News Corporation Reports Third Quarter Operating Income of $1.0 Billion; Growth of 14% over Third Quarter a Year Ago.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Revenues Increase to $6.2 Billion; Net Income More Than Doubles, Increasing to $820 Million QUARTER HIGHLIGHTS --SKY Italia generates operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $69 million, an improvement of $90 million compared to the third quarter a year ago, as the subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. base expands to more than 3.7 million subscribers. --Cable Network Programming operating income up 23% on increased affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. revenue at the Regional Sports Networks In the United States of America, a Regional Sports Network, or RSN, is a cable television station that presents sports programming to a local market. The most important programming on an RSN consists of live broadcasts of professional and college sporting events, as those games and advertising strength at Fox News Channel. --Primetime ratings strength at the FOX Network and advertising growth at STAR drive Television operating income up 29%. --Filmed Entertainment delivers solid operating income contribution of $225 million. Decrease versus a year ago reflects record prior year results on strength of home entertainment sales of film and television titles. --Total print business operating income declines 9% as double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth at Magazines and Inserts was more than offset primarily by the absence of TSL TSL Texas State Library TSL Transport Layer Security TSL Techsideline.com (website) TSL Teen Second Life (website) TSL The Svedberg Laboratory (Uppsala, Sweden) Education business earnings in the Newspaper segment following its sale in October October: see month. 2005. News Corporation (NYSE NYSE See: New York Stock Exchange : NWS NWS National Weather Service NWS Naval Weapons Station NWS New World Symphony NWS Nuclear Weapon State NWS Not Work Safe NWS National Watercolor Society NWS North Warning System NWS Nose Wheel Steering NWS National Waste Strategy (UK) , NWSA NWSA National Women's Studies Association NWSA National Woman Suffrage Association (1869-1890) NWSA New World School of the Arts (Miami, Florida, USA) NWSA National Welding Supply Association ; ASX ASX See: Australian Stock Exchange : NWS, NWSLV) today reported third quarter operating income of $1.0 billion, an increase of 14% over the $889 million a year ago on revenues of $6.2 billion, up $155 million from the $6.0 billion reported in the third quarter of fiscal 2005. The year-on-year operating income growth was primarily driven by double-digit percentage increases at the Television, Cable Network Programming and Magazines and Inserts segments, as well as by a $90 million improvement at SKY Italia SKY Italia is an Italian digital satellite television platform owned by News Corporation. It is similar in many ways to BSkyB's Sky Digital in the United Kingdom and Ireland, and like that network it is a major sports broadcaster. . Third quarter net income of $820 million ($0.26 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. combined basis(1)) more than doubled from the $400 million ($0.13 per share on a diluted combined basis(1)) reported in the third quarter a year ago. These results primarily reflect the increased consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating income, higher equity earnings of affiliates and increased Other income, reflecting a gain on the sale of Innova partially offset by the unrealized charge for the fair value of certain outstanding exchangeable debt Exchangeable Debt Similar to convertibles, except this type of debt can be converted into the shares of a company other than the issuing company (usually a subsidiary). Notes: Often used by corporations to sell a large position in the shares of another company. securities.
