues. Excluding the impact of acquisitions,
divestitures, and foreign exchange fluctuations, revenues increased
8% and Segment EBITDA increased 38%.
Other
Revenues in the quarter decreased $10 million, or 31%, compared
to the prior year primarily due to declines at Amplify related to
lower project-based consulting revenues at its Insight business
coupled with divestitures of certain of the Company’s non-core
Australian businesses during fiscal 2013. Segment EBITDA in the
quarter improved $4 million, primarily due to decreased fees and
costs, net of indemnification, related to the U.K. Newspaper
Matters of approximately $30 million, partially offset by higher
investment spending of $10 million at Amplify primarily resulting
from increased product and curriculum development, $8 million
incurred by the corporate Strategy and Creative Group related to
the development of new products and services and international
rights acquisitions and higher corporate overhead expenses of $11
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 December 31, 2013, the
Company’s Statement of Operations reflects actual corporate
overhead costs incurred by the Company as it performed these
functions using its own resources or purchased services from either
third parties or 21st Century Fox.
In the second quarter of fiscal 2014, News Corp incurred gross
fees and costs of $51 million related to the U.K. Newspaper Matters
compared to $49 million incurred in the prior year. The net impact
on Segment EBITDA after indemnification from 21st Century Fox was
$19 million in the current quarter.
REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’
RESULTS
Quarterly equity earnings from affiliates were $17 million
compared to $28 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 For the six months ended
December 31, December 31, 2013 2012 2013 2012 (in
millions) (in millions) Foxtel(a) $ 17 $ 8 $ 30 $ 13 Pay
television and cable network programming equity affiliates(b) - 20
- 42 Other equity affiliates - -
- (1 ) Total equity earnings of affiliates $ 17
$ 28 $ 30 $ 54 (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 $15 million
and $31 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 and
six months ended December 31, 2013, respectively, and $6 million in
both the corresponding periods of fiscal 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.
On a U.S. GAAP basis, Foxtel revenues were higher in local
currency. However, in U.S. dollars, revenues for the six months
ended December 31, 2013 decreased $148 million to $1,457 million
from $1,605 million in the corresponding prior year period.
Operating income before depreciation and amortization was higher in
local currency reflecting the realization of cost savings from the
Austar acquisition and the absence of costs associated with the
London Olympics. However, in U.S. dollars, operating income before
depreciation and amortization decreased $12 million to $431 million
from $443 million. Depreciation and amortization for the six months
ended December 31, 2013 and 2012 was $171 million and $229 million,
respectively, reflecting foreign exchange fluctuations and reduced
Austar intangible amortization. Total closing subscribers were 2.5
million in the six months ended December 31, 2013, a 5% increase
compared to the prior year period driven by an increase in digital
platform subscribers. Churn improved to 12.4% from 14.2% in the
prior year.
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 operating
activities, less capital expenditures, and REA Group Limited (“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
capital expenditures, 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 operating activities to free cash flow available to
News Corporation:
For the six months ended
December 31,
2013 2012 (in millions) Net cash provided by
operating activities $ 407 $ 5 Less: Capital expenditures
(147 ) (141 ) 260 (136 ) Less: REA Group free cash flow (62
) (57 ) Plus: Cash dividends received from REA Group 19
17 Free cash flow available to News
Corporation $ 217 $ (176 )
Free cash flow available to News Corporation in the six months
ended December 31, 2013 improved by $393 million to $217 million
from $(176) million in the prior year. This improvement was
primarily driven by lower restructuring payments of $110 million,
the timing of net receipts related to the foreign tax refund of $81
million, and lower payments for fees and costs related to the U.K.
Newspaper Matters of $58 million, coupled with operational and
working capital improvements.
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 was resolved during the three months ended September 30,
2013. In the second quarter of fiscal 2014, the foreign tax
authority completed its review and the remainder of the uncertain
matter was resolved during the three months ended December 31,
2013.
