FISCAL 2016 THIRD QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues of $1.9 billion compared to
$2.0 billion in the prior year
- Total Segment EBITDA of $158 million
excluding a one-time settlement charge of $280 million; Reported
Total Segment EBITDA was ($122) million (which includes the
settlement charge)
- Loss from continuing operations of
$128 million, which includes the settlement charge, net of tax,
compared to income from continuing operations of $56 million in the
prior year
- Adjusted EPS were $0.04 compared to
$0.09 in the prior year – Reported EPS from continuing operations
were ($0.26) compared to $0.08 in the prior year
- Completed the acquisition of
iProperty, bolstering the Digital Real Estate Services
segment
- Realtor.com® achieved
record traffic with 50 million average monthly unique users this
quarter, up 30% versus the prior year, driving robust revenue
growth
News Corporation (“News Corp” or the “Company”)
(NASDAQ:NWS)((NASDAQ:NWSA)(ASX:NWS)(ASX:NWSLV) today reported
financial results for the three months ended March 31, 2016.
Commenting on the results, Chief Executive Robert Thomson
said:
“The third quarter results were materially affected by a $280
million pre-tax charge at News America Marketing to resolve a
legacy lawsuit and related claims, and continued currency
headwinds, which impacted revenues by $72 million and EBITDA by $9
million. Excluding those and other items, revenues and EBITDA
declined 5% and 8%, respectively, which was still disappointing. We
believe, however, that the company is on track to see improvements
in the fourth quarter, with the expansion of our digital real
estate business, foreign currency comparisons hopefully beginning
to ease, and cost saving initiatives taking firmer root.
Our pursuit of digital growth continues apace and we enhanced
our status as the world's largest digital property company with
REA’s completion of the iProperty acquisition in Southeast Asia.
Meanwhile, traffic and revenue growth remained robust at REA and
realtor.com®. We are particularly focused on driving mobile revenue
growth, and are pleased with the results at realtor.com®, where the
mobile audience grew close to 50% this quarter, and now represents
60% of page views and the majority of leads.
Despite the difficult conditions for advertising, we saw both
Dow Jones and News Corp Australia contributing to Segment EBITDA
growth, thanks to an increase in paid digital subscribers, digital
advertising growth and ongoing cost reduction to improve
efficiency. While we believe in the strength of our print
properties, we are also investing energetically in the rapid
pursuit of digital which is clearly evident in the transition at
Dow Jones. At Dow Jones this quarter, digital accounted for more
than 50% of total revenues for the first time, and digital-only
subscribers at the Wall Street Journal grew to 893,000,
representing nearly 45% of the base. We are building a strong
digital platform on top of the WSJ print circulation which today is
double the size of its nearest competitor.
With the advertising market in the midst of upheaval,
advertisers and agencies are experimenting with their spend. We
believe that premium mastheads and audiences are currently
undervalued by agencies, some of which are more focused on fashion
than function. With Silicon Valley's demand for quality content
more voracious than ever, and advertisers seeking greater digital
accountability, we believe News Corp is ideally positioned to
capitalize on these macro-trends through the power of its global
mastheads and large and growing premium audiences.”
THIRD QUARTER RESULTS FROM CONTINUING OPERATIONS
The Company reported fiscal 2016 third quarter total revenues of
$1.9 billion, a 7% decline as compared to prior year third quarter
revenues of $2.0 billion. The decline in total reported revenues
includes a negative impact from foreign currency fluctuations of
$72 million. Adjusted revenues (which excludes the foreign currency
impact and acquisitions as defined in Note 1) declined 5% compared
to the prior year, as growth in the Digital Real Estate Services
segment was more than offset by lower advertising revenues at the
News and Information Services segment, driven primarily by a
decline at News America Marketing, and lower consumer revenues at
the Book Publishing segment.
The Company reported third quarter Total Segment EBITDA of
($122) million as compared to $184 million in the prior year.
Negative foreign currency fluctuations reduced Total Segment EBITDA
by $9 million as compared to the prior year. Fiscal 2016 third
quarter Total Segment EBITDA includes a one-time pre-tax charge of
$280 million for the settlement of litigation and related claims at
News America Marketing. Excluding the settlement charge, third
quarter Total Segment EBITDA would have been $158 million.
