(f) | The leased offices of NAM in Wilton, Connecticut; and
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(g) | The office space campus owned by the Company in South Brunswick, New Jersey.
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(a)The leased U.S. headquarters of the Company, located at 1211 Avenue of the Americas, New York, New York. The space includes the executive and corporate offices of the Company, the executive and editorial offices of Dow Jones and the editorial offices of the Post;
(b)The leased offices of HarperCollins U.S. in New York, New York;
(c)The leased offices of HarperCollins U.S. in Scranton, Pennsylvania;
(d)The leased offices of Move in Santa Clara, California;
(e)The office space campus owned by the Company in South Brunswick, New Jersey; and
(f)The leased offices of Opcity in Austin, Texas.
The Company’s principal real properties in Europe are the following:
(a) | The leased headquarters and editorial offices of the London operations of News UK, Dow Jones and HarperCollins at The News Building, 1 London Bridge Street, London, England;
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(b) | The newspaper production and printing facilities for its U.K. newspapers, which consist of:
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| 1. | The leased office space at each of Fleet House, Peterborough, England; Dublin, Ireland; and Glasgow City Centre, Scotland; and
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| 2. | The freehold interests in each of a publishing and printing facility in Broxbourne, England and printing facilities in Knowsley, England and North Lanarkshire, Scotland; and
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(c) | The leased warehouse and office facilities of HarperCollins Publishers Limited in Glasgow, Scotland.
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(a)The leased headquarters and editorial offices of the London operations of News UK, Dow Jones and HarperCollins and the broadcast studios for the Company’s U.K. radio stations at The News Building, 1 London Bridge Street, London, England;
(b)The newspaper production and printing facilities for its U.K. newspapers, which consist of:
1.The leased office space at each of Fleet House, Peterborough, England; Dublin, Ireland; and Glasgow City Centre, Scotland; and
2.The freehold interests in each of a publishing and printing facility in Broxbourne, England and printing facilities in Knowsley, England and North Lanarkshire, Scotland; and
(c)The leased warehouse and office facilities of HarperCollins Publishers Limited in Glasgow, Scotland.
The Company’s principal real properties in Australia and Asia are the following:
(a) | The Australian newspaper production and printing facilities which consist of:
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| 1. | The Company-owned print center and office building in Sydney, Australia at whichThe Australian,The Daily Telegraph andThe Sunday Telegraphare printed and published;
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| 2. | The Company-owned print center and the leased office facility in Melbourne, Australia at whichHerald Sun andSunday Herald Sun are printed and published;
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| 3. | The Company-owned print center and office building in Adelaide, Australia utilized in the printing and publishing ofThe Advertiser andSunday Mail; and
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| 4. | The Company-owned print center and office building in Brisbane, Australia at whichThe Courier Mail andThe Sunday Mailare printed and published;
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(b) | The leased headquarters of new Foxtel in Sydney, Australia;
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(c) | The leased corporate offices of new Foxtel in Melbourne, Australia;
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(d) | The leased offices and studios of FOX SPORTS Australia in Sydney, Australia;
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(e) | The leased offices and studios of FOX SPORTS Australia in Melbourne, Australia;
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(f) | The leased corporate offices of REA Group in Melbourne, Australia; and
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(g) | The leased office space of Dow Jones in Hong Kong.
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(a)The Australian newspaper production and printing facilities which consist of:
1.The Company-owned print center and office building in Sydney, Australia at which The Australian, The Daily Telegraph and The Sunday Telegraph are printed and published, respectively;
2.The leased print center and office facility in Melbourne, Australia at which Herald Sun and Sunday Herald Sun are printed and published, respectively;
3.The Company-owned print center and office building in Adelaide, Australia at which The Advertiser and Sunday Mail are printed and published, respectively; and
4.The Company-owned print center and office building in Brisbane, Australia at which The Courier Mail and The Sunday Mail are printed and published, respectively;
(b)The leased headquarters of Foxtel in Sydney, Australia;
(c)The leased corporate offices and call center of Foxtel in Melbourne, Australia;
(d)The leased offices and studios of FOX SPORTS Australia in Sydney, Australia;
(e)The leased corporate offices of REA Group in Melbourne, Australia; and
(f)The leased office space of Dow Jones in Hong Kong.
ITEM 3. LEGAL PROCEEDINGS
The Company routinely is involved in various legal proceedings, claims
See Note 16—Commitments and
governmental inspections or investigations, including those discussed below.Valassis Communications, Inc.
On November 8, 2013, Valassis Communications, Inc. (“Valassis”) filed a complaintContingencies in the U.S. District Court for the Eastern Districtaccompanying Consolidated Financial Statements.
“NAM Group”) alleging violations of federal and state antitrust laws and common law business torts. The complaint sought treble damages, injunctive relief and attorneys’ fees and costs. On December 19, 2013, the NAM Group filed a motion to dismiss the complaint, and on March 30, 2016, the District Court ordered that Valassis’s bundling and tying claims be dismissed and that all remaining claims in the NAM Group’s motion to dismiss be referred to a panel of antitrust experts (the “Antitrust Expert Panel”) appointed in connection with a prior action brought by Valassis against certain members of the NAM Group. The Antitrust Expert Panel was convened and, on February 8, 2017, recommended that the NAM Group’s counterclaims in the action be dismissed with leave to replead three of the four counterclaims. The NAM Group filed an amended counterclaim on February 27, 2017. Valassis subsequently filed motions with the District Court seeking either tore-open the case in the District Court or to transfer the case to the U.S. District Court for the Southern District of New York (the “N.Y. District Court”). On September 25, 2017, the District Court granted Valassis’s motions and transferred the case to the N.Y. District Court. On April 13, 2018, the NAM Group filed a motion for summary judgment dismissing the case with the N.Y. District Court. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, the NAM Group believes it has been compliant with applicable laws and intends to defend itself vigorously.
U.K. Newspaper Matters
Civil claims have been brought against the Company with respect to, among other things, voicemail interception and inappropriate payments to public officials at the Company’s former publication,The News of the World, and atThe Sun, and related matters (the “U.K. Newspaper Matters”). The Company has admitted liability in many civil cases and has settled a number of cases. The Company also settled a number of claims through a private compensation scheme which was closed to new claims after April 8, 2013.
In connection with the Separation, the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that 21st Century Fox would indemnify the Company for payments made after the Distribution Date arising out of civil claims and investigations relating to the U.K. Newspaper Matters as well as legal and professional fees and expenses paid in connection with the previously concluded criminal matters, other than fees, expenses and costs relating to employees (i) who are not directors, officers or certain designated employees or (ii) with respect to civil matters, who are notco-defendants with the Company or 21st Century Fox. 21st Century Fox’s indemnification obligations with respect to these matters will be settled on anafter-tax basis.
The net (benefit) expense related to the U.K. Newspaper Matters in Selling, general and administrative expenses was $(35) million, $10 million and $19 million for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, respectively. As of June 30, 2018, the Company has provided for its best estimate of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $52 million. The amount to be indemnified by 21st Century Fox of approximately $49 million was recorded as a receivable in Other current assets on the Balance Sheet as of June 30, 2018. The net benefit for the fiscal year ended June 30, 2018 and the accrual and receivable recorded as of that date reflect a $46 million impact from the reversal of a portion of the Company’s previously accrued liability and the corresponding receivable from 21st Century Fox as the result of an agreement reached with the relevant tax authority with respect to certain employment taxes. It is not possible to estimate the liability or corresponding receivable for any additional claims that may be filed given the information that is currently available to the Company. If more claims are filed and additional information becomes available, the Company will update the liability provision and corresponding receivable for such matters.
The Company is not able to predict the ultimate outcome or cost of the civil claims. It is possible that these proceedings and any adverse resolution thereof could damage its reputation, impair its ability to conduct its business and adversely affect its results of operations and financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
News Corporation’s Class A Common Stock and Class B Common Stock are listed and traded on The Nasdaq Global Select Market (“Nasdaq”), its principal market, under the symbols “NWSA” and “NWS,” respectively. CHESS Depositary Interests (“CDIs”) representing the Company’s Class A Common Stock and Class B Common Stock are listed and traded on the Australian Securities Exchange (“ASX”) under the symbols “NWSLV” and “NWS,” respectively. As of
August 7, 2018,July 30, 2021, there were approximately
21,00017,000 holders of record of shares of Class A Common Stock and
600400 holders of record of shares of Class B Common Stock.
The following table sets forth, for
Dividends
For information regarding dividends, see Note 12—Stockholders' Equity in the
fiscal periods indicated, the high and low sales prices for the Class A Common Stock and Class B Common Stock, as reported on Nasdaq. | | | | | | | | | | | | | | | | |
| | | Class B Common Stock | | | Class A Common Stock | |
| | | High | | | Low | | | High | | | Low | |
Fiscal year ended June 30, 2017: | | | | | | | | | | | | | | | | |
First Quarter | | $ | 14.65 | | | | 11.50 | | | | 14.34 | | | | 11.05 | |
Second Quarter | | | 15.22 | | | | 11.25 | | | | 14.68 | | | | 10.99 | |
Third Quarter | | | 13.80 | | | | 11.90 | | | | 13.48 | | | | 11.51 | |
Fourth Quarter | | | 14.40 | | | | 12.60 | | | | 13.92 | | | | 12.19 | |
| | | | |
Fiscal year ended June 30, 2018: | | | | | | | | | | | | | | | | |
First Quarter | | | 14.90 | | | | 13.10 | | | | 14.49 | | | | 12.84 | |
Second Quarter | | | 17.05 | | | | 13.50 | | | | 16.87 | | | | 13.14 | |
Third Quarter | | | 17.70 | | | | 15.50 | | | | 17.29 | | | | 15.22 | |
Fourth Quarter | | | 16.80 | | | | 15.35 | | | | 16.65 | | | | 14.97 | |
Dividends
During fiscal 2018 and 2017,accompanying Consolidated Financial Statements.
Issuer Purchases of Equity Securities
In May 2013, the Company’s Board of Directors (the “Board of Directors”)
declared semi-annual cash dividends on both the Company’s Class A Common Stock and Class B Common Stock. The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Board of Directors. The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant.The following table summarizes the dividends paid per share on both the Company’s Class A Common Stock and the Class B Common Stock:
| | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | |
Cash dividends paid per share | | $ | 0.20 | | | $ | 0.20 | |
Issuer Purchases of Equity Securities
In May 2013, the Board of Directors authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. No stock repurchases were made during the fiscal yearyears ended June 30, 2018. Through August 7, 2018,2021, 2020 and 2019. Over the life of the program through July 30, 2021, the Company cumulatively repurchased approximately 5.2 million shares of Class A Common Stock
for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2018July 30, 2021 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased.
The Company did not purchase any of its Class A or Class B Common Stock during the fiscal years ended June 30, 20182021, 2020 and 2017.2019.
ITEM 6. | SELECTED FINANCIAL DATA
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The selected consolidated financial data should be read in conjunction with “Item 7—Management’s Discussion and Analysis
ITEM 6. [RESERVED]
Not applicable.
Table of Financial Condition and Results of Operations” and “Item 8—Financial Statements and Supplementary Data” and the other financial information included elsewhere herein. | | | | | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018(c) | | | 2017(c) | | | 2016(c) | | | 2015 | | | 2014 | |
| | | (in millions except per share information) | |
STATEMENT OF OPERATIONS DATA: | | | | | | | | | | | | | | | | | | | | |
Revenues(a) | | $ | 9,024 | | | $ | 8,139 | | | $ | 8,292 | | | $ | 8,524 | | | $ | 8,486 | |
(Loss) income from continuing operations attributable to News Corporation stockholders(b) | | | (1,514 | ) | | | (738 | ) | | | 164 | | | | 298 | | | | 381 | |
Net (loss) income attributable to News Corporation stockholders | | | (1,514 | ) | | | (738 | ) | | | 179 | | | | (147 | ) | | | 239 | |
(Loss) income from continuing operations available to News Corporation stockholders—basic and diluted | | | (2.60 | ) | | | (1.27 | ) | | | 0.28 | | | | 0.51 | | | | 0.65 | |
Net (loss) income available to News Corporation stockholders per share—basic and diluted | | | (2.60 | ) | | | (1.27 | ) | | | 0.30 | | | | (0.26 | ) | | | 0.41 | |
Cash dividends per share of Class A and Class B Common Stock | | | 0.20 | | | | 0.20 | | | | 0.20 | | | | — | | | | — | |
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| | | As of June 30, | |
| | | 2018(c) | | | 2017(c) | | | 2016 | | | 2015 | | | 2014 | |
| | | (in millions) | |
BALANCE SHEET DATA: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 2,034 | | | $ | 2,016 | | | $ | 1,832 | | | $ | 1,951 | | | $ | 3,145 | |
Total assets(a) | | | 16,346 | | | | 14,552 | | | | 15,483 | | | | 15,035 | | | | 16,351 | |
Total borrowings(a) | | | 1,952 | | | | 379 | | | | 372 | | �� | | — | | | | — | |
Redeemable preferred stock | | | 20 | | | | 20 | | | | 20 | | | | 20 | | | | 20 | |
(a) | During the fiscal year ended June 30, 2018, News Corp and Telstra Corporation Limited (“Telstra”) combined their respective 50% interests in Foxtel and News Corp’s 100% interest in FOX SPORTS Australia into a new company. Following the completion of the transaction in April 2018, News Corp owns a 65% interest in new Foxtel, and Telstra owns the remaining 35%. Consequently, the Company began consolidating Foxtel in the fourth quarter of fiscal 2018. As a result of the transaction, Foxtel’s outstanding debt of approximately $1.6 billion is included in the Balance Sheets as of June 30, 2018. See Note 3—Acquisitions, Disposals and Other Transactions in the accompanying Consolidated Financial Statements.
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(b) | During the fiscal year ended June 30, 2018, the Company recognized a $957 millionnon-cash write-down of the carrying value of its investment in Foxtel. See Note 6—Investments in the accompanying Consolidated Financial Statements. Additionally, during the fiscal year ended June 30, 2018, the Company recognizednon-cash impairment charges of $280 million primarily related to the impairment of goodwill and intangible assets at the News America Marketing reporting unit and impairment of goodwill at the FOX SPORTS Australia reporting unit. See Note 8—Goodwill and Other Intangible Assets in the accompanying Consolidated Financial Statements. As a result of the Transaction, the Company recognized a $337 million loss in Other, net, primarily related to the Company’s settlement of its pre-existing contractual arrangement between Foxtel and FOX SPORTS Australia which resulted in a $317 million write-off of its channel distribution agreement intangible asset at the time of the Transaction. See Note 3—Acquisitions, Disposals and Other Transactions in the accompanying Consolidated Financial Statements.
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During the fiscal year ended June 30, 2017, the Company recordednon-cash impairment charges of approximately $785 million, of which approximately $360 million related to the News and Information Services business in the U.K. and approximately $310 million related to the News and Information Services
Contents business in Australia. See Note 7—Property, Plant and Equipment in the accompanying Consolidated Financial Statements. Additionally, during the fiscal year ended June 30, 2017, the Company recognized a $227 millionnon-cash write-down of the carrying value of its investment in Foxtel. The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
During the fiscal year ended June 30, 2016, the Company recognized $158 million ($98 million, net of tax) in net settlement costs associated with the NAM Group and Zillow legal settlements. The Company recognizedone-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing during the three months ended March 31, 2016. In addition, the Company recognized a gain of $122 million in connection with the settlement of litigation with Zillow, Inc., which reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to the National Association of Realtors® during the three months ended June 30, 2016. See Note 16—Commitments and Contingencies in the accompanying Consolidated Financial Statements.
(c) | See Notes 3, 4,5, 6, 7, 8 and 16 in the accompanying Consolidated Financial Statements for information with respect to significant acquisitions, disposals, discontinued operations, impairment charges, restructuring charges, contingencies and legal settlements and other transactions during fiscal 2018, 2017 and 2016.
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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. The words “expect,
” “will,” “estimate,” “anticipate,” “predict,” “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations,
the Company’s strategy and strategic initiatives and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks
and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth under the heading “Risk Factors” in Item 1A of this Annual Report on Form
10-K (the “Annual Report”). The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review this document and the other documents filed by the Company with the Securities and Exchange Commission (the “SEC”). This section should be read together with the Consolidated Financial Statements of News Corporation and related notes set forth elsewhere in this Annual Report.
The following discussion and analysis omits discussion of fiscal 2019. Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for a discussion on fiscal 2019.
News Corporation (together with its subsidiaries, “News Corporation,” “News Corp,” the “Company,” “we,” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including:
digital real estate services, subscription video services in Australia, news and information services
and book
publishing, digital real estate services and subscription video services in Australia.In April 2018, News Corp and Telstra combined their respective 50% interests in Foxtel and News Corp’s 100% interest in FOX SPORTS Australia into a new company, which the Company refers to as “new Foxtel” (the “Transaction”). Following the completion of the Transaction, News Corp owns a 65% interest in the combined business, with Telstra owning the remaining 35%. Consequently, the Company began consolidating Foxtel in the fourth quarter of fiscal 2018. (See Note 3—Acquisitions, Disposals and Other Transactions in the accompanying Consolidated Financial Statements). The results of the combined business are reported within the Subscription Video Services segment (formerly the Cable Network Programming segment). The Company has revised its prior year discussion and analysis to reflect this segment name change. To enhance the comparability of the financial information provided to users, the Company has supplementally included pro forma financial information for the fiscal years ended June 30, 2018 and 2017 reflecting the Transaction within its discussion and analysis below.
During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. Unless indicated otherwise, the information in the notes to the Consolidated Financial Statements relates to the Company’s continuing operations. See Note 4—Discontinued Operations in the accompanying Consolidated Financial Statements.
publishing.
The consolidated financial statements are referred to herein as the “Consolidated Financial Statements.” The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are
referred to herein as the “Statements of Cash Flows.” The Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company’s financial condition, changes in financial condition and results of operations. This discussion is organized as follows:
| • | | Overview of the Company’s Business—This section provides a general description of the Company’s businesses, as well as developments that occurred during the three fiscal years ended June 30, 2018 and through the date of this filing that the Company believes are important in understanding its results of operations and financial condition or to disclose known trends.
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| • | | Results of Operations—This section provides an analysis of the Company’s results of operations for the three fiscal years ended June 30, 2018. This analysis is presented on both a consolidated basis and a segment basis. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed. To enhance the comparability of the financial information provided to users, the Company has supplementally included pro forma financial information for fiscal 2018 and fiscal 2017 within its discussion and analysis below reflecting the Transaction. The Company maintains a52-53 week fiscal year ending on the Sunday closest to June 30 in each year. Fiscal 2018, fiscal 2017 and fiscal 2016 included 52, 52 and 53 weeks, respectively. As a result, the Company has referenced the impact of the 53rd week, where applicable, when providing analysis of the results of operations.
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| • | | Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for the three fiscal years ended June 30, 2018, as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed as of June 30, 2018.
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| • | | Critical Accounting Policies—This section discusses accounting policies considered important to the Company’s financial condition and results of operations, and which require significant judgment and estimates on the part of management in application. In addition, Note 2 to the Consolidated Financial Statements summarizes the Company’s significant accounting policies, including the critical accounting policies discussed in this section.
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•Overview of the Company’s Businesses—This section provides a general description of the Company’s businesses, as well as developments that occurred during the two fiscal years ended June 30, 2021 and through the date of this filing that the Company believes are important in understanding its results of operations and financial condition or to disclose known trends.
•Results of Operations—This section provides an analysis of the Company’s results of operations for the two fiscal years ended June 30, 2021. This analysis is presented on both a consolidated basis and a segment basis. Supplemental revenue information is also included for reporting units within certain segments and is presented on a gross basis, before eliminations in consolidation. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed. The Company maintains a 52-53 week fiscal year ending on the Sunday closest to June 30 in each year. Fiscal 2021 and 2020 each included 52 weeks.
•Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for the two fiscal years ended June 30, 2021, as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed as of June 30, 2021.
•Critical Accounting Policies—This section discusses accounting policies considered important to the Company’s financial condition and results of operations, and which require significant judgment and estimates on the part of management in application. In addition, Note 2 to the Consolidated Financial Statements summarizes the Company’s significant accounting policies, including the critical accounting policies discussed in this section.
OVERVIEW OF THE COMPANY’S BUSINESSES
The Company manages and reports its businesses in the following
fivesix segments:
| • | | News and Information Services—The News and Information Services segment includes the Company’s global print, digital and broadcast radio media platforms. These product offerings include the global print and digital versions ofThe Wall Street Journal and the Dow Jones Media Group, which includesBarron’s and MarketWatch, the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires and DJX and its live journalism events. The Company also owns, among other publications, The Australian, The Daily Telegraph, Herald Sun,The Courier Mail andThe Advertiser in Australia, The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. and the New York Post in the U.S. This segment also includes News America Marketing, a leading provider of home-delivered shopper media,in-store marketing products and services and digital marketing solutions, including Checkout 51’s mobile application, as well as Unruly, a global video advertising marketplace, Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency.
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| • | | Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 18 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper, William Morrow, HarperCollins Children’s Books,
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| Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well-known authors such as Harper Lee, Patricia Cornwell, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird, Jesus Calling andHillbilly Elegy.
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| • | | Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s 61.6% interest in REA Group and 80% interest in Move. The remaining 20% interest in Move is held by REA Group. REA Group is a market-leading digital media business specializing in property and is listed on the Australian Securities Exchange (“ASX”) (ASX: REA). REA Group advertises property and property-related services on its websites and mobile applications across Australia and Asia, including Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au, and property portals in Asia. In addition, REA Group provides property-related data to the financial sector and financial services through anend-to-end digital property search and financing experience and a mortgage broking offering.
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•Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s 61.4% interest in REA Group and 80% interest in Move. The remaining 20% interest in Move is held by REA Group. REA Group is a market-leading digital media business specializing in property and is listed on the Australian Securities Exchange (“ASX”) (ASX: REA). REA Group advertises property and property-related services on its websites and mobile apps, including Australia’s leading residential, commercial and share property websites, realestate.com.au, realcommercial.com.au and Flatmates.com.au, and property portals in India and East Asia. In addition, REA Group provides property-related data to the financial sector and financial services through an end-to-end digital property search and financing experience and a mortgage broking offering.
Move is a leading provider of onlinedigital real estate services in the U.S. and primarily operates realtor.com®, a premier real estate information, advertising and services marketplace.platform. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM for Buyers Plus and AdvantageSM Pro products.products as well as its referral-based services. Move also offers a number ofonline tools and services to do-it-yourself landlords and tenants, as well as professional software and services products, including Top Producer®products.
•Subscription Video Services—The Company’s Subscription Video Services segment provides sports, entertainment and news services to pay-TV and streaming subscribers and other commercial licensees, primarily via cable, satellite and internet distribution, and consists of (i) the Company’s 65% interest in the Foxtel Group (with the remaining 35% interest held by Telstra, an ASX-listed telecommunications company) and (ii) Australian News Channel (“ANC”). The Foxtel Group is the largest Australian-based subscription television provider, with nearly 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news. Foxtel and the Kayo Sports streaming service offer the leading sports programming content in Australia, with broadcast rights to live sporting events including: National Rugby League, Australian Football League, Cricket Australia and various motorsports programming. The Foxtel Group also operates BINGE, FiveStreet®its on-demand entertainment streaming service, and ListHubTM. | • | | Subscription Video Services—The Company’s Subscription Video Services segment provides video sports, entertainment and news services topay-TV subscribers and other commercial licensees, primarily via cable, satellite and Internet Protocol, or IP, distribution, and consists of (i) its 65% interest in new Foxtel and (ii) Australian News Channel Pty Ltd (“ANC”). The remaining 35% interest in new Foxtel is held by Telstra, anASX-listed telecommunications company. New Foxtel is the largestpay-TV provider in Australia, with over 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news and broadcast rights to live sporting events in Australia including: National Rugby League, Australian Football League, Cricket Australia, the domestic football league, the Australian Rugby Union and various motorsports programming.
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Foxtel Now, a streaming service that provides access across Foxtel's live and on-demand content.
ANC operates the SKY NEWS network, Australia’s24-hour multi-channel, multi-platform news service. ANC channels are distributed throughout Australia and New Zealand and available on Foxtel and Sky Network Television NZ. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including web, mobile podcasts and third party providers.
•Dow Jones—The Dow Jones segment consists of Dow Jones, a global provider of news and business information, which distributes its content and data through a variety of media channels including newspapers, newswires, websites, applications, or apps, for mobile devices, tablets and e-book readers, newsletters, magazines, proprietary databases, live journalism, video and podcasts. The Dow Jones segment’s products, which target individual consumers and enterprise customers, include The Wall Street Journal, Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Barron’s, MarketWatch and Investor’s Business Daily.
•Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 17 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well-known authors such as Harper Lee, George Orwell, Agatha Christie and Zora Neale Hurston, as well as global author brands including J.R.R. Tolkien, C.S. Lewis, Daniel Silva, Karin Slaughter and Dr. Martin Luther King, Jr. It is also home to many beloved children’s books and authors and a significant Christian publishing business.
•News Media—The News Media segment consists primarily of News Corp Australia, News UK and the New York Post and includes, among other publications, The Australian, The Daily Telegraph, Herald Sun, The Courier Mail and The Advertiser in Australia and The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. This segment also includes Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media websites. | • | | Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy Group and costs related to the U.K. Newspaper Matters (as defined in “Item 3. Legal Proceedings” in this Annual Report). The Company’s Strategy Group identifies new products and services across its businesses to increase revenues and profitability and targets and assesses potential acquisitions, investments and dispositions.
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content agency. The segment included News America Marketing until the completion of the sale of the business on May 5, 2020.
•Other—The Other segment consists primarily of general corporate overhead expenses, costs related to the U.K. Newspaper Matters (as defined in Note 16—Commitments and InformationContingencies to the Consolidated Financial Statements) and transformation costs associated with the Company’s ongoing cost reduction initiatives.
Digital Real Estate Services
The Digital Real Estate Services segment generates revenue through property and property-related advertising and services, including: the sale of real estate listing and lead generation products and referral-based services to agents, brokers and developers; real estate-related and property rental-related services; display advertising on residential real estate and commercial property sites; and residential property data services to the financial sector. The Digital Real Estate Services segment also generates revenue through licenses of certain professional software products on a subscription basis and fees and commissions from referrals generated through its end-to-end digital property search and financing offering and mortgage broking services. Significant expenses associated with these sites, services and software solutions include development costs, advertising and promotional expenses, hosting and support services, salaries, broker commissions, employee benefits and other routine overhead expenses.
Consumers overwhelmingly turn to the internet and mobile devices for real estate information and services. The Digital Real Estate Services segment’s success depends on its continued innovation to provide products and services that are useful for consumers and real estate, mortgage and financial services professionals and attractive to its advertisers. The Digital Real Estate Services segment operates in a highly competitive digital environment with other operators of real estate and property websites and mobile apps.
Subscription Video Services
The Company’s Subscription Video Services segment consists of (i) its 65% interest in the Foxtel Group and (ii) ANC. The Foxtel Group is the largest Australian-based subscription television provider through its Foxtel pay-TV and Kayo Sports, BINGE and Foxtel Now streaming services. The Foxtel Group generates revenue primarily through subscription revenue as well as advertising revenue.
The Foxtel Group competes for audiences primarily with a variety of other video content providers, such as traditional Free-To-Air (“FTA”) TV operators in Australia, including the three major commercial FTA networks and two major government-funded FTA broadcasters, and content providers that deliver video programming over the internet. These providers include, Internet Protocol television, or IPTV, subscription video-on-demand and broadcast video-on-demand providers; streaming services offered through digital media providers; as well as programmers and distributors that provide content directly to consumers over the internet.
ANC operates the SKY NEWS network, Australia’s 24-hour multi-channel, multi-platform news service, and also owns and operates the Australia Channel IPTV service for international markets. Revenue is primarily derived from monthly affiliate fees received from pay-TV providers based on the number of subscribers and advertising.
The most significant operating expenses of the Subscription Video Services segment are the acquisition and production expenses related to programming, the expenses related to operating the technical facilities of the broadcast operations, expenses related to cable, satellite, internet and broadband transmission costs and studio and engineering expense. The expenses associated with licensing certain sports programming rights are recognized during the applicable season or event, which can cause results at the Subscription Video Services segment to fluctuate based on the timing and mix of the Foxtel Group’s local and international sports programming. Sports programming rights costs associated with a dedicated channel are amortized over 12 months. Other expenses include subscriber acquisition costs such as sales costs and marketing and promotional expenses related to improving the market visibility and awareness of the channels and their programming. Additional expenses include salaries, employee benefits, rent and other routine overhead expenses.
