News Corporation Reports First Quarter Operating Income of $1.05 Billion; Growth of 23% over First Quarter a Year Ago



    Revenues Increase 19% to $7.1 Billion

    QUARTER HIGHLIGHTS

    --  Filmed Entertainment delivers operating income of $362 million, up
51% on strong theatrical release slate and success of television home
entertainment titles.

    --  Cable Network Programming operating income up 16% despite launch
costs for the Fox Business Network and the Big Ten Network. Growth led by
affiliate and advertising gains at the Fox News Channel, the Regional Sports
Networks and Fox International Channels.

    --  SKY Italia generates operating income of $48 million, an improvement
of $61 million versus a year ago, reflecting net subscriber additions of
410,000 over the past 12 months as the subscriber base expands to 4.24
million.

    --  Television operating income declines as advertising strength at the
FOX broadcast network and STAR is more than offset by lower political
advertising at the Television Stations and a full quarter of losses at
MyNetworkTV.

    --  Increased demand for in-store marketing products increases Magazines
and Inserts operating income slightly, while the strength of prior year titles
results in an operating income decline at Book Publishing.

    --  Newspapers operating income declines versus a year ago as the new
color printing operations in the U.K., nearing completion, results in
increased accelerated depreciation on the presses being replaced.

    NEW YORK, November 7 /CNW/ - News Corporation (NYSE:   NWS, NWSA; ASX: NWS,
NWSLV) today reported first quarter consolidated operating income of $1.05
billion, up 23% as compared to the $851 million reported a year ago, primarily
as a result of double-digit percentage increases at the Filmed Entertainment
and Cable Network Programming segments and a $61 million improvement at the
Direct Broadcast Satellite segment.

    First quarter net income of $732 million ($0.23 per share), decreased
versus net income of $843 million ($0.27 per share on a diluted combined
basis(1)) reported in the first quarter a year ago. The year-on-year decline
primarily reflects increased consolidated operating income more than offset by
a decrease in Other income, mainly from the prior year inclusion of gains on
the sale of shares in Sky Brasil and Phoenix.

    (1) See supplemental financial data on page 12 for detail on earnings per
share.

    Commenting on the results, Chairman and Chief Executive Officer Rupert
Murdoch said:

    "The strength of our financial results during the first quarter is yet
another illustration of our ability to deliver sustained growth while
concurrently investing in tomorrow's profit generators. The 19% revenue growth
and 23% operating income growth in the quarter was achieved despite spending
to expand our cable portfolio both domestically and internationally; despite
continued investment in broadening our internet offerings; and despite
additional costs associated with upgrading the color capacity at our newspaper
group. We expect the development of these assets to drive future growth much
as our investments in the Fox News Channel and SKY Italia have translated into
strong profit growth today. The financial momentum at these businesses, along
with the success of our theatrical slate in the quarter, has given us a great
start to fiscal 2008 and we look forward to building upon the record results
we delivered during fiscal 2007."

    
    Consolidated Operating Income                           3 Months Ended
                                                            September 30,
                                                             2007    2006
                                                            ------- ------
                                                            US $ Millions

    Filmed Entertainment                                    $   362 $  239
    Television                                                  183    192
    Cable Network Programming                                   289    249
    Direct Broadcast Satellite Television                        48   (13)
    Magazines and Inserts                                        79     78
    Newspapers                                                   93    124
    Book Publishing                                              36     55
    Other                                                      (43)   (73)
                                                            ------- ------
    Consolidated Operating Income                           $ 1,047 $  851
                                                            ------- ------
    

    REVIEW OF OPERATING RESULTS

    FILMED ENTERTAINMENT

    The Filmed Entertainment segment reported first quarter operating income
of $362 million as compared to $239 million reported in the same period a year
ago. The 51% growth primarily reflects increased contributions from theatrical
releases and the strong performance of television home entertainment titles.

