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Form 8-K NEWS CORP For: May 05

May 5, 2015 4:17 PM EDT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

May 5, 2015

DATE OF REPORT

(DATE OF EARLIEST EVENT REPORTED)

 

 

 

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NEWS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

Delaware   001-35769   46-2950970

(STATE OR OTHER JURISDICTION

OF INCORPORATION)

 

(COMMISSION

FILE NO.)

 

(IRS EMPLOYER

IDENTIFICATION NO.)

1211 Avenue of the Americas, New York, New York 10036

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(212) 416-3400

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02 Results of Operations and Financial Condition.

On May 5, 2015, News Corporation (the “Company”) released its financial results for the quarter ended March 31, 2015. A copy of the Company’s press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.

The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

No.

  

Description

99.1    Press release issued by News Corporation, dated May 5, 2015, announcing News Corporation’s financial results for the quarter ended March 31, 2015.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

NEWS CORPORATION

(REGISTRANT)

By: /s/ Michael L. Bunder
Michael L. Bunder
Senior Vice President, Deputy General Counsel and Corporate Secretary

Dated: May 5, 2015


Exhibit Index

 

Exhibit

No.

  

Description

99.1    Press release issued by News Corporation, dated May 5, 2015, announcing News Corporation’s financial results for the quarter ended March 31, 2015.

Exhibit 99.1

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NEWS CORPORATION REPORTS THIRD QUARTER RESULTS FOR FISCAL 2015

FISCAL 2015 THIRD QUARTER KEY FINANCIAL HIGHLIGHTS

 

    Revenues of $2.06 billion compared to $2.08 billion in the prior year

 

    Reported Total Segment EBITDA of $163 million compared to $175 million in the prior year

 

    Adjusted EPS were $0.05 compared to $0.11 in the prior year – Reported EPS were $0.04 compared to $0.08 in the prior year

NEW YORK, NY – May 5, 2015 – News Corporation (“News Corp” or the “Company”) (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) today reported financial results for the three months ended March 31, 2015.

Commenting on the results, Chief Executive Robert Thomson said:

“The new News Corp continues to build a firm foundation for digital growth. We see that most clearly in the successful integration of realtor.com®, which grew audience and revenue at record levels in the third quarter. News Corp is now a global leader in digital real estate, which we believe will underpin long-term expansion and complement our expertise in news and financial analysis, both of which have been important ingredients in realtor.com®’s accelerated growth. While the quarter faced some revenue challenges, particularly at News and Information Services, including currency headwinds, our adjusted EBITDA was relatively stable, underscoring the strength of our assets and the diversification of our revenue base. We believe the company is firmly on track and the signs are positive for year-over-year EBITDA growth in the fourth quarter.”

THIRD QUARTER RESULTS

The Company reported fiscal 2015 third quarter total revenues of $2.06 billion, a 1% decline as compared to prior year third quarter revenues of $2.08 billion. The majority of the revenue decline reflects negative foreign currency fluctuations and lower advertising revenues at the News and Information Services segment, offset in large part by growth in the Book Publishing and Digital Real Estate Services segments as a result of the acquisition of Harlequin Enterprises Limited (“Harlequin”) and Move, Inc. (“Move”), respectively. Adjusted revenues (as defined in Note 1) declined 2% compared to the prior year.

The Company reported third quarter Total Segment EBITDA of $163 million, a 7% decline as compared to $175 million in the prior year. These results include $15 million and $20 million in fees and costs – net of indemnification – related to the U.K. Newspaper Matters (as defined below) in the three months ended March 31, 2015 and 2014, respectively. Declines at the News and Information Services segment, including higher legal costs at News America Marketing, negative foreign currency fluctuations and increased stock-based compensation expense resulting from the acquisition of Move were partially offset by lower expenses at Amplify and increased revenues in the Book Publishing segment due to the inclusion of Harlequin results. Adjusted Total Segment EBITDA (as defined in Note 1) declined 1% compared to the prior year.

Net income available to News Corporation stockholders was $23 million as compared to $48 million in the prior year, due to lower Total Segment EBITDA as well as a higher effective tax rate, lower equity earnings of affiliates, and lower interest income. Adjusted net income available to News Corporation stockholders (as defined in Note

 

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3) was $28 million compared to $66 million in the prior year. Impairment and restructuring charges were $10 million in both the three months ended March 31, 2015 and 2014.

