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News Corporation (NWS)

F2Q10 (Qtr End 12/31/09) Earnings Call

February 2, 2010 4:30 pm ET


Reed Nolte - SVP, IR

Rupert Murdoch - Chairman & CEO

Chase Carey - President & COO

Dave DeVoe - CFO


Alan Gould - Soliel

Jessica Reif Cohen - Banc of America

John Janedis - Wells Fargo

Doug Michelson - 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 - The Wall Street Journal

Claire Atkinson - Lead Business

Claire Delahunty - The Business Spectator

Ryan Nakashima - The Associated Press



Ladies and gentlemen, thank you for standing by and welcome to the News Corp second quarter 2010 earnings release conference call. At this time all participants are in a listen-only mode. Later we will conduct the question and answer session. (Operator Instructions).

And also as a reminder this teleconference is being recorded. And at this time I will turn the conference call over to your host Senior Vice President Investor Relations for News Corp Reed Nolte. Please go ahead sir.

Reed Nolte

Thanks very much. 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'll then take your question first from the financial community and then from the press. This call may include certain forward looking information with respect to News Corporation's businesses and strategy. Actual results could differ materially from what is said. These operation form 10-Q for three months ended December 31, 2009, identifies risks and uncertainties to cause actual results to differ. And these statements are qualified by the cautionary statements contained in such filing.

Additionally in this quarter, you may have noticed that we have changed the presentation format of the consolidated income statement to no longer display and operating income caption. Instead we provide the measurement of total segment operating income in the earnings released and both to 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, you 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.

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

Dave DeVoe

Thank you very much and good afternoon everybody. At the outset of the call I'd like to note that our reported results this quarter reflects a one-time charge related to the previously announced settlement of litigation involving the company's Integrated Marketing Services 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're extremely pleased with the underlying strong financial result 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% factoring in the absence of the results from [NDS] which are no longer consolidated this year. This increase was fueled by in 10% overall revenue growth which further supported by the cost reduction efforts we initiated over the past several years. Our reporting 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 effects of both years 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. Now let's start with the Film segment, where second quarter operating income was $324 million, this is up $212 million over the last year results 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 included Wolverine and Night at the Museum. December quarter also included significant loss, launch cost 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 second quarter a year ago. And this is driven by a 19% higher television station contribution and improved results at MyNetworkTV. And after six consecutive quarters of year-over-year declines, station revenues were up 6% on the current quarter and this reflects improved local advertising trend 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 whole season on FOX.

The growth was achieved despite a significant reduction in football advertising revenues versus last year. And I think it's worth noting that we saw significant improvements at the stations as the quarter progressed. For example, we began with October being down 14% versus a year ago, and ended up in December being up 28% and these positive trends which Rupert will probably talk more about has continued into the current quarter.

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