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News Corporation (NWSA)

F2Q10 Earnings Call

February 2, 2010 4:30 pm ET


Reed Nolte – Senior Vice President, Investor Relations

Dave DeVoe – Senior EVP and CFO

Rupert Murdoch – Chairman and CEO

Chase Carey – Deputy Chairman, President and COO


Allan Gould – Soleil

Jessica Reif Cohen – Bank of America/Merrill Lynch

John Janedis – Wells Fargo

Doug Mitchelson – Deutsche Bank

Michael Nathanson – Sanford Bernstein

Rich Greenfield – Pali Capital

Imran Khan – JP Morgan

Spencer Wang – Credit Suisse


Andrew Clark – The Guardian

Ken Li – The Financial Times

Shira Ovide – Wall Street Journal

Claire Atkinson – Broadcasting and Cable

Claire Delahunty – The Business Spectator

Ryan [Nakatumo] – The Associated Press



Welcome to the News Corporation second quarter 2010 earnings release conference call. (Operator instructions) At this time I will turn the conference over to your host, Senior Vice President of Investor Relations for News Corp., Reed Nolte. Please go ahead, Sir.

Reed Nolte

Thank you very much, operator. Hello everyone and welcome to our second quarter fiscal 2010 earnings conference call. On the call today are Rupert Murdoch, Chairman and Chief Executive Officer; 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. We will then take your questions, first from the financial community and then from the press.

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-Q for the three months ended December 31, 2009, identifies risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such a filing.

Additionally in this quarter you might have noticed that we have changed the presentation format of the consolidated income statement to no longer display an operating income caption. Instead we provide the measurement of total segment operating income in the earnings release and our financial statements. As contrasted to our prior reporting of operating income the only difference is that total segment operating income excludes impairment and restructuring charges. Prior periods have been revised to conform to this new presentation.

Total segment operating income is a non-GAAP financial measure. The definition of and a reconciliation of total segment operating income to income before taxes is provided in both the earnings release and our 10-Q filing. In addition, we may refer to other non-GAAP financial measures. A reconciliation of these non-GAAP financial measures can be found on our website. If you have any questions on the presentation you can contact me after the call.

With that, I will turn it over to Dave.

Dave DeVoe

Thank you, and good afternoon everybody. At the outset of the call I would like to note that our reported results this quarter reflect a one-time charge related to the previously announced settlement of litigation involving the company’s integrated marketing service segment. The related $500 million pre-tax settlement charge is reflected in this quarter’s segment operating income and it had a $315 million or$0.12 per share net income effect.

After adjusting for this item we are extremely pleased with the underlying strong financial results we reported for the second quarter of fiscal 2010 where total segment operating income reached $1.2 billion. This is an improvement of 44% from a year ago and this improvement rises to 50% when factoring in the absence of the results from NDS which are no longer consolidated this year.

This increase was fueled by a 10% overall revenue growth and was further supported by the cost reduction efforts we initiated over the past several years. Our reported net income in the quarter was $254 million with earnings per share of $0.10. This compares to a reported loss of $6.4 billion or $2.45 per share last year. However, excluding the net income effect of both tiers of one-time items such as the litigation charge this year and the impairment charge we took last year, second quarter earnings per share this year were $0.25 as compared to the year-ago results of $0.15.

Now I would like to provide some context on some of the results in our segments. Let’s start with the film segment where second quarter operating income was $324 million. This is up $212 million over last year’s result with revenue growth of 28%. This strong performance was led by the worldwide home entertainment release of Ice Age, Dawn of the Dinosaurs and also reflected other home entertainment releases including Wolverine and Night at the Museum.

The December quarter also included significant launch costs for our very successful theatrical releases of Avatar and Alvin and the Chipmunks. The profits from these films will begin to flow in the next quarter which is our third quarter of the year.

At our television segment operating income in the quarter of $29 million improved by $31 million as compared to the second quarter a year ago. This was driven by 19% higher television station contribution and improved results at My Network TV. After six consecutive quarters of year-over-year decline, station revenues were up 6% on the current quarter and this reflects improved local advertising trends particularly in the telecommunications, retail, fast food and finance sectors as well as improved sports advertising from considerably higher ratings in the Major League Baseball post-season on Fox.

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