Dow Jones
The Dow Jones segment’s products target individual consumers and enterprise customers. Revenue from the Dow Jones segment’s consumer business is derived primarily from circulation, which includes subscription and single-copy sales of its digital and print consumer products, the sale of digital and print advertising, licensing fees for its print and digital consumer content and participation fees for its live journalism events. Circulation revenues are dependent on the content of the Dow Jones segment’s consumer products, prices of its and/or competitors’ products, as well as promotional activities and news cycles. Advertising revenue is dependent on a number of factors, including demand for the Dow Jones segment’s consumer products, general economic and business conditions, demographics of the customer base, advertising rates and effectiveness and brand strength and reputation. Advertising revenues are also subject to seasonality, with revenues typically highest in the Company's second fiscal quarter due to the end-of-year holiday season. In addition, the traditional consumer print business faces challenges from alternative media formats and shifting consumer preferences, which have adversely affected, and are expected to continue to adversely affect, both print circulation and advertising revenues. Advertising, in particular, has been impacted by long-term structural movements in advertising spending from print to digital. The increasing range of advertising choices and formats has
resulted in audience fragmentation and increased competition. Technologies and policies have also been and will continue to be developed and implemented that may make it more difficult to target and measure the effectiveness of digital advertising or allow users to block advertising on websites and mobile devices, which may impact digital advertising rates or revenues. As a multi-platform news provider, the Dow Jones segment recognizes the importance of maximizing revenues from a variety of media formats and platforms, both in terms of paid-for content and in new advertising models, and continues to invest in its digital and other products, which represent an increasingly larger share of revenues at its consumer business. Mobile devices, their related apps and other technologies, provide continued opportunities for the Dow Jones segment to make its content available to a new audience of readers, introduce new or different pricing schemes and develop its products to continue to attract advertisers and/or affect the relationship between content providers and consumers. The Dow Jones segment continues to develop and implement strategies to exploit its content across a variety of media channels and platforms, including leveraging its content through licensing arrangements with third-party distribution platforms and growing its live journalism events business, which has been affected in recent periods by uncertainty, cancellations and postponements caused by the novel coronavirus (”COVID-19”) pandemic and new revenue models for virtual events.
Operating expenses for the consumer business include costs related to paper, production, distribution, third party printing, editorial and commissions. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overheads. The costs associated with printing and distributing newspapers, including paper prices and delivery costs, are key operating expenses whose fluctuations can have a material effect on the results of the Dow Jones segment’s consumer business. The consumer business is affected by the cyclical increases and decreases in the price of paper and other factors that may affect paper prices, including tariffs or other restrictions on non-U.S. paper suppliers. In addition, the Dow Jones segment relies on third parties for much of the printing and distribution of its print products. Long-term structural movements from print to digital and the more immediate, as well as longer term, economic impacts of COVID-19 present challenges to the financial and operational stability of these third parties which could, in turn, increase the cost of printing and distributing the Company's newspapers.
The Dow Jones segment’s consumer products compete for consumers, audience and advertising with other local and national newspapers, web and app-based media, magazines, investment tools, social media sources and podcasts, as well as other media such as television, radio stations and outdoor displays. As a result of rapidly changing and evolving technologies, distribution platforms and business models, and corresponding changes in consumer behavior, the consumer business continues to face increasing competition for both circulation and advertising revenue, including from a variety of alternative news and information sources. These include both paid and free websites, digital apps, news aggregators, blogs, podcasts, search engines, social media networks, programmatic advertising buying channels, as well as other emerging media and distribution platforms, including off-platform distribution of its products.
The Dow Jones segment’s professional information business, which targets enterprise customers, derives revenue primarily from subscriptions to its professional information products. The professional information business serves enterprise customers with products that combine news and information with technology and tools that inform decisions and aid awareness, research and understanding. The success of the professional information business depends on its ability to provide products, services, applications and functionalities that meet the needs of its enterprise customers, who operate in information-intensive and oftentimes highly regulated industries such as finance and insurance. The professional information business must also anticipate and respond to industry trends and regulatory and technological changes.
Significant expenses for the professional information business include development costs, sales and marketing expenses, hosting and support services, royalties, salaries, consulting and professional fees, sales commissions, employee benefits and other routine overhead expenses.
The Dow Jones segment’s professional information products compete with various information service providers, compliance data providers and global financial newswires, including Reuters News, LexisNexis and Refinitiv, as well as many other providers of news, information and compliance data.
Book Publishing
The Book Publishing segment derives revenues from the sale of general fiction, nonfiction, children’s and religious books in the U.S. and internationally. The revenues and operating results of the Book Publishing segment are significantly affected by the timing of releases and the number of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand during the end-of-year holiday season in its main operating geographies. This marketplace is highly competitive and continues to change due to technological developments, including additional digital platforms, such as e-books and downloadable audiobooks, and distribution channels and other factors. Each book is a separate and distinct product and its financial success depends upon many factors, including public acceptance.
Major new title releases represent a significant portion of the Book Publishing segment’s sales throughout the fiscal year. Print-based consumer books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Book Publishing segment is subject to global trends and local economic conditions. Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, promotional, art and design expenses. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.
News Media
Revenue at the News and Information ServicesMedia segment is derived primarily from the sale of advertising, circulation and subscriptions, as well as licensing. Adverse changes in general market conditions for advertising, including as a result of COVID-19, continue to affect revenues. Advertising revenues at the News and Information ServicesMedia segment are also subject to seasonality, with revenues typically being highest in the Company’s second fiscal quarter due to theend-of-year holiday season in its main operating geographies. Circulation and subscription revenues can be greatly affected by changes in the prices of the Company’s and/or competitors’ products, as well as by promotional activities.activities and news cycles.
Operating expenses include costs related to paper, production, distribution, third party printing, editorial, commissions, technology and radio sports rights. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overhead.
The
News and Information Services segment’s advertising volume and rates, circulation and the pricecost of paper
are theis a key
variablesoperating expense whose fluctuations can have a material effect on the
Company’s operating results
and cash flow.of the segment. The
Company has to anticipate the level of advertising volume and rates, circulation and paper prices in managing its businesses to maximize operating profit during expanding and contracting economic cycles. The CompanyNews Media segment continues to be exposed to risks associated with paper used for printing. Paper is a basic commodity and its price is sensitive to the balance of supply and demand. The
Company’sNews Media segment’s expenses are affected by the cyclical increases and decreases in the price of paper and other factors that may affect paper prices, including
tariffs or other restrictions onnon-U.S. paper suppliers.tariffs. The News
and Information ServicesMedia segment’s products compete for readership, audience and advertising with local and national competitors and also compete with other media alternatives in their respective markets. Competition for circulation and subscriptions is based on the content of the products provided, pricing and, from time to time, various promotions. The success of these products also depends upon advertisers’ judgments as to the most effective use of their advertising budgets. Competition for advertising is based upon the reach of the products, advertising rates and advertiser results. Such judgments are based on factors such as cost, availability of alternative media, distribution and quality of consumer demographics.
The
Company’sNews Media segment's traditional print business faces challenges from alternative media formats and shifting consumer preferences. The
CompanyNews Media segment is also exposed to the impact of long-term structural movements in advertising spending, in particular, the move
in advertising from print to digital. These alternative media formats could impact the
Company’ssegment’s overall performance, positively or negatively. In addition, technologies
and policies have been and will continue to be developed
and implemented that
may make it more difficult to target and measure the effectiveness of digital advertising or allow users to block advertising on websites and mobile devices, which may impact
digital advertising rates or revenues.
As
a multi-platform news
provider,providers, the
Company recognizesbusinesses within the News Media segment recognize the importance of maximizing revenues from a variety of media formats and platforms, both in terms of
paid-for content and in new advertising models, and
continuescontinue to invest in
itstheir digital products.
Smartphones, tablets and similarMobile devices, their related
applications,apps and other technologies, provide continued opportunities for the
Companybusinesses within the News Media segment to make
itstheir content available to a new audience of readers, introduce new or different pricing schemes and develop
itstheir products to continue to attract advertisers and/or affect the relationship between content providers and consumers. The
Company continuesbusinesses within the News Media segment continue to develop and implement strategies to exploit
itstheir content across a variety of media channels and platforms.
Book Publishing
The Book Publishing segment derives revenues from the sale of general fiction, nonfiction, children’s and religious books in the U.S. and internationally. The revenues and operating results of the Book Publishing segment are significantly affected by the timing of releases and the number of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand during theend-of-year holiday season in its main operating geographies. This marketplace is highly competitive and continues to change due to technological developments, including additional digital platforms and distribution channels, and other factors. Each book is a separate and distinct product, and its financial success depends upon many factors, including public acceptance.
Major new title releases represent a significant portion of the Book Publishing segment’s sales throughout the fiscal year. Print-based consumer books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Book Publishing segment is subject to global trends and local economic conditions. Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, promotional, art and design expenses. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.
Digital Real Estate Services
The Digital Real Estate Services segment generates revenue through property and property-related advertising and services, including the sale of real estate listing products to agents, brokers and developers, display advertising on its residential real estate and commercial property sites and residential property data services to the financial sector. The Digital Real Estate Services segment also generates revenue through licenses of certain professional software products on a subscription basis and fees and commissions from referrals generated through itsend-to-end digital property search and financing offering and mortgage broking services. Significant expenses associated with these sites, services and software solutions include development costs, advertising and promotional expenses, hosting and support services, salaries, broker commissions, employee benefits and other routine overhead expenses.
Consumers are increasingly turning to the Internet and mobile devices for real estate information and services. The Digital Real Estate Services segment’s success depends on its continued innovation to provide products and services that are useful for consumers and real estate, mortgage and financial services professionals and attractive to its advertisers. The Digital Real Estate Services segment operates in a highly competitive digital environment with other real estate and property websites.
Subscription Video Services
The Company’s Subscription Video Services segment consists of (i) its 65% interest in new Foxtel and (ii) ANC. New Foxtel is the largestpay-TV provider in Australia, delivering over 200 channels including the leading sports programming content in Australia. New Foxtel generates revenue primarily through subscription revenue as well as advertising revenue.
New Foxtel competes for audiences primarily withFree-To-Air (“FTA”) TV operators in Australia, including the three major commercial FTA networks and two major government-funded FTA broadcasters, as well as otherpay-TV operators, IPTV providers and subscriptionvideo-on-demand services such as Fetch TV, Netflix, Stan, Amazon Prime Video, hayu and Mubi.
ANC operates the SKY NEWS network, Australia’s24-hour multi-channel, multi-platform news service, and also owns and operates the Australia Channel IPTV service for international markets. Revenue is primarily derived from monthly affiliate fees received frompay-TV providers based on the number of subscribers and advertising.
The most significant operating expenses of the Subscription Video Services segment are the acquisition and production expenses related to programming, the expenses related to operating the technical facilities of the broadcast operations, expenses related to cable, satellite, Internet and broadband transmission costs and studio and engineering expense. The expenses associated with licensing certain programming rights are recognized during the applicable season or event, which can cause results at the Subscription Video Services segment to fluctuate based on the timing and mix of new Foxtel’s local and international sports programming. Programming rights associated with a dedicated channel are amortized over twelve months. Other expenses include subscriber acquisition costs such as sales costs and marketing and promotional expenses related to improving the market visibility and awareness of the channels and their programming. Additional expenses include salaries, employee benefits, rent and other routine overhead expenses.
Other
The Other segment primarily consists of general corporate overhead expenses, the corporate Strategy Group and costs related to the U.K. Newspaper Matters. The Company’s Strategy Group identifies new productsMatters and services acrosstransformation costs associated with the Company’s businesses to increase revenues and profitability and targets and assesses potential acquisitions, investments and dispositions.ongoing cost reduction initiatives.
Other Business Developments
Fiscal 2021
REA Group sale of Malaysia and Thailand businesses
In June 2018,August 2021, REA Group acquired Hometrack Australia Pty Ltdan 18% interest (16.6% on a diluted basis) in PropertyGuru Pte. Ltd. (“Hometrack Australia”PropertyGuru”), a leading digital property technology company operating marketplaces in Southeast Asia, in exchange for all shares of REA
Group’s entities in Malaysia and Thailand. The transaction was completed after REA Group entered into an agreement to sell its 27% interest in its existing venture with 99.co. The transaction will create a leading digital real estate services company in Southeast Asia and create new opportunities for collaboration and access to a deeper pool of expertise, technology and investment in the region. REA Group received one seat on the board of directors of PropertyGuru as part of the transaction.
Agreement to acquire OPIS
In July 2021, the Company entered into an agreement to acquire the Oil Price Information Service business and related assets (“OPIS”) from S&P Global Inc. (“S&P”) and IHS Markit Ltd. (“IHS”) for A$130 million (approximately $100 million)$1.15 billion in cash, which was funded with a mix of cash on hand and debt of A$70 million (approximately $53 million). Hometrack Australiasubject to customary purchase price adjustments. OPIS is a global industry standard for benchmark and reference pricing and news and analytics for the oil, natural gas liquids and biofuels industries. The business also provides pricing and news and analytics for the coal, mining and metals end markets and insights and analytics in renewables and carbon pricing. The acquisition will enable Dow Jones to become a leading provider of property data servicesenergy and renewables information and further its goal of building the leading global business news and information platform for professionals. OPIS will be operated by Dow Jones, and its results will be included in the Dow Jones segment. The acquisition is subject to customary closing conditions, including regulatory approvals and the financial sectorconsummation of the S&P and it allowsIHS merger, and is expected to close in the second quarter of fiscal 2022.
Acquisition of Mortgage Choice
In June 2021, REA Group
acquired Mortgage Choice Limited (“Mortgage Choice”) for approximately A$244 million in cash (approximately $183 million based on exchange rates as of the closing date), funded by an increase in REA Group’s debt facilities. Control was transferred and the acquisition became effective and binding on Mortgage Choice shareholders on June 18, 2021 upon court approval. Mortgage Choice is a leading Australian mortgage broking business, and the acquisition complements REA Group’s existing Smartline broker footprint and accelerates REA Group’s financial services strategy to
deliver more property data and insights to its customers. Hometrack Australiaestablish a leading mortgage broking business with national scale. Mortgage Choice is a subsidiary of REA Group and its results are included
withinin the Digital Real Estate Services segment.
Acquisition of HMH Books & Media
In
April 2018, News Corp and Telstra combined their respective 50% interests in Foxtel and News Corp’s 100% interest in FOX SPORTS Australia into a new company, new Foxtel. FollowingMay 2021, the
completionCompany acquired the Books & Media segment of
the Transaction, News Corp owns a 65% interest in new Foxtel, and Telstra owns the remaining 35%. The combination allows Foxtel and FOX SPORTS Australia to leverage their media platforms and content to improve services for consumers and advertisers. The results of new Foxtel are reported within the Subscription Video Services segment (formerly, the Cable Network Programming segment), and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.In July 2017, REA Group acquired an 80.3% interest in Smartline Home Loans Pty LimitedHoughton Mifflin Harcourt (“Smartline”HMH Books & Media”) for approximately A$70$349 million in cash (approximately $55 million).cash. HMH Books & Media publishes renowned and awarded children’s, young adult, fiction, non-fiction, culinary and reference titles. The minority shareholders have the option to sell the remaining 19.7% interest to REA Group beginning three years after closing atacquisition adds an extensive and successful backlist, a price dependent on the financial performance of Smartline. If the option is not exercised, the minority interest will become mandatorily redeemable four years after closing. As a result, REA Group recognized a liability of $12 millionstrong frontlist in the three months ended September 30, 2017 for the present value of the amount expectedlifestyle and children’s segments and a productions business that provides opportunities to be paid for the remaining interest based on the formula specified in the acquisition agreement. Smartline is one of Australia’s premier mortgage broking franchise groups, and the acquisition provides REA Group’s financial services business with greater scale and capability. Smartlineexpand HarperCollins’s intellectual property across different formats. HMH Books & Media is a subsidiary of REA Group,HarperCollins and its results are included in the Book Publishing segment.
Acquisition of Investor’s Business Daily
In May 2021, the Company acquired Investor’s Business Daily (“IBD”) for $275 million in cash. IBD is a digital-first financial news and research business with unique investing content, analytical products and educational resources, including the Investors.com website. The acquisition expands Dow Jones’s offerings with the addition of proprietary data and tools to help professional and retail investors identify top-performing stocks. IBD is operated by Dow Jones, and its results are included within the
Digital Real Estate ServicesDow Jones segment.
Senior Notes Offering
In January 2017, REA GroupApril 2021, the Company issued $1 billion of senior notes due 2029 (the “2021 Senior Notes”). The 2021 Senior Notes bear interest at a fixed rate of 3.875% per annum, payable in cash semi-annually on May 15 and November 15 of each year, commencing November 15, 2021. The notes will mature on May 15, 2029. The Company is using the net proceeds from the offering for general corporate purposes, which may include acquisitions and working capital.
Google partnership
In February 2021, the Company entered into a multi-year partnership with Google to provide content from its news sites around the world. The three-year agreement also includes the development of a subscription platform, the sharing of advertising revenue via Google’s advertising technology services, the cultivation of audio journalism and meaningful investments in video journalism by YouTube.
Elara
In December 2020, the Company acquired an approximate 15%a controlling interest in Elara Technologies Pte. Ltd., (“Elara”) through a leading online real estate services provider in India (“Elara”),subscription for $50 million. Elara operates PropTiger.com, Makaan.com and Housing.com,newly-issued preference shares and the investment further strengthens REA Group’s presence in Asia. Followingbuyout of certain minority shareholders. The total aggregate purchase price associated
with the acquisition at the completion
date is $138 million which primarily consists of $69 million of cash, the fair value of noncontrolling interests of $37 million and the fair value of the
investment and certain related transactions, including Elara’s acquisition of Housing.com, News Corporation’spre-existingCompany’s previously held equity interest in Elara
decreasedof $22 million. As a result of the transactions, REA Group’s shareholding in Elara increased from 13.5% to
approximately 23%59.7%, while News Corporation’s shareholding increased from 22.1% to 39.0%.
In December 2016, During the three months ended March 31, 2021, REA Group sold its European business for approximately $140 million (approximately €133 million)acquired an additional 0.8% interest in cash, which resultedElara. REA Group and News Corporation now hold all Elara board seats, and the Company began consolidating Elara in apre-tax gainDecember 2020. The acquisition of $107 million for the fiscal year ended June 30, 2017. The saleElara allows REA Group to focus on its core businesses in Australia and Asia.
In September 2016,be at the Company completed its acquisitionforefront of Wireless Group plc (“Wireless Group”) for a purchase price of 315 pence per share in cash, or approximately £220 million (approximately $285 million) in the aggregate, plus $23 million of assumed debt which was repaid subsequent to closing. Wireless Group operates talkSPORT, the leading sports radio network in the U.K., and a portfolio of radio stations in the U.K. and Ireland. The acquisition broadens the Company’s range of services in the U.K., Ireland and internationallylong-term growth opportunities within India and the Company continues to closely align Wireless Group’s operations with those ofThe SunandThe Times. Wireless Group’s results are included within the News and Information Services segment, and it is considered a separate reporting unit for purposesdigitization of the Company’s annual goodwill impairment review.
In addition to the acquisitions noted above, the Company used $62 million of cash for additional acquisitions during fiscal 2017, primarily consisting of Australian Regional Media (“ARM”). ARM’s results are included within the News and Information Services segment.
In February 2016, REA Group increased its investment in iProperty Group Limited (“iProperty”) from 22.7% to approximately 86.9% for A$482 million in cash (approximately $340 million). The remaining 13.1% interest was
mandatorily redeemable during fiscal 2018, and as a result, the Company recognized a liability of approximately $76 million at the time of acquisition. The acquisition was funded primarily with the proceeds from borrowings under an unsecured syndicated revolving loan facility (the “REA Facility”). (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). The acquisition of iProperty extends REA Group’s market leading business in Australia to attractive markets throughout Southeast Asia. iPropertyreal estate sector. Elara is a subsidiary of REA Group, and its results are included within the Digital Real Estate Services segment. DuringAs a result of the fiscal year endedtransactions, the Company’s ownership in REA Group was diluted by 0.2% to 61.4%. Subsequent to June 30, 2016,2021, REA Group recognized a gain of $29 million relatedprovided additional funding to the revaluation of its previously heldElara in exchange for further equity which increased REA Group’s ownership interest in iProperty in Other, net in the Statements of Operations. The mandatorily redeemable noncontrollingto 65.5% and diluted News Corporation’s interest was redeemed in April 2018 and the amount paid was based on the actual performance of the business against the targets stipulated in the acquisition agreement.
On September 30, 2015,to 34.3%.
Avail
In December 2020, the Company acquired Unruly Holdings LimitedRentalutions, Inc. (“Unruly”Avail”) for initial cash consideration of approximately £60$36 million, (approximately $90 million) innet of $4 million of cash acquired, and up to £56$8 million (approximately $86 million) in future cash consideration related to payments primarily contingentbased upon the achievement of certain performance objectives. Unrulyobjectives over the next three years. Avail is a global video advertising marketplaceplatform that improves the renting experience for do-it-yourself landlords and tenants with online tools, educational content and world-class support. The acquisition helps realtor.com® further expand into the rental space, extend its support for landlords, augment current rental listing content, grow its audience and build brand affinity and long-term relationships with renters. Avail is focused on delivering branded video advertising across websitesa subsidiary of Move, and mobile devices. Unruly’s results are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.In addition to the acquisitions noted above, the Company used $90 million of cash for additional acquisitions during fiscal 2016, primarily consisting of DIAKRIT International Limited (“DIAKRIT”), Flatmates.com.au Pty Ltd (“Flatmates”) and Checkout 51 Mobile Apps ULC (“Checkout 51”). DIAKRIT and Flatmates’its results are included within the Digital Real Estate Services segment.
Regional and community newspapers in Australia
During the fourth quarter of fiscal 2020, the Company decommissioned the print operations for its regional and community newspapers in Australia. These initiatives resulted in a revenue decrease at News Corp Australia of approximately $111 million and had an immaterial impact on Segment EBITDA during fiscal 2021.
Fiscal 2020
Sale of News America Marketing
On May 5, 2020, the Company sold its News America Marketing business, a reporting unit within its News Media segment
(the “Disposition”). The aggregate purchase price for the Disposition consists of (a) up to approximately $235 million, comprised of (i) $50 million in cash at closing, subject to working capital and
Checkout 51’s results are included withinother adjustments, less cash reinvested to acquire a 5% equity interest in the
business at closing, and (ii) additional deferred cash payments payable on or before the fifth anniversary of closing in an aggregate amount of between $125 million and approximately $185 million, depending on the timing of such payments, and (b) a warrant to purchase up to an additional 10% equity interest in the business, which the Company exercised in fiscal 2021. In the Disposition, the Company retained certain liabilities relating to News
America Marketing, including those arising from its legal proceedings with Valassis Communications, Inc. and
Information Services segment.Insignia Systems, Inc. See Note 16—Commitments and Contingencies in the accompanying Consolidated Financial Statements.
Sale of Unruly
In January 2020, the Company sold Unruly to Tremor International Ltd (“Tremor”) for approximately 7% of Tremor’s outstanding shares. The Company agreed not to sell the Tremor shares for a period of 18 months after closing. At closing, the Company and Tremor entered into a three year commercial arrangement which granted Tremor the exclusive right to sell outstream video advertising on all of the Company’s digital properties in exchange for a total minimum revenue guarantee for News Corp of £30 million.
See Note 4—Acquisitions, Disposals and Other Transactions in the accompanying Consolidated Financial Statements for further discussion of the acquisitions and dispositions discussed above.
Results of Operations—Fiscal
20182021 versus Fiscal
2017 (as reported)2020
The following table sets forth the Company’s operating results for fiscal
20182021 as compared to fiscal
2017. | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,799 | | | $ | 2,860 | | | $ | (61 | ) | | | (2)% | |
Circulation and subscription | | | 3,021 | | | | 2,470 | | | | 551 | | | | 22% | |
Consumer | | | 1,664 | | | | 1,573 | | | | 91 | | | | 6% | |
Real estate | | | 858 | | | | 696 | | | | 162 | | | | 23% | |
Other | | | 682 | | | | 540 | | | | 142 | | | | 26% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 9,024 | | | | 8,139 | | | | 885 | | | | 11% | |
Operating expenses | | | (4,903 | ) | | | (4,529 | ) | | | (374 | ) | | | (8)% | |
Selling, general and administrative | | | (3,049 | ) | | | (2,725 | ) | | | (324 | ) | | | (12)% | |
Depreciation and amortization | | | (472 | ) | | | (449 | ) | | | (23 | ) | | | (5)% | |
Impairment and restructuring charges | | | (351 | ) | | | (927 | ) | | | 576 | | | | 62% | |
Equity losses of affiliates | | | (1,006 | ) | | | (295 | ) | | | (711 | ) | | | ** | |
Interest, net | | | (7 | ) | | | 39 | | | | (46 | ) | | | ** | |
Other, net | | | (325 | ) | | | 132 | | | | (457 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Loss before income tax expense | | | (1,089 | ) | | | (615 | ) | | | (474 | ) | | | (77)% | |
Income tax expense | | | (355 | ) | | | (28 | ) | | | (327 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Net loss | | | (1,444 | ) | | | (643 | ) | | | (801 | ) | | | ** | |
Less: Net income attributable to noncontrolling interests | | | (70 | ) | | | (95 | ) | | | 25 | | | | 26% | |
| | | | | | | | | | | | | | | | |
Net loss attributable to News Corporation | | $ | (1,514 | ) | | $ | (738 | ) | | $ | (776 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Circulation and subscription | $ | 4,206 | | | $ | 3,857 | | | $ | 349 | | | 9 | % |
| Advertising | 1,594 | | | 2,193 | | | (599) | | | (27) | % |
| Consumer | 1,908 | | | 1,593 | | | 315 | | | 20 | % |
| Real estate | 1,153 | | | 862 | | | 291 | | | 34 | % |
| Other | 497 | | | 503 | | | (6) | | | (1) | % |
| Total Revenues | 9,358 | | | 9,008 | | | 350 | | | 4 | % |
| Operating expenses | (4,831) | | | (5,000) | | | 169 | | | 3 | % |
| Selling, general and administrative | (3,254) | | | (2,995) | | | (259) | | | (9) | % |
| Depreciation and amortization | (680) | | | (644) | | | (36) | | | (6) | % |
| Impairment and restructuring charges | (168) | | | (1,830) | | | 1,662 | | | 91 | % |
| Equity losses of affiliates | (65) | | | (47) | | | (18) | | | (38) | % |
| Interest expense, net | (53) | | | (25) | | | (28) | | | ** |
| Other, net | 143 | | | 9 | | | 134 | | | ** |
| Income (loss) before income tax expense | 450 | | | (1,524) | | | 1,974 | | | ** |
| Income tax expense | (61) | | | (21) | | | (40) | | | ** |
| Net income (loss) | 389 | | | (1,545) | | | 1,934 | | | ** |
| Less: Net (income) loss attributable to noncontrolling interests | (59) | | | 276 | | | (335) | | | ** |
| Net income (loss) attributable to News Corporation stockholders | $ | 330 | | | $ | (1,269) | | | $ | 1,599 | | | ** |
________________________
** not meaningful
Revenues—Revenues increased $885$350 million, or 11%4%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017. The Revenue2020, primarily driven by the $328 million increase was primarily due to higher revenues at the Subscription Video Services segment of $510 million resulting in large part from the Transaction, which contributed $461 million to the increase. The Revenue increase was also attributable to higher revenues of $203 million at the Digital Real Estate Services segment mainlyprimarily due to increasedhigher real estate revenues, at both REA Group and Move, and $122the $319 million increase at the Book Publishing segment as a resultprimarily due to higher book sales across categories, the $188 million increase at the Subscription Video Services segment which was due to the positive impact of strong frontlistforeign currency fluctuations and backlist salesthe $112 million increase at the Dow Jones segment primarily driven by higher circulation and subscription revenues. The increases were partially offset by the $596 million decline at the News Media segment, primarily driven by the $649 million impact from the sale of News America Marketing in the general books category and $28 million from the sublicensing agreement for J.R.R. Tolkien’sThe Lordfourth quarter of the Rings trilogy.fiscal 2020.
The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of
$172$513 million,
or 6%, for the fiscal year ended June 30,
20182021 as compared to fiscal
2017.2020. The Company calculates the impact of foreign currency fluctuations for businesses reporting in currencies other than the U.S. dollar by multiplying the results for each quarter in the current period by the difference between the average exchange rate for that quarter and the average exchange rate in effect during the corresponding quarter of the prior year and totaling the impact for all quarters in the current period.
Operating expenses—Operating expenses increased $374decreased $169 million, or 8%3%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017.2020. The increase in Operating expenses for the fiscal year ended June 30, 2018decrease was mainlylargely due to higherlower operating expenses at the News Media segment of $476 million, primarily due to the sale of News America Marketing, cost savings initiatives and lower newsprint, production and distribution costs, partially offset by the $87 million negative impact of foreign currency fluctuations and the absence of the $22 million one-time benefit from the settlement of certain warranty-related claims in the U.K. in fiscal 2020. The decrease at the News Media segment was partially offset by increases of $167 million at the Book Publishing segment driven by increased revenue and $114 million at the Subscription Video Services segment, of $313 million primarily resulting from the Transaction and, to a lesser extent, the timing of programming amortization related to the launch of a dedicated National Rugby League channel, higher National Rugby League programming rights costs and the acquisition of ANC. The Book Publishing segment also contributed $54 million to the increase primarily due to higher costs associated with higher revenues and the $139 million negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense increase of $84 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.Selling, general and administrative expenses—Selling, general and administrative expenses increased $324$250 million, or 12%5%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017. 2020.
Selling, general and administrative—Selling, general and administrative increased $259 million, or 9%, for the fiscal year ended June 30, 2021 as compared to fiscal 2020. The increase in Selling, general and administrative expensesfor the fiscal year ended June 30,
2021 was primarily due to
higherincreased expenses of
$147 million at the Subscription Video Services segment, primarily as a result of the Transaction, and $108$149 million at the Digital Real Estate Services segment,
primarily due todriven by the $40 million negative impact of foreign currency fluctuations and higher
costs associated with higher revenues, the acquisition of Smartlineemployee and
increased marketing costs,
as well as a $128 million increase at
Move.the Other segment driven primarily by higher employee costs largely related to stock price and Company performance, which were negatively impacted by COVID-19 in the prior year, one-time legal settlement costs and investment spending as the Company ramps up its global cost reduction initiatives. The increase was
also attributable to higherpartially offset by lower expenses of
$81$119 million at the News
Media segment driven by the sale of News America Marketing and
Information Services segment primarily related to higher compensation and marketing costs, the $55 million increase from foreign currency fluctuations, as well as the absence of a $12 million adjustment to reduce the deferred consideration accrual related to the acquisition of Unruly which did not recur in the current year period. These increases wereongoing cost savings initiatives, partially offset by the
$46$74 million
negative impact
from the reversal of
a portion of the previously accrued liability for the U.K. Newspaper Matters and the corresponding receivable from 21st Century Fox as the result of an agreement reached with the relevant tax authority with respect to certain employment taxes in the first quarter of fiscal 2018.foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative
expense increase of
$71 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.Depreciation and amortization—Depreciation and amortization expense increased $23$177 million, or 5%6%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017, primarily2020.
