The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.
The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.
The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.
The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.
NOTES TO THE UNAUDITED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Fox Corporation, a Delaware corporation (“FOX” or the “Company”), is a news, sports and entertainment company, which manages and reports its businesses in the following segments: Cable Network Programming, Television and Other, Corporate and Eliminations.
The Distribution
On March
19, 2019, the Company became a standalone publicly traded company through the pro rata distribution by Twenty-First Century Fox, Inc. (“21CF”) of
all of the issued and outstanding common stock of FOX to 21CF stockholders (other than holders that were subsidiaries of 21CF) (the “Distribution”) in accordance with the Amended and Restated Distribution Agreement and Plan of Merger, dated as of June 20, 2018, by and between 21CF and 21CF Distribution Merger Sub, Inc. Following the Distribution, 354,328,270 and 266,173,651 shares of the Company’s Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”), and Class B Common Stock, par value $0.01 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), respectively, began trading independently on The Nasdaq Global Select Market. In connection with the Distribution, the Company entered into the Separation and Distribution Agreement, dated as of March 19, 2019 (the “Separation Agreement”), with 21CF, which effected the internal restructuring (the “Separation”) whereby 21CF transferred to FOX a portfolio of 21CF’s news, sports and broadcast businesses, including
FOX News
,
FOX Business
,
FOX Broadcasting Company (the “FOX Network”)
,
FOX
Sports
, FOX Television Stations Group, and sports cable networks FS1, FS2, FOX Deportes and Big Ten Network (collectively, the “FOX business”), and certain other assets, and FOX assumed from 21CF the liabilities associated with such businesses and certain other liabilities. The Separation and the Distribution were effected as part of a series of transactions (collectively, the “Transactions”) contemplated by the Amended and Restated Merger Agreement and Plan of Merger, dated as of June 20, 2018 (the “21CF Disney Merger Agreement”), by and among 21CF, The Walt Disney Company (“Disney”), TWDC Holdco 613 Corp., a wholly-owned subsidiary of Disney (“New Disney”), and certain other subsidiaries of Disney, pursuant to which, among other things, Disney merged with and into a subsidiary of New Disney and each of Disney and 21CF became wholly-owned subsidiaries of New Disney.
In connection with the Separation, the Company entered into several agreements that govern certain aspects of the Company’s relationship with 21CF and Disney following the Separation. These include the Separation Agreement, a tax matters agreement, a transition services agreement, as well as agreements relating to intellectual property licenses, employee matters, commercial arrangements and a studio lot lease and management agreement.
The Separation Agreement contains the key provisions relating to the Separation and the Distribution. The Separation Agreement identifies the assets that were transferred, the liabilities that were assumed and the contracts that were assigned to each of the Company and 21CF as part of the Separation and describes how these transfers, assumptions and assignments occurred. It also provides for cross-indemnities between the Company and 21CF.
Other matters governed by the Separation Agreement include access to financial and other information, confidentiality, access to and provision of records, continued access for the Company to 21CF insurance policies and shared contracts and certain third-party consent provisions. Pursuant to the Separation Agreement, the Company is the owner of all “FOX” brands and related trademarks, as well as all other intellectual property primarily related to the Company’s business. In addition, the Company has entered into certain trademark license agreements in connection with the use of certain intellectual property by 21CF.
The Company also entered into a tax matters agreement with Disney and 21CF that governs the parties’ respective rights, responsibilities and obligations with respect to certain tax matters. Under the tax matters agreement, 21CF will generally indemnify the Company against any taxes required to be reported on a consolidated or separate tax return of 21CF and/or any of its subsidiaries, including any taxes resulting from the Separation and the Distribution, and the Company will generally indemnify 21CF against any taxes required to be reported on a separate tax return of the Company or any of its subsidiaries. The Company may also be responsible for certain taxes resulting from the anticipated divestitures by Disney of certain assets, primarily the FOX Sports Regional Sports Networks.
The Transaction Tax (as defined below) included a prepayment of the Company’s share of the estimated tax liabilities resulting from the anticipated divestitures by Disney of these assets in the amount of approximately $700 million (which amount is subject to adjustment in the future, as described below).
5
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
In addition, the Company and 21CF entered into a transition services agreement under which the Company an
d 21CF are providing specified services to each other on a transitional basis, including broadcast operations, sports production, information systems and technology, human resources services, finance and accounting, facilities and other corporate services.
Generally, the term for the provision of services under the agreement extends for no longer than two years after the Separation, subject to certain rights of the parties to extend the term for an additional three months. To the extent transition services
are utilized during the first two years after the Separation, the charges paid by the recipient for the services are generally limited to the cost of providing such services. The Company anticipates that it will generally be in a position to complete the t
ransition of most services on or before
the
two-year anniversary of the Separation.
The Company owns the FOX Studios Lot in Los Angeles, California and is responsible for the management of the lot, including servicing and managing the facility and managing and providing studio operation services, including production operations and post-production services. The Company leased office space on the FOX Studios Lot to 21CF for an initial term of seven years, subject to two five-year renewal options exercisable by 21CF.
The Company also entered into an employee matters agreement with 21CF that governs the parties’ obligations with respect to certain employee-related liabilities and certain employee benefit plans, programs, policies and other related matters for employees of the Company (See Note 7 – Equity-Based Compensation and Note 10 – Pension and Other Postretirement Benefits).
Basis of Presentation
The Unaudited Consolidated and Combined Financial Statements of FOX have been prepared
in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”)
for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X
.
In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Unaudited Consolidated and Combined Financial Statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019.
These interim Unaudited Consolidated and Combined Financial Statements and notes thereto should be read in conjunction with the audited combined financial statements and notes thereto included in the Company’s Registration Statement on Form 10, as amended and filed with the Securities and Exchange Commission (the “SEC”) on January 7, 2019 (the “Form 10”).
Prior to the Distribution, the Company’s Unaudited Combined Financial Statements were prepared on a standalone basis, derived from the unaudited consolidated financial statements and accounting records of 21CF. The Company’s financial statements as of June 30, 2018 and for the three and nine months ended March 31, 2018 are presented on a combined basis as the Company was not a separate consolidated group prior to the Distribution. These financial statements reflect the combined historical results of operations, financial position and cash flows of 21CF’s domestic news, national sports and broadcast businesses and certain other assets and liabilities associated with such businesses
. The Company became a separate consolidated group as a result of the Distribution, and the Company’s financial statements as of March 31, 2019 and for the three and nine months ended March 31, 2019 are presented on a consolidated basis.
The Unaudited Consolidated and Combined Statements of Operations include allocations for certain support functions that were provided on a centralized basis within 21CF prior to the Distribution and not recorded at the business unit level, such as certain expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others. 21CF did not routinely allocate these costs to any of its business units. These expenses were allocated to FOX on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures. Management believes the assumptions underlying the Unaudited Consolidated and Combined Financial Statements, including the assumptions regarding allocating general corporate expenses from 21CF, are reasonable. Nevertheless, the Unaudited Consolidated and Combined Financial Statements may not include all of the actual expenses that would have been incurred by FOX and may not reflect FOX’s consolidated and combined results of operations, financial position and cash flows had it been a standalone company during the entirety of the periods presented. Actual costs that would have been incurred if FOX had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
6
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The Comp
any’s
C
onsolidated
B
alance
S
heet as of March 31, 2019 consists of the Company’s consolidated balances subsequent to the Distribution. The Company’s
C
ombined
B
alance
S
heet as of June 30, 2018 consists of the combined balances of 21CF’s domestic news, nation
al sports and broadcast businesses and certain other assets and liabilities associated with such businesses. The assets and liabilities have been reflected on a historical cost basis, as prior to the Distribution all of the assets and liabilities presented
were
wholly owned by 21CF and were transferred to the combined FOX group at
a
carry-over basis.
For purposes of the Company’s financial statements for the periods prior to the Distribution,
the income tax (expense) benefit in the Unaudited Consolidated and Combined Statements of Operations was calculated as if FOX filed a separate tax return and was operating as a standalone business. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of FOX’s actual tax balances prior to or subsequent to the Distribution. Prior to the Distribution, the Company’s operating results were included in 21CF’s consolidated U.S. federal and state income tax returns. Pursuant to rules promulgated by the Internal Revenue Service and various state taxing authorities, the Company will file its initial U.S. income tax returns for the period March 20, 2019 through June 30, 2019.