    Higher first quarter film results were largely driven by the theatrical
success of The Simpsons Movie, which has grossed over $524 million in
worldwide box office, and Live Free or Die Hard, which has surpassed $375
million in worldwide box office. The quarter also included the continued
worldwide home entertainment success of Eragon and Night at the Museum, as
well as the pay-TV availability of Little Miss Sunshine.

    Twentieth Century Fox Television reported increased contributions versus
the first quarter a year ago, primarily reflecting continued momentum in home
entertainment sales and international television, most notably from Family Guy
and Prison Break.

    TELEVISION

    The Television segment reported first quarter operating income of $183
million, a decline of $9 million versus the same period a year ago as improved
results from the FOX Broadcasting Company and STAR were offset by lower
contributions from the Fox Television Stations and a full quarter of losses at
MyNetworkTV, which was launched in September 2006.

    At the FOX Broadcasting Company, first quarter operating results improved
compared to a year ago as increased pricing drove higher advertising revenues.
Additionally, lower primetime programming and promotional costs, due to the
timing of the fall schedule launch, also contributed to the year-on-year
growth.

    Fox Television Stations' (FTS) first quarter operating income declined 9%
from the same period a year ago as advertising strength associated with FOX
primetime and the continued success of local news was more than offset by
lower political advertising revenues and decreased advertising revenues at the
MyNetwork affiliated stations.

    STAR's first quarter operating income increased versus the same quarter a
year ago as 22% revenue growth was driven by advertising and subscription
revenue gains, primarily in India. The revenue growth was partially offset by
increased programming costs from new program launches, most notably at STAR
PLUS in India.

    CABLE NETWORK PROGRAMMING

    Cable Network Programming reported first quarter operating income of $289
million, an increase of $40 million over the first quarter a year ago. The 16%
growth reflects increased contributions from Fox News Channel, the Regional
Sports Networks and the Fox International Channels, partially offset by launch
costs associated with the Fox Business Network and the Big Ten Network.

    The Fox News Channel (FNC) more than doubled its operating income versus
the first quarter a year ago primarily from increased affiliate revenues on
higher rates and advertising revenue growth from higher volume and pricing.
During the quarter, viewership at FNC was more than 65% higher than its
nearest competitor in primetime and more than 55% greater on a 24-hour basis,
reflecting FNC broadcasting thirteen of the top 15 shows in cable news.

    At our other cable channels, operating profit was in-line with the first
quarter a year ago as increased contributions from the Regional Sports
Networks (RSNs) and Fox International Channels were offset by launch costs for
the Fox Business Network and the Big Ten Network, as well as lower
contributions from FX. The growth at the RSNs was driven by affiliate revenue
growth from increased rates and additional subscribers, as well as from
advertising revenue growth on higher rates. The revenue growth was partially
offset by higher programming costs from broadcasting additional major league
baseball games and new rights deals. The increased contributions from the Fox
International Channels were driven by continued growth in Latin America and
Europe. Operating income at FX declined slightly during the quarter as
increased affiliate and advertising revenues were more than offset by higher
programming costs for movie product and promotional costs for new series.

    DIRECT BROADCAST SATELLITE TELEVISION

    SKY Italia reported first quarter operating income of $48 million, an
improvement of $61 million versus a loss of $13 million a year ago on local
currency revenue growth of 11%. This improvement primarily reflects subscriber
additions, with 410,000 net new subscribers added over the past 12 months,
bringing SKY Italia's subscriber base to 4.24 million at quarter end. The
revenue growth was partially offset by increased programming spending
associated with the larger subscriber base as well as costs associated with
the launch of new channels.

    MAGAZINES AND INSERTS

    The Magazines and Inserts segment reported first quarter operating income
of $79 million, a slight increase versus the $78 million reported in the
quarter a year ago. The growth was driven by higher revenues due to increased
demand for in-store marketing products, partially offset by lower volume and
revenue rates from free standing inserts.

