News Column

News Corporation Reports Third Quarter Results for Fiscal 2014

May 8, 2014

Fiscal 2014 Third Quarter Key Financial Highlights

  • Revenues of $2.08 billion compared to $2.18 billion in the prior year
  • Reported Total Segment EBITDA of $175 million compared to $169 million in the prior year
  • Adjusted EPS were $0.11 compared to $0.13 in the prior year – Reported EPS were $0.08 compared to $0.56 in the prior year, which included a non-taxable gain on the SKY Network Television Ltd. transaction

    NEW YORK--(BUSINESS WIRE)-- 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, 2014.

    Commenting on the results, Chief Executive Robert Thomson said:

    "The past quarter marked another robust stride in the direction of expanding our digital and international businesses, which was the goal we articulated on our investor day last year. Through the planned acquisition of Harlequin we will extend the global reach not only of HarperCollins but of the broader News Corp, which will clearly benefit from that company's commercial infrastructure. We are already reaping benefits from the acquisition of Storyful, which is powering a new social newswire and creating video content communities around our mastheads, whose digital transition is continuing apace.The improved results underscore the strength and diversity of our portfolio.It is also patent that we have been consistently disciplined on costs across the company and around the globe, leading to an improvement in our profitability."

    THIRD QUARTER RESULTS

    The Company reported fiscal 2014 third quarter total revenues of $2.08 billion, a 5% decrease as compared to the prior year third quarter revenues of $2.18 billion. The majority of the revenue decline reflects foreign currency fluctuations, lower advertising revenues at the News and Information Services segment and the sale of the Dow Jones Local Media Group (“LMG”), partially offset by the strength in the Book Publishing and Digital Real Estate Services segments. Adjusted revenues (as defined in Note 1) were relatively flat with the prior year.

    The Company reported third quarter Total Segment EBITDA of $175 million, a 4% increase as compared to $169 million in the prior year. This improvement was driven primarily by stronger performances in the Book Publishing and Digital Real Estate Services segments, partially offset by declines at the News and Information Services segment, adverse foreign currency fluctuations and slightly higher losses at Amplify compared to the prior year. Adjusted Total Segment EBITDA (as defined in Note 1) increased 3% compared to the prior year.

    Net income available to News Corporation stockholders was $48 million as compared to $323 million in the prior year, which included a non-taxable gain on the SKY Network Television Ltd. transaction within Other, net. Adjusted net income available to News Corporation stockholders (as defined in Note 3) was $66 million compared to $73 million in the prior year. Impairment and restructuring charges were $10 million and $54 million in the three months ended March 31, 2014 and 2013, respectively.

    Net income per share available to News Corporation stockholders was $0.08 as compared to $0.56 in the prior year. Adjusted EPS (as defined in Note 3) were $0.11 compared to $0.13 in the prior year.

    Free cash flow available to News Corporation improved by $362 million in the nine months ended March 31, 2014 to $496 million, from $134 million in the prior year.

     

    SEGMENT REVIEW

     
            For the three months ended     For the nine months ended
    March 31, March 31,
    2014     2013     % Change 2014     2013     % Change
    (in millions) (in millions)
     
    Revenues:
    News and Information Services $ 1,488 $ 1,631 (9 ) % $ 4,595 $ 5,069 (9 ) %
    Cable Network Programming 113 125 (10 ) % 355 178 99 %
    Digital Real Estate Services 102 86 19 % 295 254 16 %
    Book Publishing 354 311 14 % 1,073 1,040 3 %
    Other   21     27   (22 ) %   70     93   (25 ) %
    Total Revenues $ 2,078   $ 2,180   (5 ) % $ 6,388   $ 6,634   (4 ) %
     