The income tax accounts reflected in the Consolidated Balance Sheet as of March 31, 2019 include income taxes payable and deferred taxes attributed to the Company at the time of the Separation (See Note
8
–
Related Party Transactions and Twenty-First Century Fox, Inc. Investment
under
the
heading
“Corporate Allocations and
Twenty-First Century Fox, Inc.
Investment”). The calculation of the Company’s income taxes involves considerable judgment and the use of both estimates and allocations.
Pursuant to the 21CF Disney Merger Agreement, immediately prior to the Distribution, the Company paid to 21CF a dividend in the amount of $8.5 billion (the “Dividend”). The final determination of the taxes in respect of the Separation and the Distribution for which the Company is responsible pursuant to the 21CF Disney Merger Agreement and a prepayment of the estimated taxes in respect of divestitures (collectively, the “Transaction Tax”) was $6.5 billion. Following the Distribution, on March 20, 2019 the Company received a cash payment in the amount of $2.0 billion (the “Cash Payment”) from Disney, which had the net effect of reducing the Dividend the Company paid to 21CF. The Transaction Tax included a prepayment of the Company’s share of the estimated tax liabilities resulting from the anticipated divestitures by Disney of certain assets, principally the FOX Sports Regional Sports Networks. This prepayment was in the amount of approximately $700 million and is subject to adjustment in the future, when the actual amounts of the tax liabilities are reported on the federal income tax returns of 21CF or Disney.
As a result of the Separation and the Distribution, FOX obtained a tax basis in its assets equal to their respective fair market values. This will result in estimated annual tax deductions of approximately $1.5 billion, principally over the next 15 years related to the amortization of the additional tax basis. This amortization is estimated to reduce the Company’s annual cash tax liability by $360 million per year at the current combined federal and state applicable tax rate of 24%. Such estimates are subject to revisions, which could be material, based upon, among other things, final appraisals.
The Unaudited Consolidated and Combined Financial Statements include, for periods prior to the Distribution, certain assets and liabilities that were historically held at 21CF’s corporate level but are specifically identifiable or otherwise attributable to the Company. All significant intracompany transactions and accounts within the Company’s consolidated and combined businesses have been eliminated.
Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Unaudited Consolidated and Combined Financial Statements for periods prior to the Distribution. All significant intercompany balances between 21CF and the Company, for periods prior to the Distribution, have been included within the
Twenty-First Century Fox, Inc.
investment in these Unaudited Consolidated and Combined Financial Statements.
Any change in the Company’s ownership interest in a consolidated or combined subsidiary, where a controlling financial interest is retained, is accounted for as a capital transaction. When the Company ceases to have a controlling interest in a consolidated or combined subsidiary, the Company will recognize a gain or loss in net income upon deconsolidation.
7
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The preparation of the Company’s Unaudited Consolidated and Combined Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Una
udited Consolidated and Combined Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from
those estimates.
The Company’s fiscal year ends on June 30 of each year. Certain fiscal 2018 amounts have been reclassified to conform to the fiscal 2019 presentation.
Summary of Significant Accounting Policies
Earnings per Share
Basic earnings per share for the Class A Common Stock and Class B common stock is calculated by dividing Net income attributable to Fox Corporation stockholders by the weighted average number of outstanding shares of Class A Common Stock, including vested Restricted Stock Units (“RSUs”), and Class B Common Stock. Diluted earnings per share for the Class A Common Stock and Class B Common Stock is calculated similarly, except that the calculation for the Class A Common Stock includes the dilutive effect of the assumed issuance of the shares issuable under the Company’s equity-based compensation plan.
On March 19, 2019, the date of the Distribution,
621 million shares of the Company’s Common Stock
were distributed to 21CF stockholders
(other than holders that were subsidiaries of 21CF)
. These
621 million shares
have been utilized for the calculation of basic and diluted earnings per share for all periods presented that ended prior to the date of the Distribution as no shares of common stock or equity-based awards of the Company were outstanding prior to that date (See Note 7 – Equity-Based Compensation).
Recently Adopted and Recently Issued Accounting Guidance and U.S. Tax Reform
Adopted
In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, “Financial Instruments––Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The Company adopted this guidance as of July 1, 2018 on a modified retrospective basis and recorded a cumulative effect adjustment to reclassify unrealized holding gains on securities within Accumulated other comprehensive (loss) income to
Twenty-First Century Fox, Inc.
investment (See Note 6 – Stockholders’ Equity). In addition, the Company recorded changes in the fair value of equity investments with readily determinable fair values in Net income rather than in Accumulated other comprehensive (loss) income (See Note 12 – Additional Financial Information under the heading “Other, net”). Cost method investments that do not have readily determinable fair values will be recognized prospectively at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adjustments related to the observable price changes will also be recognized in net income.
On July 1, 2018, the Company early adopted ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”) on a prospective basis using the security-by-security approach. The objective of ASU 2018-02 is to eliminate the stranded tax effects resulting from the Tax Act (as defined below) and to improve the usefulness of information reported to financial statement users. The adoption of ASU 2018-02 resulted in a reclassification from Accumulated other comprehensive (loss) income to
Twenty-First Century Fox, Inc.
investment related to the income tax effects on the change in the federal statutory rate (See Note 6 – Stockholders’ Equity).
8
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Issued
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“Topic 842”), as amended. Topic 842 requires recognition of lease liabilities and right-of-use assets on the balance sheet and disclosure of key information about leasing arrangements. Topic 842 will be effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company expects to apply Topic 842 on a modified retrospective basis with the cumulative effect, if any, of initially applying the new guidance recognized at the date of adoption as an adjustment to opening retained earnings. The Company is currently evaluating the impact Topic 842 will have on its consolidated financial statements, including determining which practical expedients to apply. Since the Company has a significant amount of minimum lease commitments (See Note 11 – Commitments and Contingencies in the Form 10), the Company expects that the impact of recognizing operating lease liabilities and right-of-use assets will be significant to the Company’s Consolidated Balance Sheet. The Company is in process of gathering the necessary lease data and implementing accounting lease software for all leases as well as assessing necessary changes to the Company’s processes and controls to support the recognition and disclosure requirements in accordance with the new standard.
In March 2019, the FASB issued ASU 2019-02, “Entertainment—Films—Other Assets—Film Costs (Subtopic
926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic
920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials” (“ASU
2019-02”). The amendments in ASU
2019-02
align the accounting for production costs of episodic television series with the accounting for production costs of films. In addition, ASU 2019-02 modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements in Accounting Standards Codification (“ASC”) 926-20 and the impairment, presentation and disclosure requirements in ASC 920-350.
ASU 2019-02 will
be
effective
for
the
Company
for
annual
and
interim
reporting
periods
beginning
July 1, 2020 on a prospective basis. Early adoption is permitted. The
Company
is
currently evaluating
the
impact
ASU
2019-02
will
have
on
its
consolidated
financial
statements.
U.S. Tax Reform
On December 22, 2017, the U.S. government enacted tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. Effective July 1, 2018, the Company’s corporate income tax rate is 21%.
The SEC issued guidance that allowed for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. In December 2018, the Company finalized its analysis and has not materially modified the provisional amounts previously recorded
in the combined financial statements (See Note 2 – Summary of Significant Accounting Policies in the Form 10 under the heading “U.S. Tax Reform”).
NOTE 2. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS
Fiscal 2019
In May 2019
, the Company and The Stars Group Inc. (“The Stars Group”) announced
plans to launch FOX Bet, a national media and sports wagering partnership in the United States.
FOX Sports
and The Stars Group have entered into a long-term commercial agreement through which
FOX Sports
will provide The Stars Group with an exclusive license to use certain
FOX Sports
trademarks. In addition, the Company invested $236 million to acquire a 4.99% equity interest in The Stars Group.