    NEWSPAPERS

    The Newspapers segment reported first quarter operating income of $93
million, down $31 million from the $124 million reported in the same period a
year ago, as increased depreciation associated with the development of new
color printing operations in the U.K. more than offset increased contributions
from Australia.

    The U.K. newspaper group reported a decrease in operating income in local
currency terms as compared with the first quarter a year ago primarily as a
result of increased accelerated depreciation on the printing presses that will
be replaced, sooner than anticipated, by the new color printing operations.
During the quarter, circulation revenues were slightly above prior year while
advertising revenues declined slightly.

    The Australian newspaper group reported first quarter operating income
growth versus the first quarter of fiscal 2007 in local currency terms on the
strength of display and classified advertising revenues. Display advertising
was led by the retail and real estate sectors while classified advertising
experienced gains in the employment sector. Additionally, circulation revenues
increased slightly during the quarter mainly from higher cover pricing at the
major weekend newspapers.

    BOOK PUBLISHING

    HarperCollins reported first quarter operating income of $36 million, a
decrease of $19 million versus the same period a year ago that included strong
sales of Lemony Snicket's A Series of Unfortunate Events. Current quarter
results were highlighted by strong sales of The Dangerous Book for Boys by
Conn and Hal Iggulden, Motor Mouth by Janet Evanovich, Ana's Story by Jenna
Bush and Deceptively Delicious by Jessica Seinfeld. During the quarter,
HarperCollins had 51 books on The New York Times bestseller list, including
six books that reached the #1 spot.

    OTHER

    The Other segment reported an operating loss of $43 million, a $30
million improvement versus the first quarter a year ago, primarily led by
improved results at Fox Interactive Media (FIM), partially offset by startup
losses at our Eastern European broadcasting initiatives. The operating income
at FIM was driven by higher search revenues, primarily from the Google
agreement which took effect in January 2007, and advertising revenue growth as
a result of increased traffic, further inventory monetization and
international expansion. The revenue growth was partially offset by increased
costs associated with the larger audience, international expansion and new
features.

    OTHER ITEMS

    In July 2007, the Company entered into a definitive merger agreement with
Dow Jones & Company to acquire all of the outstanding shares of Dow Jones in a
transaction valued at approximately $5.7 billion. Members of the Bancroft
family and related trusts owning approximately 37% of Dow Jones voting stock
have agreed to vote their shares in favor of the transaction. The transaction
is subject to approval by the Dow Jones stockholders, regulatory approvals and
other customary closing conditions, and is expected to be completed in the
fourth quarter of calendar 2007. The Company has agreed, upon closing of the
transaction, to appoint a member of the Bancroft family or another mutually
acceptable person to the Company's Board of Directors.

    REVIEW OF EQUITY EARNINGS OF AFFILIATES' RESULTS

    First quarter net earnings of affiliates were $246 million versus $243
million in the same period a year ago. The improvement was primarily due to
higher earnings at Gemstar-TV Guide International due to a reduced tax
provision, partially offset by lower contributions from BSkyB and The DIRECTV
Group. At BSkyB, the decline in equity earnings was primarily due to higher
costs associated with the broadband offering, increased product upgrade
volumes and increased sports rights. The decreased earnings from The DIRECTV
Group reflect higher set-top box depreciation and product upgrade costs.

    The Company's share of equity earnings of affiliates is as follows:

    
                                                           3 Months Ended
                                                            September 30,
                                             % Owned        2007    2006
                                             -------       ------- -------
                                                            US $ Millions
    BSkyB                                        39% (a)   $    64  $   82
    The DIRECTV Group                            40%(a)(b)     104     116
    Other affiliates                         Various (c)        78      45
                                                           ------- -------
    Total equity earnings of affiliates                    $   246  $  243
                                                           ------- -------
    

    
    (a) Please refer to respective companies' earnings releases for
     detailed information.