Net income available to News Corporation stockholders per share was $0.04 as compared to $0.08 in the prior year. Adjusted EPS (as defined in Note 3) were $0.05 compared to $0.11 in the prior year.

Free cash flow available to News Corporation decreased by $105 million in the nine months ended March 31, 2015 to $391 million, primarily as a result of certain one-time items.

SEGMENT REVIEW

 

     For the three months ended
March 31,
    For the nine months ended
March 31,
 
     2015     2014     % Change     2015     2014     % Change  
     (in millions)           (in millions)        

Revenues:

            

News and Information Services

   $ 1,353      $ 1,488        (9 )%    $ 4,327      $ 4,595        (6 )% 

Book Publishing

     402        354        14     1,277        1,073        19

Cable Network Programming

     116        113        3     367        355        3

Digital Real Estate Services

     170        102        67     436        295        48

Digital Education

     21        21        —       85        70        21

Other

     —          —          *     —          —          *
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

$ 2,062    $ 2,078      (1 )%  $ 6,492    $ 6,388      2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment EBITDA:

News and Information Services

$ 113    $ 146      (23 )%  $ 434    $ 534      (19 )% 

Book Publishing

  56      53      6   188      164      15

Cable Network Programming

  27      27      —     113      109      4

Digital Real Estate Services(a)

  42      53      (21 )%    156      152      3

Digital Education

  (21   (45   53   (69   (140   51

Other(b)

  (54   (59   8   (161   (176   9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Segment EBITDA

$ 163    $ 175      (7 )%  $ 661    $ 643      3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

** - Not meaningful

 

(a)  Digital Real Estate Services Segment EBITDA for the three and nine months ended March 31, 2015 includes one-time transaction related costs of $1 million and $19 million, respectively, related to the acquisition of Move.

 

(b)  Other Segment EBITDA for the three and nine months ended March 31, 2015 includes fees and costs, net of indemnification, related to the U.K. Newspaper Matters of $15 million and $42 million, respectively. Other Segment EBITDA for the three and nine months ended March 31, 2014 includes fees and costs, net of indemnification, related to the U.K. Newspaper Matters of $20 million and $56 million, respectively.

News and Information Services

Revenues for the third quarter of fiscal 2015 decreased $135 million, or 9%, compared to the prior year. Total segment advertising revenues declined 12%, driven primarily by negative foreign currency fluctuations, weakness in the print advertising market and lower revenues at News America Marketing. Circulation and subscription

 

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revenues declined 6%, due to negative foreign currency fluctuations, a decline in professional information business revenues at Dow Jones and lower print circulation volume, partially offset by higher subscription pricing, cover price increases and higher digital subscription volume. Adjusted revenues declined 3% compared to the prior year.

Segment EBITDA decreased $33 million in the quarter, or 23%, as compared to the prior year. Results were impacted by lower advertising revenues, negative foreign currency fluctuations and $8 million of higher legal expenses at News America Marketing, partially offset by lower expenses at News Corp Australia. Adjusted Segment EBITDA decreased 21% compared to the prior year.

Book Publishing

Revenues in the quarter increased $48 million, or 14%, compared to the prior year driven by the inclusion of the results of Harlequin and strong backlist sales in General Books resulting from the continued popularity of American Sniper by Chris Kyle, partially offset by lower revenues from the Divergent series. E-book revenues declined 3% versus the prior year period, driven by lower contribution from the Divergent series as well as a shift towards the non-fiction genre, which has lower e-book conversion, partially offset by the inclusion of Harlequin results. E-book revenues represented 22% of consumer revenues for the quarter. Segment EBITDA for the quarter increased $3 million, or 6%, from the prior year, primarily due to the inclusion of the results of Harlequin and lower expenses, partially offset by lower contribution from the Divergent series. Adjusted revenues decreased 5% and Adjusted Segment EBITDA decreased 8% compared to the prior year.

Cable Network Programming

In the third quarter of fiscal 2015, revenues increased $3 million, or 3%, compared to the prior year primarily due to higher affiliate and advertising revenues, partially offset by negative foreign currency fluctuations. Segment EBITDA in the quarter was flat compared with the prior year, as the higher revenues were offset by negative foreign currency fluctuations and higher programming rights costs. Both Adjusted revenues and Adjusted Segment EBITDA increased 15% compared to the prior year.

