FISCAL 2017 SECOND QUARTER KEY
FINANCIAL HIGHLIGHTS
- Revenues of $2.12 billion compared
to $2.16 billion in the prior year
- Digital Real Estate Services segment
revenue grew 16% compared to the prior year
- Digital revenues increased to 27% of
News and Information Services segment revenues, compared to 22% in
the prior year
- (Loss) income from continuing
operations was ($219) million, compared to $106 million in the
prior year. The loss includes $537 million of non-cash impairments
and write-downs and a one-time gain of $120 million as a result of
cash proceeds from the sale of REA Group’s European
business
- Total Segment EBITDA of $325 million
compared to $280 million in the prior year
- Reported EPS were ($0.50) compared
to $0.15 in the prior year – Adjusted EPS were $0.19 compared to
$0.20 in the prior year
News Corporation (“News Corp” or the “Company”) (NASDAQ: NWS,
NWSA; ASX: NWS, NWSLV) today reported financial results for the
three months ended December 31, 2016.
Commenting on the results, Chief Executive Robert Thomson
said:
“In the second quarter, we saw the efficacy of our strategic
reinvestment and digital diversification. Both were evident in our
significantly increased operating profitability in the quarter,
despite continued headwinds in print advertising. Results were
driven by strong performance at our Digital Real Estate Services
segment and meaningful revenues at HarperCollins, along with
appropriate and ongoing management of the cost base at our news
mastheads.
Our core platform has been bolstered by our rapid expansion in
digital real estate, which is well on the way to becoming the
largest contributor to our profitability. This segment posted
another very strong quarter, with a 16% year-over-year revenue
increase, improved margins and robust audience gains.
This quarter's results were impacted by non-cash charges because
of a change in the carrying value of Foxtel and an impairment of
the print-related fixed assets at our Australian newspaper
business.
In News and Information Services, we are assertively
transitioning to digital, now accounting for 27% of segment
revenues, up from 22%. We are especially confident in the value of
our news brands, given growing consumer demand for accurate and
timely journalism. In fact, the Wall Street Journal now has over
2.1 million paid subscribers and, for the first time, more than 50%
of those subscribers are digital.
Audiences are craving integrity, which is why so many of our
mastheads have reported strong growth in readers and subscribers
this quarter. And advertisers need a trusted canvas and real
results, not the muddled, muddied metrics of many digital
platforms.”
SECOND QUARTER RESULTS
The Company reported fiscal 2017 second quarter total revenues
of $2.12 billion, compared to $2.16 billion in the prior year
period. Reported revenues reflect a negative impact from foreign
currency fluctuations of $53 million. Adjusted Revenues (which
exclude the foreign currency impact and acquisitions and
divestitures as defined in Note 1) decreased 1% compared to the
prior year, as growth in the Digital Real Estate Services and Book
Publishing segments was more than offset by lower advertising
revenues at the News and Information Services segment.
(Loss) income from continuing operations for the quarter was
($219) million as compared to $106 million in the prior year. The
current year’s quarter includes a pre-tax non-cash impairment
charge of $310 million, primarily related to the write-down of the
fixed assets at the Australian newspapers, and lower equity
earnings of affiliates, primarily driven by a $227 million pre-tax
non-cash write-down related to the adjustment of the carrying value
of the Company’s investment in Foxtel to fair value. The aggregate
tax benefit on the impairment and write-down was $121 million.
These charges were partially offset by a gain of $120 million ($103
million, net of tax) from the sale of REA Group’s European
businesses and higher Total Segment EBITDA, as discussed below.
The Company reported second quarter Total Segment EBITDA of $325
million, compared to $280 million in the prior year. Adjusted Total
Segment EBITDA (as defined in Note 1) was 14% higher compared to
the prior year, primarily due to the continued growth in the
Digital Real Estate Services and Book Publishing segments and lower
programming rights costs at the Cable Network Programming
segment.
(Loss) income per share from continuing operations available to
News Corporation stockholders was ($0.50) as compared to $0.15 in
the prior year.
Adjusted EPS (as defined in Note 3) were $0.19 compared to $0.20
in the prior year.
