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News Corporation Reports Second Quarter Earnings Per Share Of $1.01 On Net Income Attributable To Stockholders Of $2.38 Billion

REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’ RESULTS

Quarterly earnings from affiliates were $174 million as compared to $142 million in the same period a year ago. The increased contributions from affiliates are primarily due to higher contributions from BSkyB, including the Company’s $131 million pre-tax gain related to the its participation in BSkyB’s share repurchase, partially offset by one-time costs resulting from Hulu’s purchase of Providence Equity Partners’ ownership stake and the absence of contributions from NDS, which was sold in July 2012.

The Company’s share of equity earnings (losses) of affiliates is as follows:

        3 Months Ended     6 Months Ended
December 31, December 31,
% Owned 2012       2011       2012       2011
US $ Millions
BSkyB 39% (1) $ 298     $ 174 $ 507     $ 315
Other affiliates Various (2)  

(124

)

 

(32

)

 

(143

)

 

(52

)

Total equity earnings of affiliates $ 174 $ 142 $ 364 $ 263
 
   

(1)

 

Please refer to BSkyB’s earnings releases for detailed information.

(2)

Primarily comprised of Sky Deutschland, Hulu, Australian and STAR equity affiliates, as well as NDS in the prior year.

 

Foreign Exchange Rates

Average foreign exchange rates used in the quarter-to-date profit results are as follows:

      3 Months Ended
December 31,
2012     2011
 
Australian Dollar/U.S. Dollar 1.04 1.01
U.K. Pounds Sterling/U.S. Dollar 1.61 1.57
Euro/U.S. Dollar 1.30 1.35
 

To receive a copy of this press release through the Internet, access News Corporation’s corporate Web site located at http://www.newscorp.com.

Audio from News Corporation’s conference call with analysts on the second quarter results can be heard live on the Internet at 4:30 p.m. Eastern Standard Time today. To listen to the call, visit http://www.newscorp.com.

Cautionary Statement Concerning Forward-Looking Statements

This document contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from these expectations due to changes in global economic, business, competitive market and regulatory factors. More detailed information about these and other factors that could affect future results is contained in our filings with the Securities and Exchange Commission. The “forward-looking statements” included in this document are made only as of the date of this document and we do not have any obligation to publicly update any “forward-looking statements” to reflect subsequent events or circumstances, except as required by law.

             
CONSOLIDATED STATEMENTS OF OPERATIONS
3 Months Ended 6 Months Ended
December 31, December 31,
2012     2011     2012     2011
US $ Millions (except share related amounts)
 
Revenues $ 9,425 $ 8,975 $ 17,561 $ 16,934
 
 
Operating expenses (5,869 ) (5,583 ) (10,717 ) (10,336 )
Selling, general and administrative expenses (1,666 ) (1,614 ) (3,276 ) (3,141 )
Depreciation and amortization (310 ) (281 ) (610 ) (575 )
Impairment and restructuring charges (65 ) (36 ) (217 ) (127 )
Equity earnings of affiliates 174 142 364 263
Interest expense, net (266 ) (257 ) (533 ) (515 )
Interest income 37 29 68 65
Other, net 1,400   125   2,775   (5 )
Income from continuing operations before income tax expense 2,860 1,500 5,415 2,563
Income tax expense (402 ) (373 ) (661 ) (650 )
Net income 2,458 1,127 4,754 1,913
Less: Net income attributable to

noncontrolling interests

(77 ) (70 ) (140 ) (118 )
Net income attributable to News Corporation stockholders $ 2,381   $ 1,057   $ 4,614   $ 1,795  
 
 
Weighted average shares: 2,346 2,515 2,358 2,563
 
Net income attributable to News Corporation stockholders per share: $ 1.01 $ 0.42 $ 1.96 $ 0.70
 
     
CONSOLIDATED BALANCE SHEETS December 31, June 30,
2012     2012
Assets: US $ Millions
Current assets:
Cash and cash equivalents $ 7,806 $ 9,626
Receivables, net 7,760 6,608
Inventories, net 3,282 2,595
Other   896   619
Total current assets   19,744   19,448
 
Non-current assets:
Receivables 449 387
Investments 7,441 4,968
Inventories, net 5,024 4,596
Property, plant and equipment, net 5,857 5,814
Intangible assets, net 7,149 7,133
Goodwill 15,875 13,174
Other non-current assets   1,206   1,143
Total assets $ 62,745 $ 56,663
 
 
Liabilities and Equity:
Current liabilities:
Borrowings $ 273 $ 273
Accounts payable, accrued expenses and other current liabilities 5,260 5,405
Participations, residuals and royalties payable 1,899 1,691
Program rights payable 1,665 1,368
Deferred revenue   1,163   880
Total current liabilities   10,260   9,617
 