Digital Real Estate Services

Revenues in the quarter increased $68 million, or 67%, compared to the prior year, primarily driven by the inclusion of the results of Move, coupled with higher residential listing depth product penetration and higher pricing at REA Group Limited (“REA Group”), partially offset by negative foreign currency fluctuations and a decline in Australian listing volumes across the market which are down against the prior comparative period. Segment EBITDA in the quarter decreased $11 million, or 21%, compared to the prior year primarily due to negative foreign currency fluctuations, partially offset by increased revenues. Segment EBITDA also includes $11 million of stock-based compensation expense related to awards assumed in the acquisition of Move, of which $5 million is related to the acceleration of stock-based compensation resulting from the departures of senior executives. Excluding the impact of Move, divestitures and foreign currency fluctuations, Adjusted revenues and Adjusted Segment EBITDA increased 9% and 7%, respectively, compared to the prior year. In the third quarter, Move saw strength in its Connection for Co-Brokerage product and Media revenues. Based on Move’s internal data, average monthly unique users of realtor.com®’s web and mobile sites for the quarter grew 34% year-over-year to approximately 39 million, which was driven by more than 70% growth in mobile users; traffic accelerated in April to 44 million monthly unique users, or 38% growth year-over-year.

 

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Digital Education

Revenues in the quarter were $21 million, which was flat compared with the prior year. Segment EBITDA in the quarter improved $24 million, or 53%, from the prior year, primarily due to the impact of the capitalization of Amplify Learning’s software development costs of $12 million and lower operating expenses.

Other

Segment EBITDA in the quarter improved by $5 million compared to the prior year, primarily due to lower fees and costs, net of indemnification, related to the claims and investigations arising out of certain conduct at The News of the World (the “U.K. Newspaper Matters”) of approximately $5 million.

The net expense related to the U.K. Newspaper Matters was $15 million for the three months ended March 31, 2015 as compared to $20 million for the three months ended March 31, 2014.

REVIEW OF EQUITY EARNINGS OF AFFILIATES’ RESULTS

Quarterly equity earnings from affiliates were $7 million compared to $23 million in the prior year.

 

     For the three months ended
March 31,
     For the nine months ended
March 31,
 
     2015     2014      2015      2014  
     (in millions)      (in millions)  

Foxtel(a)

   $ 8      $ 23       $ 48       $ 53   

Other equity affiliates, net

     (1     —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 

Total equity earnings of affiliates

$ 7    $ 23    $ 48    $ 53   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

(a)  The Company amortized $14 million and $44 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the three and nine months ended March 31, 2015, respectively, and $15 million and $46 million in the corresponding periods of fiscal 2014, respectively. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations.

On a U.S. GAAP basis, Foxtel revenues, for the three months ended March 31, 2015, decreased $77 million to $620 million from $697 million in the prior year period due to negative foreign currency fluctuations. Foxtel EBITDA decreased $61 million to $163 million from $224 million due to increased programming costs, higher marketing and support costs for the new Foxtel pricing and packaging, and investment in Presto and the launch of Triple Play, as well as negative foreign currency fluctuations. In local currency, Foxtel revenues increased 1% and EBITDA declined 17%. Total closing subscribers were approximately 2.8 million as of March 31, 2015, a 7% increase compared to the prior year period, as a result of higher subscriber sales and lower churn, driven by the new pricing and packaging strategy that was implemented in November 2014. In the quarter, cable and satellite churn improved to 10.9% from 13.1% in the prior year.

Foxtel operating income for the three months ended March 31, 2015 and 2014 after depreciation and amortization of $75 million and $92 million, respectively, was $88 million and $132 million, respectively. Operating income decreased as a result of the factors noted above. Foxtel’s net income of $44 million decreased from $76 million in the prior year period as a result of lower operating income as noted above.

 

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FREE CASH FLOW AVAILABLE TO NEWS CORPORATION

Free cash flow available to News Corporation is a non-GAAP financial measure defined as net cash provided by operating activities, less capital expenditures, and REA Group free cash flow, plus cash dividends received from REA Group.