Adjusted Total Segment EBITDA (as defined in Note 1), which also
excludes the impact of the settlement charge noted above as well as
the other items described in Note 1, declined 8%, compared to the
prior year, as strength at the Cable Network Programming segment
was more than offset by the declines at the News and Information
Services segment, driven primarily by the decline at News America
Marketing, and the decrease at the Book Publishing segment. Higher
legal expenses at Move, Inc. (“Move”), as well as transaction costs
related to the acquisition of iProperty Group Limited
(“iProperty”), also contributed to the decline.
(Loss) income from continuing operations was ($128) million for
the quarter as compared to $56 million in the prior year due to
lower Total Segment EBITDA and higher restructuring charges.
Reported results include the News America Marketing settlement
charge of $280 million and a related tax benefit of $107 million as
well as a non-taxable gain of $29 million resulting from REA
Group’s acquisition of iProperty and the corresponding revaluation
of its previously held equity interest.
(Loss) income per share from continuing operations available to
News Corporation stockholders was ($0.26) for the quarter as
compared to $0.08 in the prior year.
Adjusted EPS (as defined in Note 3) were $0.04 compared to $0.09
in the prior year.
SEGMENT REVIEW
For the three months ended For the nine months
ended March 31, March 31, 2016 2015 % Change 2016
2015 % Change (in millions)
Better/(Worse)
(in millions)
Better/(Worse)
Revenues: News and Information Services $ 1,231 $
1,353 (9 ) % $ 3,921 $ 4,327 (9 ) % Book Publishing 358 402 (11 ) %
1,213 1,277 (5 ) % Digital Real Estate Services 194 170 14 % 593
436 36 % Cable Network Programming 107 116 (8 ) % 337 367 (8 ) %
Other 1 - ** 2
- **
Total Revenues $ 1,891 $
2,041 (7 ) % $ 6,066 $ 6,407 (5 ) %
Segment EBITDA: News and Information Services(a) $ (187 ) $
113 ** $ 54 $ 434 (88 ) % Book Publishing 36 56 (36 ) % 135 188 (28
) % Digital Real Estate Services(b) 39 42 (7 ) % 169 156 8 % Cable
Network Programming 34 27 26 % 101 113 (11 ) % Other(c) (44
) (54 ) 19 % (136 ) (161 ) 16 %
Total Segment EBITDA $ (122 ) $ 184 ** $ 323
$ 730 (56 ) % ** - Not meaningful (a)
News and Information Services Segment EBITDA for the three and nine
months ended March 31, 2016 includes a one-time pre-tax charge of
$280 million for the settlement of litigation and related claims at
News America Marketing. Excluding the settlement charge, Segment
EBITDA for the three and nine months ended March 31, 2016 would
have been $93 million and $334 million, respectively. News and
Information Services Segment EBITDA for the nine months ended March
31, 2016 also includes transaction costs of $5 million related to
the acquisition of Unruly Holdings Limited. (b) Digital Real Estate
Services Segment EBITDA for the three and nine months ended March
31, 2016 includes transaction costs of $7 million related to the
acquisition of iProperty. Digital Real Estate Services Segment
EBITDA for the three and nine months ended March 31, 2015 includes
transaction costs of $1 million and $19 million, respectively,
related to the acquisition of Move. (c) Other Segment EBITDA for
the three and nine months ended March 31, 2016 includes fees and
costs, net of indemnification, related to the U.K. Newspaper
Matters of $3 million and $15 million, respectively. Other Segment
EBITDA for the three and nine months ended March 31, 2015 includes
fees and costs, net of indemnification, related to the U.K.
Newspaper Matters of $15 million and $42 million, respectively.
News and Information Services
Revenues for the third quarter of fiscal 2016 decreased $122
million, or 9%, compared to the prior year. Adjusted segment
revenues declined 6% compared to the prior year.
Total segment advertising revenues declined 15%, or 11%
excluding the impact of $23 million from negative foreign currency
fluctuations, primarily due to lower free standing insert revenues
at News America Marketing and weakness in print advertising,
partially offset by growth in digital advertising revenues.
Circulation and subscription revenues declined 4%, and would have
been flat excluding the impact of $19 million from negative foreign
currency fluctuations, as growth in paid digital subscribers at The
Wall Street Journal and in Australia, higher subscription pricing
and selected cover price increases in the U.K. and Australia offset
print volume declines and the impact from the change in the digital
strategy at The Sun.