In the first quarter of fiscal 2019, the Company invested, in the aggregate, approximately $100 million in cash for a minority equity interest in Caffeine, Inc. (“Caffeine”), a social broadcasting platform for gaming, entertainment and other creative content, and Caffeine Studio, LLC (“Caffeine Studios”), a newly formed venture that is jointly owned by the Company and Caffeine. The Company accounts for the investments in Caffeine in accordance with ASU 2016-01 and Caffeine Studios as an equity method investment.
9
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Fiscal 201
8
In March 2017, the Federal Communications Commission (“FCC”) concluded a voluntary auction to reclaim television broadcast station spectrum. The Company had three stations’ bids of $354 million to relinquish spectrum accepted by the FCC as part of the auction and received the proceeds in July 2017. As a result, spectrum previously utilized by its television stations in Washington, DC, Charlotte, NC and Chicago, IL designated market areas, in which the Company operates duopolies, was relinquished to the FCC. The Company recorded a pre-tax gain of $114 million of which $102 million was recorded in fiscal 2018 and the remaining balance was recorded in Other, net in the Unaudited Consolidated Statement of Operations for the nine months ended March 31, 2019 for the spectrum relinquished to the FCC in July 2018. These television stations will continue broadcasting using the spectrum of the existing FOX Network owned and operated station in that market.
NOTE 3. INVENTORIES, NET
The Company’s inventories were comprised of the following:
|
|
As of
March 31,
2019
|
|
|
As of
June 30,
2018
|
|
|
|
(in millions)
|
|
Sports programming rights
|
|
$
|
928
|
|
|
$
|
983
|
|
Entertainment programming rights
|
|
|
367
|
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
Total inventories, net
|
|
|
1,295
|
|
|
|
1,301
|
|
Less: current portion of inventories, net
|
|
|
(1,074
|
)
|
|
|
(1,180
|
)
|
|
|
|
|
|
|
|
|
|
Total non-current inventories, net
|
|
$
|
221
|
|
|
$
|
121
|
|
The Company evaluates the recoverability of the unamortized costs associated
with the Company’s programming rights
using total estimated advertising and other revenues attributable to the program material and considering the Company’s expectations of the usefulness of the program rights.
As a result of the evaluation, the Company recognized a write-down of approximately $55 million related to entertainment and syndicated programming rights at the Television segment, which was recorded in Operating expenses in the Unaudited Consolidated Statements of Operations for the three and nine months ended March 31, 2019.
NOTE 4. FAIR VALUE
In accordance with ASC 820, “Fair Value Measurement,” fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”).
The following tables present information about financial assets and liabilities carried at fair value on a recurring basis. As of March 31, 2019 and June 30, 2018, there were no assets or liabilities in the Level 2 category.
|
|
Fair value measurements
|
|
|
|
As of March 31, 2019
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 3
|
|
|
|
(in millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
(a)
|
|
$
|
389
|
|
|
$
|
389
|
|
|
$
|
-
|
|
Redeemable noncontrolling interests
(b)
|
|
|
(136
|
)
|
|
|
-
|
|
|
|
(136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
253
|
|
|
$
|
389
|
|
|
$
|
(136
|
)
|
10
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
|
|
As of June 30, 2018
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 3
|
|
|
|
(in millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
(a)
|
|
$
|
257
|
|
|
$
|
257
|
|
|
$
|
-
|
|
Redeemable noncontrolling interests
(b)
|
|
|
(275
|
)
|
|
|
-
|
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(18
|
)
|
|
$
|
257
|
|
|
$
|
(275
|
)
|
(a)
|
Represents an investment in equity securities of Roku, Inc. (“Roku”) with a readily determinable fair value.
|
(b)
|
The Company utilizes the market approach valuation technique for its Level 3 fair value measures. Inputs to such measures could include observable market data obtained from independent sources such as broker quotes and recent market transactions for similar assets. It is the Company’s policy to maximize the use of observable inputs in the measurement of its Level 3 fair value measurements. To the extent observable inputs are not available, the Company utilizes unobservable inputs based upon the assumptions market participants would use in valuing the liability. Examples of utilized unobservable inputs are future cash flows and long term growth rates.
|
Redeemable Noncontrolling Interests
The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity” (“ASC 480-10-S99-3A”), because their exercise is outside the control of the Company. The redeemable noncontrolling interests recorded at fair value are put rights held by the minority shareholder in
one of the Company’s majority-owned sports networks
.
The changes in redeemable noncontrolling interests classified as Level 3 measurements were as follows:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Beginning of period
|
|
$
|
(106
|
)
|
|
$
|
(195
|
)
|
|
$
|
(275
|
)
|
|
$
|
(154
|
)
|
Net income
|
|
|
(6
|
)
|
|
|
(9
|
)
|
|
|
(27
|
)
|
|
|
(32
|
)
|
Distributions
|
|
|
6
|
|
|
|
10
|
|
|
|
25
|
|
|
|
29
|
|
Accretion and other
|
|
|
(30
|
)
|
|
|
(32
|
)
|
|
|
141
|
|
(a)
|
|
(69
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
(136
|
)
|
|
$
|
(226
|
)
|
|
$
|
(136
|
)
|
|
$
|
(226
|
)
|
(a)
|
As a result of the expiration of a portion of the minority shareholder’s put right, approximately $200 million was reclassified into
equity
.
|
As of March 31, 2019, the redeemable noncontrolling interests are not exercisable. A portion of the minority shareholder’s put right will become exercisable in July 2019.
11
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Financial Instruments
The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and investments without a readily determinable fair value and not accounted for using the equity method, approximates fair value.
|
|
As of
March 31,
2019
|
|
|
As of
June 30,
2018
|
|
|
|
(in millions)
|
|
Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
7,320
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
$
|
6,750
|
|
|
$
|
-
|
|
Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market (a Level 1 measurement).
Concentrations of Credit Risk
Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.
Generally, the Company does not require collateral to secure receivables. As of March 31, 2019, the Company had one customer that accounted for approximately 13% of the Company’s receivables. As of June 30, 2018, the Company had two customers that accounted for approximately 21% of the Company’s receivables.
NOTE 5. BORROWINGS
Senior Notes Issued Under January 2019 Indenture
In January 2019, the Company issued $6.8 billion of senior notes (as summarized below) (the “Notes”) in a private offering and used the net proceeds from the sale of the Notes, together with available cash on its balance sheet, to fund the Dividend and to pay fees and expenses incurred in connection with the issuance of the Notes and the Transactions.
|
|
Outstanding
as of March 31, 2019
|
|
|
|
(in millions)
|
|
Senior notes
|
|
|
|
|
3.666% senior notes due 2022
|
|
$
|
750
|
|
4.030% senior notes due 2024
|
|
|
1,250
|
|
4.709% senior notes due 2029
|
|
|
2,000
|
|
5.476% senior notes due 2039
|
|
|
1,250
|
|
5.576% senior notes due 2049
|
|
|
1,550
|
|
|
|
|
|
|
Total senior notes
|
|
|
6,800
|
|
|
|
|
|
|
Less: unamortized debt issuance costs
|
|
|
(50
|
)
|
Total borrowings
|
|
$
|
6,750
|
|
The Notes were issued under an Indenture, dated as of January 25, 2019, by and between the Company and The Bank of New York Mellon, as Trustee (the “2019 Indenture”). The Notes are direct unsecured obligations of the Company and rank pari passu with all other senior indebtedness of the Company, including the indebtedness under the Revolving Credit Agreement described below. Redemption may occur, at the option of the holders, at 101% of the principal amount plus an accrued interest amount in certain circumstances where a change of control is deemed to have occurred. The Notes are subject to certain covenants, which, among other things, limit the Company’s ability and the ability of the Company’s subsidiaries, to create liens and engage in a merger, sale or consolidation transaction. The 2019 Indenture does not contain any financial maintenance covenants.
12
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Revolving Credit Agreement
On March 15, 2019, the Company entered into a credit agreement (the “Revolving Credit Agreement”) among the Company as Borrower, the initial lenders named therein, the initial issuing banks named therein, Citibank, N.A., as Administrative Agent, Deutsche Bank Securities Inc. and Goldman Sachs Bank USA, as Co-Syndication Agents, JPMorgan Chase Bank, N.A. and Morgan Stanley Bank, N.A., as Co-Documentation Agents and the other parties party thereto.