SEGMENT REVIEW
For the three months ended For the six months ended December
31, December 31, 2016 2015 % Change 2016 2015
% Change (in millions) Better/
(Worse)
(in millions) Better/
(Worse)
Revenues: News and Information Services $ 1,303 $
1,400 (7 ) % $ 2,525 $ 2,690 (6 ) % Book Publishing 466 446 4 % 855
855 - Digital Real Estate Services 242 208 16 % 468 399 17 % Cable
Network Programming 104 106 (2 ) % 232 230 1 % Other 1
1 - 1 1
-
Total Revenues $ 2,116 $ 2,161
(2 ) % $ 4,081 $ 4,175 (2 ) %
Segment EBITDA: News and Information Services(a) $ 142 $ 158
(10 ) % $ 188 $ 241 (22 ) % Book Publishing 75 57 32 % 123 99 24 %
Digital Real Estate Services 95 73 30 % 162 130 25 % Cable Network
Programming 51 39 31 % 65 67 (3 ) % Other (38 ) (47 )
19 % (83 ) (92 ) 10 %
Total Segment
EBITDA $ 325 $ 280 16 % $ 455 $ 445
2 %
(a)
News and Information Services Segment EBITDA for the
six months ended December 31, 2016 includes transaction related
costs of $5 million associated with the acquisition of Wireless
Group. News and Information Services Segment EBITDA for the three
and six months ended December 31, 2015 includes transaction related
costs of $5 million related to the acquisition of Unruly.
News and Information Services
Revenues in the quarter were lower by $97 million, or 7%,
compared to the prior year. Adjusted Revenues were 5% lower
compared to the prior year.
Advertising revenues decreased 9%, or 8% excluding a $12 million
impact from negative foreign currency fluctuations, primarily due
to weakness in the print advertising market. The decrease was
partially offset by the $22 million from the inclusion of Wireless
Group and higher in-store and digital product revenues at News
America Marketing.
Circulation and subscription revenues decreased 5%, but
increased 1% excluding a $28 million impact from negative foreign
currency fluctuations, due to higher subscription pricing, selected
cover price increases in the U.K. and Australia and higher paid
digital subscribers, partially offset by lower print volume.
Segment EBITDA decreased $16 million in the quarter, or 10%, as
compared to the prior year, driven by the lower advertising
revenues noted above and $8 million of investment spending in
connection with Checkout 51, partially offset by lower expenses
across the businesses.
Digital revenues represented 27% of segment revenues in the
quarter, compared to 22% in the prior year. At Dow Jones, digital
revenues represented 53% of total revenues in the quarter. Digital
subscribers and users across key properties within the News and
Information Services segment are summarized below:
- The Wall Street Journal average daily
digital subscribers in the three months ended December 31, 2016
were 1,080,000, compared to 828,000 in the prior year (Source:
Internal data)
- Closing digital subscribers at News
Corp Australia’s mastheads as of December 31, 2016 were 309,200,
compared to 255,800 in the prior year (Source: Internal data;
adjusted for divested mastheads)
- The Times and Sunday Times closing
digital subscribers as of December 31, 2016 were 184,000, compared
to 172,000 in the prior year (Source: Internal data)
- The Sun’s digital offering reached
approximately 61 million global monthly unique users in December
2016, based on ABCe (Source: Omniture)
Book Publishing
Revenues in the quarter increased $20 million, or 4%, compared
to the prior year, primarily due to the continued popularity of
Jesus Calling and Jesus Always by Sarah Young and Hillbilly Elegy
by J.D. Vance, strong sales from frontlist titles such as The
Magnolia Story by Chip and Joanna Gaines, Chaos by Patricia
Cornwell, The Midnight Gang by David Walliams and Settle for More
by Megyn Kelly, as well as the continued expansion of
HarperCollins’ global footprint. Digital sales increased 3%
compared to the prior year and represented 16% of Consumer revenues
for the quarter. Segment EBITDA for the quarter increased $18
million, or 32%, from the prior year, primarily due to higher
revenues as discussed above.
Digital Real Estate Services
Revenues in the quarter increased $34 million, or 16%, compared
to the prior year, primarily due to the continued growth at REA
Group and Move, as well as $9 million from the acquisitions of
iProperty and Diakrit. Adjusted Revenues increased 10%. Segment
EBITDA in the quarter increased $22 million, or 30%, compared to
the prior year, primarily due to the higher revenues noted above,
the positive impact of foreign currency fluctuations at REA Group
and lower legal costs at Move. REA Group and Move contributed $12
million and $10 million, respectively, to the increase in Segment
EBITDA.