Depreciation and amortization—Depreciation and amortization expense increased $36 million, or 6%, for the fiscal year ended June 30, 2021 as a resultcompared to fiscal 2020. The impact of an additional $78 millionforeign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense dueincrease of $46 million, or 8%, for the fiscal year ended June 30, 2021 as compared to the Transaction. The increase was partially offset by lower depreciation expense of $60 million at the News and Information Services segment, primarily due to the write down of fixed assets at the U.K. and Australian newspapers during fiscal 2017.2020
. Impairment and restructuring charges—During the fiscal years ended June 30, 20182021 and 2017,2020, the Company recorded restructuring charges of $71$168 million and $142$140 million, respectively, primarilyof which $122 million and $84 million, respectively, related to employee termination benefits in the News Media segment. The increase in restructuring charges was primarily as a result of exit costs associated with the anticipated closure of the Company’s Bronx print plant, the termination of a third-party printing contract and Information Services segment.the Company’s global cost reduction initiatives.
During the fiscal year ended June 30, 2018,2020, the Company recognizednon-cash impairment charges of $280$1,690 million, primarily due to a $931 million write-down of goodwill and indefinite-lived intangible assets at its Foxtel reporting unit in the third quarter of fiscal 2020, $410 million of write-downs related to News America Marketing, including $175 million related to its reclassification to assets held for sale in the impairmentthird quarter of fiscal 2020, and $292 million in impairments of property, plant and equipment, goodwill and intangible assets atidentified during the News America Marketing reporting unit andCompany's annual impairment of goodwill at the FOX SPORTS Australia reporting unit.
During the fiscal year ended June 30, 2017, the Company recognized totalnon-cash impairment charges of $785 million, primarily at News UK and News Corp Australia. The charges consisted of a write-down of the Company’s fixed assets of $679 million, a write-down of intangible assets of $58 million and a write-down of goodwill of $48 million.
assessment.
See Note 5—Restructuring Programs, Note 7—Property, Plant and Equipment and Note 8—Goodwill and Other Intangible Assets in the accompanying Consolidated Financial Statements.
Equity losses of affiliates—Equity losses of affiliates increased $711by $18 million for the fiscal year ended June 30, 20182021 as compared to fiscal 2017. The increase in losses for the fiscal year ended June 30, 2018 was2020, primarily due to a $957the $54 millionnon-cash write-down of the carrying value of the Company’sFoxtel Group’s investment in Foxtel in the third quarter of fiscal 2018 due to lower-than-expected revenues from certain new products and broadcast subscribers. The increase was partially offset by the absence of the $227 millionnon-cash write-down of the carrying value of the Company’s investment in Foxtel during the second quarter of fiscal 2017. | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Foxtel(a) | | $ | (974 | ) | | $ | (265 | ) | | $ | (709 | ) | | | ** | |
Other equity affiliates, net(b) | | | (32 | ) | | | (30 | ) | | | (2 | ) | | | 7% | |
| | | | | | | | | | | | | | | | |
Total Equity losses of affiliates | | $ | (1,006 | ) | | $ | (295 | ) | | $ | (711 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
(a) | The fiscal years ended June 30, 2018 and 2017 include the write-downs discussed above. See Note 6—Investments in the accompanying Consolidated Financial Statements.
|
Nickelodeon Australia Joint Venture. In accordance with Accounting Standards Codification (“ASC”) 350, “Intangibles—Goodwill and Other” (“ASC 350”), the Company amortized $49 million and $68 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2018 and 2017, respectively. Such amortization is reflected in Equity losses of affiliates in the Statement of Operations. The Company began consolidating the results of Foxtel in the fourth quarter of fiscal 2018 as2021, Foxtel and ViacomCBS entered into a separate programming rights agreement which will result in the windup of the Transaction.Nickelodeon Australia Joint Venture in the first half of fiscal 2022. See Note 6—Investments in the accompanying Consolidated Financial Statements.
(b) | Other equity affiliates, net for the fiscal year ended June 30, 2018 and 2017 include losses primarily from the Company’s interest in Elara. Additionally, during the fiscal years ended June 30, 2018 and 2017, the Company recognizednon-cash write-downs of $13 million and $9 million, respectively, on certain other equity method investments. The write-downs are reflected in Equity losses of affiliates in the Statements of Operations for the fiscal years ended June 30, 2018 and 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
|
Interest expense, net—Interest expense, net for the fiscal year ended June 30, 2018 decreased $462021 increased $28 million as compared to fiscal 2017, 2020, primarily due to lower interest income due to the repaymentabsence of the Foxtel shareholder noteimpact from the settlement of cash flow hedges related to debt maturities in the first quarter of fiscal 2018 (See Note 6—Investments2020 and the issuance of the 2021 Senior Notes in the accompanying Consolidated Financial Statements), higher interest expense as a result of the Transaction and the absence of an adjustment of the deferred consideration related to REA Group’s acquisition of iProperty recognized in the secondfourth quarter of fiscal 2017. As a result of the Transaction, the Company recorded outstanding debt of approximately $1.8 billion. 2021.See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
Other, net—Other, net decreased $457increased $134 million for the fiscal year ended June 30, 20182021 as compared to fiscal 2017.2020. See Note 21—Additional Financial Information in the accompanying Consolidated Financial Statements.
Income tax (expense) benefitexpense—The Company’s income tax expense and effective tax rate for the fiscal year ended June 30, 20182021 were $355$61 million and (33%)14%, respectively, as compared to an income tax expense and effective tax rate of $28$21 million and (5%)(1)%, respectively, for fiscal 2017.2020.
For the fiscal year ended June 30,
20182021 the Company recorded
aincome tax expense of
$355$61 million on
pre-tax loss income of
$1,089$450 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The
lower tax rate was
primarily due to $340 million of lowerimpacted by valuation allowances being recorded against tax benefits
on impairmentsin certain foreign jurisdictions with operating losses and
write-downs of approximately $1.3 billion, $88 million of lower tax benefits related to the $337 million loss for the settlement of the pre-existing contractual arrangement between FOX SPORTS Australia and Foxtel as a result of the Transaction and a tax expense of $237 million related toby the impact of
the Tax Act,foreign operations which are subject to higher tax rates, offset by a
release of valuation allowances on deferred tax
benefitassets that are more-likely-than-not to be realized and a remeasurement of
approximately $49 million related todeferred taxes in the
settlement ofpre-Separation tax matters with the Internal Revenue Service.U.K.
For the fiscal year ended June 30, 20172020, the Company recorded aincome tax expense of $28$21 million on a pre-tax loss of $615$1,524 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to $139 million of lowerimpacted by the non-cash impairments, which have low or no tax benefit, valuation allowances being recorded against tax benefits on impairments and write-downs in certain foreign jurisdictions with operating losses and by the impact of approximately $1 billion, aforeign operations which are subject to higher tax expenserates.
Management assesses available evidence to
determine whether sufficient future taxable income will be generated to permit the
settlementuse of
aexisting deferred tax assets. Based on management’s assessment of available evidence, it has been determined that it is more likely than not that certain deferred tax assets in U.S. Federal, State and foreign
tax auditjurisdictions may not be realized and
$40 million related to the recording oftherefore, a valuation allowance
has been established against
foreign net operating losses, offset by lower taxes on the sale of certain businessthose tax assets.
Net lossincome (loss)—Net loss increased $801income was $389 million for the fiscal year ended June 30, 20182021, as compared to fiscal 2017 primarily due to higher equity lossesa net loss of affiliates resulting from the $957 millionnon-cash write-down of the carrying value of the Company’s investment in Foxtel, the loss on the Transaction,non-cash impairment charges of approximately $280 million mainly related to News America Marketing and FOX SPORTS Australia and the tax impacts discussed above in fiscal 2018 and the absence of the gain recognized on the sale of REA Group’s European business in fiscal 2017, partially offset by the absence of thenon-cash impairment charges of approximately $785 million primarily related to the write-down of fixed assets at the U.K. and Australian newspapers and the $227 millionnon-cash write-down of the Company’s investment in Foxtel in the prior year period.Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests decreased by $25$1,545 million for the fiscal year ended June 30, 20182020, an improvement of $1,934 million, primarily driven by the absence of non-cash impairment charges recognized in fiscal 2020, higher Total Segment EBITDA and higher Other, net, partially offset by higher tax expense.
Net (income) loss attributable to noncontrolling interests—Net income attributable to noncontrolling interests was $59 million for the fiscal year ended June 30, 2021, as compared to a net loss attributable to noncontrolling interests of $276 million for the fiscal 2017,year ended June 30, 2020, primarily due to the absence of the gainnon-cash impairment charges recognized onin fiscal 2020 at the sale of REA Group’s European business.Company’s Foxtel reporting unit.
Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity losses of affiliates, interest
(expense) income, net, other, net
and income tax (expense)
benefit and net income attributable to noncontrolling interests.benefit. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA.
Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of, and allocate resources within, the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
Total Segment EBITDA is anon-GAAP measure and should be considered in addition to, not as a substitute for, net income (loss), 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 and restructuring charges, which are significant components in assessing the Company’s financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company’s operations and other factors that affect the Company’s reported results. Specifically, the Company believes that by excluding certainone-time ornon-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company’s consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods.
The following table reconciles Net
lossincome (loss) to Total Segment EBITDA for the fiscal years ended June 30,
20182021 and
2017: | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| (in millions) | | 2018 | | | 2017 | |
Net loss | | $ | (1,444 | ) | | $ | (643 | ) |
Add: | | | | | | | | |
Income tax expense | | | 355 | | | | 28 | |
Other, net | | | 325 | | | | (132 | ) |
Interest, net | | | 7 | | | | (39 | ) |
Equity losses of affiliates | | | 1,006 | | | | 295 | |
Impairment and restructuring charges | | | 351 | | | | 927 | |
Depreciation and amortization | | | 472 | | | | 449 | |
| | | | | | | | |
Total Segment EBITDA | | $ | 1,072 | | | $ | 885 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | |
| | | | | | Segment | | | | | | Segment | |
| (in millions) | | Revenues | | | EBITDA | | | Revenues | | | EBITDA | |
News and Information Services | | $ | 5,119 | | | $ | 392 | | | $ | 5,069 | | | $ | 414 | |
Book Publishing | | | 1,758 | | | | 244 | | | | 1,636 | | | | 199 | |
Digital Real Estate Services | | | 1,141 | | | | 401 | | | | 938 | | | | 324 | |
Subscription Video Services | | | 1,004 | | | | 173 | | | | 494 | | | | 123 | |
Other | | | 2 | | | | (138 | ) | | | 2 | | | | (175 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 9,024 | | | $ | 1,072 | | | $ | 8,139 | | | $ | 885 | |
| | | | | | | | | | | | | | | | |
News | | | | | | | | | | | |
| For the fiscal years ended
June 30, |
| 2021 | | 2020 |
| (in millions) | | | |
| Net income (loss) | $ | 389 | | | $ | (1,545) | |
| Add: | | | |
| Income tax expense | 61 | | | 21 | |
| Other, net | (143) | | | (9) | |
| Interest expense, net | 53 | | | 25 | |
| Equity losses of affiliates | 65 | | | 47 | |
| Impairment and restructuring charges | 168 | | | 1,830 | |
| Depreciation and amortization | 680 | | | 644 | |
| Total Segment EBITDA | $ | 1,273 | | | $ | 1,013 | |
The following table sets forth the Company’s Revenues and InformationSegment EBITDA by reportable segment for the fiscal years ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 |
| (in millions) | Revenues | | Segment
EBITDA | | Revenues | | Segment
EBITDA |
| Digital Real Estate Services | $ | 1,393 | | | $ | 514 | | | $ | 1,065 | | | $ | 345 | |
| Subscription Video Services | 2,072 | | | 359 | | | 1,884 | | | 323 | |
| Dow Jones | 1,702 | | | 332 | | | 1,590 | | | 236 | |
| Book Publishing | 1,985 | | | 303 | | | 1,666 | | | 214 | |
| News Media | 2,205 | | | 52 | | | 2,801 | | | 53 | |
| Other | 1 | | | (287) | | | 2 | | | (158) | |
| Total | $ | 9,358 | | | $ | 1,273 | | | $ | 9,008 | | | $ | 1,013 | |
Digital Real Estate Services (57%(15% and 62%12% of the Company’s consolidated revenues in fiscal 20182021 and 2017,2020, respectively) | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,532 | | | $ | 2,608 | | | $ | (76 | ) | | | (3)% | |
Circulation and subscription | | | 2,115 | | | | 2,010 | | | | 105 | | | | 5% | |
Other | | | 472 | | | | 451 | | | | 21 | | | | 5% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 5,119 | | | | 5,069 | | | | 50 | | | | 1% | |
Operating expenses | | | (2,934 | ) | | | (2,943 | ) | | | 9 | | | | ** | |
Selling, general and administrative | | | (1,793 | ) | | | (1,712 | ) | | | (81 | ) | | | (5)% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 392 | | | $ | 414 | | | $ | (22 | ) | | | (5)% | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Circulation and subscription | $ | 25 | | | $ | 36 | | | $ | (11) | | | (31) | % |
| Advertising | 126 | | | 98 | | | 28 | | | 29 | % |
| Real estate | 1,153 | | | 862 | | | 291 | | | 34 | % |
| Other | 89 | | | 69 | | | 20 | | | 29 | % |
| Total Revenues | 1,393 | | | 1,065 | | | 328 | | | 31 | % |
| Operating expenses | (182) | | | (172) | | | (10) | | | (6) | % |
| Selling, general and administrative | (697) | | | (548) | | | (149) | | | (27) | % |
| Segment EBITDA | $ | 514 | | | $ | 345 | | | $ | 169 | | | 49 | % |
For the fiscal year ended June 30, 2018,2021, revenues at the News and InformationDigital Real Estate Services segment increased $50$328 million, or 1%31%, as compared to fiscal 2017.2020. Revenues at Move increased $168 million, or 36%, to $641 million for the fiscal year ended June 30, 2021 from $473 million in fiscal 2020, primarily driven by higher real estate revenues due to the factors discussed below and the absence of an estimated $15 million of discounts offered to customers in response to COVID-19 during fiscal 2020. The revenue increase wasreferral model and the traditional lead generation product both benefited from higher lead and transaction volumes. The referral model also benefited from higher average home values and referral fees and generated approximately 29% of total Move revenues. The traditional lead generation product saw continued strong demand from agents, driving improvements in sell-through and yield. At REA Group, revenues increased $160 million, or 27%, to $752 million for the fiscal year ended June 30, 2021 from $592 million in fiscal 2020. The higher revenues were primarily due to higher circulation and subscription revenues of $105 million as compared to the corresponding period of fiscal 2017, mainly due to cover price and subscription price increases, the $53$80 million positive impact of foreign currency fluctuations, digital subscriber growth, primarily at The Wall Street Journal andan increase in Australia, higher professional information business revenues at Dow JonesAustralian residential depth revenue driven by strong national listings and the contribution$l3 million impact from the acquisition of ARM. These increases were partially offset by lower single-copy sales in the U.K., primarily atThe Sun, and in Australia. Advertising revenues forElara.
For the fiscal year ended June 30, 2018 decreased $762021, Segment EBITDA at the Digital Real Estate Services segment increased $169 million, or 49%, as compared to fiscal 20172020. The increase in Segment EBITDA was primarily due to weakness in the print advertising market across mastheads and lower revenues at News America Marketing of $75 million. These decreases were partially offsetdriven by the $47$100 million and $67 million higher contributions from Move and REA Group, respectively, resulting from the higher revenues discussed above and the $40 million positive impact of foreign currency fluctuations, partially offset by higher employee costs at both Move and REA Group, an $18 million increase in marketing costs at Move and the $42$17 million and $38 million contributionsnegative impact from the acquisitionsacquisition of Wireless GroupElara. Fiscal 2021 included approximately $12 million of transaction costs related to current year acquisitions.
Subscription Video Services (22% and ARM, respectively,21% of the Company’s consolidated revenues in fiscal 2021 and digital advertising growth,2020, respectively)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Circulation and subscription | $ | 1,825 | | | $ | 1,673 | | | $ | 152 | | | 9 | % |
| Advertising | 210 | | | 174 | | | 36 | | | 21 | % |
| Other | 37 | | | 37 | | | — | | | — | % |
| Total Revenues | 2,072 | | | 1,884 | | | 188 | | | 10 | % |
| Operating expenses | (1,334) | | | (1,220) | | | (114) | | | (9) | % |
| Selling, general and administrative | (379) | | | (341) | | | (38) | | | (11) | % |
| Segment EBITDA | $ | 359 | | | $ | 323 | | | $ | 36 | | | 11 | % |
For the fiscal year ended June 30, 2021, revenues at the Subscription Video Services segment increased $188 million, or 10%, as compared to fiscal 2020, primarily due to the positive impact of foreign currency fluctuations and $89 million of higher streaming revenues, primarily from Kayo and BINGE, partially offset by lower subscription revenues resulting from fewer residential broadcast subscribers. Commercial subscription revenues were largely flat, as the recovery in the commercial sector during the second half of fiscal 2021 largely offset the impact of COVID-19 restrictions that began in the fourth quarter of fiscal 2020. However, ongoing lockdowns within certain states in Australia andare expected to have a modest negative impact on commercial subscription revenues in the U.K.first quarter of fiscal 2022. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $119$217 million, or 12%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017.2020.
For the fiscal year ended June 30, 2018,2021, Segment EBITDA at the News and Information Services segment decreased $22increased $36 million, or 5%11%, as compared to fiscal 2017. The decrease was2020, primarily due to the $12$36 million positive impact of foreign currency fluctuations and lower entertainment programming, transmission and employee costs. The increase was partially offset by increased investment in streaming products and $35 million in higher sports programming rights and production costs, primarily driven by the absence of live sports in the fourth quarter of fiscal 2020 due to COVID-19 restrictions which led to the subsequent recognition of $57 million of those deferred costs in fiscal 2021, partially offset by savings from renegotiated sports rights.
The following tables provide information regarding certain key performance indicators for the Foxtel Group, the primary reporting unit within the Subscription Video Services segment, as of and for the fiscal years ended June 30, 2021 and 2020. Management believes these metrics provide useful information to allow investors to understand trends in consumer behavior and acceptance of the various services offered by the Foxtel Group. Management utilizes these metrics to track and forecast subscription revenue trends across the business’s various linear and streaming products. See “Part I. Business” for further detail regarding these performance indicators including definitions and methods of calculation.
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in 000's) |
| Broadcast Subscribers | | | |
Residential(a) | 1,651 | | | 1,903 | |
Commercial(b) | 234 | | | 86 | |
| Streaming Subscribers (Total (Paid)) | | | |
Kayo(c) | 1,079 (1,054 paid) | | 465 (419 paid) |
BINGE(d) | 827 (733 paid) | | 80 (56 paid) |
Foxtel Now(e) | 228 (219 paid) | | 336 (313 paid) |
| Total Subscribers (Total (Paid)) | 4,019 (3,891 paid) | | 2,870 (2,777 paid) |
| | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 |
Broadcast ARPU(f) | A$80 (US$60) | | A$78 (US$52) |
Broadcast Subscriber Churn(g) | 17.3% | | 15.3% |
(a)Subscribing households throughout Australia as of June 30, 2021 and 2020.
(b)Commercial subscribers throughout Australia as of June 30, 2021 and 2020.
(c)Total and Paid Kayo subscribers as of June 30, 2021 and 2020.
(d)Total and Paid BINGE subscribers as of June 30, 2021 and 2020. BINGE was launched on May 25, 2020.
(e)Total and Paid Foxtel Now subscribers as of June 30, 2021 and 2020.
(f)Average monthly broadcast residential subscription revenue per user (excluding Optus) (Broadcast ARPU) for the fiscal years ended June 30, 2021 and 2020.
(g)Broadcast residential subscriber churn rate (excluding Optus) (Broadcast Subscriber Churn) for the fiscal years ended June 30, 2021 and 2020.
Dow Jones (18% of the Company’s consolidated revenues in both fiscal 2021 and 2020)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Circulation and subscription | $ | 1,296 | | | $ | 1,191 | | | $ | 105 | | | 9 | % |
| Advertising | 373 | | | 359 | | | 14 | | | 4 | % |
| Other | 33 | | | 40 | | | (7) | | | (18) | % |
| Total Revenues | 1,702 | | | 1,590 | | | 112 | | | 7 | % |
| Operating expenses | (781) | | | (765) | | | (16) | | | (2) | % |
| Selling, general and administrative | (589) | | | (589) | | | — | | | — | % |
| Segment EBITDA | $ | 332 | | | $ | 236 | | | $ | 96 | | | 41 | % |
For the fiscal year ended June 30, 2021, revenues at the Dow Jones segment increased $112 million, or 7%, as compared to fiscal 2020 driven by an increase in circulation and subscription revenues, higher digital advertising revenues and the $11 million impact from the
absence of the adjustment to reduce the deferred consideration accrual related to the acquisition of
UnrulyIBD in
May 2021, partially offset by declines in print advertising revenues and print circulation revenues. Digital revenues at the
prior year period.Dow Jones
Revenues were $1,511 million segment represented 72% of total revenues for the fiscal year ended June 30, 2018, an increase of $32 million, or 2%,2021, as compared to 67% in fiscal 2017 revenues of $1,479 million. Circulation and subscription revenues increased $84 million, primarily due to the $56 million impact mainly from digital subscriber growth and subscription price increases atThe Wall Street Journal, as well as $28 million of higher professional information business revenues led by Risk & Compliance. Advertising revenues decreased $55 million, primarily due to weakness in the print advertising market and the decision to ceaseThe Wall Street Journal’s international print editions in the second quarter of fiscal 2018.2020. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $9$13 million as compared to fiscal 2020.
Circulation and subscription revenues
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Circulation and subscription revenues: | | | | | | | |
| Circulation and other | $ | 817 | | | $ | 740 | | | $ | 77 | | | 10 | % |
| Professional information business | 479 | | | 451 | | | 28 | | | 6 | % |
| Total circulation and subscription revenues | $ | 1,296 | | | $ | 1,191 | | | $ | 105 | | | 9 | % |
Circulation and subscription revenues increased $105 million, or 9%, during the fiscal year ended June 30, 2021 as compared to fiscal 2020. Circulation and other revenues increased $77 million, or 10%, primarily driven by growth in digital-only subscriptions at The Wall Street Journal and Barron’s and a $12 million increase in content licensing revenues, partially offset by print volume declines. During the fourth quarter of fiscal 2021, average daily digital-only subscriptions at The Wall Street Journal increased 21% to 2.7 million as compared to the corresponding period of fiscal 2020, and digital revenues represented 64% of circulation revenue for the fiscal year ended June 30, 20182021 as compared to 58% in fiscal 2020. Revenues at the professional information business increased $28 million, or 6%, as growth of $36 million in Risk & Compliance revenues was partially offset by lower revenues from other professional information business products.
The following table summarizes average daily consumer subscriptions during the three months ended June 30, 2021 and 2020 for select publications and for all consumer subscription products.(a)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended June 30(b), |
| 2021 | | 2020 | | Change | | % Change |
| (in thousands, except %) | | | | | Better/(Worse) |
| The Wall Street Journal | | | | | | | |
Digital-only subscriptions(c) | 2,722 | | | 2,244 | | | 478 | | | 21 | % |
| Total subscriptions | 3,456 | | | 2,998 | | | 458 | | | 15 | % |
Barron’s Group(d) | | | | | | | |
Digital-only subscriptions(c) | 700 | | | 556 | | | 144 | | | 26 | % |
| Total subscriptions | 920 | | | 780 | | | 140 | | | 18 | % |
Total Consumer(e) | | | | | | | |
Digital-only subscriptions(c) | 3,522 | | | 2,800 | | | 722 | | | 26 | % |
| Total subscriptions | 4,502 | | | 3,778 | | | 724 | | | 19 | % |
________________________
(a)Based on internal data for the periods from March 29, 2021 to June 27, 2021 and March 30, 2020 to June 28, 2020, respectively, with independent assurance over global total sales and subscriptions provided by PricewaterhouseCoopers LLP UK.
(b)Subscriptions include individual consumer subscriptions, as well as subscriptions purchased by companies, schools, businesses and associations for use by their respective employees, students, customers or members. Subscriptions exclude single-copy sales and copies purchased by hotels, airlines and other businesses for limited distribution or access to customers.
(c)For some publications, including The Wall Street Journal and Barron’s, Dow Jones sells bundled print and digital products. For bundles that provide access to both print and digital products every day of the week, only one unit is reported each day and is designated as a print subscription. For bundled products that provide access to the print product only on specified days and full digital access, one print subscription is reported for each day that a print copy is served and one digital subscription is reported for each remaining day of the week.
(d)Barron’s Group consists of Barron’s, MarketWatch, Financial News and Private Equity News.
(e)Total Consumer consists of The Wall Street Journal, Barron’s Groupand, from May 5, 2021, Investor’s Business Daily.
Advertising revenues
Advertising revenues increased $14 million, or 4%, during the fiscal year ended June 30, 2021 as compared to fiscal 2017.News Corp Australia
Revenues at2020, primarily driven by the Australian newspapers were $1,279$52 million increase in digital advertising revenue, which represented 58% of advertising revenue for the fiscal year ended June 30, 2018, an2021, as compared to 46% in fiscal 2020. The increase of $8was partially offset by a $38 million decline in print advertising revenues resulting from general market weakness and lower print volume across
The Wall Street Journal and Barron’s accelerated by COVID-19. Segment EBITDA
For the fiscal year ended June 30, 2021, Segment EBITDA at the Dow Jones segment increased $96 million, or 1%41%, as compared to fiscal 20172020. The increase was mainly due to the increase in revenues discussed above, lower newsprint, production and distribution costs driven by lower print volumes and other discretionary cost savings, partially offset by increased employee and marketing costs.
Book Publishing (21% and 18% of $1,271 million.the Company’s consolidated revenues in fiscal 2021 and 2020, respectively)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Consumer | $ | 1,908 | | | $ | 1,593 | | | $ | 315 | | | 20 | % |
| Other | 77 | | | 73 | | | 4 | | | 5 | % |
| Total Revenues | 1,985 | | | 1,666 | | | 319 | | | 19 | % |
| Operating expenses | (1,301) | | | (1,134) | | | (167) | | | (15) | % |
| Selling, general and administrative | (381) | | | (318) | | | (63) | | | (20) | % |
| Segment EBITDA | $ | 303 | | | $ | 214 | | | $ | 89 | | | 42 | % |
For the fiscal year ended June 30, 2021, revenues at the Book Publishing segment increased $319 million, or 19%, as compared to fiscal 2020. The increase was primarily driven by the strong performance across categories, including the Bridgerton series by Julia Quinn, The Guest List by Lucy Foley, The Boy, The Mole, the Fox and the Horse by Charlie Mackesy and other backlist titles in the General Books and children’s categories, the strong performance of The Order by Daniel Silva, The Happy In A Hurry Cookbook by Steve Doocey, and Didn’t See That Coming by Rachel Hollis, as well as the $32 million impact from the acquisition of a book publisher in Europe in the fourth quarter of fiscal 2020 and the $23 million impact from the acquisition of HMH Books and Media in May 2021. Digital sales increased by 16% as compared to fiscal 2020 due to growth in both e-books and downloadable audiobooks. Digital sales represented approximately 22% of consumer revenues during the fiscal year ended June 30, 2021. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $35$34 million, or 3%2%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017. Circulation and subscription revenues2020.
For the fiscal year ended June 30, 2021, Segment EBITDA at the Book Publishing segment increased
$17 $89 million, or 42%, as compared to fiscal 2020, primarily due to the $13higher revenues discussed above, partially offset by higher costs related to increased sales volume and higher employee costs.