The Revolving Credit Agreement provides for a $1.0 billion unsecured revolving credit facility with a sub-limit of $150 million available for the issuance of letters of credit and a maturity date of March 2024. Under the Revolving Credit Agreement, the Company may request an increase in the amount of the credit facility commitments up to a maximum facility amount of $1.5 billion and the Company may request that the maturity date be extended for up to two additional one-year periods. The material terms of the Revolving Credit Agreement include the requirement that the Company maintain specific leverage ratios and limitations on indebtedness. The interest rates and fees under the Revolving Credit Agreement are based on the Company’s long-term senior unsecured non-credit enhanced debt ratings. Given the current credit ratings, the interest rate on borrowings under the Revolving Credit Agreement would be London Interbank Offered Rate (“LIBOR”) plus 1.1% and the facility fee is 0.15%. As of March 31, 2019, there were no borrowings outstanding under the Revolving Credit Agreement.
Bridge Credit Agreement
In addition, as previously disclosed, 21st Century Fox America, Inc., a wholly owned subsidiary of 21CF, entered into a commitment letter on behalf of FOX with the financial institutions party thereto to provide FOX with financing in connection with the Dividend. Upon the issuance of the Notes, the commitment letter was reduced to $1.7 billion. In anticipation of the payment of the Dividend, the Company entered into a $1.7 billion 364-Day Bridge Term Loan Agreement (the “Bridge Credit Agreement”) on March 15, 2019 with the initial lenders named therein, Goldman Sachs Bank USA, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and Citibank, N.A. and Deutsche Bank
Securities Inc.
, as Co-Syndication Agents. The Company did not request any borrowings under the Bridge Credit Agreement and, as permitted under the terms of the agreement, terminated the agreement on March 20, 2019. In connection with such termination all accrued and unpaid fees thereunder were paid in full and all commitments thereunder were terminated.
NOTE 6. STOCKHOLDERS’ EQUITY
Common Stock and Preferred Stock
The Company has two classes of common stock that are authorized and outstanding: Class A Common Stock and Class B Common Stock. As a general matter, holders of Class B Common Stock are entitled to one vote per share on all matters on which stockholders have the right to vote, including director elections. Holders of Class A Common Stock are entitled to vote only in the limited circumstances set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”).
In the event of a liquidation or dissolution or winding up of the Company, after distribution in full of the preferential and/or other amounts to be distributed to the holders of shares of any outstanding series of preferred stock or series common stock, holders of Class A Common Stock and Class B Common Stock, to the extent fixed by the Board of Directors with respect thereto, are entitled to receive all of the remaining assets of the Company available for distribution to its stockholders, ratably in proportion to the number of shares held by Class A Common Stock holders and Class B Common Stock holders, respectively. In the event of any merger or consolidation with or into another entity, the holders of Class A Common Stock and the holders of Class B Common Stock generally are entitled to receive substantially identical per share consideration.
Under the Certificate of Incorporation, the Board of Directors is authorized to issue shares of preferred stock or common stock at any time, without stockholder approval, and to determine all the terms of those shares, including the following:
(i) the voting rights, if any, except that the issuance of preferred stock or series common stock which entitles holders thereof to more than one vote per share requires the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors;
13
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
(ii) the dividend rate and preferences, if any, which that preferred stock or common stock will have compared to any other class; and
(iii) the redemption and liquidation rights and preferences, if any, which that preferred stock or common stock will have compared to any other class.
Any decision by the Board of Directors to issue preferred stock or common stock must, however, be taken in accordance with the Board of Directors’ fiduciary duty to act in the best interests of the Company’s stockholders. The Company is authorized to issue 35,000,000 shares of preferred stock, par value $0.01 per share and 35,000,000 shares of series common stock, par value $0.01 per share. The Board of Directors has the authority, without any further vote or action by the stockholders, to issue preferred stock and series common stock in one or more series and to fix the number of shares, designations, relative rights (including voting rights), preferences, qualifications and limitations of such series to the full extent permitted by Delaware law.
Temporary Stockholder Rights Plan
In connection with the Distribution, the Board of Directors approved the adoption of a Temporary Stockholder Rights Agreement (the “Rights Agreement”), effective March 19, 2019. The Rights Agreement will expire following the next annual meeting of stockholders of the Company, unless the rights are redeemed earlier by the Company or the Rights Agreement is approved by the Company’s stockholders. In adopting the Rights Agreement, the Board of Directors considered that there may be significant volume of trading in the Company’s shares around the time of the Distribution. The Rights Agreement is intended to protect the stockholders of the Company during the post-Distribution period from actions that the Board of Directors determines are not in the best interest of the Company’s stockholders. The Rights Agreement is not intended to interfere with any merger, tender or exchange offer, share acquisition or other business combination transaction approved in advance by the Board of Directors, and the Rights Agreement does not prevent the Board of Directors from considering any offer that it considers to be in the best interest of the Company’s stockholders.
Pursuant to the Rights Agreement, the Company declared a dividend distribution of one right (a “Class A Right”) for each outstanding share of the Company’s Class A Common Stock and one right (a “Class B Right” and, together with the Class A Rights, the “Rights”) for each outstanding share of the Company’s Class B Common Stock, in each case as of the close of business on April 2, 2019. One Class A Right will also be issued together with each share of Class A Common Stock issued by the Company after April 2, 2019 and prior to the Distribution Date (as defined in the Rights Agreement), and in certain circumstances, after the Distribution Date. One Class B Right will also be issued together with each share of Class B Common Stock issued by the Company after April 2, 2019 and prior to the Distribution Date and in certain circumstances, after the Distribution Date. Initially, these Rights are not exercisable and trade with the Company’s Class A Common Stock and Class B Common Stock.
The Rights will become exercisable only if a person or group obtains beneficial ownership (as defined in the Rights Agreement) of 15% or more of the Class B Common Stock outstanding, or 15% or more of the Common Stock outstanding. In each such case, each Class A Right and each Class B Right will entitle its holder (except the acquiring person or group) to purchase, at the exercise price of $160 (subject to adjustments provided in the Rights Agreement), a number of authorized but unissued shares of Class A Common Stock or Class B Common Stock, respectively, having a then current market value of two times the exercise price of the Right.
The Rights are not exercisable because of any current stockholder’s beneficial ownership of 15% or more of either Class A or Class B Common Stock, unless such stockholder acquires beneficial ownership of additional shares (subject to certain exceptions set forth in the Rights Agreement).
Dividends
Subsequent to March 31, 2019, the Company declared a semi-annual dividend of $0.23 per share on both the Class A Common Stock and the Class B Common Stock. The dividend declared is payable on June 3, 2019 with a record date for determining dividend entitlements of May 20, 2019.
