fox-10q_20190331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2019

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from             to             

Commission file number 001-38776

 

FOX CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

83-1825597

(State or Other Jurisdiction
of Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

1211 Avenue of the Americas, New York, New York

 

10036

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code (212) 852-7000

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes       No  

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class

Trading Symbols

Name of Each Exchange
on Which Registered

Class A Common Stock, par value $0.01 per share

FOXA

The Nasdaq Global Select Market

Class B Common Stock, par value $0.01 per share

FOX

The Nasdaq Global Select Market

Rights to Purchase Series A Junior Participating Preferred Stock

N/A

The Nasdaq Global Select Market

As of May 7, 2019, 354,351,378 shares of Class A Common Stock, par value $0.01 per share, and 266,173,651 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

 

 


FOX CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

 

Page

Part I. Financial Information

 

 

Item 1.

 

Financial Statements

 

 

 

Unaudited Consolidated and Combined Statements of Operations for the three and nine months ended March 31, 2019 and 2018 

1

 

 

 

Unaudited Consolidated and Combined Statements of Comprehensive Income for the three and nine months ended March 31, 2019 and 2018

2

 

 

 

Consolidated and Combined Balance Sheets as of March 31, 2019 (unaudited) and June 30, 2018 (audited)

3

 

 

 

Unaudited Consolidated and Combined Statements of Cash Flows for the nine months ended March 31, 2019 and 2018

4

 

 

 

Notes to the Unaudited Consolidated and Combined Financial Statements

5

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

40

 

Item 4.

 

Controls and Procedures

41

Part II. Other Information

 

 

Item 1.

 

Legal Proceedings

42

 

Item 1A.

 

Risk Factors

43

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

45

 

Item 3.

 

Defaults Upon Senior Securities

45

 

Item 4.

 

Mine Safety Disclosures

45

 

Item 5.

 

Other Information

45

 

Item 6.

 

Exhibits

46

 

Signature

48

 

 


 

FOX CORPORATION

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues

 

$

2,752

 

 

$

2,463

 

 

$

8,876

 

 

$

7,759

 

Operating expenses

 

 

(1,660

)

 

 

(1,444

)

 

 

(5,969

)

 

 

(5,054

)

Selling, general and administrative

 

 

(336

)

 

 

(324

)

 

 

(964

)

 

 

(896

)

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

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax (expense) benefit

 

 

706

 

 

 

654

 

 

 

1,568

 

 

 

1,577

 

Income tax (expense) benefit

 

 

(167

)

 

 

(188

)

 

 

(390

)

 

 

171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

539

 

 

 

466

 

 

 

1,178

 

 

 

1,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

 

(10

)

 

 

(9

)

 

 

(37

)

 

 

(32

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fox Corporation stockholders

 

$

529

 

 

$

457

 

 

$

1,141

 

 

$

1,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

621

 

 

 

621

 

 

 

621

 

 

 

621

 

Diluted

 

 

621

 

 

 

621

 

 

 

621

 

 

 

621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fox Corporation stockholders per share - basic and diluted

 

$

0.85

 

 

$

0.74

 

 

$

1.84

 

 

$

2.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.

1


 

FOX CORPORATION

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(IN MILLIONS)

 

 

 

For the three months ended March 31,

 

 

For the nine months ended March 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

539

 

 

$

466

 

 

$

1,178

 

 

$

1,748

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains on securities

 

 

-

 

 

 

(93

)

 

 

-

 

 

 

84

 

Benefit plan adjustments and other

 

 

2

 

 

 

(2

)

 

 

5

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

2

 

 

 

(95

)

 

 

5

 

 

 

85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

541

 

 

 

371

 

 

 

1,183

 

 

 

1,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests(a)

 

 

(10

)

 

 

(9

)

 

 

(37

)

 

 

(32

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Fox Corporation stockholders

 

$

531

 

 

$

362

 

 

$

1,146

 

 

$

1,801

 

 

(a)

Net income attributable to noncontrolling interests includes $6 million and $9 million for the three months ended March 31, 2019 and 2018, respectively, and $27 million and $32 million for the nine months ended March 31, 2019 and 2018, respectively, relating to redeemable noncontrolling interests.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements. 