(1) See supplemental financial data on page 13 for detail on earnings
per share
Commenting on the results, Chairman and Chief Executive Officer Rupert Rupert, 1352–1410, German king (1400–1410), elector palatine of the Rhine. He was elected German king after the deposition of Wenceslaus. Seeking the imperial crown, Rupert went to Italy. Murdoch said: "We are obviously pleased with the 14% operating income growth and two-fold increase in net income we delivered this quarter. Our growth was as diverse as it was deep: continued subscriber expansion at SKY Italia; ratings success at our broadcast network; sustained momentum across our array of cable channels; and a dramatic increase in equity earnings from DIRECTV DirecTV (trademarked as "DIRECTV") is a direct broadcast satellite (DBS) service based in El Segundo, California, USA, that transmits digital satellite television and audio to households in the United States, the Caribbean and Latin America except for Mexico. . "This quarter also saw accelerated progress in our new media evolution. MySpace The most popular social networking site on the Web, especially for teenagers and people under 30. Founded in 2003 by Tom Anderson and Chris DeWolfe, MySpace was acquired by Rupert Murdoch's News Corporation via its $500 million purchase of parent company Intermix in 2005. expanded to over 70 million registered users, solidifying so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. its prominence prominence /prom·i·nence/ (prom´i-nins) a protrusion or projection. frontonasal prominence as one of the fastest growing sites on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . We also launched Mobizzo, a comprehensive new destination for mobile content, putting us in the vanguard Vanguard Any of three unmanned U.S. experimental satellites. Vanguard I (1958), the second U.S. satellite placed in orbit around Earth (after Explorer 1), was a tiny 3.25-lb (1.47-kg) sphere with two radio transmitters. of this exploding new platform. And we reached agreement with our broadcast affiliates on repurposing network content, thus allowing us to aggressively develop new ways of distributing and monetizing our programming across the full range of new media platforms. "At the same time, as we invest in these new opportunities, our strong balance sheet has enabled us to continue aggressively with our stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. We have completed close to $2.5 billion of the original $3.0 billion buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may program we initiated last June June: see month. , and today we announced that the Board of Directors has approved an increase in the stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program to $6.0 billion. This $3.0 billion step up clearly reinforces our view that repurchases of News Corporation shares are among the best uses of our cash in today's environment."
Consolidated Operating Income 3 Months Ended 9 Months Ended
March 31, March 31,
2006 2005 2006 2005
------- ------- ------- -------
US Millions
Filmed Entertainment $ 225 $ 251 $ 892 $ 949
Television 286 221 629 608
Cable Network Programming 211 172 670 565
Direct Broadcast Satellite Television 69 (21) (45) (247)
Magazines and Inserts 90 79 242 216
Newspapers 153 186 347 488
Book Publishing 26 30 173 152
Other (49) (29) (68) (122)
------- ------- ------- -------
Total Consolidated Operating Income $1,011 $ 889 $2,840 $2,609
------- ------- ------- -------
REVIEW OF OPERATING RESULTS FILMED ENTERTAINMENT The Filmed Entertainment segment reported third quarter operating income of $225 million versus the $251 million reported in the same period a year ago. The year on year decline is primarily due to comparisons with record results a year ago led by the home entertainment performances of Alien alien, in law, any person residing in one political community while owing allegiance to another. A procedure known as naturalization permits aliens to become citizens. vs. Predator predator an animal that derives its life support by predation. , Napoleon Dynamite  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. and I, Robot I, Robot is a collection of nine English language science fiction short stories by Isaac Asimov, first published by Gnome Press in 1950 in an edition of 5,000 copies. . The current-year results primarily reflect several successful film and television home entertainment releases, as well as increased contributions from the worldwide theatrical and pay-TV pay-TV n. A system for receiving television broadcasts by making subscription payments, as by renting a device that unscrambles the broadcaster's scrambled signal. Also called pay television. markets. Third quarter film results were largely driven by the domestic home entertainment performances of Walk the Line and Transporter 2 and by the continued success of Fantastic Four This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. in the international home entertainment market. Additionally, the pay-TV availability of Hide and Seek and Because of Winn Dixie Dixie popular name for Southern states in U.S. and for song. [Am. Hist.: EB, III: 