FISCAL 2018 FIRST QUARTER KEY FINANCIAL
HIGHLIGHTS
- Revenues of $2.06 billion, a 5%
increase compared to $1.97 billion in the prior year
- Net income was $87 million compared
to nil in the prior year
- Total Segment EBITDA was $249
million compared to $130 million in the prior year
- Reported revenue and Segment EBITDA
growth in every segment
- Reported EPS were $0.12 compared to
($0.03) in the prior year – Adjusted EPS were $0.07 compared to
($0.01) in the prior year
- Digital revenues represented 27% of
News and Information Services segment revenues, compared to 24% 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 ended September 30, 2017.
Commenting on the results, Chief Executive Robert Thomson
said:
“In the first quarter, revenues and Segment EBITDA increased
across every segment of our business, in particular, in digital
real estate services, which have become core to our character and
are on track for significant growth in coming quarters. Total
reported revenues this quarter increased 5% to $2.1 billion, net
income increased to $87 million and Total Segment EBITDA rose 92%
to $249 million. Excluding one-time items and foreign currency
impacts, our underlying Total Adjusted Segment EBITDA grew 46%.
We have reason for optimism about the future of our premium
media businesses, in light of the profound changes agreed by Google
in the ranking of news content. These changes follow almost a
decade of campaigning by News Corp, which led the world in
understanding the threat to and the opportunities for quality
journalism in the digital age. We are continuing our discussions
with both Google and Facebook about further facilitating
subscriptions and the sharing of permissioned personal data. And we
look forward to serving our advertisers with data that is reliable,
not risible.
In August, we and Telstra announced a non-binding agreement to
combine Foxtel and FOX SPORTS Australia, with News Corp owning 65%
of the new company. Pending definitive documentation and regulatory
approval, we expect to close in the first half of calendar year
2018. The combined company, with majority control by News Corp, is
expected to fundamentally transform our revenue and EBITDA profile,
and increase the relative share of digital subscription
businesses.”
FIRST QUARTER RESULTS
The Company reported fiscal 2018 first quarter total revenues of
$2.06 billion, a 5% increase compared to $1.97 billion in the prior
year period, reflecting continued growth in the Digital Real Estate
Services segment, the acquisitions of Australian Regional Media
(“ARM”) and Wireless Group plc (“Wireless Group”) and a $26 million
positive impact from foreign currency fluctuations. Growth was
partially offset by lower print advertising revenues at the News
and Information Services segment. Adjusted Revenues (which exclude
the foreign currency impact, acquisitions and divestitures as
defined in Note 1) increased 1%.
Net income for the quarter was $87 million as compared to nil in
the prior year. The increase was primarily driven by higher Total
Segment EBITDA, as discussed below, and lower depreciation and
amortization expense, partially offset by higher income tax expense
associated with higher pre-tax income.
The Company reported first quarter Total Segment EBITDA of $249
million, a 92% increase compared to $130 million in the prior year.
The increase was primarily due to strong performances across all
segments as well as a one-time $46 million benefit from the
reversal of certain previously accrued net liabilities related to
certain employment taxes in the U.K. Operational improvement was
driven by the continued growth in the Digital Real Estate Services
segment, as well as lower costs at the News and Information
Services segment and at FOX SPORTS Australia. Adjusted Total
Segment EBITDA (as defined in Note 1) increased 46%.
Income (loss) per share available to News Corporation
stockholders was $0.12 as compared to ($0.03) in the prior
year.
Adjusted EPS (as defined in Note 3) were $0.07 compared to
($0.01) in the prior year.
SEGMENT REVIEW
For the three months ended September
30, 2017 2016 % Change (in millions) Better/
(Worse)
Revenues: News and Information Services $ 1,241 $
1,222 2 % Book Publishing 401 389 3 % Digital Real Estate Services
271 226 20 % Cable Network Programming 145 128 13 % Other -
- **
Total Revenues $ 2,058 $ 1,965
5 %
Segment EBITDA: News and Information
Services(a) $ 73 $ 46 59 % Book Publishing 50 48 4 % Digital Real
Estate Services 95 67 42 % Cable Network Programming 27 14 93 %
Other(b) 4 (45 ) **
Total Segment
EBITDA $ 249 $ 130 92 % ** - Not meaningful (a)
News and Information Services Segment EBITDA for the three
months ended September 30, 2016 included transaction related costs
of $5 million associated with the acquisition of Wireless Group.
