News Corporation Reports Second Quarter Earnings Per Share of $1.01 on Net Income Attributable to Stockholders of $2.38 Billion
News Corporation (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) today reported
$9.43 billion of total revenue for the three months ending December 31,
2012, a $450 million or 5% increase over the $8.98 billion of revenue
reported in the prior year quarter. The revenue increase was led by $398
million or 18% growth at the Company’s Cable Network Programming segment.
The Company reported second quarter total segment operating income(1)
of $1.58 billion compared to $1.50 billion reported a year ago. The
improvement was led by operating income improvements at the Company’s
Cable Network Programming and Television segments. The second quarter
results included $56 million of costs related to the ongoing
investigations initiated upon the closure of The News of the World as
compared to $87 million in the corresponding period of the prior year.
This year’s second quarter results also included $23 million of costs
related to the proposed separation of the Company’s entertainment and
publishing businesses. Excluding these costs from both years, second
quarter adjusted total segment operating income of $1.66 billion
increased $75 million or 5% from $1.58 billion reported in the second
quarter of the prior year.
The Company reported quarterly net income attributable to stockholders
of $2.38 billion ($1.01 per share), compared to $1.06 billion ($0.42 per
share) reported in the corresponding period of the prior year. This
quarter’s pre-tax results included $1.40 billion of income in Other,
net, principally related to gains on the acquisitions of additional
ownership stakes in FOX SPORTS Australia and Fox Star Sports Asia
(formerly ESPN Star Sports), as well as a $131 million gain from the
Company’s participation in British Sky Broadcasting’s (“BSkyB”) share
repurchase program, which is reflected in Equity earnings of affiliates.
These gains were partially offset by $65 million of restructuring and
impairment charges, primarily related to the Company’s international
newspaper businesses. Excluding the net income effects of these items,
the costs related to the investigations in the U.K. and the proposed
separation of the Company’s entertainment and publishing businesses,
along with comparable items in both years, second quarter adjusted
earnings per share(2) was $0.44 compared with the adjusted
prior year quarter result of $0.39.
Commenting on the results, Chairman and Chief Executive Officer Rupert
Murdoch said:
"News Corporation’s fiscal second quarter performance reflects our
strong momentum. Double-digit gains in our Cable and Television
businesses, along with improvements in our Publishing segment, drove
revenue and earnings growth even as we seized opportunities to invest in
our core businesses for long-term and sustainable growth.
“The strategies we executed against in the quarter continue to bolster
News Corporation's competitive position and enhance our ability to
benefit from global demand for content, especially sports programming.
As we make progress toward the proposed separation of our entertainment
and publishing businesses later this year, I am confident in the future
prospects for both businesses.”
____________________________________________________________
(1) Total segment operating income is a non-GAAP financial
measure. See page 12 for a description of total segment operating
income and for a reconciliation of total segment operating income to
income before income tax expense.
(2) See page 15 for a reconciliation of reported net income
and earnings per share to adjusted net income and adjusted earnings per
share.
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REVIEW OF SEGMENT OPERATING RESULTS
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Total Segment Operating Income (Loss)
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3 Months Ended
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6 Months Ended
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December 31,
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December 31,
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2012
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2011
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2012
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2011
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US $ Millions
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Cable Network Programming
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$
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945
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$
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882
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$
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1,898
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$
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1,657
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Filmed Entertainment
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383
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393
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783
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740
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Television
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224
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189
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380
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322
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Direct Broadcast Satellite Television
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(20
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)
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6
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3
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125
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Publishing
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234
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218
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291
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328
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Other
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(186
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)
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(191
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(397
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(290
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Total Segment Operating Income *
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$
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1,580
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$
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1,497
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$
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2,958
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$
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2,882
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*
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The three months ended December 31, 2012 and 2011 include $56
million and $87 million, respectively, of costs related to the
ongoing investigations in the U.K. The three months ended December
31, 2012 include $23 million of costs related to the proposed
separation of the Company’s entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $1,659 and $1,584 million in the three months
ended December 31, 2012 and 2011, respectively.
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The six months ended December 31, 2012 and 2011 include $123 million
and $104 million, respectively, of costs related to the ongoing
investigations in the U.K. The six months ended December 31, 2012
include $28 million of costs related to the proposed separation of
the Company’s entertainment and publishing businesses. Excluding
these charges, adjusted total segment operating income is $3,109 and
$2,986 million in the six months ended December 31, 2012 and 2011,
respectively.
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CABLE NETWORK PROGRAMMING
Cable Network Programming reported quarterly segment operating income of
$945 million, a $63 million or 7% increase over the prior year quarter,
driven by an 18% increase in revenue. Operating income contributions
from the domestic channels increased 9%. Double-digit revenue growth at
the Regional Sports Networks (“RSNs”), Fox News Channel, FX Network and
National Geographic Channels was partially offset by increased
programming costs, including expanded college football and Ultimate
Fighting Championship (“UFC”) coverage, as well as higher costs at the
RSNs related to the benefit recognized in the prior year as a result of
the National Basketball Association (“NBA”) lockout. The Company’s
international cable channels’ quarterly earnings contributions increased
3% from the same period a year ago, reflecting strong operating profit
growth at the non-sports channels at Fox International Channels (“FIC”)
and STAR, partially offset by the costs associated with the inaugural
broadcasts of BCCI cricket and the adverse impact of the strengthened
U.S. dollar.