587] See : Southern States contributed to the strong quarterly results. The current quarter also included release costs for several successful theatrical releases including Big Momma's House 2, The Hills Have Eyes and the phenomenal success of Ice Age 2: The Meltdown meltdown Occurrence in which a huge amount of thermal energy and radiation is released as a result of an uncontrolled chain reaction in a nuclear power reactor. The chain reaction that occurs in the reactor's core must be carefully regulated by control rods, which absorb , which was released on March 31st and has grossed over $590 million in worldwide box office to date. Twentieth Century Fox Television (TCFTV) had increased contributions versus the third quarter a year ago, primarily reflecting continued momentum in home entertainment sales, most notably from Family Guy and 24. Several of TCFTV's new shows this broadcast season are delivering strong ratings including the number one new comedy, My Name is Earl My Name Is Earl is an Emmy Award-winning American sitcom created by Greg Garcia. It is produced by 20th Century Fox Television. It is currently in its third season and is broadcast on the NBC television network Thursdays at 8:00 PM Eastern time. , and the top two new dramas, The Unit and Prison Break. TELEVISION The Television segment reported third quarter operating income of $286 million, an increase of $65 million, or 29%, versus the same period a year ago, primarily reflecting higher contributions from the FOX Broadcasting Company Noun 1. broadcasting company - a company that manages tv or radio stations company - an institution created to conduct business; "he only invests in large well-established companies"; "he started the company in his garage" and STAR. At the FOX Broadcasting Company (FBC See fully buzzword compliant. ), third quarter operating results were solidly profitable versus a loss a year ago as ratings momentum and higher pricing drove primetime advertising revenue growth. The higher primetime advertising revenues in the current year were partially offset by increased programming costs for several returning series including American Idol American Idol is an annual American televised singing competition, which began its first season on June 11, 2002. Part of the Idol franchise, it originated from the British reality program Pop Idol. and 24, which, along with House, fueled ratings growth of 17% among Adults 18-49 for the quarter. Additionally, the third quarter a year ago included a loss associated with the broadcast of Super Bowl XXXIX Super Bowl XXXIX was the 39th championship game of the modern National Football League (NFL). The game was played on February 6, 2005, at ALLTEL Stadium in Jacksonville, Florida, following the 2004 regular season. . Fox Television Stations' (FTS FTS facteur thymique sérique. ) third quarter operating income declined only 4% despite the benefit a year ago from FBC's broadcast of Super Bowl XXXIX. Primetime ratings strength and the continued success of local news drove advertising revenue growth which was partially offset by increased local sports rights and the further expansion of local newscasts. STAR's third quarter operating income increased 28% as advertising revenue growth, mainly from India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. , drove total revenues up 14%. Advertising gains were led by weekend programming initiatives at STAR Plus and by the growth of STAR One and STAR Gold. CABLE NETWORK PROGRAMMING Cable Network Programming reported third quarter operating income of $211 million, an increase of $39 million over last year's result. The 23% growth primarily reflects advertising strength at the Fox News Channel and affiliate revenue growth at the Regional Sports Networks (RSNs). The Fox News Channel (FNC FNC - Federal Networking Council ) reported operating income growth of 24% compared to the third quarter a year ago, primarily from higher advertising on increased pricing and volume. During the quarter, viewership view·er·ship n. The people who watch a television program or motion picture: a largely male viewership. at FNC was nearly double its nearest competitor in primetime and was over 80% higher on a 24-hour basis reflecting FNC broadcasting the top five shows in cable news. At our other cable channels (including the RSNs, the FX Channel (FX) and SPEED Channel) operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. increased 25% from last year's third quarter results. Revenue gains at the RSNs, primarily from increased affiliate rates and additional DBS (Direct Broadcast Satellite) A one-way TV broadcast service from a communications satellite to a small round or oval dish antenna no larger than 20" in diameter. subscribers, were partially offset by programming costs associated with broadcasting NHL NHL Non-Hodgkin's lymphoma, see there games. Current quarter results also included higher revenues and costs associated with the consolidation of FSN (Full-Service Network) A communications network that provides shopping, movies on demand and access to databases and a variety of interactive services. Ohio, FSN Florida FSN Florida, formerly