NWSA

News Corporation (NWSA)

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News (NWSA)

Q1 2013 Earnings Call

November 06, 2012 4:30 pm ET

Executives

Reed Nolte - Senior Vice President of Investor Relations

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

Chase Carey - Deputy Chairman, President, Chief Operating Officer, President of the Media & Entertainment Arm and Chief Operating Officer of the Media & Entertainment Arm

Analysts

Anthony J. DiClemente - Barclays Capital, Research Division

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

Richard Greenfield - BTIG, LLC, Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division

Michael C. Morris - Davenport & Company, LLC, Research Division

Adam Alexander - Goldman Sachs & Partners Australia Pty Ltd, Research Division

Adam Alexander - Goldman Sachs Group Inc., Research Division

Tim Nollen - Macquarie Research

Vasily Karasyov - Susquehanna Financial Group, LLLP, Research Division

James G. Dix - Wedbush Securities Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the News Corporation's First Quarter 2013 Earnings Release. [Operator Instructions] I'd 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-Q for the 3 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-Q filing. 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. The 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.

David F. DeVoe

Reed, thank you, and good afternoon, everyone. As you all seen in today's earnings release, we are quite pleased with the continued growth we are delivering at our Cable Networks, Filmed Entertainment and Television segments so far in fiscal 2013 with double-digit segment operating income increases at all 3 segments, although 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 the United Kingdom as compared to $17 million in the first quarter a year ago. Excluding these charges from both years and a $5 million charge related to the post 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 a stronger U.S. 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 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's result is $1.38 billion of income in Other, primarily related to a gain on the company's sale of NDS, partially offset by $152 million of pretax impairment and restructuring charges.

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 the year ago adjusted result of $0.32, a 34% earnings per share improvement. Our press release includes a reconciliation of our GAAP results to these amounts.

The reduction of shares outstanding versus last year from our buyback accounted for $0.04 per share to the adjusted EPS this quarter.

Now I'd like to provide some additional context on the performance of few of our businesses, and let's begin with the Cable Networks. This segment continues to drive overall company results, generating over 2/3 of News Corporation's total segment operating income. First quarter Cable segment operating income contributions increased 23% over year ago levels to $953 million with double-digit earnings growth at the RSNs, Fox News and in FX, partially due to the timing of original programming and marketing cost at FX. This strong domestic channel growth is partially offset by higher sports cost at STAR India, reflecting the inaugural broadcast of the new BCCI cricket matches and the strengthened U.S. dollar that more than offset local currency profit growth at the Fox International Channels.

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