UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(STATE OR OTHER JURISDICTION |
(COMMISSION |
(IRS EMPLOYER |
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Trading Symbols |
Name of Each Exchange on Which Registered | ||
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02. | Results of Operations and Financial Condition. |
On May 6, 2020, Fox Corporation (the “Company”) released its financial results for the quarter ended March 31, 2020. A copy of the Company’s press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.
The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit |
Description | |
99.1 |
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104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FOX CORPORATION | ||
By: |
/s/ Viet D. Dinh | |
Name: Viet D. Dinh | ||
Title: Chief Legal and Policy Officer |
May 6, 2020
Exhibit 99.1
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
FOX REPORTS THIRD QUARTER FISCAL 2020
REVENUES OF $3.44 BILLION, AN INCREASE OF 25%
NET INCOME OF $90 MILLION,
EARNINGS PER SHARE OF $0.13
ADJUSTED EBITDA OF $920 MILLION
AND ADJUSTED EARNINGS PER SHARE OF $0.93
NEW YORK, NY, May 6, 2020 Fox Corporation (Nasdaq: FOXA, FOX) (FOX or the Company) today reported financial results for the three months ended March 31, 2020.
The Company reported total quarterly revenues of $3.44 billion, a 25% increase from the $2.75 billion of revenues reported in the prior year quarter, reflecting revenue growth across all operating segments. Advertising revenues increased 44%, led by the broadcast of Super Bowl LIV at the Television segment. Affiliate revenues increased 10%, led by increases at the Television segment due to higher fees from third-party FOX affiliates and higher average rates per subscriber, partially offset by net subscriber declines, at the Companys owned and operated television stations. The Company also reported a 27% increase in other revenues, led by the operation of the FOX Studios Lot for third parties and the impact of the consolidation of Credible Labs Inc at the Other, Corporate and Eliminations segment.
Quarterly net income decreased to $90 million from the $539 million in the prior year quarter, primarily due to a loss recognized in other, net related to the change in fair value of the Companys former investment in Roku, Inc., as well as higher operating and selling, general and administrative expenses. The increase in selling, general and administrative expenses primarily reflects higher costs related to FOX operating as a standalone public company following the Distribution1 in the prior year quarter. Quarterly net income attributable to Fox Corporation stockholders decreased to $78 million ($0.13 per share) compared to $529 million ($0.85 per share) in the prior year quarter.
Quarterly Adjusted EBITDA2 of $920 million was 20% higher than the prior year quarter, primarily due to higher contributions at the Television and Cable Network Programming segments. Adjusted net income attributable to Fox Corporation stockholders3 was $568 million ($0.93 per share), which was higher than the $471 million ($0.76 per share) adjusted result in the prior year quarter.
Commenting on the results, Executive Chairman and Chief Executive Officer Lachlan Murdoch said:
We delivered exceptional operational and financial results in the quarter, highlighted by our successful broadcast of Super Bowl LIV on FOX. While we remain focused on continuing to execute against the strategy that drove this strong performance, we are acutely mindful of the global health crisis and its countless impacts. Our highest priority remains the safety and well-being of our employees and their families. Due to the selfless dedication of many of our colleagues, the strength of FOX has been on display throughout the crisis as we continue to provide news, information, entertainment and assistance to communities around the country. As we eventually emerge, we are confident that FOXs focused collection of assets centered on live and event programming will be even more in-demand by advertisers and audiences alike, positioning us well for the future and enabling us to maximize long-term shareholder value.