At Dow Jones, the Company saw stable performance at the
professional information business. In the third quarter, Dow Jones’
digital revenues represented more than 50% of total revenues and
approximately one-third of advertising revenues.
Segment EBITDA for the third quarter of fiscal 2016 was ($187)
million as compared to $113 million in the prior year. Fiscal 2016
third quarter Segment EBITDA includes a one-time pre-tax charge of
$280 million for the settlement of litigation and related claims at
News America Marketing. Excluding the settlement charge, third
quarter Segment EBITDA would have been $93 million, a decline of
18% compared to the prior year. The decline in Segment EBITDA is
also due to lower revenues and higher promotion and marketing costs
in the U.K. The decline was partially offset by growth at Dow Jones
and in Australia driven by lower operating expenses, reflecting
lower variable costs due to ongoing cost initiatives and volume
declines. Adjusted Segment EBITDA decreased 11%.
Book Publishing
Revenues in the quarter decreased $44 million, or 11%, compared
to the prior year, due to lower revenues from American Sniper by
Chris Kyle and the Divergent series by Veronica Roth, lower e-book
sales and negative foreign currency fluctuations. Digital sales
represented 21% of consumer revenues for the quarter. Segment
EBITDA for the quarter decreased $20 million, or 36%, from the
prior year, primarily due to the factors noted above, partially
offset by cost savings initiatives.
Digital Real Estate Services
Revenues in the quarter increased $24 million, or 14%, compared
to the prior year, primarily driven by continued growth at REA
Group Limited (“REA Group”) and Move. Segment EBITDA in the quarter
decreased $3 million, or 7%, compared to the prior year, primarily
due to $11 million of higher legal expenses at Move, $7 million of
transaction costs related to the acquisition of iProperty and
negative foreign currency fluctuations.
Adjusted revenues increased 18% compared to the prior year.
Adjusted Segment EBITDA, which includes the higher legal expenses
noted above, increased 23% compared to the prior year.
In the third quarter, revenues at REA Group increased 9%, or 20%
excluding $10 million of negative foreign currency fluctuations,
due to greater residential listing depth product penetration,
partially offset by the timing of an earlier Easter compared to the
prior year. Move’s revenues increased 20%, primarily due to the
continued strength in its Connection for Co-Brokerage product and
non-listing Media revenues. Based on Move’s internal data, average
monthly unique users of realtor.com®’s web and mobile sites for the
quarter grew 30% year-over-year to 50 million; traffic in April
grew 25% year-over-year to 55 million monthly unique users.
Cable Network Programming
In the third quarter of fiscal 2016, revenues decreased $9
million, or 8%, compared to the prior year. Adjusted revenues were
flat, primarily due to higher affiliate revenues offsetting lower
advertising revenues driven by the absence of the Asian Cup and
Cricket World Cup. Segment EBITDA in the quarter increased $7
million, or 26%, compared with the prior year. Adjusted Segment
EBITDA increased 33%, primarily due to lower programming rights
costs. Negative foreign currency fluctuations reduced reported
revenues and Segment EBITDA for the third quarter of fiscal 2016 by
$9 million and $2 million, respectively, as compared to the prior
year.
Other
Segment EBITDA in the quarter improved by $10 million compared
to the prior year, primarily due to lower fees and costs, net of
indemnification, related to the claims and investigations arising
out of certain conduct at The News of the World (the “U.K.
Newspaper Matters”).
The net expense related to the U.K. Newspaper Matters was $3
million for the three months ended March 31, 2016 as compared to
$15 million for the three months ended March 31, 2015.
REVIEW OF EQUITY EARNINGS OF AFFILIATES’ RESULTS
Quarterly equity earnings from affiliates were $2 million
compared to $7 million in the prior year.
For the three months ended For the nine months ended
March 31, March 31, 2016 2015 2016
2015
(in millions) (in millions) Foxtel(a) $ 4 $ 8 $ 26 $ 48
Other equity affiliates, net (2 ) (1 ) (1 )
- Total equity earnings of affiliates $ 2 $ 7
$ 25 $ 48 (a) The Company amortized $12
million and $37 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
nine months ended March 31, 2016, respectively, and $14 million and
$44 million in the corresponding periods of fiscal 2015,
respectively. Such amortization is reflected in Equity earnings of
affiliates in the Statements of Operations.