Affiliate revenue grew 13% and 42% at the domestic and international
cable channels, respectively. Domestic network growth reflects higher
rates across all networks, led by growth at the Fox News Channel and
RSNs. Approximately 40% of the international affiliate revenue increase
reflects strong local currency growth at the non-sports channels at FIC
and STAR. The balance of the growth was principally from the inclusion
of Fox Pan American Sports (“FPAS”) and Fox Star Sports Asia, partially
offset by the impact of the strengthened U.S. dollar.
Advertising revenue at the domestic cable channels grew 8% in the
quarter over the prior year period driven by growth across most
networks. The international cable channels’ advertising revenue improved
29% from the prior year quarter. Nearly two-thirds of the international
cable revenue increase reflects strong local currency growth at the
non-sports channels at FIC and STAR. The balance of the growth was from
the inclusion of FPAS and Fox Star Sports Asia, partially offset by the
impact of the strengthened U.S. dollar.
Expenses at Cable Network Programming grew 26% in the quarter over the
corresponding period in the prior year due to increased sports
programming costs, including increased rights costs at the RSNs related
to the timing benefit in the prior year resulting from the NBA lockout,
rights fees for BCCI cricket in India, expanded college football
coverage, UFC rights fees, as well as expenses associated with the
consolidation of the FPAS and Fox Star Sports Asia networks. These
increases were partially offset by reduced National Hockey League rights
costs at the RSNs resulting from this season’s lockout.
FILMED ENTERTAINMENT
Filmed Entertainment reported quarterly segment operating income of $383
million, as compared to the $393 million reported in the same period a
year ago. Quarterly results reflect the successful worldwide theatrical
performances of Taken 2, which has grossed approximately
$375 million in worldwide box office to date, and Life of Pi,
which has grossed over $500 million in worldwide box office and is
nominated for eleven Academy Awards including Best Picture. In
aggregate, the Fox film studios garnered thirty-one Academy Award
nominations, the most of any studio. In addition, the quarterly results
include the successful worldwide home entertainment performance of Ice
Age: Continental Drift. Prior year second quarter film results
included the successful worldwide home entertainment performances of Rio,
Rise of the Planet of the Apes and X-Men: First Class.
TELEVISION
Television reported quarterly segment operating income of $224 million,
an increase of $35 million or 19% versus the same period a year ago.
This increase reflects a more than doubling of retransmission consent
revenues and increased local advertising at the Fox Television Stations
driven by political advertising revenues. These improvements were
partially offset by lower national advertising revenues, primarily
reflecting lower primetime ratings at the Fox Broadcast Network and
three fewer World Series games in the current year, as well as increased
costs associated with expanded college football coverage.
DIRECT BROADCAST SATELLITE TELEVISION
SKY Italia generated a quarterly segment operating loss of $20 million,
compared to operating income of $6 million reported in the same period a
year ago. The decline was driven by higher programming expenses,
including nearly $30 million of rights costs primarily associated with
expanded UEFA Champions and Europa League coverage. Although reported
U.S. dollar revenue declined reflecting the impact of the strengthened
U.S. dollar, quarterly local currency revenue was essentially in line
with the corresponding period of the prior year. SKY Italia experienced
a net reduction of approximately 28,000 subscribers during the quarter,
bringing total subscribers to 4.83 million.
PUBLISHING
Publishing reported quarterly segment operating income of $234 million,
a $16 million improvement from the $218 million reported in the same
period a year ago. Increased contributions from the U.K. newspapers
which benefitted from the launch of the Sunday edition of The Sun in
February 2012, integrated marketing services driven by higher custom
publishing revenues, and book publishing businesses related to the
acquisition of Thomas Nelson, Inc., a Christian book publisher, more
than offset lower advertising revenues at the Australian newspapers.
OTHER
The Other segment quarterly operating loss of $186 million improved
slightly from the $191 million reported the same period a year ago. The
current year quarterly results included $56 million of costs related to
the ongoing investigations initiated upon the closure of The News of
the World, as compared to $87 million of comparable costs included
in the prior year quarterly results, as well as $23 million of costs
related to the proposed separation of the Company’s entertainment and
publishing businesses. As a result of the Company’s acquisition of
Consolidated Media Holdings in November, the second quarter results also
included a benefit from the consolidation of FOX SPORTS Australia. This
benefit was largely offset by an increased operating loss at Amplify,
the Company’s education business, reflecting increased product
development costs.
OTHER ITEMS
Eredivisie Media & Marketing
In November 2012, the Company acquired a controlling 51% ownership stake
in Eredivisie Media & Marketing CV (“EMM”) for approximately $350
million, of which $325 million was cash and $25 million was contingent
consideration. EMM is a media company that holds the collective media
and sponsorship rights of the Dutch Premier League. The remaining 49% of
EMM is owned by the Dutch Premier League and the global TV production
company Endemol.
Fox Star Sports Asia (formerly ESPN Star Sports)
In November 2012, the Company acquired the remaining 50% interest in
ESPN Star Sports (“ESS”) that it did not already own for approximately
$220 million, net of cash acquired. Accordingly, the results of ESS are
included the Company’s consolidated results of operations beginning in
November 2012. Subsequent to its acquisition, the Company rebranded the
ESS channel group Fox Star Sports Asia.