Pursuant to the Tax Sharing and Indemnification Agreement with
21st Century Fox, refunds received related to these matters, net of
applicable taxes to be paid by the Company, are to be remitted to
21st Century Fox. Accordingly, the Company recorded an income tax
benefit and a corresponding expense, net of applicable taxes, to
Other, net of $238 million for the payable to 21st Century Fox in
the Statements of Operations for the three months ended December
31, 2013.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted revenues, Adjusted Total Segment EBITDA, Total Segment
EBITDA, Adjusted Net Income available to News Corporation
stockholders, Adjusted EPS and Free cash flow available to News
Corporation are non-GAAP financial measures contained in this
earnings release. This information is provided in order to allow
investors to make meaningful comparisons of the Company’s operating
performance between periods and to view the Company’s business from
the same perspective as Company management. These non-GAAP measures
may be different than similar measures used by other companies and
should be considered in addition to, not as a substitute for,
measures of financial performance calculated in accordance with
GAAP. Reconciliations for the differences between non-GAAP measures
used in this earnings release and comparable financial measures
calculated in accordance with U.S. GAAP are included in Notes 1, 2
and 3 and the reconciliation of Net cash provided by operating
activities to Free cash flow available to News Corporation is
included above.
Conference call
News Corporation’s earnings conference call can be heard live at
4:30pm Eastern Standard Time on February 6, 2014. 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 For the six months ended December 31,
December 31, 2013 2012 2013 2012 Revenues:
Advertising
$ 1,080 $ 1,163 $ 2,038 $ 2,204 Circulation and Subscription 661
654 1,340 1,262 Consumer 377 346 688 672 Other 120
158 244 316 Total
Revenues 2,238 2,321 4,310 4,454 Operating expenses (1,274 )
(1,352 ) (2,569 ) (2,686 ) Selling, general and administrative (637
) (669 ) (1,273 ) (1,379 ) Depreciation and amortization (138 )
(129 ) (279 ) (254 ) Impairment and restructuring charges (36 ) (62
) (63 ) (177 ) Equity earnings of affiliates 17 28 30 54 Interest,
net 16 18 33 29 Other, net (231 ) 1,252
(672 ) 1,255 (Loss) income before income tax benefit
(45 ) 1,407 (483 ) 1,296 Income tax benefit 211
4 687 32 Net income 166
1,411 204 1,328 Less: Net income attributable to noncontrolling
interests (15 ) (12 ) (26 ) (21 ) Net
income attributable to News Corporation stockholders $ 151 $
1,399 $ 178 $ 1,307 Less: Adjustments to Net
income attributable to News Corporation stockholders – Redeemable
Preferred Stock Dividends (1 ) - (1 )
- Net income available to News Corporation
stockholders $ 150 $ 1,399 $ 177 $ 1,307
Weighted average shares outstanding: Basic 579 579
579 579 Diluted 580 579 580 579 Net income available to News
Corporation stockholders per share Basic and diluted $ 0.26 $ 2.42
$ 0.31 $ 2.26
NEWS CORPORATION CONSOLIDATED
BALANCE SHEETS (in millions)
As of December
31, 2013
As of June 30,
2013
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 2,908 $ 2,381 Amounts due from 21st Century Fox - 247
Receivables, net 1,481 1,335 Income taxes receivable 147 29 Other
current assets 576 651 Total current assets
5,112 4,643 Non-current assets: Investments 2,431
2,499 Property, plant and equipment, net 2,927 2,992 Intangible
assets, net 2,120 2,186 Goodwill 2,728 2,725 Other non-current
assets 665 598 Total assets $ 15,983 $ 15,643
LIABILITIES AND EQUITY Current liabilities: Accounts payable
$ 242 $ 242 Accrued expenses 1,115 1,108 Amounts due to 21st
Century Fox, net 83 - Deferred revenue 380 389 Other current
liabilities 472 432 Total current liabilities
2,292 2,171 Non-current liabilities: Retirement
benefit obligations 284 345 Deferred income taxes 239 152 Other
non-current liabilities 277 279 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 12,309 12,281 Retained earnings 177 -
Accumulated other comprehensive income 257 271 Total
News Corporation stockholders' equity 12,749 12,558 Noncontrolling
