FISCAL 2016 FOURTH QUARTER KEY
FINANCIAL HIGHLIGHTS
- Revenues of $2.2 billion increased
5% compared to $2.1 billion in the prior year
- Income from continuing operations of
$114 million compared to $20 million in the prior year
- Total Segment EBITDA of $361
million, which includes a one-time litigation settlement gain of
$122 million, compared to $215 million in the prior year
- EPS were $0.16 including the
settlement gain, compared to $0.01 in the prior year
- Digital Real Estate Services segment
revenue grew 21% compared to the prior year
- Digital revenues represented 23% of
News and Information Services segment revenues, compared to 19% 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 and fiscal year ended June 30, 2016
(includes 14 and 53 weeks, respectively, compared to 13 and 52
weeks in the three months and fiscal year ended June 30, 2015,
respectively).
Commenting on the results, Chief Executive Robert Thomson
said:
“We ended Fiscal Year 2016 with strong results in the fourth
quarter, highlighted by robust year-over-year growth in revenues
and EBITDA at Digital Real Estate Services and an upturn at
HarperCollins.
Over the past year, we made clear progress on our primary goals
– to become more digital and more global. Since the advent of the
new News three years ago, revenue at Digital Real Estate Services
has more than doubled, and it is expected to become the biggest
contributor to EBITDA in the future thanks to the ongoing success
of REA and the rapid growth at Realtor.com® in the U.S. Our reach
in digital real estate is unparalleled and highlights the potential
of the News Corp network, which is monetizing shared data and
maximizing the value of content and traffic.
Book Publishing ended the year strongly, highlighting our
ability to leverage quality content across both print and digital
platforms.
While global print ad trends remain challenging at our News and
Information Services segment, we are continuing our aggressive
growth in digital, which now accounts for 23% of segment revenues,
up from 19% last year.
The success of the Wall Street Journal is a testament to the
importance of high quality content with global appeal. This past
quarter the WSJ reached 948,000 digital-only subscribers, posting
healthy year-over-year gains with improved pricing to better
reflect its unique value. At News UK, The Times and The Sunday
Times continue to impress with nearly 182,500 digital-only
subscribers. Digital subscriptions continue to grow and now account
for approximately 45% of the subscriber base, while print sales
have also risen tangibly in recent months. This quarter we
relaunched the Sun’s website, which had over 42 million global
unique users in June, a distinctive increase since the lifting of
the paywall last year. The U.K. team is focused on leveraging our
immensely valuable U.K. brands, which is part of the logic behind
our offer for Wireless Group. Finally, at News Australia, The
Australian continues to post higher paid volume, thanks to
digital.
With the advertising marketplace in upheaval and, rightly under
increased scrutiny, we believe the need for trusted content and
premium audiences will only increase. We are confident that News
Corp’s unique portfolio and global distribution, combined with our
focus on cost efficiencies, mean we are uniquely positioned to
capitalize on broader social and commercial trends, and drive
long-term value for investors."
FOURTH QUARTER RESULTS FROM CONTINUING OPERATIONS
The Company reported fiscal 2016 fourth quarter total revenues
of $2.2 billion, a 5% increase as compared to the prior year fourth
quarter revenues of $2.1 billion. Reported revenues reflect a
negative impact from foreign currency fluctuations of $54 million.
Adjusted Revenues (which exclude the foreign currency impact and
acquisitions as defined in Note 1) increased 6% compared to the
prior year, as growth in the Digital Real Estate Services and Book
Publishing segments and the impact from the additional week in the
quarter of $112 million were partially offset by lower advertising
revenues at the News and Information Services segment.
Income from continuing operations for the quarter was $114
million as compared to $20 million in the prior year. The increase
was primarily due to a one-time gain of $122 million ($75 million,
net of tax) related to the settlement of litigation between Move
and Zillow Group, lower restructuring charges and higher Total
Segment EBITDA, as discussed below, offset in part by lower Other,
net.
The Company reported fourth quarter Total Segment EBITDA of $361
million, a 68% increase as compared to $215 million in the prior
year. Fourth quarter Total Segment EBITDA includes the gain at Move
from the settlement as mentioned above. Excluding this settlement,
Total Segment EBITDA in the quarter would have been $239
million.
Adjusted Total Segment EBITDA (as defined in Note 1), which
excludes the impact of the settlement noted above as well as the
other items described in Note 1, increased 23% compared to the
prior year, primarily due to strength at the Book Publishing and
Digital Real Estate Services segments and the impact from the
additional week in the quarter.
Earnings per share from continuing operations available to News
Corporation stockholders were $0.16 as compared to $0.01 in the
prior year.
Adjusted EPS (as defined in Note 3) were $0.10 compared to $0.08
in the prior year.
FULL YEAR RESULTS FROM CONTINUING OPERATIONS
The Company reported fiscal 2016 full year total revenues of
$8.3 billion, a 3% decrease as compared to the prior year revenues
of $8.5 billion. The decline in total reported revenues includes a
negative impact from foreign currency fluctuations of $455 million.