    Segment EBITDA:
    News and Information Services $ 146 $ 166 (12 ) % $ 534 $ 584 (9 ) %
    Cable Network Programming 27 25 8 % 109 44 **
    Digital Real Estate Services 53 41 29 % 152 122 25 %
    Book Publishing 53 29 83 % 164 120 37 %
    Other(a)   (104 )   (92 ) 13   %   (316 )   (312 ) 1   %
    Total Segment EBITDA $ 175   $ 169   4   % $ 643   $ 558   15   %
     
    ** - Not meaningful
     

    (a)

      Other Segment EBITDA for the three and nine months ended March 31, 2014 includes fees and costs, net of indemnification, related to the U.K. Newspaper Matters of $20 million and $56 million, respectively. Other Segment EBITDA for the three and nine months ended March 31, 2013 includes fees and costs related to the U.K. Newspaper Matters of $34 million and $144 million, respectively.
     


    News and Information Services

    Revenues for the third quarter of fiscal 2014 decreased $143 million, or 9%, compared to the prior year. Australian newspapers revenues declined 21%, of which 13% 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 currency coupled with weakness primarily in the print advertising market and the absence of results from LMG, partially offset by continued growth at News America Marketing led by in-store advertising. Circulation and subscription revenues declined 5%, primarily due to the 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 in the U.K. and at several Australian newspapers as well as higher subscription pricing at The Wall Street Journal and WSJ.com. Adjusted revenues declined 4% compared to the prior year.

    Segment EBITDA decreased $20 million in the quarter, or 12%, 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 and incremental dual rent and other facility costs related to the relocation of the Company’s London operations, which are primarily non-cash, partially offset by the growth of revenues at News America Marketing’s in-store advertising. 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. Adjusted Segment EBITDA decreased 11% compared to the prior year.

    Cable Network Programming

    In the third quarter of fiscal 2014, revenues declined $12 million, or 10%, compared to the prior year as higher digital platform subscribers and increased affiliate pricing were more than offset by adverse foreign currency fluctuations. Segment EBITDA in the quarter increased $2 million, or 8%, compared to the prior year driven by lower programming costs, which were impacted by the absence of domestic cricket rights compared to the prior year. Adjusted revenues increased 5% and Adjusted Segment EBITDA increased 24%, compared to the prior year.

    Digital Real Estate Services

    Revenues in the quarter increased $16 million, or 19%, compared to the prior year, primarily reflecting increased residential listing depth product penetration. Segment EBITDA in the quarter increased $12 million, or 29%, compared to the prior year primarily due to the increased revenues as noted above. Adjusted revenues and Adjusted Segment EBITDA increased 36% and 49%, respectively, compared to the prior year.

    Book Publishing

    Revenues in the quarter increased $43 million, or 14%, compared to the prior year driven by the continued popularity of the Divergent series by Veronica Roth which sold more than 8 million net units in the quarter. E-book revenues improved by 46% versus the prior year period and represented 26% of revenues, up from 21% in the prior year. Segment EBITDA increased $24 million, or 83%, from the prior year benefiting from the higher contribution to profits from e-books and ongoing operational efficiencies coupled with higher revenues. Adjusted revenues increased 15% and Adjusted Segment EBITDA increased 77%, compared to the prior year.

    Other

    Revenues in the quarter decreased $6 million, or 22%, 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 declined $12 million, as 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”) of approximately $14 million, were more than offset by higher investment spending of $4 million at Amplify primarily resulting from increased product and curriculum development, $9 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 $9 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 March 31, 2014, 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 third quarter of fiscal 2014, News Corp incurred gross fees and costs of $46 million ($20 million net of indemnification from 21st Century Fox) related to the U.K. Newspaper Matters. This is comparable to $34 million incurred in the prior year.

    REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’ RESULTS

    Quarterly equity earnings from affiliates were $23 million compared to $27 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.