Fox Sports Net Florida, is a television channel that shows local sports coverage in the state of Florida. It is owned by News Corp. along with Sun Sports. and National Sports Partners after acquiring a controlling stake in the fourth quarter of fiscal 2005. At FX, double-digit revenue growth in the quarter was driven by increased affiliate revenues from higher rates and additional subscribers, as well as by increased advertising revenues on ratings growth and higher pricing. These revenue gains were more than offset by increased programming costs for returning series, as well as promotional and programming spending for several new original series, including Black/White which had the most watched premiere of any original basic cable series this season. FX's investment in programming has translated into significant ratings momentum with primetime ratings up 31% among Adults 18-49 during the third quarter. DIRECT BROADCAST SATELLITE TELEVISION SKY Italia reported third quarter operating income of $69 million, an improvement of $90 million compared to a year ago on local currency revenue growth of 17%. This improvement primarily reflects the addition of 472,000 net new subscribers over the past 12 months, bringing SKY Italia's subscriber base to 3.71 million at quarter-end. The related revenue growth was partially offset by increased programming costs associated with the larger subscriber base, as well as higher spending primarily due to the broadcast of additional movie titles and new entertainment channels on the basic programming tier. MAGAZINES AND INSERTS The Magazines and Inserts segment reported third quarter operating income of $90 million, an increase of 14% versus the $79 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 revenue rates from the publication of free standing inserts. NEWSPAPERS The Newspapers segment reported third quarter operating income of $153 million, a decrease of $33 million from last year's results primarily reflecting lower contributions from the U.K. newspaper group. While the U.K. newspaper group reported an operating income decline in local currency terms in the third quarter, this was principally the result of the absence of operating income from the TSL Education business and costs associated with the launch of a consumer magazine division. Without these factors, results were in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. with a year ago, as double-digit circulation revenue growth was offset by a slight reduction in advertising revenues. The circulation revenue gains were the result of increased cover prices across all major titles, with particular revenue growth at The Sun, The Sunday Sunday: see Sabbath; week. Times and The Times. The Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. newspaper group reported third quarter operating income in-line with a year ago in local currency terms as display and classified advertising growth was offset by higher editorial and production costs. Display advertising experienced gains in the national and property sectors, while classified revenues were led by strength in the employment market. Circulation revenues also increased slightly during the quarter mainly from higher cover pricing at the major weekend newspapers. BOOK PUBLISHING book publishing. The term publishing means, in the broadest sense, making something publicly known. Usually it refers to the issuing of printed materials, such as books, magazines, periodicals, and the like. HarperCollins HarperCollins is a publishing company owned by News Corporation. It is the combination of the publishers William Collins, Sons and Co Ltd, a British company, and Harper & Row, an American company. The worldwide CEO of HarperCollins is Jane Friedman. reported third quarter operating income of $26 million, a decrease of $4 million versus the same period a year ago. The prior year included robust sales of The Purpose Driven Life and Lemony lem·on n. 1. a. A spiny, Asian evergreen tree (Citrus limon) widely cultivated for its yellow, egg-shaped fruit. b. The fruit of this tree, having a yellow aromatic rind and juicy, acid pulp. 2. Snicket's A Series of Unfortunate Events, as well as strong contributions from Winning by Jack Welch For the illustrator named Jack Welch, see Jack Welch (illustrator) John Francis "Jack" Welch, Jr. (born on November 19 1935 and Suzy Welch Suzy Welch (nee Wetlaufer) (b. 1959) is a former editor of the Harvard Business Review. She gained notoriety after being forced to resign as editor in early 2002 after admitting having an affair with Jack Welch, the former chief executive officer of General Electric while and Jose JOSE Jealous One's Still Envy (song) JOSE Joint Optics Structures Experiment Canseco's Juiced See Joost. See also juice. . The current quarter results included continued strong sales of Marley Marley the friendly ghost who helps Ebenezer Scrooge become more benevolent. [Br. Lit.: A Christmas Carol] See : Ghost & Me by John Grogan For the journalist of the same name, see . John Timothy Grogan (born 24 February, 1961) is a British politician. He is the first Labour Member of Parliament to represent Selby. John Grogan was born in Halifax, West Yorkshire, the son of a teacher, he was educated at St. and Freakonomics by Steven Ste´ven n. 1. Voice; speech; language. Ye have as merry a steven As any angel hath that is in heaven. - Chaucer. 