14
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Stock
holders’ E
quity
The following tables summarize changes in stockholders’ equity:
|
|
For the three months ended March 31, 2019
|
|
|
For the nine months ended March 31, 2019
|
|
|
|
Fox Corporation stockholders
|
|
|
Noncontrolling interests
(a)
|
|
|
Total equity
|
|
|
Fox Corporation stockholders
|
|
|
Noncontrolling interests
(a)
|
|
|
Total equity
|
|
|
|
(in millions)
|
|
Balance, beginning of period
|
|
$
|
10,394
|
|
|
$
|
12
|
|
|
$
|
10,406
|
|
|
$
|
9,594
|
|
|
$
|
-
|
|
|
$
|
9,594
|
|
Net income
|
|
|
529
|
|
|
|
4
|
|
|
|
533
|
|
|
|
1,141
|
|
|
|
10
|
|
|
|
1,151
|
|
Other comprehensive income
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
5
|
|
|
|
-
|
|
|
|
5
|
|
Other
|
|
|
(26
|
)
|
|
|
(5
|
)
|
|
|
(31
|
)
|
|
|
136
|
|
(b)
|
|
1
|
|
|
|
137
|
|
Transferred from Twenty-First Century Fox, Inc. investment to Accumulated other comprehensive (loss) income
|
|
|
(14
|
)
|
(c)
|
|
-
|
|
|
|
(14
|
)
|
|
|
(157
|
)
|
(c)
|
|
-
|
|
|
|
(157
|
)
|
Net decrease in Twenty-First Century Fox, Inc. investment
|
|
|
(2,285
|
)
|
|
|
-
|
|
|
|
(2,285
|
)
|
|
|
(2,119
|
)
|
|
|
-
|
|
|
|
(2,119
|
)
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
8,600
|
|
|
$
|
11
|
|
|
$
|
8,611
|
|
|
$
|
8,600
|
|
|
$
|
11
|
|
|
$
|
8,611
|
|
|
|
For the three months ended March 31, 2018
|
|
|
For the nine months ended March 31, 2018
|
|
|
|
Fox Corporation stockholders
|
|
|
Noncontrolling interests
(a)
|
|
|
Total equity
|
|
|
Fox Corporation stockholders
|
|
|
Noncontrolling interests
(a)
|
|
|
Total equity
|
|
|
|
(in millions)
|
|
Balance, beginning of period
|
|
$
|
7,953
|
|
|
$
|
-
|
|
|
$
|
7,953
|
|
|
$
|
6,093
|
|
|
$
|
-
|
|
|
$
|
6,093
|
|
Net income
|
|
|
457
|
|
|
|
-
|
|
|
|
457
|
|
|
|
1,716
|
|
|
|
-
|
|
|
|
1,716
|
|
Other comprehensive (loss) income
|
|
|
(95
|
)
|
|
|
-
|
|
|
|
(95
|
)
|
|
|
85
|
|
|
|
-
|
|
|
|
85
|
|
Other
|
|
|
(32
|
)
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
(69
|
)
|
|
|
-
|
|
|
|
(69
|
)
|
Net increase in Twenty-First Century Fox, Inc. investment
|
|
|
700
|
|
|
|
-
|
|
|
|
700
|
|
|
|
1,158
|
|
|
|
-
|
|
|
|
1,158
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
8,983
|
|
|
$
|
-
|
|
|
$
|
8,983
|
|
|
$
|
8,983
|
|
|
$
|
-
|
|
|
$
|
8,983
|
|
(a)
|
Excludes Redeemable noncontrolling interests which are reflected in temporary equity (See Note 4 – Fair Value under the heading “Redeemable Noncontrolling Interests”).
|
(
b
)
|
Approximately $200 million was reclassified to equity from Redeemable noncontrolling interests (See Note 4 – Fair Value).
|
(
c
)
|
See Note 10 – Pension and Other Postretirement Benefits.
|
Comprehensive Income
Comprehensive income is reported in the Unaudited Consolidated and Combined Statements of Comprehensive Income and consists of Net income and Other comprehensive income (loss), including unrealized holding gains and losses on securities and benefit plan adjustments, which affect Total equity, and under GAAP, are excluded from Net income.
15
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The following table summarizes the material activity within Other comprehensive income
(loss)
:
|
|
For the three months ended March 31, 2018
|
|
|
For the nine months ended March 31, 2018
|
|
|
|
Before tax
|
|
|
Tax benefit
|
|
|
Net of tax
|
|
|
Before tax
|
|
|
Tax provision
|
|
|
Net of tax
|
|
|
|
(in millions)
|
|
(Losses) gains on securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains
|
|
$
|
(122
|
)
|
|
$
|
29
|
|
|
$
|
(93
|
)
|
|
$
|
161
|
|
|
$
|
(77
|
)
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
$
|
(122
|
)
|
|
$
|
29
|
|
|
$
|
(93
|
)
|
|
$
|
161
|
|
|
$
|
(77
|
)
|
|
$
|
84
|
|
Accumulated other comprehensive (loss) income
The following table summarizes the changes in the components of Accumulated other comprehensive (loss) income, net of tax:
|
|
For the three months ended March 31, 2019
|
|
|
For the nine months ended March 31, 2019
|
|
|
|
Unrealized holding gains on securities
|
|
|
Benefit plan adjustments and other
|
|
|
Accumulated other comprehensive (loss) income
|
|
|
Unrealized holding gains on securities
|
|
|
Benefit plan adjustments and other
|
|
|
Accumulated other comprehensive (loss) income
|
|
|
|
(in millions)
|
|
Balance, beginning of period
|
|
$
|
-
|
|
|
$
|
(202
|
)
|
|
$
|
(202
|
)
|
|
$
|
130
|
|
|
$
|
(49
|
)
|
|
$
|
81
|
|
Adoption of ASUs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(130
|
)
|
(a)
|
|
(13
|
)
|
(b)
|
|
(143
|
)
|
Other comprehensive income, net of tax
|
|
|
-
|
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
5
|
|
|
|
5
|
|
Transferred from Twenty-First Century Fox, Inc. investment
|
|
|
-
|
|
|
|
(14
|
)
|
(c)
|
|
(14
|
)
|
|
|
-
|
|
|
|
(157
|
)
|
(c)
|
|
(157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
-
|
|
|
$
|
(214
|
)
|
|
$
|
(214
|
)
|
|
$
|
-
|
|
|
$
|
(214
|
)
|
|
$
|
(214
|
)
|
(a)
|
Reflects the adoption of ASU 2016-01 (See Note 1 – Description of Business and Basis of Presentation under the heading “Recently Adopted and Recently Issued Accounting Guidance and U.S. Tax Reform” for additional information).
|
(
b
)
|
Reflects the adoption of ASU 2018-02 (See Note 1 – Description of Business and Basis of Presentation under the heading “Recently Adopted and Recently Issued Accounting Guidance and U.S. Tax Reform” for additional information).
|
(
c
)
|
See Note 10 – Pension and Other Postretirement Benefits.
|
NOTE 7. EQUITY-BASED COMPENSATION
Prior to the Distribution, the Company’s employees participated in 21CF’s equity plans. 21CF had plans authorized to grant equity awards of 21CF stock to the Company’s employees. The equity-based compensation expense recorded by the Company, in the periods presented, includes the expense associated with the employees historically attributable to the Company’s operations, as well as the expense associated with the allocation of equity-based compensation expense for corporate employees.
2019 Shareholder Alignment Plan
In connection with the Distribution, the Company adopted the Fox Corporation 2019 Shareholder Alignment Plan (the “SAP”), under which equity-based compensation, including stock options, stock appreciation rights, restricted and unrestricted stock, RSUs and other types of FOX equity awards may be granted. The Company’s officers, directors and employees are eligible to participate in the SAP. The maximum number of shares of Class A Common Stock that may be issued under the SAP is 65 million shares. As of March 31, 2019, the remaining number of shares of Class A Common Stock available for issuance under the SAP was approximately 59.5 million.
16
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
In connection with the Distribution,
21CF
performance stock units (“PSUs”) scheduled to vest
in 2019 and
50%
of
21CF
retention
RSUs
were accelerated and paid out in shares of 21CF class A common stock
in March 2019
.
21CF RSUs and PSUs scheduled to vest after 2019
were
converted into new equity awards of the Company, using a formula designed to preserve the
intrinsic
value of the awards immediately prior to the Distribution. Converted awards have the same terms and features as the original 21CF awards, except for the PS
Us, which w
ere
converted into RSUs that
are
subject only to time-based vesting conditions and
are
no longer subject to achievement of applicable performance goals. In addition, the remaining
50%
of the 21CF retention RSUs w
ere
converted into new FOX
RSUs
a
nd Disney
RSUs
on the same pro rata basis accorded to shareholders of 21CF common stock in the
merger
s
contemplated by the 21CF Disney Merger Agreement
. All of the converted FOX
RSUs
were
granted
under the SAP
and the approximately
5.5
million shares of Cl
ass A Common Stock that may be issued under the converted FOX
RSUs
do not count against the maximum number of shares that may be issued under the SAP described above
.
Awards granted under the SAP (other than a stock option or stock appreciation right) entitle the holder
to receive Dividend Equivalents (as defined in the SAP) for each regular cash dividend on the common stock underlying the award paid by the Company during the award period.
Dividend equivalents granted with respect to equity awards will be accrued during the applicable vesting period and such dividend equivalents will vest and be paid only if and when the underlying award vests.
Restricted Stock Units
RSUs are awards that represent the potential to receive shares of Class A Common Stock at the end of the applicable vesting period, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee of the Board of Directors of FOX (the “Compensation Committee”) may establish. RSUs awarded under the SAP are fair valued based upon the fair market value of Class A Common Stock on the grant date. Any person who holds RSUs shall have no ownership interest in the shares of Class A Common Stock to which such RSUs relate until and unless shares of Class A Common Stock are delivered to the holder.