News Media (24% and 31% of the Company’s consolidated revenues in fiscal 2021 and 2020, respectively)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | Change | | % Change |
| (in millions, except %) | | | | | Better/(Worse) |
| Revenues: | | | | | | | |
| Circulation and subscription | $ | 1,060 | | | $ | 956 | | | $ | 104 | | | 11 | % |
| Advertising | 885 | | | 1,562 | | | (677) | | | (43) | % |
| Other | 260 | | | 283 | | | (23) | | | (8) | % |
| Total Revenues | 2,205 | | | 2,801 | | | (596) | | | (21) | % |
| Operating expenses | (1,233) | | | (1,709) | | | 476 | | | 28 | % |
| Selling, general and administrative | (920) | | | (1,039) | | | 119 | | | 11 | % |
| Segment EBITDA | $ | 52 | | | $ | 53 | | | $ | (1) | | | (2) | % |
For the fiscal year ended June 30, 2021, revenues at the News Media segment decreased $596 million, contributionor 21%, as compared to fiscal 2020, primarily due to lower advertising revenues of $677 million driven by the sale of News America Marketing in the fourth quarter of fiscal 2020, which contributed $649 million to the decline, the $90 million impact from the acquisitionclosure or transition to digital of ARMregional and the $12 million positive impact of foreign currency fluctuations,community newspapers in Australia as cover price increases and digital subscriber growth were more than offset by the impact of print volume declines. Advertising revenues decreased $11 million, primarilywell as a result of the $80 million impact ofcontinued weakness in the print advertising market and the $8 million impact from the sale ofPerth Sunday Times in November 2016. These decreases wereexacerbated by COVID-19, partially offset by the acquisition of ARM, the $19 $68million positive impact of foreign currency fluctuations and $18 million of digital advertising growth.growth at the
New York Post and News UKRevenues were $1,076 millionUK. Other revenues for the fiscal year ended June 30, 2018, an increase of $392021 decreased $23 million or 4%, as compared to fiscal 2017 revenues of $1,037 million. Advertising revenues increased $16 million,2020 primarily due to the $19$26
million impact from the sale of Unruly in January 2020. Circulation and subscription revenues increased $104 million as compared to fiscal 2020 primarily due to the $79 million positive impact of foreign currency fluctuations, as weakness in the print advertising market more than offset digital advertising growth. Circulationsubscriber growth across key mastheads and subscription revenues increased $9 million, primarily due to the $32 million positive impact of foreign currency fluctuations and the $15 million impact of cover price increases, across mastheads, partially offset by the $36 million impact of single-copyprint volume declines, mainlyprimarily atThe Sun. News UK. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $63$169 million, or 6%, for the fiscal year ended June 30, 20182021 as compared to fiscal 2017.News America Marketing
Revenues at News America Marketing were $956 million for the fiscal year ended June 30, 2018, a decrease of $65 million, or 6%, as compared to fiscal 2017 revenues of $1,021 million. The decrease was primarily related to lower home delivered revenues of $74 million, mainly due to lower volume and rate and lower custom publishing.
Book Publishing (19% and 20% of the Company’s consolidated revenues in fiscal 2018 and 2017, respectively)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Consumer | | $ | 1,664 | | | $ | 1,573 | | | $ | 91 | | | | 6% | |
Other | | | 94 | | | | 63 | | | | 31 | | | | 49% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 1,758 | | | | 1,636 | | | | 122 | | | | 7% | |
Operating expenses | | | (1,178 | ) | | | (1,124 | ) | | | (54 | ) | | | (5)% | |
Selling, general and administrative | | | (336 | ) | | | (313 | ) | | | (23 | ) | | | (7)% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 244 | | | $ | 199 | | | $ | 45 | | | | 23% | |
| | | | | | | | | | | | | | | | |
2020
. For the fiscal year ended June 30, 2018, revenues2021, Segment EBITDA at the Book PublishingNews Media segment increased $122decreased $1 million, or 7%2%, as compared to fiscal 2017. The increase was mainly due to strong frontlist and backlist sales in the general books category, which increased $54 million, includingThe Subtle Art Of Not Giving A F*ckby Mark Manson,Magnolia Table by Joanna Gaines,The Pioneer Woman Cooks: Come and Get It!by Ree Drummond,The Woman In The Windowby A.J. Finn andHillbilly Elegy by J.D. Vance, $28 million from the sublicensing agreement for J.R.R Tolkien’sThe Lord of the Ringstrilogy and the $25 million positive impact of foreign currency fluctuations. Digital sales increased 6% compared to the prior year period, driven by growth in downloadable audiobook sales, and represented 19% of Consumer revenues during the fiscal year ended June 30, 2018.For the fiscal year ended June 30, 2018, Segment EBITDA at the Book Publishing segment increased $45 million, or 23%, as compared to fiscal 2017. The increase was2020, primarily due to the higher revenues discussed above and the mix of titles as compared to the prior year.
Digital Real Estate Services(13% and 12% of the Company’s consolidated revenues in fiscal 2018 and 2017, respectively)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 139 | | | $ | 165 | | | $ | (26 | ) | | | (16)% | |
Circulation and subscription | | | 56 | | | | 58 | | | | (2 | ) | | | (3)% | |
Real estate | | | 858 | | | | 696 | | | | 162 | | | | 23% | |
Other | | | 88 | | | | 19 | | | | 69 | | | | ** | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 1,141 | | | | 938 | | | | 203 | | | | 22% | |
Operating expenses | | | (138 | ) | | | (120 | ) | | | (18 | ) | | | (15)% | |
Selling, general and administrative | | | (602 | ) | | | (494 | ) | | | (108 | ) | | | (22)% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 401 | | | $ | 324 | | | $ | 77 | | | | 24% | |
| | | | | | | | | | | | | | | | |
For the fiscal year ended June 30, 2018, revenues at the Digital Real Estate Services segment increased $203net $50 million or 22%, as compared to fiscal 2017. At REA Group, revenues increased $141 million, or 27%, to $666 million in fiscal 2018 from $525 million in fiscal 2017. The higher revenues were primarily due to a $74 million increase in Australian residential depth revenue, the $55 million contributionnegative impact from the acquisitionsales of Smartline and the $18 million positive impact of foreign currency fluctuations, partially offset by the $19 million impact resulting from the sale of REA Group’s European business in December 2016. Revenues at Move increased $58 million, or 15%, to $452 million in fiscal 2018 from $394 million in fiscal 2017, primarily due to a $61 million increase in ConnectionsSM for Buyers product revenues driven by improvement in yield optimization and growth in leads and customers.
For the fiscal year ended June 30, 2018, Segment EBITDA at the Digital Real Estate Services segment increased $77 million, or 24%, as compared to fiscal 2017. The increase in Segment EBITDA was the result of higher contributions from REA Group and Move of $71 million and $5 million, respectively, primarily due to the higher revenues noted above, partially offset by $50 million in higher costs associated with higher revenues, $43 million in broker commissions from the acquisition of Smartline and $28 million of higher marketing costs, primarily at Move, to drive audience growth.
Subscription Video Services (11% and 6% of the Company’s consolidated revenues in fiscal 2018 and 2017, respectively)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 127 | | | $ | 86 | | | $ | 41 | | | | 48% | |
Circulation and subscription | | | 850 | | | | 402 | | | | 448 | | | | ** | |
Other | | | 27 | | | | 6 | | | | 21 | | | | ** | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 1,004 | | | | 494 | | | | 510 | | | | ** | |
Operating expenses | | | (654 | ) | | | (341 | ) | | | (313 | ) | | | (92)% | |
Selling, general and administrative | | | (177 | ) | | | (30 | ) | | | (147 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 173 | | | $ | 123 | | | $ | 50 | | | | 41% | |
| | | | | | | | | | | | | | | | |
For the fiscal year ended June 30, 2018, revenues at the Subscription Video Services segment increased $510 million, as compared to fiscal 2017. The revenue increase was primarily due to the Transaction, which contributed $461 million of revenue in the fourth quarter of fiscal 2018. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $10 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017. See the “Results of Operations—Fiscal 2018 versus Fiscal 2017 (pro forma)” section below for additional details.
For the fiscal year ended June 30, 2018, Segment EBITDA at the Subscription Video Services segment increased $50 million, or 41%, as compared to fiscal 2017. The increase in Segment EBITDA was due to the Transaction.
Results of Operations—Fiscal 2018 versus Fiscal 2017 (pro forma)
The following supplemental unaudited pro forma information for the fiscal years ended June 30, 2018 and 2017 reflect the Company’s results of operations as if the Transaction had occurred on July 1, 2016. The Company believes that the presentation of this supplemental information enhances comparability across the reporting periods. The information was prepared in accordance with Article 11 of RegulationS-X and is based on historical results of operations of News Corp and Foxtel, adjusted for the effect of Transaction-related accounting adjustments, as described below. Pro forma adjustments were based on available information and assumptions regarding impacts that are directly attributable to the Transaction, are factually supportable, and are expected to have a continuing impact on the combined results. However, these adjustments are subject to change as valuations are finalized. In addition, the pro forma information is provided for supplemental and informational purposes only, and is not necessarily indicative of what the Company’s results of operations would have been, or the Company’s future results of operations, had the Transaction actually occurred on the date indicated. The unaudited pro forma information should be read in conjunction with other sections of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as “Selected Financial Data” and the Consolidated Financial Statements and related notes appearing elsewhere in this Annual Report.
| | | | | | | | | | | | | | | | |
| | | Pro Forma (unaudited)
For the fiscal year ended June 30, 2018 | |
| | | News Corp
Historical(a) | | | Foxtel
Historical(b) | | | Transaction
Adjustments | | | Pro
Forma | |
| (in millions, except per share amounts) | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,799 | | | $ | 141 | | | $ | — | | | $ | 2,940 | |
Circulation and subscription | | | 3,021 | | | | 1,638 | | | | (278 | )(c)(d) | | | 4,381 | |
Consumer | | | 1,664 | | | | — | | | | — | | | | 1,664 | |
Real estate | | | 858 | | | | — | | | | — | | | | 858 | |
Other | | | 682 | | | | 39 | | | | — | | | | 721 | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 9,024 | | | | 1,818 | | | | (278 | ) | | | 10,564 | |
Operating expenses | | | (4,903 | ) | | | (1,136 | ) | | | 291 | (c)(e) | | | (5,748 | ) |
Selling, general and administrative | | | (3,049 | ) | | | (340 | ) | | | 17 | (f) | | | (3,372 | ) |
Depreciation and amortization | | | (472 | ) | | | (187 | ) | | | (17 | )(g)(h)(i) | | | (676 | ) |
Impairment and restructuring charges | | | (351 | ) | | | (5 | ) | | | (957 | )(j) | | | (1,313 | ) |
Equity losses of affiliates | | | (1,006 | ) | | | 5 | | | | 974 | (j) | | | (27 | ) |
Interest, net | | | (7 | ) | | | (76 | ) | | | — | | | | (83 | ) |
Other, net | | | (325 | ) | | | (2 | ) | | | 337 | (k) | | | 10 | |
| | | | | | | | | | | | | | | | |
(Loss) income before income tax expense | | | (1,089 | ) | | | 77 | | | | 367 | | | | (645 | ) |
Income tax expense | | | (355 | ) | | | (13 | ) | | | (5 | )(l) | | | (373 | ) |
| | | | | | | | | | | | | | | | |
Net loss (income) | | | (1,444 | ) | | | 64 | | | | 362 | | | | (1,018 | ) |
Less: Net (loss) income attributable to noncontrolling interests | | | (70 | ) | | | 1 | | | | (27 | )(m) | | | (96 | ) |
| | | | | | | | | | | | | | | | |
Net (loss) income attributable to News Corporation | | $ | (1,514 | ) | | $ | 65 | | | $ | 335 | | | $ | (1,114 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted (loss) earnings per share: | | | | | | | | | | | | | | | | |
Net loss available to News Corporation stockholders per share | | $ | (2.60 | ) | | | | | | | | | | $ | (1.92 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Pro Forma (unaudited)
For the fiscal year ended June 30, 2017 | |
| | | News Corp
Historical(a) | | | Foxtel
Historical(b) | | | Transaction
Adjustments | | | Pro
Forma | |
| (in millions, except per share amounts) | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,860 | | | $ | 196 | | | $ | — | | | $ | 3,056 | |
Circulation and subscription | | | 2,470 | | | | 2,156 | | | | (359 | )(c)(d) | | | 4,267 | |
Consumer | | | 1,573 | | | | — | | | | — | | | | 1,573 | |
Real estate | | | 696 | | | | — | | | | — | | | | 696 | |
Other | | | 540 | | | | 59 | | | | — | | | | 599 | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 8,139 | | | | 2,411 | | | | (359 | ) | | | 10,191 | |
Operating expenses | | | (4,529 | ) | | | (1,382 | ) | | | 367 | (c)(e) | | | (5,544 | ) |
Selling, general and administrative | | | (2,725 | ) | | | (461 | ) | | | — | | | | (3,186 | ) |
Depreciation and amortization | | | (449 | ) | | | (215 | ) | | | (47 | )(g)(h)(i) | | | (711 | ) |
Impairment and restructuring charges | | | (927 | ) | | | (63 | ) | | | (227 | )(j) | | | (1,217 | ) |
Equity losses of affiliates | | | (295 | ) | | | (52 | ) | | | 265 | (j) | | | (82 | ) |
Interest, net | | | 39 | | | | (161 | ) | | | — | | | | (122 | ) |
Other, net | | | 132 | | | | — | | | | — | | | | 132 | |
| | | | | | | | | | | | | | | | |
(Loss) income before income tax expense | | | (615 | ) | | | 77 | | | | (1 | ) | | | (539 | ) |
Income tax expense | | | (28 | ) | | | (18 | ) | | | 15 | (l) | | | (31 | ) |
| | | | | | | | | | | | | | | | |
Net (loss) income | | | (643 | ) | | | 59 | | | | 14 | | | | (570 | ) |
Less: Net (loss) income attributable to noncontrolling interests | | | (95 | ) | | | 1 | | | | (31 | )(m) | | | (125 | ) |
| | | | | | | | | | | | | | | | |
Net (loss) income attributable to News Corporation | | $ | (738 | ) | | $ | 60 | | | $ | (17 | ) | | $ | (695 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted (loss) earnings per share: | | | | | | | | | | | | | | | | |
Net loss available to News Corporation stockholders per share | | $ | (1.27 | ) | | | | | | | | | | $ | (1.20 | ) |
| | | | | | | | | | | | | | | | |
Notes to the unaudited proforma statements:
(a) | Reflects the historical results of operations of News Corporation. As the acquisition of a controlling interest in Foxtel was completed on April 3, 2018, Foxtel is reflected in our historical Statement of Operations from April 3, 2018 onwards.
|
(b) | Reflects the historical results of operations of Foxtel to the date of the Transaction. From April 3, 2018 onwards, Foxtel is included in the historical results of operations of News Corporation. The Statements of Operations of Foxtel are derived from its historical financial statements for the nine months ended March 31, 2018 and the fiscal year ended June 30, 2017. These Statements of Operations for the nine months ended March 31, 2018 and the fiscal year ended June 30, 2017 reflect Foxtel’s Statements of Operations on a U.S. GAAP basis and translated from Australian dollars to U.S. dollars, the reporting currency of the combined group, using the quarterly average rates for each period presented. Additionally, certain balances within Foxtel’s historical financial information were reclassified to be consistent with the Company’s presentation.
|
(c) | Represents the impact of eliminating transactions between Foxtel and the consolidated subsidiaries of News Corporation, which would be eliminated upon consolidation as a result of the Transaction.
|
(d) | Reflects the reversal of revenue recognized in Foxtel’s historical Statements of Operations resulting from the fair value adjustment of Foxtel’s historical deferred installation revenue in the preliminary purchase price allocation for the Transaction.
|
(e) | Reflects the adjustment to amortization of program inventory recognized in Foxtel’s historical Statements of Operations related to the fair value adjustment of Foxtel’s historical program inventory in the preliminary purchase price allocation.
|
(f) | Reflects the removal of transaction expenses directly related to the Transaction that are included in News Corp’s historical Statements of Operations for the fiscal year ended June 30, 2018. These costs are considered to be non-recurring in nature, and as such, have been excluded from the pro forma Statement of Operations.
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(g) | Reflects the adjustment to amortization expense resulting from the recognition of amortizable intangible assets in the preliminary purchase price allocation.
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(h) | Reflects the adjustment to depreciation and amortization expense resulting from the fair value adjustment to Foxtel’s historical fixed assets in the preliminary purchase price allocation, which resulted in a step-up in the value of such assets.
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(i) | Reflects the reversal of amortization expense included in News Corp’s historical Statements of Operations from the Company’s settlement of its pre-existing contractual arrangement between Foxtel and FOX SPORTS Australia, which resulted in a write-off of its channel distribution agreement intangible asset at the time of the Transaction.
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(j) | Represents the impact to equity losses of affiliates as a result of the Transaction, as if the Transaction occurred on July 1, 2016. Historically News Corp accounted for its investment in Foxtel under the equity method of accounting. As a result of the Transaction, Foxtel became a majority-owned subsidiary of the Company, and therefore, the impact of Foxtel on the Company’s historical equity losses of affiliates was eliminated. In addition, News Corp previously recorded certain impairments to its investment in Foxtel within equity losses of affiliates which are reflected in News Corp’s historical results. As these impairments are not directly attributable to the Transaction, such amounts have not been eliminated and have been reclassified in the pro forma Statement of Operations from equity losses of affiliates into impairment and restructuring charges.
|
(k) | Represents the write-off recorded as a result of the effective settlement of the channel distribution agreement between FOX SPORTS Australia and Foxtel as a result of the Transaction as well as other costs directly attributable to the Transaction. The write-off of the intangible asset related to this agreement and other associated costs are considered transaction costs directly attributable to the Transaction that were incurred in the fiscal year ended June 30, 2018.
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(l) | In determining the tax rate to apply to our pro forma adjustments we used the Australian statutory rate of 30%, which is the jurisdiction in which the business operates. However, in certain instances, the effective tax rate applied to adjustments differs from the statutory rate primarily as a result of certain valuation allowances on deferred tax assets, based on the Company’s historical tax profile in Australia.
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(m) | Represents the adjustment, as a result of the Transaction, to reflect the noncontrolling interest of the combined company on a pro forma basis.
|
The following table sets forth the Company’s unaudited pro forma operating results for fiscal 2018 and 2017.
| | | | | | | | | | | | | | | | |
| | | Pro Forma (unaudited)
For the fiscal year ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,940 | | | $ | 3,056 | | | $ | (116 | ) | | | (4)% | |
Circulation and subscription | | | 4,381 | | | | 4,267 | | | | 114 | | | | 3% | |
Consumer | | | 1,664 | | | | 1,573 | | | | 91 | | | | 6% | |
Real estate | | | 858 | | | | 696 | | | | 162 | | | | 23% | |
Other | | | 721 | | | | 599 | | | | 122 | | | | 20% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 10,564 | | | | 10,191 | | | | 373 | | | | 4% | |
Operating expenses | | | (5,748 | ) | | | (5,544 | ) | | | (204 | ) | | | (4)% | |
Selling, general and administrative | | | (3,372 | ) | | | (3,186 | ) | | | (186 | ) | | | (6)% | |
Depreciation and amortization | | | (676 | ) | | | (711 | ) | | | 35 | | | | 5% | |
Impairment and restructuring charges | | | (1,313 | ) | | | (1,217 | ) | | | (96 | ) | | | (8)% | |
Equity losses of affiliates | | | (27 | ) | | | (82 | ) | | | 55 | | | | 67% | |
Interest, net | | | (83 | ) | | | (122 | ) | | | 39 | | | | 32% | |
Other, net | | | 10 | | | | 132 | | | | (122 | ) | | | (92)% | |
| | | | | | | | | | | | | | | | |
Loss before income tax expense | | | (645 | ) | | | (539 | ) | | | (106 | ) | | | (20)% | |
Income tax expense | | | (373 | ) | | | (31 | ) | | | (342 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Net loss | | | (1,018 | ) | | | (570 | ) | | | (448 | ) | | | (79)% | |
Less: Net income attributable to noncontrolling interests | | | (96 | ) | | | (125 | ) | | | 29 | | | | 23% | |
| | | | | | | | | | | | | | | | |
Net loss attributable to News Corporation | | $ | (1,114 | ) | | $ | (695 | ) | | $ | (419 | ) | | | (60)% | |
| | | | | | | | | | | | | | | | |
Revenues (pro forma)—Revenues increased $373 million, or 4%, for the fiscal year ended June 30, 2018 as compared to fiscal 2017. The Revenue increase was primarily attributable to higher revenues of $203 million at the Digital Real Estate Services segment, mainly due to increased revenues at both REA Group and Move, and $122 million at the Book Publishing segment as a result of strong frontlist and backlist sales in the general books category and $28 million from the sublicensing agreement for J.R.R. Tolkien’sThe Lord of the Rings trilogy. News and Information Services segment revenues increased $50 million primarily due to higher circulation and subscription revenues of $105 million primarily due to cover price and subscription price increases, the positive impact of foreign currency fluctuations and digital subscriber growth, partially offset by lower advertising revenues of $76 million primarily due to weakness in the print advertising market across mastheads and lower revenues at News America Marketing of $75 million. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue increase of $244 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.
Operating expenses (pro forma)—Operating expenses increased $204 million, or 4%, for the fiscal year ended June 30, 2018 as compared to fiscal 2017. The increase in Operating expenses for the fiscal year ended June 30, 2018 was mainly due to higher operating expenses at the Subscription Video Services segment of $143 million primarily resulting from higher sports programming rights costs and the negative impact of foreign currency fluctuations. The Book Publishing segment also contributed $54 million to the increase primarily due to higher costs associated with higher revenues and the impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense increase of $123 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.
Selling, general and administrative expenses (pro forma)—Selling, general and administrative expenses increased $186 million, or 6%, for the fiscal year ended June 30, 2018 as compared to fiscal 2017. The increase in Selling, general and administrative expenses was primarily due to higher expenses of $108 million at the
Digital Real Estate Services segment primarily due to higher costs associated with higher revenues, the acquisition of Smartline and increased marketing costs at Move. The increase was also attributable to higher expenses of $81 million at the News and Information Services segment primarily related to higher compensation and marketing costs, the $55 million increase from foreign currency fluctuations, as well as the absence of a $12 million adjustment to reduce the deferred consideration accrual related to the acquisition of Unruly which did not recur in the current year period. These increases were partially offset by the $46 million impact from the reversal of a portion of the previously accrued liability for the U.K. Newspaper Matters and the corresponding receivable from 21st Century Fox as the result of an agreement reached with the relevant tax authority with respect to certain employment taxes in the first quarter of fiscal 2018. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense increase of $89 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.
Depreciation and amortization (pro forma)—Depreciation and amortization expense decreased $35 million, or 5%, for the fiscal year ended June 30, 2018 as compared to fiscal 2017, primarily due to lower depreciation expense of $60 million at the News and Information Services segment, primarily due to the write-down of fixed assets at the U.K. and Australian newspapers during fiscal 2017. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense increase of $79 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017.
Impairment and restructuring charges (pro forma)—During the fiscal years ended June 30, 2018 and 2017, the Company recorded restructuring charges of $76 million and $151 million, respectively, primarily related to employee termination benefits in the News and Information Services segment.
During the fiscal year ended June 30, 2018, the Company recognizednon-cash impairment charges of $1,237 million primarily related to the $957 millionnon-cash write-down of the carrying value of its investment in Foxtel and $280 million primarily related to the impairment of goodwill and intangible assets at the News America Marketing reporting unit and impairment of goodwill at the FOX SPORTS Australia reporting unit.
During the fiscal year ended June 30, 2017, the Company recognized total non-cash impairment charges of $1,066 million primarily at News UK and News Corp Australia. The charges consisted of a write-down of the Company’s fixed assets of $679 million, a write-down of intangible assets of $58 million and a write-down of goodwill of $48 million. The Company also recognized a $227 millionnon-cash write-down of the carrying value of its investment in Foxtel and $53 million related to Foxtel Management’s decision to cease Presto operations in fiscal 2017.
See Note 5—Restructuring Programs, See Note 6—Investments, Note 7—Property, Plant2020 and Equipment and Note 8—Goodwill and Other Intangible Assets in the accompanying Consolidated Financial Statements.
Equity losses of affiliates (pro forma)—Equity losses of affiliates improved $55 million to ($27) million for the fiscal year ended June 30, 2018 from ($82) million in fiscal 2017. The decrease in losses for the fiscal year ended June 30, 2018 was primarily due to the absence of losses from the Company’s interest in Ten Network Holdings (“Ten”).
Included within Losses of affiliates in fiscal 2017 was a $58 million write-down of Foxtel’s investment in Ten. During the first quarter of fiscal 2017, Foxtel was deemed to have significant influence over its investment in Ten. As a result, Foxtel was required to treat its investment in Ten as an equity investment. Foxtel elected the fair value option under ASC 825, “Financial Instruments” (“ASC 825”) and adjusted the carrying value of the Ten investment to fair value each reporting period. Although Foxtel ceased to have significantinfluence in Ten during the third quarter of fiscal 2017, it continued to adjust the carrying value of the Ten investment to fair value each reporting period due to its election of the fair value option under ASC 825.
During the fiscal years ended June 30, 2018 and 2017, the Company recognizednon-cash impairments of $13 million and $9 million on certain other equity method investments, respectively. The impairments are reflected in Equity losses of affiliates in the Statement of Operations for the fiscal years ended June 30, 2018 and 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
Interest, net (pro forma)—Interest, net decreased $39 million, or 32%, for the fiscal year ended June 30, 2018, as compared to fiscal 2017, primarily due to lower interest expense from the repayment of the Foxtel shareholder note in the first quarter of fiscal 2018, partially offset by the absence of an adjustment of the deferred consideration related to REA Group’s acquisition of iProperty recognized in the second quarter of fiscal 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
Other, net (pro forma)—Other, net decreased $122 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017, primarily related to the absence of the $107$22 million gain recognized in the prior fiscal year related to REA Group’s sale of its European business.
Income tax (expense)one-time benefit (pro forma)—The Company’s income tax expense and effective tax rate for the fiscal year ended June 30, 2018 were $373 million and (58%), respectively, as compared to an income tax expense and effective tax rate of $31 million and (6%), respectively, for fiscal 2017.
For the fiscal year ended June 30, 2018 the Company recorded a tax expense of $373 million onpre-tax loss of $645 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to $340 million of lower tax benefits on impairments and write-downs of approximately $1.3 billion and a tax expense of $237 million related to the impact of the Tax Act, offset by a tax benefit of approximately $49 million related to the settlement ofpre-Separation tax matters with the Internal Revenue Service.
For the fiscal year ended June 30, 2017 the Company recorded a tax expense of $31 million onpre-tax loss of $539 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to $139 million of lower tax benefits on impairments and write-downs in foreign jurisdictions of approximately $1 billion, a tax expense of approximately $63 million related tofrom the settlement of a foreign tax audit and $40 million related tocertain warranty-related claims in the recording of a valuation allowance against foreign net operating losses, offset by lower taxes on the sale of certain business assets.
Net loss (pro forma)—Net loss increased $448 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017 primarily due to the tax impacts discussed above and lower Other, net primarily due to the absence of the gain recognized on the sale of REA Group’s European business.
Net income attributable to noncontrolling interests(pro forma)—Net income attributable to noncontrolling interests decreased by $29 million for the fiscal year ended June 30, 2018 as compared to fiscal 2017, primarily due to the absence of the gain recognized on the sale of REA Group’s European business.
Segment Analysis (pro forma)
The following table reconciles Pro Forma Net loss to Pro Forma Total Segment EBITDA for the fiscal years ended June 30, 2018 and 2017:
| | | | | | | | |
| | | Pro Forma
For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | |
| (in millions, except %) | | | | | | |
Pro forma net loss | | $ | (1,018 | ) | | $ | (570 | ) |
Add: | | | | | | | | |
Income tax expense | | | 373 | | | | 31 | |
Other, net | | | (10 | ) | | | (132 | ) |
Interest, net | | | 83 | | | | 122 | |
Equity losses of affiliates | | | 27 | | | | 82 | |
Impairment and restructuring charges | | | 1,313 | | | | 1,217 | |
Depreciation and amortization | | | 676 | | | | 711 | |
| | | | | | | | |
Pro forma Total Segment EBITDA | | $ | 1,444 | | | $ | 1,461 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Pro Forma
For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | |
| (in millions) | | Revenues | | | Segment
EBITDA | | | Revenues | | | Segment
EBITDA | |
News and Information Services | | $ | 5,119 | | | $ | 392 | | | $ | 5,069 | | | $ | 414 | |
Book Publishing | | | 1,758 | | | | 244 | | | | 1,636 | | | | 199 | |
Digital Real Estate Services | | | 1,141 | | | | 401 | | | | 938 | | | | 324 | |
Subscription Video Services | | | 2,544 | | | | 545 | | | | 2,546 | | | | 699 | |
Other | | | 2 | | | | (138 | ) | | | 2 | | | | (175 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 10,564 | | | $ | 1,444 | | | $ | 10,191 | | | $ | 1,461 | |
| | | | | | | | | | | | | | | | |
Subscription Video Services(pro forma) (24% and 25% of the Company’s consolidated revenuesU.K. in fiscal 2018 and 2017, respectively)
| | | | | | | | | | | | | | | | |
| | | Pro Forma
For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 268 | | | $ | 282 | | | $ | (14 | ) | | | (5)% | |
Circulation and subscription | | | 2,210 | | | | 2,199 | | | | 11 | | | | 1% | |
Other | | | 66 | | | | 65 | | | | 1 | | | | 2% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 2,544 | | | | 2,546 | | | | (2 | ) | | | ** | |
Operating expenses | | | (1,499 | ) | | | (1,356 | ) | | | (143 | ) | | | (11)% | |
Selling, general and administrative | | | (500 | ) | | | (491 | ) | | | (9 | ) | | | (2)% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 545 | | | $ | 699 | | | $ | (154 | ) | | | (22)% | |
| | | | | | | | | | | | | | | | |
For the fiscal year ended June 30, 2018, revenues at the Subscription Video Services segment decreased $2 million as compared to fiscal 2017.2020. The revenue decrease was primarily due to lower advertising revenues,
as lower subscription revenues resulting from subscriber mix were more than offset by the $82 million positive impact of foreign currency fluctuations.
For the fiscal year ended June 30, 2018, Segment EBITDA at the Subscription Video Services segment decreased $154 million, or 22%, as compared to fiscal 2017. The decrease in Segment EBITDA was primarily due to the lower revenues discussed above and higher sports programming costs, primarily for the National Rugby League and Australian Football League and third party transition costs of $10 million.
Results of Operations—Fiscal 2017 versus Fiscal 2016
The following table sets forth the Company’s operating results for fiscal 2017 as compared to fiscal 2016.