Adjusted Revenues were flat compared to the prior year, as growth
in the Digital Real Estate Services segment was offset by lower
advertising revenues at the News and Information Services
segment.
Income from continuing operations was $235 million for fiscal
2016 as compared to $367 million in the prior year. The decline was
primarily due to lower Total Segment EBITDA, as discussed below,
and lower Other, net, partially offset by a tax benefit of $106
million from the release of valuation allowances resulting from the
disposal of the digital education business. As a result of the
release of the valuation allowances, the Company recorded an income
tax benefit of $54 million for the fiscal year.
The Company reported full year Total Segment EBITDA of $684
million, a 28% decline as compared to $945 million in the prior
year. Fiscal 2016 Total Segment EBITDA includes a one-time charge
of $280 million for the settlement of litigation and related claims
at News America Marketing and a one-time gain of $122 million for
the settlement of the Zillow litigation. Excluding those
settlements, Total Segment EBITDA would have been $842 million.
Negative foreign currency fluctuations also reduced Total Segment
EBITDA by $70 million as compared to the prior year.
Adjusted Total Segment EBITDA, which excludes the impact of the
litigation settlements noted above, as well as the other items
described in Note 1, declined 4% compared to the prior year as
strength at the Digital Real Estate Services segment and modest
improvement in the Cable Network Programming segment were more than
offset by the declines at the News and Information Services and
Book Publishing segments and higher legal expenses at Move related
to the Zillow litigation.
Earnings per share from continuing operations available to News
Corporation stockholders were $0.28 for the full year as compared
to $0.51 in the prior year.
Adjusted EPS were $0.40 compared to $0.59 in the prior year.
SEGMENT REVIEW
For the three months ended
For the fiscal years ended June 30, June 30, 2016
2015 % Change 2016 2015 % Change (in millions)
Better/
(Worse)
(in millions) Better/
(Worse)
Revenues: News and Information Services $ 1,417 $
1,404 1 % $ 5,338 $ 5,731 (7) % Book Publishing 433 390 11 % 1,646
1,667 (1) % Digital Real Estate Services 229 189 21 % 822 625 32 %
Cable Network Programming 147 133 11 % 484 500 (3) % Other -
1 ** 2 1 **
Total
Revenues $ 2,226 $ 2,117 5 % $ 8,292 $ 8,524 (3) %
Segment EBITDA: News and Information Services(a) $ 160 $ 169
(5) % $ 214 $ 603 (65) % Book Publishing 50 33 52 % 185 221 (16) %
Digital Real Estate Services(b) 175 45 ** 344 201 71 % Cable
Network Programming 23 22 5 % 124 135 (8) % Other (47)
(54) 13 % (183) (215) 15 %
Total Segment
EBITDA $ 361 $ 215 68 % $ 684 $ 945 (28) % ** - Not
meaningful
(a)
News and Information Services Segment EBITDA for the fiscal
year ended June 30, 2016 includes a one-time charge of $280 million
for the settlement of litigation and related claims at News America
Marketing.
(b)
Digital Real Estate Services Segment EBITDA for the three months
and fiscal year ended June 30, 2016 includes a one-time gain of
$122 million from the settlement of litigation at Move.
News and Information Services
Fourth Quarter Segment Results
Revenues for the fourth quarter of fiscal 2016 increased $13
million, or 1%, compared to the prior year. Adjusted Revenues
increased 2% compared to the prior year, primarily due to an
additional $77 million from the extra week in the quarter.
Advertising revenues, which include $17 million of negative
impact from foreign currency fluctuations, declined 5%, primarily
due to the weakness in the print advertising market coupled with
lower free standing insert product revenues at News America
Marketing. The decline was partially offset by an additional $33
million from the extra week in the quarter, growth in digital
advertising revenues and higher in-store product revenues at News
America Marketing. Circulation and subscription revenues, which
include $16 million of negative impact from foreign currency
fluctuations, increased 5% due to an additional $39 million from
the extra week in the quarter, growth in paid digital subscribers
across the mastheads, higher subscription pricing, and selected
cover price increases in the U.K. and Australia. The improvement
was offset by print volume declines and a modest impact from the
change in the digital strategy at The Sun. Excluding the impact of
negative foreign currency fluctuations and the additional week,
advertising revenues declined 7% and circulation and subscription
revenues increased 1%.
Segment EBITDA decreased $9 million in the quarter, or 5%, as
compared to the prior year. The decline was driven by lower
advertising revenues as well as investment spending and
acquisition-related costs in connection with Checkout 51 and
Unruly. The decline was partially offset by the impact from the
additional week in the quarter and lower operating expenses.
Adjusted Segment EBITDA increased 10% compared to the prior
year.