1 | On March 19, 2019, the Company became a standalone publicly traded company through the pro rata distribution by Twenty-First Century Fox, Inc. (now known as TFCF Corporation) (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). See page 5 for additional detail. |
2 | Adjusted EBITDA is considered a non-GAAP financial measure. See Note 1 for a description of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA. |
3 | Excludes net income effects of Impairment and restructuring charges, adjustments to Equity (losses) earnings of affiliates, Other, net and tax provision adjustments. See Note 2 for a description of adjusted net income and adjusted earnings per share attributable to Fox Corporation stockholders, which are considered non-GAAP financial measures, and a reconciliation of reported net income and earnings per share attributable to Fox Corporation stockholders to adjusted net income and adjusted earnings per share attributable to Fox Corporation stockholders. |
Page 1
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
REVIEW OF OPERATING RESULTS
Three Months Ended March 31, |
Nine Months Ended March 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
$ Millions | ||||||||||||||||
Revenues by Component: |
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Affiliate fee |
$ | 1,559 | $ | 1,420 | $ | 4,389 | $ | 4,102 | ||||||||
Advertising |
1,570 | 1,088 | 4,621 | 4,138 | ||||||||||||
Other |
311 | 244 | 875 | 636 | ||||||||||||
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Total revenues |
$ | 3,440 | $ | 2,752 | $ | 9,885 | $ | 8,876 | ||||||||
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Segment Revenues: |
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Cable Network Programming |
$ | 1,467 | $ | 1,383 | $ | 4,221 | $ | 4,082 | ||||||||
Television |
1,926 | 1,370 | 5,548 | 4,796 | ||||||||||||
Other, Corporate and Eliminations |
47 | (1 | ) | 116 | (2 | ) | ||||||||||
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Total revenues |
$ | 3,440 | $ | 2,752 | $ | 9,885 | $ | 8,876 | ||||||||
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Segment EBITDA: |
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Cable Network Programming |
$ | 792 | $ | 741 | $ | 2,032 | $ | 1,893 | ||||||||
Television |
224 | 99 | 261 | 256 | ||||||||||||
Other, Corporate and Eliminations |
(96 | ) | (74 | ) | (256 | ) | (177 | ) | ||||||||
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Adjusted EBITDA4 |
$ | 920 | $ | 766 | $ | 2,037 | $ | 1,972 | ||||||||
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Depreciation and amortization: |
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Cable Network Programming |
$ | 15 | $ | 12 | $ | 44 | $ | 35 | ||||||||
Television |
17 | 28 | 46 | 80 | ||||||||||||
Other, Corporate and Eliminations |
25 | 18 | 74 | 37 | ||||||||||||
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Total depreciation and amortization |
$ | 57 | $ | 58 | $ | 164 | $ | 152 | ||||||||
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4 Adjusted EBITDA is considered a non-GAAP financial measure. See Note 1 for a description of Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA.
Page 2
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
CABLE NETWORK PROGRAMMING
Three Months Ended March 31, |
Nine Months Ended March 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
$ Millions | ||||||||||||||||
Revenues |
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Affiliate fee |
$ | 1,006 | $ | 968 | $ | 2,902 | $ | 2,845 | ||||||||
Advertising |
304 | 276 | 895 | 893 | ||||||||||||
Other |
157 | 139 | 424 | 344 | ||||||||||||
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Total revenues |
1,467 | 1,383 | 4,221 | 4,082 | ||||||||||||
Operating expenses |
(554 | ) | (547 | ) | (1,866 | ) | (1,896 | ) | ||||||||
Selling, general and administrative |
(126 | ) | (105 | ) | (342 | ) | (322 | ) | ||||||||
Amortization of cable distribution investments |
5 | 10 | 19 | 29 | ||||||||||||
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Segment EBITDA |
$ | 792 | $ | 741 | $ | 2,032 | $ | 1,893 | ||||||||
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Cable Network Programming reported quarterly segment revenues of $1.47 billion, an increase of $84 million or 6% from the amount reported in the prior year quarter, reflecting increases in affiliate, advertising and other revenues. Affiliate revenues increased $38 million or 4% as contractual price increases, including the impact of distribution agreement renewals, were partially offset by net subscriber declines. Advertising revenues increased $28 million or 10% as stronger ratings and higher digital advertising revenues at FOX News Media were partially offset by the impact of higher preemptions associated with breaking news coverage at FOX News Media and fewer live events at FS1 due to Coronavirus Disease 2019 (COVID-19). Other revenues increased $18 million or 13%, primarily due to higher sports sublicensing revenues.
Cable Network Programming reported quarterly segment EBITDA of $792 million, an increase of $51 million or 7% from the amount reported in the prior year quarter, as the revenue increases noted above were partially offset by higher expenses. The increase in expenses was primarily due to higher digital costs and political coverage at FOX News Media and higher FOX Sports and FOX News production costs related to on-location studio shows in Miami leading up to Super Bowl LIV. Partially offsetting the increase in expenses was lower NASCAR programming rights amortization at FS1 due to the postponement of live events because of COVID-19.
