21st Century Fox Reports Q4 Total Segment Operating Income before Depreciation & Amortization of $1.77 Bil, a 19% Increase over the Prior Yr Qtr, on Total Revenue of $8.42 Bil, a 17% Increase over the Prior Yr Qtr

Twenty-First Century Fox, Inc. (“21st Century Fox” or the “Company” -- NASDAQ: FOXA, FOX) today reported financial results for the three months and full year ended June 30, 2014.

Commenting on the results, Chairman and Chief Executive Officer Rupert Murdoch said:

“In the fiscal fourth quarter we built on our operational momentum with double-digit earnings and revenue gains. The Company’s strong financial performance was driven by sustained affiliate revenue increases at our cable networks and record fourth quarter contributions at our filmed entertainment segment on the strength of global box office successes X-Men: Days of Future Past, Rio 2 and The Fault In Our Stars. As we close the fiscal year, I continue to have confidence in our ability to execute our growth plan and drive value for our shareholders. Our new $6 billion share buyback program, to be executed over the next twelve months, further underscores our disciplined approach to increasing shareholder value.”

Fourth Quarter Company Results

The Company reported quarterly revenues of $8.42 billion, a $1.21 billion or 17% increase over prior year quarterly revenues of $7.21 billion. This growth reflects a substantial increase at the Filmed Entertainment segment, led by higher theatrical revenues, and strong double-digit growth at the Cable Network Programming and Direct Broadcast Satellite Television (“DBS”) segments from higher affiliate and subscription revenues, respectively.

Quarterly total segment operating income before depreciation and amortization (“OIBDA”)(1) grew 19% to $1.77 billion as compared with prior year quarterly OIBDA of $1.49 billion. This improvement was led by a near tripling of Filmed Entertainment segment contributions and double-digit growth at the Cable Network Programming segment. These increases were partially offset by lower contributions at the Television segment.

The Company reported quarterly income from continuing operations attributable to stockholders of $966 million ($0.43 per share), compared with $977 million ($0.42 per share) in the corresponding period of the prior year. Current year quarterly results included a $74 million increase above the prior year quarter in Depreciation and amortization expense principally resulting from the amortization of intangible assets related to the Company's acquisition of controlling ownership stakes in Sky Deutschland AG (“Sky Deutschland”) and the Yankees Entertainment and Sports Network (“YES Network”). This year’s quarterly results also included a $50 million gain from the Company’s participation in British Sky Broadcasting’s (“BSkyB”) share repurchase program, which is reflected in Equity earnings of affiliates and Other, net income of $51 million, which was principally driven by gains from asset sales. Excluding the net income effects of Other, net and gains from the Company’s participation in the BSkyB share repurchase program, along with comparable items in both years, adjusted quarterly income per share from continuing operations attributable to stockholders(2) was $0.42 compared with the adjusted result from the corresponding period a year-ago of $0.31.

Full Year Company Results

The Company reported annual revenues of $31.87 billion, a $4.19 billion or 15% increase over prior year revenues of $27.68 billion. The growth includes a $1.59 billion increase at the DBS segment, led by the full year consolidation of Sky Deutschland revenues, and double-digit rate revenue growth at the Cable Network Programming and Filmed Entertainment segments led by higher affiliate and content revenues, respectively.

The Company reported annual total segment OIBDA of $6.72 billion compared with prior year OIBDA of $6.26 billion. This 7% increase was driven by increased contributions from all of the Company’s segments, with more than half reflecting growth at the Company’s Cable Network Programming segment.

The Company reported annual income from continuing operations attributable to stockholders of $3.79 billion ($1.67 per share), compared with $6.82 billion ($2.91 per share) in the prior year. Current year results included a $345 million increase above prior year levels in Depreciation and amortization expense principally resulting from the amortization of intangible assets related to the Company's acquisition of controlling ownership stakes in Sky Deutschland and the YES Network. The full year results also included $174 million of income in Other, net, in the current year as compared with $3.75 billion a year-ago. The prior year amount principally related to gains on the acquisition of additional ownership stakes in Sky Deutschland and ESPN STAR Sports Networks (now operating as Fox Sports Asia and STAR Sports) (“ESS”), as well as the sale of the ownership stake in NDS Group Limited (“NDS”). In addition, the current year results included a $134 million gain from the Company’s participation in BSkyB’s share repurchase program, which is reflected in Equity earnings of affiliates. Excluding the net income effects of Other, net and gains from the Company’s participation in the BSkyB share repurchase program, along with comparable items in both years, adjusted annual income per share from continuing operations attributable to stockholders was $1.55 compared with the adjusted year-ago result of $1.36.

CABLE NETWORK PROGRAMMING

Fourth Quarter Segment Results

Cable Network Programming quarterly segment OIBDA increased 11% to $1.20 billion, driven by a 13% revenue increase led by continued affiliate revenue growth. The revenue improvement was partially offset by a 14% increase in expenses, approximately a third of which reflects the planned investments related to the launches of new channels, including Fox Sports 1, STAR Sports and FXX, and the consolidation of the YES Network. Segment OIBDA growth was also adversely impacted by 3% from foreign exchange rate fluctuations, primarily in Latin America and India.