    (b) Due to The DIRECTV Group's stock repurchase program, the Company's
     ownership in The DIRECTV Group increased to 40% as of September 30,
     2007 from 39% as of June 30, 2007 and September 30, 2006.

    (c) Primarily comprising Gemstar-TV Guide International, Fox Cable
     Networks affiliates, Sky Network Television Limited, and STAR equity
     affiliates.
    

    Foreign Exchange Rates

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

    
                                                 3 Months Ended
                                                  September 30,
                                                2007        2006
                                             ---------- ------------

    Australian Dollar/U.S. Dollar                  0.85         0.76
    U.K. Pounds Sterling/U.S. Dollar               2.02         1.87
    Euro/U.S. Dollar                               1.37         1.27
    

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

    Audio from News Corp's conference call with analysts on the first quarter
results can be heard live on the Internet at 4:45 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
                                                            September 30,
                                                            2007    2006
                                                           ------- -------
                                                           US $ Millions
                                                             (except per
                                                            share amounts)

    Revenues                                               $7,067  $5,914
    Expenses:
        Operating                                           4,408   3,754
        Selling, general and administrative                 1,290   1,102
        Depreciation and amortization                         322     207
                                                           ------- -------
    Operating income                                        1,047     851
    Other income (expense):
        Equity earnings of affiliates                         246     243
        Interest expense, net                                (213)   (200)
        Interest income                                       100      75
        Other, net                                              -     428
                                                           ------- -------

    Income before income tax expense and minority interest
     in subsidiaries                                        1,180   1,397
        Income tax expense                                   (414)   (538)
        Minority interest in subsidiaries, net of tax         (34)    (16)
                                                           ------- -------
    Net income                                             $  732  $  843
                                                           ------- -------


    Per share amounts:
        Basic and diluted                                   $0.23
        Class A                                                     $0.28
        Class B                                                     $0.23
    

    
    CONSOLIDATED BALANCE SHEETS                September 30,   June 30,
                                                   2007          2007
                                               ------------- -------------

    Assets                                            US $ Millions
    Current assets:
    Cash and cash equivalents                  $       8,118 $       7,654
    Receivables, net                                   6,480         5,842
    Inventories, net                                   2,422         2,039
    Other                                                534           371
                                               ------------- -------------
    Total current assets                              17,554        15,906
                                               ------------- -------------

    Non-current assets:
    Receivables                                          499           437
    Investments                                       10,977        11,413
    Inventories, net                                   2,653         2,626
    Property, plant and equipment, net                 5,839         5,617
    Intangible assets, net                            11,845        11,703
    Goodwill                                          14,192        13,819
    Other non-current assets                             933           822
                                               ------------- -------------
    Total non-current assets                          46,938        46,437
                                               ------------- -------------
    Total assets                               $      64,492 $      62,343
                                               ------------- -------------

    Liabilities and Stockholders' Equity
    Current liabilities:
    Borrowings                                 $         385 $         355
    Accounts payable, accrued expenses and
     other current liabilities                         5,355         4,545
    Participations, residuals and royalties
     payable                                           1,313         1,185
    Program rights payable                               986           940
    Deferred revenue                                     780           469
                                               ------------- -------------
    Total current liabilities                          8,819         7,494
                                               ------------- -------------

    Non-current liabilities:
    Borrowings                                        12,148        12,147
    Other liabilities                                  4,459         3,319
    Deferred income taxes                              4,737         5,899
    Minority interest in subsidiaries                    688           562
    Commitments and contingencies
    Stockholders' Equity:
    Class A common stock, $0.01 par value                 21            21
    Class B common stock, $0.01 par value                 10            10
    Additional paid-in capital                        27,253        27,333
    Retained earnings and accumulated other
     comprehensive income                              6,357         5,558
                                               ------------- -------------
    Total stockholders' equity                        33,641        32,922
                                               ------------- -------------
    Total liabilities and stockholders' equity $      64,492 $      62,343
                                               ------------- -------------
    

