News Corporation Reports Third Quarter Operating Income of $1.4 Billion; Growth of 16% Over Third Quarter a Year Ago

News Corporation (NYSE: NWS, NWSA; ASX: NWS, NWSLV) today reported third quarter net income of $2.7 billion ($0.91 per share) as compared with $871 million ($0.27 per share on a diluted combined basis1) reported in the third quarter a year ago. The year-on-year growth reflects an increase in Other, net of $1.6 billion primarily reflecting a $1.7 billion tax-free gain on the asset and stock exchange with Liberty Media Corporation. Additionally, increases in consolidated operating income partially offset by lower equity earnings contributed to the improved results. Consolidated operating income for the third quarter of $1.4 billion was up 16% versus the $1.2 billion reported a year ago, primarily driven by double-digit percentage increases at the Television, Cable Network Programming, Newspapers and Information Services and Other segments. Third quarter net earnings from affiliates were $109 million versus $255 million reported in the same period a year ago. The $146 million decrease was primarily driven by lower contributions from BSkyB due to the write-down of its ITV investment and by a decrease in contributions from The DIRECTV Group as a result of the Company’s exchange with Liberty Media Corporation in February 2008. Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch said: "Our 16% revenue and operating income growth this past quarter is a great illustration of how the diversity of our asset base is translating into sustained financial success. We delivered growth from advertising based businesses, such as our television stations and broadcast network, and we delivered growth from subscription based businesses, such as our domestic cable channels. We delivered growth from established businesses, such as our newspapers and we delivered growth from our developing assets, such as our international cable channels and Fox Interactive Media. Our ability to generate returns from a multitude of sources puts us in a great position to maintain our financial momentum even in times of economic uncertainty.” Consolidated Operating Income 3 Months Ended   9 Months Ended March 31, March 31, 2008   2007 2008   2007 US $ Millions   Filmed Entertainment $ 261 $ 410 $ 1,026 $ 1,119 Television 419 273 847 577 Cable Network Programming 330 282 956 806 Direct Broadcast Satellite Television 97 91 207 66 Magazines and Inserts 93 102 257 254 Newspapers and Information Services 216 156 505 450 Book Publishing 29 29 132 138 Other   (7 )   (104 )   (27 )   (176 ) Total Consolidated Operating Income $ 1,438   $ 1,239   $ 3,903   $ 3,234   REVIEW OF OPERATING RESULTS FILMED ENTERTAINMENT The Filmed Entertainment segment reported third quarter operating income of $261 million as compared with the record third quarter results of $410 million reported in the same period a year ago. The current year results were led primarily by a string of successful theatrical releases, as well as by strong contributions from film and television home entertainment releases. Third quarter film results were driven by the continued theatrical success of Alvin and the Chipmunks, which has delivered over $350 million in worldwide box office to date, and Academy Award winner Juno, which has now generated over $225 million in worldwide box office. Additionally, the current quarter also included continued home entertainment contributions from theatrical hits The Simpsons Movie, Live Free or Die Hard and Fantastic Four: Rise of the Silver Surfer, as well as pay-TV contributions from Night at the Museum and Eragon. The third quarter also reflected the initial releasing costs and results for several new successful theatrical releases, including Horton Hears a Who! and Jumper, with more than $275 million and $219 million, respectively, in worldwide box office to date. Twentieth Century Fox Television reported slightly lower contributions versus the third quarter a year ago, primarily reflecting the timing and delivery of new episodes partially offset by higher contributions from home entertainment, primarily from Family Guy. TELEVISION The Television segment reported third quarter operating income of $419 million, an increase of $146 million versus the same period a year ago. The 53% growth was led by higher contributions from the FOX Broadcasting Company, Fox Television Stations and STAR and improved results at MyNetworkTV. At the FOX Broadcasting Company, third quarter operating income nearly doubled versus a year ago primarily reflecting lower prime-time programming costs and advertising