     
            For the three months ended     For the nine months ended
    March 31, March 31,
    2014   2013 2014   2013
    (in millions) (in millions)
     
    Foxtel(a) $ 23 $ 17 $ 53 $ 30

    Pay television and cable network programming

    equity affiliates(b)

    - 10 - 52
    Other equity affiliates, net   -   -   -   (1 )
    Total equity earnings of affiliates $ 23 $ 27 $ 53 $ 81  
     

    (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 $46 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, 2014, respectively, and $20 million and $26 million in the corresponding periods of fiscal 2013, respectively. 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, in the three months ended March 31, 2014, decreased $96 million to $697 million from $793 million due to foreign currency fluctuations. Operating income for the quarter increased $14 million to $132 million from $118 million due to cost savings and reduced intangible asset amortization from the Austar acquisition, partially offset by foreign currency fluctuations. Total closing subscribers were approximately 2.6 million as of March 31, 2014, a 5% increase compared to the prior year period driven by an increase in digital platform subscribers. Cable and satellite churn improved to 13.1% from 14.9% 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 nine months ended

    March 31,

    2014     2013
    (in millions)
     
    Net cash provided by operating activities $ 803 $ 420
    Less: Capital expenditures   (244 )   (227 )
    559 193
    Less: REA Group free cash flow (98 ) (89 )
    Plus: Cash dividends received from REA Group   35     30  
    Free cash flow available to News Corporation $ 496   $ 134  
     


    Free cash flow available to News Corporation in the nine months ended March 31, 2014 improved by $362 million to $496 million from $134 million in the prior year. This improvement was primarily driven by lower restructuring payments of $153 million, lower payments for fees and costs related to the U.K. Newspaper Matters of $73 million and the increase in Cable Network Programming Segment EBITDA of $65 million, coupled with operational and working capital improvements. The increases were partially offset by lower cash distributions of $72 million primarily from the absence of cash distributions from SKY Network Television Ltd. as the Company sold the investment in March 2013.

    SUBSEQUENT EVENTS

    On May 1, 2014, the Company agreed to acquire Harlequin Enterprises Limited (“Harlequin”) from Torstar Corporation for a purchase price of C$455 million (approximately US$415 million). Harlequin is a leading publisher of women’s fiction and this acquisition will extend HarperCollins’ global platform, particularly in Europe and Asia Pacific. Harlequin will become a division of HarperCollins Publishers and its results will be included within the Company’s Book Publishing segment. The acquisition is subject to customary closing conditions, including regulatory approvals and approval of Torstar's Class A shareholders. The closing is anticipated by the end of the third quarter of calendar year 2014.

    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 5:30pm Eastern Time on May 8, 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 nine months ended
    March 31, March 31,
    2014     2013 2014     2013
     
    Revenues:
    Advertising $ 952 $ 1,046 $ 2,990 $ 3,250
    Circulation and Subscription 665 703 2,005 1,965
    Consumer 342 297 1,030 969
    Other   119     134     363     450  
     
    Total Revenues 2,078 2,180 6,388 6,634
     
    Operating expenses (1,259 ) (1,354 ) (3,828 ) (4,040 )
    Selling, general and administrative (644 ) (657 ) (1,917 ) (2,036 )
    Depreciation and amortization (142 ) (144 ) (421 ) (398 )
    Impairment and restructuring charges (10 ) (54 ) (73 ) (231 )
    Equity earnings of affiliates 23 27 53 81
    Interest, net 17 25 50 54
    Other, net   (1 )   314     (673 )   1,569  
    Income (loss) before income tax (expense) benefit 62 337 (421 ) 1,633
    Income tax (expense) benefit   (1 )   (5 )   686     27  
    Net income 61 332 265 1,660

    Less: Net income attributable to noncontrolling

    interests

      (13 )   (9 )   (39 )   (30 )
    Net income attributable to News Corporation stockholders 48 323 226 1,630

    Less: Adjustments to Net income attributable to

    News Corporation stockholders – Redeemable

    Preferred Stock Dividends

      -     -     (1 )   -  
    Net income available to News Corporation stockholders $ 48   $ 323   $ 225   $ 1,630  
     