(b) Other Segment EBITDA for the three months ended September 30,
2017 includes a $46 million benefit from the reversal of certain
previously accrued net liabilities for the U.K. Newspaper Matters
as a result of an agreement reached with the relevant tax authority
related to certain employment taxes. Other Segment EBITDA for the
three months ended September 30, 2017 and 2016 included $3 million
and $2 million, respectively, of fees and costs, net of
indemnification, related to the U.K. Newspaper Matters.
News and Information Services
Revenues in the quarter increased $19 million, or 2%, compared
to the prior year. Within the segment, News Corp Australia and Dow
Jones revenues grew 4% and 2%, respectively, while revenues at News
UK and News America Marketing declined 6% and 4%, respectively.
Adjusted Revenues were 3% lower compared to the prior year.
Advertising revenues were flat compared to the prior year as the
growth driven by $23 million from the acquisition of Wireless
Group, $21 million from the acquisition of ARM, the positive impact
from foreign currency fluctuations and a modest increase in digital
advertising revenue was offset by the weakness in the print
advertising market and lower free standing insert revenues at News
America Marketing.
Circulation and subscription revenues increased 3%, primarily
due to healthy contribution from Dow Jones, which saw an 11%
increase in its circulation revenues and growth in its professional
information business, and higher subscription pricing and selected
cover price increases at News Corp Australia and News UK, partially
offset by lower print volume.
Segment EBITDA increased $27 million in the quarter, or 59%, as
compared to the prior year. The increase was due to revenue growth
and lower expenses at Dow Jones, lower investment spending at
Checkout 51, the absence of transaction costs associated with the
acquisition of Wireless Group, as well as lower expenses due to
ongoing cost efficiencies. Adjusted Segment EBITDA (as defined in
Note 1) increased 33%.
Digital revenues represented 27% of segment revenues in the
quarter, compared to 24% in the prior year; for the quarter,
digital revenues for Dow Jones and the newspaper mastheads
represented 31% of their revenues. 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 September 30, 2017
were 1,318,000, compared to 967,000 in the prior year (Source:
Internal data)
- Closing digital subscribers at News
Corp Australia’s mastheads as of September 30, 2017 were 375,400
(including ARM), compared to 283,100 in the prior year (Source:
Internal data; adjusted for divested mastheads)
- The Times and Sunday Times closing
digital subscribers as of September 30, 2017 were 212,000, compared
to 181,000 in the prior year (Source: Internal data)
- The Sun’s digital offering reached
approximately 84 million global monthly unique users in September
2017, compared to 46 million in the prior year, based on ABCe
(Source: Omniture)
Book Publishing
Revenues in the quarter increased $12 million, or 3%, compared
to the prior year, primarily due to the continued popularity of
Hillbilly Elegy by J.D. Vance and The Subtle Art of Not Giving a
F*ck by Mark Manson, as well as the success of frontlist titles
such as Daniel Silva’s House of Spies and Karin Slaughter’s The
Good Daughter. Digital sales increased 6% compared to the prior
year and represented 21% of Consumer revenues for the quarter,
driven by growth in downloadable audio book sales. Segment EBITDA
for the quarter increased $2 million, or 4%, from the prior year
due to the higher revenues discussed above.
Digital Real Estate Services
Revenues in the quarter increased $45 million, or 20%, compared
to the prior year, primarily due to the continued growth at REA
Group and Move. Segment EBITDA in the quarter increased $28
million, or 42%, compared to the prior year, primarily due to the
higher revenues discussed above. Adjusted Revenues and Adjusted
Segment EBITDA increased 19% and 38%, respectively.
In the quarter, revenues at REA Group increased 22% to $158
million from $129 million in the prior year due to an increase in
Australian residential depth revenue, driven by favorable product
mix and pricing increases, the acquisition of Smartline and the
positive impact from foreign currency fluctuations. The growth was
partially offset by the sale of its European business in fiscal
2017.
Move’s revenues in the quarter increased 15% to $107 million
from $93 million in the prior year, primarily due to the continued
growth in its ConnectionsSM for Buyers product. The growth was
partially offset by the $3 million decline in revenue associated
with the sale of TigerLead®. Based on Move’s internal data, average
monthly unique users of realtor.com®’s web and mobile sites for the
fiscal first quarter grew year-over-year to more than 55 million,
with mobile representing more than half of all unique users.