Digital revenues represented 23% of segment revenues in the
quarter, compared to 19% in the prior year. At Dow Jones, digital
revenues represented 53% of total revenues in the quarter. Below
summarizes the digital subscriber trends across properties within
the News and Information Services segment in the quarter:
- The Wall Street Journal digital
subscribers were 948,000, compared to 753,000 in the prior year
(Source: Internal data)
- Digital subscribers at News Corp
Australia’s mastheads were 272,700, compared to 225,600 in the
prior year (Source: Internal data)
- The Times and Sunday Times digital
subscribers were 182,500, compared to 172,000 in the prior year
(Source: Internal data)
- The Sun’s digital offering reached 42
million global average monthly unique users, based on ABCe (Source:
Omniture)
Full Year Segment Results
Fiscal 2016 full year revenues decreased $393 million, or 7%,
compared to the prior year. Adjusted Revenues declined 3% compared
to the prior year.
Advertising revenues, which include $152 million of negative
impact from foreign currency fluctuations, declined 11%.
Circulation and subscription revenues, which include $109 million
of negative impact from foreign currency fluctuations, declined 2%.
Excluding the impact of negative foreign currency fluctuations and
the additional week, advertising revenues declined 7% and
circulation and subscription revenues increased 1%.
Full year Segment EBITDA decreased $389 million, or 65%, as
compared to the prior year. Results include a one-time charge of
$280 million for the settlement of litigation and related claims at
News America Marketing. Adjusted Segment EBITDA decreased 10%
compared to the prior year. The decline was driven by lower
revenues and higher promotion and marketing costs in the U.K.,
partially offset by lower costs due to ongoing cost initiatives,
combined with savings from lower print volume.
Book Publishing
Fourth Quarter Segment Results
Revenues in the quarter increased $43 million, or 11%, compared
to the prior year, driven by the popularity of front-list titles
such as The Nest by Cynthia D’Aprix Sweeney, The Rainbow Comes and
Goes by Anderson Cooper, The World’s Worst Children by David
Walliams and carry-over sales from Jesus Calling by Sarah Young, as
well as a $19 million impact from the additional week in the
quarter and the continued expansion of HarperCollins’ global
footprint. Digital sales represented 19% of Consumer revenues for
the quarter. Adjusted Revenues increased 9% compared to the prior
year. Segment EBITDA increased $17 million, or 52%, from the prior
year due to higher revenues as noted above.
Full Year Segment Results
Full year revenues decreased $21 million, or 1%, compared to the
prior year, driven by lower revenues from the Divergent series by
Veronica Roth and American Sniper by Chris Kyle, lower e-book sales
and negative foreign currency fluctuations, partially offset by the
release of Go Set a Watchman by Harper Lee, the inclusion of the
results of Harlequin, which was acquired in August 2014, continued
expansion of HarperCollins’ global footprint and the $19 million
impact from the additional week. Digital sales represented 19% of
Consumer revenues for fiscal 2016. Full year Segment EBITDA
decreased $36 million, or 16%, from the prior year primarily due to
the factors noted above, partially offset by cost savings
initiatives. Adjusted Revenues and Adjusted Segment EBITDA declined
2% and 19%, respectively, compared to the prior year.
Digital Real Estate Services
Fourth Quarter Segment Results
Revenues in the quarter increased $40 million, or 21%, compared
to the prior year, primarily due to the continued growth at REA
Group and Move, as well as the acquisitions of iProperty and
Diakrit. Segment EBITDA in the quarter was $175 million, compared
to $45 million in the prior year. The increase in Segment EBITDA
was primarily due to a one-time gain of $122 million related to the
settlement of the Zillow litigation at Move and continued strength
at REA Group, partially offset by $10 million of higher legal
expenses at Move associated with the litigation and higher
marketing expenses at REA Group.
Adjusted Revenues increased 17% and Adjusted Segment EBITDA,
which includes $15 million of legal expenses at Move for the
quarter related to the Zillow litigation, increased 24% compared to
the prior year.
In the quarter, revenues at REA Group increased 17%, or 21%
excluding a $5 million impact from negative foreign currency
fluctuations, due to greater listing depth product penetration and
higher developer and media revenues.
Move’s revenues in the quarter increased 21% to $98 million from
$81 million in the prior year, primarily due to the continued
strength in its Connection for Co-Brokerage product, as well as
growth in non-listing Media and professional software revenues.
Based on Move’s internal data, average monthly unique users of
realtor.com®’s web and mobile sites for the fiscal fourth quarter
grew 17% year-over-year to approximately 53 million. Mobile
continues to drive audience growth and now makes up over half of
all unique users.
Full Year Segment Results
Fiscal 2016 revenues increased $197 million, or 32%, compared to
the prior year, primarily due to the $169 million from the
inclusion of the results of Move, which was acquired in November
2014, coupled with higher revenues at REA Group and the
acquisitions of iProperty and Diakrit. Segment EBITDA increased
$143 million, or 71%, compared to the prior year, primarily due to
a one-time gain of $122 million related to the settlement of the
Zillow litigation at Move. The improvement was partially offset by
a $28 million increase in legal expenses related to the litigation,
which totaled $38 million for fiscal 2016, as well as negative
foreign currency fluctuations and transaction costs of $7 million
related to the acquisition of iProperty.