    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 $ 0.08 $ 0.56 $ 0.39 $ 2.82
     
     

    NEWS CORPORATION

    CONSOLIDATED BALANCE SHEETS

    (in millions)

     
           

    As of March 31,

    2014

       

    As of June 30,

    2013

    ASSETS (unaudited) (audited)
    Current assets:
    Cash and cash equivalents $ 3,207 $ 2,381
    Amounts due from 21st Century Fox 91 247
    Receivables, net 1,394 1,335
    Other current assets   678   680
    Total current assets   5,370   4,643
     
    Non-current assets:
    Investments 2,551 2,499
    Property, plant and equipment, net 2,959 2,992
    Intangible assets, net 2,116 2,186
    Goodwill 2,763 2,725
    Other non-current assets   784   598
    Total assets $ 16,543 $ 15,643
     
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable $ 245 $ 242
    Accrued expenses 1,200 1,108
    Deferred revenue 406 389
    Other current liabilities   647   432
    Total current liabilities   2,498   2,171
     
    Non-current liabilities:
    Retirement benefit obligations 253 345
    Deferred income taxes 295 152
    Other non-current liabilities 309 279
     
    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 12,321 12,281
    Retained earnings 225 -
    Accumulated other comprehensive income   482   271
    Total News Corporation stockholders' equity 13,034 12,558
    Noncontrolling interests   134   118
    Total equity   13,168   12,676
    Total liabilities and equity $ 16,543 $ 15,643
     
     

    NEWS CORPORATION

    CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

    (Unaudited; in millions)

     
            For the nine months ended
    March 31,
    2014     2013
     
    Operating activities:
    Net Income $ 265 $ 1,660
     
    Adjustments to reconcile net income to cash provided by operating activities:
    Depreciation and amortization 421 398
    Equity earnings of affiliates (53 ) (81 )
    Cash distributions received from affiliates 47 119
    Impairment charges, net of tax 12 -
    Other, net (48 ) (1,569 )
    Deferred income taxes and taxes payable 85 (97 )
    Change in operating assets and liabilities, net of acquisitions:
    Receivables and other assets (140 ) (62 )
    Inventories, net (32 ) (79 )
    Accounts payable and other liabilities 281 173
    Pension and postretirement benefit plans   (35 ) (42 )
    Net cash provided by operating activities   803   420  
     
    Investing activities:
    Capital expenditures (244 ) (227 )
    Acquisitions, net of cash acquired (39 ) (2,157 )
    Investments in equity affiliates and other (12 ) (10 )
    Proceeds from dispositions   109     702  
    Net cash used in investing activities   (186 )   (1,692 )
     
    Financing activities:
    Net transfers from 21st Century Fox and affiliates 217 1,927
    Repayment of borrowings acquired in the CMH acquisition - (235 )
    Dividends paid (23 ) (20 )
    Purchase of subsidiary shares from noncontrolling interest - (9 )
    Other, net   (3 )   -  
    Net cash provided by financing activities   191     1,663  
     
    Net increase in cash and cash equivalents 808 391
    Cash and cash equivalents, beginning of period 2,381 1,133
    Exchange movement on opening cash balance   18     15  
    Cash and cash equivalents, end of period $ 3,207   $ 1,539  
     


    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 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, 2014 and 2013.

            Revenues         Total Segment EBITDA
    For the three months ended March 31, For the three months ended March 31,
    2014       2013       Difference 2014       2013       Difference
    (in millions) (in millions)
     
    As reported $ 2,078 $ 2,180 $ (102 ) $ 175 $ 169 $ 6
     
    Impact of acquisitions (2 ) - (2 ) - - -
     
    Impact of divestitures - (42 ) 42 - (1 ) 1
     
    Impact of foreign currency fluctuations 72 - 72 13 - 13
     
    Net impact of U.K. Newspaper Matters - - - 20 34 (14 )
                           
