NWS

News Corporation (NWS)

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News Corporation (NWS)

F1Q09 (Qtr End 09/30/08) Earnings Call

November 5, 2008 4:30 pm ET

Executives

Gary Ginsberg - EVP

Rupert Murdoch - Chairman and CEO

Peter Chernin - President and COO

Dave DeVoe - CFO

Analysts

Rich Greenfield - Pali Capital

Jessica Reif-Cohen - Merrill Lynch

Michael Nathanson - Sanford Bernstein

Doug Mitchelson - Deutsche Bank

Benjamin Swinburne - Morgan Stanley

Jolanta Masojada - Credit Suisse

Mark Wienkes - Goldman Sachs

Michael Morris - UBS

Spencer Wang - Credit Suisse

Jason Bazinet - Citigroup

Adam Alexander - JBWere

Imran Khan - JPMorgan

Anthony DiClemente - Barclays Capital

David Bank - RBC Capital Markets

Alan Gould - Natexis Bleichroeder

James Quinn - The Daily Telegraph

Ria McLennan - AAP

Ken Lee - Financial Times

George Silino - The Hollywood Reporter

Dave Hayes - Variety

Shira Obaid - Wall Street Journal

Robert McMillan - Reuters

Presentation

Operator

Welcome to the News Corp. first quarter 2009 earnings release conference call. At this time, all phone lines are in a listen-only mode. Later, there will be an opportunity for your questions. (Operator Instructions). As a reminder, today's conference call is being recorded.

And with that, I'd now like to introduce your opening speaker for today Executive Vice President, Gary Ginsberg. Please go ahead, sir.

Gary Ginsberg

Thank you, operator, and welcome to our fiscal first quarter 2009 Earnings Call. Joining me today are Rupert Murdoch, Chairman and CEO of News; Peter Chernin, President and Chief Operating Officer; and Dave DeVoe, our CFO.

As is our custom, Dave will begin the call with the summary of the results, followed by some general commentary from Rupert. And given the lateness of the hour and the fact that so many of us were up late last night, we will then go straight to your questions.

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 adjusted to exclude certain items. The GAAP to non-GAAP reconciliation will be posted on our website on our Investor Relations earnings release page.

With all that, I'll turn the call over to Dave.

Dave DeVoe

Gary, thank you, and good afternoon, everyone. As you have seen in today's earnings release, News Corporation reported mixed year-over-year comparisons for the quarter ended September 30. Some businesses, particularly SKY Italia and our Cable Networks, showed continued underlying growth.

As expected, our film segment declined from its near record of prior year performance while our other divisions, principally our advertising sensitive businesses, were affected by the economic slowdown and reported lower contributions in a year ago. As a result, operating income for this first fiscal quarter declined 9% to $953 million from last year's record first quarter of $1.05 billion.

At our associated entities, we reported equity losses of $359 million in this quarter, compared to $246 million in income a year ago. This variance is primarily attributable to the inclusion of $447 million in losses from Premiere, principally representing a write-down of our investments, as well as the absence of equity earnings from DIRECTV and from Gemstar, both of which were disposed off in the latter half of fiscal 2008.

Our other income line reflects the gain on the sale of eight television stations and an unrealized gain for mark-to-market adjustments on our BUCS liability. The company reported net income for the quarter of $515 million, as compared to $732 million in last year's first quarter.

The absence of $131 million results from property sold, including DIRECTV, Gemstar and eight television stations contributed to this decline. Earning per share for the quarter was $0.20, a $0.03 decrease from last year's reported earnings per share of $0.23.

Given you should now have a copy of our earnings release, I would not review all of business segments; however, I would like to provide context on the performance of a few of our businesses.

At our film segment, operating income declined as expected from the near record first quarter a year ago. The segment reported $251 million in operating income, decline of $111 million from last year's result, which included theatrical releases of the Simpson Movie and Live Free or Die Hard.

This year, our new releases including Meet Dave, X-Files, I Want to Believe, and The Rocker did not match the results of those prior year's releases. Since the end of the quarter we released two titles, Max Payne and The Secret Life of Bees, which are both performing well.

At our television stations, operating income in the quarter of $54 million, declined by $129 million just compared to the first quarter year ago. This result reflects the impact of lower station advertising revenues [and charges] STAR approximately $30 million related to the termination of a channel distribution agreement and the absence of earnings from the sale of eight stations in July. These eight stations accounted for revenue and earnings declines of $63 million and $17 million respectively.

Revenues at remaining stations declined 17% and operating income decreased 44% in the quarter. This result reflects the current week local television advertising markets and, in particular, the automotive, telecom and movie categories.

At the Fox Broadcasting Network profits were in line with year ago results, as lower programming cost offset the absence of results from the Emmy Awards which were broadcasted year ago on Fox.

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