August 13, 2015 Last Updated 7:32 am

News Corp reports loss of $149M for fiscal year 2015 due to large impairment charges

Total revenue increased 1 percent due to additional assets including in results, but revenue from its News division fell 7 percent

The media company News Corp today reported its fourth quarter earnings for its fiscal 2015 year. The company reported overall revenue increased 1 percent, though the growth is almost entirely due to the inclusion of its Move acquisition.

Revenue for its News division fell 7 percent to $422 million, or 7%, with advertising revenues declining 10 percent. Book publishing grew its revenues by $233 million, or 16 percent, due to the inclusion of Harlequin results and strong backlist sales resulting from the success of American Sniper.

Net income was impacted by an impairment charge of $371 million related to the Amplify business, so the company reported a loss of $149 million, compared to net income of $237 million in the prior year.

When looking at News Corp’s structure, one is struck by how much more diversified it is than the other newspaper companies that have completed spin-outs. In addition to its News division, there is book publishing, digital real estate and cable network programming, making News Corp far less vulnerable to declining print ad sales than many of its competitors.

Here is News Corp’s Q4 earnings announcement:


NEW YORK, NY – August 13, 2015 — News Corporation today reported financial results for the three months and fiscal year ended June 30, 2015.

Commenting on the results, Chief Executive Robert Thomson said:

“Thanks to solid performance across a number of our businesses, including the fast-growing realtor.com®, we had a strong fourth quarter finish to a good fiscal year. Despite an uneven global economy, very tough currency headwinds and the ongoing transformation of the media landscape, for fiscal 2015 we posted stable revenues, robust EBITDA growth and healthy free cash flow.

“With disciplined internal investments, strategic acquisitions and ongoing product innovation, we have aggressively shifted the company to be more global and more digital. We have clearly emerged as an international leader in digital real estate, opened up new territories at HarperCollins, expanded digital subscriber penetration at our mastheads and successfully integrated our programmatic exchange, creating new digital and mobile advertising opportunities across News Corp.

“We have begun to execute on a capital return program that signifies our confidence in the prospects of the company and the efficacy of its long-term strategy. The year ahead will be an opportunity to build on the sound and profitable platform we have collectively created.”

FULL YEAR RESULTS

The Company reported fiscal 2015 full year total revenues of $8.63 billion, a 1% increase as compared to the prior year revenues of $8.57 billion. The increase reflects growth in the Book Publishing and Digital Real Estate Services segments, primarily as a result of the acquisitions of Harlequin Enterprises Limited (“Harlequin”) and Move, Inc. (“Move”), respectively, which was partially offset by adverse foreign currency fluctuations and lower advertising revenues at the News and Information Services segment. Adjusted revenues (as defined in Note 1) were 1% lower than the prior year.

The Company reported full year Total Segment EBITDA of $852 million, an 11% increase as compared to $770 million in the prior year. These results include $50 million in fees and costs in fiscal 2015 and $72 million in fiscal 2014 – net of indemnification – related to the U.K. Newspaper Matters (as defined below). The improvement was driven by increased revenues in the Book Publishing segment due to the inclusion of Harlequin results and lower expenses, mainly due to the increased capitalization of software development costs, at the Digital Education segment; partially offset by adverse foreign currency fluctuations, declines at the News and Information Services segment, which includes higher legal costs at News America Marketing, and stock-based compensation expense in connection to the acquisition of Move. Adjusted Total Segment EBITDA (as defined in Note 1) increased 15% compared to the prior year.

Impairment and restructuring charges were $455 million and $94 million in the fiscal years ended June 30, 2015 and 2014, respectively. Included in impairment and restructuring charges for fiscal 2015 was a non-cash impairment charge of $371 million related to the Amplify business. In the fourth quarter of fiscal 2015, the Company determined it would cease actively marketing Amplify’s Access products to new customers; however, it will continue to provide service and support to its existing customers. Additionally, the Company is reviewing strategic alternatives with respect to Amplify’s remaining digital education businesses. This change in Amplify’s strategy and related outlook resulted in a reduction in expected future cash flows for the business. As a result, the Company determined that the fair value of Amplify declined below its carrying value and recorded an impairment charge.

Net loss available to News Corporation stockholders was $149 million as compared to net income available to News Corporation stockholders of $237 million in the prior year. Adjusted net income available to News Corporation stockholders (as defined in Note 3) was $272 million compared to $268 million in the prior year.