Consolidated Media Holdings
In November 2012, the Company acquired Consolidated Media Holdings Ltd.
(“CMH”), a media investment company that operates in Australia, for
approximately $2.2 billion which consisted of cash of $2 billion and
assumed debt of $235 million. CMH had a 25% interest in Foxtel and a 50%
interest in FOX SPORTS Australia. The remaining 50% of Foxtel is owned
by Telstra Corporation Limited, one of Australia’s leading
telecommunications companies. The acquisition doubled the Company’s
stakes in FOX SPORTS Australia and Foxtel to 100% and 50%, respectively.
Accordingly, the results of FOX SPORTS Australia are included the
Company’s consolidated results of operations beginning in November 2012.
Prior to November 2012, the Company accounted for its investment in FOX
SPORTS Australia under the equity method of accounting. The Company’s
investment in Foxtel was and continues to be accounted for under the
equity method of accounting.
YES Network & Sports Time Ohio
In December 2012, the Company acquired a 49% equity interest in the
Yankees Entertainment and Sports Network (“YES”), a New York City-based
RSN, for $584 million. In addition, simultaneous with the closing of
this transaction, the Company paid approximately $250 million of upfront
costs on behalf of YES. Under the purchase agreement, after three years,
News Corporation may acquire an additional 31% stake in the YES Network
that could bring its total ownership stake to 80%.
In December 2012, the Company also acquired Sports Time Ohio, a RSN
serving the Cleveland, Ohio market, for an estimated total purchase
price of approximately $270 million, of which $130 million was paid in
cash. The balance of the purchase price represents the fair value of
deferred payments and payments that are contingent upon achievement of
certain performance objectives.
Sky Deutschland
In January 2013, the Company reached an agreement with Sky Deutschland
AG (“Sky Deutschland”) and its new bank syndicate to support both a new
financing structure and the issuance of €438 million (approximately $585
million) of new equity, which includes the outstanding €144 million
(approximately $195 million) of equity under the capital measures
announced by Sky Deutschland in February 2012. Sky Deutschland finalized
the equity offering in early February 2013 and the Company acquired,
through a combination of a private placement and a rights offering,
approximately 92 million additional shares of Sky Deutschland increasing
its ownership to approximately 55%. The aggregate cost of the shares
acquired by the Company was approximately €410 million (approximately
$550 million). As a result of these transactions, the results of Sky
Deutschland will be included in the Company’s consolidated results of
operations in the fiscal third quarter of 2013. In addition, the Company
has committed to guarantee Sky Deutschland’s new €300 million
(approximately $400 million) five-year bank credit facility, which will
replace Sky Deutschland’s existing bank debt facilities (to be repaid in
full). Additionally, News Corporation will act as guarantor to the
German Football League for Sky Deutschland’s Bundesliga broadcasting
license for the 2013/14 to 2016/17 seasons in an amount up to 50% of the
license fee per season. News Corporation has also agreed to extend the
maturity of existing shareholder loans.
Share repurchases
On May 9, 2012, News Corporation announced that its Board of Directors
approved an increase to the previously authorized stock repurchase
program from $5 billion to $10 billion. Through February 5, 2013, the
Company has purchased nearly $6.3 billion of Class A common stock under
the program, at an average price of $19.13 per share. As a result of the
stock repurchase program, diluted weighted Class A shares outstanding of
2,346 million in this year’s quarter declined 7% from 2,515 million in
the same period a year ago.
Dividends
The Company has declared a dividend of $0.085 per Class A and Class B
share. This dividend is payable on April 17, 2013 with a record date for
determining dividend entitlements of March 13, 2013.
Intent to pursue separation of entertainment and publishing
businesses
On June 28, 2012, News Corporation announced that it intends to pursue
the separation of its publishing and its media and entertainment
businesses into two distinct publicly traded companies. The global
publishing company that would be created through the proposed
transaction would consist of the Company’s publishing businesses, its
education division and other Australian assets. The global media and
entertainment company would consist of the Company’s cable and
television assets, filmed entertainment, and direct satellite
broadcasting businesses. Following the separation, each company would
maintain two classes of common stock: Class A Common and Class B Common
Voting Shares. The separation is expected to be completed in
approximately one year from the date of announcement. In addition to
final approval from the Board of Directors and stockholder approval of
certain amendments to the Company’s Restated Certificate of
Incorporation, the completion of the separation will be subject to
receipt of regulatory approvals, opinions from tax counsel and favorable
rulings from certain tax jurisdictions regarding the tax-free nature of
the transaction to the Company and to its stockholders, further due
diligence as appropriate, the execution of certain agreements relating
to the distribution, and the filing and effectiveness of appropriate
filings with the SEC. On December 21, 2012, New Newscorp LLC filed an
initial Form 10 registration statement and News Corporation filed a
preliminary proxy statement with the Securities and Exchange Commission
in connection with the separation. The Company has also applied for
certain regulatory approvals and tax rulings required to enable the
separation to be completed as described. There can be no assurances
given that the separation of the Company's businesses as described will
occur.
REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’ RESULTS
Quarterly earnings from affiliates were $174 million as compared to $142
million in the same period a year ago. The increased contributions from
affiliates are primarily due to higher contributions from BSkyB,
including the Company’s $131 million pre-tax gain related to the its
participation in BSkyB’s share repurchase, partially offset by one-time
costs resulting from Hulu’s purchase of Providence Equity Partners’
ownership stake and the absence of contributions from NDS, which was
sold in July 2012.
The Company’s share of equity earnings (losses) of affiliates is as
follows:
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3 Months Ended
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6 Months Ended
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December 31,
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December 31,
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% Owned
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2012
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2011
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2012
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2011
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US $ Millions
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BSkyB
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39%(1) |
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$
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298
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$
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174
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$
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507
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$
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315
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Other affiliates
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Various(2) |
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(124
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)
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(32
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)
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(143
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)
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(52
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)
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Total equity earnings of affiliates
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$
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174
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$
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142
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$
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364
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|
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$
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263
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(1)
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Please refer to BSkyB’s earnings releases for detailed information.
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(2)
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Primarily comprised of Sky Deutschland, Hulu, Australian and STAR
equity affiliates, as well as NDS in the prior year.
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Foreign Exchange Rates
Average foreign exchange rates used in the quarter-to-date profit
results are as follows:
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3 Months Ended
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December 31,
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2012
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2011
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Australian Dollar/U.S. Dollar
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1.04
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1.01
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U.K. Pounds Sterling/U.S. Dollar
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1.61
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1.57
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Euro/U.S. Dollar
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1.30
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1.35
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To receive a copy of this press release through the Internet, access
News Corporation’s corporate Web site located at http://www.newscorp.com.
Audio from News Corporation’s conference call with analysts on the
second quarter results can be heard live on the Internet at 4:30 p.m.
Eastern Standard Time today. To listen to the call, visit http://www.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.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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3 Months Ended
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6 Months Ended
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December 31,
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December 31,
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2012
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2011
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2012
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2011
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US $ Millions (except share related amounts)
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Revenues
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$
|
9,425
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|
|
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$
|
8,975
