Exhibit 99.1
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
21ST CENTURY FOX REPORTS THIRD QUARTER INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAX EXPENSE OF $1.25 BILLION AND TOTAL
SEGMENT OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION OF $1.94 BILLION ON 5% REVENUE GROWTH
NEW YORK, NY, May 10, 2017 –Twenty-First Century Fox, Inc. (“21st Century Fox” or the “Company” — NASDAQ: FOXA, FOX) today reported financial results for the three months ended March 31, 2017.
The Company reported quarterly income from continuing operations attributable to 21st Century Fox stockholders of $811 million ($0.44 per share), as compared to $844 million ($0.44 per share) reported in the prior year quarter. Excluding the net income effects of Impairment and restructuring charges, Other, net and adjustments to Equity losses of affiliates1 adjusted quarterly earnings per share from continuing operations attributable to 21st Century Fox stockholders2 was $0.54, a 15% increase over the $0.47 reported in the same quarter of the prior year.
The Company reported total quarterly revenues of $7.56 billion, a $336 million, or 5%, increase from the $7.23 billion of revenues reported in the prior year quarter. This revenue growth reflects higher advertising revenue at the Television segment, led by the broadcast of Super Bowl LI, and higher affiliate revenues at both the Cable Network Programming and Television segments partially offset by lower content revenues at the Filmed Entertainment segment.
Quarterly income from continuing operations before income tax expense of $1.25 billion decreased $139 million from the $1.39 billion reported in the prior year quarter. Quarterly total segment OIBDA3 of $1.94 billion increased $57 million, or 3%, from the $1.88 billion reported in the prior year quarter. This increase was due to higher contributions from the Company’s Cable Network Programming and Television segments partially offset by lower contributions from the Filmed Entertainment segment.
Commenting on the results, Executive Chairmen Rupert and Lachlan Murdoch said:
“We delivered a quarter marked by operational momentum and strong domestic affiliate fee growth. We continue to demonstrate our ability to capture opportunities to grow distribution of our domestic portfolio of video brands, whether through established MVPD partners or new digital entrants such as Hulu’s recently launched live television service. We made progress in the quarter against our key strategic priorities, exemplified by our creative successes across screens, from theatrical releasesLogan andHidden Figures to new FX debuts ofLegion,Feud andTaboo. Our proposed combination with Sky, which was recently approved unconditionally by the European Commission, will advance another of our strategic priorities, driving innovation for customers. We remain confident the proposed transaction will be approved by the end of the calendar year following a thorough review process.”
1 | See footnote (a) on page 14 for a description of the adjustments to Equity losses from affiliates. |
2 | See page 14 for a reconciliation of reported income and earnings per share from continuing operations attributable to 21st Century Fox stockholders to adjusted income and adjusted earnings per share from continuing operations attributable to 21st Century Fox stockholders, which may be considerednon-GAAP financial measures. |
3 | Total segment operating income before depreciation and amortization (“OIBDA”) may be considered anon-GAAP financial measure. See page 11 for a description of total segment OIBDA and for a reconciliation from income from continuing operations before income tax expense to total segment OIBDA. |
Page 1
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
REVIEW OF SEGMENT OPERATING RESULTS
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | US $ Millions | |
Revenues: | | | | | | | | | | | | | | | | |
| | | | |
Cable Network Programming | | $ | 4,024 | | | $ | 3,941 | | | $ | 11,801 | | | $ | 11,108 | |
Television | | | 1,690 | | | | 1,299 | | | | 4,646 | | | | 4,064 | |
Filmed Entertainment | | | 2,256 | | | | 2,321 | | | | 6,432 | | | | 6,467 | |
Other, Corporate and Eliminations | | | (406 | ) | | | (333 | ) | | | (1,127 | ) | | | (959 | ) |
| | | | | | | | | | | | | | | | |
Total revenues | | $ | 7,564 | | | $ | 7,228 | | | $ | 21,752 | | | $ | 20,680 | |
| | | | | | | | | | | | | | | | |
Segment OIBDA: | | | | | | | | | | | | | | | | |
| | | | |
Cable Network Programming | | $ | 1,446 | | | $ | 1,375 | | | $ | 4,160 | | | $ | 3,931 | |
Television | | | 190 | | | | 125 | | | | 757 | | | | 600 | |
Filmed Entertainment | | | 373 | | | | 470 | | | | 1,073 | | | | 921 | |
Other, Corporate and Eliminations | | | (71 | ) | | | (89 | ) | | | (267 | ) | | | (306 | ) |
| | | | | | | | | | | | | | | | |
Total Segment OIBDA(a) | | $ | 1,938 | | | $ | 1,881 | | | $ | 5,723 | | | $ | 5,146 | |
| | | | | | | | | | | | | | | | |