    
    CONSOLIDATED STATEMENTS OF CASH FLOWS    3 Months Ended September 30,
                                                  2007           2006
                                             -------------- --------------
                                                     US $ Millions
    Operating activities:
    Net income                               $         732  $         843
    Adjustments to reconcile net income to
     cash provided by operating activities:
      Depreciation and amortization                    322            207
      Amortization of cable distribution
       investments                                      12             23
      Equity earnings of affiliates                   (246)          (243)
      Cash distributions received from
       affiliates                                       19             14
      Other, net                                         -           (428)
      Minority interest in subsidiaries, net
       of tax                                           34             16
      Change in operating assets and
       liabilities, net of acquisitions:
          Receivables and other assets                (719)           (55)
          Inventories, net                            (215)          (232)
          Accounts payable and other
           liabilities                                 864            571
                                             -------------- --------------
    Net cash provided by operating
     activities                                        803            716
                                             -------------- --------------

    Investing activities:
      Property, plant and equipment, net of
       acquisitions                                   (343)          (282)
      Acquisitions, net of cash acquired              (239)          (157)
      Investments in equity affiliates                 (35)           (11)
      Other investments                                  3            (17)
      Proceeds from sale of investments and
       other non-current assets                        289            288
                                             -------------- --------------
    Net cash used in investing activities             (325)          (179)
                                             -------------- --------------

    Financing activities:
      Borrowings                                        10            145
      Repayment of borrowings                            -           (190)
      Issuance of shares                                39             68
      Repurchase of shares                            (122)           (59)
      Dividends paid                                    (2)            (3)
      Other, net                                        22              -
                                             -------------- --------------
    Net cash used in financing activities              (53)           (39)
                                             -------------- --------------

    Net increase in cash and cash
     equivalents                                       425            498
    Cash and cash equivalents, beginning of
     period                                          7,654          5,783
    Exchange movement on opening cash
     balance                                            39             11
                                             -------------- --------------
    Cash and cash equivalents, end of period $       8,118  $       6,292
                                             -------------- --------------
    

    
    SEGMENT INFORMATION                                   3 Months Ended
                                                           September 30,
                                                           2007     2006
                                                         -------- --------

                                                           US $ Millions

    Revenues

    Filmed Entertainment                                 $ 1,582  $ 1,213
    Television                                             1,145    1,103
    Cable Network Programming                              1,102      889
    Direct Broadcast Satellite Television                    747      622
    Magazines and Inserts                                    264      275
    Newspapers                                             1,244    1,049
    Book Publishing                                          330      368
    Other                                                    653      395
                                                         -------- --------
    Total Revenues                                       $ 7,067  $ 5,914
                                                         -------- --------

    Operating Income

    Filmed Entertainment                                 $   362  $   239
    Television                                               183      192
    Cable Network Programming                                289      249
    Direct Broadcast Satellite Television                     48      (13)
    Magazines and Inserts                                     79       78
    Newspapers                                                93      124
    Book Publishing                                           36       55
    Other                                                    (43)     (73)
                                                         -------- --------
    Total Operating Income                               $ 1,047  $   851
                                                         -------- --------
    

    NOTE 1 - SUPPLEMENTAL FINANCIAL DATA FOR FISCAL 2007

    Earnings per share is presented on a combined basis for fiscal 2007 as
the Company was required to present the two-class method prior to fiscal 2008.
In fiscal 2007, under U.S. GAAP, earnings per share was computed individually
for the Class A and Class B shares. Class A non-voting shares carry rights to
a greater dividend than Class B voting shares through fiscal 2007. As such,
net income available to the Company's common stockholders is allocated between
our two classes of common stock for fiscal 2007. The allocation between
classes was based upon the two-class method. Earnings per share by class and
by total weighted average shares outstanding (Class A and Class B combined) is
as follows:

    
                                                               3 Months
                                                                 Ended
                                                             September 30,
                                                                      2006
                                                             -------------


