As it prepares to spin off its publishing, education and Australian broadcasting and cable assets into a separate company, News Corp. filed a proxy statement with the SEC Friday morning that showed HarperCollins with revenue of $1.19 billion in the fiscal year ended June 30, 2012, and earnings before interest, taxes, depreciation and amortization of $86 million. Sales were off 1% compared to fiscal 2011, while EBITDA was down 8% from $93 million.
News Corp. attributed the decline primarily to lower print book sales at the U.S. General Books division and lower distribution revenues, partially offset by strong growth in digital book sales. The decrease in revenue was also partially offset by strong sales in the U.K. due to the success of A Dance with Dragons. The decline in EBITDA was attributed to lower revenue plus litigation settlement expenses related to the e-books antitrust action, partially offset by lower manufacturing costs reflecting the continued shift to digital book sales. Fiscal 2012 was the second consecutive year sales and earnings fell at HC; in fiscal 2010 revenue was $1.27 billion and EBITDA $106 million.
As has been previously reported, HC’s acquisition of Thomas Nelson gave a boost to HC’s results for the quarter ended September 30, with sales ahead 17%, to $352 million, and EBITDA up 29% to $40 million.
In reporting results, News Corp. broke down HC revenue into consumer and other, although it doesn’t identify what other includes. In the quarter, consumer sales were $326 million and other $26 million, while in fiscal 2012, consumer sales were $1.12 billion and other $66 million.
In providing background on HC, News Corp. said HC has about 100,000 SKUs with about 30,000 titles available in digital formats. E-books accounted for about 15% of HC’s global revenue in fiscal 2012. Looking forward, News Corp. wrote that “as our digital products continue to account for more of our business, we expect to benefit from increased profit contribution and improved working capital dynamics due to diminishing physical plant requirements, inventory and returns related to our print business as well as faster payments for e-books.”
The filing also includes a litany of litigation against HC, most tied to the agency e-book pricing model. No surprising revelations were in the document, although it notes that Minnesota —the only state not to file suit against HC and other publishers and Apple--opened up its own investigation in October. Since July, HarperCollins Canada has been cooperating with the Canadian Competition Bureau inquiry regarding the sale of e-books in Canada. The document also included the settlement agreements HC has reached with the DoJ, European Commission and states. The civil class action lawsuit is still moving forward.