interests 122 118 Total equity 12,871
12,676 Total liabilities and equity $ 15,983 $ 15,643
NEWS CORPORATION CONSOLIDATED AND COMBINED
STATEMENTS OF CASH FLOWS (Unaudited; in millions)
For the six months ended December 31, 2013
2012
Operating activities: Net Income $
204 $ 1,328 Adjustments to reconcile net income to cash
provided by operating activities: Depreciation and amortization 279
254 Equity earnings of affiliates (30 ) (54 ) Cash distributions
received from affiliates 47 118 Foreign tax refund payable to 21st
Century Fox 148 - Foreign tax refund receivable (140 ) - Impairment
charges, net of tax 12 - Other, net (49 ) (1,255 ) Deferred income
taxes and taxes payable 85 (82 ) Change in operating assets and
liabilities, net of acquisitions: Receivables and other assets (244
) (188 ) Inventories, net 51 11 Accounts payable and other
liabilities 65 (129 ) Pension and postretirement benefit plans
(21 ) 2 Net cash provided by operating activities
407 5
Investing activities:
Capital expenditures (147 ) (141 ) Acquisitions, net of cash
acquired (26 ) (2,154 ) Investments in equity affiliates and other
(2 ) (3 ) Proceeds from dispositions 100 26
Net cash used in investing activities (75 )
(2,272 )
Financing activities: Net transfers from
21st Century Fox and affiliates 217 2,115 Repayment of borrowings
acquired in the CMH acquisition - (235 ) Dividends paid (13 ) (11 )
Purchase of subsidiary shares from noncontrolling interest -
(8 ) Net cash provided by financing activities
204 1,861
Net increase (decrease) in
cash and cash equivalents 536 (406 ) Cash and cash equivalents,
beginning of period 2,381 1,133 Exchange movement on opening cash
balance (9 ) 14
Cash and cash equivalents,
end of period $ 2,908 $ 741
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 and six months ended December 31, 2013
and 2012.
Revenues Total Segment EBITDA For the
three months ended December 31, For the three months ended December
31, 2013 2012 Difference 2013 2012
Difference (in millions) (in millions)
As reported $
2,238 $ 2,321 $ (83 ) $ 327 $ 300 $ 27 Impact of
acquisitions (60 ) - (60 ) (25 ) - (25 ) Impact of
divestitures (1 ) (59 ) 58 - (8 ) 8 Impact of foreign
exchange fluctuations 74 - 74 16 - 16 Net impact of U.K.
Newspaper Matters - - - 19 49 (30 )
As
adjusted $ 2,251 $ 2,262 $ (11 ) $ 337 $
341 $ (4 ) Revenues Total Segment EBITDA For
the six months ended December 31, For the six months ended December
31, 2013 2012 Difference 2013 2012 Difference (in millions) (in
millions)
As reported $ 4,310 $ 4,454 $ (144 ) $ 468
$ 389 $ 79 Impact of acquisitions (194 ) - (194 ) (54 ) -
(54 ) Impact of divestitures (35 ) (120 ) 85 (4 ) (16 ) 12
Impact of foreign exchange fluctuations 154 - 154 26 - 26
Net impact of U.K. Newspaper Matters - - - 36 110 (74 )
As adjusted $ 4,235 $ 4,334
$ (99 ) $ 472 $ 483 $ (11 )
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and six months ended December 31, 2013 and 2012 are as
follows:
For the three months ended December 31,
2013 2012 % Change (in millions)
Adjusted
Revenues: News and Information Services $ 1,663 $ 1,729 (4 ) %
Cable Network Programming 57 53 8 % Digital Real Estate Services
115 87 32 % Book Publishing 394 365 8 % Other 22
28 (21 ) %
Total Adjusted Revenues $ 2,251
$ 2,262 - %
Adjusted Segment
EBITDA: News and Information Services $ 261 $ 285 (8 ) % Cable
Network Programming 31 19 63 % Digital Real Estate Services 61 46
33 % Book Publishing 69 50 38 % Other (85 ) (59 ) 44
%
Total Adjusted Segment EBITDA $ 337 $ 341
(1 ) %
For the six months ended December
31,
2013 2012 % Change (in millions)
Adjusted
Revenues: News and Information Services $ 3,195 $ 3,351 (5 ) %
Cable Network Programming 57 53 8 % Digital Real Estate Services
215 168 28 % Book Publishing 719 707 2 % Other 49
55 (11 ) %
Total Adjusted Revenues $ 4,235
$ 4,334 (2 ) %
Adjusted Segment EBITDA:
News and Information Services $ 394 $ 404 (2 ) % Cable Network
Programming 31 19 63 % Digital Real Estate Services 111 81 37 %
Book Publishing 112 90 24 % Other (176 ) (111 ) 59
%
Total Adjusted Segment EBITDA $ 472 $ 483
(2 ) %
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 December 31, 2013 and
2012.