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,860 | | | $ | 3,025 | | | $ | (165 | ) | | | (5)% | |
Circulation and Subscription | | | 2,470 | | | | 2,569 | | | | (99 | ) | | | (4)% | |
Consumer | | | 1,573 | | | | 1,578 | | | | (5 | ) | | | ** | |
Real estate | | | 696 | | | | 619 | | | | 77 | | | | 12% | |
Other | | | 540 | | | | 501 | | | | 39 | | | | 8% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 8,139 | | | | 8,292 | | | | (153 | ) | | | (2)% | |
Operating expenses | | | (4,529 | ) | | | (4,728 | ) | | | 199 | | | | 4% | |
Selling, general and administrative | | | (2,725 | ) | | | (2,722 | ) | | | (3 | ) | | | ** | |
NAM Group and Zillow settlements, net | | | — | | | | (158 | ) | | | 158 | | | | ** | |
Depreciation and amortization | | | (449 | ) | | | (505 | ) | | | 56 | | | | 11% | |
Impairment and restructuring charges | | | (927 | ) | | | (89 | ) | | | (838 | ) | | | ** | |
Equity (losses) earnings of affiliates | | | (295 | ) | | | 30 | | | | (325 | ) | | | ** | |
Interest, net | | | 39 | | | | 43 | | | | (4 | ) | | | (9)% | |
Other, net | | | 132 | | | | 18 | | | | 114 | | | | ** | |
| | | | | | | | | | | | | | | | |
(Loss) income from continuing operations before income tax (expense) benefit | | | (615 | ) | | | 181 | | | | (796 | ) | | | ** | |
Income tax (expense) benefit | | | (28 | ) | | | 54 | | | | (82 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
(Loss) income from continuing operations | | | (643 | ) | | | 235 | | | | (878 | ) | | | ** | |
Income (loss) from discontinued operations, net of tax | | | — | | | | 15 | | | | (15 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Net (loss) income | | | (643 | ) | | | 250 | | | | (893 | ) | | | ** | |
Less: Net income attributable to noncontrolling interests | | | (95 | ) | | | (71 | ) | | | (24 | ) | | | (34)% | |
| | | | | | | | | | | | | | | | |
Net (loss) income attributable to News Corporation | | $ | (738 | ) | | $ | 179 | | | $ | (917 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Revenues—Revenues decreased $153 million, or 2%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The Revenue decrease was mainly due to a decrease in revenues at the News and Information Services segment of $269 million, primarily resulting from weakness in the print advertising market across mastheads, the $143 million negative impact of foreign currency fluctuations and the $77 million impact from the absence of the 53rd week in fiscal 2017. The revenue decrease was partially offset by the acquisitionsincreased contribution from News Corp Australia of Wireless Group and ARM which contributed $74 million and $61 million in revenues, respectively. The decrease in the News and Information Services segment was partially offset by increased revenues at the Digital Real Estate Services segment of $116$15 million, primarily as a result of higher revenues at both REA Group and Move.
The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $147 million and $112 million, respectively, for the fiscal
year ended June 30, 2017 as compared to fiscal 2016. The Company calculates the impact of foreign currency fluctuations for businesses reporting in currencies other than the U.S. dollar by multiplying the results for each quarter in the current period by the difference between the average exchange rate for that quarter and the average exchange rate in effect during the corresponding quarter of the prior year and totaling the impact for all quarters in the current period.
Operating Expenses—Operating expenses decreased $199 million, or 4%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The decrease in Operating expenses for the fiscal year ended June 30, 2017 was mainly due to a decrease in operating expenses at the News and Information Services segment of $199 million, primarily as a result of the impact of cost savings initiatives and lower newsprint, production and distribution costs, lower losses at the New York Post of $15 million primarily due to higher revenues, the increased contribution from News UK of $9 million and a $74the $8 million positive impact from foreign currency fluctuations, partially offset by higher costs of $75 million associated with the acquisitions of ARM and Wireless Group. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense decrease of $59fluctuations.
News Corp Australia
Revenues were $997 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016.Selling, general and administrative expenses—Selling, general and administrative expenses increased $3 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The increase in Selling, general and administrative expenses was primarily due to higher expenses at the News and Information Services segment of $10 million, mainly due to $56 million in higher costs associated with the acquisitions of Wireless Group and ARM, and $19 million in higher costs at News America Marketing, primarily due to2021, a $12 million increase in investment spending at Checkout 51, partially offset by the $63 million positive impact of foreign currency fluctuations. The increase was also attributable to aone-time corporate charge of $11 million associated with a change in the Company’s executive management in February 2017. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $87 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016.
NAM Group and Zillow settlements, net—During the fiscal year ended June 30, 2016, the Company recognizedone-time costs of approximately $280 million in connection with the settlement of certain litigation and related claims at News America Marketing and aone-time gain of $122 million in connection with the settlement of litigation with Zillow, Inc. (“Zillow”). The gain reflects settlement proceeds received from Zillow of $130 million, less $8 million paid to the National Association of Realtors® (“NAR”). See Note 16—Commitments and Contingencies in the accompanying Consolidated Financial Statements.
Depreciation and amortization—Depreciation and amortization expense decreased $56 million, or 11%, for the fiscal year ended June 30, 2017 as compared to fiscal 2016, primarily due to the write-down of fixed assets at the Australian newspapers in the second quarter of fiscal 2017 and the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of $9 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016.
Impairment and restructuring charges—During the fiscal year ended June 30, 2017 and 2016, the Company recorded restructuring charges of $142 million and $89 million, respectively.
During the fiscal year ended June 30, 2017, the Company recognized total impairment charges of $785 million, primarily at News UK and News Corp Australia. The total charges consisted of a write-down of the Company’s fixed assets of $679 million, a write-down of intangible assets of $58 million and a write-down of goodwill of $48 million.
See Note 5—Restructuring Programs, Note 7—Property, Plant and Equipment and Note 8—Goodwill and Other Intangible Assets in the accompanying Consolidated Financial Statements.
Equity (losses) earnings of affiliates—Equity (losses) earnings of affiliates decreased $325 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016, primarily as a result of the$227 million non-cash
write-down of the carrying value of the Company’s investment in Foxtel to fair value and lower net income at Foxtel. See Note 6—Investments in the accompanying Consolidated Financial Statements.
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Foxtel(a) | | $ | (265 | ) | | $ | 38 | | | $ | (303 | ) | | | ** | |
Other equity affiliates(b) | | | (30 | ) | | | (8 | ) | | | (22 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Total Equity (losses) earnings of affiliates | | $ | (295 | ) | | $ | 30 | | | $ | (325 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
(a) | During the second quarter of fiscal 2017, the Company recognized a $227 millionnon-cash write-down of the carrying value of its investment in Foxtel to fair value. The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
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In accordance with Accounting Standards Codification (“ASC”) 350, “Intangibles—Goodwill and Other” (“ASC 350”), the Company amortized $68 million and $52 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2017 and 2016, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. See Note 6—Investments in the accompanying Consolidated Financial Statements. The increase in amortization expense recognized by the Company in fiscal 2017 resulted from a corresponding decrease in amortization expense recognized by Foxtel as certain intangible assets were fully amortized in fiscal 2016.
For the fiscal year ended June 30, 2017, Foxtel revenues increased $32 million, or 1%, as a result of the positive impact of foreign currency fluctuations, as revenues decreased 2% in local currency due to lower subscribers. Operating income decreased $20 million, primarily due to planned increases in programming spend and the lower revenues noted above, partially offset by lower depreciation costs and the positive impact of foreign currency fluctuations. Net income decreased $121 million, mainly due to $58 million in losses associated with the change in the fair value of Foxtel’s investment in Ten Network Holdings (“Ten”) and losses of $53 million associated with Presto, primarily resulting from Foxtel management’s decision to cease Presto operations in January 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
During the first quarter of fiscal 2017, Foxtel was deemed to have significant influence over its investment in Ten. As a result, Foxtel was required to treat its investment in Ten as an equity method investment. Foxtel elected the fair value option under ASC 825, “Financial Instruments” (“ASC 825”) and adjusts the carrying value of the Ten investment to fair value each reporting period. Although Foxtel ceased to have significant influence in Ten during the third quarter of fiscal 2017, it will continue to adjust the carrying value of the Ten investment to fair value each reporting period due to its election of the fair value option under ASC 825. This adjustment will be recorded as a component of Foxtel’s net income.
(b) | Other equity affiliates, net for the fiscal year ended June 30, 2017 includes losses primarily from the Company’s interest in Elara. Additionally, during the fourth quarter of fiscal 2017, the Company recognized impairments of $9 million on certain other equity method investments. The impairments are reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017. See Note 6—Investments in the accompanying Consolidated Financial Statements.
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Interest, net—Interest, net for the fiscal year ended June 30, 2017 decreased $4 million, or 9%, as compared to fiscal 2016, primarily due to higher interest expense associated with the REA Facility. See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
Other, net—Other, net increased $114 million for the fiscal year ended 2017 as compared to the fiscal year ended June 30, 2016. See Note 21—Additional Financial Information in the accompanying Consolidated Financial Statements.
Income tax (expense) benefit—The Company’s income tax expense and effective tax rate for the fiscal year ended June 30, 2017 were $28 million and (5%), respectively, as compared to an income tax benefit and effective tax rate2020 revenues of $54 million and (30%), respectively, for fiscal 2016.
For the fiscal year ended June 30, 2017 the Company recorded a tax expense of $28 million onpre-tax loss of $615 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to $139 million of lower tax benefits on impairments and write-downs in foreign jurisdictions of approximately $1 billion, a tax expense of approximately $63 million related to the settlement of a foreign tax audit and $40 million related to the recording of valuation allowance against foreign net operating losses, offset by lower taxes on the sale of certain business assets.
For the fiscal year ended June 30, 2016, the Company recorded a tax benefit of $54 million onpre-tax income of $181 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate was primarily due to a tax benefit of approximately $106 million related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business in the first quarter of fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration. In addition, the effective tax rate was also impacted by the $29 millionnon-taxable gain resulting from the revaluation of REA Group’s previously held equity interest in iProperty. See Note 19—Income Taxes in the accompanying Consolidated Financial Statements.
Income (loss) from discontinued operations, net of tax—For the fiscal year ended June 30, 2017, the Company did not recognize any income from discontinued operations as the operations of the digital education business were discontinued during fiscal 2016.
For the fiscal year ended June 30, 2016, the Company recorded income from discontinued operations, net of tax, of $15$1,005 million. The income recognizedclosure or transition to digital of regional and community newspapers in fiscal 2016 was Australia resulted in a revenue decrease of $111 million. Advertising revenues decreased $79 million, primarily due to the impactclosure or transition to digital of a $144 million tax benefit recognized upon reclassification of the Digital Education segment to discontinued operations, a tax benefit of $30 million related to the operations for the periodregional and lower operating losses as a result of the sale of Amplify Insightcommunity newspapers and Amplify Learning, which more than offset thepre-taxnon-cash impairment charge recognized in the first quarter of fiscal 2016 of $76 million and $17 million in severance and lease termination charges recognized in the second quarter of fiscal 2016. See Note 4—Discontinued Operations in the accompanying Consolidated Financial Statements.
Net (loss) income—Net (loss) income decreased $893 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016 primarily due tonon-cash impairment charges of approximately $785 million, mainly related to the write-down of fixed assets at the U.K. and Australian newspapers, higher equity losses of affiliates, primarily due to the$227 million non-cash write-down of the carrying value of the Company’s investment in Foxtel to fair value, the absence of theone-time gain of $122 million in connection with the settlement of litigation with Zillow, and the tax benefit related to the release of valuation allowances and income from discontinued operations recognized in fiscal 2016 which did not recur in fiscal 2017, partially offset by the absence of the $280 million NAM Group settlement charge in the prior year and higher Other, net.
Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests increased by $24 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016, due to the gain on the sale of REA Group’s European business.
Segment Analysis
Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses and excluding impact from the NAM Group and Zillow legal settlements. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity (losses) earnings of affiliates, interest, net, other, net, income tax (expense) benefit and net income attributable to noncontrolling interests. Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA.
Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
Total Segment EBITDA is anon-GAAP measure and should be considered in addition to, not as a substitute for, net (loss) 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 and restructuring charges, which are significant components in assessing the Company’s financial performance. The Company believes that the presentation of Total Segment EBITDA provides useful information regarding the Company’s operations and other factors that affect the Company’s reported results. Specifically, the Company believes that by excluding certainone-time ornon-cash items such as impairment and restructuring charges and depreciation and amortization, as well as potential distortions between periods caused by factors such as financing and capital structures and changes in tax positions or regimes, the Company provides users of its consolidated financial statements with insight into both its core operations as well as the factors that affect reported results between periods but which the Company believes are not representative of its core business. As a result, users of the Company’s consolidated financial statements are better able to evaluate changes in the core operating results of the Company across different periods. The following table reconciles Net loss to Total Segment EBITDA for the fiscal years ended June 30, 2017 and 2016:
| | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2017 | | | 2016 | |
| (in millions) | | | | | | |
Net (loss) income | | $ | (643 | ) | | $ | 235 | |
Add: | | | | | | | | |
Income tax expense | | | 28 | | | | (54 | ) |
Other, net | | | (132 | ) | | | (18 | ) |
Interest, net | | | (39 | ) | | | (43 | ) |
Equity losses of affiliates | | | 295 | | | | (30 | ) |
Impairment and restructuring charges | | | 927 | | | | 89 | |
Depreciation and amortization | | | 449 | | | | 505 | |
| | | | | | | | |
Total Segment EBITDA | | $ | 885 | | | $ | 684 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | |
| | | Revenues | | | Segment
EBITDA | | | Revenues | | | Segment
EBITDA | |
| | | (in millions) | |
News and Information Services | | $ | 5,069 | | | $ | 414 | | | $ | 5,338 | | | $ | 214 | |
Book Publishing | | | 1,636 | | | | 199 | | | | 1,646 | | | | 185 | |
Digital Real Estate Services | | | 938 | | | | 324 | | | | 822 | | | | 344 | |
Subscription Video Services | | | 494 | | | | 123 | | | | 484 | | | | 124 | |
Other | | | 2 | | | | (175 | ) | | | 2 | | | | (183 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 8,139 | | | $ | 885 | | | $ | 8,292 | | | $ | 684 | |
| | | | | | | | | | | | | | | | |
News and Information Services (62% and 64% of the Company’s consolidated revenues in fiscal 2017 and 2016, respectively)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 2,608 | | | $ | 2,810 | | | $ | (202 | ) | | | (7)% | |
Circulation and subscription | | | 2,010 | | | | 2,107 | | | | (97 | ) | | | (5)% | |
Other | | | 451 | | | | 421 | | | | 30 | | | | 7% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 5,069 | | | | 5,338 | | | | (269 | ) | | | (5)% | |
Operating expenses | | | (2,943 | ) | | | (3,142 | ) | | | 199 | | | | 6% | |
Selling, general and administrative | | | (1,712 | ) | | | (1,702 | ) | | | (10 | ) | | | (1)% | |
NAM Group settlement | | | — | | | | (280 | ) | | | 280 | | | | ** | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 414 | | | $ | 214 | | | $ | 200 | | | | 93% | |
| | | | | | | | | | | | | | | | |
**—not meaningful
For the fiscal year ended June 30, 2017, revenues at the News and Information Services segment decreased $269 million, or 5%, as compared to fiscal 2016. The revenue decrease was mainly due to lower advertising revenues of $202 million as compared to fiscal 2016, primarily resulting fromcontinued weakness in the print advertising market across mastheads, the $33 million impact from the absence of the 53rd week in fiscal 2017, the $28 million negative impact from foreign currency fluctuations and lower advertising revenues of $16 million from the Perth Sunday Times which was sold in November 2016. These decreases wereexacerbated by COVID-19, partially offset by the acquisitions of Wireless Group and ARM, which contributed $63 million and $42 million of advertising revenues, respectively. Circulation and subscription revenues for the fiscal year ended June 30, 2017 decreased $97 million as compared to fiscal 2016, primarily due to the $88 million negative impact of foreign currency fluctuations and the $39 million impact from the absence of the 53rd week in fiscal 2017, which more than offset higher circulation and subscription revenues at Dow Jones. Other revenues for the fiscal year ended June 30, 2017 increased $30 million as compared to fiscal 2016, primarily due to higher brand partnership revenues in the U.K. of $14 million, higher third-party printing revenues in Australia of $10 million and the acquisitions of Wireless Group and Unruly, which contributed $11 million and $8 million, respectively, to the increase. These increases were partially offset by the $27 million negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $143 million and $77 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016.
For the fiscal year ended June 30, 2017, Segment EBITDA at the News and Information Services segment increased $200 million, or 93%, as compared to fiscal 2016. The increase was primarily due to the absence of the $280 million NAM Group settlement charge in the prior year and the $12 million impact of an adjustment to the deferred consideration accrual related to the acquisition of Unruly. These factors were partially offset by lower
contributions from News Corp Australia, News UK and Dow Jones of $44 million, $36 million and $22 million, respectively, primarily due to the impact of lower advertising revenues as discussed above, partially offset by the impact of cost savings initiatives and lower newsprint, production, editorial and distribution costs.
News Corp Australia
Revenues at the Australian newspapers were $1,271 million for the fiscal year ended June 30, 2017, a decrease of $21 million, or 2%, compared to fiscal 2016 revenues of $1,292 million. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in a revenue increase of $43 million, or 3%, and a revenue decrease of $21 million, or 2%, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016. Advertising revenues decreased $46 million, primarily as a result of the $94 million impact of weakness in the print advertising market, lower advertising revenues of $16 million from the Perth Sunday Times, which was sold in November 2016, and the $14 million impact from the absence of the 53rd week in fiscal 2017. These decreases were partially offset by the acquisition of ARM, which contributed $42 million to advertising revenues, and the $25$45 million positive impact of foreign currency fluctuations. Circulation and subscription revenues increased $7$66 million primarily driven by the $43 million positive impact from foreign currency fluctuations and digital
subscriber growth, which were partially offset by print volume declines resulting from the closure or transition to digital of regional and community newspapers.
News UK
Revenues were $942 million for the fiscal year ended June 30, 2021, an increase of $44 million, or 5%, as compared to fiscal 2020 revenues of $898 million. Circulation and subscription revenues increased $44 million, primarily driven by the $36 million positive impact of foreign currency fluctuations, cover price increases, mainly at The Sun, and digital subscriber growth, mainly at The Times and The Sunday Times, partially offset by single-copy volume declines exacerbated by COVID-19, primarily at The Sun. Advertising revenues decreased $3 million, primarily due to continued weakness in the $14print advertising market exacerbated by COVID-19, partially offset by the $16 million positive impact of foreign currency fluctuations and $13 million from the acquisition of ARM, partially offset by lower circulation and subscription revenues of $10 million primarily from thePerth Sunday Timesand the $7 million impact from the absence of the 53rd week in fiscal 2017, as price increases and digital subscriber growth were offset by print volume declines. Other revenues increased $18 million primarily due to higher third-party printing revenues.News UK
Revenues were $1,037 million for the fiscal year ended June 30, 2017, a decrease of $244 million, or 19%, as compared to fiscal 2016 revenues of $1,281 million. Advertising revenues decreased $114 million, primarily due to the $52 million negative impact of foreign currency fluctuations and the $51 million impact from weakness in the print advertising. Circulation and subscription revenues decreased $111 million, primarily due to the $96 million negative impact of foreign currency fluctuations and the $13 million impact from the absence of the 53rd week in fiscal 2017, as the $33 million impact of single-copy volume declines, primarily at The Sun, was offset by the $32 million impact of cover price increases acrossThe Sun andThe Times. Other revenues decreased $19 million due to the $29 million negative impact of foreign currency fluctuations, which more than offset higher brand partnership revenues. The impact of foreign currency fluctuations of the U.S. dollar against local currencies and the absence of the 53rd week in fiscal 2017 resulted in revenue decreases of $177 million and $21 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016.
Dow Jones
Revenues were $1,479 million for the fiscal year ended June 30, 2017, a decrease of $91 million, or 6%, as compared to fiscal 2016 revenues of $1,570 million. Advertising revenues decreased $103 million, primarily due to the $95 million impact of weakness in the print advertising market. Circulation and subscription revenues increased $9 million, primarily due to the $38 million impact of price increases and volume growth at The Wall Street Journal, partially offset by the $19 million impact from the absence of the 53rd week in fiscal 2017 and the $6 million negative impact of foreign currency fluctuations, as professional information business revenues were relatively flat compared to fiscal 2016. The absence of the 53rd week in fiscal 2017 and the impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in revenue decreases of $26 million and $6 million, respectively, for the fiscal year ended June 30, 2017 as compared to fiscal 2016.
News America Marketing
Revenues at News America Marketing were $1,021 million for the fiscal year ended June 30, 2017, an increase of $9 million, or 1%, as compared to fiscal 2016 revenues of $1,012 million. The increase was primarily due to
growth. higher other revenues of $9 million related to certain merchandising products. Advertising revenues were flat, as higher domesticin-store product revenues of $42 million and certain other increases were offset by lower home delivered revenues, which include free-standing insert products, of $51 million.
Book Publishing (20% of the Company’s consolidated revenues in fiscal 2017 and 2016)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Consumer | | $ | 1,573 | | | $ | 1,578 | | | $ | (5 | ) | | | ** | |
Other | | | 63 | | | | 68 | | | | (5 | ) | | | (7)% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 1,636 | | | | 1,646 | | | | (10 | ) | | | (1)% | |
Operating expenses | | | (1,124 | ) | | | (1,145 | ) | | | 21 | | | | 2% | |
Selling, general and administrative | | | (313 | ) | | | (316 | ) | | | 3 | | | | 1% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 199 | | | $ | 185 | | | $ | 14 | | | | 8% | |
| | | | | | | | | | | | | | | | |
**—not meaningful
For the fiscal year ended June 30, 2017, revenues at the Book Publishing segment decreased $10 million, or 1%, as compared to fiscal 2016. The decrease was mainly due to the absence of $42 million in sales ofGo Set a Watchman by Harper Lee, the $34 million negative impact of foreign currency fluctuations and the $19 million impact from the absence of the 53rd week in fiscal 2017. These decreases were partially offset by strong frontlist and backlist sales in the general books category, which increased $43 million, includingHillbilly Elegy by J.D. Vance, and in the Christian publishing category, which increased $24 million, including The Magnolia Story by Chip and Joanna Gaines andJesus Calling and Jesus Always by Sarah Young, as well as the $25 million impact of the continued expansion of HarperCollins’ global footprint. Digital sales represented 19% of Consumer revenues during the fiscal year ended June 30, 2017 and were flat as compared to fiscal 2016.
For the fiscal year ended June 30, 2017, Segment EBITDA at the Book Publishing segment increased $14 million, or 8%, as compared to fiscal 2016. The increase was primarily due to the mix of titles as compared to the prior year.
Digital Real Estate Services(12% and 10% of the Company’s consolidated revenues in fiscal 2017 and 2016, respectively)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues | | | | | | | | | | | | | | | | |
Advertising | | $ | 165 | | | $ | 133 | | | $ | 32 | | | | 24% | |
Circulation and Subscription | | | 58 | | | | 64 | | | | (6 | ) | | | (9)% | |
Real estate | | | 696 | | | | 619 | | | | 77 | | | | 12% | |
Other | | | 19 | | | | 6 | | | | 13 | | | | ** | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 938 | | | | 822 | | | | 116 | | | | 14% | |
Operating expenses | | | (120 | ) | | | (102 | ) | | | (18 | ) | | | (18)% | |
Selling, general and administrative | | | (494 | ) | | | (498 | ) | | | 4 | | | | 1% | |
Zillow settlement | | | — | | | | 122 | | | | (122 | ) | | | ** | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 324 | | | $ | 344 | | | $ | (20 | ) | | | (6)% | |
| | | | | | | | | | | | | | | | |
**—not meaningful
For the fiscal year ended June 30, 2017, revenues at the Digital Real Estate Services segment increased $116 million, or 14%, as compared to fiscal 2016. At REA Group, revenues increased $66 million, or 14%, to
$525 million in fiscal 2017 from $459 million in fiscal 2016, primarily due to a $45 million increase in Australian residential depth revenue and the $18 million positive impact of foreign currency fluctuations, partially offset by an $18 million decrease resulting from the sale of REA Group’s European business in December 2016. Revenues at Move increased $37 million, or 10%, to $394 million in fiscal 2017 from $357 million in fiscal 2016, primarily due to a $38 million increase in ConnectionsSM for Buyers product revenues and a $12 million increasein non-listing media revenues, partially offset by the $12 million impact of lower revenues from TigerLead® , which was sold in November 2016. The acquisition of DIAKRIT also contributed $13 million to the revenue increase for the fiscal year ended June 30, 2017.
For the fiscal year ended June 30, 2017, Segment EBITDA at the Digital Real Estate Services segment decreased $20 million, or 6%, as compared to fiscal 2016. The decrease in Segment EBITDA was the result of the $63 million lower contribution from Move, primarily due to the absence of the $122 million gain recognized in connection with the settlement of litigation with Zillow in fiscal 2016 and $11 million of increased marketing costs to drive traffic growth and brand awareness, partially offset by the higher revenues noted above and the absence of $36 million of legal costs, primarily related to the Zillow litigation. The decrease was partially offset by the $46 million higher contribution from REA Group, primarily due to the higher revenues noted above, the $11 million positive impact of foreign currency fluctuations and the absence of $12 million of costs associated with REA Group’s European business, which was disposed of in fiscal 2017, partially offset by $16 million in higher costs associated with higher revenues and $14 million in higher costs related to the acquisition of iProperty.
Subscription Video Services(6% of the Company’s consolidated revenues in fiscal 2017 and 2016)
| | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2017 | | | 2016 | | | Change | | | % Change | |
| (in millions, except %) | | | | | | | | Better/(Worse) | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | $ | 86 | | | $ | 81 | | | $ | 5 | | | | 6% | |
Circulation and Subscription | | | 402 | | | | 398 | | | | 4 | | | | 1% | |
Other | | | 6 | | | | 5 | | | | 1 | | | | 20% | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | 494 | | | | 484 | | | | 10 | | | | 2% | |
Operating expenses | | | (341 | ) | | | (336 | ) | | | (5 | ) | | | (1)% | |
Selling, general and administrative | | | (30 | ) | | | (24 | ) | | | (6 | ) | | | (25)% | |
| | | | | | | | | | | | | | | | |
Segment EBITDA | | $ | 123 | | | $ | 124 | | | $ | (1 | ) | | | (1)% | |
| | | | | | | | | | | | | | | | |
For the fiscal year ended June 30, 2017, revenues at the Subscription Video Services segment increased $10 million, or 2% as compared to fiscal 2016. The revenue increase was primarily due to the acquisition of ANC, which contributed $20 million of revenue in fiscal 2017 and the $12 million positive impact of foreign currency fluctuations. These increases were partially offset by lower affiliate revenues of $11 million at FOX SPORTS Australia and the $10 million impact of the absence of the 53rd week in fiscal 2017.
For the fiscal year ended June 30, 2017, Segment EBITDA at the Subscription Video Services segment decreased $1 million, or 1%, as compared to fiscal 2016. The decrease in Segment EBITDA was due to the $3 million negative impact of foreign currency fluctuations as the impact of lower revenues at FOX SPORTS Australia were offset by lower programming rights costs.
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition
The Company’s principal source of liquidity is internally generated funds and cash and cash equivalents on hand. As of June 30, 2018,2021, the Company’s cash and cash equivalents were $2,034 million. The Company expects these
elements of liquidity will enable it to meet its liquidity needs in the foreseeable future, including repayment of indebtedness.$2.24 billion. The Company also has available borrowing capacity under the 2019 News Corp Credit Facility (as defined below) and certain other facilities, as described below, and expects to have access to the worldwide credit and capital markets, subject to market conditions, in order to issue additional debt if needed or desired. The Company currently expects these elements of liquidity will enable it to meet its liquidity needs for at least the next 12 months, including repayment of indebtedness. Although the Company believes that its cash on hand and future cash from operations, together with its access to the credit and capital markets, will provide adequate resources to fund its operating and financing needs for at least the next 12 months, its access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) the financial and operational performance of the Company and/or its operating subsidiaries, as applicable,applicable; (ii) the Company’s credit rating or absence of a credit ratingratings and/or the credit rating of its operating subsidiaries, as applicable,applicable; (iii) the provisions of any relevant debt instruments, credit agreements, indentures and similar or associated documents,documents; (iv) the liquidity of the overall credit and capital marketsmarkets; and (v) the current state of the economy. There can be no assurances that the Company will continue to have access to the credit and capital markets on acceptable terms. See Part I, “Item 1A. Risk Factors” for further discussion.
As of June 30,
2018,2021, the Company’s consolidated assets included
$887$798 million in cash and cash equivalents that were held by its foreign subsidiaries.
$86 million ofOf this amount,
$128 million is cash not readily accessible by the Company as it is held by REA Group, a majority owned but separately listed public company. REA Group must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance. The Company earns income outside the U.S., which is deemed to be permanently reinvested in certain foreign jurisdictions. The Company does not currently intend to repatriate these earnings. Should the Company require more capital in the U.S. than is generated by and/or available to its domestic operations, the Company could elect to transfer funds held in foreign jurisdictions. The transfer of funds from foreign jurisdictions may be cumbersome due to local regulations, foreign exchange controls and taxes. Additionally, the transfer of funds from foreign jurisdictions may result in higher effective tax rates and higher cash paid for income taxes for the Company.