Page 3
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
TELEVISION
Three Months Ended March 31, |
Nine Months Ended March 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
$ Millions | ||||||||||||||||
Revenues |
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Advertising |
$ | 1,266 | $ | 812 | $ | 3,726 | $ | 3,245 | ||||||||
Affiliate fee |
553 | 452 | 1,487 | 1,257 | ||||||||||||
Other |
107 | 106 | 335 | 294 | ||||||||||||
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Total revenues |
1,926 | 1,370 | 5,548 | 4,796 | ||||||||||||
Operating expenses |
(1,486 | ) | (1,114 | ) | (4,713 | ) | (4,075 | ) | ||||||||
Selling, general and administrative |
(216 | ) | (157 | ) | (574 | ) | (465 | ) | ||||||||
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Segment EBITDA |
$ | 224 | $ | 99 | $ | 261 | $ | 256 | ||||||||
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Television reported quarterly segment revenues of $1.93 billion, an increase of $556 million or 41% from the amount reported in the prior year quarter, reflecting increases in advertising, affiliate and other revenues. Advertising revenues increased $454 million or 56%, primarily due to the broadcast of Super Bowl LIV, partially offset by the impact of one less NFL Divisional playoff game compared to the prior year quarter. Also contributing to the increase in advertising revenues were higher cyclical political revenues at FOX Television Stations, partially offset by a decline in the local advertising market as a result of COVID-19. Affiliate revenues increased $101 million or 22% due to increases in fees from third-party FOX affiliates and higher average rates per subscriber, partially offset by net subscriber declines, at the Companys owned and operated television stations.
Television reported quarterly segment EBITDA of $224 million, an increase of $125 million from the amount reported in the prior year quarter, as the revenue increases noted above were partially offset by higher expenses. The increase in expenses was primarily due to higher programming rights amortization and production costs at FOX Sports related to the broadcast of Super Bowl LIV, partially offset by the impact of one less NFL Divisional playoff game compared to the prior year quarter. Also contributing to the increase in expenses were incremental investments in original scripted programming and co-production arrangements with third-party studios at FOX Entertainment, partially offset by the absence of a write-down of certain entertainment and syndicated programming in the prior year quarter.
Page 4
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
ISSUANCE OF SENIOR NOTES
In April, the Company issued $600 million of 3.05% senior notes due 2025 and $600 million of 3.50% senior notes due 2030.
ACQUISITION OF TUBI, INC. AND SALE OF STAKE IN ROKU, INC.
In April, the Company completed its acquisition of Tubi Inc., a leading free ad-supported streaming service, for approximately $445 million in net cash consideration at closing. The Company financed the Tubi acquisition principally with the net proceeds of approximately $340 million from the sale of its stake in Roku, Inc. in March. The Company purchased its stake in Roku, Inc. for approximately $40 million.
The Company recorded a loss of approximately $470 million during the quarter ended March 31, 2020 due to the change in fair value of the Companys investment in Roku, Inc. prior to disposition, which is recognized in net income in accordance with United States generally accepted accounting principles (GAAP). This loss, along with other gains or losses on investments, non-recurring, infrequent or unusual items, are excluded from Adjusted EBITDA and adjusted net income and adjusted earnings per share attributable to Fox Corporation stockholders. See Notes 1 and 2 for more information about these non-GAAP financial measures.
IMPACT OF COVID-19
The impact of COVID-19 and measures to prevent its spread are affecting the macroeconomic environment, as well as the business of the Company, in a number of ways. For example, while the Companys national news ratings remain strong, sporting events for which the Company has broadcast rights have been cancelled or postponed, the production of certain entertainment content the Company acquires has been suspended and demand in local advertising markets has declined. The magnitude of the impacts will depend on the duration and extent of COVID-19 and the effect of governmental actions, consumer behavior and actions taken by the Companys business partners in response to the pandemic and such governmental actions. The evolving and uncertain nature of this situation makes it challenging for the Company to estimate the future performance of its businesses, particularly over the near to medium term, including the supply and demand for its services, its cash flows and its current and future advertising revenue. However, the impact of COVID-19 could have a material adverse effect on the Companys business, financial condition or results of operations over the near to medium term. A significant decline in estimated advertising revenue or the expected popularity of the Companys programming could lead to a downward revision in the fair value of, among other things, the Companys reporting units, indefinite-lived intangible assets and long-lived assets and result in an impairment and a non-cash charge that is material to the Companys reported net earnings.