In March 2019, in connection with the Distribution, the Compensation Committee granted approximately 2.4 million RSUs under the SAP, which will primarily vest in two tranches. Approximately 50% of the RSUs will vest on June 15, 2020 and the remaining RSUs will vest on June 15, 2021, in each case, subject to a service requirement through the vesting dates.
17
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The following table summarizes the activity related to target PSUs and RSUs granted to the Company’s employees to be settled in stock (PSUs and RSUs in thousands):
|
|
For the nine months ended March 31, 2019
|
|
|
|
Number
of
shares
|
|
|
Weighted
average
grant-
date fair
value
(
a
)
|
|
PSUs and RSUs
|
|
|
|
|
|
|
|
|
Unvested units at beginning of the year
|
|
|
10,896
|
|
|
$
|
29.77
|
|
Granted prior to the Distribution
|
|
|
1,565
|
|
|
|
46.11
|
|
Vested
|
|
|
(4,882
|
)
|
|
|
29.54
|
|
Cancelled
|
|
|
(3,121
|
)
|
|
|
29.73
|
|
Net units granted in conversion, as a result of the Separation
(
b
)
|
|
|
1,011
|
|
|
N/A
|
|
Subtotal of unvested units after the conversion
|
|
|
5,469
|
|
|
|
29.17
|
|
Granted after the Distribution
|
|
|
2,405
|
|
|
|
40.14
|
|
|
|
|
|
|
|
|
|
|
Unvested units at the end of the period
(
c
)
|
|
|
7,874
|
|
|
$
|
32.52
|
|
(
a
)
|
The weighted average grant date fair value prior to the Distribution represents the fair value of awards granted with respect to 21CF Class A Common Stock prior to the conversion of the awards to FOX equity awards. The weighted average grant date fair value of the unvested units after the conversion represents the fair value of awards using the applicable conversion ratio.
|
(
b
)
|
As disclosed above, 21CF RSUs and PSUs scheduled to vest after 2019 were converted into new equity awards of the Company, using a formula designed to preserve the value of the awards immediately prior to the Distribution. In addition, the 50% of the 21CF retention RSUs that were not accelerated and paid out in shares of 21CF class A common stock were converted into new FOX RSUs and Disney RSUs on the same pro rata basis accorded to shareholders of 21CF common stock in the mergers contemplated by the 21CF Disney Merger Agreement.
|
(
c
)
|
The intrinsic value of these unvested RSUs was approximately $290 million as of March 31, 2019.
|
Stock Options
Stock options are awards that entitle the holder to purchase a specified number of shares of Class A Common Stock at a specified price for a specified period of time and become exercisable over time, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee may establish. Stock Options granted under the SAP were fair valued using a Black-Scholes option valuation model that uses the following assumptions: (i) expected volatility was based on historical volatility of 21CF and the Company’s peer group over the expected term of the stock options; (ii) expected term of stock options granted was determined by analyzing historical data of the Company’s peer group and represented the period of time that stock options granted were expected to be outstanding; (iii) risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award; and (iv) expected dividend yield.
In March 2019, in connection with the Distribution, the Compensation Committee granted approximately 3.1 million stock options with an exercise price of $40.26 and grant-date fair value of $8.67 under the SAP. The stock options will vest 50% on June 15, 2020 and 50% on June 15, 2021, in each case, subject to a service requirement through the vesting dates. The options will expire approximately seven years from the grant date.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants during the nine months ended March 31, 2019:
|
|
For the nine months ended March 31, 2019
|
|
Expected volatility
|
|
|
26.50
|
%
|
Risk-free interest rate
|
|
|
2.41
|
%
|
Expected dividend yield
|
|
|
1.12
|
%
|
Expected term of stock options
|
|
3.84 years
|
|
18
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The following table summarizes the Company’s equity-based compensation:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Equity-based compensation
(a)
|
|
$
|
38
|
|
|
$
|
41
|
|
|
$
|
71
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of all settled equity-based awards
|
|
$
|
130
|
|
|
$
|
-
|
|
|
$
|
240
|
|
|
$
|
31
|
|
(a)
|
Prior to the Distribution, equity-based compensation included allocated expense for both executive directors and corporate executives of 21CF, allocated using a proportional allocation driver, which management has deemed to be reasonable.
|
As of March 31, 2019, the Company’s total estimated compensation cost, not yet recognized, related to non-vested equity awards held by the Company’s employees for all plans presented was approximately $210 million and is expected to be recognized over a weighted average period between two and three years. For awards granted under the SAP that have only service requirements and a graded vesting schedule, the Company recognizes this compensation cost on a straight-line basis over the requisite service period for the entire award.
NOTE 8. RELATED PARTY TRANSACTIONS AND TWENTY-FIRST CENTURY FOX, INC. INVESTMENT
Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties, including subsidiaries and equity affiliates of 21CF (prior to the Distribution), to buy and/or sell programming and purchase and/or sell advertising.
The following table sets forth the net revenue from related parties included in the Unaudited Consolidated and Combined Statements of Operations:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Related party revenue
|
|
$
|
111
|
|
|
$
|
42
|
|
|
$
|
289
|
|
|
$
|
174
|
|
Related party expense
|
|
|
(33
|
)
|
|
|
(18
|
)
|
|
|
(67
|
)
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party revenue, net of expense
|
|
$
|
78
|
|
|
$
|
24
|
|
|
$
|
222
|
|
|
$
|
107
|
|
Corporate Allocations and Twenty-First Century Fox, Inc. Investment
Prior to the Distribution, 21CF provided services to and funded certain expenses for the Company such as: global real estate and occupancy costs and employee benefits (“Direct Corporate Expenses”). In addition, the Company’s Unaudited Consolidated and Combined Financial Statements include general corporate expenses of 21CF which were not historically allocated to the Company for certain support functions that were provided on a centralized basis within 21CF and not recorded at the business unit level, such as expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others (“General Corporate Expenses”). For purposes of these standalone Unaudited Consolidated and Combined Financial Statements, the General Corporate Expenses have been allocated to the Company. The General Corporate Expenses are included in the Unaudited Consolidated and Combined Statements of Operations in Selling, general and administrative expenses and Other, net, as appropriate, and accordingly as a component of the
Twenty-First Century Fox, Inc.
investment in the Consolidated and Combined Balance Sheets. These expenses have been allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures of the Company. Management believes the assumptions underlying the Unaudited Consolidated and Combined Financial Statements, including the assumptions regarding allocating General Corporate Expenses from 21CF are reasonable. Nevertheless, the Unaudited Consolidated and Combined Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect the Company’s consolidated and combined results of operations, financial position
19
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
and cash flows had it been a standalone company
prior to the Distribution
. Actual costs that would have been
incurred if the Company had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. For the purposes of these
standa
lone
Unaudited
Consolidated and
Combined Financial Statements, the corporate allocations recorded
for the three months ended
March
31, 201
9
and 201
8
of
$
111
million
and $
93
million
, respectively, and
for the
nine
months ended
March
31, 201
9
and 201
8
of
$
291
million
and $
230
million
, respectively,
were General Corporate Expenses of 21CF
,
which were not historically allocated to the Company.
Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Unaudited Consolidated and Combined Financial Statements for periods prior to the Distribution. All significant intercompany balances between 21CF and the Company, for periods prior to the Distribution, have been reflected in the Unaudited Consolidated and Combined Statements of Cash Flows as a financing activity and in the Consolidated and Combined Balance Sheets as a
Twenty-First Century Fox, Inc.
investment.