Adjusted Revenues increased 19% compared to the prior year.
Adjusted Segment EBITDA, which excludes the settlement gain but
includes the higher legal expenses, increased 24% compared to the
prior year.
In the fiscal year, revenues at REA Group increased 5%, or 20%
excluding $66 million of impact from negative foreign currency
fluctuations, due to greater listing depth product penetration and
higher developer and media revenues. Move’s revenues in the fiscal
year increased 27% to $357 million from $282 million on a
stand-alone basis in the prior year, primarily due to the continued
strength in its Connection for Co-Brokerage product, as well as
growth in non-listing Media and professional software revenues.
Cable Network Programming
Fourth Quarter Segment Results
In the fourth quarter of fiscal 2016, revenues increased $14
million, or 11%, compared to the prior year. Adjusted Revenues
increased 14%, primarily due to the $10 million impact from the
additional week in the quarter and higher affiliate revenues, as
well as increased advertising revenues resulting from higher
ratings. Segment EBITDA increased $1 million, or 5%, from the prior
year. Adjusted Segment EBITDA increased 14%, primarily due to
higher revenues, partially offset by higher programming rights
costs primarily related to the NRL simulcast. Negative foreign
currency fluctuations reduced reported revenues and Segment EBITDA
for the quarter by $5 million and $2 million, respectively, as
compared to the prior year.
Full Year Segment Results
Fiscal 2016 full year revenues decreased $16 million, or 3%,
compared to the prior year. Adjusted Revenues increased 9%,
primarily due to higher affiliate and advertising revenues, as well
as the $10 million impact from the additional week in the year.
Segment EBITDA decreased $11 million, or 8%, from the prior year.
Adjusted Segment EBITDA increased 2%, primarily due to higher
revenues, partially offset by higher programming rights and
production costs. Negative foreign currency fluctuations reduced
reported revenues and Segment EBITDA by $60 million and $14
million, respectively, as compared to the prior year.
Other
Fourth Quarter Segment Results
Segment EBITDA in the quarter improved by $7 million, primarily
due to decreased 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 $4
million for the three months ended June 30, 2016, as compared to $8
million in the prior year.
Full Year Segment Results
Full year Segment EBITDA improved by $32 million. The net
expense related to the U.K. Newspaper Matters was $19 million for
the full year, as compared to $50 million in the prior year.
REVIEW OF EQUITY EARNINGS OF AFFILIATES’ RESULTS
Full year equity earnings from affiliates were $30 million
compared to $58 million in the prior year. Equity earnings from
affiliates for the fourth quarter were $5 million compared to $10
million in the prior year.
For the three months ended For
the fiscal years ended June 30, June 30, 2016 2015 2016
2015 (in millions) (in millions) Foxtel(a) $ 12 $ 11
$ 38 $ 59 Other equity affiliates, net(b) (7 ) (1 )
(8 ) (1 ) Total equity earnings of affiliates $ 5
$ 10 $ 30 $ 58
(a)
The Company amortized $15 million and $52 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 and fiscal year ended
June 30, 2016, respectively, and $13 million and $57 million in the
corresponding periods of fiscal 2015, respectively. Such
amortization is reflected in Equity earnings of affiliates in the
Statements of Operations.
(b)
Other equity affiliates, net for the three months ended June 30,
2016 includes losses primarily from the Company’s interests in
Draftstars and Elara Technologies, which owns PropTiger.
On a U.S. GAAP basis, Foxtel revenues, for the fiscal year ended
June 30, 2016, decreased $279 million to $2,379 million from $2,658
million in the prior year period. In local currency, Foxtel
revenues increased 3% due to higher subscribers. Foxtel EBITDA
decreased $156 million to $604 million from $760 million in the
prior year. In local currency, Foxtel EBITDA declined 9% primarily
due to increased investment in programming to support subscriber
growth, higher offer costs, as well as continued investment in
Presto.
Foxtel’s total closing subscribers were more than 2.9 million as
of June 30, 2016, with the vast majority of year-over-year growth
driven by cable and satellite subscribers, which increased
approximately 5% compared to the prior year period. In the fourth
quarter, cable and satellite churn increased to 14.0% from 9.9% in
the prior year due to customer departures with the increased use of
no-contract offers during fiscal 2016. Fiscal 2016 full year churn
was 12.2% compared to 10.9% in the prior year. Broadcast
residential ARPU for the full year was A$89, a mid-single digit
decline compared to the prior year.
Foxtel operating income for the fiscal years ended June 30, 2016
and 2015 was $373 million and $441 million, respectively, after
depreciation and amortization of $231 million and $319 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 $180 million decreased from $232 million
in the prior year period as a result of lower operating income as
noted above.
FULL YEAR CASH FLOW
Net cash provided by continuing operating activities decreased
$36 million for the fiscal year ended June 30, 2016 as compared to
fiscal 2015 which was primarily due to lower dividends from Foxtel
and cost method investments of $104 million and higher
restructuring payments of $44 million during the fiscal year ended
June 30, 2016. The decrease was offset by net proceeds received in
fiscal 2016 from the Zillow litigation settlement of $122 million
and a benefit in working capital related to the additional
week.