DISTRIBUTION
On March 19, 2019, the Company became a standalone publicly traded company through the pro rata distribution by Twenty-First Century Fox, Inc. (now known as TFCF Corporation) (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, approximately 354 million and approximately 266 million shares of the Companys class A common stock and class B 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 with 21CF, which effected the internal restructuring (the Separation) whereby 21CF transferred to FOX a portfolio of 21CFs news, sports and broadcast businesses, including FOX News Media (consisting of FOX News and FOX Business), FOX Entertainment, FOX Sports, FOX Television Stations, and sports cable networks FS1, FS2, FOX Deportes and Big Ten Network, 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 contemplated by the Amended and Restated Merger Agreement and Plan of Merger, dated as of June 20, 2018, by and among 21CF, The Walt
Page 5
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
Disney Company (Disney) and certain subsidiaries of Disney, pursuant to which, among other things, 21CF became a wholly-owned subsidiary of Disney.
BASIS OF PRESENTATION
The Unaudited Consolidated Financial Statements of the Company have been prepared in accordance with GAAP.
The Companys financial statements for the three and nine months ended March 31, 2020 and 2019 and as of March 31, 2020 and June 30, 2019 are presented on a consolidated basis. The Companys Unaudited Consolidated Financial Statements for the three and nine months ended March 31, 2020 reflect the Companys results of operations and cash flows as a standalone company, and the Companys Consolidated Balance Sheets as of March 31, 2020 and June 30, 2019 consist of the Companys consolidated balances.
Prior to the Distribution, which occurred on March 19, 2019, the Companys financial statements were derived from the unaudited consolidated financial statements and accounting records of 21CF. The Unaudited Consolidated Statements of Operations for the three and nine months ended March 31, 2019 include, for the periods prior to March 19, 2019, 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 Financial Statements, including the assumptions regarding allocating general corporate expenses from 21CF, are reasonable. Nevertheless, the Unaudited Consolidated Financial Statements may not include all of the actual expenses that would have been incurred by FOX and may not reflect FOXs consolidated results of operations 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. The Unaudited Consolidated Statements of Operations includes corporate allocations of approximately $100 million and $270 million for the three and nine months ended March 31, 2019, respectively, in Selling, general and administrative expenses.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as may, will, should, likely, anticipates, expects, intends, plans, projects, believes, estimates, outlook and similar expressions are used to identify these forward-looking statements. These statements are based on managements current expectations and beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements in this press release due to changes in economic, business, competitive, technological, strategic and/or regulatory factors and other factors affecting the operation of the Companys businesses, including the impact of COVID-19. More detailed information about these factors is contained in the documents the Company has filed with or furnished to the Securities and Exchange Commission (the SEC), including the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2019.
Statements in this press release speak only as of the date they were made, and the Company undertakes no duty to update or release any revisions to any forward-looking statement made in this press release or to report any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events or to conform such statements to actual results or changes in the Companys expectations, except as required by law.
Page 6
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
To access a copy of this press release through the Internet, access Fox Corporations corporate website located at http://www.foxcorporation.com.
CONTACTS
Joe Dorrego, Investor Relations | Megan Klein, Press Inquiries | |
212-852-7856 | 310-369-1363 | |
Dan Carey, Investor Relations 212-852-7955 |
Page 7
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, |
Nine Months Ended March 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
$ Millions, except per share amounts | ||||||||||||||||
Revenues |
$ | 3,440 | $ | 2,752 | $ | 9,885 | $ | 8,876 | ||||||||
Operating expenses |
(2,061 | ) | (1,660 | ) | (6,620 | ) | (5,969 | ) | ||||||||
Selling, general and administrative |
(464 | ) | (336 | ) | (1,247 | ) | (964 | ) | ||||||||
Depreciation and amortization |
(57 | ) | (58 | ) | (164 | ) | (152 | ) | ||||||||
Impairment and restructuring charges |
- | (14 | ) | (9 | ) | (14 | ) | |||||||||
Interest expense |
(89 | ) | (81 | ) | (269 | ) | (112 | ) | ||||||||
Interest income |
8 | 19 | 33 | 19 | ||||||||||||
Other, net |
(632 | ) | 84 | (345 | ) | (116 | ) | |||||||||
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Income before income tax expense |
145 | 706 | 1,264 | 1,568 | ||||||||||||
Income tax expense |
(55 | ) | (167 | ) | (347 | ) | (390 | ) | ||||||||
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Net income |
90 | 539 | 917 | 1,178 | ||||||||||||
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Less: Net income attributable to noncontrolling interests |
(12 | ) | (10 | ) | (40 | ) | (37 | ) | ||||||||
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Net income attributable to Fox Corporation stockholders |
$ | 78 | $ | 529 | $ | 877 | $ | 1,141 | ||||||||