(a) | Total segment OIBDA may be considered anon-GAAP financial measure. See page 11 for a description of total segment OIBDA and for a reconciliation from income from continuing operations before income tax expense to total segment OIBDA. |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
CABLE NETWORK PROGRAMMING
Cable Network Programming quarterly segment OIBDA increased 5% to $1.45 billion and revenue increased 2% to $4.02 billion. Expenses were consistent with the prior year quarter as higher entertainment programming and marketing costs at FX Networks and National Geographic Channels, higher National Association for Stock Car Auto Racing (“NASCAR”) rights costs at FOX Sports 1 (“FS1”) and higher National Basketball Association (“NBA”) rights costs at the regional sports networks (“RSNs”) were offset by lower sports rights costs at STAR India due to the absence of the prior year broadcast of the International Cricket Council (“ICC”) Cricket World Twenty20 matches.
Domestic affiliate revenue increased 8% reflecting continued contractual rate increases led by Fox News, FS1, the RSNs and FX Networks. Domestic advertising revenue was flat over the prior year period as the impact of higher ratings at Fox News and FS1 was offset by lower revenues at the National Geographic Partners businesses. Domestic OIBDA contributions were equal to the prior year quarter as higher contributions from Fox News were offset by lower contributions from FX Networks and National Geographic Channels.
International affiliate revenue increased 5% driven by local currency growth of 7% partially offset by negative currency impacts from the strengthened U.S. dollar. International advertising revenue decreased 18% from lower advertising revenues at STAR India due to the absence of the prior year broadcast of the ICC Cricket World Twenty20 matches and the effect of the Indian government demonetization initiatives on the general advertising market. Quarterly OIBDA at the international cable channels increased 44% from the prior year quarter primarily reflecting lower sports programming costs at STAR India and higher contributions from Fox Networks Group International.
TELEVISION
Television reported quarterly segment OIBDA of $190 million, an increase of 52% as compared to the prior year quarter driven by 30% revenue growth reflecting increased advertising revenue and continued growth of retransmission consent revenues. Quarterly advertising revenues grew 39% from the corresponding period of the prior year driven by the broadcast of Super Bowl LI and the inclusion of one additional National Football League divisional playoff game, partially offset by the impact from lower general entertainment ratings, led by the absence ofAmerican Idol, which concluded its final season in the prior year. The segment results also included higher sports programming costs associated with the broadcast of Super Bowl LI and the additional National Football League divisional playoff game.
FILMED ENTERTAINMENT
Filmed Entertainment generated quarterly segment OIBDA of $373 million, a $97 million decrease from the $470 million reported in the same period ayear-ago. The OIBDA decrease in the current quarter was driven primarily by lower film studio contributions reflecting difficult comparisons to last year’s strong worldwide theatrical performance ofDeadpool and the home entertainment performance ofThe Martian, partially offset by higher television production contributions from higher subscriptionvideo-on demand revenues led by the licensing ofThe People v. O.J. Simpson: American Crime Story and higher network revenue. Quarterly segment revenues decreased $65 million to $2.26 billion, primarily reflecting lower worldwide theatrical and home entertainment revenues partially offset by higher television production revenues. Quarterly results also included the successful theatrical performances of bothLogan andHidden Figures, which have grossed approximately $600 million and $230 million in worldwide box office,respectively.
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
REVIEW OF EQUITY (LOSSES) EARNINGS OF AFFILIATES’ RESULTS
The Company’s share of equity (losses) earnings of affiliates is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | % Owned | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | | | | US $ Millions | |
Sky plc | | | 39 | %(1) | | $ | 93 | | | $ | 95 | | | $ | 255 | | | $ | 305 | |
Other equity affiliates | | | Various(2) | | | | (144 | ) | | | (104 | ) | | | (312 | ) | | | (267 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total equity (losses) earnings of affiliates | | | | | | $ | (51 | ) | | $ | (9 | ) | | $ | (57 | ) | | $ | 38 | |
| | | | | | | | | | | | | | | | | | | | |
(1) | Please refer to Sky plc’s (“Sky”) earnings releases for detailed information. |
(2) | Primarily comprised of Endemol Shine Group, Hulu and Tata Sky |
Quarterly equity losses of affiliates were $51 million as compared to $9 million reported in the same period ayear-ago. The $42 million increase in losses primarily reflects higher equity losses reported at Hulu and Endemol Shine Group.
