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Executives

Keith Rupert Murdoch - Co-Founder, Executive Chairman, Chief Executive Officer, Chairman of Media & Entertainment Arm and Chief Executive of Media & Entertainment Arm

Viet D. Dinh - Independent Director, Chairman of Nominating & Corporate Governance Committee and Member of Audit Committee

News Corporation (NWSA) 2013 Annual Shareholder Meeting October 18, 2013 1:00 PM ET

Operator

Welcome to the Twenty-First Century Fox 2013 Annual Meeting of Stockholders, and thank you for attending the meeting. We realize that many of you have questions that you would like to ask today, and we request that everyone please be mindful to keep their comments and questions to the allotted time.

As noted in the rules of the meeting that were provided to you when you registered today, each person is limited to 2 questions, which should be no longer than 1 minute in length. Also, photography and the use of audio/video equipment is prohibited. We ask that you comply with these and other rules of the meeting so that we may conduct an orderly meeting. If anyone has not received the rules for today's meeting, please raise your hand and a staff member will bring a copy to you now. Thank you.

The meeting will now begin.

Keith Rupert Murdoch

Good morning, everybody. I'm Rupert Murdoch, the Chairman and Chief Executive Officer of Twenty-First Century Fox. It's my pleasure to welcome all of you to the 2013 Annual Meeting of Stockholders of Twenty-First Century Fox. Before calling the meeting to order, I'd like to present some remarks about the performance of our company.

2013 was a transformative year, and I couldn't be prouder of what we have accomplished. Following the separation transaction that created Twenty-First Century Fox out of the old News Corporation, we are today more aligned operationally and strategically than ever before. Combined, our film and TV production, cable and broadcast channels and satellite platform businesses have a global footprint that is unparalleled. In tandem with the scale, we have maintained something that sets us apart from our peers, an entrepreneurial spirit and a commitment to reimagine the status quo.

I'm pleased to report that the company has never been better positioned. We continue to deliver long-term value for you, our shareholders. The opportunities that lie ahead are extraordinary. To pursue these opportunities, Twenty-First Century Fox starts with a solid foundation. We have built powerful franchises and brands across news, entertainment, sports and platforms. They lead the categories with most-watched programming and will benefit greatly from the increased global demand for compelling content.

Today, our reach is truly global, with a distribution network of 1.5 billion subscribers in over 100 local languages every day. We have led the industry in investing early and with conviction in emerging economies, adding new dimensions to our company and setting us up to benefit from the enormous growth of the middle-class consumer in some of the most populous regions on Earth. I believe that under the leadership of the most talented team in the industry, many of whom are in this room today, we can drive our businesses to new heights, with a clarity of a unified corporate vision and shared priorities.

Simply put, our mission is to bring consumers content they can't live without whenever and however they want it. That means providing them with the best stories in film and television, the greatest moments in sports and unrivaled TV news coverage, as well as an array of satellite products and services that deliver the world like never before. And we can respond to these opportunities from a base of financial strength. Our concentration of revenues on the more predictable subscription-related fees, coupled with a cash balance of approximately $6.6 billion, provide a significant flexibility to balance our capital allocation.

In reviewing this past fiscal year, we continued to drive forward on our strategic priorities with several important milestones. Our Cable Network Programming segment continued to be our engine of growth. In fiscal 2013, our Cable Network Programming alone surpassed $10 billion in revenue for the first time, nearly 1/3 of our total revenue. EBITDA increased by nearly 20%, contributing about 2/3 of the company's total EBITDA. We made important progress in our strategic priority to simplify our global portfolio, moving opportunistically to wholly own and consolidate certain assets while sharing others. We increased our stake in Sky Deutschland to 55%, making it a consolidated entity. We and the stock market [ph] are encouraged by Sky D's financial momentum and believe that the underpenetrated pay-TV business in Europe's largest market is a compelling opportunity. We bolstered our global sports footprint by acquiring from ESPN the 50% of ESPN's Star Sports we did not already earn, extending our sports leadership to Asia. Here in the U.S., we expanded our regional sports network portfolio through the acquisition of a 49% stake in the Yankees Entertainment and Sports Network, with a path to a controlling interest. And we acquired all of SportsTime Ohio. Both deals expand the footprint of our fast-growing Regional Sports Network business, a key driver for our cable channels group.