revenue growth. The increased advertising revenues were driven by higher pricing for sports and prime-time programming, as well as by strong ratings for the National Football League post-season. These results were partially offset by costs associated with the broadcast of Super Bowl XLII. Fox Television Stations’ third quarter operating income increased 12% from the same period a year ago as the broadcast of Super Bowl XLII on FOX drove advertising revenue growth and contributed to record market share during the quarter. Additionally, political spending for the presidential primaries contributed to the year-on-year growth. STAR’s third quarter operating income increased versus the same period a year ago as 15% revenue growth was driven by higher subscription revenues, primarily from India. The revenue growth was partially offset by increased programming costs for new program launches. CABLE NETWORK PROGRAMMING Cable Network Programming reported third quarter operating income of $330 million, a 17% increase over the third quarter a year ago, reflecting increased contributions from Fox News Channel, the Regional Sports Networks, FX and the Fox International Channels, partially offset by launch costs associated with the Fox Business Network and the Big Ten Network. Quarterly results also reflect the inclusion of National Geographic Channels which were not consolidated in the same period a year ago. Fox News Channel (FNC) reported operating income growth of 11% compared to the third quarter a year ago as affiliate revenues increased from higher rates and additional subscribers and advertising revenues expanded primarily from increased pricing. Partially offsetting the revenue growth was higher programming costs from coverage of the presidential primaries. For the quarter, FNC’s viewership was more than 40% greater than its nearest competitor in primetime and on a 24-hour basis, reflecting FNC broadcasting the top five shows in cable news. At our other cable channels, operating income increased 20% as compared with the third quarter a year ago as increased contributions from the Regional Sports Networks (RSNs), FX and Fox International Channels were partially offset by launch costs for the Fox Business Network and the Big Ten Network. Higher affiliate revenues from increased rates and additional subscribers contributed to the growth at the RSNs and FX, which also increased its advertising revenues versus the same period a year ago. The increased contributions from the Fox International Channels were driven by continued advertising and affiliate growth in Latin America and Europe. DIRECT BROADCAST SATELLITE TELEVISION SKY Italia reported third quarter operating income of $97 million, an improvement of 7% versus a year ago, on local currency revenue growth of 6%. This improvement reflects subscriber additions, with more than 342,000 net subscribers added over the past 12 months, bringing SKY Italia’s subscriber base to 4.5 million at quarter end, as well as the impact from foreign currency fluctuations. The subscriber revenue growth was partially offset by reduced mobile revenues, increased programming spending associated primarily with the larger subscriber base and the launch of new channels, as well as planned higher promotional costs for new subscriber offerings. MAGAZINES AND INSERTS The Magazines and Inserts segment reported third quarter operating income of $93 million, a decrease of 9% versus the $102 million reported in the quarter a year ago. The decline was primarily driven by lower rates and a decline in page volume for free-standing inserts. NEWSPAPERS AND INFORMATION SERVICES The Newspapers and Information Services segment, previously referred to as Newspapers, reported third quarter operating income of $216 million, an increase of $60 million versus the same period a year ago. The 38% increase primarily reflects advertising revenue growth in Australia, reduced transition costs to our new U.K. printing presses and the inclusion of the results of Dow Jones & Company, which was acquired in December 2007. The U.K. newspaper group reported an increase in operating income in local currency terms as compared with the third quarter a year ago primarily as a result of reduced depreciation on the printing presses that were decommissioned during the quarter as the Company transitioned to new color printing operations. During the quarter, advertising and circulation revenues were in-line with the prior year. The Australian newspaper group reported third quarter operating income growth versus a year ago in local currency terms primarily from increased display