2. An outcry; a loud call; a clamor. To set steven to make an appointment. D. Levitt and Stephen Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and J. Dubner, as well as the release of Bad Childhood-Good Life by Dr. Laura. During the quarter, HarperCollins had 36 books on The New York Times bestseller list, including four books Four Books Chinese Sishu Ancient Confucian texts used as the basis of study for civil service examinations (see Chinese examination system) in China (1313–1905). that reached the #1 spot. OTHER ITEMS In February February: see month. 2006 the Company completed its previously announced sale of its investment in Innova, a Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum DTH (Direct-To-Home) Typically refers to satellite TV broadcasting directly to a dish antenna on the roof of a house. See DBS. platform, to DIRECTV for $285 million. As a result of this transaction the Company recognized a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain of $206 million, which is included in Other, net in the Consolidated Statement of Operations See Income statement. . On June 13, 2005, the Company announced that its Board of Directors approved a stock repurchase program, under which the Company was authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to acquire up to an aggregate of $3.0 billion in the Company's Class A and Class B common stock. Today, the Board authorized an increase of that $3.0 billion buyback to $6.0 billion. As of May 10, 2006, the Company has purchased nearly $2.5 billion of stock under the program. The remaining repurchases are expected to be completed within the next two years, but may be suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time. REVIEW OF EQUITY EARNINGS OF AFFILIATES' RESULTS Third quarter net earnings from affiliates were $264 million versus $91 million in the same period a year ago. The $173 million improvement was primarily due to an increased contribution from The DIRECTV Group on subscriber growth and increased pricing. The DIRECTV Group's results also reflect lower expenses associated with a new set-top receiver lease program. Additionally, the improved results include recognition of a tax benefit by Innova and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact from foreign currency fluctuations at Sky Brasil. The Company's share of equity earnings (losses) of affiliates is as follows:
3 Months Ended 9 Months Ended
March 31, March 31,
% Owned 2006 2005 2006 2005
------- ---------------------------------
US Millions US Millions
BSkyB 37.9% (a) $ 100 $ 107 $ 286 $ 249
The DIRECTV Group 36.8% (b) 61 (40) 89 (217)
Sky Brasil 49.7% 19 (2) 23 23
Innova 30.0% (c) 41 6 61 17
FOXTEL 25.0% 2 (3) (1) (17)
Other affiliates Various (d) 41 23 152 99
---------------------------------
Total equity earnings
of affiliates $ 264 $ 91 $ 610 $ 154
=================================
Further details on the certain affiliated entities follow.
(a) Due to BSkyB's stock repurchase program, News' ownership in BSkyB
increased to 37.9% as of March 31, 2006 from 37.6% as of December
31, 2005.
(b) Due to The DIRECTV Group's stock repurchase program, News'
ownership in The DIRECTV Group increased to 36.8% at March 31,
2006 from 33.8% at December 31, 2005.
(c) The Company sold its investment in Innova on February 16, 2006.
The Company's share of equity earnings for Innova for 2006
reflects results through the date of sale.
(d) Primarily comprising Gemstar-TV Guide International, Fox Cable
Networks affiliates, Sky Network Television Limited and Queensland
Press (through November 12, 2004).
BSkyB (in STG and IFRS)(2)
-----------------------
3 Months Ended 9 Months Ended
March 31, March 31,
2006 2005(1) 2006 2005(1)
----------- ---------- ----------- -----------
Millions Millions
(except subscribers) (except subscribers)
Revenues GBP 1,063 GBP 958 GBP 3,079 GBP 2,813
Operating profit 246 217 660 573
Net income GBP 151 GBP 140 GBP 425 GBP 385
========= ======== ========== ===========
News' reportable 37.9%
share (in US$ and US
GAAP) $ 100 $ 107 $ 286 $ 249
========= ======== ========== ===========
Ending Subscribers 11,999,000 11,565,000
DTH Subscribers 8,099,000 7,704,000
(1) Certain amounts have been restated upon adoption of International
Financial Reporting Standards on July 1, 2005.
The DIRECTV Group, Inc. (2)
-----------------------------
3 Months Ended 9 Months Ended
March 31, March 31,
2006 2005 2006 2005
------- ------- ----------- -----------
Millions Millions
(except subscribers) (except subscribers)
Revenues $3,386 $3,148 $10,215 $ 9,372
Operating profit (loss) 392 (54) 767 (2,049)
Net income (loss) $ 235 $ (41) $ 451 $(1,338)
======= ======= =========== ===========
News' reportable 36.8% share $ 61 $ (40) $ 89 $ (217)
======= ======= =========== ===========
Ending Subscribers 15,388,000 14,445,000
(2) Please refer to respective companies' earnings releases for
detailed information.