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Weighted average shares: |
612 | 621 | 619 | 621 | ||||||||||||
Net income attributable to Fox Corporation stockholders per share: |
$ | 0.13 | $ | 0.85 | $ | 1.42 | $ | 1.84 |
Page 8
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
CONSOLIDATED BALANCE SHEETS
March 31, 2020 |
June 30, 2019 |
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Assets: | $ Millions | |||||||
Current assets: |
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Cash and cash equivalents |
$ | 3,196 | $ | 3,234 | ||||
Receivables, net |
2,453 | 1,967 | ||||||
Inventories, net |
971 | 1,129 | ||||||
Other |
124 | 148 | ||||||
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Total current assets |
6,744 | 6,478 | ||||||
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Non-current assets: |
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Property, plant and equipment, net |
1,386 | 1,313 | ||||||
Intangible assets, net |
3,084 | 2,851 | ||||||
Goodwill |
3,089 | 2,691 | ||||||
Deferred tax assets |
4,386 | 4,651 | ||||||
Other non-current assets |
1,548 | 1,525 | ||||||
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Total assets |
$ | 20,237 | $ | 19,509 | ||||
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Liabilities and Equity: |
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Current liabilities: |
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Accounts payable, accrued expenses and other current liabilities |
$ | 1,780 | $ | 1,712 | ||||
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Non-current liabilities: |
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Borrowings |
6,754 | 6,751 | ||||||
Other liabilities |
1,312 | 899 | ||||||
Redeemable noncontrolling interests |
258 | 189 | ||||||
Commitments and contingencies |
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Equity: |
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Class A common stock, $0.01 par value |
3 | 4 | ||||||
Class B common stock, $0.01 par value |
3 | 3 | ||||||
Additional paid-in capital |
9,810 | 9,891 | ||||||
Retained earnings |
589 | 357 | ||||||
Accumulated other comprehensive loss |
(291 | ) | (308 | ) | ||||
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Total Fox Corporation stockholders equity |
10,114 | 9,947 | ||||||
Noncontrolling interests |
19 | 11 | ||||||
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Total equity |
10,133 | 9,958 | ||||||
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Total liabilities and equity |
$ | 20,237 | $ | 19,509 | ||||
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Page 9
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
$ Millions | ||||||||
Operating Activities: |
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Net income |
$ | 917 | $ | 1,178 | ||||
Adjustments to reconcile net income to cash provided by operating activities |
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Depreciation and amortization |
164 | 152 | ||||||
Amortization of cable distribution investments |
19 | 29 | ||||||
Impairment and restructuring charges |
9 | 14 | ||||||
Equity-based compensation |
101 | 5 | ||||||
Other, net |
345 | 116 | ||||||
Deferred income taxes |
255 | 322 | ||||||
Change in operating assets and liabilities, net of acquisitions and dispositions |
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Receivables and other assets |
(299 | ) | (196 | ) | ||||
Inventories net of program rights payable |
167 | 137 | ||||||
Accounts payable and other liabilities |
(333 | ) | (133 | ) | ||||
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Net cash provided by operating activities |
1,345 | 1,624 | ||||||
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Investing Activities: |
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Property, plant and equipment |
(192 | ) | (147 | ) | ||||
Acquisitions, net of cash acquired |
(611 | ) | - | |||||
Sale of investments |
349 | - | ||||||
Purchase of investments |
- | (100 | ) | |||||
Other investing activities, net |
57 | (64 | ) | |||||
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Net cash used in investing activities |
(397 | ) | (311 | ) | ||||
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Financing activities: |
||||||||
Borrowings |
- | 6,750 | ||||||
Net transfers to Twenty-First Century Fox, Inc. |
- | (1,233 | ) | |||||
Net dividend paid to Twenty-First Century Fox, Inc. |
- | (6,500 | ) | |||||
Repurchase of shares |
(600 | ) | - | |||||
Dividends paid and distributions |
(321 | ) | (33 | ) | ||||
Other financing activities, net |
(65 | ) | 21 | |||||
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Net cash used in financing activities |
(986 | ) | (995 | ) | ||||
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|
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Net (decrease) increase in cash and cash equivalents |
(38 | ) | 318 | |||||
Cash and cash equivalents, beginning of year |
3,234 | 2,500 | ||||||
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|
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Cash and cash equivalents, end of period |
$ | 3,196 | $ | 2,818 | ||||
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Page 10
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
NOTE 1 ADJUSTED EBITDA
Beginning with the announcement of the Companys financial results for the first quarter of fiscal 2020, the Company has renamed as Adjusted EBITDA the measure that it had previously referred to as Total Segment EBITDA and, prior to the announcement of the Companys financial results for the third quarter of fiscal 2019, as Total Segment OIBDA. The definition of this measure has not changed: Adjusted EBITDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses. Adjusted 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.