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
To receive a copy of this press release through the Internet, access 21st Century Fox’s corporate Web site located athttp://www.21cf.com.
Audio from 21st Century Fox’s conference call with analysts on the third quarter results can be heard live on the Internet at 4:30 p.m. Eastern Daylight Time today. To listen to the call, visithttp://www.21cf.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.
| | |
CONTACTS: | | |
Reed Nolte, Investor Relations | | Julie Henderson, Press Inquiries |
212-852-7092 Mike Petrie, Investor Relations 212-852-7130 | | 310-369-0773 Nathaniel Brown, Press Inquiries 212-852-7746 |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | US $ Millions, except per share amounts | |
Revenues | | $ | 7,564 | | | $ | 7,228 | | | $ | 21,752 | | | $ | 20,680 | |
| | | | |
Operating expenses | | | (4,763 | ) | | | (4,472 | ) | | | (13,472 | ) | | | (12,902 | ) |
Selling, general and administrative | | | (878 | ) | | | (893 | ) | | | (2,603 | ) | | | (2,685 | ) |
Depreciation and amortization | | | (140 | ) | | | (133 | ) | | | (410 | ) | | | (391 | ) |
Impairment and restructuring charges | | | (37 | ) | | | (15 | ) | | | (213 | ) | | | (46 | ) |
Equity (losses) earnings of affiliates | | | (51 | ) | | | (9 | ) | | | (57 | ) | | | 38 | |
Interest expense, net | | | (310 | ) | | | (295 | ) | | | (909 | ) | | | (888 | ) |
Interest income | | | 9 | | | | 12 | | | | 27 | | | | 28 | |
Other, net | | | (142 | ) | | | (32 | ) | | | (241 | ) | | | (226 | ) |
| | | | | | | | | | | | | | | | |
Income from continuing operations before income tax expense | | | 1,252 | | | | 1,391 | | | | 3,874 | | | | 3,608 | |
Income tax expense | | | (370 | ) | | | (463 | ) | | | (1,161 | ) | | | (1,190 | ) |
| | | | | | | | | | | | | | | | |
Income from continuing operations | | | 882 | | | | 928 | | | | 2,713 | | | | 2,418 | |
Loss from discontinued operations, net of tax | | | (12 | ) | | | (3 | ) | | | (19 | ) | | | (8 | ) |
| | | | | | | | | | | | | | | | |
Net income | | | 870 | | | | 925 | | | | 2,694 | | | | 2,410 | |
| | | | | | | | | | | | | | | | |
Less: Net income attributable to noncontrolling interests | | | (71 | ) | | | (84 | ) | | | (218 | ) | | | (222 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to Twenty-First Century Fox, Inc. stockholders | | $ | 799 | | | $ | 841 | | | $ | 2,476 | | | $ | 2,188 | |
| | | | | | | | | | | | | | | | |
Weighted average shares: | | | 1,853 | | | | 1,916 | | | | 1,857 | | | | 1,962 | |
| | | | |
Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders per share: | | $ | 0.44 | | | $ | 0.44 | | | $ | 1.34 | | | $ | 1.12 | |
| | | | |
Net income attributable to Twenty-First Century Fox, Inc. stockholders per share: | | $ | 0.43 | | | $ | 0.44 | | | $ | 1.33 | | | $ | 1.12 | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | | March 31,
2017 | | | June 30,
2016 | |
| | | US $ Millions | |
Assets: | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 5,572 | | | $ | 4,424 | |
Receivables, net | | | 7,219 | | | | 6,258 | |
Inventories, net | | | 3,418 | | | | 3,291 | |
Other | | | 529 | | | | 976 | |
| | | | | | | | |
Total current assets | | | 16,738 | | | | 14,949 | |
| | | | | | | | |
Non-current assets: | | | | | | | | |
Receivables, net | | | 538 | | | | 389 | |
Investments | | | 3,679 | | | | 3,863 | |
Inventories, net | | | 7,725 | | | | 7,041 | |
Property, plant and equipment, net | | | 1,691 | | | | 1,692 | |
Intangible assets, net | | | 6,579 | | | | 6,777 | |
Goodwill | | | 12,733 | | | | 12,733 | |
Othernon-current assets | | | 1,001 | | | | 749 | |
| | | | | | | | |
Total assets | | $ | 50,684 | | | $ | 48,193 | |
| | | | | | | | |
Liabilities and Equity: | | | | | | | | |
