SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 6, 2004
FOX ENTERTAINMENT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-14595 95-4066193
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(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
1211 Avenue of the Americas
New York, New York 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 852-7111
Not applicable
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(Former name or former address, if changed since last report)
Item 12: Results of Operations and Financial Condition
On May 6, 2004, Fox Entertainment Group, Inc. ("FEG") released its financial
results for the quarter ended March 31, 2004.
The text of the press release follows:
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2004
Fox Reports Third Quarter Operating Income of $582 Million,
a 25% Increase, on Revenue Growth of 5%
Third Quarter Operating Income before Depreciation and
Amortization Grows 21% to $654 Million
QUARTER HIGHLIGHTS
-- Strong advertising growth at Fox News and higher affiliate
revenues at the Regional Sports Networks drive operating
income before depreciation and amortization up 43% at Cable
Network Programming.
-- Television Broadcast Network operating income before
depreciation and amortization improves 41% reflecting higher
advertising revenues from increased pricing combined with the
strength of American Idol.
-- Record market share and higher pricing at Television Stations
contribute to operating income before depreciation and
amortization growth of 19%.
-- Filmed Entertainment operating income before depreciation and
amortization up 8% over a year ago as continued robust home
entertainment sales of film and television titles match
prior-year success.
NEW YORK--(BUSINESS WIRE)--May 6, 2004--The Fox Entertainment Group
(NYSE: FOX) today reported third quarter consolidated revenues of $2.8
billion, a 5% increase over the $2.7 billion in prior year and operating
income before depreciation and amortization(1) of $654 million, a 21%
increase over the $542 million reported a year ago. The year-on-year
operating income before depreciation and amortization growth was driven
by increased contributions from all divisions including double-digit
gains at the Television Stations, Television Broadcast Network and Cable
Network Programming segments.
Third quarter net income increased to $299 million ($0.31 per
share) as compared to net income of $276 million ($0.31 per share) in
the prior year primarily due to higher consolidated operating income
before depreciation and amortization partially offset by higher
interest expense as a result of the Company's acquisition of The
DIRECTV Group on December 22, 2003.
Commenting on the results, Chairman and Chief Executive Officer
Rupert Murdoch said:
"We are extremely pleased with our third quarter results, with 21%
operating income before depreciation and amortization growth that was
achieved across all of our business segments. Several assets in which
we have invested heavily in recent years continue to achieve rapid
growth. Our film and television production units have been buoyed by
an expanding home entertainment market and our cable networks are
enjoying double-digit gains on the back of advertising and affiliate
growth. Simultaneously, we have maintained momentum at our established
businesses with double-digit gains across our television stations and
television broadcast network.
"The growing success of our core businesses is complemented by the
encouraging progress at our new direct-to-home television investment.
DIRECTV's new management has quickly strengthened that platform's
competitive and financial position with the addition of 460,000 new
subscribers during the quarter and the announced sale of its stake in
PanAmSat for $4.3 billion. Our unique asset balance, combined with the
strong earnings growth throughout the company, puts us in a great
position to continue to generate value for our shareholders."
Consolidated Operating Income (Loss)
3 Months Ended 9 Months Ended
March 31, March 31,
2004 2003 2004 2003
-------- -------- -------- --------
$ Millions $ Millions
Filmed Entertainment $ 223 $ 205 $ 816 $ 570
Television Stations 201 162 698 676
Television Broadcast Network 47 33 (131) (129)
Cable Network Programming 111 64 368 236
-------- -------- -------- --------
Consolidated operating income $ 582 $ 464 $ 1,751 $ 1,353
======== ======== ======== ========
Consolidated Operating Income (Loss) Before Depreciation and
Amortization(1)
3 Months Ended 9 Months Ended
March 31, March 31,
2004 2003 2004 2003
-------- -------- -------- --------
$ Millions $ Millions
Filmed Entertainment $ 237 $ 220 $ 857 $ 612
Television Stations 213 179 739 723
Television Broadcast Network 52 37 (117) (115)
Cable Network Programming 152 106 493 366
-------- -------- -------- --------
Consolidated operating income
before depreciation and
amortization $ 654 $ 542 $ 1,972 $ 1,586
======== ======== ======== ========
FILMED ENTERTAINMENT
The Filmed Entertainment segment reported third quarter operating
income before depreciation and amortization of $237 million, 8% above
the $220 million reported in the same period a year ago.
Current-quarter results primarily reflect strong contributions from
film and television home entertainment releases.
Film results were largely driven by the worldwide home
entertainment performance of League of Extraordinary Gentlemen as well
as contributions from various catalog titles including Planet of the
Apes, Moulin Rouge and Ice Age. Additionally, the worldwide theatrical
performance of Cheaper by the Dozen, which has brought in nearly $190
million worldwide since its release, also contributed to the strong
quarterly results. The prior year's strong results included the
continued success of Ice Age in the worldwide home entertainment
market and strong domestic home entertainment performances from
several smaller-budget releases.