On a U.S. GAAP basis, Foxtel revenues, for the three months
ended March 31, 2016, decreased $42 million to $578 million from
$620 million in the prior year period. In local currency, Foxtel
revenues increased 2% due to higher subscribers. Foxtel EBITDA
decreased $19 million to $144 million from $163 million in the
prior year. In local currency, Foxtel EBITDA declined 4% due to
increased subscriber acquisition costs related to higher gross adds
in the quarter, increases in programming costs, as well as
continued investment in Presto.
Foxtel’s total closing subscribers were approximately 2.9
million as of March 31, 2016, with year-over-year growth driven by
cable and satellite subscribers, which increased approximately 6%
compared to the prior year period, and higher Presto subscribers.
In the quarter, cable and satellite churn increased to 14.3% from
10.9% in the prior year due to some customer departures following
the introduction of no-contract offers in the first half of fiscal
2016. Fiscal 2016 year-to-date churn was relatively flat compared
to the prior year.
Foxtel operating income for the three months ended March 31,
2016 and 2015 was $85 million and $88 million, respectively, after
depreciation and amortization of $59 million and $75 million,
respectively. Operating income decreased as a result of the factors
noted above and negative foreign currency fluctuations, partially
offset by lower depreciation expense resulting from the increase in
the useful lives of cable and satellite installations. Foxtel’s net
income of $32 million decreased from $44 million in the prior year
period as a result of lower operating income as noted above.
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 continuing
operating activities, less capital expenditures, and REA Group free
cash flow, plus cash dividends received from REA Group.
Free cash flow available to News Corporation excludes cash flows
from discontinued operations.
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, strategic 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 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 continuing operating activities to free cash flow
available to News Corporation:
For the nine months ended
March 31,
2016 2015 (in millions) Net cash provided by
continuing operating activities $ 589 $ 826 Less: Capital
expenditures (180 ) (218 ) 409 608 Less: REA Group
free cash flow (92 ) (88 ) Plus: Cash dividends received from REA
Group 45 45 Free cash flow available to
News Corporation $ 362 $ 565
Free cash flow available to News Corporation in the nine months
ended March 31, 2016 was $362 million compared to $565 million in
the prior year period. The decrease was primarily due to lower
Total Segment EBITDA, higher restructuring payments of $43 million,
lower dividends received of $38 million, which includes the absence
of dividends received from cost method investments of $20 million
during the nine months ended March 31, 2015, as well as payments
related to the News America Marketing claim settlement of
approximately $20 million during the nine months ended March 31,
2016. The decline was partially offset by lower capital
expenditures due to the absence of costs related to the relocation
of the Company’s U.K. operations to a new site in London in fiscal
2015.
The difference in free cash flow available to News Corporation
above includes a negative impact from foreign currency fluctuations
of approximately $40 million, or 7%, for the nine months ended
March 31, 2016.