For the three months ended December 31, 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 $ 1,612 $ - $ (1 ) $
52 $ - $ 1,663 Cable Network Programming 110 (59 ) - 6 - 57 Digital
Real Estate Services 103 - - 12 - 115 Book Publishing 391 (1 ) - 4
- 394 Other 22 - -
- - 22
Total Revenues $ 2,238 $
(60 ) $ (1 ) $ 74 $ - $ 2,251
Segment EBITDA:
News and Information Services $ 255 $ - $ - $ 6 $ - $ 261 Cable
Network Programming 53 (25 ) - 3 - 31 Digital Real Estate Services
55 - - 6 - 61 Book Publishing 68 - - 1 - 69 Other (104 )
- - - 19 (85 )
Total Segment EBITDA $ 327 $ (25 ) $ - $ 16 $
19 $ 337
For the three months ended December 31,
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 $ 1,772 $ - $ (43 )
$ - $ - $ 1,729 Cable Network Programming 53 - - - - 53 Digital
Real Estate Services 87 - - - - 87 Book Publishing 377 - (12 ) - -
365 Other 32 - (4 ) - -
28
Total Revenues $ 2,321 $ - $ (59 ) $
- $ - $ 2,262
Segment EBITDA: News and
Information Services $ 292 $ - $ (7 ) $ - $ - $ 285 Cable Network
Programming 19 - - - - 19 Digital Real Estate Services 46 - - - -
46 Book Publishing 51 - (1 ) - - 50 Other (108 ) -
- - 49 (59 )
Total Segment
EBITDA $ 300 $ - $ (8 ) $ - $ 49 $ 341
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the six months ended December 31, 2013 and 2012.
For the six months ended December 31, 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 $ 3,107 $ - $ (30 )
$ 118 $ - $ 3,195 Cable Network Programming 242 (191 ) - 6 - 57
Digital Real Estate Services 193 - - 22 - 215 Book Publishing 719
(3 ) (5 ) 8 - 719 Other 49 - -
- - 49
Total Revenues $
4,310 $ (194 ) $ (35 ) $ 154 $ - $ 4,235
Segment EBITDA: News and Information Services $ 388 $ - $ (4
) $ 10 $ - $ 394 Cable Network Programming 82 (54 ) - 3 - 31
Digital Real Estate Services 99 - - 12 - 111 Book Publishing 111 -
- 1 - 112 Other (212 ) - -
- 36 (176 )
Total Segment EBITDA $ 468
$ (54 ) $ (4 ) $ 26 $ 36 $ 472
For the six months ended December 31, 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 $ 3,438 $ - $ (87 ) $ - $ - $ 3,351
Cable Network Programming 53 - - - - 53 Digital Real Estate
Services 168 - - - - 168 Book Publishing 729 - (22 ) - - 707 Other
66 - (11 ) - - 55
Total Revenues $ 4,454 $ - $ (120 ) $ - $ - $
4,334
Segment EBITDA: News and Information
Services $ 418 $ - $ (14 ) $ - $ - $ 404 Cable Network Programming
19 - - - - 19 Digital Real Estate Services 81 - - - - 81 Book
Publishing 91 - (1 ) - - 90 Other (220 ) - (1
) - 110 (111 )
Total Segment EBITDA $
389 $ - $ (16 ) $ - $ 110 $ 483
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,
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.