    As adjusted $ 2,148   $ 2,138   $ 10   $ 208   $ 202   $ 6  
     
    Revenues Total Segment EBITDA
    For the nine months ended March 31, For the nine months ended March 31,
    2014 2013 Difference 2014 2013 Difference
    (in millions) (in millions)
     
    As reported $ 6,388 $ 6,634 $ (246 ) $ 643 $ 558 $ 85
     
    Impact of acquisitions (196 ) - (196 ) (54 ) - (54 )
     
    Impact of divestitures (35 ) (162 ) 127 (4 ) (17 ) 13
     
    Impact of foreign currency fluctuations 226 - 226 39 - 39
     
    Net impact of U.K. Newspaper Matters - - - 56 144 (88 )
                           
    As adjusted $ 6,383   $ 6,472   $ (89 ) $ 680   $ 685   $ (5 )
     


    Adjusted Revenues and Adjusted Segment EBITDA by segment for the three and nine months ended March 31, 2014 and 2013 are as follows:

     
            For the three months ended March 31,
    2014     2013     % Change
    (in millions)
     
    Adjusted Revenues:
    News and Information Services $ 1,525 $ 1,594 (4 ) %
    Cable Network Programming 131 125 5 %
    Digital Real Estate Services 117 86 36 %
    Book Publishing 354 309 15 %
    Other   21     24   (13 ) %
    Total Adjusted Revenues $ 2,148   $ 2,138   -   %
     
    Adjusted Segment EBITDA:
    News and Information Services $ 146 $ 164 (11 ) %
    Cable Network Programming 31 25 24 %
    Digital Real Estate Services 61 41 49 %
    Book Publishing 53 30 77 %
    Other   (83 )   (58 ) 43   %
    Total Adjusted Segment EBITDA $ 208   $ 202   3   %
     
            For the nine months ended March 31,
    2014     2013     % Change
    (in millions)
     
    Adjusted Revenues:
    News and Information Services $ 4,720 $ 4,945 (5 ) %
    Cable Network Programming 188 178 6 %
    Digital Real Estate Services 332 254 31 %
    Book Publishing 1,073 1,016 6 %
    Other   70     79   (11 ) %
    Total Adjusted Revenues $ 6,383   $ 6,472   (1 ) %
     
    Adjusted Segment EBITDA:
    News and Information Services $ 540 $ 568 (5 ) %
    Cable Network Programming 62 44 41 %
    Digital Real Estate Services 172 122 41 %
    Book Publishing 165 120 38 %
    Other   (259 )   (169 ) 53   %
    Total Adjusted Segment EBITDA $ 680   $ 685   (1 ) %
     


    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, 2014 and 2013.

     
            For the three months ended March 31, 2014

    As

    Reported

       

    Impact of

    Acquisitions

       

    Impact of

    Divestitures

       

    Impact of

    Foreign

    Currency

    Fluctuations

       

    Net Impact

    of U.K.

    Newspaper

    Matters

       

    As

    Adjusted

    (in millions)
     
    Revenues:
    News and Information Services $ 1,488 $ (1 ) $ - $ 38 $ - $ 1,525
    Cable Network Programming 113 - - 18 - 131
    Digital Real Estate Services 102 (1 ) - 16 - 117
    Book Publishing 354 - - - - 354
    Other   21     -     -   -     -   21  
    Total Revenues $ 2,078   $ (2 ) $ - $ 72   $ - $ 2,148  
     
    Segment EBITDA:
    News and Information Services $ 146 $ 1 $ - $ (1 ) $ - $ 146
    Cable Network Programming 27 - - 4 - 31
    Digital Real Estate Services 53 (1 ) - 9 - 61
    Book Publishing 53 - - - - 53
    Other   (104 )   -     -   1     20   (83 )
    Total Segment EBITDA $ 175   $ -   $ - $ 13   $ 20 $ 208  
     
     
            For the three months ended March 31, 2013

    As

    Reported

       

    Impact of

    Acquisitions

       

    Impact of

    Divestitures

       

    Impact of

    Foreign

    Currency

    Fluctuations

       

    Net Impact

    of U.K.