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 continuing
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
5:00pm EDT on May 5, 2016. 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, book publishing, digital real estate
services, cable network programming in Australia, 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 STATEMENTS OF
OPERATIONS
(Unaudited; in millions, except per
share amounts)
For the three months
For the nine months
ended
ended
March 31, March 31, 2016 2015 2016 2015
Revenues: Advertising $ 816 $ 904 $ 2,672 $ 2,862 Circulation and
Subscription 615 638 1,875 1,954 Consumer 343 385 1,164 1,223 Other
117 114 355 368
Total Revenues 1,891 2,041 6,066 6,407
Operating expenses (1,084 ) (1,204 ) (3,476 ) (3,737 ) Selling,
general and administrative (649 ) (653 ) (1,987 ) (1,940 ) NAM
Group settlement charge (280 ) - (280 ) - Depreciation and
amortization (126 ) (124 ) (370 ) (375 ) Restructuring charges (24
) (10 ) (63 ) (31 ) Equity earnings of affiliates 2 7 25 48
Interest, net 11 12 34 42 Other, net 33 12
32 70 (Loss) income from
continuing operations before income tax benefit (expense) (226 ) 81
(19 ) 484 Income tax benefit (expense) 98 (25
) 140 (137 ) (Loss) income from continuing
operations (128 ) 56 121 347 (Loss) income from discontinued
operations, net of tax (2 ) (22 ) 20 (62 ) Net
(loss) income (130 ) 34 141 285 Less: Net income attributable to
noncontrolling interests (19 ) (11 ) (52 ) (54 ) Net
(loss) income attributable to News Corporation stockholders $ (149
) $ 23 $ 89 $ 231 Less: Adjustments to Net (loss) income
attributable to News Corporation stockholders – Redeemable
preferred stock dividends - - (1
) (1 ) Net (loss) income available to News Corporation
stockholders $ (149 ) $ 23 $ 88 $ 230
Weighted average shares outstanding: Basic 580 582 581 581 Diluted
580 583 583 582 (Loss) income from continuing operations
available to News Corporation stockholders per share - basic and
diluted $ (0.26 ) $ 0.08 $ 0.12 $ 0.51 (Loss) income from
discontinued operations available to News Corporation stockholders
per share - basic and diluted $ - $ (0.04 ) $ 0.03 $
(0.11 ) Net (loss) income available to News Corporation
stockholders per share - basic and diluted $ (0.26 ) $ 0.04
$ 0.15 $ 0.40
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions)
As of March 31,
As of June 30,
2016
2015
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 1,972 $ 1,951 Receivables, net 1,254 1,283 Other
current assets 679 780 Total current
assets 3,905 4,014 Non-current
assets: Investments 2,264 2,379 Property, plant and equipment, net
2,499 2,690 Intangible assets, net 2,229 2,203 Goodwill 3,681 3,063
Deferred income tax assets 666 219 Other non-current assets
472 467 Total assets $ 15,716 $ 15,035
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 227 $ 238 Accrued expenses 1,439 1,125 Deferred
revenue 378 346 Other current liabilities 604
401 Total current liabilities 2,648
2,110 Non-current liabilities: Borrowings 369 -
Retirement benefit obligations 281 305 Deferred income tax
liabilities 200 166 Other non-current liabilities 353 318
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 12,425 12,433 Retained earnings 60 88
Accumulated other comprehensive loss (845 ) (582 )
Total News Corporation stockholders' equity 11,646 11,945
Noncontrolling interests 199 171 Total
equity 11,845 12,116 Total liabilities
and equity $ 15,716 $ 15,035
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
For the nine months ended March 31, 2016 2015
Operating activities: Net income $ 141 $ 285 Less:
Income (loss) from discontinued operations, net of tax 20
(62 ) Income from continuing operations 121 347
Adjustments to reconcile income from continuing operations
to cash provided by operating activities: Depreciation and
amortization 370 375 Equity earnings of affiliates (25 ) (48 ) Cash
distribution received from affiliates 31 69 Other, net (32 ) (70 )
Deferred income taxes and taxes payable (217 ) 61 Changes in
operating assets and liabilities, net of acquisitions: Receivables
and other assets (12 ) 51 Inventories, net (37 ) (43 ) Accounts
payable and other liabilities 414 102 Pension and postretirement
benefit plans (24 ) (18 ) Net cash provided by operating
activities from continuing operations 589 826
Investing activities: Capital expenditures (180 )
(218 ) Acquisitions, net of cash acquired (486 ) (1,188 )
Investments in equity affiliates and other (62 ) (257 ) Proceeds
from dispositions 4 134 Other 21 16 Net
cash used in investing activities from continuing operations
(703 ) (1,513 )
Financing activities:
Borrowings 342 - Repayment of borrowings acquired in the Move
acquisition - (129 ) Repurchase of shares (41 ) - Dividends paid
(88 ) (29 ) Other, net (9 ) (2 ) Net cash provided by
(used in) financing activities from continuing operations
204 (160 ) Net increase (decrease) in cash and cash
equivalents from continuing operations 90 (847 ) Net decrease in
cash and cash equivalents from discontinued operations (51 ) (174 )
Cash and cash equivalents, beginning of period 1,951 3,145 Exchange
movement on opening cash balance (18 ) (97 )
Cash
and cash equivalents, end of period $ 1,972 $ 2,027
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, the NAM Group
settlement charge and foreign currency 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 nine months ended March 31, 2016
and 2015.