Current liabilities: | | | | | | | | |
Borrowings | | $ | 107 | | | $ | 427 | |
Accounts payable, accrued expenses and other current liabilities | | | 3,832 | | | | 3,181 | |
Participations, residuals and royalties payable | | | 1,663 | | | | 1,672 | |
Program rights payable | | | 1,233 | | | | 1,283 | |
Deferred revenue | | | 621 | | | | 505 | |
| | | | | | | | |
Total current liabilities | | | 7,456 | | | | 7,068 | |
| | | | | | | | |
Non-current liabilities: | | | | | | | | |
Borrowings | | | 19,789 | | | | 19,126 | |
Other liabilities | | | 3,826 | | | | 3,678 | |
Deferred income taxes | | | 2,742 | | | | 2,888 | |
Redeemable noncontrolling interests | | | 619 | | | | 552 | |
Commitments and contingencies | | | | | | | | |
Equity: | | | | | | | | |
Class A common stock, $0.01 par value | | | 11 | | | | 11 | |
Class B common stock, $0.01 par value | | | 8 | | | | 8 | |
Additionalpaid-in capital | | | 12,274 | | | | 12,211 | |
Retained earnings | | | 4,919 | | | | 3,575 | |
Accumulated other comprehensive loss | | | (2,195 | ) | | | (2,144 | ) |
| | | | | | | | |
Total Twenty-First Century Fox, Inc. stockholders’ equity | | | 15,017 | | | | 13,661 | |
Noncontrolling interests | | | 1,235 | | | | 1,220 | |
| | | | | | | | |
Total equity | | | 16,252 | | | | 14,881 | |
| | | | | | | | |
Total liabilities and equity | | $ | 50,684 | | | $ | 48,193 | |
| | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | |
| | | Nine Months Ended
March 31, | |
| | | 2017 | | | 2016 | |
| | | US $ Millions | |
Operating activities: | | | | | | | | |
Net income | | $ | 2,694 | | | $ | 2,410 | |
Less: Loss from discontinued operations, net of tax | | | (19 | ) | | | (8 | ) |
| | | | | | | | |
Income from continuing operations | | | 2,713 | | | | 2,418 | |
Adjustments to reconcile income from continuing operations to cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 410 | | | | 391 | |
Amortization of cable distribution investments | | | 46 | | | | 53 | |
Impairment and restructuring charges | | | 213 | | | | 46 | |
Equity-based compensation | | | 97 | | | | 152 | |
Equity losses (earnings) of affiliates | | | 57 | | | | (38 | ) |
Cash distributions received from affiliates | | | 182 | | | | 225 | |
Other, net | | | 241 | | | | 226 | |
CLT20 contract termination costs | | | — | | | | (420 | ) |
Deferred income taxes and other taxes | | | (70 | ) | | | 373 | |
Change in operating assets and liabilities, net of acquisitions and dispositions | | | | | | | | |
Receivables | | | (1,146 | ) | | | (870 | ) |
Inventories net of program rights payable | | | (932 | ) | | | (814 | ) |
Accounts payable and accrued expenses | | | 257 | | | | 136 | |
Other changes, net | | | 350 | | | | 134 | |
| | | | | | | | |
Net cash provided by operating activities from continuing operations | | | 2,418 | | | | 2,012 | |
| | | | | | | | |
Investing activities: | | | | | | | | |
Property, plant and equipment | | | (202 | ) | | | (156 | ) |
Acquisitions, net of cash acquired | | | — | | | | (908 | ) |
Investments in equity affiliates | | | (18 | ) | | | (87 | ) |
Other investments | | | (148 | ) | | | (229 | ) |
| | | | | | | | |
Net cash used in investing activities from continuing operations | | | (368 | ) | | | (1,380 | ) |
| | | | | | | | |
Financing activities: | | | | | | | | |
Borrowings | | | 879 | | | | 1,195 | |
Repayment of borrowings | | | (546 | ) | | | (502 | ) |
Repurchase of shares | | | (619 | ) | | | (3,958 | ) |
Dividends paid and distributions | | | (522 | ) | | | (465 | ) |
Purchase of subsidiary shares from noncontrolling interests | | | — | | | | (287 | ) |
Other financing activities, net | | | (63 | ) | | | 11 | |
| | | | | | | | |
Net cash used in financing activities from continuing operations | | | (871 | ) | | | (4,006 | ) |
