NWSA

News Corporation (NWSA)

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News Corporation (NWSA)

F1Q10 (Qtr End 09/30/09) Earnings Call Transcript

November 4, 2008, 4:30 pm ET

Executives

Gary Ginsberg – EVP, Global Marketing and Corporate Affairs

Dave DeVoe – Senior EVP and CFO

Rupert Murdoch – Chairman and CEO

Chase Carey – Deputy Chairman, President and COO

Analysts

Jessica Reif Cohen – Bank of America/Merrill Lynch

Adam Alexander – JB Were

Imran Khan – JP Morgan

Michael Nathanson – Sanford Bernstein

Rich Greenfield – Pali Capital

Jolanta Masojada – Credit Suisse

Doug Mitchelson – Deutsche Bank

Benjamin Swinburne – Morgan Stanley

David Bank – RBC Capital Markets

Jason Bazinet – Citi

Spencer Wang – Credit Suisse

John Janedis – Wells Fargo

Michael Morris – UBS

Sarah Rabil – Bloomberg News

Barbara Miller – ABC Radio

Brian Stelter – The New York Times

Shira Ovide – Wall Street Journal

Claire Atkinson – Broadcasting and Cable

James Quinn – Daily Telegraph

Ken Li – The Financial Times

George Zallie [ph] – Hollywood Reporter

Richard Morgan – The Deal

Andrew Clark – The Guardian

Staci Kramer – ContentNext Media

Andrew Edgecliffe – The Financial Times

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the News Corporation first quarter 2010 earnings release. For the conference, all participants are in a listen only mode; however, there will be an opportunity for your questions. (Operator instructions). As a reminder, today's call is being recorded.

I will now turn the conference over to the Executive Vice President, Mr. Gary Ginsberg. Please go ahead, sir.

Gary Ginsberg

Thank you very much, operator. Hello everyone and welcome to our first quarter fiscal 2010 earnings conference call.

On the call today are Rupert Murdoch, Chairman and Chief Executive Officer, who is speaking to you from Sydney, Australia, Chase Carey, President and Chief Operating Officer, and Dave DeVoe, our CFO. Dave will give a detailed presentation of the quarter results followed by Rupert who will give his own perspective and color on the quarter, as well as what he sees looking ahead. We'll then take your questions, first from the financial community and then from the press.

But before we start, a little legalese, this call may include certain forward-looking information with respect to News Corporation's business and strategy. Actual results could differ materially from what is said. News Corporation's Form 10-K for the three months ended September 30, 2009, lists risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such a filing.

And with that, I'll turn it over to Dave.

Dave DeVoe

Gary, thank you, and good afternoon everybody. As you will have seen in our earnings release today, we are pleased with the start to our fiscal 2010. While we continue to operate in a challenged economic environment, our first-quarter operating income increased 9% over last year's level. This improvement is due largely to very strong growth at our film and our cable network segments, which offsets declines at a number of our other businesses.

Net income in the quarter was $571 million, this is a 11% increase over last year's result, and our earnings per share for the quarter were up 10% to $0.22 this year from $0.20 reported a year ago. This increase is driven by higher operating income contributions as well as improved equity earnings from affiliates.

Now I would like to provide some additional context on the performance at a few of our businesses. At our film segment, the first quarter operating income was $391 million; this is up a $140 million or 56% over last year's result. This very solid performance was driven by the strength of worldwide theatrical results from Ice Age

Dawn of the Dinosaurs. As , we incurred a substantial amount of this film's releasing cost last year, so we're recognizing sizable contributions from this record-breaking film this year. This film was just released into the home entertainment window last week and we expect continued strong contributions for the rest of the year.

At our television segment, operating income in the third quarter of $38 million declined by 45 million as compared to the first quarter a year ago. This is largely due to lower televisions stations revenues and to a lesser extent reduced Fox Network results due to higher primetime programming cost. The station's operating income decreased 26% in the quarter reflecting lower local television advertising as well as less political advertising as compared to a year ago. Moreover this result which included an increase in our market share is moderately better than our initial expectations, and Rupert will comment on our current station advertising trends in a moment.

Now moving on to the cable networks, where we continue to show very solid growth with operating income contributions up 41% above a year ago, the largest year-over-year gains in the quarter were from the Fox News Channel and this is due to higher affiliate rates and also additional subscriber growth, our international channels, from affiliate revenue increases, and the regional sports networks, reflecting higher affiliate rates. Also note that our Star operations were reorganized in the quarter, and as a result their financial results are now included this year and last year as part of this cable network programming segment. Star reported strong growth particularly from our Indian operations in the quarter. However these profits from operations were fully offset by $28 million in restructuring related costs. This compares to $29 million operating loss at Star a year ago which was primarily due to the cost of the termination of a distribution agreement.

Turning to our Italian pay television operations, Sky Italia, Sky had operating income of $128 million in the quarter, a $37 million decrease from last year. Sky Italia continues to operate in an extremely challenging business and economic environment aggravated by a significant tax increase on our subscribers. Despite these factors, Sky Italia grew local currency revenue by 1% and this is driven by a 5% increase in the average subscriber base as compared to the prior year's quarter. This growth is more than offset by increased programming cost due to the larger average subscriber base, higher SAC cost and the addition of 16 new channels over last year.

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