advertising revenues. The increase in display advertising was led by strength in the retail and real estate sectors. BOOK PUBLISHING HarperCollins reported third quarter operating income of $29 million, in-line with the same period a year ago. The current quarter included strong sales of Naughty Neighbor by Janet Evanovich, Stop Whining, Start Living by Dr. Laura Schlessinger, Lady Killer by Lisa Scottoline, Fancy Nancy, Bonjour Butterfly by Jane O’Connor and The Chronicles of Narnia: Prince Caspian by C.S. Lewis. During the quarter, HarperCollins had 54 books on The New York Times bestseller list, including 4 titles that reached the #1 spot. OTHER The Other segment reported an operating loss of $7 million, a $97 million improvement versus the third quarter a year ago, primarily from the absence of losses associated with the 2007 Cricket World Cup which were included in the third quarter in the prior year. Current quarter results also include higher contributions from Fox Interactive Media and NDS, partially offset by startup losses at our Eastern European broadcasting initiatives. At Fox Interactive Media strong revenue growth from increased search and advertising revenues was partially offset by increased costs associated with domestic and international expansion, new features and costs associated with the startup of new ventures. OTHER ITEMS In February 2008, News Corporation completed its previously announced share exchange agreement with Liberty Media Corporation. Under the terms of the agreement, approved by the Company’s Class B common stockholders on April 3, 2007, Liberty exchanged its entire approximately 16 percent interest in the Company’s common stock (325 million Class A and 188 million Class B shares) for the Company’s entire stake in The DIRECTV Group, three Regional Sports Networks and approximately $625 million in cash. In January 2008, News Corporation acquired a 14.58 percent stake in Premiere AG, the leading German pay-TV operator for 287 million Euro in cash. In February 2008, the Company increased its total stake to nearly 20 percent and following the quarter it purchased additional shares, raising its total stake to approximately 23 percent. Foreign Exchange Rates Average foreign exchange rates used in the year-to-date results are as follows:   9 Months Ended March 31, 2008   2007   Australian Dollar/U.S. Dollar 0.88 0.77 U.K. Pounds Sterling/U.S. Dollar 2.01 1.91 Euro/U.S. Dollar 1.44 1.29 To receive a copy of this press release through the Internet, access News Corporation’s corporate website located at http://www.newscorp.com. Audio from News Corporation’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, visit http://www.newscorp.com. Cautionary Statement Concerning Forward-Looking Statements This document contains certain "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from these expectations due to changes in global economic, business, competitive market and regulatory factors. More detailed information about these and other factors that could affect future results is contained in our filings with the Securities and Exchange Commission. The "forward-looking statements” included in this document are made only as of the date of this document and we do not have any obligation to publicly update any "forward-looking statements” to reflect subsequent events or circumstances, except as required by law. (1) See supplemental financial data on page 11 for detail on earnings per share CONSOLIDATED STATEMENTS OF OPERATIONS 3 Months Ended   9 Months Ended March 31, March 31, 2008   2007 2008   2007 US $ Millions (except per share amounts)   Revenues $ 8,750 $ 7,530 $ 24,407 $ 21,288 Expenses: Operating 5,452 4,922 15,303 14,017 Selling, general and administrative 1,568 1,145 4,300 3,400 Depreciation and amortization   292     224     901     637   Operating income 1,438 1,239 3,903 3,234 Other income (expense): Equity earnings of affiliates 109 255 305 747 Interest expense, net (244 ) (220 ) (702 ) (632 ) Interest income 37 79 215 226 Other, net   1,673     47     1,860     493   Income before income tax expense and minority interest in subsidiaries 3,013 1,400 5,581 4,068 Income tax expense (300 ) (517 ) (1,234 ) (1,486 ) Minority interest in subsidiaries, net of tax   (19 )   (12 )   (89 )   (46 ) Net income $   2,694   $   871   $   4,258   $   2,536     Per share amounts: Basic earnings $ 0.92 $ 1.39 Class A $ 0.29 $ 0.85 Class B $ 0.24 $ 0.71   Diluted earnings $ 0.91 $ 1.38 Class A $ 0.29 $ 0.84 Class B $ 0.24 $ 0.70   Weighted average shares in millions (diluted) 2,959 3,082 CONSOLIDATED BALANCE SHEETS   March 31,   June 30, 