The Company considers free cash flow available to News Corporation to provide useful information to management and investors about the amount of cash generated by the business after capital expenditures, which can then be used for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, strengthening the Company’s balance sheet, dividend payouts and repurchasing stock. A limitation of free cash flow available to News Corporation is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow available to News Corporation by also relying on the net change in cash and cash equivalents as presented in the Company’s consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

The following table presents a reconciliation of net cash provided by operating activities to free cash flow available to News Corporation:

 

     For the nine months ended
March 31,
 
     2015      2014  
     (in millions)  

Net cash provided by operating activities

   $ 702       $ 803   

Less: Capital expenditures

     (268      (244
  

 

 

    

 

 

 
  434      559   

Less: REA Group free cash flow

  (88   (98

Plus: Cash dividends received from REA Group

  45      35   
  

 

 

    

 

 

 

Free cash flow available to News Corporation

$ 391    $ 496   
  

 

 

    

 

 

 

Free cash flow available to News Corporation in the nine months ended March 31, 2015 declined $105 million to $391 million from $496 million in the prior year. The decrease was primarily due to the absence of the net receipts related to a foreign tax refund of $73 million and lease incentives of $35 million received during the nine months ended March 31, 2014, as well as higher net tax payments of $53 million and approximately $45 million of higher deferred compensation payments related to the acquisition of Wireless Generation incurred in the current year period. The decrease was partially offset by lower restructuring payments of $62 million, lower payments for fees and costs related to the U.K. Newspaper Matters of $46 million and higher dividends received from REA Group.

 

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COMPARISON OF ADJUSTED INFORMATION TO U.S. GAAP INFORMATION

Adjusted revenues, Adjusted Total Segment EBITDA, Total Segment EBITDA, Adjusted net income available to News Corporation stockholders, Adjusted EPS and Free cash flow available to News Corporation are non-GAAP financial measures contained in this earnings release. This information is provided in order to allow investors to make meaningful comparisons of the Company’s operating performance between periods and to view the Company’s business from the same perspective as Company management. These non-GAAP measures may be different than similar measures used by other companies and should be considered in addition to, not as a substitute for, measures of financial performance calculated in accordance with GAAP. Reconciliations for the differences between non-GAAP measures used in this earnings release and comparable financial measures calculated in accordance with U.S. GAAP are included in Notes 1, 2 and 3 and the reconciliation of Net cash provided by operating activities to Free cash flow available to News Corporation is included above.

 

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Conference call

News Corporation’s earnings conference call can be heard live at 4:30pm EDT on May 5, 2015. 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, cable network programming in Australia, digital real estate services, digital education, and pay-TV distribution in Australia. Headquartered in New York, the activities of News Corporation are conducted primarily in the United States, Australia, and the United Kingdom. More information is available at: www.newscorp.com.

Contacts:

Michael Florin

Investor Relations

212-416-3363

[email protected]

Jim Kennedy

Corporate Communications

212-416-4064

[email protected]

 

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NEWS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except share and per share amounts)

 

     For the three months ended
March 31,
    For the nine months ended
March 31,
 
     2015     2014     2015     2014  

Revenues:

        

Advertising

   $ 904      $ 952      $ 2,862      $ 2,990   

Circulation and Subscription

     650        665        1,989        2,005   

Consumer

     385        342        1,223        1,030   

Other

     123        119        418        363   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

  2,062      2,078      6,492      6,388   

Operating expenses

  (1,216   (1,259   (3,796   (3,828

Selling, general and administrative

  (683   (644   (2,035   (1,917

Depreciation and amortization

  (132   (142   (398   (421

Impairment and restructuring charges

  (10   (10   (31   (73

Equity earnings of affiliates

  7      23      48      53   

Interest, net

  12      17      42      50   

Other, net

  12      (1   70      (673
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax (expense) benefit

  52      62      392      (421

Income tax (expense) benefit

  (18   (1   (107   686   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  34      61      285      265   

Less: Net income attributable to noncontrolling interests

  (11   (13   (54   (39
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to News Corporation stockholders

$ 23    $ 48    $ 231    $ 226   

Less: Adjustments to Net income attributable to News Corporation stockholders – Redeemable Preferred Stock Dividends

  —        —        (1   (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to News Corporation stockholders

$ 23    $ 48    $ 230    $ 225   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

Basic

  582      579      581      579   

Diluted

  583      580      582      580   

Net income available to News Corporation stockholders per share:

Basic and diluted

$ 0.04    $ 0.08    $ 0.40    $ 0.39   

 

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NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions)

 

     As of March 31,
2015
    As of June 30,
2014
 
     (unaudited)     (audited)  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 2,027      $ 3,145   