Cable Network Programming
Revenues in the quarter increased $17 million, or 13%, compared
to the prior year due to the acquisition of Australian News Channel
Pty Ltd (“ANC”), operator of Australia’s SKY NEWS network, higher
affiliate revenues at FOX SPORTS Australia and favorable foreign
currency fluctuations, partially offset by lower advertising
revenues. Segment EBITDA in the quarter increased $13 million, or
93%, compared with the prior year, primarily due to the timing of
programming amortization related to the launch of a dedicated
National Rugby League channel, combined with lower other sports
programming rights costs. Adjusted Revenues and Adjusted Segment
EBITDA, which exclude the impact from favorable foreign currency
fluctuations and the ANC acquisition as described in Note 1,
increased 2% and 107%, respectively.
REVIEW OF EQUITY LOSSES OF AFFILIATES’ RESULTS
Equity losses of affiliates for the first quarter were $10
million compared to $15 million in the prior year.
For the three months ended September 30, 2017
2016 (in millions) Foxtel(a) $ (5 ) $ (11 ) Other
equity affiliates, net(b) (5 ) (4 ) Total equity
losses of affiliates $ (10 ) $ (15 ) (a) The Company
amortized $17 million and $19 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 ended September 30, 2017 and 2016, respectively. Such
amortization is reflected in Equity losses of affiliates in the
Statements of Operations. (b) Other equity affiliates, net for the
three months ended September 30, 2017 primarily includes losses
from the Company’s interest in Elara Technologies, which owns
PropTiger.
On a U.S. GAAP basis, Foxtel revenues for the first quarter
increased $15 million, or 2%, to $633 million from $618 million in
the prior year period. In local currency, Foxtel revenues decreased
2% due to lower subscription revenues, partially offset by higher
pay-per-view revenue. Foxtel’s total closing subscribers were more
than 2.8 million as of September 30, 2017, which was lower than the
prior year, primarily due to the shutdown of Presto and the winding
down of Telstra’s T-box. Total subscribers improved compared to the
prior quarter due to the launch of Foxtel Now. In the first
quarter, cable and satellite churn was 12.7% compared to 15.5% in
the prior year. Broadcast residential ARPU for the first quarter
was A$86, a 2% decline compared to the prior year.
Foxtel’s net income of $24 million increased from $16 million in
the prior year period, primarily due to the absence of losses
associated with Foxtel management’s decision to cease Presto
operations in January 2017 and lower non-programming expenses,
partially offset by planned increases in sports rights costs.
Equity losses of affiliates for Foxtel of $(5) million and $(11)
million for the three months ended September 30, 2017 and 2016,
respectively, reflect the Company's share of Foxtel's net income,
less the Company's amortization of $17 million and $19 million,
respectively, related to the Company's excess cost over its share
of Foxtel's finite-lived intangible assets.
Foxtel EBITDA declined $21 million to $122 million from $143
million in the prior year. In local currency, Foxtel EBITDA
decreased 18% due to planned increases in sports programming costs
of $24 million, primarily related to the Australian Football League
rights, partially offset by lower sales and marketing and
transmission costs. Foxtel operating income declined to $63 million
from $91 million in the prior year, primarily as a result of the
increased programming spend noted above. Operating income includes
depreciation and amortization of $59 million compared to $52
million in the prior year.
CASH FLOW
The following table presents a reconciliation of net cash used
in continuing operating activities to free cash flow available to
News Corporation:
For the three months ended
September 30,
2017 2016 (in millions) Net cash used in continuing
operating activities $ (4 ) $ (268 ) Less: Capital expenditures
(62 ) (49 ) (66 ) (317 ) Less: REA Group free cash
flow (27 ) (28 ) Plus: Cash dividends received from REA Group
33 28 Free cash flow available to News
Corporation $ (60 ) $ (317 )
Net cash used in continuing operating activities improved $264
million for the three months ended September 30, 2017 as compared
to the prior year period, primarily due to the absence of the NAM
Group’s settlement payments of $250 million and higher Total
Segment EBITDA, partially offset by higher working capital.