Domestic affiliate revenue grew 19% reflecting the combination of sustained growth at the regional sports networks (“RSNs”), FX Networks and Fox News Channel, the contributions from the launches of Fox Sports 1 and FXX, as well as the consolidation of the YES Network. Reported international affiliate revenue increased 8% driven by strong local currency growth at the Fox International Channels (“FIC”) and STAR channels which was partially offset by a 10% adverse impact from the strengthened U.S. dollar.

Domestic advertising revenue grew 12% in the quarter over the prior year period driven by solid growth at the RSNs and FX Networks. The growth at the RSNs included the impact from the consolidation of the YES Network while the FX Networks growth included increases attributable to FXX. Reported international advertising revenue increased 5% due to strong local currency growth at STAR and FIC which was partially offset by a 10% adverse impact from the strengthened U.S. dollar.

OIBDA from the domestic channels increased 17% from the corresponding period in the prior year, reflecting strong OIBDA growth at the RSNs, which includes contributions from the YES Network. Reported quarterly OIBDA at the Company’s international cable channels’ declined 3% from the corresponding period of the prior year as strong local currency growth at the FIC and STAR entertainment channels was more than offset by a 15% adverse impact from the strengthened U.S. dollar.

Full Year Segment Results

Full year Cable Network Programming annual segment OIBDA increased 6% to $4.41 billion, driven by a 13% revenue increase led by continued affiliate revenue growth. The revenue improvement was partially offset by a 17% increase in expenses, almost half of which reflects the planned investments related to the launches of new channels and the impact of the consolidation of recently acquired ownership stakes in the YES Network, ESS, Eredivisie Media & Marketing CV (“EMM”) and Sports Time Ohio. Segment OIBDA growth was also adversely impacted by 3% from foreign exchange rate fluctuations, primarily in Latin America and India.

Domestic affiliate revenue grew 14% reflecting the combination of sustained growth at the RSNs, FX Network and Fox News Channel, contributions from new channel launches and the impact from the consolidation of the YES Network. Reported international affiliate revenue increased 19% driven by strong local currency growth at FIC and STAR as well as the benefit from the full year consolidation of ESS and EMM, partially offset by an 8% adverse impact from the strengthened U.S. dollar.

Domestic advertising revenue grew 8% over the prior year period led by double-digit growth at the FX Networks, the RSNs and the National Geographic networks. The growth at the FX Networks included increases attributable to FXX while the RSNs growth included the impact from the consolidation of the YES Network. Reported international advertising revenue increased 9% due to strong local currency growth at STAR and FIC which was partially offset by a 9% adverse impact from the strengthened U.S. dollar.

OIBDA from the domestic channels increased 7% from the prior year, led by strong double-digit growth at the RSNs, which includes contributions from the YES Network. Full year results also reflect higher contributions at the FX Networks and Fox News Channel. Reported annual OIBDA at the Company’s international cable channels’ declined 1% from the corresponding period of the prior year as strong local currency growth at FIC and the STAR entertainment channels was more than offset by investments in the STAR Sports channels and a 12% adverse impact from the strengthened U.S. dollar.

TELEVISION

Fourth Quarter Segment Results

Television reported quarterly segment OIBDA of $145 million compared with the $213 million reported in the prior year quarter, as increased retransmission consent revenues were more than offset by lower advertising revenues. Quarterly advertising revenues declined 11% from the corresponding period of the prior year driven by the impact of lower general entertainment ratings, led by declines at American Idol.

Full Year Segment Results

Full year segment OIBDA of $882 million increased $27 million or 3% versus the prior year. This increase was driven by continued retransmission consent revenue growth and contributions from the broadcast of Super Bowl XLVIII partially offset by the impact of lower primetime general entertainment ratings led by declines at American Idol and X-Factor and higher programming costs. Advertising revenues increased 5% from the prior year driven by the broadcast of Super Bowl XLVIII and higher rates and ratings for the National Football League and Major League Baseball playoffs, substantially offset by the impact from lower general entertainment ratings.

FILMED ENTERTAINMENT

Fourth Quarter Segment Results

Filmed Entertainment reported record fourth quarter segment OIBDA of $339 million, nearly triple the $117 million reported in the same period a year-ago, driven by a $768 million or 38% revenue increase. This growth was led by several successful worldwide theatrical releases in the quarter including X-Men: Days of Future Past, which has grossed $740 million in worldwide box office to date, Rio 2, which has grossed over $490 million in worldwide box office to date, and The Fault in Our Stars, which has grossed over $260 million in worldwide box office to date. As a result of the successful releases, the film studio became the first to cross the $3 billion mark in worldwide box office this year. Quarterly results also reflect higher contributions from the television production businesses led by the syndication of Modern Family and the delivery of a new season of 24.

Full Year Segment Results

Full year segment OIBDA of $1.36 billion increased $50 million or 4% over prior year amounts. Annual results reflect higher contributions from the television production businesses led by higher SVOD revenues, including the sale of series to Amazon, and the syndication of Modern Family. This growth was partially offset by difficult comparisons to the successful worldwide theatrical performance of Ice Age: Continental Drift in the prior year.