In the quarter, revenues at REA Group increased 19%, or 14%
excluding a $6 million impact from favorable foreign currency
fluctuations, due to an increase in Australian residential depth
revenue, as a favorable product mix and pricing increase offset
lower listing volumes, and the acquisition of iProperty.
Move’s revenues in the quarter increased 7% to $93 million from
$87 million in the prior year, primarily due to the continued
growth in its Connection for Co-BrokerageSM product and non-listing
Media revenues. The growth was partially offset by a $3 million
decline in revenue at TigerLead®, which was sold in November 2016.
Based on Move’s internal data, average monthly unique users of
realtor.com®’s web and mobile sites for the fiscal second quarter
grew 14% year-over-year to approximately 44 million.
Cable Network Programming
Revenues in the quarter decreased $2 million, or 2%, compared to
the prior year due to lower affiliate and advertising revenues,
partially due to the absence of the uplift from the Rugby World
Cup, which was held in the prior year. Segment EBITDA in the
quarter increased $12 million, or 31%, compared with the prior
year, due to lower programming rights costs from the absence of
Rugby World Cup and English Premier League rights. Adjusted
Revenues and Adjusted Segment EBITDA, which exclude the impact from
favorable foreign currency fluctuations, decreased 5% and increased
23%, respectively.
REVIEW OF EQUITY (LOSSES) EARNINGS OF AFFILIATES’
RESULTS
Equity (losses) earnings of affiliates for the second quarter
were ($238) million compared to $15 million in the prior year.
For the three months ended For the six months ended
December 31, December 31, 2016 2015 2016 2015 (in
millions) (in millions) Foxtel $ (233 ) $ 13 $ (244 ) $ 22
Other equity affiliates, net (5 ) 2 (9 )
1 Total equity (losses) earnings of affiliates $ (238 ) $ 15
$ (253 ) $ 23
On a U.S. GAAP basis, Foxtel revenues for the second quarter
increased $4 million, or 1%, to $602 million from $598 million in
the prior year period. In local currency, Foxtel revenues decreased
3%. Foxtel’s total closing subscribers were more than 2.8 million
as of December 31, 2016, with closing cable and satellite
subscribers flat compared to the prior year period. In the second
quarter, cable and satellite churn was 15.6%, which was comparable
to churn in the fiscal first quarter, primarily driven by newer
customers under no-contract offers and seasonal sports
disconnections.
Foxtel’s net income of $24 million decreased from $52 million in
the prior year period, primarily due to a $17 million loss
resulting from the change in the fair value of Foxtel’s investment
in Ten Network Holdings and $5 million in losses associated with
the continued operation of Presto. Equity (losses) earnings of
affiliates for Foxtel of ($6) million and $13 million for the three
months ended December 31, 2016 and 2015, respectively, reflect the
Company's share of Foxtel's net income, less the Company's
amortization of $18 million and $13 million, respectively, related
to the Company's excess cost over its share of Foxtel's
finite-lived intangible assets.
Foxtel EBITDA decreased $11 million to $144 million from $155
million in the prior year. In local currency, Foxtel EBITDA
decreased 10%, primarily due to lower revenues and planned
increases in programming costs, specifically investments in local
productions and sports, partially offset by lower transmission
costs. Foxtel operating income for the three months ended December
31, 2016 and 2015 was $93 million and $99 million, respectively,
after depreciation and amortization of $51 million and $56 million,
respectively. Operating income decreased primarily as a result of
the lower revenues and increased programming spend noted above,
partially offset by the positive impact of foreign currency
fluctuations.
During the three months ended December 31, 2016, the Company
recognized a $227 million non-cash write-down of the carrying value
of its investment in Foxtel to fair value. As a result of Foxtel’s
performance in the first half of fiscal 2017, the competitive
operating environment in the Australian pay-TV market and
management’s revised projections, the Company determined that the
fair value of its investment in Foxtel declined below its $1.4
billion carrying value to $1.2 billion. The carrying value had
previously been written up in connection with the acquisition of
Consolidated Media Holdings Ltd. (“CMH”) in November 2012 and at
that time a non-cash gain of $0.9 billion was recognized on the
Foxtel investment in accordance with ASC 805.