| | | | | | | | |
Net decrease in cash and cash equivalents from discontinued operations | | | (21 | ) | | | (15 | ) |
Net increase (decrease) in cash and cash equivalents | | | 1,158 | | | | (3,389 | ) |
Cash and cash equivalents, beginning of year | | | 4,424 | | | | 8,428 | |
Exchange movement on cash balances | | | (10 | ) | | | (46 | ) |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 5,572 | | | $ | 4,993 | |
| | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
SEGMENT INFORMATION
| | | | | | | | | | | | | | | | |
| | | Three Months
Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | US $ Millions | |
Revenues: | | | | | | | | | | | | | | | | |
| | | | |
Cable Network Programming | | $ | 4,024 | | | $ | 3,941 | | | $ | 11,801 | | | $ | 11,108 | |
Television | | | 1,690 | | | | 1,299 | | | | 4,646 | | | | 4,064 | |
Filmed Entertainment | | | 2,256 | | | | 2,321 | | | | 6,432 | | | | 6,467 | |
Other, Corporate and Eliminations | | | (406 | ) | | | (333 | ) | | | (1,127 | ) | | | (959 | ) |
| | | | | | | | | | | | | | | | |
Total revenues | | $ | 7,564 | | | $ | 7,228 | | | $ | 21,752 | | | $ | 20,680 | |
| | | | | | | | | | | | | | | | |
Segment OIBDA: | | | | | | | | | | | | | | | | |
| | | | |
Cable Network Programming | | $ | 1,446 | | | $ | 1,375 | | | $ | 4,160 | | | $ | 3,931 | |
Television | | | 190 | | | | 125 | | | | 757 | | | | 600 | |
Filmed Entertainment | | | 373 | | | | 470 | | | | 1,073 | | | | 921 | |
Other, Corporate and Eliminations | | | (71 | ) | | | (89 | ) | | | (267 | ) | | | (306 | ) |
| | | | | | | | | | | | | | | | |
Total Segment OIBDA(a) | | $ | 1,938 | | | $ | 1,881 | | | $ | 5,723 | | | $ | 5,146 | |
| | | | | | | | | | | | | | | | |
Depreciation and amortization: | | | | | | | | | | | | | | | | |
| | | | |
Cable Network Programming | | $ | 87 | | | $ | 79 | | | $ | 252 | | | $ | 229 | |
Television | | | 28 | | | | 29 | | | | 85 | | | | 88 | |
Filmed Entertainment | | | 19 | | | | 20 | | | | 59 | | | | 60 | |
Other, Corporate and Eliminations | | | 6 | | | | 5 | | | | 14 | | | | 14 | |
| | | | | | | | | | | | | | | | |
Total depreciation and amortization | | $ | 140 | | | $ | 133 | | | $ | 410 | | | $ | 391 | |
| | | | | | | | | | | | | | | | |
(a) | Total segment OIBDA may be considered anon-GAAP financial measure. See page 11 for a description of total segment OIBDA and for a reconciliation from income from continuing operations before income tax expense to total segment OIBDA. |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
CONSOLIDATED REVENUES BY COMPONENT
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | US $ Millions | |
Affiliate fees | | $ | 3,160 | | | $ | 2,939 | | | $ | 8,989 | | | $ | 8,321 | |
Advertising | | | 2,203 | | | | 1,907 | | | | 6,338 | | | | 5,950 | |
Content | | | 2,078 | | | | 2,288 | | | | 5,979 | | | | 6,046 | |
Other | | | 123 | | | | 94 | | | | 446 | | | | 363 | |
| | | | | | | | | | | | | | | | |
Total revenues | | $ | 7,564 | | | $ | 7,228 | | | $ | 21,752 | | | $ | 20,680 | |
| | | | | | | | | | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
NOTE 1 – TOTAL SEGMENT OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION
The Company evaluates the performance of its operating segments based on segment operating income before depreciation and amortization (“OIBDA”), and management uses total segment OIBDA as a measure of the performance of operating businesses separate fromnon-operating factors. Total segment OIBDA may be considered anon-GAAP measure and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements. This measure excludes items, such as depreciation and amortization as well as impairment charges, which are significant components in assessing the Company’s financial performance.