Amounts due from 21st Century Fox

     52        66   

Receivables, net

     1,308        1,388   

Other current assets

     701        671   
  

 

 

   

 

 

 

Total current assets

  4,088      5,270   
  

 

 

   

 

 

 

Non-current assets:

Investments

  2,382      2,609   

Property, plant and equipment, net

  2,699      3,009   

Intangible assets, net

  2,313      2,137   

Goodwill

  3,510      2,782   

Other non-current assets

  694      682   
  

 

 

   

 

 

 

Total assets

$ 15,686    $ 16,489   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$ 225    $ 276   

Accrued expenses

  1,121      1,188   

Deferred revenue

  399      369   

Other current liabilities

  528      431   
  

 

 

   

 

 

 

Total current liabilities

  2,273      2,264   
  

 

 

   

 

 

 

Non-current liabilities:

Retirement benefit obligations

  266      272   

Deferred income taxes

  295      224   

Other non-current liabilities

  306      310   

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

  12,450      12,390   

Retained earnings

  467      237   

Accumulated other comprehensive (loss) income

  (554   610   
  

 

 

   

 

 

 

Total News Corporation stockholders’ equity

  12,369      13,243   

Noncontrolling interests

  157      156   
  

 

 

   

 

 

 

Total equity

  12,526      13,399   
  

 

 

   

 

 

 

Total liabilities and equity

$ 15,686    $ 16,489   
  

 

 

   

 

 

 

 

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NEWS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

 

     For the nine months ended
March 31,
 
     2015     2014  

Operating activities:

    

Net Income

   $ 285      $ 265   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     398        421   

Equity earnings of affiliates

     (48     (53

Cash distributions received from affiliates

     69        47   

Impairment charges, net of tax

     —          12   

Other, net

     (70     (48

Deferred income taxes and taxes payable

     31        85   

Change in operating assets and liabilities, net of acquisitions:

    

Receivables and other assets

     60        (140

Inventories, net

     (46     (32

Accounts payable and other liabilities

     41        281   

Pension and postretirement benefit plans

     (18     (35
  

 

 

   

 

 

 

Net cash provided by operating activities

  702      803   
  

 

 

   

 

 

 

Investing activities:

Capital expenditures

  (268   (244

Acquisitions, net of cash acquired

  (1,188   (39

Investments in equity affiliates and other

  (257   (12

Proceeds from dispositions

  134      109   

Other

  16      —     
  

 

 

   

 

 

 

Net cash used in investing activities

  (1,563   (186
  

 

 

   

 

 

 

Financing activities:

Net transfers from 21st Century Fox and affiliates

  —        217   

Repayment of borrowings acquired in the Move acquisition

  (129   —     

Dividends paid

  (29   (23

Other, net

  (2   (3
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

  (160   191   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

  (1,021   808   

Cash and cash equivalents, beginning of period

  3,145      2,381   

Exchange movement on opening cash balance

  (97   18   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

$ 2,027    $ 3,207   
  

 

 

   

 

 

 

 

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NOTE 1 – ADJUSTED REVENUES, ADJUSTED TOTAL SEGMENT EBITDA AND ADJUSTED SEGMENT EBITDA

The Company uses revenues, Total Segment EBITDA and Segment EBITDA excluding the impact of acquisitions, divestitures, costs associated with the U.K. Newspaper Matters and foreign currency fluctuations (“Adjusted Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA”) to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period. The calculation of Adjusted Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. Adjusted Revenues, Adjusted Total Segment EBITDA and Adjusted Segment EBITDA are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for amounts determined under GAAP as measures of performance.

However, management uses these measures in comparing the Company’s historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of our performance relative to prior periods and our competitors.

The following table reconciles reported revenues and reported Total Segment EBITDA to Adjusted Revenues and Adjusted Total Segment EBITDA for the three and nine months ended March 31, 2015 and 2014.