The following table summarizes the components of the net (decrease) increase in the
Twenty-First Century Fox, Inc.
investment for the three and nine months ended March 31, 2019 and 2018:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Cash pooling, general financing activities and other
(a)
|
|
$
|
(1,523
|
)
|
|
$
|
607
|
|
|
$
|
(1,537
|
)
|
|
$
|
928
|
|
Corporate allocations
|
|
|
111
|
|
|
|
93
|
|
|
|
291
|
|
|
|
230
|
|
Net dividend paid to Twenty-First Century Fox, Inc.
|
|
|
(6,500
|
)
|
|
|
-
|
|
|
|
(6,500
|
)
|
|
|
-
|
|
Taxes payable
(b)
|
|
|
593
|
|
|
|
-
|
|
|
|
593
|
|
|
|
-
|
|
Deferred taxes on step-up
(c)
|
|
|
5,515
|
|
|
|
-
|
|
|
|
5,515
|
|
|
|
-
|
|
Other deferred taxes
(
c
)
|
|
|
(481
|
)
|
|
|
-
|
|
|
|
(481
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in Twenty-First Century Fox, Inc. investment
|
|
$
|
(2,285
|
)
|
|
$
|
700
|
|
|
$
|
(2,119
|
)
|
|
$
|
1,158
|
|
(a)
|
The nature of activities included in the line item ‘Cash pooling, general financing activities and other’ includes financing activities, capital transfers, cash sweeps, other treasury services and Direct Corporate Expenses. As part of this activity and prior to December 31, 2017, the majority of the cash balances were swept to 21CF on a daily basis and the Company received capital from 21CF for the Company’s cash needs. Effective January 1, 2018, the Company ceased participating in 21CF’s capital and cash management accounts.
|
(b)
|
For purposes of the Company’s financial statements for the periods prior to the Distribution,
the income tax (expense) benefit in the Unaudited Consolidated and Combined Statements of Operations has been calculated as if FOX filed a separate tax return and was operating as a standalone business. This amount represents the difference between the separate tax return methodology and the actual tax liabilities attributed to the Company, in accordance with applicable tax law, as of the date of the Distribution.
|
(c)
|
As a result of the Separation and the Distribution, FOX obtained an additional tax basis in its assets equal to their respective fair market values. These amounts represent the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1 – Description of Business and Basis of Presentation under the heading “Basis of Presentation”) and other deferred tax adjustments recorded as of the date of the Distribution.
|
NOTE 9. COMMITMENTS AND CONTINGENCIES
Commitments
The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The total firm commitments and future debt payments as of March 31, 2019 and June 30, 2018 were approximately $41 billion and $32 billion, respectively. The increase from June 30, 2018 was primarily due to the issuance of $6.8 billion of senior notes (See Note 5 – Borrowings), the new multi-year, multi-platform rights agreement expanding the Company’s television, digital and Spanish-language rights and extending its arrangement with Major League Baseball (“MLB”) through the 2028 MLB season partially offset by sports programming rights payments.
20
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Contingencies
Profits Participants Litigation
On November 25, 2015, Wark Entertainment, Inc. filed a lawsuit (the “Wark Lawsuit”) against Twentieth Century Fox Film Corporation, the FOX Network, and Fox Entertainment Group, Inc. (“Fox Entertainment Group”) in the Superior Court of the State of California, County of Los Angeles, Central District (the “Superior Court”). On November 30, 2015, Temperance Brennan, L.P., Snooker Doodle Productions, Inc., and Bertha Blue, Inc. filed a lawsuit (the “Temperance Brennan Lawsuit”) against 21CF, Fox Entertainment Group, Twentieth Century Fox Film Corporation, and the FOX Network in the Superior Court. The plaintiffs in these cases are profits participants in the television series Bones, which was produced by Twentieth Century Fox Television, a unit of Twentieth Century Fox Film Corporation (“TCFTV”), and aired on the FOX Network from 2005 to 2017. TCFTV, 21CF, the FOX Network and Fox Entertainment Group are defendants in one or both of the Wark Lawsuit and the Temperance Brennan Lawsuit (collectively, the “Lawsuits”), which were joined by the Superior Court on December 21, 2015.
The plaintiffs in the Lawsuits alleged, among other things, that TCFTV breached its contracts with the plaintiffs and committed fraud concerning certain of those contracts, and that 21CF, Fox Entertainment Group, and the FOX Network induced TCFTV’s breach of contract and intentionally interfered with the plaintiffs’ contracts with TCFTV. These allegations were based on plaintiffs’ claims that in licensing Bones between affiliated 21CF entities, the defendants agreed to lower license fees for Bones to the detriment of the Plaintiffs (collectively, the “Affiliated Dealing Claims”). The plaintiffs also challenged TCFTV’s accounting practices with regard to Bones, including challenging TCFTV’s distribution and overhead charges for Bones (the “Accounting Claims”). The defendants vigorously disputed the Affiliated Dealing Claims and the Accounting Claims and the related allegations.
On April 8, 2016, the Superior Court stayed the Accounting Claims and ordered that the Affiliated Dealing Claims be submitted to arbitration pursuant to the plaintiffs’ contracts. On February 20, 2019, the arbitrator issued a punitive damages award of approximately $129 million against the defendants, including the FOX Network. On February 27, 2019, the defendants filed a motion with the Superior Court to vacate the entire punitive damages award on the ground that the arbitrator did not have authority to award punitive damages, and the plaintiffs filed a petition with the Superior Court to confirm the entirety of the arbitrator’s award. A hearing on these matters was held on April 29, 2019. On May 2, 2019, the Superior Court issued a ruling granting the defendants’ motion, denying the plaintiffs’ petition and vacating the entire punitive damages award.
FOX News Channel
The Company and certain of its current and former employees have been subject to allegations of sexual harassment and discrimination and racial discrimination relating to alleged misconduct at the Company’s
FOX News
channel business. The Company has resolved many of these claims and is contesting other claims in litigation. The Company has also received regulatory and investigative inquiries relating to these matters. To date, none of the amounts paid in settlements or reserved for pending or future claims, is individually or in the aggregate, material to the Company. The amount of liability, if any, that may result from these or related matters cannot be estimated at this time. However, the Company does not currently anticipate that the ultimate resolution of any such pending matters will have a material adverse effect on its financial condition, future results of operations or liquidity.
U.K. Newspaper Matters Indemnity
In connection with the separation of 21CF and News Corporation in June 2013, 21CF agreed to indemnify News Corporation, on an after-tax basis, for payments made after the separation arising out of civil claims and investigations relating to phone hacking, illegal data access and inappropriate payments to public officials that occurred at subsidiaries of News Corporation, as well as legal and professional fees and expenses paid in connection with the related criminal matters, other than fees, expenses and costs relating to employees who are not (i) directors, officers or certain designated employees or (ii) with respect to civil matters, co-defendants with News Corporation (the “U.K. Newspaper Matters Indemnity”). In accordance with the Separation Agreement, certain costs and liabilities related to the U.K. Newspaper Matters Indemnity were assumed by the Company. The liability recorded in the Consolidated and Combined Balance Sheets related to the indemnity was approximately $50 million as of March 31, 2019 and June 30, 2018.
21
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Other
The Company establishes an accrued liability for legal claims when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition. For the contingencies disclosed above for which there is at least a reasonable possibility that a loss may be incurred, other than the accrual provided, the Company was unable to estimate the amount of loss or range of loss.
The Company’s operations are subject to tax in various domestic jurisdictions and as a matter of course, the Company is regularly audited by federal and state tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated and combined financial condition, future results of operations or liquidity. Each member of the 21CF consolidated group, which includes 21CF, the Company (prior to the Distribution) and 21CF’s other subsidiaries, is jointly and severally liable for the U.S. federal income
and, in certain jurisdictions, state tax liabilities of each other member of the consolidated group. Consequently, the Company could be liable in the event any such liability is incurred, and not discharged, by any other member of the 21CF consolidated group. The tax matters agreement requires 21CF and/or Disney to indemnify the Company for any such liability. Disputes or assessments could arise during future audits by the Internal Revenue Service in amounts that the Company cannot quantify.
NOTE 10. PENSION AND OTHER POSTRETIREMENT BENEFITS
Certain of the Company’s U.S. employees participated in defined benefit pension and postretirement plans sponsored by 21CF (“Shared Plans”), which include participants of other 21CF subsidiaries. Plans that are sponsored by entities included in the Company are accounted for as defined benefit pension plans.
Shared Plans were accounted for as multiemployer benefit plans. Therefore, no asset or liability was recorded to recognize the funded status. The related pension expenses allocated to the Company were based primarily on benefits earned by active employees and accounted for in a manner similar to a defined contribution plan.