Free cash flow available to News Corporation in the fiscal year
ended June 30, 2016 was $610 million compared to $595 million in
the prior year period. The increase was primarily due to lower
capital expenditures, partially offset by a decrease in cash
provided by continuing operating activities as discussed above.
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 (“free cash flow”),
less 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 to strengthen the
Company’s balance sheet and for strategic opportunities including,
among others, investing in the Company’s business, strategic
acquisitions, 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 fiscal years ended June 30, 2016
2015 (in millions) Net cash provided by continuing
operating activities $ 952 $ 988 Less: Capital expenditures
(256 ) (308 ) 696 680 Less: REA Group free cash flow (131 )
(130 ) Plus: Cash dividends received from REA Group 45
45 Free cash flow available to News
Corporation $ 610 $ 595
OTHER ITEMS
Wireless Group plc
On June 30, 2016, the Company announced that it had reached an
agreement on the terms of a recommended cash offer (the “Offer”) to
acquire Wireless Group plc (“Wireless Group”) for a purchase price
of 315 pence per share in cash, or approximately £220 million
(approximately $300 million) in the aggregate, plus any assumed
debt at closing. Wireless Group operates TalkSPORT, the leading
sports radio network in the U.K., and a portfolio of radio stations
in the U.K. and Ireland. The Offer is subject to customary closing
conditions, including shareholder acceptances and regulatory
approval. As a result of U.K. takeover rules, the Company has
specifically set aside $315 million of cash for the Offer and has
classified it as restricted cash on the Balance Sheet as of June
30, 2016.
Dividends
The Company today declared a semi-annual cash dividend of $0.10
per share for Class A Common Stock and Class B Common Stock. This
dividend is payable on October 19, 2016 to stockholders of record
as of September 14, 2016.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted Revenues, Total Segment EBITDA, Adjusted 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. The Company believes these measures are important
tools for investors and analysts to use in assessing the Company’s
underlying business performance and to provide for more meaningful
comparisons of the Company’s operating performance between periods.
These measures also allow investors and analysts 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
4:30 p.m. Eastern Daylight Time on August 8, 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 share
and per share amounts)
For the three months ended For the fiscal years ended June
30, June 30, 2016 2015 2016 2015 Revenues:
Advertising $ 972 $ 973 $ 3,644 $ 3,835 Circulation and
subscription 694 654 2,569 2,608 Consumer 414 371 1,578 1,594 Other
146 119 501 487
Total Revenues 2,226 2,117 8,292 8,524
Operating expenses (1,252 ) (1,215 ) (4,728 ) (4,952 ) Selling,
general and administrative (735 ) (687 ) (2,722 ) (2,627 ) NAM
Group and Zillow settlements, net 122 - (158 ) - Depreciation and
amortization (135 ) (123 ) (505 ) (498 ) Impairment and
restructuring charges (26 ) (53 ) (89 ) (84 ) Equity earnings of
affiliates 5 10 30 58 Interest, net 9 14 43 56 Other, net
(14 ) 5 18 75 Income from
continuing operations before income tax (expense) benefit 200 68
181 552 Income tax (expense) benefit (86 ) (48 )
54 (185 ) Income from continuing operations
114 20 235 367 (Loss) income from discontinued operations, net of
tax (5 ) (383 ) 15 (445 ) Net
income (loss) 109 (363 ) 250 (78 ) Less: Net income attributable to
noncontrolling interests (19 ) (15 ) (71 )
(69 ) Net income (loss) attributable to News Corporation
stockholders 90 (378 ) 179 (147 ) Less: Adjustments to Net income
(loss) attributable to News Corporation stockholders – Redeemable
preferred stock dividends (1 ) (1 ) (2 )
(2 ) Net income (loss) available to News Corporation
stockholders $ 89 $ (379 ) $ 177 $ (149 )
Weighted average shares outstanding: Basic 580 583 581 581 Diluted
582 584 583 583 Income from continuing operations available
to News Corporation stockholders per share - basic and diluted $
0.16 $ 0.01 $ 0.28 $ 0.51 (Loss) income from discontinued
operations available to News Corporation stockholders per share -
basic and diluted $ (0.01 ) $ (0.66 ) $ 0.02 $ (0.77 ) Net
income (loss) available to News Corporation stockholders per share
- basic and diluted $ 0.15 $ (0.65 ) $ 0.30 $ (0.26 )
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
As of June 30, 2016
As of June 30, 2015
ASSETS Current assets: Cash and
cash equivalents $ 1,832 $ 1,951 Restricted cash 315 - Receivables,
net 1,229 1,283 Other current assets 513 780
Total current assets 3,889 4,014