    Basic earnings per share:
          Class A                                                    $0.28
          Class B                                                    $0.23
          Total                                                      $0.27

    Diluted earnings per share:
          Class A                                                    $0.28
          Class B                                                    $0.23
          Total                                                      $0.27

    Weighted average shares outstanding (diluted):
          Class A                                                    2,191
          Class B                                                      987
                                                             -------------
          Total                                                      3,178
                                                             -------------
    

    NOTE 2 - OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

    Operating income before depreciation and amortization, defined as
operating income plus depreciation and amortization and the amortization of
cable distribution investments, eliminates the variable effect across all
business segments of non-cash depreciation and amortization. Since operating
income before depreciation and amortization is a non-GAAP measure it should be
considered in addition to, not as a substitute for, operating income, net
income, cash flow and other measures of financial performance reported in
accordance with GAAP. Operating income before depreciation and amortization
does not reflect cash available to fund requirements, and the items excluded
from operating income before depreciation and amortization, such as
depreciation and amortization, are significant components in assessing the
Company's financial performance. Management believes that operating income
before depreciation and amortization is an appropriate measure for evaluating
the operating performance of the Company's business segments. Operating income
before depreciation and amortization, which is the information reported to and
used by the Company's chief decision maker for the purpose of making decisions
about the allocation of resources to segments and assessing their performance,
provides management, investors and equity analysts a measure to analyze
operating performance of each business segment and enterprise value against
historical and competitors' data.

    The following table reconciles operating income before depreciation and
amortization to the presentation of operating income.

    
                                                         3 Months Ended
                                                         September 30,
                                                        2007       2006
                                                      --------- ----------
                                                         US $ Millions

    Operating income                                  $   1,047 $      851
    Depreciation and amortization                           322        207
    Amortization of cable distribution investments           12         23
                                                      --------- ----------
    Operating income before depreciation and
     amortization                                     $   1,381 $    1,081
                                                      --------- ----------
    

    
                        For the Three Months Ended September 30, 2007
                                       (US $ Millions)
                   -------------------------------------------------------
                                                              Operating
                                                                income
                                                                (loss)
                                              Amortization      before
                    Operating  Depreciation     of cable      depreciation
                     income         and        distribution       and
                      (loss)    amortization   investments    amortization
                   ---------- -------------- -------------- --------------

    Filmed
     Entertainment $      362             21              -            383
    Television            183             24              -            207
    Cable Network
     Programming          289             20             12            321
    Direct
     Broadcast
     Satellite
     Television            48             50              -             98
    Magazines and
     Inserts               79              2              -             81
    Newspapers             93            139              -            232
    Book
     Publishing            36              2              -             38
    Other                (43)             64              -             21
                   ---------- -------------- -------------- --------------
    Total          $    1,047            322             12          1,381
                   ---------- -------------- -------------- --------------
    

    
                        For the Three Months Ended September 30, 2006
                                       (US $ Millions)
                   -------------------------------------------------------
                                                              Operating
                                                                income
                                                                (loss)
                                              Amortization      before
                    Operating  Depreciation     of cable      depreciation
                     income         and        distribution       and
                      (loss)    amortization   investments    amortization
                   ---------- -------------- -------------- --------------

    Filmed
     Entertainment $      239 $           20 $            - $          259
    Television            192             22              -            214
    Cable Network
     Programming          249             13             23            285
    Direct
     Broadcast
     Satellite
     Television          (13)             48              -             35
    Magazines and
     Inserts               78              2              -             80
    Newspapers            124             68              -            192
    Book
     Publishing            55              2              -             57
    Other                (73)             32              -           (41)
                   ---------- -------------- -------------- --------------
    Total          $      851 $          207 $           23 $        1,081
                   ---------- -------------- -------------- --------------
    




For further information:

For further information: News Corporation Investor Relations: Reed
Nolte, 212-852-7092 or Press Inquiries: Andrew Butcher, 212-852-7070

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