For the three months ended December 31,
2013 2012 Change % Change
(in millions)
Revenues $ 2,238 $ 2,321 $ (83 ) (4 ) % Operating
expenses (1,274 ) (1,352 ) 78 (6 ) % Selling, general and
administrative (637 ) (669 ) 32 (5 ) %
Total Segment EBITDA 327 300 27 9 % Depreciation and
amortization (138 ) (129 ) (9 ) 7 % Impairment and restructuring
charges (36 ) (62 ) 26 (42 ) % Equity earnings of affiliates 17 28
(11 ) (39 ) % Interest, net 16 18 (2 ) (11 ) % Other, net
(231 ) 1,252 (1,483 ) ** (Loss) income
before income tax benefit (45 ) 1,407 (1,452 ) ** Income tax
benefit 211 4 207 **
Net income $ 166 $ 1,411 $ (1,245 ) (88
) % ** - Not meaningful For the six months ended
December 31, 2013 2012 Change % Change
(in millions)
Revenues $ 4,310 $ 4,454 $ (144 ) (3 ) % Operating
expenses (2,569 ) (2,686 ) 117 (4 ) % Selling, general and
administrative (1,273 ) (1,379 ) 106 (8
) %
Total Segment EBITDA 468 389 79 20 % Depreciation and
amortization (279 ) (254 ) (25 ) 10 % Impairment and restructuring
charges (63 ) (177 ) 114 (64 ) % Equity earnings of affiliates 30
54 (24 ) (44 ) % Interest, net 33 29 4 14 % Other, net (672
) 1,255 (1,927 ) ** (Loss) income
before income tax benefit (483 ) 1,296 (1,779 ) ** Income tax
benefit 687 32 655 **
Net income $ 204 $ 1,328 $ (1,124 ) (85
) % ** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME AVAILABLE TO NEWS CORPORATION
STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income available to News Corporation
stockholders and diluted earnings per share (“EPS”) excluding
expenses related to U.K. Newspaper Matters, Impairment and
restructuring charges, and “Other, net”, net of tax (“adjusted net
income available 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
available 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 available 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 available to News Corporation stockholders and net
income 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 available to
News Corporation stockholders and reported diluted EPS to adjusted
net income available to News Corporation stockholders and adjusted
EPS for the three and six months ended December 31, 2013 and
2012.
For the three months ended For the three
months ended December 31, 2013 December 31, 2012 Net income
Net income available to EPS available to EPS stockholders
stockholders (in millions, except per share data)
As reported $ 150 $ 0.26 $ 1,399 $ 2.42 U.K.
Newspaper Matters 19 0.03 49 0.08 Impairment and
restructuring charges 36 0.06 62 0.11 Other, net (a) 231
0.40 (1,252 ) (2.16 ) Tax impact on items above(b) (257 )
(0.44 ) (80 ) (0.14 )
As adjusted $ 179 $ 0.31 $ 178
$ 0.31 (a) Other, net for the three
months ended December 31, 2013 primarily includes a foreign tax
refund paid or payable to 21st Century Fox. Other, net for the
three months ended December 31, 2012 primarily includes the
non-taxable gain from the CMH transaction. (b) Tax impact on items
above for the three months ended December 31, 2013 primarily
includes a foreign tax refund of $238 million which has an
offsetting payable to 21st Century Fox included within Other, net
above. For the six months ended For the
six months ended December 31, 2013 December 31, 2012 Net income
Net income available to EPS available to EPS
stockholders stockholders (in millions, except per
share data)
As reported $ 177 $ 0.31 $ 1,307 $ 2.26
U.K. Newspaper Matters 36 0.06 110 0.19 Impairment
and restructuring charges 63 0.11 177 0.31 Other, net (a)
672 1.16 (1,255 ) (2.17 ) Tax impact on items above(b) (752
) (1.30 ) (124 ) (0.22 )
As adjusted $ 196 $ 0.34 $ 215
$ 0.37 (a) Other, net for the six
months ended December 31, 2013 primarily includes a foreign tax
refund paid or payable to 21st Century Fox offset by a gain on a
third party pension contribution. Other, net for the six months
ended December 31, 2012 primarily includes the non-taxable gain
from the CMH transaction. (b) Tax impact on items above for the six
months ended December 31, 2013 primarily includes a foreign tax
refund of $721 million which has an offsetting payable to 21st
Century Fox included within Other, net above.
News CorporationInvestor Relations:Michael Florin,
212-416-3363mflorin@newscorp.comorCorporate Communications:Jim
Kennedy, 212-416-4064jkennedy@newscorp.comAshley Huston,
212-416-2025ahuston@newscorp.com
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