The Tax Act was enacted on December 22, 2017. As part of the transition to the new partial territorial tax system, the Tax Act imposes aone-time tax on the mandatory deemed repatriation of earnings of the Company’s foreign subsidiaries. It is estimated that the deemed repatriation tax will be approximately $26 million, which was recorded to income tax expense. The estimate may change, possibly materially, due to among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Tax Act.The principal uses of cash that affect the Company’s liquidity position include the following: operational expenditures including employee costs,
paper purchases and
paper purchases;programming costs; capital expenditures; income tax payments; investments in associated
entitiesentities; acquisitions; and
acquisitions.the repayment of debt and related interest. In addition to the acquisitions and dispositions disclosed elsewhere, the Company has evaluated, and expects to continue to evaluate, possible future acquisitions and dispositions of certain businesses. Such transactions may be material and may involve cash, the issuance of the Company’s securities or the assumption of indebtedness.
Issuer Purchases of Equity Securities
In May 2013, the Company’s Board of Directors (the “Board of Directors”) authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. No stock repurchases were made during the fiscal yearyears ended June 30, 2018. Through August 7, 2018,2021 and 2020. Over the life of the program through July 30, 2021, the Company cumulatively repurchased approximately 5.2 million shares of Class A Common Stock for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2018July 30, 2021 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased.
The Company did not purchase any of its Class A or Class B Common Stock during the Board of Directorsfiscal years ended June 30, 2021 and 2020.
Dividends
The following table summarizes the dividends declared a semi-annual cash dividend of $0.10and paid per share foron both the Company’s Class A Common Stock and Class B Common Stock. This dividend was paid on October 18, 2017 to stockholders of record at the close of business on September 13, 2017. In February 2018, the Board of Directors declared a semi-annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. This dividend was paid on April 18, 2018 to stockholders of record as of March 14, 2018. Stock:
| | | | | | | | | | | |
| For the fiscal years ended
June 30, |
| 2021 | | 2020 |
| Cash dividends paid per share | $ | 0.20 | | | $ | 0.20 | |
The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Board of Directors. The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant.
Sources and Uses of Cash—Fiscal
20182021 versus Fiscal
20172020
Net cash provided by operating activities
from continuing operations for the fiscal years ended June 30,
20182021 and
20172020 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2018 | | | 2017 | |
Net cash provided by operating activities from continuing operations | | $ | 757 | | | $ | 499 | |
| | | | | | | | | | | | | | |
| For the fiscal years ended June 30, | | 2021 | | 2020 |
| Net cash provided by operating activities | | $ | 1,237 | | | $ | 780 | |
Net cash provided by operating activities
from continuing operations increased by
$258$457 million for the fiscal year ended June 30,
20182021 as compared to fiscal
2017.2020. The increase was primarily due to
the absence of NAM Group’s settlement payments of $256 million made during fiscal 2017 which did not recur during the fiscal year ended June 30, 2018, higher Total Segment EBITDA and lower
restructuring payments of $61 million,working capital, partially offset by higher
working capital primarily related tocash taxes paid of $88 million and higher
revenues and reversal of a portion of the previously accrued net liability related to the U.K. Newspaper Matters as a result of an agreement reached with the relevant tax authority and certain timing related items, as well as higher net taxrestructuring payments of
$30$42 million.
Net cash used in investing activities
from continuing operations for the fiscal years ended June 30,
20182021 and
20172020 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2018 | | | 2017 | |
Net cash used in investing activities from continuing operations | | $ | (321 | ) | | $ | (105 | ) |
The Company had net
| | | | | | | | | | | | | | |
| For the fiscal years ended June 30, | | 2021 | | 2020 |
| Net cash used in investing activities | | $ | (1,292) | | | $ | (427) | |
Net cash used in investing activities from continuing operations of $321was $1,292 million for the fiscal year ended June 30, 20182021 as compared to net cash used in investing activities from continuing operations of $105$427 million for fiscal 2017. 2020.
During the fiscal year ended June 30,
2018,2021, the Company used
$364$886 million of cash for acquisitions, primarily HMH Books & Media, IBD and Mortgage Choice, and used $390 million of cash for capital expenditures,
of which
included$139 million related to the Foxtel Group. The Company’s capital expenditures for fiscal 2022 are expected to increase approximately
$60$100 million,
fromsubject to foreign currency fluctuations, partly driven by higher technology costs and the
consolidation of Foxtel and $77 million of cash for acquisitions, primarily for the acquisitions of Hometrack and Smartline, partially offset by cash acquired from the Transaction. The net cash used in investing activities from continuing operations for the fiscal year ended June 30, 2018 was also partially offset by proceeds from the saleroll-out of the
SEEKAsia cost method investment of $122 million.IP-enabled set-top-boxes at the Foxtel Group.
During the fiscal year ended June 30,
2017,2020, the Company used
$347$438 million of cash for
acquisitions, primarily for the acquisitions of Wireless Group and ARM. The Company also had capital expenditures, of
$256 million. The net cash used in investing activities from continuing operations for the fiscal year ended June 30, 2017 was partially offset by the utilization of restricted cash for the Wireless Group acquisition of $315which $195 million
and proceeds from the sale of REA Group’s European business of approximately $140 million.Foxtel’s full year capital expenditures for fiscal 2018 were approximately $285 million, including $225 million of capital expenditures incurred prior to the consolidation. Foxtel’s total capital expenditures in fiscal 2019,
which will be primarily related to subscriber-related expenditures, is expected to be higher than fiscal 2018 by more than $50 million.
Foxtel.
Net cash
used inprovided by (used in) financing activities
from continuing operations for the fiscal years ended June 30,
20182021 and
20172020 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2018 | | | 2017 | |
Net cash used in financing activities from continuing operations | | $ | (398 | ) | | $ | (217 | ) |
| | | | | | | | | | | | | | |
| For the fiscal years ended June 30, | | 2021 | | 2020 |
| Net cash provided by (used in) financing activities | | $ | 699 | | | $ | (472) | |
The Company had net cash used inprovided by financing activities from continuing operations of $398$699 million for the fiscal year ended June 30, 20182021 as compared to net cash used in financing activities from continuing operations of $217$472 million for fiscal 2017. 2020.
During the fiscal year ended June 30, 2018,2021, the Company issued $1.0 billion of senior notes and had new borrowings related to REA Group and the Foxtel Group of $515 million, which includes drawdowns under REA Group's 2021 bridge facility to repay outstanding debt in connection with its refinancing completed in the fourth quarter of fiscal 2021. The net cash provided by financing activities was partially offset by $557 million of repayments for borrowings related to the Foxtel Group and REA Group and dividend payments of $163 million to News Corporation stockholders and REA Group minority stockholders. See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
During the fiscal year ended June 30, 2020, the Company repaid
$213$1,226 million of borrowings related to
new Foxtel and REA Group,
which includes repayments made as part of the debt refinancings completed in the second quarter of fiscal 2020, and made dividend payments of $158 million
primarily to News Corporation stockholders and REA Group minority stockholders. The
Company also paid $79 million for its mandatorily redeemable interest in iProperty in fiscal 2018. The net cash used in financing activities
from continuing operations for the fiscal year ended June 30,
20182020 was partially offset by new borrowings of
$95 million.During$926 million, which includes drawdowns under the fiscal year ended June 30, 2017, the Company paid dividendsnew facilities entered into as part of $152 million, primarily to News Corporation stockholders and REA Group minority stockholders, and repaid the debt assumed inrefinancings referenced above, and the acquisition of Wireless Group of $23 million.
Sources and Uses of Cash—Fiscal 2017 versus Fiscal 2016
Net cash provided by operating activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2017 | | | 2016 | |
Net cash provided by operating activities from continuing operations | | $ | 499 | | | $ | 952 | |
Net cash provided by operating activities from continuing operations decreased by $453 million for the fiscal year ended June 30, 2017 as compared to fiscal 2016. The decrease was primarily due to higher NAM Group settlement payments of $234 million during the fiscal year ended June 30, 2017, the absence of net proceeds received in fiscal 2016 from the Zillow litigation settlement of $122 million, higher restructuring paymentshedges of $41 million during the fiscal year ended June 30, 2017, lower dividends received from Foxtel and other equity method investments of $30 million and higher net tax payments of $30 million in fiscal 2017.
Net cash used in investing activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2017 | | | 2016 | |
Net cash used in investing activities from continuing operations | | $ | (105 | ) | | $ | (1,124 | ) |
The Company had net cash used in investing activities from continuing operations of $105 million for the fiscal year ended June 30, 2017 as compared to net cash used in investing activities from continuing operations of $1,124 million for fiscal 2016. During the fiscal year ended June 30, 2017, the Company used $347 million of cash for acquisitions, primarily for the acquisitions of Wireless Group and ARM. The Company also had capital expenditures of $256$57 million. The net cash used in investing activities from continuing operations for the fiscal year ended June 30, 2017 was partially offset by the utilization of restricted cash for the Wireless Group acquisition of $315 million and proceeds from the sale of REA Group’s European business of approximately $140 million.
During the fiscal year ended June 30, 2016, the Company used $520 million of cash for acquisitions, primarily for the acquisitions of iProperty, Unruly, DIAKRIT, Flatmates and Checkout 51. The Company also had capital expenditures of $256 million in fiscal 2016. Additionally, the Company had set aside $315 million of cash for use in the Wireless Group acquisition as a result of U.K. takeover regulations and classified this as restricted cash as of June 30, 2016.
Net cash (used in) provided by financing activities from continuing operations for the fiscal years ended June 30, 2017 and 2016 was as follows (in millions):
| | | | | | | | |
For the fiscal years ended June 30, | | 2017 | | | 2016 | |
Net cash (used in) provided by financing activities from continuing operations | | $ | (217 | ) | | $ | 150 | |
The Company had net cash used in financing activities from continuing operations of $217 million for the fiscal year ended June 30, 2017 as compared to net cash provided by financing activities from continuing operations of $150 million for fiscal 2016. During the fiscal year ended June 30, 2017, the Company paid dividends of $152 million, primarily to News Corporation stockholders and REA Group minority stockholders, and repaid the debt assumed in the acquisition of Wireless Group of $23 million.
During the fiscal year ended June 30, 2016, the Company had proceeds from borrowings under the REA Facility of approximately $340 million. The net cash provided by financing activities from continuing operations for the fiscal year ended June 30, 2016 was partially offset by dividend payments of $147 million, primarily to News Corporation stockholders and REA Group minority stockholders, and repurchases of News Corporation shares for $41 million.
Reconciliation of Free Cash Flow Available to News Corporation
Free cash flow available to News Corporation is a
non-GAAP financial measure defined as net cash provided by operating activities,
from continuing operations, less capital expenditures (“free cash flow”), less REA Group free cash flow, plus cash dividends received from REA Group. Free cash flow available to News Corporation
excludes cash flows from discontinued operations. Free cash flow available to News Corporation should be considered in addition to, not as a substitute for, cash flows from
continuing operations and other measures of financial performance reported in accordance with GAAP. Free cash flow available to News Corporation may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of free cash flow.
The Company considers free cash flow available to News Corporation to provide useful information to management and investors about the amount of cash that is available to be used to strengthen the Company’s balance sheet and for strategic opportunities including, among others, investing in the Company’s business, strategic acquisitions, dividend payouts and repurchasing stock. The Company believes excluding REA Group’s free cash flow and including dividends received from REA Group provides users of its consolidated financial statements with a measure of the amount of cash flow that is readily available to the Company, as REA Group is a separately listed public company in Australia and must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance. The Company believes free cash flow available to News Corporation provides a more conservative view of the Company’s free cash flow because this presentation includes only that amount of cash the Company actually receives from REA Group, which has generally been lower than the Company’s unadjusted free cash flow.
A limitation of free cash flow available to News Corporation is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for the limitation of free cash flow available to News Corporation by also relying on the net change in cash and cash equivalents as presented in the Statements of Cash Flows prepared in accordance with GAAP which incorporate all cash movements during the period.
The following table presents a reconciliation of net cash provided by continuing operating activities to free cash flow available to News Corporation:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Net cash provided by continuing operating activities | | $ | 757 | | | $ | 499 | | | $ | 952 | |
Less: Capital expenditures | | | (364 | ) | | | (256 | ) | | | (256 | ) |
| | | | | | | | | | | | |
| | | 393 | | | | 243 | | | | 696 | |
Less: REA Group free cash flow | | | (207 | ) | | | (183 | ) | | | (131 | ) |
Plus: Cash dividends received from REA Group | | | 63 | | | | 53 | | | | 45 | |
| | | | | | | | | | | | |
Free cash flow available to News Corporation | | $ | 249 | | | $ | 113 | | | $ | 610 | |
| | | | | | | | | | | | |
| | | | | | | | | | | |
| For the fiscal years ended
June 30, |
| 2021 | | 2020 |
| (in millions) |
| Net cash provided by operating activities | $ | 1,237 | | | $ | 780 | |
| Less: Capital expenditures | (390) | | | (438) | |
| 847 | | | 342 | |
| Less: REA Group free cash flow | (185) | | | (227) | |
| Plus: Cash dividends received from REA Group | 69 | | | 65 | |
| Free cash flow available to News Corporation | $ | 731 | | | $ | 180 | |
Free cash flow available to News Corporation increased
$136$551 million in the fiscal year ended June 30,
20182021 to
$249$731 million from
$113$180 million in fiscal
20172020, primarily due to higher cash provided by
continuing operating activities as discussed above
partially offset by higherand lower capital expenditures.
Free cash flow available to News Corporation decreased $497 million in the fiscal year ended June 30, 2017 to $113 million from $610 million in fiscal 2016. The decrease was primarily due to lower cash provided by continuing operating activities as discussed above, as well as higher REA Group free cash flow.
As of June 30, 2018,2021, the Company, certain subsidiaries of NXE Australia Pty Limited (the “Foxtel Group” and together with such subsidiaries, the “Foxtel Debt Group”) and REA Group and certain of its subsidiaries (REA Group and certain of its subsidiaries, the “REA Debt Group”) had total borrowings of $1.95$2.31 billion, including the current portion. The Company’sBoth Foxtel and REA Group are consolidated but non wholly-owned subsidiaries of News Corp, and their indebtedness is only guaranteed by members of the Foxtel Debt Group and REA Debt Group, respectively, and is non-recourse to News Corp.
News Corporation Borrowings
As of June 30, 2021, the Company had borrowings as of such date reflect $1.6$985 million. In April 2021, the Company issued $1 billion of outstanding debt incurred by certain subsidiariessenior notes due 2029 (the “2021 Senior Notes”). The 2021 Senior Notes bear interest at a fixed rate of new Foxtel (together with new Foxtel, the “Foxtel Group”) that the Company consolidated upon completion3.875% per annum, payable in cash semi-annually on May 15 and November 15 of the Transaction.each year, commencing November 15, 2021. The notes will mature on May 15, 2029.
Foxtel Group debt includesBorrowings
As of June 30, 2021, the Foxtel Debt Group had (i) borrowings of approximately $914 million, including the full drawdown of its 2019 Term Loan Facility, amounts outstanding under the 2019 Credit Facility and 2017 Working Capital Facility, its outstanding U.S. private placement senior unsecured notes and drawn amounts outstanding under the Telstra Facility (described below), and (ii) total undrawn commitments of A$334 million available under the 2017 Working Capital Facility and 2019 Credit Facility. On April 9, 2021, the Foxtel Debt Group amended its 2019 Credit Facility and 2017 Working Capital Facility to, among other things, extend the debt maturity from November 2022 to May 2024 and reduce the applicable margin to between 2.00% to 3.25%, depending on the Foxtel Debt Group’s net leverage ratio.
In addition to third-party indebtedness, the Foxtel Debt Group has related party indebtedness, including A$900 million of outstanding shareholder loans and available facilities from the Company. The shareholder loans bear interest at a variable rate of the Australian BBSY plus an applicable margin ranging from 6.30% to 7.75% and mature in December 2027. The shareholder revolving credit facilities, with maturitiesfacility bears interest at a variable rate of the Australian BBSY plus an applicable margin ranging from 20192.00% to 3.75%, depending on the Foxtel Debt Group’s net leverage ratio, and matures in July 2024. Approximately $370Additionally, the Foxtel Debt Group has an A$170 million (A$500 million) aggregate principal amount outstanding will mature during fiscal 2019, and the Company expectssubordinated shareholder loan facility agreement with Telstra which can be used to fund these debt repayments primarily with new borrowings.finance cable transmission costs due to Telstra. The Foxtel Group’s borrowings are guaranteed by certain membersTelstra Facility bears interest at a variable rate of the Foxtel Group. In accordance with ASC 805, these debt instruments were recorded at fair value asAustralian BBSY plus an applicable margin of 7.75% and matures in December 2027. The Company excludes the utilization of the Transaction date. DuringTelstra Facility from the fourth quarterStatements of fiscal 2018, the FoxtelCash Flows because it is non-cash.
REA Group
had repayments of $119 million and borrowings of $42 million under its working capital facility.The Company’s borrowings asBorrowings
As of June 30,
2018 also reflect the incurrence2021, REA Group had (i) borrowings of approximately
$53$314 million, consisting of amounts outstanding under its new 2021 Bridge Facility, and (ii) A$107 million of
indebtedness byundrawn commitments available under the 2021 Bridge Facility. In June 2021, REA Group
duringentered into an A$520 million 2021 Bridge Facility due July 2022 (the “2021 Bridge Facility”). Drawdowns under this facility were used to repay and terminate its A$170 million 2019 Credit Facility, while cash on hand was used to repay the
fourth quarterA$70 million 2018 Credit Facility at maturity. The undrawn 2020 Credit Facility and 2020 Overdraft Facility were also terminated. REA Group expects to refinance the 2021 Bridge Facility with a syndicate of loans in the first half of fiscal
2018 to fund the acquisition of Hometrack Australia and the repayment of approximately $93 million (A$120 million) for the first tranche of its A$480 million unsecured revolving loan facility, which matured in December 2017. The second tranche of approximately $89 million (A$120 million) will mature in December 2018, and the Company expects REA Group to fund this debt repayment primarily with cash on hand.2022.
News Corp Revolving Credit Facility
The Company has additional borrowing capacity under itsan undrawn $750 million unsecured $650 million revolving credit facility (the “Facility”“2019 News Corp Credit Facility”), which that can be increased up to a maximum amountused for general corporate purposes, which terminates on December 12, 2024.
All of
$900 million at the Company’s
request. The lenders’ commitments to make the Facility available terminate on October 23, 2020, provided the Company may request that the commitments be extended under certain circumstances for up to two additionalone-year periods. As of the date of this filing, the Company has not borrowed any funds under the Facility. In addition, the Company has $198 million of undrawn commitments under Foxtel Group’s revolving credit facilities.The Company’s borrowings containscontain customary representations, covenants and events of default. The Company was in compliance with all such covenants at June 30, 2018.
2021.
See Note 9—Borrowings in the accompanying Consolidated Financial Statements for further details regarding the Company’s outstanding debt, including certainadditional information about interest rates, maturities covenants and restrictionscovenants related to such debt arrangements.
The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the current and future rights to various assets and services to be used in the normal course of operations.
The following table summarizes the Company’s material firm commitments as of June 30,
2018. | | | | | | | | | | | | | | | | | | | | |
| | | As of June 30, 2018 | |
| | | Payments Due by Period | |
| | | Total | | | Less than
1 year | | | 1-3 years | | | 3-5 years | | | More than
5 years | |
| | | (in millions) | |
Purchase obligations(a) | | $ | 1,165 | | | $ | 505 | | | $ | 409 | | | $ | 168 | | | $ | 83 | |
Sports programming rights(b) | | | 2,316 | | | | 490 | | | | 966 | | | | 750 | | | | 110 | |
Programming costs(c) | | | 239 | | | | 120 | | | | 100 | | | | 19 | | | | — | |
Operating leases(d) | | | | | | | | | | | | | | | | | | | | |
Transmission costs(e) | | | 480 | | | | 66 | | | | 122 | | | | 118 | | | | 174 | |
Land and buildings | | | 1,585 | | | | 168 | | | | 291 | | | | 244 | | | | 882 | |
Plant and machinery | | | 26 | | | | 7 | | | | 10 | | | | 8 | | | | 1 | |
Borrowings(f) | | | 1,937 | | | | 459 | | | | 962 | | | | 373 | | | | 143 | |
Interest payments on borrowings(g) | | | 196 | | | | 19 | | | | 56 | | | | 77 | | | | 44 | |
| | | | | | | | | | | | | | | | | | | | |
Total commitments and contractual obligations | | $ | 7,944 | | | $ | 1,834 | | | $ | 2,916 | | | $ | 1,757 | | | $ | 1,437 | |
| | | | | | | | | | | | | | | | | | | | |
(a) | The Company has commitments under purchase obligations related to minimum subscriber guarantees for license fees, printing contracts, capital projects, marketing agreements, production services and other legally binding commitments.
|
(b) | The Company has sports programming rights commitments with National Rugby League, Australian Football League, Cricket Australia, the domestic football league, and Australian Rugby Union as well as certain other broadcast rights which are payable through fiscal 2024. In April 2018, new Foxtel entered into a sports programming rights agreement with Cricket Australia to broadcast domestic cricket for a six year period from 2018 to 2024. The sports rights commitments are included in the table above. The Company expects to incur approximately $75 million for the domestic cricket rights and other related expenses in fiscal 2019.
|
(c) | The Company has programming rights commitments with various suppliers for programming content.
|
(d) | The Company leases office facilities, warehouse facilities, printing plants, satellite service agreements and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2062. This amount includes approximately $175 million of land and office facilities that have been subleased from 21st Century Fox.
|
(e) | The Company has contractual commitments for satellite transmission services. The transponder services arrangements extend through 2029 and are accounted for as operating leases.
|
(f) | See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
|
(g) | Reflects the Company’s expected future interest payments on borrowings outstanding and interest rates applicable at June 30, 2018. Such rates are subject to change in future periods. See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
|
2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 |
| Payments Due by Period |
| Total | | Less than 1
year | | 1-3 years | | 3-5 years | | More than
5 years |
| (in millions) |
Purchase obligations(a) | $ | 1,042 | | | $ | 444 | | | $ | 402 | | | $ | 106 | | | $ | 90 | |
Sports programming rights(b) | 2,022 | | | 402 | | | 938 | | | 446 | | | 236 | |
Programming costs(c) | 745 | | | 265 | | | 430 | | | 36 | | | 14 | |
Operating leases(d) | | | | | | | | | |
Transmission costs(e) | 207 | | | 30 | | | 54 | | | 37 | | | 86 | |
| Land and buildings | 1,313 | | | 153 | | | 267 | | | 224 | | | 669 | |
| Plant and machinery | 13 | | | 7 | | | 5 | | | 1 | | | — | |
| Finance leases | | | | | | | | | |
Transmission costs(e) | 106 | | | 31 | | | 58 | | | 17 | | | — | |
Borrowings(f) | 2,224 | | | — | | | 824 | | | 340 | | | 1,060 | |
Interest payments on borrowings(g) | 438 | | | 87 | | | 136 | | | 92 | | | 123 | |
| Total commitments and contractual obligations | $ | 8,110 | | | $ | 1,419 | | | $ | 3,114 | | | $ | 1,299 | | | $ | 2,278 | |
________________________
(a)The Company has commitments under purchase obligations related to minimum subscriber guarantees for license fees, printing contracts, capital projects, marketing agreements, production services and other legally binding commitments.
(b)The Company has sports programming rights commitments with the National Rugby League, Australian Football League and Cricket Australia, as well as certain other broadcast rights which are payable through fiscal 2028.
(c)The Company has programming rights commitments with various suppliers for programming content.
(d)The Company leases office facilities, warehouse facilities, printing plants, satellite services and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2048. Amounts reflected represent only the Company’s lease obligations for which it has firm commitments.
(e)The Company has contractual commitments for satellite transmission services. The Company’s satellite transponder services arrangements extend through fiscal 2032 and are accounted for as operating or finance leases, based on the underlying terms of those arrangements.
(f)See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
(g)Reflects the Company’s expected future interest payments on borrowings outstanding and interest rates applicable at June 30, 2021. Such rates are subject to change in future periods. See Note 9—Borrowings in the accompanying Consolidated Financial Statements.
The Company has certain contracts to purchase newsprint, ink and plates that require the Company to purchase a percentage of its total requirements for production. Since the quantities purchased annually under these contracts are not fixed and are based on the Company’s total requirements, the amount of the related payments for these purchases is excluded from the table above.
The table also excludes the Company’s pension obligations, other postretirement benefits (“OPEB”) obligations and the liabilities for unrecognized tax benefits for uncertain tax positions as the Company is unable to reasonably predict the ultimate amount and timing of the commitments. The Company made contributions of $29$35 million and $26$30 million to its pension plans in fiscal 20182021 and fiscal 2017,2020, respectively. Future plan
contributions are dependent upon actual plan asset returns and interest rates and statutory requirements. The Company anticipates that it will make contributions of approximately $17$15 million in fiscal 2019,2022, assuming that actual plan asset returns are consistent with the Company’s expected returns in fiscal 20172021 and beyond, and that interest rates remain constant. The Company will continue to make voluntary contributions as necessary to improve the funded status of the plans. Payments due to participants under the Company’s pension plans are primarily paid out of underlying trusts. Payments due under the Company’s OPEB plans are not required to be funded in advance, but are paid as medical costs are incurred by covered retiree populations, and are principally dependent upon the future cost of retiree medical benefits under the Company’s OPEB plans. The Company expects its OPEB payments to approximate $9$8 million in fiscal 2019.2022. See Note 17—Retirement Benefit Obligations in the accompanying Consolidated Financial Statements.
The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed in Note 16 to16—Commitments and Contingencies in the accompanying Consolidated Financial Statements. The
outcome of these matters and claims is subject to significant uncertainty, and the Company often cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition.
The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. The Company recognizes gain contingencies when the gain becomes realized or realizable. See Note 16—Commitments and Contingencies in the accompanying Consolidated Financial Statements.
The Company’s tax returns are subject to
on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company’s tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress, or as settlements or litigations occur.
CRITICAL ACCOUNTING POLICIES
An accounting policy is considered to be critical if it is important to the Company’s financial condition and results
of operations and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by management of the Company. See Note 2—Summary of Significant Accounting Policies in the accompanying Consolidated Financial Statements.
The Company’s long-lived assets include goodwill, finite-lived and indefinite-lived intangible assets and property, plant and equipment. Assets acquired in business combinations are recorded at their estimated fair value at the date of acquisition. Goodwill is recorded as the difference between the cost of acquiring an entitya business and the estimated fair values assigned to its tangible and identifiable intangible net assets and is assigned to one or more reporting units for purposes of testing for impairment.
Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Identifying reporting units and assigning goodwill to them requires judgment involving the aggregation of business units with similar economic characteristics and the identification of existing business units that benefit from the acquired goodwill. The judgments made in determining the estimated fair value assigned to each class of long-lived assets acquired, their reporting unit, as well as their useful lives can significantly impact net income. The Company allocates goodwill to disposed businesses using the relative fair value method.
Goodwill and Indefinite-lived Intangible Assets
The Company tests goodwill and indefinite-lived
intangiblesintangible assets for impairment on an annual basis in the fourth quarter and at other times if a significant event or change in circumstances indicates that it is more likely than not that the fair value of these assets has been reduced below their carrying value. The Company uses its judgment in assessing whether assets may have become impaired between annual impairment assessments. Indicators such as unexpected adverse economic factors, unanticipated technological
changechanges or competitive activities, loss of key personnel and acts by governments and courts, may signal that an asset has become impaired.
During the third quarter of fiscal 2017, the Company early adoptedASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”(“ASU 2017-04”) which eliminates Step 2 from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.
Under
ASU2017-04,ASC 350, in assessing goodwill for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is not required to perform any additional tests in assessing goodwill for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of a reporting unit with its carrying amount, including goodwill.
In performing the valuation, theThe Company determines the fair value of a reporting unit primarily by using
both a discounted cash flow analysis and market-based valuation
approach methodologies.approach.
Determining fair value requires the exercise of significant judgments, including judgments about appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. During the fourth quarter of fiscal
2018,2021, as part of the Company’s long-range planning process, the Company completed its annual goodwill and indefinite-lived intangible asset impairment test.
The performance of the Company’s annual impairment analysis resulted in
$43 million ofno impairments
ofto goodwill and indefinite-lived intangible assets in fiscal
2018.2021. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from
8.5%-25.0% 8.0% to 22.0%), long-term growth rates (ranging from
(1.0% 0.0% to 3.0%)-3.0%) and royalty rates (ranging from
0.5%-7.5% 0.25% to 6.0%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums
of 10%(ranging from 5.0% to 10.0%).
Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.
The fair valuesAs of the Company’sJune 30, 2021, there were no reporting units in fiscal 2018 exceeded the respective carrying values in a range from approximately 0% to 45%. No material impairments were identified. Any increase in the discount rate or decrease in the projected cash flows terminal growth rate would have resulted in a reporting unit of the News and Information Services segment failing the 2018 impairment analysis, which would have required the company to record an impairment charge equal to the difference between the fair value of the reporting unit and its carrying value. The News and Information Services segment has a reporting unit with goodwill of approximately $170 million at June 30, 2018 that isat-risk for future impairment. The Company will continue to monitor its goodwill for possible future impairment.
Property, Plant and Equipment
The Company evaluates the carrying value of property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable, in accordance with ASC 360, “Property, Plant, and Equipment” (“ASC 360”). An asset group is the lowest level of assets and liabilities for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Events or circumstances that might warrant an impairment recoverability review include, among other things, material declines in operating performance, significant adverse market conditions and planned changes in the use of an asset group.