CASH FLOW
The following table presents net cash provided by continuing
operating activities and a reconciliation to free cash flow
available to News Corporation:
For the six months ended
December 31,
2016 2015 (in millions) Net cash provided by
continuing operating activities $ 4 $ 346 Less: Capital
expenditures (108 ) (120 ) (104 ) 226 Less: REA Group
free cash flow (84 ) (72 ) Plus: Cash dividends received from REA
Group 28 24 Free cash flow available to
News Corporation $ (160 ) $ 178
Net cash provided by continuing operating activities decreased
by $342 million for the six months ended December 31, 2016 as
compared to the prior year period, which was primarily due to the
NAM Group’s settlement payments of $250 million during the period,
lower dividends received of $30 million, as well as higher working
capital due to timing.
Free cash flow available to News Corporation in the six months
ended December 31, 2016 was ($160) million compared to $178 million
in the prior year period. The decrease was primarily due to lower
cash provided by continuing operating activities as discussed
above, partially offset by lower capital expenditures.
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 that is available to 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.
OTHER ITEMS
Subsequent Events
In January 2017, REA Group acquired an approximately 15%
interest in Elara Technologies Pte. Ltd., a leading online real
estate services provider in India ("Elara"), for $50 million. Elara
operates PropTiger.com, Makaan.com and the recently acquired
Housing.com, and the investment further strengthens REA Group's
presence in Asia. Following the completion of the investment and
certain related transactions, including Elara's acquisition of
Housing.com, News Corporation's pre-existing interest in Elara
decreased to approximately 23%.
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 April 19, 2017 to stockholders of record as
of March 15, 2017.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted Revenues, Total Segment EBITDA, Adjusted Total Segment
EBITDA, adjusted net income from continuing operations 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
5:00pm EST on February 9, 2017. 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 monthsended
For the six monthsended
December 31, December 31, 2016 2015 2016 2015
Revenues: Advertising $ 748 $ 816 $ 1,418 $ 1,551 Circulation and
subscription 595 621 1,216 1,260 Consumer 450 429 824 821 Real
estate 185 160 357 305 Other 138 135
266 238 Total Revenues 2,116
2,161 4,081 4,175 Operating expenses (1,126 ) (1,193 )
(2,283 ) (2,392 ) Selling, general and administrative (665 ) (688 )
(1,343 ) (1,338 ) Depreciation and amortization (120 ) (123 ) (240
) (244 ) Impairment and restructuring charges (356 ) (22 ) (376 )
(39 ) Equity (losses) earnings of affiliates (238 ) 15 (253 ) 23
Interest, net 15 11 22 23 Other, net 123 (6 )
140 (1 ) (Loss) income from continuing
operations before income tax benefit (expense) (251 ) 155 (252 )
207 Income tax benefit (expense) 32 (49 )
33 42 (Loss) income from continuing
operations (219 ) 106 (219 ) 249 (Loss) income from discontinued
operations, net of tax - (24 ) - 22
Net (loss) income (219 ) 82 (219 ) 271 Less: Net income
attributable to noncontrolling interests (70 ) (19 ) (85 )
(33 ) Net (loss) income attributable to News Corporation
stockholders $ (289 ) $ 63 $ (304 ) $ 238
Less: Adjustments to Net (loss) income
attributable to NewsCorporation stockholders – Redeemable preferred
stock dividends
(1 ) (1 ) (1 ) (1 ) Net (loss) income
available to News Corporation stockholders $ (290 ) $ 62 $
(305 ) $ 237 Weighted average shares outstanding:
Basic 581 581 581 581 Diluted 581 583 581 583
(Loss) income from continuing operations
available to NewsCorporation stockholders per share - basic and
diluted
$ (0.50 ) $ 0.15 $ (0.52 ) $ 0.37
(Loss) income from discontinued operations
available to NewsCorporation stockholders per share - basic and
diluted
$ - $ (0.04 ) $ - $ 0.04
Net (loss) income available to News
Corporationstockholders per share - basic and diluted
$ (0.50 ) $ 0.11 $ (0.52 ) $ 0.41
NEWS CORPORATION CONSOLIDATED
BALANCE SHEETS (in millions)
As of December31, 2016
As of June 30,2016
ASSETS (unaudited) (audited) Current assets: Cash and cash
equivalents $ 1,564 $ 1,832 Restricted cash - 315 Receivables, net
1,528 1,229 Other current assets 499 513
Total current assets 3,591 3,889
Non-current assets: Investments 1,932 2,270 Property, plant