Net loss per share available to News Corporation stockholders was $0.26 as compared to net income per share available to News Corporation stockholders of $0.41 in the prior year. Adjusted EPS (as defined in Note 3) were $0.47 compared to $0.46 in the prior year.

Free cash flow available to News Corporation was $368 million in the fiscal year ended June 30, 2015, compared to $365 million in the prior year.

FOURTH QUARTER RESULTS

The Company reported fiscal 2015 fourth quarter total revenues of $2.14 billion, a 2% decrease as compared to the prior year fourth quarter revenues of $2.19 billion. The majority of the revenue decline reflects adverse foreign currency fluctuations and lower advertising revenues at the News and Information Services segment, partially offset by growth in the Digital Real Estate Services and Book Publishing segments, primarily as a result of the acquisitions of Move and Harlequin, respectively. Adjusted revenues were 1% lower than the corresponding prior year period.

The Company’s fourth quarter Total Segment EBITDA of $191 million, which includes fees and costs, net of indemnification, related to the U.K. Newspaper Matters of $8 million, was a 50% increase as compared to $127 million in the prior year. This increase was primarily driven by lower expenses at the News and Information Services and Digital Education segments, partially offset by adverse foreign currency fluctuations. Adjusted Total Segment EBITDA increased 62% compared to the prior year.

Net loss available to News Corporation stockholders was $379 million as compared to net income available to News Corporation stockholders of $12 million in the prior year. Impairment and restructuring charges were $424 million and $21 million in the three months ended June 30, 2015 and 2014, respectively. The impairment and restructuring charges for the three months ended June 30, 2015 include an impairment charge of $371 million related to Amplify, as discussed above. Adjusted net income available to News Corporation stockholders was $38 million compared to $6 million in the prior year.

Net loss per share available to News Corporation stockholders was $0.65 as compared to net income per share available to News Corporation stockholders of $0.02 in the prior year. Adjusted EPS were $0.07 compared to $0.01 in the prior year.

SEGMENT REVIEW

NewsCorp-segments

News and Information Services

Full Year Segment Results

Fiscal 2015 full year revenues decreased $422 million, or 7%, compared to the prior year. Total segment advertising revenues declined 10%, driven primarily by weakness in the print advertising market coupled with the negative impact of foreign currency fluctuations. Circulation and subscription revenues declined 4%, due to adverse foreign currency fluctuations. Adjusted revenues declined 3% compared to the prior year.

Full year Segment EBITDA decreased $62 million, or 9%, as compared to the prior year. Results were impacted by lower advertising revenues, higher legal expenses at News America Marketing of $20 million, negative foreign currency fluctuations and one-time expenses of $11 million related to the termination of a distribution contract in connection with continued cost reduction initiatives, which more than offset lower operating expenses. Adjusted Segment EBITDA decreased 6% compared to the prior year.

Fourth Quarter Segment Results

Revenues for the fourth quarter of fiscal 2015 decreased $154 million, or 10%, compared to the prior year, as a result of a 13% decline in advertising revenues and a 5% decline in circulation revenues, driven by negative foreign currency fluctuations. Adjusted revenues declined 2% compared to the prior year. Segment EBITDA increased $38 million in the quarter, or 29%, as compared to the prior year. The increase was driven by lower operating expenses, partially offset by lower advertising revenues, one-time expenses of $11 million related to the termination of a distribution contract in connection with continued cost reduction initiatives and negative foreign currency fluctuations. Adjusted Segment EBITDA increased 34% compared to the prior year.

Book Publishing

Full Year Segment Results

Full year revenues increased $233 million, or 16%, compared to the prior year driven by the inclusion of Harlequin results and strong backlist sales in the general books category, resulting from the success of American Sniper by Chris Kyle, partially offset by lower revenues from the Divergent series by Veronica Roth. Digital sales, which consist of revenues generated through the sale of e-books and digital audio books, represented 22% of Consumer revenues for fiscal 2015. Segment EBITDA increased $24 million, or 12%, from the prior year primarily due to the inclusion of the results of Harlequin and lower expenses, partially offset by lower contribution from the Divergent series. Adjusted revenues and Adjusted Segment EBITDA each decreased 2%, compared to the prior year.