In determining whether the carrying value of an asset group is recoverable, the Company estimates undiscounted future cash flows over the estimated life of the primary asset of the asset group. The estimates of such future cash flows require estimating such factors as future operating performance, market conditions and the estimated holding period of each asset. If all or a portion of the carrying value of an asset group is found to be
non-recoverable, the Company records an impairment charge equal to the difference between the asset group’s carrying value and its fair value. The Company generally measures fair value by considering sales prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Typical assumptions applied when using a market-based approach include projected EBITDA and related multiples. Typical assumptions applied when using an income approach include projected free cash flows, discount rates and long-term growth rates. All of these assumptions are made by management based on the best available information at the time of the estimates and are subject to deviations from actual results.
Costs incurred in acquiring
programprogramming rights
or producing programs are accounted for in accordance with ASC 920, “Entertainment—Broadcasters.”
ProgramProgramming rights and the related liabilities are recorded at the gross amount of the liabilities when the license period has begun, the cost of the program is determinable and the program is accepted and available for airing. Programming costs are amortized
based on the expected pattern of consumption over the license period or expected useful life of each program.
The pattern of consumption is based primarily on consumer viewership information as well as other factors. If initial airings are expected to generate higher viewership, an accelerated method of amortization is used. The Company monitors its programming amortization policy on an ongoing basis and any impact arising from changes to the policy would be recognized prospectively. The Company regularly reviews its programming assets to ensure they continue to reflect
net realizablefair value.
Any changeChanges in circumstances may result in a write-down of the asset to fair value. The Company has single and multi-year contracts for broadcast rights of sporting events. The costs of sports contracts are primarily charged to expense over the respective season as events are aired. For sports contracts with dedicated channels, the Company amortizes the sports programming rights costs over 12 months.
The Company is subject to income taxes in the U.S. and various foreign jurisdictions in which it operates and records its tax provision for the anticipated tax consequences in its reported results of operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining the Company’s tax expense and in evaluating its tax positions including evaluating uncertainties as promulgated under ASC 740, “Income Taxes.”
The Company’s annual tax rate is based primarily on its geographic income and statutory tax rates in the various jurisdictions in which it operates. Significant management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against the Company’s net deferred tax assets, if any. In assessing the likelihood of realization of deferred tax assets, management considers estimates of the amount and character of future taxable income. The Company’s actual effective tax rate and income tax expense could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, tax planning and the Company’s forecasted financial condition and results of operations in future periods. Although the Company believes
its current estimates are reasonable, actual results could differ from these estimates.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Significant management judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of unrecognized tax benefits to be recorded in the Consolidated Financial Statements. Management
re-evaluates tax positions each period in which new information about recognition or measurement becomes available. The Company’s policy is to recognize, when applicable, interest and penalties on unrecognized income tax benefits as part of Income tax
benefit (expense)
. benefit.
Retirement Benefit Obligations
The Company’s employees participate in various defined benefit pension and postretirement plans sponsored by the Company and its subsidiaries. See Note 17—Retirement Benefit Obligations in the accompanying Consolidated Financial Statements.
The Company records amounts relating to its pension and other postretirement benefit plans based on calculations specified by GAAP. The measurement and recognition of the Company’s pension and other postretirement benefit plans require the use of significant management judgments, including discount rates, expected return on plan assets, mortality and other actuarial assumptions. Net periodic benefit costs (income) is calculated based upon a number of actuarial assumptions, including a discount rate for plan obligations,
and an expected rate of return on plan
assets.assets and mortality rates. Current market conditions, including changes in investment returns and interest rates, were considered in making these assumptions. In developing the expected long-term rate of return, the pension portfolio’s past average rate of returns, and future return expectations of the various asset classes were considered. The weighted average expected long-term rate of return of
4.7%3.7% for fiscal
20192022 is based on a weighted average target asset allocation assumption of
23%20% equities,
65%73% fixed-income securities and
12%7% cash and other investments.
The Company recorded $3 million, $1$(1) million and $8$7 million in net periodic benefit (income) costs (income) in the Statements of Operations for the fiscal years ended June 30, 2018, 20172021 and 2016,2020, respectively. In fiscal 2017,The Company utilizes the Company changed the method usedfull yield-curve approach to estimate the service and interest cost components of net periodic benefit costs (income) for its pension and other postretirement benefit plans. For fiscal 2016, the Company estimated the service and interest cost components of net periodic benefit costs (income) utilizing a single weighted-average discount rate for each country in which the Company has plans derived from a yield curve used to measure the benefit obligation. The new method utilized a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company changed to the new method to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates. The change was accounted for as a change in accounting estimate which was applied prospectively. This change in estimate is not expected to have a material impact on the Company’s pension and postretirement net periodic benefit expense in future periods.
Although the discount rate used for each plan will be established and applied individually, a weighted average discount rate of 3.2%2.1% will be used in calculating the fiscal 20192022 net periodic benefit costs (income). The discount rate reflects the market rate for high-quality fixed-income investments on the Company’s annual measurement date of June 30 and is subject to change each fiscal year. The discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. The rate was determined by matching the Company’s expected benefit payments for the plans to a hypothetical yield curve developed using a portfolio of several hundred high-qualitynon-callable corporate bonds. The weighted average discount rate is volatile from year to year because it is determined based upon the prevailing rates in the U.S., the U.K., Australia and other foreign countries as of the measurement date.
The key assumptions used in developing the Company’s fiscal
2018, 20172021 and
20162020 net periodic benefit costs (income) for its plans consist of the following:
| | | | | | | | | | | | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions, except %) | |
Weighted average assumptions used to determine net periodic benefit costs (income) | | | | | | | | | | | | |
Discount rate for PBO | | | 3.0 | % | | | 3.1 | % | | | 3.9 | % |
Discount rate for Service Cost | | | 3.9 | % | | | 3.1 | % | | | 3.9 | % |
Discount rate for Interest on PBO | | | 2.6 | % | | | 2.6 | % | | | 3.9 | % |
Discount rate for Interest on Service Cost | | | 3.5 | % | | | 2.9 | % | | | 3.9 | % |
Assets: | | | | | | | | | | | | |
Expected rate of return | | | 5.1 | % | | | 5.7 | % | | | 5.7 | % |
Expected return | | $ | 70 | | | $ | 75 | | | $ | 81 | |
Actual return | | $ | 35 | | | $ | 106 | | | $ | 121 | |
| | | | | | | | | | | | |
Gain/(Loss) | | $ | (35 | ) | | $ | 31 | | | $ | 40 | |
One year actual return | | | 3.0 | % | | | 8.2 | % | | | 9.4 | % |
Five year actual return | | | 7.3 | % | | | 8.8 | % | | | 7.7 | % |
| | | | | | | | | | | |
| 2021 | | 2020 |
| (in millions, except %) |
| Weighted average assumptions used to determine net periodic benefit costs (income): | | | |
| Discount rate for PBO | 2.0% | | 2.6% |
| Discount rate for Service Cost | 1.8% | | 2.6% |
| Discount rate for Interest on PBO | 1.6% | | 2.3% |
| Discount rate for Interest on Service Cost | 1.3% | | 2.2% |
| Assets: | | | |
| Expected rate of return | 3.7% | | 4.6% |
| Expected return | $50 | | $59 |
| Actual return | $48 | | $110 |
| (Loss)/gain | $(2) | | $51 |
| One year actual return | 3.7% | | 8.8% |
| Five year actual return | 5.9% | | 7.0% |
The Company will use a weighted average long-term rate of return of
4.7%3.7% for
2019fiscal 2022 based principally on a combination of current asset mix and an expectation of future long term investment returns. The accumulated net
pre-tax losses on the Company’s pension plans as of June 30,
20182021 were approximately
$442$542 million which
decreasedincreased from approximately
$595$529 million for the Company’s pension plans as of June 30,
2017.2020. This
decreaseincrease of
$153$13 million was primarily due to
increased discount rates.currency movements partially offset by unrecognized losses amortized during fiscal 2021. Lower discount rates increase present values of benefit obligations and increase the Company’s deferred losses and also increase subsequent-year benefit costs. Higher discount rates decrease the present values of benefit obligations and reduce the Company’s accumulated net loss and
also decrease subsequent-yearhave a minimal impact on benefit costs. These deferred losses are being systematically recognized in future net periodic benefit costs (income) in accordance with ASC 715, “Compensation—Retirement Benefits.” Unrecognized losses for the primary plans in excess of 10% of the greater of the market-related value of plan assets or the plan’s projected benefit obligation are recognized over the average life expectancy for plan participants for the primary plans.
The Company made contributions of
$29 million, $26$35 million and
$26$30 million to its funded pension plans in fiscal
2018, 20172021 and
2016,2020, respectively. Future plan contributions are dependent upon actual plan asset returns, statutory requirements and interest rate movements. Assuming that actual plan
asset returns are consistent with the Company’s expected
plan returns in fiscal
20182021 and beyond, and that interest rates remain constant, the Company anticipates that it will make contributions of approximately
$17$15 million in fiscal
2019.2022. The Company will continue to make voluntary contributions as necessary to improve the funded status of the plans. See Note 18—Other Postretirement Benefits in the accompanying Consolidated Financial Statements.
Changes in net periodic benefit costs may occur in the future due to changes in the Company’s expected rate of return on plan assets and discount rate resulting from economic events. The following table highlights the
sensitivity of the Company’s pension obligations and expense to changes in these assumptions, assuming all other assumptions remain constant:
| | | | | | | | | | | | | | |
Changes in Assumption | | Impact on Annual
Pension Expense | | Impact on Projected
Benefit Obligation
|
0.25 percentage point decrease in discount rate | | Increase $1 million | | Increase $60$68 million |
0.25 percentage point increase in discount rate | | — Decrease $1 million | | Decrease $54$60 million |
0.25 percentage point decrease in expected rate of return on assets | | Increase $3$4 million | | — |
0.25 percentage point increase in expected rate of return on assets | | Decrease $3$4 million | | — |
Recent Accounting Pronouncements
See Note 2 —Summary2—Summary of Significant Accounting Policies in the accompanying Consolidated Financial Statements.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to different types of market risk including changes in foreign currency rates, interest rates, stock prices and stock prices. credit.
When deemed appropriate, the Company uses derivative financial instruments such as cross currencycross-currency interest rate swaps, interest rate swaps and foreign exchange contracts to hedge certain risk exposures. The primary market risks managed by the Company through the use of derivative instruments include:
•foreign currency exchange rate risk: arising primarily through Foxtel Debt Group borrowings denominated in U.S. dollars, payments for customer premise equipment and certain programming rights; and
•interest rate risk: arising from fixed and floating rate Foxtel Debt Group borrowings. The Company neither holds nor issues financial instruments for trading purposes. The following sections provide quantitative information on the Company’s exposure to foreign currency rate risk, interest rate risk and other relevant market risks. The Company makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.
Foreign Currency
RatesExchange Rate Risk
The Company conducts operations in three principal currencies: the U.S. dollar; the Australian dollar; and the British pound sterling. These currencies operate primarily as the functional currency for the Company’s U.S., Australian and U.K. operations, respectively. Cash is managed centrally within each of the three regions with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, funding in the appropriate local currencies is made available from intercompany capital. The Company does not hedge its investments in the net assets of its Australian and U.K. operations.
Because of fluctuations in exchange rates, the Company is subject to currency translation
exposurerisk on the results of its operations. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to the Company’s reporting currency (the U.S. dollar) for consolidation purposes. The Company does not hedge translation risk because it generally generates positive cash flows from its international operations that are typically reinvested locally. Exchange rates with the most significant impact to
its translation include the Australian dollar and British pound sterling. As exchange rates fluctuate, translation of its Statements of Operations into U.S. dollars affects the comparability of revenues and expenses between years.
The table below details the percentage of revenues and expenses by the three principal currencies for the fiscal years ended June 30,
20182021 and
2017: | | | | | | | | | | | | |
| | | U.S.
Dollars | | | Australian
Dollars | | | British Pound
Sterling | |
Fiscal year ended June 30, 2018 | | | | | | | | | | | | |
Revenues | | | 43 | % | | | 34 | % | | | 18 | % |
Operating and Selling, general, and administrative expenses | | | 44 | % | | | 31 | % | | | 19 | % |
| | | |
Fiscal year ended June 30, 2017 | | | | | | | | | | | | |
Revenues | | | 47 | % | | | 29 | % | | | 19 | % |
Operating and Selling, general, and administrative expenses | | | 47 | % | | | 26 | % | | | 20 | % |
2020:
| | | | | | | | | | | | | | | | | |
| U.S.
Dollars | | Australian
Dollars | | British Pound
Sterling |
| Fiscal year ended June 30, 2021 | | | | | |
| Revenues | 39 | % | | 42 | % | | 15 | % |
| Operating and Selling, general and administrative expenses | 40 | % | | 39 | % | | 16 | % |
| Fiscal year ended June 30, 2020 | | | | | |
| Revenues | 43 | % | | 39 | % | | 15 | % |
| Operating and Selling, general and administrative expenses | 44 | % | | 36 | % | | 16 | % |
Based on the
fiscal year ended June 30,
2018,2021, a one cent change in each of the U.S. dollar/Australian dollar and the U.S. dollar/British pound sterling exchange rates would have impacted revenues by approximately
$39$53 million and
$12$11 million, respectively, for each currency on an annual basis, and would have impacted Total Segment EBITDA by approximately
$8$11 million and $1 million, respectively, on an annual basis.
Derivatives and Hedging
As a result of the Transaction, the Company consolidated Foxtel’s portfolio of debt and derivative instruments.
As of June 30, 2018,2021, the new Foxtel Group operating subsidiaries, whose functional currency is Australian dollars, had $575approximately $354 million aggregate principal amount of outstanding indebtedness denominated in U.S. dollars. The remaining borrowings are denominated in Australian dollars. NewThe Foxtel Group utilizes cross-currency interest rate swaps, designated as both cash flow hedgesderivatives and fair value hedges, to hedge a portion of the exchange rate risk related to
interest and principal payments on its U.S. dollar denominated debt. The total notional value of these cross-currency interest rate swaps designated as cash flow hedgesderivatives and fair value hedges were $296approximately $280 million (A$400 million) and $74$70 million, (A$100 million), respectively, as of June 30, 2018. New2021. Foxtel also has a portfolio of foreign exchange contracts to hedge a portion of the exchange rate risk related to U.S. dollar payments for license fees.customer premise equipment and certain programming rights. The notional value of these foreign exchange contracts was $100$18 million as of June 30, 2018.
In addition to2021.
Some of the derivative instruments thatin place may create volatility during the fiscal year as they are designated and qualify for hedgemarked-to-market according to accounting rules which may result in revaluation gains or losses in different periods from when the Company also uses certain derivatives not designated as accounting hedges to mitigate foreign currency and interest rate risk. Theseimpact on the underlying transactions are referred to as economic hedges. realized.
The
total notional value of cross currency interest rate derivatives was $75 million as of June 30, 2018. Refer to the table below
forprovides further details of the sensitivity of the Company’s
derivative financial instruments which are subject to foreign exchange
risk. | | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
Fair value (Hedge type) | | | | |
Foreign currency derivatives—cash flow hedge asset | | $ | 3 | | | $ | — | |
Sensitivity Analysis | | | | | | | | |
Potential change in fair values resulting from a 10% adverse change in quoted foreign currency exchange rates: loss | | $ | (9 | ) | | $ | — | |
| | |
Fair value (Hedge type) | | | | | | | | |
Cross currency interest rate swaps—fair value hedges asset | | $ | 29 | | | $ | — | |
Cross currency interest rate swaps—cash flow hedges asset | | | 64 | | | | — | |
Cross currency interest rate swaps—economic hedge asset | | | 10 | | | | — | |
| | | | | | | | |
Total cross currency interest rate swap assets, net | | $ | 103 | | | $ | — | |
| | | | | | | | |
Sensitivity Analysis | | | | | | | | |
Potential change in fair values resulting from a 10% adverse change in quoted foreign currency exchange rates: loss | | $ | (55 | ) | | $ | — | |
Potential change in fair values resulting from a 10% adverse change in quoted interest rates: loss | | $ | (2 | ) | | $ | — | |
| | |
Fair value (Hedge type) | | | | | | | | |
Interest rate derivatives—cash flow hedge liability | | $ | 20 | | | $ | — | |
Sensitivity Analysis | | | | | | | | |
Potential change in fair values resulting from a 10% adverse change in quoted interest rates: loss | | $ | (3 | ) | | $ | — | |
rate risk and interest rate risk as of June 30, 2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Notional
Value | | Fair Value | | Sensitivity
from
Adverse
10%
Change in
Foreign
Exchange
Rates | | Sensitivity
from
Adverse
10%
Change in
Interest
Rates |
| Foreign currency derivatives | US$ | 18 | | | US$ | — | | | US$ | (1) | | | n/a |
| Cross currency interest rate swaps | US$ | 350 | | | US$ | 78 | | | US$ | (42) | | | US$ | — | |
| Interest rate derivatives | A$ | 300 | | | US$ | (9) | | | n/a | | US$ | — | |
Any resulting changes in the fair value of the derivative financial instruments may be partially offset by changes in the fair value of certain balance sheet positions (primarily U.S. dollar denominated liabilities) impacted by the change in the foreign exchange rates. The ability to reduce the impact of currency fluctuations on earnings depends on the magnitude of the derivatives compared to the balance sheet positions during each reporting cycle.
The Company’s current financing arrangements and facilities include approximately $650$1,607 million of outstanding fixed-rate debt and approximately $1.3 billion$606 million of outstanding variable-rate bank facilities, before adjustments for unamortized discount and debt issuance costs (See Note 9—Borrowings in the accompanying Consolidated Financial Statements). Fixed and variable-rate debts are impacted differently by changes in interest rates. A change in the market interest rate or yield of fixed-rate debt will only impact the fair market value of such debt, while a change in the market interest rate of variable-rate debt will impact interest expense, as well as the amount of cash required to service such debt. In connection with these borrowings, newthe Foxtel Group has utilized certain derivative instruments to swap U.S. dollar denominated fixed rate interest payments for Australian dollar denominated variable rate.rate payments. As discussed above, newthe Foxtel Group utilizes cross-currency interest rate swaps, designated as both cash flow hedgesderivatives and fair value hedges, to hedge a portion of the interest rate risk related to interest and principal payments on its U.S. dollar denominated debt. The Company has also utilized certain derivative instruments to swap Australian dollar denominated variable interest rate payments for Australian dollar denominated fixed rates.rate payments. As of June 30, 2018,2021, the notional amount of interest rate swap contracts outstanding was $518 million (A$700 million).approximately A$300 million. Refer to the table above for further details of the sensitivity of the Company’s financial instruments which are subject to interest rate risk.
The Company has common stock investments in publicly traded companies that are subject to market price volatility. These investments had an aggregate fair value of approximately
$93$164 million as of June 30,
2018.2021. A hypothetical decrease in the market price of these investments of 10% would result in a decrease in
comprehensive income of approximately
$9$16 million before tax.
Any changes in fair value of the Company’s common stock investments are not recognized unless deemed other-than-temporary.Cash and cash equivalents are maintained with multiple financial institutions. Deposits held with banks may 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.
The Company’s receivables did not represent significant concentrations of credit risk as of June 30,
20182021 or June 30,
20172020 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.
The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of June 30, 2018,2021, the Company did not anticipate nonperformance by any of the counterparties.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting for June 30,
20182021
Management of News Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as
amended.amended, and for the assessment of the effectiveness of internal control over financial reporting. News Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of News Corporation;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;
•provide reasonable assurance that receipts and expenditures of News Corporation are being made only in accordance with authorizations of management and directors of News Corporation; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, the assessment of the effectiveness of internal control over financial reporting was made as of a specific date. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including the Company’s principal executive officer and principal financial officer, conducted an assessment of the effectiveness of News Corporation’s internal control over financial reporting as of June 30,
2018,2021, based on criteria for effective internal control over financial reporting described in the 2013
“Internal“Internal Control—Integrated Framework”Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of News Corporation’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. In accordance with Securities and Exchange Commission guidelines permitting the exclusion of a recently acquired business from management’s assessment of internal control over financial reporting in the year of acquisition, management did not assess the internal controls of
Foxtel, which the Company began consolidating in April 2018. The operationsMortgage Choice, HMH Books & Media and IBD (acquisition dates and related
assets of Foxtel were included indetails can be found within the
consolidated financial statements of News Corporation beginning from the dateOverview of the
transactionCompany’s Businesses in Item 7). The total assets and
total revenues of the acquired businesses constituted approximately
6% of total revenues for the year ended June 30, 2018 and approximately 25%7% of total assets as of June 30,
2018,2021, the majority of which are
goodwill and intangible assets, and
goodwill.less than 1% of total revenues for the fiscal year ended June 30, 2021. Management reviewed the results of its assessment with the Audit Committee of News Corporation’s Board of Directors.
Based on this assessment,
management did not identify any material weakness in the Company’s internal control over financial reporting, and management determined that, as of June 30,
2018,2021, News Corporation maintained effective internal control over financial reporting.
Ernst & Young LLP, the independent registered public accounting firm who audited and reported on the Consolidated Financial Statements of News Corporation included in the Annual Report on Form10-K for the fiscal year ended June 30, 2018,2021, has audited the Company’s internal control over financial reporting. Their report appears on the following page.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of News Corporation:
Opinion on Internal Control over Financial Reporting
We have audited News Corporation’s internal control over financial reporting as of June 30,
2018,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, News Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of June 30,
2018,2021, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control
Overover Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of
Foxtel,Mortgage Choice, HMH Books & Media and IBD, which
isare included in the
20182021 consolidated financial statements of News Corporation and
constituted 25%constitute approximately 7% of total assets as of June 30,
20182021 and
6%less than 1% of total revenues for the year then ended. Our audit of internal control over financial reporting of News Corporation also did not include an evaluation of the internal control over financial reporting of
Foxtel.Mortgage Choice, HMH Books and Media and IBD.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of News Corporation as of June 30,
20182021 and
2017,2020, the related consolidated statements of operations, comprehensive
loss,income (loss), equity and cash flows for each of the three years in the period ended June 30,
2018,2021, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated August
15, 201810, 2021 expressed an unqualified opinion thereon.
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
Overover Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
August 15, 201810, 2021
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of News Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of News Corporation (the Company) as of June 30,
20182021 and
2017,2020, the related consolidated statements of operations, comprehensive
loss,income (loss), equity, and cash flows for each of the three years in the period ended June 30,
2018,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of News Corporation at June 30,
20182021 and
2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30,
2018,2021, in conformity with U.S. generally accepted accounting principles.
We
have also
have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), News Corporation’s internal control over financial reporting as of June 30,
2018,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August
15, 201810, 2021 expressed an unqualified opinion thereon.
These financial statements are the responsibility of
the News Corporation’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Valuation of goodwill and indefinite-lived intangible assets |
| | |
| Description of the Matter | | As reflected in the Company’s consolidated financial statements, at June 30, 2021, the Company’s goodwill was $4,653 million and indefinite-lived intangible assets were $1,057 million. As disclosed in Note 8 to the consolidated financial statements, goodwill and indefinite-lived intangible assets are tested for impairment at least annually or more frequently if indicators of impairment require the performance of an interim impairment assessment. Auditing management’s impairment tests of goodwill and indefinite-lived intangible assets was complex and highly judgmental due to the significant measurement uncertainty in determining the fair values of the reporting units and indefinite-lived intangible assets. In particular, the fair value estimates of the reporting units were sensitive to changes in significant assumptions such as discount rates, revenue growth rates, operating margins, estimated spend on capital expenditures, terminal growth rates and market multiples. The fair value estimates for indefinite-lived intangible assets were sensitive to significant assumptions such as discount rates, revenue growth rates, royalty rates, and terminal growth rates. These assumptions are affected by expected future market or economic conditions, including the impact of COVID-19. |
| | |
| | | | | | | | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and indefinite-lived intangible asset impairment assessment process. For example, we tested controls over the Company’s long range planning process as well as controls over the review of the significant assumptions in estimating the fair values of the reporting units and indefinite-lived intangible assets. To test the fair values of the reporting units and indefinite-lived intangible assets, our audit procedures included assessing methodologies and testing the significant assumptions and underlying data used by the Company. This included forecasted revenue including subscriber and advertising growth, customer churn, and new product launches. We compared the significant assumptions used in the Company’s long range plan, including forecasted revenue and operating margins, to current industry and economic trends, including the impact of COVID-19, while also considering changes in the Company’s business model, customer base and product mix. We assessed the historical accuracy of management’s estimates by comparing past projections to actual performance and assessed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and indefinite-lived intangible assets resulting from changes in the assumptions. We also involved a valuation specialist to assist in evaluating the Company’s models, valuation methodology, and significant assumptions used in the fair value estimates. We tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. |
| | |
| | Assessment of realizability of deferred tax assets |
| | |
| Description of the Matter | | As discussed in Note 19 to the consolidated financial statements, the Company records a valuation allowance based on the assessment of the realizability of the Company’s deferred tax assets. For the year-ended June��30, 2021, the Company had deferred tax assets before valuation allowances of $2.4 billion. Auditing management’s assessment of recoverability of deferred tax assets in the U.S. and non-U.S. jurisdictions involved subjective estimation and complex auditor judgment in determining whether sufficient future taxable income, including projected pre-tax income, will be generated to support the realization of the existing deferred tax assets before expiration. |
| | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s projections of pre-tax income. Among other audit procedures performed, we evaluated the assumptions used by the Company to develop projections of future taxable income, including the pre-tax income, by income tax jurisdiction and tested the completeness and accuracy of the underlying data used in the projections. For example, we compared the projections of pre-tax income with the actual results of prior periods, as well as management’s consideration of current industry and economic trends, including the impact of COVID-19. We also compared the projections of future pre-tax income with other forecasted financial information prepared by the Company. |
We have served as the Company’s auditor since 2012.