and equipment, net 1,981 2,405 Intangible assets, net 2,298 2,207
Goodwill 3,791 3,714 Deferred income tax assets 549 602 Other
non-current assets 385 396 Total assets
$ 14,527 $ 15,483
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 240 $ 217
Accrued expenses 1,121 1,371 Deferred revenue 404 388 Other current
liabilities 560 466 Total current
liabilities 2,325 2,442
Non-current liabilities: Borrowings 268 369 Retirement benefit
obligations 315 350 Deferred income tax liabilities 40 171 Other
non-current liabilities 331 349 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 12,451 12,434 Retained earnings (213 )
150 Accumulated other comprehensive loss (1,289 )
(1,026 ) Total News Corporation stockholders' equity 10,955 11,564
Noncontrolling interests 273 218 Total
equity 11,228 11,782 Total liabilities
and equity $ 14,527 $ 15,483
NEWS
CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions) For the six months ended
December 31, 2016 2015
Operating activities:
Net (loss) income $ (219 ) $ 271 Less: Income from discontinued
operations, net of tax - 22 (Loss)
income from continuing operations (219 ) 249 Adjustments to
reconcile (loss) income from continuing operations to cash provided
by operating activities: Depreciation and amortization 240 244
Equity losses (earnings) of affiliates 253 (23 ) Cash distributions
received from affiliates - 30 Impairment charges 310 - Other, net
(140 ) 1 Deferred income taxes and taxes payable (102 ) (98 )
Changes in operating assets and liabilities, net of acquisitions:
Receivables and other assets (131 ) (97 ) Inventories, net (9 ) 72
Accounts payable and other liabilities 52 (32 ) NAM Group
settlement (250 ) - Net cash provided by operating
activities from continuing operations 4 346
Investing activities: Capital expenditures (108 )
(120 ) Changes in restricted cash for Wireless Group acquisition
315 - Acquisitions, net of cash acquired (342 ) (101 ) Investments
in equity affiliates and other (39 ) (36 ) Proceeds from
dispositions 59 2 Other, net (3 ) 5 Net cash
used in investing activities from continuing operations (118
) (250 )
Financing activities: Repayment of
borrowings acquired in the Wireless Group acquisition (23 ) -
Repurchase of shares - (18 ) Dividends paid (77 ) (74 ) Other, net
(21 ) (7 ) Net cash used in financing activities from
continuing operations (121 ) (99 ) Net decrease in
cash and cash equivalents from continuing operations (235 ) (3 )
Net decrease in cash and cash equivalents from discontinued
operations (3 ) (40 ) Cash and cash equivalents, beginning of
period 1,832 1,951 Exchange movement on opening cash balance
(30 ) (25 )
Cash and cash equivalents, end of period
$ 1,564 $ 1,883
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,” respectively) to evaluate the performance
of the Company’s core business operations exclusive of certain
items that impact the comparability of results from period to
period such as the unpredictability and volatility of currency
fluctuations. The Company calculates the impact of foreign currency
fluctuations for businesses reporting in currencies other than the
U.S. dollar by multiplying the results for each quarter in the
current period by the difference between the average exchange rate
for that quarter and the average exchange rate in effect during the
corresponding quarter of the prior year and totaling the impact for
all quarters in the current 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 tables reconcile reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three and six months ended December 31, 2016
and 2015.
Revenues Total Segment EBITDA For the three months
ended For the three months ended December 31, December 31,
2016
2015 Difference 2016 2015 Difference
(in millions) (in millions)
As reported $ 2,116 $
2,161 $ (45 ) $ 325 $ 280 $ 45 Impact of acquisitions (43 )
- (43 ) (1 ) - (1 ) Impact of divestitures (16 ) (24 ) 8 -
(3 ) 3 Impact of foreign currency fluctuations 53 - 53 (3 )
- (3 ) Net impact of U.K. Newspaper Matters - - - 2 7 (5 )
As adjusted $ 2,110 $ 2,137
$ (27 ) $ 323 $ 284 $ 39 Revenues Total
Segment EBITDA For the six months ended December 31, For the six
months ended December 31, 2016 2015 Difference 2016
2015 Difference (in millions) (in millions)
As reported $ 4,081 $ 4,175 $ (94 ) $ 455 $ 445 $ 10
Impact of acquisitions (80 ) - (80 ) 14 - 14 Impact of
divestitures (37 ) (47 ) 10 1 (4 ) 5 Impact of foreign
currency fluctuations 89 - 89 2 - 2 Net impact of U.K.