Fourth Quarter Segment Results

Revenues in the quarter increased $29 million, or 8%, compared to the prior year driven by the inclusion of Harlequin results, partially offset by lower revenues from the Divergent series. Digital sales represented 23% of Consumer revenues for the quarter. Segment EBITDA was flat from the prior year as the inclusion of results from Harlequin and lower expenses offset lower contribution from the Divergent series. Adjusted revenues decreased 9% and Adjusted Segment EBITDA decreased 18%, compared to the prior year.

Digital Real Estate Services

Full Year Segment Results

Fiscal 2015 revenues increased $217 million, or 53%, compared to the prior year, primarily due to the inclusion of the results of Move, which was acquired in November 2014, coupled with higher revenues at REA Group Limited (“REA Group”) due to the impact of increased listing depth product penetration and higher pricing, despite a decline in Australian listing volumes across the market and the negative impact of foreign currency fluctuations. Segment EBITDA decreased $13 million, or 6%, compared to the prior year primarily due to the inclusion of a loss of $39 million related to the acquisition of Move and negative foreign currency fluctuations, partially offset by increased revenues at REA Group. Segment EBITDA includes $21 million of stock-based compensation expense and $19 million of one-time transaction costs, both related to the acquisition of Move. Adjusted revenues and Adjusted Segment EBITDA increased 18% and 23%, respectively, compared to the prior year.

For the full year, Move saw strength in its Connection for Co-Brokerage product and Media revenues. Based on Move’s internal data, average monthly unique users of realtor.com®’s web and mobile sites for the fiscal fourth quarter grew 42% year-over-year to approximately 45 million, which was driven by almost 80% growth in mobile users; traffic accelerated in July to 48 million monthly unique users, or 43% growth year-over-year.

Fourth Quarter Segment Results

Revenues in the quarter increased $76 million, or 67%, compared to the prior year due to the inclusion of the results of Move coupled with higher listing depth product penetration and higher pricing at REA Group. Segment EBITDA in the quarter decreased $17 million, or 27%, compared to the prior year due to certain expenses at Move and the negative impact of foreign currency fluctuations, partially offset by the improvement at REA Group. At Move, strong revenue performance was offset by $7 million of legal expenses and $5 million of stock-based compensation expense related to the acquisition.

Adjusted revenues and Adjusted Segment EBITDA increased 15% and 18%, respectively, compared to the prior year.

Cable Network Programming

Full Year Segment Results

Fiscal 2015 full year revenues increased $9 million, or 2%, compared to the prior year driven by higher affiliate and advertising revenues, partially offset by adverse foreign currency fluctuations. Segment EBITDA increased $7 million, or 5%, from the prior year, primarily driven by higher revenues, partially offset by adverse foreign currency fluctuations and higher programming costs. Adjusted revenues and Adjusted Segment EBITDA for the full year increased 11% and 15%, respectively, compared to the prior year.

Fourth Quarter Segment Results

In the fourth quarter of fiscal 2015, revenues decreased $3 million, or 2%, compared to the prior year, as higher affiliate and advertising revenues were more than offset by negative foreign currency fluctuations. Segment EBITDA in the quarter increased $3 million, or 16%, compared to the prior year. Adjusted revenues increased 15% and Adjusted Segment EBITDA increased 37%, compared to the prior year.

Digital Education

Full Year Segment Results

Revenues for the full year increased $21 million, or 24%, compared to the prior year. Segment EBITDA improved $100 million, or 52%, compared to the prior year, primarily due to the impact of the capitalization of Amplify Learning’s software development costs of $53 million, reduced development expenses and increased revenues.

Fourth Quarter Segment Results

Revenues in the quarter increased $6 million, or 33%, and Segment EBITDA improved $29 million, or 55%.

Other

Full Year Segment Results

Full year Segment EBITDA improved by $26 million, primarily due to decreased fees and costs, net of indemnification, related to the claims and investigations arising out of certain conduct at The News of the World (the “U.K. Newspaper Matters”).

The net expense related to the U.K. Newspaper Matters was $50 million for the full year, as compared to $72 million in the prior year.

Fourth Quarter Segment Results

Segment EBITDA in the quarter improved by $11 million. The net expense related to the U.K. Newspaper Matters was $8 million for the three months ended June 30, 2015, as compared to $16 million in the prior year.

NewsCorp-earnings-Q4-2015

NewsCorp-earnings-Q4-2015

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