Non-current assets: Investments 2,270 2,379 Property, plant
and equipment, net 2,405 2,690 Intangible assets, net 2,207 2,203
Goodwill 3,714 3,063 Deferred income tax assets 602 219 Other
non-current assets 396 467 Total assets
$ 15,483 $ 15,035
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 217 $ 238
Accrued expenses 1,371 1,125 Deferred revenue 388 346 Other current
liabilities 466 401 Total current
liabilities 2,442 2,110
Non-current liabilities: Borrowings 369 - Retirement benefit
obligations 350 305 Deferred income tax liabilities 171 166 Other
non-current liabilities 349 318 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 12,434 12,433 Retained earnings 150 88
Accumulated other comprehensive loss (1,026 ) (582 )
Total News Corporation stockholders' equity 11,564 11,945
Noncontrolling interests 218 171 Total
equity 11,782 12,116 Total liabilities
and equity $ 15,483 $ 15,035
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
For the fiscal years ended June 30, 2016 2015
Operating activities:
Net income (loss)
$ 250 $ (78 )
Less: Income (loss) from discontinued
operations
15 (445 )
Income from continuing operations:
235 367
Adjustments to reconcile income from
continuing operations to cash provided by operating activities:
Depreciation and amortization 505 498 Equity earnings of affiliates
(30 ) (58 ) Cash distributions received from affiliates 34 138
Other, net (18 ) (75 ) Deferred income taxes and taxes payable (147
) 59 Change in operating assets and liabilities, net of
acquisitions: Receivables and other assets 22 29 Inventories, net
35 18 Accounts payable and other liabilities 342 34 Pension and
postretirement benefit plans (26 ) (22 )
Net cash provided by operating activities
from continuing operations
952 988
Investing activities:
Capital expenditures (256 ) (308 ) Changes in restricted cash (315
) - Acquisitions, net of cash acquired (520 ) (1,190 ) Investments
in equity affiliates and other (51 ) (146 ) Other investments (54 )
(224 ) Proceeds from dispositions 42 182 Other 30
15
Net cash used in investing activities from
continuing operations
(1,124 ) (1,671 )
Financing activities:
Borrowings 342 - Repayment of borrowings acquired in the Move
acquisition - (129 ) Repurchase of shares (41 ) (30 ) Dividends
paid (147 ) (30 ) Other, net (4 ) (1 )
Net cash provided by (used in) financing
activities from continuing operations
150 (190 )
Net decrease in cash and cash equivalents
from continuing operations
(22 ) (873 )
Net decrease in cash and cash equivalents
from discontinued operations
(61 ) (227 )
Cash and cash equivalents, beginning of
period
1,951 3,145
Exchange movement on opening cash
balance
(36 ) (94 )
Cash and cash equivalents, end of
period
$ 1,832 $ 1,951
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 and
Zillow settlements 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 GAAP 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 and fiscal years ended June 30,
2016 and 2015.
Revenues Total Segment EBITDA For the three
months ended June 30, For the three months ended June 30, 2016
2015 Difference 2016 2015 Difference
(in millions) (in millions)
As reported $ 2,226 $
2,117 $ 109 $ 361 $ 215 $ 146 Impact of acquisitions (42 ) -
(42 ) 24 - 24 Impact of foreign currency fluctuations 54 -
54 7 - 7 Net impact of U.K. Newspaper Matters - - - 4 8 (4 )
Zillow settlement - - - (122 ) - (122 )
As adjusted $ 2,238 $ 2,117 $ 121 $ 274
$ 223 $ 51 Revenues Total Segment
EBITDA For the fiscal years ended June 30, For the fiscal years
ended June 30, 2016 2015 Difference 2016 2015 Difference (in
millions) (in millions)
As reported $ 8,292 $ 8,524 $
(232 ) $ 684 $ 945 $ (261 ) Impact of acquisitions (243 ) -
(243 ) 46 24 22 Impact of divestitures - (2 ) 2 - - -
Impact of foreign currency fluctuations 455 - 455 70 - 70
Net impact of U.K. Newspaper Matters - - - 19 50 (31 ) NAM
Group and Zillow settlements, net - - - 158 - 158
As adjusted $ 8,504 $ 8,522 $ (18 ) $
977 $ 1,019 $ (42 )
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months and fiscal years ended June 30, 2016 and 2015 are as
follows:
For the three months ended June 30,
2016
2015
% Change (in millions) Better/(Worse)
Adjusted
Revenues: News and Information Services $ 1,437 $ 1,404 2 %
Book Publishing 427 390 9 % Digital Real Estate Services 222 189 17
% Cable Network Programming 152 133 14 % Other -
1
**
Adjusted Total Revenues $ 2,238 $ 2,117
6 %
Adjusted Segment EBITDA: News and Information
Services $ 186 $ 169 10 % Book Publishing 50 33 52 % Digital Real
Estate Services 56 45 24 % Cable Network Programming 25 22 14 %
Other (43 ) (46 ) 7 %
Adjusted Total Segment
EBITDA $ 274 $ 223 23 %
** - Not meaningful
For the fiscal years ended June 30,
2016 2015 % Change (in millions) Better/(Worse)