DIRECT BROADCAST SATELLITE TELEVISION

Fourth Quarter Segment Results

DBS generated quarterly segment OIBDA of $146 million compared with the $156 million reported in the same period a year ago. The $214 million or 16% increase in revenue underpinned by sustained Sky Deutschland subscriber growth was more than offset by higher sports programming costs including SKY Italia’s broadcast of the FIFA World Cup and Sky Deutschland’s exclusive broadcast of Bundesliga soccer. Sky Deutschland grew net direct subscribers by approximately 82,000 during the quarter, bringing total direct subscribers to 3.81 million, while SKY Italia’s subscriber base declined by 25,000 during the quarter bringing total subscribers to 4.73 million.

Full Year Segment Results

DBS generated annual segment OIBDA of $424 million, a $27 million or 7% increase over the prior year driven by higher contributions from Sky Italia resulting from cost reduction efforts. Annual segment revenues increased $1.59 billion principally reflecting the full year consolidation of Sky Deutschland revenues versus the consolidation of 6-months of Sky Deutschland revenues in the prior year. This revenue increase was offset by the full year consolidation of Sky Deutschland costs, including costs related to its exclusive broadcast of Bundesliga soccer.

REVIEW OF EQUITY EARNINGS (LOSSES) OF AFFILIATES’ RESULTS

The Company’s share of equity earnings (losses) of affiliates is as follows:

Fourth Quarter Results

Quarterly equity earnings from affiliates were $192 million as compared with $223 million in the same period a year ago. The decreased contributions from affiliates reflect lower contributions from BSkyB, primarily due to a decrease in the Company’s pre-tax gain related to its participation in BSkyB’s share repurchase which declined from an $89 million gain in the corresponding period of the prior year to $50 million in the current quarter.

Full Year Results

Annual equity earnings from affiliates were $622 million as compared with $655 million in the same period a year ago. The decreased contributions from affiliates are primarily due to lower contributions from BSkyB, including the Company’s pre-tax gain related to its participation in BSkyB’s share repurchase which decreased from a $306 million gain in the prior year to $134 million in the current year. This decrease was partially offset by the absence of Sky Deutschland operating losses resulting from its consolidation in January 2013, as well as improved contributions from other affiliates, including the YES Network and Hulu.

OTHER ITEMS

Share repurchases

During the quarter, the Company repurchased 30.1 million shares of Class A Common Stock for $1.02 billion bringing the total fiscal year repurchase to 114.9 million shares of Class A Common Stock for $3.77 billion. As a result of the stock repurchase program, diluted weighted average common stock outstanding of 2.23 billion in this year’s quarter declined 4% from 2.32 billion in the same period a year ago.

Last year, on August 8, 2013, the Company announced that its Board of Directors authorized the repurchase of $4 billion of Class A Common Stock, excluding commissions, which replaced the remaining authorized amount under the stock repurchase program. The Company has fully utilized this stock repurchase authorization, repurchasing 120.5 million shares of Class A Common Stock over the past twelve months.

On August 5, 2014, the Board of Directors authorized the repurchase of an additional $6 billion of Class A Common Stock, excluding commissions. The Company expects to repurchase such shares over the next twelve months.

Dividends

The Company has declared a dividend of $0.125 per Class A and Class B share. This dividend is payable on October 15, 2014 with a record date for determining dividend entitlements of September 10, 2014.

Sale of ownership stakes in Sky Italia and Sky Deutschland

On July 25, 2014 the Company announced that it will transfer Sky Italia and its fully diluted 57.4 percent interest in Sky Deutschland to BSkyB In exchange for approximately $9.3 billion in value from BSkyB comprised of approximately $8.6 billion in cash and BSkyB’s 21 percent interest in National Geographic Channels International, raising 21st Century Fox’s ownership stake to 73 percent. In addition, 21st Century Fox participated in BSkyB’s equity offering in July 2014 by purchasing approximately $900 million of additional shares in BSkyB to maintain the Company’s 39.1 percent ownership interest. The net, after-tax cash proceeds to be received by 21st Century Fox upon completion of all the elements of this transaction will approximate $7.2 billion. The agreement is subject to regulatory approvals, the approval of BSkyB stockholders and customary closing conditions.

To receive a copy of this press release through the Internet, access 21st Century Fox’s corporate Web site located at http://www.21cf.com.

Audio from 21st Century Fox’s conference call with analysts on the full year and fourth 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.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.

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 from non-operating factors. Total segment OIBDA is a non-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: Impairment charges, discontinued operations, Equity earnings of affiliates, Interest expense, net, Interest income, Other, net, Income tax expense and Net income attributable to noncontrolling interests.

The following tables reconcile revenues to segment OIBDA and from OIBDA to Income from continuing operations before income tax expense:

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 stockholders excluding Equity affiliate adjustments and “Other, net”, net of tax (“adjusted income and diluted EPS from continuing operations attributable to 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 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 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 tables reconcile reported income and reported diluted EPS from continuing operations attributable to stockholders to adjusted income and diluted EPS from continuing operations attributable to stockholders for the three months and twelve months ended June 30, 2014 and 2013.