In contemplation of the Separation, during the second quarter of fiscal 2019, the pension benefit assets and liabilities of the Shared Plans allocable to the Company’s employees were transferred to the Company. Assets of $630 million, projected benefit obligations of $765 million and $188 million of accumulated other comprehensive loss ($143 million, net of tax) were recorded for pension benefits transferred from 21CF. In January 2019, the postretirement benefit plan liabilities allocable to the Company’s employees were transferred to the Company. Projected benefit obligations of $98 million and $18 million of accumulated other comprehensive loss ($14 million, net of tax) were recorded for postretirement benefits transferred from 21CF.
The net periodic benefit cost was $13 million and $15 million for the three months ended March 31, 2019 and 2018, respectively, and $40 million and $89 million for the nine months ended March 31, 2019 and 2018, respectively.
NOTE 11. SEGMENT INFORMATION
The Company is a news, sports and entertainment company, which manages and reports its businesses in the following segments:
|
•
|
Cable Network Programming
, which principally consists of the production and licensing of news and sports content distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors (collectively, multi-channel video programming distributors), primarily in the U.S.
|
22
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
|
•
|
Television
, which principally consists of the acquisition, marketing and distribution of broadcast network programming nationally under the FOX brand and the operation of 28 full power br
oadcast television stations, including 11 duopolies, in the U.S. (of these stations, 17 are affiliated with the FOX Network, nine are affiliated with MyNetworkTV, one is affiliated with both The CW Television Network and MyNetworkTV and one is an independe
nt station).
|
|
•
|
Other, Corporate and Eliminations
, which principally consists of corporate overhead costs, intracompany eliminations and the FOX Studios lot. The FOX Studios lot, located in Los Angeles, California, provides television and film production services along with office space, studio operation services and includes all operations of the facility.
|
The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measure is segment operating income before depreciation and amortization, or Segment EBITDA. Due to the integrated nature of these operating segments, estimates and judgments are made in allocating certain assets, revenues and expenses.
Beginning with the announcement of the Company’s financial results for the quarter ended March 31, 2019, the Company has renamed as “Segment EBITDA” the measure that it previously referred to as “Segment OIBDA”. The definition of this measure has not changed: Segment EBITDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses. Segment EBITDA does not include: Amortization of cable distribution investments, Depreciation and amortization, Impairment and restructuring charges, Interest expense, Interest income, Other, net and Income tax (expense) benefit. Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources to the Company’s businesses.
Management believes that information about Total Segment EBITDA assists all users of the Company’s Unaudited Consolidated and Combined Financial Statements by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing insight into both operations and the other factors that affect reported results. Total Segment EBITDA provides management, investors and equity analysts a measure to analyze the operating performance of the Company’s business and its enterprise value against historical data and competitors’ data, although historical results, including Segment EBITDA and Total Segment EBITDA, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
Total Segment EBITDA may be considered a non-GAAP financial 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 and excludes items, such as depreciation and amortization and impairment charges, which are significant components in assessing the Company’s financial performance. Total Segment EBITDA may not be comparable to similarly titled measures reported by other companies.
23
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
The following table reconciles Income before income tax (expense) benefit
to Total Segment
EBITDA
for the three and nine months ended March 31, 2019 and 2018:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Income before income tax (expense) benefit
|
|
$
|
706
|
|
|
$
|
654
|
|
|
$
|
1,568
|
|
|
$
|
1,577
|
|
Add
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of cable distribution investments
|
|
|
10
|
|
|
|
11
|
|
|
|
29
|
|
|
|
43
|
|
Depreciation and amortization
|
|
|
58
|
|
|
|
43
|
|
|
|
152
|
|
|
|
126
|
|
Impairment and restructuring charges
|
|
|
14
|
|
|
|
14
|
|
|
|
14
|
|
|
|
11
|
|
Interest expense
|
|
|
81
|
|
|
|
7
|
|
|
|
112
|
|
|
|
20
|
|
Interest income
|
|
|
(19
|
)
|
|
|
-
|
|
|
|
(19
|
)
|
|
|
-
|
|
Other, net
|
|
|
(84
|
)
|
|
|
(23
|
)
|
|
|
116
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment EBITDA
|
|
$
|
766
|
|
|
$
|
706
|
|
|
$
|
1,972
|
|
|
$
|
1,852
|
|
The following tables set forth the Company’s Revenues and Segment EBITDA for the three and nine months ended March 31, 2019 and 2018:
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
$
|
1,383
|
|
|
$
|
1,325
|
|
|
$
|
4,082
|
|
|
$
|
3,778
|
|
Television
|
|
|
1,370
|
|
|
|
1,138
|
|
|
|
4,796
|
|
|
|
3,982
|
|
Other, Corporate and Eliminations
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
2,752
|
|
|
$
|
2,463
|
|
|
$
|
8,876
|
|
|
$
|
7,759
|
|
Segment EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
$
|
741
|
|
|
$
|
692
|
|
|
$
|
1,893
|
|
|
$
|
1,730
|
|
Television
|
|
|
99
|
|
|
|
81
|
|
|
|
256
|
|
|
|
268
|
|
Other, Corporate and Eliminations
|
|
|
(74
|
)
|
|
|
(67
|
)
|
|
|
(177
|
)
|
|
|
(146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment EBITDA
|
|
$
|
766
|
|
|
$
|
706
|
|
|
$
|
1,972
|
|
|
$
|
1,852
|
|
Revenues by Segment by Component
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Cable Network Programming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate fee
|
|
$
|
968
|
|
|
$
|
931
|
|
|
$
|
2,845
|
|
|
$
|
2,609
|
|
Advertising
|
|
|
276
|
|
|
|
266
|
|
|
|
893
|
|
|
|
825
|
|
Other
|
|
|
139
|
|
|
|
128
|
|
|
|
344
|
|
|
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cable Network Programming revenues
|
|
|
1,383
|
|
|
|
1,325
|
|
|
|
4,082
|
|
|
|
3,778
|
|
Television
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
812
|
|
|
|
735
|
|
|
|
3,245
|
|
|
|
2,796
|
|
Affiliate fee
|
|
|
452
|
|
|
|
350
|
|
|
|
1,257
|
|
|
|
1,001
|
|
Other
|
|
|
106
|
|
|
|
53
|
|
|
|
294
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Television revenues
|
|
|
1,370
|
|
|
|
1,138
|
|
|
|
4,796
|
|
|
|
3,982
|
|
Other, Corporate and Eliminations
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
2,752
|
|
|
$
|
2,463
|
|
|
$
|
8,876
|
|
|
$
|
7,759
|
|
24
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS
Future Performance Obligations
As of March 31, 2019, approximately $2.1 billion of revenues are expected to be recognized primarily over the next one to three years. The Company’s most significant remaining performance obligations relate to sports rights sublicensing contracts and affiliate contracts with fixed fees. The amount disclosed does not include (i) revenues related to performance obligations that are part of a contract whose original expected duration is one year or less, (ii) revenues that are in the form of sales- or usage-based royalties and (iii) revenues related to performance obligations for which the Company elects to recognize revenue in the amount it has a right to invoice.
|
|
For the three months ended March 31,
|
|
|
For the nine months ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
(in millions)
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
35
|
|
|
$
|
28
|
|
Television
|
|
|
28
|
|
|
|
27
|
|
|
|
80
|
|
|
|
82
|
|
Other, Corporate and Eliminations
|
|
|
18
|
|
|
|
6
|
|
|
|
37
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
58
|
|
|
$
|
43
|
|
|
$
|
152
|
|
|
$
|
126
|
|
|
|
As of
March 31,
2019
|
|
|
As of
June 30,
2018
|
|
|
|
(in millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cable Network Programming
|
|
$
|
2,620
|
|
|
$
|
2,430
|
|
Television
|
|
|
6,506
|
|
|
|
6,805
|
|
Other, Corporate and Eliminations
|
|
|
8,038
|
|
|
|
3,611
|
|
Investments
|
|
|
493
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
17,657
|
|
|
$
|
13,121
|
|
25
FOX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED AND
COMBINED FINANCIAL STATEMENTS