Adjusted
Revenues: News and Information Services $ 5,577 $ 5,731 (3 )%
Book Publishing 1,640 1,667 (2 )% Digital Real Estate Services 743
623 19 % Cable Network Programming 544 500 9 % Other -
1 **
Adjusted Total Revenues $
8,504 $ 8,522
-
%
Adjusted Segment EBITDA: News and Information
Services $ 545 $ 603 (10 )% Book Publishing 184 226 (19 )% Digital
Real Estate Services 273 220 24 % Cable Network Programming 138 135
2 % Other (163 ) (165 ) 1 %
Adjusted Total Segment
EBITDA $ 977 $ 1,019 (4 )%
** - 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 June 30, 2016 and 2015.
For the three months ended June 30,
2016 As Reported
Impact of
Acquisitions
Impact of
Foreign
Currency
Fluctuations
Net Impact of
U.K.
Newspaper
Matters
Zillow
Settlement
As
Adjusted
(in millions)
Revenues: News and Information Services
$ 1,417 $ (18 ) $ 38 $ - $ - $ 1,437 Book Publishing 433 (12 ) 6 -
- 427 Digital Real Estate Services 229 (12 ) 5 - - 222 Cable
Network Programming 147 - 5 - - 152 Other - -
- - - -
Total
Revenues $ 2,226 $ (42 ) $ 54 $ - $ - $ 2,238
Segment EBITDA: News and Information Services
$ 160 $ 24 $ 2 $ - $ - $ 186 Book Publishing 50 (1 ) 1 - - 50
Digital Real Estate Services 175 1 2 - (122 ) 56 Cable Network
Programming 23 - 2 - - 25 Other (47 ) -
- 4 - (43 )
Total Segment EBITDA
$ 361 $ 24 $ 7 $ 4 $ (122 ) $ 274
For the three months ended June 30,
2015 As Reported
Net Impact of
U.K.
Newspaper
Matters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,404 $ - $ 1,404 Book Publishing 390 - 390
Digital Real Estate Services 189 - 189 Cable Network Programming
133 - 133 Other 1 - 1
Total
Revenues $ 2,117 $ - $ 2,117
Segment
EBITDA: News and Information Services $ 169 $ - $ 169 Book
Publishing 33 - 33 Digital Real Estate Services 45 - 45 Cable
Network Programming 22 - 22 Other (54 ) 8 (46
)
Total Segment EBITDA $ 215 $ 8 $ 223
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the fiscal years ended June 30, 2016 and 2015.
For the fiscal year ended June 30, 2016
As
Reported
Impact of
Acquisitions
Impact of
Foreign
Currency
Fluctuations
Net Impact
of U.K.
Newspaper
Matters
NAM
Group and
Zillow
Settlement, net
As
Adjusted
(in millions)
Revenues: News and Information Services
$ 5,338 $ (51 ) $ 290 $ - $ - $ 5,577 Book Publishing 1,646 (45 )
39 - - 1,640 Digital Real Estate Services 822 (145 ) 66 - - 743
Cable Network Programming 484 - 60 - - 544 Other 2
(2 ) - - - -
Total Revenues $ 8,292 $ (243 ) $ 455 $ - $ -
$ 8,504
Segment EBITDA: News and Information
Services $ 214 $ 35 $ 16 $ - $ 280 $ 545 Book Publishing 185 (4 ) 3
- - 184 Digital Real Estate Services 344 14 37 - (122 ) 273 Cable
Network Programming 124 - 14 - - 138 Other (183 ) 1
- 19 - (163 )
Total
Segment EBITDA $ 684 $ 46 $ 70 $ 19 $ 158
$ 977 For the fiscal year
ended June 30, 2015
As Reported
Impact of
Acquisitions
Impact of
Divestitures
Net Impact
of U.K.
Newspaper
Matters
As Adjusted (in millions)
Revenues: News and
Information Services $ 5,731 $ - $ - $ - $ 5,731 Book Publishing
1,667 - - - 1,667 Digital Real Estate Services 625 - (2 ) - 623
Cable Network Programming 500 - - - 500 Other 1
- - - 1
Total
Revenues $ 8,524 $ - $ (2 ) $ - $ 8,522
Segment EBITDA: News and Information Services $ 603 $ - $ -
$ - $ 603 Book Publishing 221 5 - - 226 Digital Real Estate
Services 201 19 - - 220 Cable Network Programming 135 - - - 135
Other (215 ) - - 50 (165
)
Total Segment EBITDA $ 945 $ 24 $ - $ 50 $
1,019
NOTE 2 – TOTAL SEGMENT EBITDA
Segment EBITDA is defined as revenues less operating expenses,
selling, general and administrative expenses and excluding the
impact of the NAM Group and Zillow legal settlements. Segment
EBITDA does not include: Depreciation and amortization, impairment
and restructuring charges, equity earnings of affiliates, interest,
net, other, net, and income tax (expense) benefit. 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). Segment EBITDA may not be comparable to similarly
titled measures reported by other companies, since companies and
investors may differ as to what items should be included in the
calculation of Segment EBITDA.