Free cash flow available to News Corporation in the three months
ended September 30, 2017 was ($60) million compared to ($317)
million in the prior year period. The improvement was primarily due
to the absence of the settlement payments as discussed above,
partially offset by higher capital expenditures.
Free cash flow available to News Corporation is a non-GAAP
financial measure defined as net cash used in 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.
COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP
INFORMATION
Adjusted Revenues, Total Segment EBITDA, Adjusted Total Segment
EBITDA, Adjusted 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 used in 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
5:30pm EST on November 9, 2017. To listen to the call, please visit
http://investors.newscorp.com.
Annual Meeting of Stockholders
News Corporation will provide a live audio webcast of its 2017
Annual Meeting of Stockholders to be held in Los Angeles,
California on November 15, 2017, beginning at 3:00pm PST. The
webcast will be available via
http://newscorp.com/annual-meeting-information. A replay will be
available at the same location for a period of time following the
meeting.
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) (NASDAQ:NWSA) (ASX:NWS)
(ASX:NWSLV) is a global, diversified media and information
services company focused on creating and distributing authoritative
and engaging content to consumers throughout the world. The
company comprises businesses across a range of media, including:
news and information services, book publishing, digital real estate
services, cable network programming in Australia, and pay-TV
distribution in Australia. Headquartered in New York, the
activities of News Corporation are conducted primarily in the
United States, Australia, and the United Kingdom. More information
is available at: www.newscorp.com.
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited; in millions, except per
share amounts)
For the three months ended September
30, 2017 2016 Revenues: Advertising $ 670 $ 670
Circulation and subscription 651 621 Consumer 386 374 Real estate
203 172 Other 148 128 Total
Revenues 2,058 1,965 Operating expenses (1,149 ) (1,157 )
Selling, general and administrative (660 ) (678 ) Depreciation and
amortization (97 ) (120 ) Restructuring charges (15 ) (20 ) Equity
losses of affiliates (10 ) (15 ) Interest, net 6 7 Other, net
8 17 Income (loss) before income tax
(expense) benefit 141 (1 ) Income tax (expense) benefit (54
) 1 Net income 87 - Less: Net income attributable to
noncontrolling interests (19 ) (15 ) Net income
(loss) available to News Corporation stockholders $ 68 $ (15
) Weighted average shares outstanding: Basic 582 581 Diluted
583 581 Net income (loss) available to News Corporation
stockholders per share - basic and diluted $ 0.12 $ (0.03 )
NEWS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions)
As of September 30, 2017 As of
June 30, 2017
ASSETS (unaudited) (audited) Current assets:
Cash and cash equivalents $ 1,877 $ 2,016 Receivables, net 1,365
1,276 Other current assets 526 523
Total current assets 3,768 3,815
Non-current assets: Investments 2,044 2,027 Property, plant and
equipment, net 1,636 1,624 Intangible assets, net 2,301 2,281
Goodwill 3,922 3,838 Deferred income tax assets 553 525 Other
non-current assets 438 442 Total assets
$ 14,662 $ 14,552
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 235 $ 222
Accrued expenses 1,146 1,204 Deferred revenue 448 426 Other current
liabilities 588 600 Total current
liabilities 2,417 2,452
Non-current liabilities: Borrowings 281 276 Retirement benefit
obligations 313 319 Deferred income tax liabilities 73 61 Other
non-current liabilities 362 351 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 12,340 12,395 Accumulated deficit (581 )