Twentieth Century Fox Television (TCFTV) profits continued to
expand, primarily reflecting sustained momentum in home entertainment
sales, most notably from Angel, Futurama, Family Guy and 24.
TELEVISION STATIONS
At the Fox Television Stations (FTS), third quarter operating
income before depreciation and amortization grew 19% over the prior
year to $213 million as FTS achieved another quarter of record market
share. Current-year results were driven by stronger primetime
advertising revenue led by the success of American Idol as well as
higher sales for local news and the NFL playoffs. Additionally,
non-recurring advertising pre-emptions in the prior year, associated
with the war in Iraq, contributed to the year-on-year improvement.
TELEVISION BROADCAST NETWORK
At the FOX Broadcasting Company, third quarter operating income
before depreciation and amortization of $52 million improved by 41%
compared to a year ago due to higher pricing for the primetime
entertainment schedule and improved sports advertising on National
Football League telecasts, with ratings up nearly 10% for the
post-season. Current year entertainment contributions were fueled by
American Idol, which has grown its ratings by 13% versus a year ago,
partially offset by the success a year ago of Joe Millionaire.
CABLE NETWORK PROGRAMMING
Cable Network Programming reported third quarter operating income
before depreciation and amortization of $152 million, an increase of
43% over last year's results, reflecting strong growth across all of
the Company's primary cable channels.
Fox News Channel (FNC) operating income increased significantly as
higher advertising pricing drove double-digit revenue gains over the
third quarter a year ago, which included pre-emptions and higher news
gathering costs associated with covering the war in Iraq. During the
quarter, FNC once again achieved the highest viewership among all
cable news channels, expanding its lead over its nearest competitor to
59% in primetime and 73% on a 24-hour basis.
Fox Cable Networks (including the Regional Sports Networks (RSNs),
FX and SPEED Channel) operating profit improved 18% during the quarter
driven by affiliate revenue growth at both the RSNs and FX. Higher
affiliate revenue contributions at the RSNs, largely due to increased
affiliate rates and additional DTH subscribers, combined with
increased advertising sales to drive operating income growth at the
RSNs. This growth was partially offset by higher programming costs
from additional events and rights increases versus a year ago. FX
affiliate revenue growth, primarily resulting from a 6% increase in
subscribers over the past year, drove double-digit operating income
growth. Partially offsetting these improvements were increased costs
related to entertainment programming, including The Shield and the
original movie Redemption, whose April premiere delivered the highest
Adults 18-49 rating on basic cable this season. Overall, FX's nightly
primetime viewership during the third quarter was the highest in FX
history with an average of more than one million viewers.
OTHER ITEMS
During the quarter, the Company completed the sale of the Los
Angeles Dodgers franchise and real estate assets to real estate
developer Frank McCourt for the gross sale price of approximately $421
million and agreed to remit $50 million to the buyer for certain
pre-existing commitments.
(1) Operating income before depreciation and amortization is defined
as operating income (loss) plus depreciation and amortization and
amortization of cable distribution investments. Depreciation and
amortization expense includes the depreciation of property and
equipment, as well as the 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 operating income
before depreciation and amortization. Fox Entertainment Group
reconciles this non-GAAP measure to operating income in our
supplemental data beginning on page 8 of this release.
To receive a copy of this press release through the Internet,
access Fox's corporate website located at http://www.fox.com
Audio from Fox's conference call with analysts on the third
quarter results can be heard live on the Internet at 8:30 a.m. Eastern
Daylight Time today. To listen to the call, visit http://www.fox.com
Cautionary Statement Concerning Forward-Looking Statements
This document contains certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on management's views and assumptions
regarding future events and business performance as of the time the
statements are made. Actual results may differ materially from these
expectations due to changes in global economic, business, competitive
market and regulatory factors. More detailed information about these
and other factors that could affect future results is contained in our
filings with the Securities and Exchange Commission. The
"forward-looking statements" included in this document are made only
as of the date of this document and we do not have any obligation to
publicly update any "forward-looking statements" to reflect subsequent
events or circumstances, except as required by law.
CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except for per share amounts)
3 Months Ended 9 Months Ended
March 31, March 31,
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited) (Unaudited)
Revenues $ 2,840 $ 2,707 $ 8,978 $ 8,201
Expenses
Operating 1,895 1,882 6,170 5,764
Selling, general and
administrative 322 314 930 945
Depreciation and amortization 41 47 127 139
-------- -------- -------- --------
Operating income 582 464 1,751 1,353
Other income (expense):
Interest expense, net (75) (25) (98) (120)
Equity losses of affiliates (26) (8) (21) (18)
Minority interest in
subsidiaries (1) (5) (4) (21)
Other, net - - 19 -
-------- -------- -------- --------
Income before provision for income
taxes 480 426 1,647 1,194
Provision for income tax expense on
stand-alone basis (181) (150) (617) (421)
-------- -------- -------- --------
Net income $ 299 $ 276 $ 1,030 $ 773
======== ======== ======== ========
Basic and diluted earnings per
share $ 0.31 $ 0.31 $ 1.11 $ 0.88
======== ======== ======== ========
Basic and diluted weighted average
number of common equivalent shares
outstanding 974 900 926 875
======== ======== ======== ========
SEGMENT INFORMATION
(in millions)
3 Months Ended 9 Months Ended
March 31, March 31,
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited) (Unaudited)
Revenues
Filmed Entertainment $ 1,194 $ 1,171 $ 3,828 $ 3,392
Television Stations 490 463 1,579 1,570
Television Broadcast Network 576 558 1,830 1,731
Cable Network Programming 580 515 1,741 1,508
-------- -------- -------- --------
Total Revenues $ 2,840 $ 2,707 $ 8,978 $ 8,201
======== ======== ======== ========
Operating Income (Loss) Before
Depreciation and Amortization
Filmed Entertainment $ 237 $ 220 $ 857 $ 612
Television Stations 213 179 739 723
Television Broadcast Network 52 37 (117) (115)
Cable Network Programming 152 106 493 366
-------- -------- -------- --------
Total Operating Income
Before Depreciation and
Amortization $ 654 $ 542 $ 1,972 $ 1,586
======== ======== ======== ========
Operating Income (Loss)
Filmed Entertainment $ 223 $ 205 $ 816 $ 570
Television Stations 201 162 698 676
Television Broadcast Network 47 33 (131) (129)
Cable Network Programming 111 64 368 236
-------- -------- -------- --------
Total Operating Income $ 582 $ 464 $ 1,751 $ 1,353
======== ======== ======== ========
SUPPLEMENTAL FINANCIAL DATA
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,
2004 2003 2004 2003
-------- -------- -------- --------
$ Millions $ Millions
Operating income $ 582 $ 464 $ 1,751 $ 1,353
Depreciation and amortization 41 47 127 139
Amortization of cable distribution
investments 31 31 94 94
-------- -------- -------- --------
Operating income before
depreciation and amortization $ 654 $ 542 $ 1,972 $ 1,586
======== ======== ======== ========
For the Three Months Ended March 31, 2004
($ Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 223 $ 14 $ - $ 237
Television
Stations 201 12 - 213
Television
Broadcast
Network 47 5 - 52
Cable Network
Programming 111 10 31 152
---------- -------------- -------------- --------------
Consolidated
Total $ 582 $ 41 $ 31 $ 654
========== ============== ============== ==============
SUPPLEMENTAL FINANCIAL DATA (continued)
For the Three Months Ended March 31, 2003
($ Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 205 $ 15 $ - $ 220
Television
Stations 162 17 - 179
Television
Broadcast
Network 33 4 - 37
Cable Network
Programming 64 11 31 106
---------- -------------- -------------- --------------
Consolidated
Total $ 464 $ 47 $ 31 $ 542
========== ============== ============== ==============
For the Nine Months Ended March 31, 2004
($ Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 816 $ 41 $ - $ 857
Television
Stations 698 41 - 739
Television
Broadcast
Network (131) 14 - (117)
Cable Network
Programming 368 31 94 493
---------- -------------- -------------- --------------
Consolidated
Total $ 1,751 $ 127 $ 94 $ 1,972
========== ============== ============== ==============
For the Nine Months Ended March 31, 2003
($ Millions)
-------------------------------------------------------
Operating
income
(loss)
Amortization before
Operating Depreciation of cable depreciation
income and distribution and
(loss) amortization investments amortization
---------- -------------- -------------- --------------
Filmed
Entertainment $ 570 $ 42 $ - $ 612
Television
Stations 676 47 - 723
Television
Broadcast
Network (129) 14 - (115)
Cable Network
Programming 236 36 94 366
---------- -------------- -------------- --------------
Consolidated
Total $ 1,353 $ 139 $ 94 $ 1,586
========== ============== ============== ==============
CONTACT: Fox Entertainment Group, New York
Reed Nolte, Investor Relations, 212-852-7092
or
Andrew Butcher, Press Inquiries, 212-852-7070
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 6, 2004
FOX ENTERTAINMENT GROUP, INC.
By: /s/ Lawrence A. Jacobs
------------------------
Lawrence A. Jacobs
Senior Vice President