 

     Revenues     Total Segment EBITDA  
     For the three months ended March 31,     For the three months ended March 31,  
     2015     2014     Difference     2015      2014      Difference  
     (in millions)     (in millions)  

As reported

   $ 2,062      $ 2,078      $ (16   $ 163       $ 175       $ (12

Impact of acquisitions

     (148     —          (148     3         —           3   

Impact of divestitures

     —          (3     3        —           1         (1

Impact of foreign currency fluctuations

     119        —          119        13         —           13   

Net impact of U.K. Newspaper Matters

     —          —          —          15         20         (5
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

As adjusted

$ 2,033    $ 2,075    $ (42 $ 194    $ 196    $ (2
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

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     Revenues     Total Segment EBITDA  
     For the nine months ended March 31,     For the nine months ended March 31,  
     2015     2014     Difference     2015      2014     Difference  
     (in millions)     (in millions)  

As reported

   $ 6,492      $ 6,388      $ 104      $ 661       $ 643      $ 18   

Impact of acquisitions

     (330     —          (330     8         —          8   

Impact of divestitures

     (1     (45     44        —           (3     3   

Impact of foreign currency fluctuations

     151        —          151        26         —          26   

Net impact of U.K. Newspaper Matters

     —          —          —          42         56        (14
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

As adjusted

$ 6,312    $ 6,343    $ (31 $ 737    $ 696    $ 41   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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Adjusted Revenues and Adjusted Segment EBITDA by segment for the three and nine months ended March 31, 2015 and 2014 are as follows:

 

     For the three months ended March 31,  
     2015      2014      % Change  
     (in millions)         

Adjusted Revenues:

        

News and Information Services

   $ 1,436       $ 1,486         (3 )% 

Book Publishing

     336         354         (5 )% 

Cable Network Programming

     130         113         15

Digital Real Estate Services

     110         101         9

Digital Education

     21         21         —  

Other

     —           —           —  
  

 

 

    

 

 

    

 

 

 

Total Adjusted Revenues

$ 2,033    $ 2,075      (2 )% 
  

 

 

    

 

 

    

 

 

 

Adjusted Segment EBITDA:

News and Information Services

$ 116    $ 146      (21 )% 

Book Publishing

  49      53      (8 )% 

Cable Network Programming

  31      27      15

Digital Real Estate Services

  58      54      7

Digital Education

  (21   (45   53

Other

  (39   (39   —  
  

 

 

    

 

 

    

 

 

 

Total Adjusted Segment EBITDA

$ 194    $ 196      (1 )% 
  

 

 

    

 

 

    

 

 

 

 

     For the nine months ended March 31,  
     2015      2014      % Change  
     (in millions)         

Adjusted Revenues:

        

News and Information Services

   $ 4,417       $ 4,556         (3 )% 

Book Publishing

     1,071         1,069         —  

Cable Network Programming

     389         355         10

Digital Real Estate Services

     350         293         19

Digital Education

     85         70         21

Other

     —           —           —  
  

 

 

    

 

 

    

 

 

 

Total Adjusted Revenues

$ 6,312    $ 6,343      —  
  

 

 

    

 

 

    

 

 

 

Adjusted Segment EBITDA:

News and Information Services

$ 445    $ 530      (16 )% 

Book Publishing

  167      164      2

Cable Network Programming

  121      109      11

Digital Real Estate Services

  192      153      25

Digital Education

  (69   (140   51

Other

  (119   (120   1
  

 

 

    

 

 

    

 

 

 

Total Adjusted Segment EBITDA

$ 737    $ 696      6
  

 

 

    

 

 

    

 

 

 

 

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The following tables reconcile reported revenues and Segment EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA by segment for the three months ended March 31, 2015 and 2014.

 

     For the three months ended March 31, 2015  
     As
Reported
    Impact of
Acquisitions
    Impact of
Divestitures
     Impact of
Foreign
Currency
Fluctuations
     Net Impact
of U.K.
Newspaper
Matters
     As
Adjusted
 
     (in millions)  

Revenues:

               

News and Information Services

   $ 1,353      $ —        $ —         $ 83       $ —         $ 1,436   

Book Publishing

     402        (75     —           9         —           336   

Cable Network Programming

     116        —          —           14         —           130   

Digital Real Estate Services

     170        (73     —           13         —           110   

Digital Education

     21        —          —           —           —           21   

Other

     —          —          —           —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

$ 2,062    $ (148 $ —      $ 119    $ —      $ 2,033   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Segment EBITDA:

News and Information Services

$ 113    $ 1    $ —      $ 2    $ —      $ 116   

Book Publishing

  56      (7   —        —        —        49   

Cable Network Programming

  27      —        —        4      —        31   

Digital Real Estate Services

  42      9      —        7      —        58   

Digital Education

  (21   —        —        —        —        (21

Other

  (54   —        —        —        15      (39
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

$ 163    $ 3    $ —      $ 13    $ 15    $ 194   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