2


 

FOX CORPORATION

CONSOLIDATED AND COMBINED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

 

 

As of

March 31,

2019

 

 

As of

June 30,

2018

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,818

 

 

$

2,500

 

Receivables, net

 

 

1,949

 

 

 

1,833

 

Inventories, net

 

 

1,074

 

 

 

1,180

 

Other

 

 

123

 

 

 

67

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

5,964

 

 

 

5,580

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

1,286

 

 

 

1,169

 

Intangible assets, net

 

 

2,855

 

 

 

2,866

 

Goodwill

 

 

2,691

 

 

 

2,747

 

Deferred tax assets

 

 

3,685

 

 

 

-

 

Other non-current assets

 

 

1,176

 

 

 

759

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

17,657

 

 

$

13,121

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

1,297

 

 

$

1,759

 

 

 

 

-

 

 

 

 

 

Total current liabilities

 

 

1,297

 

 

 

1,759

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

Borrowings

 

 

6,750

 

 

 

-

 

Other liabilities

 

 

863

 

 

 

422

 

Deferred income taxes

 

 

-

 

 

 

1,071

 

Redeemable noncontrolling interests

 

 

136

 

 

 

275

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Class A common stock(a)

 

 

4

 

 

 

-

 

Class B common stock(b)

 

 

3

 

 

 

-

 

Twenty-First Century Fox, Inc. investment

 

 

-

 

 

 

9,513

 

Additional paid-in capital

 

 

8,706

 

 

 

-

 

Retained earnings

 

 

101

 

 

 

-

 

Accumulated other comprehensive (loss) income

 

 

(214

)

 

 

81

 

 

 

 

-

 

 

 

 

 

Total Fox Corporation stockholders' equity

 

 

8,600

 

 

 

9,594

 

Noncontrolling interests

 

 

11

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

8,611

 

 

 

9,594

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

17,657

 

 

$

13,121

 

 

(a)

Class A common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 354,328,270 shares issued and outstanding as of March 31, 2019, net of nil treasury shares at par as of March 31, 2019.

(b)

Class B common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 266,173,651 shares issued and outstanding as of March 31, 2019, net of nil treasury shares at par as of March 31, 2019.

 

 

The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.

3


 

FOX CORPORATION

UNAUDITED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

 

 

 

For the nine months ended

March 31,

 

 

 

2019

 

 

2018

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

1,178

 

 

$

1,748

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

152

 

 

 

126

 

Amortization of cable distribution investments

 

 

29

 

 

 

43

 

Impairment and restructuring charges

 

 

14

 

 

 

11

 

Equity-based compensation

 

 

5

 

 

 

-

 

Other, net

 

 

116

 

 

 

75

 

Deferred income taxes

 

 

322

 

 

 

(563

)

Change in operating assets and liabilities, net of acquisitions and dispositions

 

 

 

 

 

 

 

 

Receivables and other assets

 

 

(196

)

 

 

(118

)

Inventories net of program rights payable

 

 

137

 

 

 

(300

)

Accounts payable and other liabilities

 

 

(133

)

 

 

(237

)

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

1,624

 

 

 

785

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

(147

)

 

 

(148

)

Proceeds from the relinquishment of spectrum

 

 

-

 

 

 

354

 

Purchase of investments

 

 

(100

)

 

 

-

 

Other investing activities, net

 

 

(64

)

 

 

(9

)

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(311

)

 

 

197

 

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Borrowings

 

 

6,750

 

 

 

-

 

Net transfers (to) from Twenty-First Century Fox, Inc.

 

 

(1,233

)

 

 

845

 

Net dividend paid to Twenty-First Century Fox, Inc.

 

 

(6,500

)

 

 

-

 

Distributions and other

 

 

(12

)

 

 

(65

)

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by financing activities

 

 

(995

)

 

 

780

 

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

318

 

 

 

1,762

 

Cash and cash equivalents, beginning of year

 

 

2,500

 

 

 

19

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

2,818

 

 

$

1,781

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Unaudited Consolidated and Combined Financial Statements.

 

4


FOX CORPORATION

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 and 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 transition 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 Company’s Consolidated Balance Sheet as of March 31, 2019 consists of the Company’s consolidated balances subsequent to the Distribution. The Company’s Combined Balance Sheet as of June 30, 2018 consists of the combined balances of 21CF’s domestic news, national 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 Unaudited 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 2018

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

 

Stockholders’ Equity

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