We also commenced important investments that will deliver returns in the coming years. We've broadened our core cable business with a new national sports channel, Fox Sports 1, which launched in August, and our third branded FX Channel, FXX, which went live last month. Both initiatives underscore the priority we place on building our core businesses and brands over acquiring new ones and achieving our growth organically.

An overarching priority to deliver superior shareholder value has led to the execution of the separation transaction. And although a significant amount of time and effort was spent implementing the separation, we did it on schedule and without disruption or distraction, as demonstrated by the company's strong financial performance. Our shareholders have been rewarded with superior returns at levels well above the market and our peers. Since we announced our intent to separate in June 2012, our total shareholder return through share price appreciation and dividends was nearly 95%, approximately 3x that of the S&P 500 and 25% higher than our major media peers. These numbers speak for themselves. If we look forward, I believe we are uniquely positioned to continue to transform our business and take it to a new level.

Our 3-year growth plan sets us up to increase our earnings and the EBITDA to more than $9 billion in fiscal 2016, an increase of nearly 50% over what we reported last year. Our entire leadership team detailed this growth plan with significant transparency and clear targets at our Investor Day on August 8. This growth will be led by our channels business, and we will also benefit from the returns on the investments we are making now in building new businesses, many of which I outlined earlier.

In addition to the disciplined investments in our core business, the company's strong capital structure also allowed us to return more capital to our shareholders. This summer, we announced a $4 billion stock repurchase program targeted for this fiscal year, as well as a 50% increase in our semiannual dividend.

Let me conclude by saying I'm confident and optimistic in this company. Our management team will continue to build on our financial and operational momentum, delivering innovation to consumers and continued long-term value to our investors.

Before closing, I would like to knowledge José María Aznar, Natalie Bancroft, Peter Barnes, Elaine Chao and Joel Klein, who are no longer serving on this board but continue their service on the News Corp. board. I would also like to acknowledge our new board nominees, Delphine Arnault, Jacques Nasser and Robert Silberman, each of whom will bring valuable experience and perspective to the board. Thank you very much.

Excuse me. I'm sorry. But we need a couple of minutes to handle some technical difficulties. So just excuse us for 2 minutes.

[Technical Difficulty]

Keith Rupert Murdoch

I apologize for the interruption. And I now call the meeting to order. Before proceeding to the business of the meeting, I'd like to introduce our directors and members of our management. In addition to myself, seated in the front row, Mr. David DeVoe, Mr. James Murdoch, Mr. Lachlan Murdoch, Mr. Jacques Nasser, Mr. Robert Silberman, Mr. Arthur Siskind and Professor -- and President Uribe. And on stage with me, the Deputy Chairman, President and Chief Operating Officer, Mr. Chase Carey; our Chief Financial Officer, Mr. John Nallen; Group General Counsel, Mr. Gerson Zweifach; Chairman of the Nominating and Corporate Governance Committee, Viet Dinh; Chairman of the Audit Committee, Mr. Rod Eddington; and the Chairman of the Compensation Committee, Mr. James Breyer. And Ms. Delphine Arnault, a Director, was unable to attend today's meeting and sent her apologies. Also present today is Mr. John Mendez [ph] of Ernst & Young LLP, the company's independent registered public accounting firm. In accordance with the company's bylaws, I hereby appoint Mr. Jim Raitt from the American Election Services LLC as the independent inspector of election for this Annual Meeting.

This meeting is held pursuant to a notice of Annual Meeting of stockholders mailed on or about August 30, 2013 to each record holder of a share of common stock on August 21, 2013. A list of holders of the company's Class B common stock entitled to vote at this meeting has been available at the company's headquarters for the past 10 days and is available at the meeting for examination by any stockholder desiring to do so.

All documents concerning the call and notice of this meeting are available here today and will be filed with the records of the meeting. The Inspector of Elections has examined the proxies received and reports that holders of the majority of voting power of all of the outstanding shares of Class B common stock entitled to vote at the meeting are present in person or represented by proxy. Therefore, I hereby declare a quorum present at the meeting.

