This summary is based on the first quarter fiscal 2009 earnings call conducted by News Corp. (NWS) on November 5, 2008.
Management:
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Chairman and CEO: Rupert Murdoch
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President and COO: Peter Chernin
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CFO: Dave DeVoe
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EVP: Gary Ginsberg
Key Investors Issues
- Revenues increased 6% to $7.5 billion from $7.1 billion in the prior year.
- Net income of $515 million or 20 cents per share decreased 29.6% from $732 million or 23 cents per share in 2007.
First Quarter Highlights
Net income of $515 million or 20 cents per share decreased 29.6% from $732 million or 23 cents per share in the prior year largely driven by declines in Equity contributions from affiliates and operating profit.
- This was partially offset by the gain on the sale of eight television stations included in Other, net.
- The lower contribution from affiliates reflects the inclusion of $447 million in losses from Premiere AG, principally representing a write down of investment, and the absence of contributions from The DIRECTV Group, which was divested in February 2008.
- The other income line reflects the gain on the sale of eight television stations and an unrealized gain for mark-to-market adjustments on BUCS liability.
- Revenues increased 6% to $7.5 billion from $7.1 billion in the prior year.
Segment Highlights:
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Film reported $251 million in operating income, a 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, 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, the firm we released two titles, Max Payne and The Secret Life of Bees, which are both performing well.
- Twentieth Century Fox Television reported decreased contributions versus a year ago, primarily due to lower contributions from home entertainment releases, most notably from 24, The Simpsons, Family Guy and Prison Break.
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Television stations operating income of $54 million, declined by $129 million just compared to the first quarter year ago reflecting the impact of lower station advertising revenues.
- It also included charges of $30 million related to the termination of a channel distribution agreement and the absence of earnings from the sale of eight stations in July.
- Revenues at remaining stations declined 17% and operating income decreased 44% due to 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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Cable Networks operating income contributions were up 31% above last year due to an increase to affiliate and advertising revenues.
- The largest year-over-year gains in the quarter were from the RSNs reflecting higher affiliate rates from the Fox News Channel due to higher rates and additional subscribers and advertising revenue increases.
- International Channels performed well, increasing from both advertising and affiliate increases, led by Latin American and European channels.
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SKY Italia had operating profit of $165 million, a $117 million increase from the first quarter year ago with 60% of this increase relating to the timing of revenue recognition associated with the premium soccer packages.
- ARPU averaged €43 compared to last year''s reported €39 and SKY added 38,000 net new subscribers as compared to 45,000 in a year ago quarter bringing total subscribers to 4.6 million.
- Churn was below year ago levels and is on track to achieve an annual churn rate of around 10% and SAC was little under $300, which was slightly above year ago levels, reflecting increased marketing to support a price increase.
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Newspaper and Information Service operating income was $134 million versus $93 million in the year ago period.
- In United Kingdom, advertising revenues were down nearly 10% from declines in display and classified advertising principally at a quality titles.
- In Australia, display advertising was about even with the prior year level, however, classified advertising revenues declined 7% due to reduced employment advertising.
- The impact of Dow Jones on operating income was not significant in the quarter, as profits from operations were offset by purchased accounting expenses.
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Book Publishing operating income contributions were down $33 million compared to last year due to lower sales at the General Books Group, higher return provisions and reduced third-party distribution income.
- Last year''s results included strong sales from The Dangerous Book for Boys and distribution profits from the release of Harry Potter.
- The Other segment reported an operating loss of $101 million, $58 million higher than a year ago primarily due to lower contributions from NDS as well as higher losses at the developing Eastern European television businesses.
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Fox Interactive Media revenue of $220 million, were up 17% compared to a year ago as a result of higher search and advertising revenue.
- Operating income contributions were similar to a year ago levels, as the revenue gains were offset by planned increases in operating and production costs associated with MySpace''s domestic and international expansion and the additions of new features.
Operational Insights:
- News has instituted a stringent cost cutting measures across all businesses to operate even more efficiently.
- It is managing down its already lean headcount wherever appropriate and where appropriate, will continue to invest in those businesses and opportunities that represent the next generation of growth.
- In the spring the firm has have two highly anticipated sequels that should do strong business i.e. ""Night At The Museum 2,"" and ""X-Men Origins: Wolverine"".
Fiscal 2009 Outlook:
- The firm is reducing its fiscal 2009 operating income outlook to now be down on a percentage basis in the low-to-mid teens from the $5.13 billion fiscal 2008 results.
- Roughly one-third of the change in this outlook is due to the strength in the US dollar, a further 40% of the change is from the challenging advertising markets in US television and international newspaper businesses.