Newspaper Matters - - - 4 12 (8 )
As
adjusted $ 4,053 $ 4,128 $ (75 ) $ 476 $
453 $ 23
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three and six months ended December 31, 2016 and 2015 are as
follows:
For the three months ended December 31, 2016 2015
% Change (in millions) Better/(Worse)
Adjusted
Revenues: News and Information Services $ 1,322 $ 1,390 (5 )%
Book Publishing 472 446 6
%
Digital Real Estate Services 214 194 10
%
Cable Network Programming 101 106 (5
)%
Other 1 1 -
Total Adjusted
Revenues $ 2,110 $ 2,137 (1 )%
Adjusted
Segment EBITDA: News and Information Services $ 142 $ 158 (10
)% Book Publishing 77 57 35
%
Digital Real Estate Services 92 70 31
%
Cable Network Programming 48 39 23
%
Other (36 ) (40 ) 10
%
Total Adjusted Segment EBITDA $ 323 $ 284 14
%
For the six months ended December 31, 2016
2015 % Change (in millions)
Adjusted
Revenues: News and Information Services $ 2,554 $ 2,670 (4 )%
Book Publishing 859 855 - Digital Real Estate Services 413 372 11
%
Cable Network Programming 226 230 (2 )% Other 1
1 -
Total Adjusted Revenues $ 4,053
$ 4,128 (2 )%
Adjusted Segment EBITDA:
News and Information Services $ 205 $ 242 (15 )% Book Publishing
125 99 26
%
Digital Real Estate Services 157 125 26
%
Cable Network Programming 68 67 1
%
Other (79 ) (80 ) (1 )%
Total Adjusted Segment
EBITDA $ 476 $ 453 5
%
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the three months ended December 31, 2016 and
2015.
For the three months ended December 31, 2016
As Reported
Impact ofAcquisitions
Impact ofDivestitures
Impact ofForeignCurrencyFluctuations
Net Impactof U.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,303 $ (26 ) $ (4 ) $ 49 $ - $ 1,322 Book
Publishing 466 (7 ) - 13 - 472 Digital Real Estate Services 242 (10
) (12 ) (6 ) - 214 Cable Network Programming 104 - - (3 ) - 101
Other 1 - - -
- 1
Total Revenues $ 2,116
$ (43 ) $ (16 ) $ 53 $ - $ 2,110
Segment EBITDA: News and Information Services $ 142 $ (3 ) $
1 $ 2 $ - $ 142 Book Publishing 75 - - 2 - 77 Digital Real Estate
Services 95 2 (1 ) (4 ) - 92 Cable Network Programming 51 - - (3 )
- 48 Other (38 ) - - -
2 (36 )
Total Segment EBITDA $ 325
$ (1 ) $ - $ (3 ) $ 2 $ 323
For the three months ended December 31, 2015 As
Reported
Impact ofDivestitures
Net Impactof U.K.NewspaperMatters
As Adjusted (in millions)
Revenues: News and
Information Services $ 1,400 $ (10 ) $ - $ 1,390 Book Publishing
446 - - 446 Digital Real Estate Services 208 (14 ) - 194 Cable
Network Programming 106 - - 106 Other 1 -
- 1
Total Revenues $ 2,161
$ (24 ) $ - $ 2,137
Segment EBITDA:
News and Information Services $ 158 $ - $ - $ 158 Book Publishing
57 - - 57 Digital Real Estate Services 73 (3 ) - 70 Cable Network
Programming 39 - - 39 Other (47 ) - 7
(40 )
Total Segment EBITDA $ 280 $ (3 ) $ 7 $
284
The following tables reconcile reported revenues and Segment
EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA
by segment for the six months ended December 31, 2016 and 2015.