2008 2007 Assets US $ Millions Current assets: Cash and cash equivalents $ 3,244 $ 7,654 Receivables, net 7,592 5,842 Inventories, net 2,437 2,039 Other   533   371 Total current assets   13,806   15,906   Non-current assets: Receivables 528 437 Investments 3,988 11,413 Inventories, net 2,917 2,626 Property, plant and equipment, net 6,726 5,617 Intangible assets, net 14,261 11,703 Goodwill 18,380 13,819 Other non-current assets   1,314   822 Total non-current assets   48,114   46,437 Total assets $ 61,920 $ 62,343   Liabilities and Stockholders' Equity Current liabilities: Borrowings $ 289 $ 355 Accounts payable, accrued expenses and other current liabilities 6,187 4,545 Participations, residuals and royalties payable 1,474 1,185 Program rights payable 1,131 940 Deferred revenue   939   469 Total current liabilities   10,020   7,494   Non-current liabilities: Borrowings 13,208 12,147 Other liabilities 5,023 3,319 Deferred income taxes 5,187 5,899 Minority interest in subsidiaries 1,046 562 Commitments and contingencies Stockholders' Equity: Class A common stock, $0.01 par value 18 21 Class B common stock, $0.01 par value 8 10 Additional paid-in capital 17,289 27,333 Retained earnings and accumulated other comprehensive income   10,121   5,558 Total stockholders' equity   27,436   32,922 Total liabilities and stockholders' equity $ 61,920 $ 62,343 CONSOLIDATED STATEMENTS OF CASH FLOWS   9 Months Ended March 31, 2008   2007 US $ Millions Operating activities: Net income $ 4,258 $ 2,536 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 901 637 Amortization of cable distribution investments 57 56 Equity earnings of affiliates (305 ) (747 ) Cash distributions received from affiliates 193 145 Other, net (1,860 ) (493 ) Minority interest in subsidiaries, net of tax 89 46 Change in operating assets and liabilities, net of acquisitions: Receivables and other assets (1,562 ) (546 ) Inventories, net (598 ) (593 ) Accounts payable and other liabilities   1,457     1,487   Net cash provided by operating activities   2,630     2,528     Investing activities: Property, plant and equipment, net of acquisitions (1,027 ) (904 ) Acquisitions, net of cash acquired (5,491 ) (589 ) Investments in equity affiliates (133 ) (120 ) Other investments (589 ) (316 ) Proceeds from sale of investments and other non-current assets   385     410   Net cash used in investing activities   (6,855 )   (1,519 )   Financing activities: Borrowings 1,255 1,181 Repayment of borrowings (713 ) (190 ) Issuance of shares 76 350 Repurchase of shares (672 ) (783 ) Dividends paid (203 ) (186 ) Other, net   19     -   Net cash (used in) provided by financing activities   (238 )   372     Net (decrease) increase in cash and cash equivalents (4,463 ) 1,381 Cash and cash equivalents, beginning of period 7,654 5,783 Exchange movement on opening cash balance   53     82   Cash and cash equivalents, end of period $ 3,244   $ 7,246   SEGMENT INFORMATION   3 Months Ended   9 Months Ended March 31, March 31, 2008   2007 2008   2007 US $ Millions   Revenues   Filmed Entertainment $ 1,618 $ 1,802 $ 5,176 $ 5,280 Television 1,799 1,568 4,474 4,271 Cable Network Programming 1,270 998 3,608 2,807 Direct Broadcast Satellite Television 993 825 2,695 2,211 Magazines and Inserts 299 303 836 844 Newspapers and Information Services 1,744 1,123 4,404 3,290 Book Publishing 302 291 1,038 1,052 Other   725     620     2,176     1,533   $ 8,750   $ 7,530   $ 24,407   $ 21,288       Operating Income   Filmed Entertainment $ 261 $ 410 $ 1,026 $ 1,119 Television 419 273 847 577 Cable Network Programming 330 282 956 806 Direct Broadcast Satellite Television 97 91 207 66 Magazines and Inserts 93 102 257 254 Newspapers and Information Services 216 156 505 450 Book Publishing 29 29 132 138 Other   (7 )   (104 )   (27 )   (176 ) $ 1,438   $ 1,239   $ 3,903   $ 3,234   NOTE 1 - SUPPLEMENTAL EARNINGS PER SHARE DATA Earnings per share is presented on a combined basis for fiscal 2007 as the Company was required to present the two-class method prior to fiscal 2008. In fiscal 2007, under U.S. GAAP, earnings per share was computed individually for the Class A and Class B shares. Class A non-voting shares carry rights to a greater dividend than Class B voting shares through fiscal 2007. As such, net income available to the Company’s common stockholders was allocated between our two classes of common stock for fiscal 2007. The allocation between classes was based upon the two-class method. Earnings per share by class and by total weighted average shares outstanding (Class A and Class B combined) is as follows:   3 Months Ended   9 Months Ended