Non-current liabilities:
Borrowings 16,184 15,182
Other liabilities 4,200 3,650
Deferred income taxes 2,447 2,388
Redeemable noncontrolling interests 649 641
Commitments and contingencies
Equity:
Class A common stock, $0.01 par value 15 15
Class B common stock, $0.01 par value 8 8
Additional paid-in capital 15,898 16,140
Retained earnings and accumulated other comprehensive income   12,231   8,521
Total News Corporation stockholders' equity 28,152 24,684
Noncontrolling interests   853   501
Total equity   29,005   25,185
Total liabilities and equity $ 62,745 $ 56,663
 
     
CONSOLIDATED STATEMENTS OF CASH FLOWS
6 Months Ended December 31,
  2012         2011  
US $ Millions
Operating activities:
Net Income $ 4,754 $ 1,913
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 610 575
Amortization of cable distribution investments 44 47
Equity earnings of affiliates (364 ) (263 )
Cash distributions received from affiliates 306 253
Impairment charges, net of tax 35 -
Other, net (2,775 ) 5
Change in operating assets and liabilities, net of acquisitions:
Receivables and other assets (986 ) (1,202 )
Inventories, net (920 ) (758 )
Accounts payable and other liabilities   267     26  
Net cash provided by operating activities   971     596  
 
Investing activities:
Property, plant and equipment, net of acquisitions (370 ) (485 )
Acquisitions, net of cash acquired (2,830 ) (488 )
Investments in equity affiliates (610 ) (37 )
Other investments (46 ) (158 )
Proceeds from dispositions   1,860     321  
Net cash used in investing activities   (1,996 )   (847 )
 
Financing activities:
Borrowings 987 -
Repayment of borrowings (235 ) (32 )
Issuance of shares 139 15
Repurchase of shares (1,434 ) (2,477 )
Dividends paid (297 ) (305 )
Purchase of subsidiary shares from noncontrolling interests (8 ) -
Other, net   8     -  
Net cash used in financing activities   (840 )   (2,799 )
 
Net decrease in cash and cash equivalents (1,865 ) (3,050 )
Cash and cash equivalents, beginning of period 9,626 12,680
Exchange movement on opening cash balance   45     (198 )
Cash and cash equivalents, end of period $ 7,806   $ 9,432  
 
       
SEGMENT INFORMATION 3 Months Ended 6 Months Ended
December 31, December 31,
2012     2011     2012     2011
US $ Millions
Revenues        
 
Cable Network Programming $ 2,559 $ 2,161 $ 5,008 $ 4,281
Filmed Entertainment 2,067 2,063 3,812 3,841
Television 1,532 1,520 2,491 2,443
Direct Broadcast Satellite Television 890 947 1,707 1,869
Publishing 2,149 2,130 4,167 4,199
Other   228     154     376     301  
Total Revenues $ 9,425   $ 8,975   $ 17,561   $ 16,934  
 
 
Segment Operating Income (Loss)
 
Cable Network Programming $ 945 $ 882 $ 1,898 $ 1,657
Filmed Entertainment 383 393 783 740
Television 224 189 380 322
Direct Broadcast Satellite Television (20 ) 6 3 125
Publishing 234 218 291 328
Other   (186 )   (191 )   (397 )   (290 )
Total Segment Operating Income * $ 1,580   $ 1,497   $ 2,958   $ 2,882  
 

*

 

The three months ended December 31, 2012 and 2011 include $56 million and $87 million, respectively, of costs related to the ongoing investigations in the U.K. The three months ended December 31, 2012 include $23 million of costs related to the proposed separation of the Company’s entertainment and publishing businesses. Excluding these charges, adjusted total segment operating income is $1,659 and $1,584 million in the three months ended December 31, 2012 and 2011, respectively.

 
The six months ended December 31, 2012 and 2011 include $123 million and $104 million, respectively, of costs related to the ongoing investigations in the U.K. The six months ended December 31, 2012 include $28 million of costs related to the proposed separation of the Company’s entertainment and publishing businesses. Excluding these charges, adjusted total segment operating income is $3,109 and $2,986 million in the six months ended December 31, 2012 and 2011, respectively.
 

NOTE 1 – TOTAL SEGMENT OPERATING INCOME AND SEGMENT OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

The Company evaluates the performance of its operating segments based on segment operating income, and management uses total segment operating income as a measure of the performance of operating businesses separate from non-operating factors. Total segment operating income and segment operating income before depreciation and amortization are non-GAAP measures and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, these measures do not reflect cash available to fund requirements. These measures exclude items, such as impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. Segment operating income before depreciation and amortization also excludes depreciation and amortization which are also significant components in assessing the Company’s financial performance.

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