Revenues Total Segment EBITDA For the three
months ended March 31, For the three months ended March 31, 2016
2015 Difference 2016
2015
Difference (in millions) (in millions)
As
reported $ 1,891 $ 2,041 $ (150 ) $ (122 ) $ 184 $ (306 )
Impact of acquisitions (21 ) - (21 ) 15 1 14 Impact
of foreign currency fluctuations 72 - 72 9 - 9 Net impact of
U.K. Newspaper Matters - - - 3 15 (12 ) NAM Group settlement
charge - - - 280 - 280
As adjusted $
1,942 $ 2,041 $ (99 ) $ 185 $ 200 $ (15
) Revenues Total Segment EBITDA For the nine months ended
March 31, For the nine months ended March 31, 2016 2015 Difference
2016 2015 Difference (in millions) (in millions)
As
reported $ 6,066 $ 6,407 $ (341 ) $ 323 $ 730 $ (407 )
Impact of acquisitions (201 ) - (201 ) 22 24 (2 ) Impact of
divestitures - (2 ) 2 - - - Impact of foreign currency
fluctuations 401 - 401 63 - 63 Net impact of U.K. Newspaper
Matters - - - 15 42 (27 ) NAM Group settlement charge - - -
280 - 280
As adjusted $ 6,266 $
6,405 $ (139 ) $ 703 $ 796 $ (93 )
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and nine months ended March 31, 2016 and 2015 are as
follows:
For the three months ended March 31, 2016 2015
% Change (in millions) Better/(Worse)
Adjusted
Revenues: News and Information Services $ 1,266 $ 1,353 (6 ) %
Book Publishing 360 402 (10 ) % Digital Real Estate Services 200
170 18 % Cable Network Programming 116 116 - % Other -
- **
Total
Adjusted Revenues $ 1,942 $ 2,041
(5 ) %
Adjusted Segment EBITDA: News and Information
Services $ 101 $ 113 (11 ) % Book Publishing 36 56 (36 ) % Digital
Real Estate Services 53 43 23 % Cable Network Programming 36 27 33
% Other (41 ) (39 ) (5 ) %
Total
Adjusted Segment EBITDA $ 185 $ 200
(8 ) % ** - Not meaningful For the nine months ended
March 31, 2016 2015 % Change (in millions)
Adjusted
Revenues: News and Information Services $ 4,140 $ 4,327 (4 ) %
Book Publishing 1,213 1,277 (5 ) % Digital Real Estate Services 521
434 20 % Cable Network Programming 392 367 7 % Other -
- **
Total
Adjusted Revenues $ 6,266 $ 6,405
(2 ) %
Adjusted Segment EBITDA: News and Information
Services $ 359 $ 434 (17 ) % Book Publishing 134 193 (31 ) %
Digital Real Estate Services 217 175 24 % Cable Network Programming
113 113 - % Other (120 ) (119 ) (1 ) %
Total Adjusted Segment EBITDA $ 703 $ 796
(12 ) % ** - 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 March 31, 2016 and 2015.
For the three months ended March 31, 2016
Impact of
Net Impact
Foreign
of U.K.
NAM Group
Impact of
Currency
Newspaper
Settlement
As Reported
Acquisitions
Fluctuations
Matters
Charge
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,231 $ (12 ) $ 47 $ - $ - $ 1,266 Book
Publishing 358 (4 ) 6 - - 360 Digital Real Estate Services 194 (4 )
10 - - 200 Cable Network Programming 107 - 9 - - 116 Other 1
(1 ) - - -
-
Total Revenues $ 1,891 $ (21 ) $ 72
$ - $ - $ 1,942
Segment
EBITDA: News and Information Services $ (187 ) $ 6 $ 2 $ - $
280 $ 101 Book Publishing 36 - - - - 36 Digital Real Estate
Services 39 9 5 - - 53 Cable Network Programming 34 - 2 - - 36
Other (44 ) - - 3
- (41 )
Total Segment EBITDA $ (122 ) $
15 $
9
$
3
$
280
$ 185 For the three months ended March 31,
2015
Net Impact of
U.K.
