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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, 2020

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 (212852-7000

 

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

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 growth 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  

As of May 4, 2020, 342,642,286 shares of Class A Common Stock, par value $0.01 per share, and 261,078,355 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 Statements of Operations for the three and nine months ended March 31, 2020 and 2019 

1

 

 

 

Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2020 and 2019

2

 

 

 

Consolidated Balance Sheets as of March 31, 2020 (unaudited) and June 30, 2019 (audited)

3

 

 

 

Unaudited Consolidated Statements of Cash Flows for the nine months ended March 31, 2020 and 2019

4

 

 

 

Unaudited Consolidated Statements of Equity for the three and nine months ended March 31, 2020 and 2019

5

 

 

 

Notes to the Unaudited Consolidated Financial Statements

6

 

Item 2.

 

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

26

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

38

 

Item 4.

 

Controls and Procedures

38

Part II. Other Information

 

 

Item 1.

 

Legal Proceedings

39

 

Item 1A.

 

Risk Factors

39

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

40

 

Item 3.

 

Defaults Upon Senior Securities

40

 

Item 4.

 

Mine Safety Disclosures

40

 

Item 5.

 

Other Information

40

 

Item 6.

 

Exhibits

41

 

Signature

42

 

 


 

FOX CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the three months ended

March 31,

 

 

For the nine months ended

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

)

Income before income tax expense

 

 

145

 

 

 

706

 

 

 

1,264

 

 

 

1,568

 

Income tax expense

 

 

(55

)

 

 

(167

)

 

 

(347

)

 

 

(390

)

Net income

 

 

90

 

 

 

539

 

 

 

917

 

 

 

1,178

 

Less: Net income attributable to noncontrolling interests

 

 

(12

)

 

 

(10

)

 

 

(40

)

 

 

(37

)

Net income attributable to Fox Corporation stockholders

 

$

78

 

 

$

529

 

 

$

877

 

 

$

1,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

608

 

 

 

621

 

 

 

615

 

 

 

621

 

Diluted

 

 

612

 

 

 

621

 

 

 

619

 

 

 

621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Fox Corporation stockholders per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.13

 

 

$

0.85

 

 

$

1.43

 

 

$

1.84

 

Diluted

 

$

0.13

 

 

$

0.85

 

 

$

1.42

 

 

$

1.84

 

 

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

1


 

FOX CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN MILLIONS)

 

 

 

For the three months ended

March 31,

 

 

For the nine months ended

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

90

 

 

$

539

 

 

$

917

 

 

$

1,178

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit plan adjustments

 

 

5

 

 

 

2

 

 

 

17

 

 

 

5

 

Other comprehensive income, net of tax

 

 

5

 

 

 

2

 

 

 

17

 

 

 

5

 

Comprehensive income

 

 

95

 

 

 

541

 

 

 

934

 

 

 

1,183

 

Less: Net income attributable to noncontrolling interests(a)

 

 

(12

)

 

 

(10

)

 

 

(40

)

 

 

(37

)

Comprehensive income attributable to Fox Corporation stockholders

 

$

83

 

 

$

531

 

 

$

894

 

 

$

1,146

 

 

(a)

Net income attributable to noncontrolling interests includes $4 million and $6 million for the three months ended March 31, 2020 and 2019, respectively, and $16 million and $27 million for the nine months ended March 31, 2020 and 2019, respectively, relating to redeemable noncontrolling interests.

 

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

2


 

FOX CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

 

 

As of

March 31,

2020

 

 

As of

June 30,

2019

 

 

 

(unaudited)

 

 

(audited)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,196

 

 

$

3,234

 

Receivables, net

 

 

2,453

 

 

 

1,967

 

Inventories, net

 

 

971

 

 

 

1,129

 

Other

 

 

124

 

 

 

148

 

Total current assets

 

 

6,744

 

 

 

6,478

 

Non-current assets

 

 

 

 

 

 

 

 

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

 

Total assets

 

$

20,237

 

 

$

19,509

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

1,780

 

 

$

1,712

 

Non-current liabilities

 

 

 

 

 

 

 

 

Borrowings

 

 

6,754

 

 

 

6,751

 

Other liabilities

 

 

1,312

 

 

 

899

 

Redeemable noncontrolling interests

 

 

258

 

 

 

189

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Class A common stock(a)

 

 

3

 

 

 

4

 

Class B common stock(b)

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

9,810

 

 

 

9,891

 

Retained earnings

 

 

589

 

 

 

357

 

Accumulated other comprehensive loss

 

 

(291

)

 

 

(308

)

Total Fox Corporation stockholders' equity

 

 

10,114

 

 

 

9,947

 

Noncontrolling interests

 

 

19

 

 

 

11

 

Total equity

 

 

10,133

 

 

 

9,958

 

Total liabilities and equity

 

$

20,237

 

 

$

19,509

 

 

(a)

Class A common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 342,640,682 shares and 354,422,419 shares issued and outstanding at par as of March 31, 2020 and June 30, 2019, respectively.