On behalf of our Board of Directors, I'd like to express my appreciation to all stockholders who returned their proxies. It's now 10:24 a.m. on October 18, 2013. The polls are now open for voting. Those stockholders voting in person should mark their ballots, and a company representative will be available to collect them for tabulation. Those of you who requested a ballot so that you could vote in person were provided with a ballot when you entered the meeting. Ballots are also available in the room where registration took place. However, we urge stockholders to allow their proxies to stand. You will have an opportunity to ask questions after all matters being submitted to stockholders to vote are presented. Please hold your questions until that time.

The first matter to be acted upon by the stockholders is Proposal 1, the election of directors. The board has nominated Delphine Arnault, James Breyer, Chase Carey, David DeVoe, Viet Dinh, Roderick Eddington, James Murdoch, Lachlan Murdoch, Jacques Nasser, Robert Silberman, Álvaro Uribe and myself to serve as directors. If elected, these director nominees will need to serve a 1-year term, expiring at the 2014 Annual Meeting or until their successors are duly elected and qualified.

Proposal 2 is for the ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending June 30, 2014.

Proposal 3 is for an advisory vote on executive compensation. All right.

Proposal 4 is for the approval of the Twenty-First Century Fox 2013 Long-Term Incentive Plan.

We also have 2 proposals submitted by shareholders who, as I said as I may speak, are no more than 2 minutes on their respective proposals.

First, Viet Dinh, the Chairman of the Nominating and Corporate Governance Committee, will state the company's position on the stockholder proposals. Then we'll hear from Christian Brothers Investment Services, represented by Mr. Timothy Shaler, who has given notice to the company that he intends to present for action at this meeting a proposal regarding the adoption of a policy, that the Chairman of the Board of Directors be an independent Director, which was included in the company's proxy statement as Proposal 5. As disclosed in the proxy statement, the board recommends that stockholders vote against this proposal.

After Mr. Shaler, we will hear from the Nathan Cummings Foundation represented by Mr. Mark Klein [ph], who has given notice to the company that he intends to present for action at this meeting a proposal regarding the elimination of the company's dual class capital structure, which was included in the company's proxy statement as Proposal 6. As disclosed in the proxy statement, the board recommends that stockholders vote against this proposal.

Is Mr. Klein [ph] in attendance? Is anyone representing the Nathan Cummings Foundation here? Well, in the absence of a representative to move Proposal 6 will not be presented to a stockholder vote.

I now present the results from the Inspector of Elections' preliminary report based on the proxies we have received. The Inspector of Elections' final report will be filed with our corporate secretary following the meeting.

A preliminary proposal of the Inspector of Elections reflects that more than a majority of the eligible voters -- votes cast had been voted for the election of each of the directors. For the ratification of the selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending June 30, 2014, for the approval of executive compensation and for the approval of the Twenty-First Century 2013 Long-Term Incentive Plan, more than a majority of eligible votes cast had been voted against the stockholder proposal regarding the adoption of a policy that the Chairman of the Board of Directors be an independent Director. Thank you very much for your support.

We'll report the final results of this meeting in the SEC filing, which we will make following the end of this meeting.

Following the presentation of the stockholder proposal, if you are a stockholder and have a question relating to any of those -- to that proposal or regarding the business or our operations of the company, you may step up to the microphone and present the pink or green admission ticket that you received upon registering to the company representative. Before asking your question, please state your name and affiliation. As noted in the rules of the meeting that were provided to you when you registered today, each person is limited to 2 questions, which should be no longer than 1 minute in length. We have many stockholders who are interested in speaking. We ask that you comply with the rules of the meeting so that we can conduct an orderly meeting, and those who would like to speak have an opportunity to do so.

Mr. Dinh, will you please state the company's position on each of the stockholder proposals?