(648 ) Accumulated other comprehensive loss (852 )
(964 ) Total News Corporation stockholders' equity 10,913 10,789
Noncontrolling interests 283 284 Total
equity 11,196 11,073 Total liabilities
and equity $ 14,662 $ 14,552
NEWS CORPORATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
For the three months ended September
30, 2017 2016
Operating activities: Net income $ 87 $
- Less: Income from discontinued operations, net of tax -
- Income from continuing operations 87 -
Adjustments to reconcile income from continuing operations
to cash used in operating activities: Depreciation and amortization
97 120 Equity losses of affiliates 10 15 Other, net (8 ) (17 )
Deferred income taxes and taxes payable 6 (35 ) Changes in
operating assets and liabilities, net of acquisitions: Receivables
and other assets (73 ) (64 ) Inventories, net (16 ) (16 ) Accounts
payable and other liabilities (107 ) (21 ) NAM Group settlement
- (250 ) Net cash used in operating activities from
continuing operations (4 ) (268 ) Net cash used in operating
activities from discontinued operations - (3 )
Net cash used in operating activities (4 ) (271 )
Investing activities: Capital expenditures (62 ) (49
) Changes in restricted cash for Wireless Group acquisition - ) 315
Acquisitions, net of cash acquired (54 ) (283 ) Investments in
equity affiliates and other (12 ) - Proceeds from property, plant
and equipment and other asset dispositions - 24 Other, net 7
(18 ) Net cash used in investing activities from continuing
operations (121 ) (11 ) Net cash used in investing activities from
discontinued operations - - Net cash
used in investing activities (121 ) (11 )
Financing activities: Repayment of borrowings acquired in
the Wireless Group acquisition - (23 ) Dividends paid (21 ) (18 )
Other, net (10 ) (18 ) Net cash used in financing activities
from continuing operations (31 ) (59 ) Net cash used in financing
activities from discontinued operations - -
Net cash used in financing activities (31 )
(59 ) Net decrease in cash and cash equivalents (156 ) (341
) Cash and cash equivalents, beginning of period 2,016 1,832
Exchange movement on opening cash balance 17 8
Cash and cash equivalents, end of period $ 1,877 $
1,499
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 table reconciles reported revenues and reported
Total Segment EBITDA to Adjusted Revenues and Adjusted Total
Segment EBITDA for the three months ended September 30, 2017 and
2016.
Revenues Total Segment EBITDA For the
three months ended For the three months ended September 30,
September 30, 2017 2016 Difference 2017 2016
Difference (in millions) (in millions)
As
reported $ 2,058 $ 1,965 $ 93 $ 249 $ 130 $ 119 Impact
of acquisitions (76 ) - (76 ) (2 ) 5 (7 ) Impact of
divestitures - (25 ) 25 - - - Impact of foreign currency
fluctuations (26 ) - (26 ) (4 ) - (4 ) Net impact of U.K.
Newspaper Matters - - - (43 ) 2 (45 )
As
adjusted $ 1,956 $ 1,940 $ 16 $ 200
$ 137 $ 63
Adjusted Revenues and Adjusted Segment EBITDA by segment for the
three months ended September 30, 2017 and 2016 are as follows:
For the three months ended September
30, 2017 2016 % Change (in millions)
Better/(Worse)
Adjusted Revenues: News and Information Services $
1,172 $ 1,209 (3
)%
Book Publishing 399 389 3
%
Digital Real Estate Services 255 214 19
%
Cable Network Programming 130 128 2
%
Other - -
**
Total Adjusted Revenues $ 1,956 $ 1,940
1
%
Adjusted Segment EBITDA: News and Information
Services $ 69 $ 52 33
%
Book Publishing 50 48 4
%
Digital Real Estate Services 91 66 38
%
Cable Network Programming 29 14 107
%
Other (39 ) (43 ) 9
%
Total Adjusted Segment EBITDA $ 200 $ 137 46
%
** - 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 September 30, 2017 and
2016.
For the three months ended September 30, 2017
Impact of Net Impact of Foreign U.K.