Impact of
Newspaper
As Reported
Acquisitions
Matters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,353 $ - $ - $ 1,353 Book Publishing 402 -
- 402 Digital Real Estate Services 170 - - 170 Cable Network
Programming 116 - - 116 Other - -
- -
Total Revenues $ 2,041
$ - $ - $ 2,041
Segment
EBITDA: News and Information Services $ 113 $ - $ - $ 113 Book
Publishing 56 - - 56 Digital Real Estate Services 42 1 - 43 Cable
Network Programming 27 - - 27 Other (54 ) -
15 (39 )
Total Segment EBITDA $ 184
$
1
$
15
$ 200
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the nine months ended March 31, 2016 and 2015.
For the nine months ended March 31, 2016
Impact of
Net Impact
Foreign
of U.K.
NAM Group
Impact of
Currency
Newspaper
Settlement
As Reported
Acquisitions
Fluctuations
Matters
Charge
As Adjusted (in millions)
Revenues: News and
Information Services $ 3,921 $ (33 ) $ 252 $ - $ - $ 4,140 Book
Publishing 1,213 (33 ) 33 - - 1,213 Digital Real Estate Services
593 (133 ) 61 - - 521 Cable Network Programming 337 - 55 - - 392
Other 2 (2 ) - -
- -
Total Revenues $ 6,066
$ (201 ) $ 401 $ - $ - $ 6,266
Segment EBITDA: News and Information Services $ 54 $
11 $ 14 $ - $ 280 $ 359 Book Publishing 135 (3 ) 2 - - 134 Digital
Real Estate Services 169 13 35 - - 217 Cable Network Programming
101 - 12 - - 113 Other (136 ) 1 -
15 - (120 )
Total
Segment EBITDA $ 323 $ 22 $
63
$
15
$
280
$ 703 For the nine months ended March 31, 2015
Net Impact of
U.K.
Impact of
Impact of
Newspaper
As Reported
Acquisitions
Divestitures
Matters
As Adjusted (in millions)
Revenues: News and
Information Services $ 4,327 $ - $ - $ - $ 4,327 Book Publishing
1,277 - - - 1,277 Digital Real Estate Services 436 - (2 ) - 434
Cable Network Programming 367 - - - 367 Other -
- - - -
Total Revenues $ 6,407 $ - $ (2 ) $ - $
6,405
Segment EBITDA: News and Information
Services $ 434 $ - $ - $ - $ 434 Book Publishing 188 5 - - 193
Digital Real Estate Services 156 19 - - 175 Cable Network
Programming 113 - - - 113 Other (161 ) -
- 42 (119 )
Total Segment
EBITDA $ 730 $
24
$ - $
42
$ 796
NOTE 2 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses,
selling, general and administrative expenses and the NAM Group
settlement charge. Segment EBITDA does not include: Depreciation
and amortization, impairment and restructuring charges, equity
earnings of affiliates, interest, net, other, net, and income tax
benefit (expense). 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 of and allocate resources within the Company’s
businesses. Segment EBITDA provides management, investors and
equity analysts with 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 (loss)
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 (loss) income from continuing
operations.