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|
$
|
17,561
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$
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16,934
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Operating expenses
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|
(5,869
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)
|
|
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|
(5,583
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)
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|
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|
(10,717
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)
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(10,336
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)
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Selling, general and administrative expenses
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|
|
(1,666
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)
|
|
|
|
(1,614
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)
|
|
|
|
(3,276
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)
|
|
|
|
(3,141
|
)
|
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Depreciation and amortization
|
|
|
(310
|
)
|
|
|
|
(281
|
)
|
|
|
|
(610
|
)
|
|
|
|
(575
|
)
|
|
Impairment and restructuring charges
|
|
|
(65
|
)
|
|
|
|
(36
|
)
|
|
|
|
(217
|
)
|
|
|
|
(127
|
)
|
|
Equity earnings of affiliates
|
|
|
174
|
|
|
|
|
142
|
|
|
|
|
364
|
|
|
|
|
263
|
|
|
Interest expense, net
|
|
|
(266
|
)
|
|
|
|
(257
|
)
|
|
|
|
(533
|
)
|
|
|
|
(515
|
)
|
|
Interest income
|
|
|
37
|
|
|
|
|
29
|
|
|
|
|
68
|
|
|
|
|
65
|
|
|
Other, net
|
|
|
1,400
|
|
|
|
|
125
|
|
|
|
|
2,775
|
|
|
|
|
(5
|
)
|
|
Income from continuing operations before income tax expense
|
|
|
2,860
|
|
|
|
|
1,500
|
|
|
|
|
5,415
|
|
|
|
|
2,563
|
|
|
Income tax expense
|
|
|
(402
|
)
|
|
|
|
(373
|
)
|
|
|
|
(661
|
)
|
|
|
|
(650
|
)
|
|
Net income
|
|
|
2,458
|
|
|
|
|
1,127
|
|
|
|
|
4,754
|
|
|
|
|
1,913
|
|
|
Less: Net income attributable to
noncontrolling interests
|
|
|
(77
|
)
|
|
|
|
(70
|
)
|
|
|
|
(140
|
)
|
|
|
|
(118
|
)
|
|
Net income attributable to News Corporation stockholders
|
|
$
|
2,381
|
|
|
|
$
|
1,057
|
|
|
|
$
|
4,614
|
|
|
|
$
|
1,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
2,346
|
|
|
|
|
2,515
|
|
|
|
|
2,358
|
|
|
|
|
2,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to News Corporation stockholders per
share:
|
|
$
|
1.01
|
|
|
|
$
|
0.42
|
|
|
|
$
|
1.96
|
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2012
|
|
Assets:
|
|
US $ Millions
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,806
|
|
|
$
|
9,626
|
|
Receivables, net
|
|
|
7,760
|
|
|
|
6,608
|
|
Inventories, net
|
|
|
3,282
|
|
|
|
2,595
|
|
Other
|
|
|
896
|
|
|
|
619
|
|
Total current assets
|
|
|
19,744
|
|
|
|
19,448
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
449
|
|
|
|
387
|
|
Investments
|
|
|
7,441
|
|
|
|
4,968
|
|
Inventories, net
|
|
|
5,024
|
|
|
|
4,596
|
|
Property, plant and equipment, net
|
|
|
5,857
|
|
|
|
5,814
|
|
Intangible assets, net
|
|
|
7,149
|
|
|
|
7,133
|
|
Goodwill
|
|
|
15,875
|
|
|
|
13,174
|
|
Other non-current assets
|
|
|
1,206
|
|
|
|
1,143
|
|
Total assets
|
|
$
|
62,745
|
|
|
$
|
56,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Borrowings
|
|
$
|
273
|
|
|
$
|
273
|
|
Accounts payable, accrued expenses and other current liabilities
|
|
|
5,260
|
|
|
|
5,405
|
|
Participations, residuals and royalties payable
|
|
|
1,899
|
|
|
|
1,691
|
|
Program rights payable
|
|
|
1,665
|
|
|
|
1,368
|
|
Deferred revenue
|
|
|
1,163
|
|
|
|
880
|
|
Total current liabilities
|
|
|
10,260
|
|
|
|
9,617
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
16,184
|
|
|
|
15,182
|
|
Other liabilities
|
|
|
4,200
|
|
|
|
3,650
|
|
Deferred income taxes
|
|
|
2,447
|
|
|
|
2,388
|
|
Redeemable noncontrolling interests
|
|
|
649
|
|
|
|
641
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Class A common stock, $0.01 par value
|
|
|
15
|
|
|
|
15
|
|
Class B common stock, $0.01 par value
|
|
|
8
|
|
|
|
8
|
|
Additional paid-in capital
|
|
|
15,898
|
|
|
|
16,140
|
|
Retained earnings and accumulated other comprehensive income
|
|
|
12,231
|
|
|
|
8,521
|
|
Total News Corporation stockholders' equity
|
|
|
28,152
|
|
|
|
24,684
|
|
Noncontrolling interests
|
|
|
853
|
|
|
|
501
|
|
Total equity
|
|
|
29,005
|
|
|
|
25,185
|
|
Total liabilities and equity
|
|
$
|
62,745
|
|
|
$
|
56,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
6 Months Ended December 31,
|
|
|
|
|
2012
|
|
|
|
|
2011
|
|
|
|
|
US $ Millions
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
4,754
|
|
|
|
$
|
1,913
|
|
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
610
|
|
|
|
|
575
|
|
|
Amortization of cable distribution investments
|
|
|
44
|
|
|
|
|
47
|
|
|
Equity earnings of affiliates
|
|
|
(364
|
)
|
|
|
|
(263
|
)
|
|
Cash distributions received from affiliates
|
|
|
306
|
|
|
|
|
253
|
|
|
Impairment charges, net of tax
|
|
|
35
|
|
|
|
|
-
|
|
|
Other, net
|
|
|
(2,775
|
)
|
|
|
|
5
|
|
|
Change in operating assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
Receivables and other assets
|
|
|
(986
|
)
|
|
|
|
(1,202
|
)
|
|
Inventories, net
|
|
|
(920
|
)
|
|
|
|
(758
|
)
|
|
Accounts payable and other liabilities
|
|
|
267
|
|
|
|
|
26
|
|
|
Net cash provided by operating activities
|
|
|
971
|
|
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net of acquisitions
|
|
|
(370
|
)
|
|
|
|
(485
|
)
|
|
Acquisitions, net of cash acquired
|
|
|
(2,830
|
)
|
|
|
|
(488
|
)
|
|
Investments in equity affiliates
|
|
|
(610
|
)
|
|
|
|
(37
|
)
|
|
Other investments
|
|
|
(46
|
)
|
|
|
|
(158
|
)
|
|
Proceeds from dispositions
|
|
|
1,860
|
|
|
|
|
321
|
|
|
Net cash used in investing activities