Foreign Exchange Rates Average foreign exchange rates used in the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. results are as follows:
9 Months Ended
March 31,
2006 2005
----------- ------------
Australian Dollar/U.S. Dollar 0.75 0.74
U.K. Pounds Sterling/U.S. Dollar 1.76 1.86
Euro/U.S. Dollar 1.20 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 third quarter results can be heard live on the Internet at 4:30 PM. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time today. To listen to the call, visit http://www.newscorp.com Cautionary Statement Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This document contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , except as required by law.
CONSOLIDATED STATEMENTS OF OPERATIONS
3 Months Ended 9 Months Ended
March 31, March 31,
2006 2005 2006 2005
------- ------- -------- --------
US Millions
(except per share amounts)
Revenues $6,198 $6,043 $18,545 $17,751
Expenses:
Operating expenses 4,006 4,060 12,116 11,925
Selling, general, and
administrative 989 918 2,926 2,715
Depreciation and amortization 189 176 561 453
Other operating charge 3 - 102 49
------ ------ ------- -------
Operating income 1,011 889 2,840 2,609
Other income (expense):
Interest expense, net (141) (143) (410) (405)
Equity earnings of affiliates 264 91 610 154
Other, net 170 (62) 243 15
------ ------ ------- -------
Income from continuing operations
before income tax expense and
minority interest in subsidiaries 1,304 775 3,283 2,373
Income tax expense (471) (317) (1,145) (773)
Minority interest in
subsidiaries, net of tax (13) (58) (44) (189)
------ ------ ------- -------
Income from continuing operations 820 400 2,094 1,411
Gain on disposition of
discontinued operations, net of
tax - - 381 -
------ ------ ------- -------
Income before cumulative effect of
accounting change 820 400 2,475 1,411
Cumulative effect of accounting
change, net of tax - - (1,013) -
------ ------ ------- -------
Net income $ 820 $ 400 $ 1,462 $ 1,411
====== ====== ======= =======
Basic earnings per share:
Income from continuing operations
Class A $0.27 $0.14 $0.68 $0.51
Class B $0.23 $0.12 $0.57 $0.43
Net income
Class A $0.27 $0.14 $0.48 $0.51
Class B $0.23 $0.12 $0.40 $0.43
Diluted earnings per share:
Income from continuing operations
Class A $0.27 $0.14 $0.68 $0.50
Class B $0.22 $0.12 $0.57 $0.42
Net income
Class A $0.27 $0.14 $0.48 $0.50
Class B $0.22 $0.12 $0.40 $0.42
CONSOLIDATED BALANCE SHEETS
March 31, June 30,
2006 2005
-------- --------
Assets US Millions
Current assets:
Cash and cash equivalents $ 5,324 $ 6,470
Receivables, net 4,893 4,353
Inventories, net 1,817 1,516
Other 368 440
-------- --------
Total current assets 12,402 12,779
-------- --------
Non-current assets:
Receivables 703 673
Investments 10,393 10,268
Inventories, net 2,872 2,366
Property, plant, and equipment, net 4,505 4,346
Intangible assets 11,280 12,517
Goodwill 12,148 10,944
Other non-current assets 962 799
-------- --------
Total non-current assets 42,863 41,913
-------- --------
Total assets $55,265 $54,692
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings $ 57 $ 912
Accounts payable, accrued expenses and other current
liabilities 3,966 3,564
Participations, residuals and royalties payable 1,218 1,051
Program rights payable 878 696
Deferred revenue 526 426
-------- --------
Total current liabilities 6,645 6,649
-------- --------
Non-current liabilities:
Borrowings 11,368 10,087
Other liabilities 3,714 3,543
Deferred income taxes 4,782 4,817
Minority interest in subsidiaries 242 219
Commitments and contingencies
Stockholders' Equity:
Class A common stock, $0.01 par value 22 22
Class B common stock, $0.01 par value 10 10
Additional paid-in capital 28,179 30,044
Retained earnings (deficit) and accumulated other
comprehensive loss 303 (699)
-------- --------
Total stockholders' equity 28,514 29,377
-------- --------
Total liabilities and stockholders' equity $55,265 $54,692
======== ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
9 Months Ended
March 31,
2006 2005
--------- --------