(b)

Class B common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 261,078,355 shares and 266,173,651 shares issued and outstanding at par as of March 31, 2020 and June 30, 2019, respectively.

 

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

3


 

FOX CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

 

 

 

For the nine months ended

March 31,

 

 

 

2020

 

 

2019

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

917

 

 

$

1,178

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Receivables and other assets

 

 

(299

)

 

 

(196

)

Inventories net of program rights payable

 

 

167

 

 

 

137

 

Accounts payable and other liabilities

 

 

(333

)

 

 

(133

)

Net cash provided by operating activities

 

 

1,345

 

 

 

1,624

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

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

)

Net cash used in investing activities

 

 

(397

)

 

 

(311

)

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

 

Net cash used in financing activities

 

 

(986

)

 

 

(995

)

Net (decrease) increase in cash and cash equivalents

 

 

(38

)

 

 

318

 

Cash and cash equivalents, beginning of year

 

 

3,234

 

 

 

2,500

 

Cash and cash equivalents, end of period

 

$

3,196

 

 

$

2,818

 

 

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

 

 

4


 

FOX CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF EQUITY

(IN MILLIONS)

 

 

 

Class A

 

 

Class B

 

 

Twenty-First Century

 

 

Additional

 

 

 

 

 

 

Accumulated Other

 

 

Total Fox Corporation

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

Fox, Inc.

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Investment

 

 

Capital

 

 

Earnings

 

 

(Loss) Income

 

 

Equity

 

 

Interests(a)

 

 

Equity

 

Balance, December 31, 2019

 

 

347

 

 

$

3

 

 

 

264

 

 

$

3

 

 

$

-

 

 

$

9,849

 

 

$

775

 

 

$

(296

)

 

$

10,334

 

 

$

19

 

 

$

10,353

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

78

 

 

 

-

 

 

 

78

 

 

 

8

 

 

 

86

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

5

 

 

 

-

 

 

 

5

 

Dividends declared

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(139

)

 

 

-

 

 

 

(139

)

 

 

-

 

 

 

(139

)

Shares repurchased

 

 

(4

)

 

 

-

 

 

 

(3

)

 

 

-

 

 

 

-

 

 

 

(79

)

 

 

(94

)

 

 

-

 

 

 

(173

)

 

 

-

 

 

 

(173

)

Other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40

 

 

 

(31

)

 

 

-

 

 

 

9

 

 

 

(8

)

 

 

1

 

Balance, March 31, 2020

 

 

343

 

 

$

3

 

 

 

261

 

 

$

3

 

 

$

-

 

 

$

9,810

 

 

$

589

 

 

$

(291

)

 

$

10,114

 

 

$

19

 

 

$

10,133

 

Balance, December 31, 2018

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

$

10,596

 

 

$

-

 

 

$

-

 

 

$

(202

)

 

$

10,394

 

 

$

12

 

 

$

10,406

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

424

 

 

 

-

 

 

 

105

 

 

 

-

 

 

 

529

 

 

 

4

 

 

 

533

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

2

 

 

 

-

 

 

 

2

 

Other

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27

)

 

 

5

 

 

 

(4

)

 

 

-

 

 

 

(26

)

 

 

(5

)

 

 

(31

)

Net decrease in Twenty-First Century Fox, Inc. investment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,285

)

 

 

-

 

 

 

-

 

 

 

(14

)

(b)

 

(2,299

)

 

 

-

 

 

 

(2,299

)

Conversion of Twenty-First Century Fox, Inc. investment

 

 

354

 

 

 

4

 

 

 

266

 

 

 

3

 

 

 

(8,708

)

 

 

8,701

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance, March 31, 2019

 

 

354

 

 

$

4

 

 

 

266

 

 

$

3

 

 

$

-

 

 

$

8,706

 

 

$

101

 

 

$

(214

)

 

$

8,600

 

 

$

11

 

 

$

8,611