March 31, March 31, 2007 2007   Basic earnings per share: Class A $0.29 $0.85 Class B $0.24 $0.71 Total $0.28 $0.80   Diluted earnings per share: Class A $0.29 $0.84 Class B $0.24 $0.70 Total $0.27 $0.80   Weighted average shares outstanding (diluted), in millions: Class A 2,198 2,195 Class B 987 987 Total 3,185 3,182 NOTE 2 - OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION Operating income before depreciation and amortization, defined as operating income plus depreciation and amortization and the amortization of cable distribution investments, eliminates the variable effect across all business segments of non-cash depreciation and amortization. Since operating income before depreciation and amortization is a non-GAAP measure it should be considered in addition to, not as a substitute for, operating income, net income, cash flow and other measures of financial performance reported in accordance with GAAP. Operating income before depreciation and amortization does not reflect cash available to fund requirements, and the items excluded from operating income before depreciation and amortization, such as depreciation and amortization, are significant components in assessing the Company’s financial performance. Management believes that operating income before depreciation and amortization is an appropriate measure for evaluating the operating performance of the Company’s business segments. Operating income before depreciation and amortization, which is the information reported to and used by the Company’s chief decision maker for the purpose of making decisions about the allocation of resources to segments and assessing their performance, provides management, investors and equity analysts a measure to analyze operating performance of each business segment and enterprise value against historical and competitors’ data. The following table reconciles operating income before depreciation and amortization to the presentation of operating income.   3 Months Ended   9 Months Ended March 31, March 31, 2008   2007 2008   2007 US $ Millions   Operating income $ 1,438 $ 1,239 $ 3,903 $ 3,234 Depreciation and amortization 292 224 901 637 Amortization of cable distribution investments   22   17   57   56 Operating income before depreciation and amortization $ 1,752 $ 1,480 $ 4,861 $ 3,927 For the Three Months Ended March 31, 2008 (US $ Millions)   Operating income (loss)     Depreciation and amortization     Amortization of cable distribution investments     Operating income before depreciation and amortization   Filmed Entertainment $ 261 $ 22 $ - $ 283 Television 419 25 - 444 Cable Network Programming 330 28 22 380 Direct Broadcast Satellite Television 97 59 - 156 Magazines and Inserts 93 2 - 95 Newspapers and Information Services 216 97 - 313 Book Publishing 29 2 - 31 Other   (7 )   57   -   50 Consolidated Total $ 1,438   $ 292 $ 22 $ 1,752 For the Three Months Ended March 31, 2007 (US $ Millions)   Operating income (loss)     Depreciation and amortization     Amortization of cable distribution investments     Operating income (loss) before depreciation and amortization   Filmed Entertainment $ 410 $ 22 $ - $ 432 Television 273 23 - 296 Cable Network Programming 282 15 17 314 Direct Broadcast Satellite Television 91 49 - 140 Magazines and Inserts 102 2 - 104 Newspapers and Information Services 156 72 - 228 Book Publishing 29 2 - 31 Other   (104 )   39   -   (65 ) Consolidated Total $ 1,239   $ 224 $ 17 $ 1,480   For the Nine Months Ended March 31, 2008 (US $ Millions)   Operating income (loss)     Depreciation and amortization     Amortization of cable distribution investments     Operating income before depreciation and amortization   Filmed Entertainment $ 1,026 $ 64 $ - $ 1,090 Television 847 74 - 921 Cable Network Programming 956 67 57 1,080 Direct Broadcast Satellite Television 207 163 - 370 Magazines and Inserts 257 6 - 263 Newspapers and Information Services 505 341 - 846 Book Publishing 132 6 - 138 Other   (27 )   180   -   153 Consolidated Total $ 3,903   $ 901 $ 57 $ 4,861 For the Nine Months Ended March 31, 2007 (US $ Millions)   Operating income (loss)     Depreciation and amortization     Amortization of cable distribution investments     Operating income (loss) before depreciation and amortization   Filmed Entertainment $ 1,119 $ 62 $ - $ 1,181 Television 577 68 - 645 Cable Network Programming 806 42 56 904 Direct Broadcast Satellite Television 66 140 - 206 Magazines and Inserts 254 6 - 260 Newspapers and Information Services 450 207 - 657 Book Publishing 138 6 - 144 Other   (176 )   106   -   (70 ) Consolidated Total $ 3,234   $ 637 $ 56 $ 3,927