|
|
|
(1,996
|
)
|
|
|
|
(847
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
987
|
|
|
|
|
-
|
|
|
Repayment of borrowings
|
|
|
(235
|
)
|
|
|
|
(32
|
)
|
|
Issuance of shares
|
|
|
139
|
|
|
|
|
15
|
|
|
Repurchase of shares
|
|
|
(1,434
|
)
|
|
|
|
(2,477
|
)
|
|
Dividends paid
|
|
|
(297
|
)
|
|
|
|
(305
|
)
|
|
Purchase of subsidiary shares from noncontrolling interests
|
|
|
(8
|
)
|
|
|
|
-
|
|
|
Other, net
|
|
|
8
|
|
|
|
|
-
|
|
|
Net cash used in financing activities
|
|
|
(840
|
)
|
|
|
|
(2,799
|
)
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,865
|
)
|
|
|
|
(3,050
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
9,626
|
|
|
|
|
12,680
|
|
|
Exchange movement on opening cash balance
|
|
|
45
|
|
|
|
|
(198
|
)
|
|
Cash and cash equivalents, end of period
|
|
$
|
7,806
|
|
|
|
$
|
9,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT INFORMATION
|
|
|
3 Months Ended
|
|
|
6 Months Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
US $ Millions
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
|
$
|
2,559
|
|
|
|
$
|
2,161
|
|
|
|
$
|
5,008
|
|
|
|
$
|
4,281
|
|
|
Filmed Entertainment
|
|
|
|
2,067
|
|
|
|
|
2,063
|
|
|
|
|
3,812
|
|
|
|
|
3,841
|
|
|
Television
|
|
|
|
1,532
|
|
|
|
|
1,520
|
|
|
|
|
2,491
|
|
|
|
|
2,443
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
890
|
|
|
|
|
947
|
|
|
|
|
1,707
|
|
|
|
|
1,869
|
|
|
Publishing
|
|
|
|
2,149
|
|
|
|
|
2,130
|
|
|
|
|
4,167
|
|
|
|
|
4,199
|
|
|
Other
|
|
|
|
228
|
|
|
|
|
154
|
|
|
|
|
376
|
|
|
|
|
301
|
|
|
Total Revenues
|
|
|
$
|
9,425
|
|
|
|
$
|
8,975
|
|
|
|
$
|
17,561
|
|
|
|
$
|
16,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
|
$
|
945
|
|
|
|
$
|
882
|
|
|
|
$
|
1,898
|
|
|
|
$
|
1,657
|
|
|
Filmed Entertainment
|
|
|
|
383
|
|
|
|
|
393
|
|
|
|
|
783
|
|
|
|
|
740
|
|
|
Television
|
|
|
|
224
|
|
|
|
|
189
|
|
|
|
|
380
|
|
|
|
|
322
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
(20
|
)
|
|
|
|
6
|
|
|
|
|
3
|
|
|
|
|
125
|
|
|
Publishing
|
|
|
|
234
|
|
|
|
|
218
|
|
|
|
|
291
|
|
|
|
|
328
|
|
|
Other
|
|
|
|
(186
|
)
|
|
|
|
(191
|
)
|
|
|
|
(397
|
)
|
|
|
|
(290
|
)
|
|
Total Segment Operating Income *
|
|
|
$
|
1,580
|
|
|
|
$
|
1,497
|
|
|
|
$
|
2,958
|
|
|
|
$
|
2,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
The three months ended December 31, 2012 and 2011 include $56
million and $87 million, respectively, of costs related to the
ongoing investigations in the U.K. The three months ended December
31, 2012 include $23 million of costs related to the proposed
separation of the Company’s entertainment and publishing
businesses. Excluding these charges, adjusted total segment
operating income is $1,659 and $1,584 million in the three months
ended December 31, 2012 and 2011, respectively.
|
|
|
|
|
|
|
|
The six months ended December 31, 2012 and 2011 include $123 million
and $104 million, respectively, of costs related to the ongoing
investigations in the U.K. The six months ended December 31, 2012
include $28 million of costs related to the proposed separation of
the Company’s entertainment and publishing businesses. Excluding
these charges, adjusted total segment operating income is $3,109 and
$2,986 million in the six months ended December 31, 2012 and 2011,
respectively.
|
|
|
|
|
NOTE 1 – TOTAL SEGMENT OPERATING INCOME AND SEGMENT OPERATING INCOME
BEFORE DEPRECIATION AND AMORTIZATION
The Company evaluates the performance of its operating segments based on
segment operating income, and management uses total segment operating
income as a measure of the performance of operating businesses separate
from non-operating factors. Total segment operating income and segment
operating income before depreciation and amortization are non-GAAP
measures 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, these measures do not
reflect cash available to fund requirements. These measures exclude
items, such as impairment and restructuring charges, which are
significant components in assessing the Company’s financial performance.
Segment operating income before depreciation and amortization also
excludes depreciation and amortization which are also significant
components in assessing the Company’s financial performance.
Management believes that total segment operating income and segment
operating income before depreciation and amortization are appropriate
measures for evaluating the operating performance of the Company’s
business and provide investors and equity analysts a measure to analyze
operating performance of the Company’s business and enterprise value
against historical data and competitors’ data. Total segment operating
income and segment operating income before depreciation and amortization
is the primary measure used by our chief operating decision maker to
evaluate the performance of and allocate resources to the Company’s
business segments.
Total segment operating income does not include: Impairment and
restructuring charges, discontinued operations, Equity earnings of
affiliates, Interest expense, net, Interest income, Other, net, Income
tax expense and Net income attributable to noncontrolling interests.
Segment operating income before depreciation and amortization is defined
as segment operating income plus depreciation and amortization and the
amortization of cable distribution investments and eliminates the
variable effect across all business segments of depreciation and
amortization. Depreciation and amortization expense includes the
depreciation of property and equipment, as well as amortization of
finite-lived intangible assets. Amortization of cable distribution
investments represents a reduction against revenues over the term of a
carriage arrangement and, as such, it is excluded from segment operating
income before depreciation and amortization.