     For the three months ended March 31, 2014  
     As
Reported
    Impact of
Acquisitions
     Impact of
Divestitures
    Impact of
Foreign
Currency
Fluctuations
     Net Impact
of U.K.
Newspaper
Matters
     As
Adjusted
 
     (in millions)  

Revenues:

               

News and Information Services

   $ 1,488      $ —         $ (2   $ —         $ —         $ 1,486   

Book Publishing

     354        —           —          —           —           354   

Cable Network Programming

     113        —           —          —           —           113   

Digital Real Estate Services

     102        —           (1     —           —           101   

Digital Education

     21        —           —          —           —           21   

Other

     —          —           —          —           —           —     
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Revenues

$ 2,078    $ —      $ (3 $ —      $ —      $ 2,075   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Segment EBITDA:

News and Information Services

$ 146    $ —      $ —      $ —      $ —      $ 146   

Book Publishing

  53      —        —        —        —        53   

Cable Network Programming

  27      —        —        —        —        27   

Digital Real Estate Services

  53      —        1      —        —        54   

Digital Education

  (45   —        —        —        —        (45

Other

  (59   —        —        —        20      (39
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

$ 175    $ —      $ 1    $ —      $ 20    $ 196   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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The following tables reconcile reported revenues and Segment EBITDA by segment to Adjusted Revenues and Adjusted Segment EBITDA by segment for the nine months ended March 31, 2015 and 2014.

 

     For the nine months ended March 31, 2015  
     As
Reported
    Impact of
Acquisitions
    Impact of
Divestitures
    Impact of
Foreign
Currency
Fluctuations
     Net Impact
of U.K.
Newspaper
Matters
     As
Adjusted
 
     (in millions)  

Revenues:

              

News and Information Services

   $ 4,327      $ (8   $ —        $ 98       $ —         $ 4,417   

Book Publishing

     1,277        (215     —          9         —           1,071   

Cable Network Programming

     367        —          —          22         —           389   

Digital Real Estate Services

     436        (107     (1     22         —           350   

Digital Education

     85        —          —          —           —           85   

Other

     —          —          —          —           —           —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total Revenues

$ 6,492    $ (330 $ (1 $ 151    $ —      $ 6,312   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Segment EBITDA:

News and Information Services

$ 434    $ 5    $ —      $ 6    $ —      $ 445   

Book Publishing

  188      (21   —        —        —        167   

Cable Network Programming

  113      —        —        8      —        121   

Digital Real Estate Services

  156      24      —        12      —        192   

Digital Education

  (69   —        —        —        —        (69

Other

  (161   —        —        —        42      (119
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

$ 661    $ 8    $ —      $ 26    $ 42    $ 737   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

     For the nine months ended March 31, 2014  
     As
Reported
    Impact of
Acquisitions
     Impact of
Divestitures
    Impact of
Foreign
Currency
Fluctuations
     Net Impact
of U.K.
Newspaper
Matters
     As
Adjusted
 
     (in millions)  

Revenues:

               

News and Information Services

   $ 4,595      $ —         $ (39   $ —         $ —         $ 4,556   

Book Publishing

     1,073        —           (4     —           —           1,069   

Cable Network Programming

     355        —           —          —           —           355   

Digital Real Estate Services

     295        —           (2     —           —           293   

Digital Education

     70        —           —          —           —           70   

Other

     —          —           —          —           —           —     
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Revenues

$ 6,388    $ —      $ (45 $ —      $ —      $ 6,343   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Segment EBITDA:

News and Information Services

$ 534    $ —      $ (4 $ —      $ —      $ 530   

Book Publishing

  164      —        —        —        —        164   

Cable Network Programming

  109      —        —        —        —        109   

Digital Real Estate Services

  152      —        1      —        —        153   

Digital Education

  (140   —        —        —        —        (140

Other

  (176   —        —        —        56      (120
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

$ 643    $ —      $ (3 $ —      $ 56    $ 696   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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NOTE 2 – TOTAL SEGMENT EBITDA

Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses. Segment EBITDA does not include: Depreciation and amortization, impairment and restructuring charges, equity earnings of affiliates, interest, net, other, net, income tax (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 operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).

Total Segment EBITDA is a non-GAAP measure and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. The following table reconciles Total Segment EBITDA to net income.