Viet D. Dinh

Thank you, Mr. Chairman. On Proposal 5 regarding an independent Chairman, the board recognizes that one of its key responsibilities is to establish and maintain the most effective leadership structure for your company. Given the highly complex business and competitive environment in which the company operates, the board believes that the right leadership structure may vary based upon circumstances and across time. To retain flexibility in establishing the most effective leadership structure for the company, the board does not have a permanent policy on whether the Chairman of the Board must be an independent Member of the Board. Instead, the board reviews its leadership structure at least annually. With this approach, the roles of the Chairman and CEO may be filled by the same or different individuals, and the board leadership structure can then be tailored to the strength of the company's officers and directors and best addresses the company's evolving and dynamic businesses at any given time.

The board believes that, at this time, the most effective leadership structure for the company and the best interest of our shareholders is combined role of Chairman and Chief Executive Officer, coupled with an independent Lead Director in Sir Roderick Eddington with significant and substantive responsibilities. The combined Chairman and CEO role ensure a strong and consistent leadership for the company, with a clarity of vision, effectiveness of leadership and appropriate accountability that has defined your company in the last 50 years. Our CEO is best suited to serve as Chairman of the Board because he is most familiar with the company's operation, he's most capable of identifying strategic opportunities and he effectively communicates between the board and the executive management team.

Our government is enhanced by a strong and substantive Lead Director in Sir Roderick Eddington, who reviews the board agenda, reviews board materials and presides over a meeting of independent directors after each and every single one of our board meeting. The Lead Director ensures independence and preserves an objective viewpoint in the board's leadership. The board also achieves independent oversight of executive management through the company's corporate governance policies and practices, including the independence of all members of the board's standing committee.

I would also note, incidentally, the 59 of the 100 top U.S. public companies have a combined Chairman and CEO role at this time.

That concludes my remarks. Thank you, Mr. Chairman.

Keith Rupert Murdoch

Thank you, Mr. Dinh. Mr. Shaler, would you like to speak briefly to your proposal? Do you have a microphone there?

Timothy Shaler

Good morning, Mr. Murdoch, members of the board, staff and fellow shareholders. My name is Tim Shaler, and I'm an investment advisor with Christian Brothers Investment Services, the faith-based socially responsible investment firm with 499,000 Class A shares and 547 Class B shares of Twenty-First Century Fox. Our resolution, co-filed by Christian Brothers Investment Services and the British Columbia Investment Management Corporation, with support from the Local Authority Pension Fund Forum, request the Board of Directors appoint an independent Chairman, an urgent first step towards improving the quality of this company forward. The separation of the company to News Corp. and Twenty-First Century Fox presents a unique opportunity to change current leadership structure, which currently is an impediment to a strong independent board, whose primary job should be to monitor management on behalf of all shareholders. This issue is so pressing that our resolution has been supported by prominent pension funds like CalPERS, CalSTRS and the Florida State Board of Administration, by leading proxy voting firms such as ISS, Glass Lewis and PIRC and by Class A shareholders representing 1.9 trillion in assets and 66 million shares.

In a strong share of support for this reform, last year, approximately 2/3 of independent shareholders voted in favor of this resolution. For the board to ignore such an overwhelming shareholder mandate to us, we believe, shows a disregard not only for shareholders but also for corporate governance. While some steps have been taking to address phone hacking, the company will continue to be closely associated with the scandal because of the upcoming trial of those charged with the illegal activity, the ongoing criminal investigations and the allegations of secret recordings. Appointing an independent Chair would give shareholders more comfort that real oversight to the executive team is being exercised.

Our new company deserves a fresh start with proper oversight and adequate controls on power. We hereby urge the board to appoint an independent Chair at Twenty-First Century Fox who's responsive to shareholder concerns and who will implement the necessary reforms to take this company into the 21st century. Thank you.

Keith Rupert Murdoch

Thank you, Mr. Shaler. Stockholders who wish to speak, proceed to the microphone. Any questions?

Well, are there any other ballots that need to be collected? Now 10:35, October 18, and the polls are now closed. There don't appear to be any.

That concludes the business described in the Notice of the Meeting, and I declare the meeting adjourned. Thank you for your attendance. Any stockholders wishing to inspect the minutes should contact our corporate secretary. Thank you very much indeed for your attendance.

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