Impact of Currency Newspaper As Reported Acquisitions Fluctuations
Matters As Adjusted (in millions)
Revenues: News and
Information Services $ 1,241 $ (55 ) $ (14 ) $ - $ 1,172 Book
Publishing 401 - (2 ) - 399 Digital Real Estate Services 271 (10 )
(6 ) - 255 Cable Network Programming 145 (11 ) (4 ) - 130 Other
- - - - -
Total Revenues $ 2,058 $ (76 ) $ (26 ) $ - $
1,956
Segment EBITDA: News and Information
Services $ 73 $ (3 ) $ (1 ) $ - $ 69 Book Publishing 50 - - - 50
Digital Real Estate Services 95 (1 ) (3 ) - 91 Cable Network
Programming 27 2 - - 29 Other 4 - -
(43 ) (39 )
Total Segment EBITDA $ 249
$ (2 ) $ (4 ) $ (43 ) $ 200 For
the three months ended September 30, 2016 Net
Impact of U.K. Impact of Impact of Newspaper As Reported
Acquisitions Divestitures Matters As Adjusted (in millions)
Revenues: News and Information Services $ 1,222 $ - $ (13 )
$ - $ 1,209 Book Publishing 389 - - - 389 Digital Real Estate
Services 226 - (12 ) - 214 Cable Network Programming 128 - - - 128
Other - - - - -
Total Revenues $ 1,965 $ - $ (25 ) $ - $ 1,940
Segment EBITDA: News and Information Services
$ 46 $ 5 $ 1 $ - $ 52 Book Publishing 48 - - - 48 Digital Real
Estate Services 67 - (1 ) - 66 Cable Network Programming 14 - - -
14 Other (45 ) - - 2 (43
)
Total Segment EBITDA $ 130 $ 5 $ - $ 2 $ 137
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 of affiliates, interest, net,
other, net, income tax (expense) 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 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 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 Company believes
that the presentation of Total Segment EBITDA provides useful
information regarding the Company’s operations and other factors
that affect the Company’s reported results. Specifically, the
Company believes that by excluding certain one-time or non-cash
items such as impairment and restructuring charges and depreciation
and amortization, as well as potential distortions between periods
caused by factors such as financing and capital structures and
changes in tax positions or regimes, the Company provides users of
its consolidated financial statements with insight into both its
core operations as well as the factors that affect reported results
between periods but which the Company believes are not
representative of its core business. As a result, users of the
Company’s consolidated financial statements are better able to
evaluate changes in the core operating results of the Company
across different periods. The following table reconciles Total
Segment EBITDA to net income (loss).
For the three months ended September 30, 2017
2016 Change % Change (in
millions) Better/(Worse)
Revenues $ 2,058 $ 1,965 $
93 5
%
Operating expenses (1,149 ) (1,157 ) 8 1
%
Selling, general and administrative (660 ) (678 )
18 3
%
Total Segment EBITDA 249 130 119 92
%
Depreciation and amortization (97 ) (120 ) 23 19
%
Restructuring charges (15 ) (20 ) 5 25
%
Equity losses of affiliates (10 ) (15 ) 5 33
%
Interest, net 6 7 (1 ) (14
)%
Other, net 8 17 (9 ) (53
)%
Income (loss) before income tax (expense) benefit 141 (1 ) 142 **
Income tax (expense) benefit (54 ) 1
(55 ) **
Net income $ 87 $ - $ 87 **
** - Not meaningful
NOTE 3 – ADJUSTED NET INCOME (LOSS) AVAILABLE TO NEWS
CORPORATION STOCKHOLDERS AND ADJUSTED EPS
The Company uses net income (loss) 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, recognized by
the Company or its equity investees (“adjusted net income (loss)
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
income (loss) 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 (loss) 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 (loss) available to News
Corporation stockholders and net income (loss) 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 table reconciles reported net income (loss)
available to News Corporation stockholders and reported diluted EPS
to adjusted net income (loss) available to News Corporation
stockholders and adjusted EPS for the three months ended September
30, 2017 and 2016.
For the three months ended For the three
months ended September 30, 2017 September 30, 2016
Net income
Net income (loss)
available to
EPS
available to
EPS
stockholders
stockholders
(in millions, except per share data)
Net
income $ 87 $ $ - $ Less: Net income attributable to
noncontrolling interests (19 ) (15 )
Income (loss)
available to News Corporation stockholders $ 68 $ 0.12 $ (15 )
$ (0.03 ) U.K. Newspaper Matters (a) (43 )
(0.07 ) 2 - Restructuring charges 15 0.02 20 0.04
Other, net (8 ) (0.01 ) (17 ) (0.03 ) Equity losses of
affiliates (b) - - 11 0.02 Tax impact on items above 9 0.01
(7 ) (0.01 )
As adjusted $ 41 $ 0.07
$ (6 ) $ (0.01 ) (a) The Company recorded a $46
million benefit from the reversal of certain previously accrued net
liabilities for the U.K. Newspaper Matters as a result of an
agreement reached with the relevant tax authority related to
certain employment taxes. (b) Foxtel’s net income in the three
months ended September 30, 2016 included a $21 million loss
resulting from Foxtel management’s decision to cease Presto
operations in January 2017. Equity losses of affiliates were
negatively affected by $11 million, which represents the Company’s
share of that loss.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171109006631/en/
News CorporationMichael Florin, 212-416-3363Investor
Relationsmflorin@newscorp.comorJim Kennedy, 212-416-4064Corporate
Communicationsjkennedy@newscorp.com
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