For the six months ended December 31, 2016
Impact of Net Impact Foreign of U.K. Impact of
Impact of Currency Newspaper As Reported Acquisitions Divestitures
Fluctuations Matters As Adjusted (in millions)
Revenues: News and Information Services $ 2,525 $ (44 ) $
(13 ) $ 86 $ - $ 2,554 Book Publishing 855 (16 ) - 20 - 859 Digital
Real Estate Services 468 (20 ) (24 ) (11 ) - 413 Cable Network
Programming 232 - - (6 ) - 226 Other 1 -
- - - 1
Total Revenues $ 4,081 $ (80 ) $ (37 ) $ 89 $
- $ 4,053
Segment EBITDA: News and Information
Services $ 188 $ 10 $ 3 $ 4 $ - $ 205 Book Publishing 123 - - 2 -
125 Digital Real Estate Services 162 4 (2 ) (7 ) - 157 Cable
Network Programming 65 - - 3 - 68 Other (83 ) -
- - 4 (79 )
Total Segment EBITDA $ 455 $ 14 $ 1 $ 2
$ 4 $ 476 For the six months
ended December 31, 2015 Net Impact of U.K.
Impact of Newspaper As Reported Divestitures Matters As Adjusted
(in millions)
Revenues: News and Information Services
$ 2,690 $ (20 ) $ - $ 2,670 Book Publishing 855 - - 855 Digital
Real Estate Services 399 (27 ) - 372 Cable Network Programming 230
- - 230 Other 1 - - 1
Total Revenues $ 4,175 $ (47 ) $ - $ 4,128
Segment EBITDA: News and Information Services
$ 241 $ 1 $ - $ 242 Book Publishing 99 - - 99 Digital Real Estate
Services 130 (5 ) - 125 Cable Network Programming 67 - - 67 Other
(92 ) - 12 (80 )
Total
Segment EBITDA $ 445 $ (4 ) $ 12 $ 453
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 (losses) earnings of affiliates,
interest, net, other, net, income tax benefit (expense) 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 of and
allocate resources within the Company’s businesses. Segment EBITDA
provides management, investors and equity analysts with a measure
to analyze the 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 Company believes
that information about Total Segment EBITDA allows users of the
Company’s financial statements to evaluate changes in the operating
results of the Company separate from non-operational factors that
affect net (loss) income, thus providing insight into both
operations and the other factors that affect reported results. The
following table reconciles Total Segment EBITDA to (Loss) income
from continuing operations.
For the three months ended December 31, 2016
2015 Change % Change (in millions) Better/(Worse)
Revenues $ 2,116 $ 2,161 $ (45 ) (2
)%
Operating expenses (1,126 ) (1,193 ) 67 6
%
Selling, general and administrative (665 ) (688 )
23 3
%
Total Segment EBITDA 325 280 45 16
%
Depreciation and amortization (120 ) (123 ) 3 2
%
Impairment and restructuring charges (356 ) (22 ) (334 ) ** Equity
(losses) earnings of affiliates (238 ) 15 (253 ) ** Interest, net
15 11 4 36
%
Other, net 123 (6 ) 129 **
(Loss) income from continuing operations before income tax
benefit (expense) (251 ) 155 (406 ) ** Income tax benefit (expense)
32 (49 ) 81 **
(Loss)
income from continuing operations $ (219 ) $ 106 $ (325
) ** ** - Not meaningful For the six months
ended December 31, 2016 2015 Change % Change ( in millions)
Better/(Worse)
Revenues $ 4,081 $ 4,175 $ (94 ) (2
)%
Operating expenses (2,283 ) (2,392 ) 109 5
%
Selling, general and administrative (1,343 ) (1,338 )
(5 ) -
Total Segment EBITDA 455 445 10 2
%
Depreciation and amortization (240 ) (244 ) 4 2
%
Impairment and restructuring charges (376 ) (39 ) (337 ) ** Equity
(losses) earnings of affiliates (253 ) 23 (276 ) ** Interest, net
22 23 (1 ) (4 )% Other, net 140 (1 )
141 ** (Loss) income from continuing operations
before income tax benefit (252 ) 207 (459 ) ** Income tax benefit
33 42 (9 ) (21
)%
(Loss) income from continuing operations $ (219 ) $ 249
$ (468 ) ** ** - Not meaningful
NOTE 3 – ADJUSTED NET (LOSS) INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO NEWS CORPORATION STOCKHOLDERS AND ADJUSTED
EPS
The Company uses net (loss) 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,
and “Other, net”, net of tax, recognized by the Company or its
equity investees (“adjusted net income from continuing operations
available to News Corporation stockholders and adjusted EPS,”
respectively) 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
(loss) 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 (loss) 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 (loss) income from
continuing operations available to News Corporation stockholders
and reported diluted EPS to adjusted net (loss) income from
continuing operations available to News Corporation stockholders
and adjusted EPS for the three and six months ended December 31,
2016 and 2015.