For the three months ended March 31, 2016 2015
Change % Change (in millions) Better/(Worse)
Revenues $ 1,891 $ 2,041 $ (150 ) (7 ) %
Operating expenses (1,084 ) (1,204 ) 120 10 % Selling, general and
administrative (649 ) (653 ) 4 1 % NAM Group settlement charge
(280 ) - (280 ) **
Total Segment EBITDA (122 ) 184 (306 ) **
Depreciation and amortization (126 ) (124 ) (2 ) (2 ) %
Restructuring charges (24 ) (10 ) (14 ) ** Equity earnings of
affiliates 2 7 (5 ) (71 ) % Interest, net 11 12 (1 ) (8 ) % Other,
net 33 12 21
** (Loss) income from continuing operations
before income tax benefit (expense) (226 ) 81 (307 ) ** Income tax
benefit (expense) 98 (25 ) 123
**
(Loss) income from continuing
operations $ (128 ) $ 56 $ (184 ) **
** - Not meaningful For the nine months
ended March 31, 2016 2015 Change % Change
(in millions)
Better/(Worse)
Revenues $ 6,066 $ 6,407 $ (341 ) (5 )
% Operating expenses (3,476 ) (3,737 ) 261 7 % Selling, general and
administrative (1,987 ) (1,940 ) (47 ) (2 ) % NAM Group settlement
charge (280 ) - (280 ) **
Total Segment EBITDA 323 730 (407 ) (56 ) %
Depreciation and amortization (370 ) (375 ) 5 1 % Restructuring
charges (63 ) (31 ) (32 ) ** Equity earnings of affiliates 25 48
(23 ) (48 ) % Interest, net 34 42 (8 ) (19 ) % Other, net 32
70 (38 ) (54 ) % (Loss)
income from continuing operations before income tax benefit
(expense) (19 ) 484 (503 ) ** Income tax benefit (expense)
140 (137 ) 277 **
Income from continuing operations $ 121 $ 347
$ (226 ) (65 ) % ** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME FROM CONTINUING OPERATIONS
AVAILABLE TO NEWS CORPORATION STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income from continuing operations available
to News Corporation stockholders and diluted earnings per share
from continuing operations (“EPS”) excluding expenses related to
U.K. Newspaper Matters, Impairment and restructuring charges,
Other, net and the NAM Group settlement charge, net of tax
(“adjusted net income from continuing operations 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 from continuing operations
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 from continuing
operations 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 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 from
continuing operations available to News Corporation stockholders
and reported diluted EPS to adjusted net income from continuing
operations available to News Corporation stockholders and adjusted
EPS for the three and nine months ended March 31, 2016 and
2015.
For the three months ended For the three months ended
March 31, 2016 March 31, 2015
Net (loss)income availableto
stockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
(Loss)
income from continuing operations $ (128 ) $ $ 56 $ Less: Net
income attributable to noncontrolling interests (19 ) (11 )
(Loss) income from continuing operations available to
News Corporation stockholders $ (147 ) $ (0.26 ) $ 45 $ 0.08
U.K. Newspaper Matters 3 0.01 15 0.02 Restructuring
charges 24 0.04 10 0.02 Other, net(a) (33 ) (0.06 ) (12 )
(0.02 ) NAM Group settlement charge 280 0.48 - - Tax
impact on items above(b) (113 ) (0.19 ) (8 ) (0.01 ) Impact
of noncontrolling interest on items included in Other, net above 11
0.02 - -
As adjusted $ 25 $ 0.04 $ 50 $ 0.09
(a) Other, net for the three months ended March 31,
2016 primarily includes a non-taxable gain of $29 million resulting
from the revaluation of REA Group’s previously held equity interest
in iProperty. (b) Tax impact on items above for the three months
ended March 31, 2016 includes a tax benefit of $107 million related
to the NAM Group settlement charge. For the nine
months ended For the nine months ended March 31, 2016 March
31, 2015
Net incomeavailable tostockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
Income
from continuing operations $ 121 $ $ 347 $ Less: Net income
attributable to noncontrolling interests (52 ) (54 ) Less:
Redeemable preferred stock dividends (1 )
(1 )
Income from continuing operations
available to News Corporation stockholders $ 68 $ 0.12 $ 292 $
0.51 U.K. Newspaper Matters 15 0.03 42 0.07
Restructuring charges 63 0.11 31 0.05 Other, net (a) (32 )
(0.06 ) (70 ) (0.12 ) NAM Group settlement charge 280 0.48 -
Tax impact on items above(b) (128 ) (0.23 ) (10 ) (0.02 )
Tax benefit(c) (106 ) (0.18 ) - - Impact of
noncontrolling interest on items included in Other, net above 11
0.02 11 0.02
As adjusted $ 171 $ 0.29 $ 296 $
0.51 (a) Other, net for the nine months ended March
31, 2016 primarily includes a non-taxable gain of $29 million
resulting from the revaluation of REA Group’s previously held
equity interest in iProperty. Other, net for the nine months ended
March 31, 2015 primarily includes a gain on the sale of marketable
securities and dividends received from cost method investments. (b)
Tax impact on items above for the nine months ended March 31, 2016
includes a tax benefit of $107 million related to the NAM Group
settlement charge. (c) The Company recognized a tax benefit of
approximately $106 million from the release of valuation allowances
resulting from the planned disposal of the digital education
business in the nine months ended March 31, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505006694/en/
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorJim Kennedy, 212-416-4064Corporate
Communicationsjkennedy@newscorp.com
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