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 income from continuing
operations.
For the three months ended June
30, 2016 2015 Change % Change (in millions) Better/(Worse)
Revenues $ 2,226 $ 2,117 $ 109 5 % Operating expenses
(1,252 ) (1,215 ) (37 ) (3 )% Selling, general and administrative
(735 ) (687 ) (48 ) (7 )% Zillow settlement 122
- 122 **
Total Segment
EBITDA 361 215 146 68 % Depreciation and amortization (135 )
(123 ) (12 ) (10 )% Impairment and restructuring charges (26 ) (53
) 27 51 % Equity earnings of affiliates 5 10 (5 ) (50 )% Interest,
net 9 14 (5 ) (36 )% Other, net (14 ) 5
(19 ) ** Income from continuing operations before income tax
expense 200 68 132 ** Income tax expense (86 ) (48 )
(38 ) (79 )%
Income from continuing operations $ 114
$ 20 $ 94 ** ** - Not meaningful
For the fiscal years ended June 30, 2016 2015 Change %
Change (in millions)
Revenues $ 8,292 $ 8,524 $ (232
) (3 )% Operating expenses (4,728 ) (4,952 ) 224 5 % Selling,
general and administrative (2,722 ) (2,627 ) (95 ) (4 )% NAM Group
and Zillow settlements, net (158 ) -
(158 ) **
Total Segment EBITDA 684 945 (261 ) (28 )%
Depreciation and amortization (505 ) (498 ) (7 ) (1 )% Impairment
and restructuring charges (89 ) (84 ) (5 ) (6 )% Equity earnings of
affiliates 30 58 (28 ) (48 )% Interest, net 43 56 (13 ) (23 )%
Other, net 18 75 (57 ) (76 )%
Income from continuing operations before income tax benefit
(expense) 181 552 (371 ) (67 )% Income tax benefit (expense)
54 (185 ) 239 **
Income from
continuing operations $ 235 $ 367 $ (132 ) (36 )%
** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME 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
the U.K. Newspaper Matters, Impairment and restructuring charges,
Other, net and the NAM Group and Zillow legal settlements, 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 GAAP 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 months and fiscal years ended June 30, 2016 and
2015.
For the three months ended For the three months ended
June 30, 2016 June 30, 2015
Net income
available to
stockholders
EPS
Net income
available to
stockholders
EPS (in millions, except per share data)
Income from continuing operations $ 114 $ 20
Less: Net income attributable to noncontrolling interests (19 ) (15
) Less: Redeemable preferred stock dividends (1 )
(1 )
Income from
continuing operations available to News Corporation
stockholders $ 94 $ 0.16 $ 4 $ 0.01 U.K. Newspaper
Matters 4 0.01 8 0.02 Impairment and restructuring charges
26 0.04 53 0.08 Other, net 14 0.02 (5 ) (0.01 )
Zillow settlement (122 ) (0.21 ) - - Tax impact on items
above (a) 39 0.07 (11 ) (0.02 ) Impact of noncontrolling
interest on items included in Other, net above 6 0.01 - -
As adjusted $ 61 $ 0.10 $ 49 $
0.08
(a)
Tax impact on items above for the three months ended June
30, 2016 includes a tax expense of $47 million related to the
Zillow settlement gain. For the fiscal year
ended For the fiscal year ended June 30, 2016 June 30, 2015
Net income
available to
stockholders
EPS
Net income
available to
stockholders
EPS (in millions, except per share data)
Income from continuing operations $ 235 $ 367
Less: Net income attributable to noncontrolling interests (71 ) (69
) Less: Redeemable preferred stock dividends (2 )
(2 )
Income from
continuing operations available to News Corporation
stockholders $ 162 $ 0.28 $ 296 $ 0.51 U.K. Newspaper
Matters 19 0.03 50 0.08 Impairment and restructuring charges
89 0.15 84 0.14 Other, net (a) (18 ) (0.03 ) (75 ) (0.13 )
NAM Group and Zillow settlements, net 158 0.27 - -
Tax impact on items above (b) (89 ) (0.15 ) (20 ) (0.03 )
Tax benefit (c) (106 ) (0.18 ) - - Impact of noncontrolling
interest on items included in Other, net above 17 0.03 11 0.02
As adjusted $ 232 $ 0.40 $ 346
$ 0.59
(b)
Other, net for the fiscal year ended June 30, 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 fiscal year ended June 30, 2015
primarily includes a gain on the sale of marketable securities and
dividends received from cost method investments.
(c)
Tax impact on items above for the fiscal year ended June 30, 2016
includes a tax benefit of $107 million related to the NAM Group
settlement charge and a tax expense of $47 million related to the
Zillow settlement gain.
(d)
The Company recognized a tax benefit of approximately $106 million
from the release of valuation allowances resulting from the
disposal of the digital education business in the fiscal year ended
June 30, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160808006174/en/
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorJim Kennedy, 212-416-4064Corporate
Communicationsjkennedy@newscorp.com
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