    Newspaper

    Matters

       

    As

    Adjusted

    (in millions)
     
    Revenues:
    News and Information Services $ 1,631 $ - $ (37 ) $ - $ - $ 1,594
    Cable Network Programming 125 - - - - 125
    Digital Real Estate Services 86 - - - - 86
    Book Publishing 311 - (2 ) - - 309
    Other   27     -   (3 )   -   -   24  
    Total Revenues $ 2,180   $ - $ (42 ) $ - $ - $ 2,138  
     
    Segment EBITDA:
    News and Information Services $ 166 $ - $ (2 ) $ - $ - $ 164
    Cable Network Programming 25 - - - - 25
    Digital Real Estate Services 41 - - - - 41
    Book Publishing 29 - 1 - - 30
    Other   (92 )   -   -     -   34   (58 )
    Total Segment EBITDA $ 169   $ - $ (1 ) $ - $ 34 $ 202  
     


    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, 2014 and 2013.

     
            For the nine months ended March 31, 2014

    As

    Reported

       

    Impact of

    Acquisitions

       

    Impact of

    Divestitures

       

    Impact of

    Foreign

    Currency

    Fluctuations

       

    Net Impact

    of U.K.

    Newspaper

    Matters

       

    As

    Adjusted

    (in millions)
     
    Revenues:
    News and Information Services $ 4,595 $ (1 ) $ (30 ) $ 156 $ - $ 4,720
    Cable Network Programming 355 (191 ) - 24 - 188
    Digital Real Estate Services 295 (1 ) - 38 - 332
    Book Publishing 1,073 (3 ) (5 ) 8 - 1,073
    Other   70     -     -     -   -   70  
    Total Revenues $ 6,388   $ (196 ) $ (35 ) $ 226 $ - $ 6,383  
     
    Segment EBITDA:
    News and Information Services $ 534 $ 1 $ (4 ) $ 9 $ - $ 540
    Cable Network Programming 109 (54 ) - 7 - 62
    Digital Real Estate Services 152 (1 ) - 21 - 172
    Book Publishing 164 - - 1 - 165
    Other   (316 )   -     -     1   56   (259 )
    Total Segment EBITDA $ 643   $ (54 ) $ (4 ) $ 39 $ 56 $ 680  
     
     
            For the nine months ended March 31, 2013

    As

    Reported

       

    Impact of

    Acquisitions

       

    Impact of

    Divestitures

       

    Impact of

    Foreign

    Currency

    Fluctuations

       

    Net Impact

    of U.K.

    Newspaper

    Matters

       

    As

    Adjusted

    (in millions)
     
    Revenues:
    News and Information Services $ 5,069 $ - $ (124 ) $ - $ - $ 4,945
    Cable Network Programming 178 - - - - 178
    Digital Real Estate Services 254 - - - - 254
    Book Publishing 1,040 - (24 ) - - 1,016
    Other   93     -   (14 )   -   -   79  
    Total Revenues $ 6,634   $ - $ (162 ) $ - $ - $ 6,472  
     
    Segment EBITDA:
    News and Information Services $ 584 $ - $ (16 ) $ - $ - $ 568
    Cable Network Programming 44 - - - - 44
    Digital Real Estate Services 122 - - - - 122
    Book Publishing 120 - - - - 120
    Other   (312 )   -   (1 )   -   144   (169 )
    Total Segment EBITDA $ 558   $ - $ (17 ) $ - $ 144 $ 685  
     


    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 March 31,
    2014     2013     Change     % Change
    (in millions)
     
