NWS

News Corporation (NWS)

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News Corporation (NWS)

F4Q08 Earnings Call

August 5, 2008 5:30 pm ET

Executives

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

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

Peter Chernin - President, Chief Operating Officer and Director

Rupert Murdoch - Chairman of the Board and Chief Executive Officer

Analysts

Rich Greenfield - Pali Capital

Jessica Reif Cohen - Merrill Lynch

Doug Mitchelson - Deutsche Bank

Jolanta Masojada - Credit Suisse

Benjamin Swinburne - Morgan Stanley

Michael Morris - UBS

Anthony DiClemente - Lehman Brothers

Alan Gould - Natexis Bleichroeder

David Bank - RBC Capital Markets

Jason Bazinet - Citigroup

Media

Kenneth Lee - Reuters

Gillian Wee - Bloomberg News

Shira Ovide - The Wall Street Journal

George Silino - The Hollywood Reporter

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the News Corp fourth quarter 2008 earnings release conference call. (Operator Instructions) I would now like to turn the conference over to our host, Mr. Gary Ginsberg, Executive Vice President of Global Marketing and Corporate Affairs for New Corporation. Please go ahead.

Gary Ginsberg

Thanks, Mary and welcome to our fourth quarter and fiscal 2008 year-end earnings conference call. I apologize to those of you in New York for our late start today. Joining me today are Rupert Murdoch, Chairman and CEO of News.; Peter Chernin, President and COO; and Dave DeVoe, our CFO.

As is our custom, Dave will begin the call with a brief summary of the results, focusing on items not immediately obvious from the reading of the earnings release, which we assume you all now have. Rupert will then give some deeper commentary on a couple of our international initiatives, including Sky Italy and our international cable channels, and then offer some perspective on our printer operations, including our latest acquisition, The Dow Jones Company. Peter will then speak about what you can expect from our leading entertainment assets in fiscal 2009, including some forward commentary on our television and cable businesses, as well as an update on what’s ahead at the film company. We will then of course take your questions.

Just some legalese: this call is of course governed by the Safe Harbor provisions. On this call, we will make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those described in News’ public filings with the SEC that could cause actual results to materially differ from those in the forward-looking statements.

Finally, please note that certain financial measures we will use in this call, such as EPS and net income, are expressed on a non-GAAP basis and have been adjusted to exclude certain items. The GAAP to non-GAAP reconciliation will be posted on our website on our investor relations earnings release page.

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

David F. DeVoe

Gary, thank you and good afternoon, everybody. As you have seen in today’s earnings release, News Corporation once again posted very solid results, with double-digit revenue, operating income, and net income growth for both the fourth quarter and the full fiscal year.

Let’s start with our full year first. We achieved 21% operating income growth on a total company basis and 17% growth when you factor out those items we were excluding from our guidance, namely the $126 million gain on the U.K. land sale and the Dow Jones operating income contribution. This 17% growth is consistent with the upper end of the expectations we provided to you six months ago and well above the low teens guidance we provided about a year ago.

This strong financial performance was driven by 15% overall revenue growth and double-digit earnings growth at our television, cable, DBS, and newspaper and information service segments.

Bottom line, the company reported net income of $5.4 billion versus $3.4 billion last year. The related earnings per share was $1.81, a 68% improvement over last year’s reported earnings per share of $1.08.

Included in net income in earnings per share are a couple of items I would like to highlight. We reported pretax other income of $2.3 billion, which includes a gain of approximately $1.7 billion related to the Liberty DIRECTV transaction. Gains from disposal of our interest in the Bay area RSN in Gemstar, as well as the positive mark-to-market adjustment on our [BUX] liability.

In addition, our equity earnings reflect a $485 million charge for our share of BSkyB’s write-down on its ITV investment. Excluding the net income effects of these items, adjusted earnings per share was $1.22 this fiscal year, an increase of 22% over similarly adjusted $1 in fiscal 2007.

Now let’s look at the fourth quarter. For the quarter, operating income of $1.48 billion was up 21% over the fourth quarter a year ago. This improvement reflects at least double-digit growth in all of our segments, with the exception of television, which was below last year. The quarter’s results also include the $126 million gain on the United Kingdom land sale and Dow Jones operating income contributions that if excluded would reduce the quarter’s operating income improvement to 9% over the fourth quarter a year ago.

Bottom line, the company reported net income for the quarter of $1.13 billion, a 27% improvement over last year’s fourth quarter results. The related earnings per share for the quarter was $0.43, and this is a 54% improvement over last year’s earnings per share of $0.28.

Similar to the full year result, the fourth quarter equity earnings included a write-down on BSkyB’s ITV investment, of which our share was $111 million. Additionally, our other income in the quarter was $433 million, reflecting gains on disposal of our interest in the Bay area RSN, in Gemstar, as well as mark-to-market adjustments on our [BUX] liability.

Excluding the net income effect of these items, adjusted earnings per share was $0.35 this quarter, an increase of 13% over a similarly adjusted $0.31 in the fourth quarter of fiscal 2007.

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