Management believes that total segment OIBDA is an appropriate measure for evaluating the operating performance of the Company’s business and provides investors and equity analysts a measure to analyze operating performance of the Company’s business and enterprise value against historical data and competitors’ data. Segment OIBDA is the primary measure used by our chief operating decision maker to evaluate the performance of and allocate resources to the Company’s business segments.
Segment OIBDA does not include depreciation and amortization and the amortization of cable distribution investments and eliminates the variable effect across all business segments of depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and, as such, it is excluded from segment operating income before depreciation and amortization.
In addition, total segment OIBDA does not include: Loss from discontinued operations, net of tax, Impairment and restructuring charges, Equity (losses) earnings of affiliates, Interest expense, net, Interest income, Other, net, Income tax expense and Net income attributable to noncontrolling interests.
The following table reconciles income from continuing operations before income tax expense to total segment OIBDA:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | | Nine Months Ended March 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | US $ Millions | |
Income from continuing operations before income tax expense | | $ | 1,252 | | | $ | 1,391 | | | $ | 3,874 | | | $ | 3,608 | |
Add: | | | | | | | | | | | | | | | | |
Amortization of cable distribution investments | | | 15 | | | | 18 | | | | 46 | | | | 53 | |
Depreciation and amortization | | | 140 | | | | 133 | | | | 410 | | | | 391 | |
Impairment and restructuring charges | | | 37 | | | | 15 | | | | 213 | | | | 46 | |
Equity losses (earnings) of affiliates | | | 51 | | | | 9 | | | | 57 | | | | (38 | ) |
Interest expense, net | | | 310 | | | | 295 | | | | 909 | | | | 888 | |
Interest income | | | (9 | ) | | | (12 | ) | | | (27 | ) | | | (28 | ) |
Other, net | | | 142 | | | | 32 | | | | 241 | | | | 226 | |
| | | | | | | | | | | | | | | | |
Total Segment OIBDA | | $ | 1,938 | | | $ | 1,881 | | | $ | 5,723 | | | $ | 5,146 | |
| | | | | | | | | | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2017 | |
| | | US $ Millions | |
| | | Revenues | | | Operating
and Selling,
general and
administrative
expenses | | | Add:
Amortization
of cable
distribution
investments | | | Segment OIBDA | |
Cable Network Programming | | $ | 4,024 | | | $ | (2,593 | ) | | $ | 15 | | | $ | 1,446 | |
Television | | | 1,690 | | | | (1,500 | ) | | | — | | | | 190 | |
Filmed Entertainment | | | 2,256 | | | | (1,883 | ) | | | — | | | | 373 | |
Other, Corporate and Eliminations | | | (406 | ) | | | 335 | | | | — | | | | (71 | ) |
| | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 7,564 | | | $ | (5,641 | ) | | $ | 15 | | | $ | 1,938 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2016 | |
| | | US $ Millions | |
| | | Revenues | | | Operating
and Selling,
general and
administrative
expenses | | | Add:
Amortization
of cable
distribution
investments | | | Segment OIBDA | |
Cable Network Programming | | $ | 3,941 | | | $ | (2,584 | ) | | $ | 18 | | | $ | 1,375 | |
Television | | | 1,299 | | | | (1,174 | ) | | | — | | | | 125 | |
Filmed Entertainment | | | 2,321 | | | | (1,851 | ) | | | — | | | | 470 | |
Other, Corporate and Eliminations | | | (333 | ) | | | 244 | | | | — | | | | (89 | ) |
| | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 7,228 | | | $ | (5,365 | ) | | $ | 18 | | | $ | 1,881 | |
| | | | | | | | | | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
| | | | | | | | | | | | | | | | |
| | | Nine Months Ended March 31, 2017 | |
| | | US $ Millions | |
| | | Revenues | | | Operating
and Selling,
general and
administrative
expenses | | | Add:
Amortization
of cable
distribution
investments | | | Segment OIBDA | |
Cable Network Programming | | $ | 11,801 | | | $ | (7,687 | ) | | $ | 46 | | | $ | 4,160 | |
Television | | | 4,646 | | | | (3,889 | ) | | | — | | | | 757 | |
Filmed Entertainment | | | 6,432 | | | | (5,359 | ) | | | — | | | | 1,073 | |
