NWS

News Corporation (NWS)

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News Corporation (NWS)

Q1 2013 Earnings Call

November 06, 2012, 04:30 pm ET

Executives

Reed Nolte - SVP, Investor Relations

Chase Carey - Deputy Chairman, President & COO

Dave DeVoe - CFO

Analysts

Anthony DiClemente - Barclays Capital

Jessica Reif Cohen - Bank of America Merrill Lynch

Michael Nathanson - Nomura Securities

Richard Greenfield - BTIG

Doug Mitchelson - Deutsche Bank

Todd Juenger - Sanford Bernstein

Michael Morris - Davenport & Company

Adam Alexander - Goldman Sachs

Tim Nollan - Macquarie

James Dix - Wedbush

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the News Corporation First Quarter 2013 Earnings Release. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) And as a reminder, please limit yourself to one question per queue. (Operator Instructions)

I would now like to turn the conference over to Reed Nolte, Senior Vice President, Investor Relations, News Corporation.

Reed Nolte

Thank you very much, operator. Hello everyone and welcome to our first quarter fiscal 2013 earnings conference call. On the call today are, Chase Carey, President and Chief Operating Officer and Dave DeVoe, our Chief Financial Officer. First, we'll give prepared remarks on the most recent quarter and then we'll be happy to take questions from the investment community.

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, 2012 identifies risks and uncertainties that could cause actual results to differ, and these statements are qualified by the cautionary statements contained in such filings. Additionally, this call will include certain non-GAAP financial measurements. The definition of and a reconciliation of such measures, can be found in our earnings release and our 10-K filings.

Finally, please note that certain financial measures used in this call such as segment operating income, adjusted segment operating income and adjusted earnings per share are expressed on a non-GAAP basis. A GAAP to non-GAAP reconciliation of these non-GAAP measures is included in our earnings release.

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

Dave DeVoe

Reed thank you and good afternoon everyone. As you all have seen in today's earnings release, we are quite pleased with the continued growth we are delivering at our Cable Network, Filmed Entertainment and Television segments so far in fiscal 2013 with double digit segment operating income increases at all three segments. However, much of this growth is offset by anticipated declines in SKY Italia and our Publishing businesses.

The current quarter operating income results also include a $67 million charge related to the ongoing investigations initiated upon closure of The News of the World in United Kingdom as compared to $17 million in the first quarter a year ago. Excluding these charges in both years and a $5 million charge related to the proposed separation of the company's Entertainment and Publishing businesses, first quarter adjusted total segment operating income of $1.45 billion, increased 3% from the year ago adjusted result of $1.4 billion.

First quarter reported revenues were up 2% driven by strong Cable Network reported revenue increases of 16%. These increases were largely offset by currency related decline at many of our divisions led by SKY Italia. It’s important to note that the stronger US dollar negatively impacted the company's financial performance this quarter. In constant currency terms, total company revenues and adjusted total segment operating income both grew 5% over last year.

Our share of reported results from our equity earnings of affiliates were up $69 million in the quarter, with this increase primarily reflecting this quarter’s gain for participation in BSkyB’s share repurchase program. Also included in this quarter result is $1.38 billion of income and other, primarily related to a gain on the company’s sale of NDS, partially offset by $152 million of pre-tax impairment or restructuring charges.

The reported net income in the quarter was $2.2 billion, with reported earnings per share of $0.94 as compared to reported earnings per share a year ago of $0.28. Excluding the net income effects in both years of one-time items, principally consisting of the items I just highlighted, first quarter adjusted earnings per share this year are $0.43 compared with a year ago adjusted results of $0.32, a 34% earnings per share improvement.

Our press release includes a reconciliation of our GAAP results for these amounts. The reduction of shares outstanding versus last year from a buyback accounted for $0.04 per share to the adjusted EPS this quarter.

Now I would like to provide some additional context on the performance of a few of our businesses and let’s begin with Cable Networks. This segment continued to drive overall company results, generating up to two-thirds of News Corporation’s total segment operating income. First quarter Cable segment operating income contributions increased 23% of a year ago levels to $953 million, with double-digit earnings growth at the RSNs, Fox News and at FX, partially due to the timing of original programming and marketing costs at FX. This strong domestic channel growth was partially offset by higher sports cost at STAR India, reflecting the inaugural broadcast of the new BCCI cricket matches and the strength in U.S. dollar that more than offset local currency profit growth at the Fox International Channels.

Cable Network growth continues to be topline driven; the segment revenues up 16%. Reported affiliate fees of the Cable Network’s increased 18% over a year ago levels with domestic channel affiliate fees up 16% and international fees up 25%. And about two-thirds of the international affiliate revenue increase reflects strong local currency of in growth at Fox International Channels and at STAR in India. The balance of our growth was from the inclusion of Fox Pan American Sports’ business partially offset by the impacts of foreign currencies.

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