The following table reconciles segment operating income before
depreciation and amortization to income from continuing operations
before income tax expense.
|
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended
|
|
|
6 Months Ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
US $ Millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating income before depreciation and amortization
|
|
|
$
|
1,913
|
|
|
|
|
$
|
1,801
|
|
|
|
$
|
3,612
|
|
|
|
$
|
3,504
|
|
|
Depreciation and amortization
|
|
|
|
(310
|
)
|
|
|
|
|
(281
|
)
|
|
|
|
(610
|
)
|
|
|
|
(575
|
)
|
|
Amortization of cable distribution investments
|
|
|
|
(23
|
)
|
|
|
|
|
(23
|
)
|
|
|
|
(44
|
)
|
|
|
|
(47
|
)
|
|
Total Segment Operating income
|
|
|
|
1,580
|
|
|
|
|
|
1,497
|
|
|
|
|
2,958
|
|
|
|
|
2,882
|
|
|
Impairment and restructuring charges
|
|
|
|
(65
|
)
|
|
|
|
|
(36
|
)
|
|
|
|
(217
|
)
|
|
|
|
(127
|
)
|
|
Equity earnings of affiliates
|
|
|
|
174
|
|
|
|
|
|
142
|
|
|
|
|
364
|
|
|
|
|
263
|
|
|
Interest expense, net
|
|
|
|
(266
|
)
|
|
|
|
|
(257
|
)
|
|
|
|
(533
|
)
|
|
|
|
(515
|
)
|
|
Interest income
|
|
|
|
37
|
|
|
|
|
|
29
|
|
|
|
|
68
|
|
|
|
|
65
|
|
|
Other, net
|
|
|
|
1,400
|
|
|
|
|
|
125
|
|
|
|
|
2,775
|
|
|
|
|
(5
|
)
|
|
Income from continuing operations before income tax expense
|
|
|
$
|
2,860
|
|
|
|
|
$
|
1,500
|
|
|
|
$
|
5,415
|
|
|
|
$
|
2,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2012
|
|
|
|
|
(US $ Millions)
|
|
|
|
|
Segment Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (loss) before
|
|
|
Depreciation
|
|
|
Amortization of
|
|
|
Segment
|
|
|
|
|
depreciation and
|
|
|
and
|
|
|
cable distribution
|
|
|
Operating income
|
|
|
|
|
amortization
|
|
|
amortization
|
|
|
investments
|
|
|
(loss)
|
|
Cable Network Programming
|
|
|
$
|
1,013
|
|
|
|
$
|
(45
|
)
|
|
|
$
|
(23
|
)
|
|
|
$
|
945
|
|
|
Filmed Entertainment
|
|
|
|
416
|
|
|
|
|
(33
|
)
|
|
|
|
-
|
|
|
|
|
383
|
|
|
Television
|
|
|
|
246
|
|
|
|
|
(22
|
)
|
|
|
|
-
|
|
|
|
|
224
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
56
|
|
|
|
|
(76
|
)
|
|
|
|
-
|
|
|
|
|
(20
|
)
|
|
Publishing
|
|
|
|
349
|
|
|
|
|
(115
|
)
|
|
|
|
-
|
|
|
|
|
234
|
|
|
Other
|
|
|
|
(167
|
)
|
|
|
|
(19
|
)
|
|
|
|
-
|
|
|
|
|
(186
|
)
|
|
Consolidated Total
|
|
|
$
|
1,913
|
|
|
|
$
|
(310
|
)
|
|
|
$
|
(23
|
)
|
|
|
$
|
1,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended December 31, 2011
|
|
|
|
|
(US $ Millions)
|
|
|
|
|
Segment Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (loss) before
|
|
|
Depreciation
|
|
|
Amortization of
|
|
|
Segment
|
|
|
|
|
depreciation and
|
|
|
and
|
|
|
cable distribution
|
|
|
Operating income
|
|
|
|
|
amortization
|
|
|
amortization
|
|
|
investments
|
|
|
(loss)
|
|
Cable Network Programming
|
|
|
$
|
943
|
|
|
|
$
|
(38
|
)
|
|
|
$
|
(23
|
)
|
|
|
$
|
882
|
|
|
Filmed Entertainment
|
|
|
|
416
|
|
|
|
|
(23
|
)
|
|
|
|
-
|
|
|
|
|
393
|
|
|
Television
|
|
|
|
210
|
|
|
|
|
(21
|
)
|
|
|
|
-
|
|
|
|
|
189
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
84
|
|
|
|
|
(78
|
)
|
|
|
|
-
|
|
|
|
|
6
|
|
|
Publishing
|
|
|
|
324
|
|
|
|
|
(106
|
)
|
|
|
|
-
|
|
|
|
|
218
|
|
|
Other
|
|
|
|
(176
|
)
|
|
|
|
(15
|
)
|
|
|
|
-
|
|
|
|
|
(191
|
)
|
|
Consolidated Total
|
|
|
$
|
1,801
|
|
|
|
$
|
(281
|
)
|
|
|
$
|
(23
|
)
|
|
|
$
|
1,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2012
|
|
|
|
|
(US $ Millions)
|
|
|
|
|
Segment Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (loss) before
|
|
|
Depreciation
|
|
|
Amortization of
|
|
|
Segment
|
|
|
|
|
depreciation and
|
|
|
and
|
|
|
cable distribution
|
|
|
Operating income
|
|
|
|
|
amortization
|
|
|
amortization
|
|
|
investments
|
|
|
(loss)
|
|
Cable Network Programming
|
|
|
$
|
2,029
|
|
|
|
$
|
(87
|
)
|
|
|
$
|
(44
|
)
|
|
|
$
|
1,898
|
|
|
Filmed Entertainment
|
|
|
|
849
|
|
|
|
|
(66
|
)
|
|
|
|
-
|
|
|
|
|
783
|
|
|
Television
|
|
|
|
423
|
|
|
|
|
(43
|
)
|
|
|
|
-
|
|
|
|
|
380
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
151
|
|
|
|
|
(148
|
)
|
|
|
|
-
|
|
|
|
|
3
|
|
|
Publishing
|
|
|
|
521
|
|
|
|
|
(230
|
)
|
|
|
|
-
|
|
|
|
|
291
|
|
|
Other
|
|
|
|
(361
|
)
|
|
|
|
(36
|
)
|
|
|
|
-
|
|
|
|
|
(397
|
)
|
|
Consolidated Total
|
|
|
$
|
3,612
|
|
|
|
$
|
(610