US Millions
Operating activities:
Net income $ 1,462 $ 1,411
Gain on disposition of discontinued
operations, net of tax (381) -
Cumulative effect of accounting change, net of tax 1,013 -
- ------- --------
Income from continuing operations $ 2,094 $ 1,411
Adjustments to reconcile income from continuing
operations to cash provided by operating
activities:
Depreciation and amortization 561 453
Amortization of cable distribution investments 78 86
Equity earnings of affiliates (610) (154)
Cash distributions received from investees 111 78
Other, net (243) (15)
Minority interest in subsidiaries, net of tax 44 189
Change in operating assets and liabilities, net
of acquisitions:
Receivables and other assets (692) (612)
Inventories, net (995) 20
Accounts payable and other liabilities 1,701 857
- ------- --------
Net cash provided by operating activities 2,049 2,313
- ------- --------
Investing activities:
Property, plant, and equipment, net of
acquisitions (648) (710)
Acquisitions, net of cash acquired (1,578) (141)
Investments in equity affiliates (39) (142)
Other investments (46) (30)
Proceeds from sale of investments and other non-
current assets 404 643
Proceeds from disposition of discontinued
operations 395 -
- ------- --------
Net cash used in investing activities (1,512) (380)
- ------- --------
Financing activities:
Borrowings 1,149 1,776
Repayment of borrowings (839) (2,095)
Cash on deposit - 275
Issuance of shares 110 65
Repurchase of shares (1,810) -
Dividends paid (246) (124)
- ------- --------
Net cash used in financing activities (1,636) (103)
- ------- --------
Net increase (decrease) in cash and cash
equivalents (1,099) 1,830
Cash and cash equivalents, beginning of period 6,470 4,051
Exchange movement on opening cash balance (47) 112
- ------- --------
Cash and cash equivalents, end of period $ 5,324 $ 5,993
= ======= ========
SEGMENT INFORMATION
3 Months Ended 9 Months Ended
March 31, March 31,
2006 2005 2005 2005
------- ------- -------- --------
US Millions US Millions
Revenues
Filmed Entertainment $1,388 $1,477 $ 4,414 $ 4,726
Television 1,347 1,414 3,991 3,982
Cable Network Programming 839 633 2,424 1,857
Direct Broadcast Satellite
Television 675 624 1,793 1,620
Magazines and Inserts 300 283 832 774
Newspapers 1,015 1,062 3,037 2,937
Book Publishing 275 300 1,056 1,041
Other 359 250 998 814
------- ------- -------- --------
$6,198 $6,043 $18,545 $17,751
======= ======= ======== ========
Operating Income
Filmed Entertainment $ 225 $ 251 $ 892 $ 949
Television 286 221 629 608
Cable Network Programming 211 172 670 565
Direct Broadcast Satellite
Television 69 (21) (45) (247)
Magazines and Inserts 90 79 242 216
Newspapers 153 186 347 488
Book Publishing 26 30 173 152
Other (49) (29) (68) (122)
------- ------- -------- --------
$1,011 $ 889 $ 2,840 $ 2,609
======= ======= ======== ========
NOTE 1 - SUPPLEMENTAL EARNINGS PER SHARE DATA Earnings per share is presented on a combined basis as the Company will not be required to present the two class method beginning in Fiscal 2008. Currently under US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , earnings per share is computed individually for the Class A and Class B shares. Class A non-voting non-voting adj non-voting shares → azioni fpl senza diritto di voto shares carry rights to a greater dividend than Class B voting shares Voting Shares Shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors. Notes: Different classes of shares, such as preferred stock, sometimes don't allow for voting rights. through fiscal 2007. As such, net income available to the Company's common stockholders is allocated between our two classes of common stock. The allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as 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 9 Months
Ended Ended
March 31, March 31,
2006 2005 2006 2005
------ ------ ------- ------
Basic earnings per share:
Income from continuing operations
Class A $0.27 $0.14 $0.68 $0.51
Class B $0.23 $0.12 $0.57 $0.43
Total $0.26 $0.14 $0.65 $0.48
Gain on disposition of discontinued