For the three months ended For the three months ended
December 31, 2016 December 31, 2015
Net (loss)income availableto
stockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
(Loss) income from continuing operations $ (219 ) $ $
106 $ Less: Net income attributable to noncontrolling interests (70
) (19 ) Less: Redeemable preferred stock dividends (1 )
(1 )
(Loss) income from
continuing operations available to News Corporation
stockholders $ (290 ) $ (0.50 ) $ 86 $ 0.15 U.K.
Newspaper Matters 2 - 7 0.01 Impairment and restructuring
charges (a) 356 0.62 22 0.04 Other, net (b) (123 ) (0.21 ) 6
0.01 Equity losses of affiliates (c) 227 0.39 - - Tax
impact on items above (d) (108 ) (0.19 ) (7 ) (0.01 ) Impact
of noncontrolling interest items included in Other, net above (b)
46 0.08 - -
As adjusted $ 110 $ 0.19
$ 114 $ 0.20
(a)
Impairment and restructuring charges for the three
months ended December 31, 2016 included a non-cash impairment
charge of approximately $310 million related to the write-down of
fixed assets at the Australian newspapers.
(b)
Other, net in the three months ended December 31, 2016 included a
pre-tax gain of $120 million resulting from the sale of REA Group’s
European business.
(c)
During the three months ended December 31, 2016, the Company
recognized a $227 million non-cash write-down of the carrying value
of its investment in Foxtel to fair value.
(d)
The tax impact on items above includes a $121 million tax benefit
from the non-cash impairment charge and non-cash write-down noted
above. For the six months ended For the six
months ended December 31, 2016 December 31, 2015
Net (loss)incomeavailable
tostockholders
EPS
Net incomeavailable tostockholders
EPS (in millions, except per share data)
(Loss) income from continuing operations $ (219 ) $ $ 249 $
Less: Net income attributable to noncontrolling interests (85 ) (33
) Less: Redeemable preferred stock dividends (1 )
(1 )
(Loss) income from continuing
operations available to News Corporation stockholders $ (305 )
$ (0.52 ) $ 215 $ 0.37 U.K. Newspaper Matters 4 - 12 0.02
Impairment and restructuring charges (a) 376 0.65 39 0.07
Other, net (b) (140 ) (0.24 ) 1 - Equity losses of
affiliates (c) 238 0.41 - - Tax impact on items above (d)
(115 ) (0.20 ) (15 ) (0.03 ) Tax benefit (e) - - (106 )
(0.18 ) Impact of noncontrolling interest on items included
in Other, net above (b) 46 0.08 - -
As adjusted
$ 104 $ 0.18 $ 146 $ 0.25
(a)
Impairment and restructuring charges for the six
months ended December 31, 2016 included a non-cash impairment
charge of approximately $310 million related to the write-down of
fixed assets at the Australian newspapers.
(b)
Other, net in the six months ended December 31, 2016 included a
pre-tax gain of $120 million resulting from the sale of REA Group’s
European business.
(c)
During the six months ended December 31, 2016, the Company
recognized a $227 million non-cash write-down of the carrying value
of its investment in Foxtel to fair value. Foxtel’s net income in
the six months ended December 31, 2016 included a $21 million loss
resulting from Foxtel management’s decision to cease Presto
operations in January 2017. Equity (losses) earnings of affiliates
were negatively affected by $11 million, which represents the
Company’s share of that loss.
(d)
The tax impact on items above includes a $121 million tax benefit
from the non-cash impairment charge and non-cash write-down noted
above.
(e)
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 six months ended
December 31, 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170209006289/en/
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorJim Kennedy, 212-416-4064Corporate
Communicationsjkennedy@newscorp.com
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