    Revenues $ 2,078 $ 2,180 $ (102 ) (5 ) %
    Operating expenses (1,259 ) (1,354 ) 95 (7 ) %
    Selling, general and administrative   (644 )   (657 )   13   (2 ) %
    Total Segment EBITDA 175 169 6 4 %
    Depreciation and amortization (142 ) (144 ) 2 (1 ) %
    Impairment and restructuring charges (10 ) (54 ) 44 (81 ) %
    Equity earnings of affiliates 23 27 (4 ) (15 ) %
    Interest, net 17 25 (8 ) (32 ) %
    Other, net   (1 )   314     (315 ) **
    Income before income tax expense 62 337 (275 ) (82 ) %
    Income tax expense   (1 )   (5 )   4   (80 ) %
    Net income $ 61   $ 332   $ (271 ) (82 ) %
     
    ** - Not meaningful
     
    For the nine months ended March 31,
    2014 2013 Change % Change
    (in millions)
     
    Revenues $ 6,388 $ 6,634 $ (246 ) (4 ) %
    Operating expenses (3,828 ) (4,040 ) 212 (5 ) %
    Selling, general and administrative   (1,917 )   (2,036 )   119   (6 ) %
    Total Segment EBITDA 643 558 85 15 %
    Depreciation and amortization (421 ) (398 ) (23 ) 6 %
    Impairment and restructuring charges (73 ) (231 ) 158 (68 ) %
    Equity earnings of affiliates 53 81 (28 ) (35 ) %
    Interest, net 50 54 (4 ) (7 ) %
    Other, net   (673 )   1,569     (2,242 ) **  
    (Loss) income before income tax benefit (421 ) 1,633 (2,054 ) **
    Income tax benefit   686     27     659   **  
    Net income $ 265   $ 1,660   $ (1,395 ) (84 ) %
     
    ** - 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 nine months ended March 31, 2014 and 2013.

     
            For the three months ended       For the three months ended
    March 31, 2014March 31, 2013

    Net income

    available to

    stockholders

          EPS

    Net income

    available to

    stockholders

          EPS
    (in millions, except per share data)
     
    As reported $ 48 $ 0.08 $ 323 $ 0.56
     
    U.K. Newspaper Matters 20 0.03 34 0.06
     
    Impairment and restructuring charges 10 0.02 54 0.09
     
    Other, net (a) 1 - (314 ) (0.54 )
     
    Tax impact on items above (13 ) (0.02 ) (24 ) (0.04 )
                         
    As adjusted $ 66     $ 0.11     $ 73     $ 0.13  
     

    (a)

      Other, net for the three months ended March 31, 2013 primarily includes the non-taxable gain from the SKY Network Television Ltd. transaction.
     


     
            For the nine months ended       For the nine months ended
    March 31, 2014March 31, 2013

    Net income

    available to

    stockholders

          EPS

    Net income

    available to

    stockholders

          EPS
    (in millions, except per share data)
     
    As reported $ 225 $ 0.39 $ 1,630 $ 2.82
     
    U.K. Newspaper Matters 56 0.10 144 0.25
     
    Impairment and restructuring charges 73 0.13 231 0.40
     
    Other, net (a) 673 1.16 (1,569 ) (2.71 )
     
    Tax impact on items above(b) (765 ) (1.33 ) (148 ) (0.26 )
                         
    As adjusted $ 262     $ 0.45     $ 288     $ 0.50  
     

    (a)

      Other, net for the nine months ended March 31, 2014 primarily includes a foreign tax refund paid to 21st Century Fox offset by a gain on a third party pension contribution. Other, net for the nine months ended March 31, 2013 primarily includes the non-taxable gain from the CMH and SKY Network Television Ltd. transactions.

    (b)

    Tax impact on items above for the nine months ended March 31, 2014 primarily includes a foreign tax refund of $721 million which has an offsetting payable to 21st Century Fox included within Other, net above.
     





    News Corporation

    Michael Florin, 212-416-3363

    Investor Relations

    mflorin@newscorp.com

    or

    Jim Kennedy, 212-416-4064

    Corporate Communications

    jkennedy@newscorp.com


    Source: News Corporation


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