NWSA

News Corporation (NWSA)

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News Corporation (NWSA)

F3Q09 Earnings Call

May 6, 2009 4:30 pm ET

Executives

Gary Ginsberg - Executive Vice President, Global Marketing and Corporate Affairs

David F. DeVoe - Chief Financial Officer, Senior Executive Vice President, Director

Rupert Murdoch - Chairman of the Board and Chief Executive Officer

Peter Chernin - President, Chief Operating Officer and Director

Analysts

Michael Nathanson - Sanford C. Bernstein

Jessica Reif Cohen - Merrill Lynch

David Bank - RBC Capital Markets

Alan Gould - Natexis Bleichroeder

Doug Mitchelson - Deutsche Bank

Jolanta Masojada - Credit Suisse

Tuna Amobi - Standard & Poor’s

Rich Greenfield - Pali Capital

Benjamin Swinburne - Morgan Stanley

Mark Wienkes - Goldman Sachs

Media

Andrew Clark - Guardian News

George Zollie - Hollywood Reporter

Sarah Rable - Bloomberg News

Robert McMillan - Reuters

Brian Steltzer - The New York Times

Ryan Makashima - The Associated Press

Ben Fricks - The Los Angeles Times

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the News Corporation third quarter 2009 earnings release. (Operator Instructions) I would now like to turn the conference over to Executive Vice President of Global Marketing and Corporate Affairs, Mr. Gary Ginsberg. Please go ahead.

Gary Ginsberg

Thank you, Ryan. Hello, everyone and welcome to our third quarter fiscal 2009 earnings conference call. On today’s call are Rupert Murdoch, Chairman and Chief executive Officer; Peter Chernin, President and Chief Operating Officer; and Dave DeVoe, our CFO. Dave will give a detailed presentation of the quarter’s results. Rupert will then offer a more qualitative analysis of the company and our future prospects, followed by Peter who will make some brief remarks before taking your questions.

This call may include certain forward-looking information with respect to News Corp.'s business and strategy. Actual results could differ materially from what is said. News Corp.'s Form 10-Q lists risks and uncertainties that could cause actual results to differ and these statements are qualified by the cautionary statement contained in such a filing.

Please note also that certain financial measures used in this call, such as adjusted operating income, adjusted EPS, and -- to non-GAAP reconciliation of operating income is posted on our website on our investor relations earnings release page.

And with all of that, I’ll turn the call over to Dave.

David F. DeVoe

Gary, thank you and good afternoon, everybody. As you can see in today’s earnings release, we are continuing to operate in a very challenging economic environment and our current operating results reflect this. Operating income in the third quarter was $755 million and this is down 47% compared to last year’s results. Primarily this reflects declines in our television and print businesses, partially offset by growth in our cable channel. The quarter also includes approximately $55 million in one-time restructuring costs at our print business.

Equity losses of affiliates totaled $40 million in the quarter, compared to equity earnings of $109 million a year ago. This variance is primarily the result of the absence of DIRECTV and Gemstar’s earnings. These two companies were disposed of last year. It also reflects the inclusion of our share of losses at Primera.

Bottom line, the company reported net income for the quarter of $2.7 billion. This is in line with the 2.7 reported in last year’s third quarter. Reported earnings per share this March quarter were $1.04 as compared to $0.91 reported for the same quarter a year ago, and this is due to fewer shares outstanding.

It’s important to note that this year’s results includes a $1.2 billion gain in other related to the partial sale of our NDS ownership, which was completed in February. The prior year’s third quarter results also includes a $1.7 billion gain on the asset and stock exchange with Liberty Media.

In addition to these items, this quarter’s equity earnings of affiliates includes an $81 million ITV write-down at BSkyB, as compared to $101 million charge recognized a year ago. Excluding the net income effects of these items, adjusted net income was at $1.59 billion in this quarter, as compared to a similarly adjusted $899 million last year. Adjusted earnings per share this quarter was $0.61, up from an adjusted $0.30 in the third quarter a year ago.

In addition, this quarter’s net income includes a one-time, non-cash tax benefit of approximately $1.2 billion resulting from the required adjustment of our opening tax accruals, due to the completion of certain multi-year tax audits, which contributed $0.46 to our earnings per share in the quarter. In accordance with FIN-48, we did not recognize the accounting benefits related to certain tax deductions in prior periods until we had final resolutions of these matters.

With that, I would like to provide some comments on the performance at a number of our business segments, and we’ll start with the film segment, which reported third quarter operating profit of $282 million, and this is 8% higher than last year’s result, primarily reflecting higher contributions from our television production business, which was negatively impacted last year by the writers’ strike.

More recently, our year-over-year performance in the movie business has also improved considerably, with a number of recent box office successes, led by Wolverine, and also including Marlie and Me, Slumdog Millionaire, and Taken, which are now starting to flow through the home entertainment window and are doing quite well.

At our television segment, operating income in the quarter was $4 million, as compared to $419 million in the third quarter a year ago. This result reflects weaker ad markets, higher entertainment programming costs at the network, and the absence of both the Super Bowl and contributions from eight stations that were sold last July. The eight stations accounted for revenues and earnings declines of $76 million and $24 million respectively.

Excluding the Super Bowl revenues of approximately $30 million last year, revenues at our remaining stations declined 28%. This is slightly less of a decline than the overall TV station market. Virtually every category was down in the quarter, with continued weakness from auto, financial, and movie categories.

At the Fox Broadcasting Network, higher operating losses resulting from higher license fees on our returning shows and lower primetime ad sales reflecting 13% lower ratings. Programming costs in the year-ago quarter were unusually low due to the writers’ strike that precluded running the entirety of 24 last season and resulted in the broadcasting of several lower priced re-runs. Lower ratings from NASCAR also impacted revenues and profits at SBC during this quarter.

Read the rest of this transcript for free on seekingalpha.com