Management believes that information about Adjusted EBITDA assists all users of the Companys Unaudited Consolidated Financial Statements by allowing them to evaluate changes in the operating results of the Companys 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. Adjusted EBITDA provides management, investors and equity analysts a measure to analyze the operating performance of the Companys business and its enterprise value against historical data and competitors data, although historical results, including Adjusted EBITDA, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
Adjusted EBITDA is 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 Companys financial performance. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table reconciles net income to Adjusted EBITDA for the three and nine months ended March 31, 2020 and 2019:
Three Months Ended March 31, |
Nine Months Ended March 31, |
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2020 | 2019 | 2020 | 2019 | |||||||||||||
$ Millions | ||||||||||||||||
Net income |
$ | 90 | $ | 539 | $ | 917 | $ | 1,178 | ||||||||
Add: |
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Amortization of cable distribution investments |
5 | 10 | 19 | 29 | ||||||||||||
Depreciation and amortization |
57 | 58 | 164 | 152 | ||||||||||||
Impairment and restructuring charges |
- | 14 | 9 | 14 | ||||||||||||
Interest expense |
89 | 81 | 269 | 112 | ||||||||||||
Interest income |
(8 | ) | (19 | ) | (33 | ) | (19 | ) | ||||||||
Other, net |
632 | (84 | ) | 345 | 116 | |||||||||||
Income tax expense |
55 | 167 | 347 | 390 | ||||||||||||
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Adjusted EBITDA |
$ | 920 | $ | 766 | $ | 2,037 | $ | 1,972 | ||||||||
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Page 11
EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2020
NOTE 2 ADJUSTED NET INCOME AND ADJUSTED EPS
The Company uses net income and earnings per share (EPS) attributable to Fox Corporation stockholders excluding net income effects of Impairment and restructuring charges, adjustments to Equity (losses) earnings of affiliates, Other, net, and tax provision adjustments (Adjusted Net Income and Adjusted EPS respectively) to evaluate the performance of the Companys operations exclusive of certain items that impact the comparability of results from period to period.
Adjusted Net Income and Adjusted EPS may not be comparable to similarly titled measures reported by other companies. Adjusted Net Income and Adjusted EPS are not measures of performance under GAAP and should be considered in addition to, and not as substitutes for, net income attributable to Fox Corporation stockholders and EPS as reported in accordance with GAAP. However, management uses these measures in comparing the Companys historical performance and believes that they provide meaningful and comparable information to management, investors and equity analysts to assist in their analysis of the Companys performance relative to prior periods and the Companys competitors.
The following table reconciles net income and EPS attributable to Fox Corporation stockholders to Adjusted Net Income and Adjusted EPS for the three months ended March 31, 2020 and 2019:
Three Months Ended | ||||||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||||||
Income | EPS | Income | EPS | |||||||||||||
$ Millions, except per share data | ||||||||||||||||
Net income |
$ | 90 | $ | 539 | ||||||||||||
Less: Net income attributable to noncontrolling interests |
(12 | ) | (10 | ) | ||||||||||||
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Net income attributable to Fox Corporation stockholders |
$ | 78 | $ | 0.13 | $ | 529 | $ | 0.85 | ||||||||
Impairment and restructuring charges |
- | - | 14 | 0.02 | ||||||||||||
Other, net5 |
627 | 1.02 | (85 | ) | (0.14 | ) | ||||||||||
Tax provision |
(137 | ) | (0.22 | ) | 13 | 0.02 | ||||||||||
Rounding |
- | - | - | 0.01 | ||||||||||||
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As adjusted |
$ | 568 | $ | 0.93 | $ | 471 | $ | 0.76 | ||||||||
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5 Other, net presented above excludes equity losses of affiliates.
Page 12