|
)
|
|
|
$
|
(44
|
)
|
|
|
$
|
2,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended December 31, 2011
|
|
|
|
|
(US $ Millions)
|
|
|
|
|
Segment Operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (loss) before
|
|
|
Depreciation
|
|
|
Amortization of
|
|
|
Segment
|
|
|
|
|
depreciation and
|
|
|
and
|
|
|
cable distribution
|
|
|
Operating income
|
|
|
|
|
amortization
|
|
|
amortization
|
|
|
investments
|
|
|
(loss)
|
|
Cable Network Programming
|
|
|
$
|
1,779
|
|
|
|
$
|
(75
|
)
|
|
|
$
|
(47
|
)
|
|
|
$
|
1,657
|
|
|
Filmed Entertainment
|
|
|
|
802
|
|
|
|
|
(62
|
)
|
|
|
|
-
|
|
|
|
|
740
|
|
|
Television
|
|
|
|
364
|
|
|
|
|
(42
|
)
|
|
|
|
-
|
|
|
|
|
322
|
|
|
Direct Broadcast Satellite Television
|
|
|
|
277
|
|
|
|
|
(152
|
)
|
|
|
|
-
|
|
|
|
|
125
|
|
|
Publishing
|
|
|
|
541
|
|
|
|
|
(213
|
)
|
|
|
|
-
|
|
|
|
|
328
|
|
|
Other
|
|
|
|
(259
|
)
|
|
|
|
(31
|
)
|
|
|
|
-
|
|
|
|
|
(290
|
)
|
|
Consolidated Total
|
|
|
$
|
3,504
|
|
|
|
$
|
(575
|
)
|
|
|
$
|
(47
|
)
|
|
|
$
|
2,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 2 – ADJUSTED NET INCOME AND ADJUSTED EPS
The Company uses net income and earnings per share excluding Segment
operating profit adjustments, Impairment and restructuring charges,
Equity affiliate adjustments, “Other, net”, and discontinued operations,
net of tax (“adjusted net income and adjusted diluted earnings per
share”) 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 and adjusted
diluted earnings per share 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
and adjusted diluted earnings per share are not measures of performance
under generally accepted accounting principles and should not be
construed as substitutes for consolidated net income and earnings 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 and reported diluted
earnings per share (“EPS”) to adjusted net income and adjusted diluted
earnings per share for the three months ended December 31, 2012 and 2011.
|
|
|
3 Months Ended
|
|
|
|
3 Months Ended
|
|
|
|
December 31,2012
|
|
|
|
December 31,2011
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
attributable to
|
|
|
|
|
|
|
|
|
attributable to
|
|
|
|
|
|
|
|
|
stockholders
|
|
|
|
EPS
|
|
|
|
stockholders
|
|
|
|
EPS
|
|
|
|
(in US$ millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
2,381
|
|
|
|
$
|
1.01
|
|
|
|
$
|
1,057
|
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit adjustments (net of provision for income
taxes of $12 and $17 for the three months ended December 31, 2012
and 2011, respectively)(a) |
|
|
67
|
|
|
|
|
0.03
|
|
|
|
|
70
|
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and restructuring charges (net of provision for income
taxes of $19 and $10 for the three months ended December 31, 2012
and 2011, respectively)
|
|
|
46
|
|
|
|
|
0.02
|
|
|
|
|
26
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliate adjustments (net of provision for income taxes of
$4 and $10 for the three months ended December 31, 2012 and 2011,
respectively)(b) |
|
|
(70)
|
|
|
|
|
(0.03)
|
|
|
|
|
(34)
|
|
|
|
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net (net of provision for income taxes of $13 for the three
months ended December 31, 2012 and 2011)
|
|
|
(1,387)
|
|
|
|
|
(0.59)
|
|
|
|
|
(138)
|
|
|
|
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rounding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01)
|
|
As adjusted
|
|
$
|
1,037
|
|
|
|
$
|
0.44
|
|
|
|
$
|
981
|
|
|
|
$
|
0.39
|
|
(a)
|
|
Segment operating profit for the three months ended December 31,
2012 and 2011 was adjusted to exclude the expenses related to the
ongoing investigations initiated upon the closure of The News of
the World. The three months ended December 31, 2012 were also
adjusted to exclude the expenses related to separation of the
Company’s entertainment and publishing businesses.
|
|
|
|
|
|
(b)
|
|
Equity earnings of affiliates for the three months ended December
31, 2012 and 2011 was adjusted to exclude from BSkyB results News
Corporation’s gain on the BSkyB repurchase program. The three
months ended December 31, 2012 were also adjusted to exclude from
Hulu results one-time costs resulting from its purchase of the
Providence Equity Partners’ ownership stake.
|