 

     For the three months ended March 31,  
     2015      2014      Change      % Change  
     (in millions)         

Revenues

   $ 2,062       $ 2,078       $ (16      (1 )% 

Operating expenses

     (1,216      (1,259      43         3

Selling, general and administrative

     (683      (644      (39      (6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

  163      175      (12   (7 )% 

Depreciation and amortization

  (132   (142   10      7

Impairment and restructuring charges

  (10   (10   —        —  

Equity earnings of affiliates

  7      23      (16   (70 )% 

Interest, net

  12      17      (5   (29 )% 

Other, net

  12      (1   13      *
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income tax (expense) benefit

  52      62      (10   (16 )% 

Income tax (expense) benefit

  (18   (1   (17   *
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

$ 34    $ 61    $ (27   (44 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  ** - Not meaningful

 

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     For the nine months ended March 31,  
     2015      2014      Change      % Change  
     (in millions)         

Revenues

   $ 6,492       $ 6,388       $ 104         2

Operating expenses

     (3,796      (3,828      32         1

Selling, general and administrative

     (2,035      (1,917      (118      (6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Segment EBITDA

  661      643      18      3

Depreciation and amortization

  (398   (421   23      5

Impairment and restructuring charges

  (31   (73   42      58

Equity earnings of affiliates

  48      53      (5   (9 )% 

Interest, net

  42      50      (8   (16 )% 

Other, net

  70      (673   743      *
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income tax (expense) benefit

  392      (421   813      *

Income tax (expense) benefit

  (107   686      (793   *
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

$ 285    $ 265    $ 20      8
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  ** - Not meaningful

 

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NOTE 3 – ADJUSTED NET INCOME AVAILABLE TO NEWS CORPORATION STOCKHOLDERS AND ADJUSTED EPS

The Company uses net income available to News Corporation stockholders and diluted earnings per share (“EPS”) excluding expenses related to U.K. Newspaper Matters, Impairment and restructuring charges, and “Other, net”, net of tax (“adjusted net income available to News Corporation stockholders and adjusted EPS”) to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period. The calculation of adjusted net income available to News Corporation stockholders and adjusted EPS may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. Adjusted net income available to News Corporation stockholders and adjusted EPS are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for consolidated net income available to News Corporation stockholders and net income per share as determined under GAAP as a measure of performance.

However, management uses these measures in comparing the Company’s historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of our performance relative to prior periods and our competitors.

The following tables reconcile reported net income available to News Corporation stockholders and reported diluted EPS to adjusted net income available to News Corporation stockholders and adjusted EPS for the three and nine months ended March 31, 2015 and 2014.

 

     For the three months ended
March 31, 2015
     For the three months ended
March 31,2014
 
     Net income
available to
stockholders
           EPS            Net income
available to
stockholders
           EPS        
     (in millions, except per share data)  

As reported

   $ 23       $ 0.04       $ 48       $ 0.08   

U.K. Newspaper Matters

     15         0.02         20         0.03   

Impairment and restructuring charges

     10         0.02         10         0.02   

Other, net

     (12      (0.02      1         —     

Tax impact on items above

     (8      (0.01      (13      (0.02
  

 

 

    

 

 

    

 

 

    

 

 

 

As adjusted

$ 28    $ 0.05    $ 66    $ 0.11   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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     For the nine months ended
March 31, 2015
     For the nine months ended
March 31, 2014
 
     Net income
available to
stockholders
           EPS            Net income
available to
stockholders
           EPS        
     (in millions, except per share data)  

As reported

   $ 230       $ 0.40       $ 225       $ 0.39   

U.K. Newspaper Matters

     42         0.07         56         0.10   

Impairment and restructuring charges

     31         0.05         73         0.13   

Other, net(a)

     (70      (0.12      673         1.16   

Tax impact on items above(b)

     (10      (0.02      (765      (1.33

Impact of noncontrolling interest on items included in Other, net above

     11         0.02         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

As adjusted

$ 234    $ 0.40    $ 262    $ 0.45   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)  Other, net for the nine months ended March 31, 2015 primarily includes a gain on the sale of marketable securities and dividends received from cost method investments. Other, net for the nine months ended March 31, 2014 primarily includes a foreign tax refund paid or payable to 21st Century Fox, offset by a gain on a third party pension contribution.
  (b)  Tax impact on items above for the nine months ended March 31, 2014 primarily includes a foreign tax refund of $721 million which has an offsetting payable to 21st Century Fox included within Other, net above.

 

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