Other, Corporate and Eliminations | | | (1,127 | ) | | | 860 | | | | — | | | | (267 | ) |
| | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 21,752 | | | $ | (16,075 | ) | | $ | 46 | | | $ | 5,723 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Nine Months Ended March 31, 2016 | |
| | | US $ Millions | |
| | | Revenues | | | Operating
and Selling,
general and
administrative
expenses | | | Add:
Amortization
of cable
distribution
investments | | | Segment OIBDA | |
Cable Network Programming | | $ | 11,108 | | | $ | (7,230 | ) | | $ | 53 | | | $ | 3,931 | |
Television | | | 4,064 | | | | (3,464 | ) | | | — | | | | 600 | |
Filmed Entertainment | | | 6,467 | | | | (5,546 | ) | | | — | | | | 921 | |
Other, Corporate and Eliminations | | | (959 | ) | | | 653 | | | | — | | | | (306 | ) |
| | | | | | | | | | | | | | | | |
Consolidated Total | | $ | 20,680 | | | $ | (15,587 | ) | | $ | 53 | | | $ | 5,146 | |
| | | | | | | | | | | | | | | | |
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EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2017
NOTE 2 – ADJUSTED NET INCOME AND ADJUSTED EPS FROM CONTINUING OPERATIONS
The calculation of income and earnings per share (“EPS”) from continuing operations attributable to 21st Century Fox stockholders excluding the net income effects of Impairment and restructuring charges, Equity affiliate adjustments and Other, net and tax provision effects (“adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders”) may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. Adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for consolidated net income and EPS as determined under GAAP as a measure of performance. However, management uses these measures in comparing the Company’s historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of our performance relative to prior periods and our competitors.
The Company uses adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period.
The following table reconciles reported income and reported diluted EPS from continuing operations attributable to 21st Century Fox stockholders to adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders for the three months ended March 31, 2017 and 2016.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | |
| | | March 31,
2017 | | | March 31,
2016 | |
| | | Income | | | EPS | | | Income | | | EPS | |
| | | US $ Millions, except per share data | |
Income from continuing operations | | $ | 882 | | | | | | | $ | 928 | | | | | |
Less: Net income attributable to noncontrolling interests | | | (71 | ) | | | | | | | (84 | ) | | | | |
| | | | | | | | | | | | | | | | |
Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders | | $ | 811 | | | $ | 0.44 | | | $ | 844 | | | $ | 0.44 | |
Impairment and restructuring charges | | | 37 | | | | 0.02 | | | | 15 | | | | 0.01 | |
Equity affiliate adjustments(a) | | | 90 | | | | 0.05 | | | | 42 | | | | 0.02 | |
Other, net | | | 142 | | | | 0.08 | | | | 32 | | | | 0.02 | |
Tax provision | | | (76 | ) | | | (0.04 | ) | | | (26 | ) | | | (0.01 | ) |
Rounding | | | — | | | | (0.01 | ) | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | |
As adjusted | | $ | 1,004 | | | $ | 0.54 | | | $ | 907 | | | $ | 0.47 | |
| | | | | | | | | | | | | | | | |
(a) | Equity losses of affiliates for the three months ended March 31, 2017 was adjusted to remove from Sky’s results 21st Century Fox’s share of Sky’s restructuring and purchase price amortization related to its acquisition of the Direct Broadcast Satellite (“DBS”) businesses from the Company and from Endemol Shine Group’s results 21st Century Fox’s share of Endemol Shine Group’s impairment, restructuring and debt revaluation adjustments. Equity losses of affiliates for the three months ended March 31, 2016 was adjusted to remove from Sky’s results 21st Century Fox’s share of Sky’s purchase price amortization related to its acquisition of the DBS businesses from the Company and from Endemol Shine Group’s results 21st Century Fox’s share of Endemol Shine Group’s debt revaluation and other discrete costs. |
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