operations, net of tax
Class A $- $- $0.12 $-
Class B $- $- $0.10 $-
Total $- $- $0.12 $-
Cumulative effect of accounting change,
net of tax
Class A $- $- ($0.33) $-
Class B $- $- ($0.28) $-
Total $- $- ($0.31) $-
Net income
Class A $0.27 $0.14 $0.48 $0.51
Class B $0.23 $0.12 $0.40 $0.43
Total $0.26 $0.14 $0.45 $0.48
Diluted earnings per share:
Income from continuing operations
Class A $0.27 $0.14 $0.68 $0.50
Class B $0.22 $0.12 $0.57 $0.42
Total $0.26 $0.13 $0.64 $0.47
Gain on disposition of discontinued
operations, net of tax
Class A $- $- $0.12 $-
Class B $- $- $0.10 $-
Total $- $- $0.12 $-
Cumulative effect of accounting change,
net of tax
Class A $- $- ($0.33) $-
Class B $- $- ($0.27) $-
Total $- $- ($0.31) $-
Net income
Class A $0.27 $0.14 $0.48 $0.50
Class B $0.22 $0.12 $0.40 $0.42
Total $0.26 $0.13 $0.45 $0.47
Weighted average shares outstanding
(diluted), in millions:
Class A 2,203 1,966 2,227 1,969
Class B 1,004 1,045 1,020 1,014
------ ------ ------- ------
Total 3,207 3,011 3,247 2,983
====== ====== ======= ======
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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 allocation of resources Apportionment of productive assets among different uses. The issue of resource allocation arises as societies seek to balance limited resources (capital, labour, land) against the various and often unlimited wants of their members. to segments and assessing their performance, provides management, investors and equity analysts a measure to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. 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 9 Months Ended
March 31, March 31,
2006 2005 2006 2005
------- ------- ------- -------
US $ Millions US $ Millions
Operating income $1,011 $ 889 $2,840 $2,609
Depreciation and amortization 189 176 561 453
Amortization of cable distribution
investments 25 28 78 86
------- ------- ------- -------
Operating income before depreciation
and amortization $1,225 $1,093 $3,479 $3,148
======= ======= ======= =======
For the Three Months Ended March 31, 2006
(US Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 225 $ 17 $ - $ 242
Television 286 24 - 310
Cable Network
Programming 211 13 25 249
Direct
Broadcast
Satellite
Television 69 37 - 106
Magazines and
Inserts 90 2 - 92
Newspapers 153 65 - 218
Book
Publishing 26 2 - 28
Other (49) 29 - (20)
---------- -------------- -------------- --------------
Consolidated
Total $ 1,011 $ 189 $ 25 $ 1,225
========== ============== ============== ==============
For the Three Months Ended March 31, 2005
(US Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 251 $ 14 $ - $ 265
Television 221 20 - 241
Cable Network
Programming 172 10 28 210
Direct
Broadcast
Satellite
Television (21) 42 - 21
Magazines and
Inserts 79 1 - 80
Newspapers 186 70 - 256
Book
Publishing 30 1 - 31
Other (29) 18 - (11)
---------- -------------- -------------- --------------
Consolidated
Total $ 889 $ 176 $ 28 $ 1,093
========== ============== ============== ==============
For the Nine Months Ended March 31, 2006
(US Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 892 $ 63 $ - $ 955
Television 629 66 - 695
Cable Network
Programming 670 38 78 786
Direct
Broadcast
Satellite
Television (45) 121 - 76
Magazines and
Inserts 242 5 - 247
Newspapers 347 196 - 543
Book
Publishing 173 5 - 178
Other (68) 67 - (1)
---------- -------------- -------------- --------------
Consolidated
Total $ 2,840 $ 561 $ 78 $ 3,479
========== ============== ============== ==============
For the Nine Months Ended March 31, 2005
(US Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 949 $ 39 $ - $ 988
Television 608 61 - 669
Cable Network
Programming 565 30 86 681
Direct
Broadcast
Satellite
Television (247) 114 - (133)
Magazines and
Inserts 216 4 - 220
Newspapers 488 151 - 639
Book
Publishing 152 4 - 156
Other (122) 50 - (72)
---------- -------------- -------------- --------------
Consolidated
Total $ 2,609 $ 453 $ 86 $ 3,148
========== ============== ============== ==============
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