August 15, 201810, 2021
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| | | | | | | | | | | | | | | | |
| | | | | | For the fiscal years ended
June 30, | |
| | | Notes | | | 2018 | | | 2017 | | | 2016 | |
Revenues: | | | | | | | | | | | | | | | | |
Advertising | | | | | | $ | 2,799 | | | $ | 2,860 | | | $ | 3,025 | |
Circulation and subscription | | | | | | | 3,021 | | | | 2,470 | | | | 2,569 | |
Consumer | | | | | | | 1,664 | | | | 1,573 | | | | 1,578 | |
Real estate | | | | | | | 858 | | | | 696 | | | | 619 | |
Other | | | | | | | 682 | | | | 540 | | | | 501 | |
| | | | | | | | | | | | | | | | |
Total Revenues | | | | | | | 9,024 | | | | 8,139 | | | | 8,292 | |
Operating expenses | | | | | | | (4,903 | ) | | | (4,529 | ) | | | (4,728 | ) |
Selling, general and administrative | | | | | | | (3,049 | ) | | | (2,725 | ) | | | (2,722 | ) |
NAM Group and Zillow settlements, net | | | 16 | | | | — | | | | — | | | | (158 | ) |
Depreciation and amortization | | | | | | | (472 | ) | | | (449 | ) | | | (505 | ) |
Impairment and restructuring charges | | | 5, 7, 8 | | | | (351 | ) | | | (927 | ) | | | (89 | ) |
Equity (losses) earnings of affiliates | | | 6 | | | | (1,006 | ) | | | (295 | ) | | | 30 | |
Interest, net | | | | | | | (7 | ) | | | 39 | | | | 43 | |
Other, net | | | 21 | | | | (325 | ) | | | 132 | | | | 18 | |
| | | | | | | | | | | | | | | | |
(Loss) income from continuing operations before income tax (expense) benefit | | | | | | | (1,089 | ) | | | (615 | ) | | | 181 | |
Income tax (expense) benefit | | | 19 | | | | (355 | ) | | | (28 | ) | | | 54 | |
| | | | | | | | | | | | | | | | |
(Loss) income from continuing operations | | | | | | | (1,444 | ) | | | (643 | ) | | | 235 | |
Income from discontinued operations, net of tax | | | 4 | | | | — | | | | — | | | | 15 | |
| | | | | | | | | | | | | | | | |
Net (loss) income | | | | | | | (1,444 | ) | | | (643 | ) | | | 250 | |
Less: Net income attributable to noncontrolling interests | | | | | | | (70 | ) | | | (95 | ) | | | (71 | ) |
| | | | | | | | | | | | | | | | |
Net (loss) income attributable to News Corporation stockholders | | | | | | $ | (1,514 | ) | | $ | (738 | ) | | $ | 179 | |
| | | | | | | | | | | | | | | | |
Basic and diluted (loss) earnings per share: | | | 14 | | | | | | | | | | | | | |
(Loss) income from continuing operations available to News Corporation stockholders per share | | | | | | $ | (2.60 | ) | | $ | (1.27 | ) | | $ | 0.28 | |
Income from discontinued operations available to News Corporation stockholders per share | | | | | | | — | | | | — | | | | 0.02 | |
| | | | | | | | | | | | | | | | |
Net (loss) income available to News Corporation stockholders per share | | | | | | $ | (2.60 | ) | | $ | (1.27 | ) | | $ | 0.30 | |
| | | | | | | | | | | | | | | | |
Cash dividends declared per share of common stock | | | | | | $ | 0.20 | | | $ | 0.20 | | | $ | 0.20 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, |
| Notes | | 2021 | | 2020 | | 2019 |
| Revenues: | | | | | | | |
| Circulation and subscription | | | $ | 4,206 | | | $ | 3,857 | | | $ | 4,104 | |
| Advertising | | | 1,594 | | | 2,193 | | | 2,738 | |
| Consumer | | | 1,908 | | | 1,593 | | | 1,679 | |
| Real estate | | | 1,153 | | | 862 | | | 908 | |
| Other | | | 497 | | | 503 | | | 645 | |
| Total Revenues | 3 | | 9,358 | | | 9,008 | | | 10,074 | |
| Operating expenses | | | (4,831) | | | (5,000) | | | (5,639) | |
| Selling, general and administrative | | | (3,254) | | | (2,995) | | | (3,191) | |
| Depreciation and amortization | | | (680) | | | (644) | | | (659) | |
| Impairment and restructuring charges | 5, 7, 8 | | (168) | | | (1,830) | | | (188) | |
| Equity losses of affiliates | 6 | | (65) | | | (47) | | | (17) | |
| Interest expense, net | | | (53) | | | (25) | | | (59) | |
| Other, net | 21 | | 143 | | | 9 | | | 33 | |
| Income (loss) before income tax expense | | | 450 | | | (1,524) | | | 354 | |
| Income tax expense | 19 | | (61) | | | (21) | | | (126) | |
| Net income (loss) | | | 389 | | | (1,545) | | | 228 | |
| Less: Net (income) loss attributable to noncontrolling interests | | | (59) | | | 276 | | | (73) | |
| Net income (loss) attributable to News Corporation stockholders | | | $ | 330 | | | $ | (1,269) | | | $ | 155 | |
| Net income (loss) attributable to News Corporation stockholders per share | 14 | | | | | | |
| Basic | | | $ | 0.56 | | | $ | (2.16) | | | $ | 0.27 | |
| Diluted | | | $ | 0.56 | | | $ | (2.16) | | | $ | 0.26 | |
The accompanying notes are an integral part of these audited consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSSINCOME (LOSS)
(IN MILLIONS)
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
Net (loss) income | | $ | (1,444 | ) | | $ | (643 | ) | | $ | 250 | |
Other comprehensive income (loss): | | | | | | | | | | | | |
Foreign currency translation adjustments | | | (123 | ) | | | 84 | | | | (398 | ) |
Net change in the fair value of cash flow hedges(a) | | | 4 | | | | — | | | | — | |
Unrealized holding (losses) gains on securities, net(b) | | | 27 | | | | (25 | ) | | | 1 | |
Benefit plan adjustments, net(c) | | | 128 | | | | 8 | | | | (32 | ) |
Share of other comprehensive (loss) income from equity affiliates, net(d) | | | 12 | | | | 4 | | | | (16 | ) |
| | | | | | | | | | | | |
Other comprehensive income (loss) | | | 48 | | | | 71 | | | | (445 | ) |
| | | | | | | | | | | | |
Comprehensive loss | | | (1,396 | ) | | | (572 | ) | | | (195 | ) |
| | | | | | | | | | | | |
Less: Net income attributable to noncontrolling interests | | | (70 | ) | | | (95 | ) | | | (71 | ) |
Less: Other comprehensive loss (income) attributable to noncontrolling interests | | | 42 | | | | (9 | ) | | | 1 | |
| | | | | | | | | | | | |
Comprehensive loss attributable to News Corporation stockholders | | $ | (1,424 | ) | | $ | (676 | ) | | $ | (265 | ) |
| | | | | | | | | | | | |
(a) | Net of income tax expense of $2 million, nil and nil for the fiscal year ended June 30, 2018, 2017 and 2016, respectively.
|
(b) | Net of income tax expense (benefit) of $1 million, ($10) million, and nil for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
(c) | Net of income tax expense (benefit) of $28 million, $8 million, and ($14) million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
(d) | Net of income tax expense (benefit) of $5 million, $2 million, and ($7) million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| Net income (loss) | $ | 389 | | | $ | (1,545) | | | $ | 228 | |
| Other comprehensive income (loss): | | | | | |
| Foreign currency translation adjustments | 468 | | | (200) | | | (247) | |
Net change in the fair value of cash flow hedges(a) | (2) | | | (9) | | | 2 | |
| | | | | |
Benefit plan adjustments, net(b) | 2 | | | (42) | | | (43) | |
| | | | | |
| Other comprehensive income (loss) | 468 | | | (251) | | | (288) | |
| Comprehensive income (loss) | 857 | | | (1,796) | | | (60) | |
| Less: Net (income) loss attributable to noncontrolling interests | (59) | | | 276 | | | (73) | |
Less: Other comprehensive (income) loss attributable to noncontrolling interests(c) | (78) | | | 43 | | | 58 | |
| Comprehensive income (loss) attributable to News Corporation stockholders | $ | 720 | | | $ | (1,477) | | | $ | (75) | |
________________________
(a)Net of income tax (benefit) expense of NaN, $(3) million and $1 million for the fiscal years ended June 30, 2021, 2020 and 2019, respectively.
(b)Net of income tax benefit of $1 million, $11 million and $10 million for the fiscal years ended June 30, 2021, 2020 and 2019, respectively.
(c)Primarily consists of foreign currency translation adjustments.
The accompanying notes are an integral part of these audited consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTSAMOUNTS)
| | | | | | | | | | | | | | | | | |
| | | As of June 30, |
| Notes | | 2021 | | 2020 |
| Assets: | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | | | $ | 2,236 | | | $ | 1,517 | |
| Receivables, net | 2 | | 1,498 | | | 1,203 | |
| Inventory, net | | | 253 | | | 348 | |
| Other current assets | | | 469 | | | 393 | |
| Total current assets | | | 4,456 | | | 3,461 | |
| Non-current assets: | | | | | |
| Investments | 6 | | 351 | | | 297 | |
| Property, plant and equipment, net | 7 | | 2,272 | | | 2,256 | |
| Operating lease right-of-use assets | | | 1,035 | | | 1,061 | |
| Intangible assets, net | 8 | | 2,179 | | | 1,864 | |
| Goodwill | 8 | | 4,653 | | | 3,951 | |
| Deferred income tax assets | 19 | | 378 | | | 332 | |
| Other non-current assets | 21 | | 1,447 | | | 1,039 | |
| Total assets | | | $ | 16,771 | | | $ | 14,261 | |
| Liabilities and Equity: | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | | | $ | 321 | | | $ | 351 | |
| Accrued expenses | | | 1,339 | | | 1,019 | |
| Deferred revenue | 3 | | 473 | | | 398 | |
| Current borrowings | 9 | | 28 | | | 76 | |
| Other current liabilities | 21 | | 1,073 | | | 838 | |
| Total current liabilities | | | 3,234 | | | 2,682 | |
| Non-current liabilities: | | | | | |
| Borrowings | 9 | | 2,285 | | | 1,183 | |
| Retirement benefit obligations | 17 | | 211 | | | 277 | |
| Deferred income tax liabilities | 19 | | 260 | | | 258 | |
| Operating lease liabilities | | | 1,116 | | | 1,146 | |
| Other non-current liabilities | | | 519 | | | 326 | |
| Commitments and contingencies | 16 | | 0 | | 0 |
| | | | | |
Class A common stock(a) | | | 4 | | | 4 | |
Class B common stock(b) | | | 2 | | | 2 | |
| Additional paid-in capital | | | 12,057 | | | 12,148 | |
| Accumulated deficit | | | (2,911) | | | (3,241) | |
| Accumulated other comprehensive loss | 21 | | (941) | | | (1,331) | |
| Total News Corporation stockholders’ equity | | | 8,211 | | | 7,582 | |
| Noncontrolling interests | | | 935 | | | 807 | |
| Total equity | | | 9,146 | | | 8,389 | |
| Total liabilities and equity | | | $ | 16,771 | | | $ | 14,261 | |
________________________
(a)Class A common stock, $0.01 par value per share (“Class A Common Stock”) | | | | | | | | | | | | |
| | | | | | As of June 30, | |
| | | Notes | | | 2018 | | | 2017 | |
Assets: | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | $ | 2,034 | | | $ | 2,016 | |
Receivables, net | | | 2 | | | | 1,612 | | | | 1,276 | |
Inventory, net | | | | | | | 376 | | | | 208 | |
Other current assets | | | | | | | 372 | | | | 315 | |
| | | | | | | | | | | | |
Total current assets | | | | | | | 4,394 | | | | 3,815 | |
| | | | | | | | | | | | |
Non-current assets: | | | | | | | | | | | | |
Investments | | | 6 | | | | 393 | | | | 2,027 | |
Property, plant and equipment, net | | | 7 | | | | 2,560 | | | | 1,624 | |
Intangible assets, net | | | 8 | | | | 2,671 | | | | 2,281 | |
Goodwill | | | 8 | | | | 5,218 | | | | 3,838 | |
Deferred income tax assets | | | 19 | | | | 279 | | | | 525 | |
Othernon-current assets | | | 21 | | | | 831 | | | | 442 | |
| | | | | | | | | | | | |
Total assets | | | | | | $ | 16,346 | | | $ | 14,552 | |
| | | | | | | | | | | | |
| | | |
Liabilities and Equity: | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
Accounts payable | | | | | | $ | 605 | | | $ | 222 | |
Accrued expenses | | | | | | | 1,340 | | | | 1,204 | |
Deferred revenue | | | | | | | 516 | | | | 426 | |
Current borrowings | | | 9 | | | | 462 | | | | 103 | |
Other current liabilities | | | 21 | | | | 372 | | | | 497 | |
| | | | | | | | | | | | |
Total current liabilities | | | | | | | 3,295 | | | | 2,452 | |
| | | | | | | | | | | | |
Non-current liabilities: | | | | | | | | | | | | |
Borrowings | | | 9 | | | | 1,490 | | | | 276 | |
Retirement benefit obligations | | | 17 | | | | 245 | | | | 319 | |
Deferred income tax liabilities | | | 19 | | | | 389 | | | | 61 | |
Othernon-current liabilities | | | | | | | 430 | | | | 351 | |
| | | |
Commitments and contingencies | | | 16 | | | | | | | | | |
| | | |
Redeemable preferred stock | | | 10 | | | | 20 | | | | 20 | |
| | | |
Class A common stock(a) | | | | | | | 4 | | | | 4 | |
Class B common stock(b) | | | | | | | 2 | | | | 2 | |
Additionalpaid-in capital | | | | | | | 12,322 | | | | 12,395 | |
Accumulated deficit | | | | | | | (2,163 | ) | | | (648 | ) |
Accumulated other comprehensive loss | | | | | | | (874 | ) | | | (964 | ) |
| | | | | | | | | | | | |
Total News Corporation stockholders’ equity | | | | | | | 9,291 | | | | 10,789 | |
Noncontrolling interests | | | | | | | 1,186 | | | | 284 | |
| | | | | | | | | | | | |
Total equity | | | | | | | 10,477 | | | | 11,073 | |
| | | | | | | | | | | | |
Total liabilities and equity | | | | | | $ | 16,346 | | | $ | 14,552 | |
| | | | | | | | | | | | |
(a) | Class A common stock, $0.01 par value per share (“Class A Common Stock”), 1,500,000,000 shares authorized, 383,385,353 and 382,294,262 shares issued and outstanding, net of 27,368,413 treasury shares at par at June 30, 2018 and June 30, 2017, respectively.
|
(b) | Class B common stock, $0.01 par value per share (“Class B Common Stock”), 750,000,000 shares authorized, 199,630,240 shares issued and outstanding, net of 78,430,424 treasury shares at par at June 30, 2018 and June 30, 2017, respectively.
|
, 1,500,000,000 shares authorized, 391,212,047 and 388,922,752 shares issued and outstanding, net of 27,368,413 treasury shares at par at June 30, 2021 and June 30, 2020, respectively.
(b)Class B common stock, $0.01 par value per share (“Class B Common Stock”), 750,000,000 shares authorized, 199,630,240 shares issued and outstanding, net of 78,430,424 treasury shares at par at June 30, 2021 and June 30, 2020, respectively.
The accompanying notes are an integral part of these audited consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
| | | | | | | | | | | | | | | | |
| | | | | | For the fiscal years ended
June 30, | |
| | | Notes | | | 2018 | | | 2017 | | | 2016 | |
Operating activities: | | | | | | | | | | | | | | | | |
Net (loss) income | | | | | | $ | (1,444 | ) | | $ | (643 | ) | | $ | 250 | |
Less: Income from discontinued operations, net of tax | | | | | | | — | | | | — | | | | 15 | |
| | | | | | | | | | | | | | | | |
(Loss) income from continuing operations | | | | | | | (1,444 | ) | | | (643 | ) | | | 235 | |
Adjustments to reconcile (loss) income from continuing operations to cash provided by operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | 472 | | | | 449 | | | | 505 | |
Equity losses (earnings) of affiliates | | | 6 | | | | 1,006 | | | | 295 | | | | (30 | ) |
Cash distributions received from affiliates | | | | | | | 5 | | | | 4 | | | | 34 | |
Impairment charges | | | 7, 8 | | | | 280 | | | | 785 | | | | — | |
Other, net | | | 21 | | | | 325 | | | | (132 | ) | | | (18 | ) |
Deferred income taxes and taxes payable | | | 19 | | | | 202 | | | | (95 | ) | | | (147 | ) |
Change in operating assets and liabilities, net of acquisitions: | | | | | | | | | | | | | | | | |
Receivables and other assets | | | | | | | (128 | ) | | | (58 | ) | | | 22 | |
Inventories, net | | | | | | | (14 | ) | | | 15 | | | | 35 | |
Accounts payable and other liabilities | | | | | | | 53 | | | | 137 | | | | 58 | |
NAM Group settlement | | | | | | | — | | | | (258 | ) | | | 258 | |
| | | | | | | | | | | | | | | | |
Net cash provided by operating activities from continuing operations | | | | | | | 757 | | | | 499 | | | | 952 | |
Net cash used in operating activities from discontinued operations | | | | | | | — | | | | (5 | ) | | | (74 | ) |
| | | | | | | | | | | | | |
Net cash provided by operating activities | | | | | | | 757 | | | | 494 | | | | 878 | |
Investing activities: | | | | | | | | | | | | | | | | |
Capital expenditures | | | | | | | (364 | ) | | | (256 | ) | | | (256 | ) |
Changes in restricted cash for Wireless Group acquisition | | | | | | | — | | | | 315 | | | | (315 | ) |
Acquisitions, net of cash acquired | | | | | | | (77 | ) | | | (347 | ) | | | (520 | ) |
Investments in equity affiliates and other | | | | | | | (18 | ) | | | (59 | ) | | | (51 | ) |
Other investments | | | | | | | (33 | ) | | | (39 | ) | | | (54 | ) |
Proceeds from business dispositions | | | | | | | 1 | | | | 162 | | | | 1 | |
Proceeds from property, plant and equipment and other asset dispositions | | | | | | | 137 | | | | 109 | | | | 41 | |
Other | | | | | | | 33 | | | | 10 | | | | 30 | |
| | | | | | | | | | | | | | | | |
Net cash used in investing activities from continuing operations | | | | | | | (321 | ) | | | (105 | ) | | | (1,124 | ) |
Net cash provided by investing activities from discontinued operations | | | | | | | — | | | | — | | | | 13 | |
| | | | | | | | | | | | | |
Net cash used in investing activities | | | | | | | (321 | ) | | | (105 | ) | | | (1,111 | ) |
Financing activities: | | | | | | | | | | | | | | | | |
Borrowings | | | 9 | | | | 95 | | | | — | | | | 342 | |
Repayment of borrowings | | | | | | | (213 | ) | | | (23 | ) | | | — | |
Repurchase of shares | | | | | | | — | | | | — | | | | (41 | ) |
Dividends paid | | | | | | | (158 | ) | | | (152 | ) | | | (147 | ) |
Other, net | | | | | | | (122 | ) | | | (42 | ) | | | (4 | ) |
| | | | | | | | | | | | | | | | |
Net cash (used in) provided by financing activities from continuing operations | | | | | | | (398 | ) | | | (217 | ) | | | 150 | |
Net cash used in financing activities from discontinued operations | | | | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
Net cash (used in) provided by financing activities | | | | | | | (398 | ) | | | (217 | ) | | | 150 | |
Net increase (decrease) in cash and cash equivalents | | | | | | | 38 | | | | 172 | | | | (83 | ) |
Cash and cash equivalents, beginning of year | | | | | | | 2,016 | | | | 1,832 | | | | 1,951 | |
Exchange movement on opening cash balance | | | | | | | (20 | ) | | | 12 | | | | (36 | ) |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of year | | | | | | $ | 2,034 | | | $ | 2,016 | | | $ | 1,832 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, |
| Notes | | 2021 | | 2020 | | 2019 |
| Operating activities: | | | | | | | |
| Net income (loss) | | | $ | 389 | | | $ | (1,545) | | | $ | 228 | |
| | | | | | | |
| | | | | | | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | |
| Depreciation and amortization | | | 680 | | | 644 | | | 659 | |
| Operating lease expense | 10 | | 128 | | | 160 | | | 0 | |
| Equity losses of affiliates | 6 | | 65 | | | 47 | | | 17 | |
| Cash distributions received from affiliates | | | 15 | | | 7 | | | 32 | |
| Impairment charges | 7,8 | | 0 | | | 1,690 | | | 96 | |
| Other, net | 21 | | (143) | | | (9) | | | (33) | |
| Deferred income taxes and taxes payable | 19 | | (100) | | | (51) | | | 0 | |
| Change in operating assets and liabilities, net of acquisitions: | | | | | | | |
| Receivables and other assets | | | (166) | | | (1,470) | | | 134 | |
| Inventories, net | | | 6 | | | 9 | | | (58) | |
| Accounts payable and other liabilities | | | 363 | | | 1,298 | | | (147) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net cash provided by operating activities | | | 1,237 | | | 780 | | | 928 | |
| Investing activities: | | | | | | | |
| Capital expenditures | | | (390) | | | (438) | | | (572) | |
| Acquisitions, net of cash acquired | | | (886) | | | (32) | | | (188) | |
| Investments in equity affiliates and other | | | (26) | | | (8) | | | (4) | |
| Other investments | | | (13) | | | 11 | | | (34) | |
| Proceeds from property, plant and equipment and other asset dispositions | | | 24 | | | 36 | | | 103 | |
| Other, net | | | (1) | | | 4 | | | 18 | |
| | | | | | | |
| | | | | | | |
| Net cash used in investing activities | | | (1,292) | | | (427) | | | (677) | |
| Financing activities: | | | | | | | |
| Borrowings | 9 | | 1,515 | | | 926 | | | 681 | |
| Repayment of borrowings | 9 | | (557) | | | (1,226) | | | (1,116) | |
| Dividends paid | | | (163) | | | (158) | | | (161) | |
| Other, net | | | (96) | | | (14) | | | (14) | |
| | | | | | | |
| | | | | | | |
| Net cash provided by (used in) financing activities | | | 699 | | | (472) | | | (610) | |
| Net change in cash and cash equivalents | | | 644 | | | (119) | | | (359) | |
| Cash and cash equivalents, beginning of year | | | 1,517 | | | 1,643 | | | 2,034 | |
| Exchange movement on opening cash balance | | | 75 | | | (7) | | | (32) | |
| Cash and cash equivalents, end of year | | | $ | 2,236 | | | $ | 1,517 | | | $ | 1,643 | |
The accompanying notes are an integral part of these audited consolidated financial statements.
CONSOLIDATED STATEMENTS OF EQUITY
(IN MILLIONS)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class A
Common Stock | | | Class B
Common Stock | | | Additional
Paid-in
Capital | | | Retained
Earnings
(Accumulated
Deficit) | | | Accumulated
Other
Comprehensive
(Loss) Income | | | Total News
Corporation
Equity | | | Noncontrolling
Interests | | | Total
Equity | |
| | | Shares | | | Amount | | | Shares | | | Amount | |
Balance, June 30, 2015 | | | 382 | | | $ | 4 | | | | 200 | | | $ | 2 | | | $ | 12,433 | | | $ | 88 | | | $ | (582 | ) | | $ | 11,945 | | | $ | 171 | | | $ | 12,116 | |
Net income | | | — | | | | — | | | | — | | | | — | | | | — | | | | 179 | | | | — | | | | 179 | | | | 71 | | | | 250 | |
Other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (444 | ) | | | (444 | ) | | | (1 | ) | | | (445 | ) |
Dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | (118 | ) | | | — | | | | (118 | ) | | | (29 | ) | | | (147 | ) |
Share repurchases | | | (3 | ) | | | — | | | | — | | | | — | | | | (39 | ) | | | — | | | | — | | | | (39 | ) | | | — | | | | (39 | ) |
Other | | | 1 | | | | — | | | | — | | | | — | | | | 40 | | | | 1 | | | | — | | | | 41 | | | | 6 | | | | 47 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2016 | | | 380 | | | | 4 | | | | 200 | | | | 2 | | | | 12,434 | | | | 150 | | | | (1,026 | ) | | | 11,564 | | | | 218 | | | | 11,782 | |
Net (loss) income | | | — | | | | — | | | | — | | | | — | | | | — | | | | (738 | ) | | | — | | | | (738 | ) | | | 95 | | | | (643 | ) |
Other comprehensive income | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 62 | | | | 62 | | | | 9 | | | | 71 | |
Dividends | | | — | | | | — | | | | — | | | | — | | | | (58 | ) | | | (60 | ) | | | — | | | | (118 | ) | | | (34 | ) | | | (152 | ) |
Other | | | 2 | | | | — | | | | — | | | | — | | | | 19 | | | | — | | | | — | | | | 19 | | | | (4 | ) | | | 15 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2017 | | | 382 | | | | 4 | | | | 200 | | | | 2 | | | | 12,395 | | | | (648 | ) | | | (964 | ) | | | 10,789 | | | | 284 | | | | 11,073 | |
Net (loss) income | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,514 | ) | | | — | | | | (1,514 | ) | | | 70 | | | | (1,444 | ) |
Other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 90 | | | | 90 | | | | (42 | ) | | | 48 | |
Foxtel transaction(a) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 914 | | | | 914 | |
Dividends | | | — | | | | — | | | | — | | | | — | | | | (119 | ) | | | — | | | | — | | | | (119 | ) | | | (39 | ) | | | (158 | ) |
Other | | | 1 | | | | — | | | | — | | | | — | | | | 46 | | | | (1 | ) | | | — | | | | 45 | | | | (1 | ) | | | 44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2018 | | | 383 | | | $ | 4 | | | | 200 | | | $ | 2 | | | $ | 12,322 | | | $ | (2,163 | ) | | $ | (874 | ) | | $ | 9,291 | | | $ | 1,186 | | | $ | 10,477 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | See Note 3—Acquisitions, Disposals and Other Transactions.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A
Common Stock | | Class B
Common Stock | | Additional
Paid-in
Capital | | Accumulated
Deficit | | Accumulated
Other
Comprehensive
Loss | | Total News
Corporation
Equity | | Noncontrolling
Interests | | Total
Equity |
| Shares | | Amount | | Shares | | Amount | |
| Balance, June 30, 2018 | 383 | | | $ | 4 | | | 200 | | | $ | 2 | | | $ | 12,322 | | | $ | (2,163) | | | $ | (874) | | | $ | 9,291 | | | $ | 1,186 | | | $ | 10,477 | |
| Cumulative impact from adoption of new accounting standards | — | | | — | | | — | | | — | | | — | | | 32 | | | (22) | | | 10 | | | 10 | | | 20 | |
| Net income | — | | | — | | | — | | | — | | | — | | | 155 | | | — | | | 155 | | | 73 | | | 228 | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (230) | | | (230) | | | (58) | | | (288) | |
| Dividends | — | | | — | | | — | | | — | | | (117) | | | — | | | — | | | (117) | | | (44) | | | (161) | |
| Other | 3 | | | — | | | — | | | — | | | 38 | | | (3) | | | — | | | 35 | | | — | | | 35 | |
| Balance, June 30, 2019 | 386 | | | 4 | | | 200 | | | 2 | | | 12,243 | | | (1,979) | | | (1,126) | | | 9,144 | | | 1,167 | | | 10,311 | |
| Cumulative impact from adoption of new accounting standards | — | | | — | | | — | | | — | | | — | | | 6 | | | 3 | | | 9 | | | — | | | 9 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | (1,269) | | | — | | | (1,269) | | | (276) | | | (1,545) | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | — | | | (208) | | | (208) | | | (43) | | | (251) | |
| Dividends | | | — | | | — | | | — | | | (117) | | | — | | | — | | | (117) | | | (41) | | | (158) | |
| Other | 3 | | | — | | | — | | | — | | | 22 | | | 1 | | | — | | | 23 | | | — | | | 23 | |
| Balance, June 30, 2020 | 389 | | | 4 | | | 200 | | | 2 | | | 12,148 | | | (3,241) | | | (1,331) | | | 7,582 | | | 807 | | | 8,389 | |
| | | | | | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | — | | | — | | | 330 | | | — | | | 330 | | | 59 | | | 389 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 390 | | | 390 | | | 78 | | | 468 | |
| Dividends | — | | | — | | | — | | | — | | | (118) | | | — | | | — | | | (118) | | | (45) | | | (163) | |
| Other | 2 | | | — | | | — | | | — | | | 27 | | | 0 | | | — | | | 27 | | | 36 | | | 63 | |
| Balance, June 30, 2021 | 391 | | | 4 | | | 200 | | | 2 | | | 12,057 | | | (2,911) | | | (941) | | | 8,211 | | | 935 | | | 9,146 | |
The accompanying notes are an integral part of these audited consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
News Corporation (together with its subsidiaries, “News Corporation,” “News Corp,” the “Company,” “we,”“we” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including: digital real estate services, subscription video services in Australia, news and information services and book publishing, digital real estate servicespublishing.
During the three months ended June 30, 2020, in connection with the Company's sale of its News America Marketing reporting unit and
subscription video services in Australia.In April 2018, News Corp and Telstra Corporation Limited (“Telstra”) combined their respective 50% interests in Foxtel and News Corp’s 100% interest in FOX SPORTS Australia into a new company, whichits annual review of its reportable segments, the Company refersdetermined to disaggregate its Dow Jones operating segment as “new Foxtel” (the “Transaction”a separate reportable segment in accordance with Accounting Standard Codification (“ASC”). 280, “Segment Reporting.” Previously, the financial information for this operating segment was aggregated with the businesses within the News Media operating segment and, together, formed the News and Information Services reportable segment. Following the completionsale of the Transaction,its News Corp owns a 65% interest in the combinedAmerica Marketing business with Telstra owning the remaining 35%. Consequently, the Company began consolidating Foxtel in the fourth quarter of fiscal 2018. See Note 3—Acquisitions, Disposals2020 and Other Transactions; Note 6—Investments; Note 8—Goodwill; Note 9—Borrowings;in conjunction with the Company’s annual budgeting process, the Company determined that aggregation was no longer appropriate as certain of the remaining businesses no longer shared similar economic characteristics. As a result, the Company has revised its historical disclosures to reflect the new Dow Jones and Note 11—Financial Instruments and Fair Value Measurements.
News Media reportable segments for all years presented.
The accompanying consolidated financial statements of the Company, which are referred to herein as the “Consolidated Financial Statements,” have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company’s financial statements as of and for the fiscal years ended June 30,
2018, 20172021, 2020 and
20162019 are presented on a consolidated basis.
The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are referred to herein as the “Statements of Cash Flows.”
The Company maintains a 52-53 week fiscal year ending on the Sunday closest to June 30 in each year. Fiscal 2018,2021, fiscal 20172020 and fiscal 20162019 each included 52 52 and 53 weeks, respectively.weeks. All references to the fiscal years ended June 30, 2018, 2017,2021, 2020 and 20162019 relate to the fiscal years ended July 1, 2018, July 2, 2017,June 27, 2021, June 28, 2020 and July 3, 2016,June 30, 2019, respectively. For convenience purposes, the Company continues to date its consolidated financial statements as of June 30.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The Consolidated Financial Statements include the accounts of all majority-owned and controlled subsidiaries. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities (“VIEs”) as defined by Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”)ASC 810-10, “Consolidation” (“ASC
810-10”) and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. All significant intercompany accounts and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees.
Changes in the Company’s ownership interest in a consolidated subsidiary where a controlling financial interest is retained are accounted for as capital transactions. When the Company ceases to have a controlling interest in a consolidated subsidiary the Company will recognize a gain or loss in the Statements of Operations upon deconsolidation.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reclassifications
Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current fiscal year presentation, including inventory and current borrowings.
Use of estimates
The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Consolidated Financial Statements and accompanying disclosures. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and other investments that are readily convertible into cash with original maturities of three months or less. The Company’s cash and cash equivalents balance as of June 30, 20182021 and 20172020 also includes $86
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$128 million and
$276$153 million, respectively, which is not readily accessible by the Company as it is held by REA Group Limited (“REA Group”), a majority owned but separately listed public company. REA Group must declare a dividend in order for the Company to have access to its share of REA Group’s cash balance.
The Company classifies cash as restricted when the cash is unavailable for use in its general operations. The Company had no0 restricted cash as of June 30, 20182021 and 2017.
2020.
Concentration of credit risk
Cash and cash equivalents are maintained with multiple 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.
Receivables are presented net of
an allowance for returns and doubtful accounts,allowances, which
is an estimate of amounts that may not be collectible. In determining the allowance for returns, management analyzes historical returns, current economic trends and changes in customer demand and acceptance ofreflect the Company’s
products. Basedexpected credit losses based on
this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return. The allowancehistorical experience as well as current and expected economic conditions. Allowance for doubtful accounts is
estimatedcalculated by pooling receivables with similar credit risks such as the level of delinquency, types of products or services and geographical locations and reflects the Company’s expected credit losses based on historical experience
receivable aging,as well as current
and expected economic
trends and specific identification of certain receivables that are at risk of not being collected.conditions.
Receivables, net consist of:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Receivables | | $ | 1,829 | | | $ | 1,484 | |
Allowances for sales returns | | | (171 | ) | | | (166 | ) |
Allowances for doubtful accounts | | | (46 | ) | | | (42 | ) |
| | | | | | | | |
Receivables, net | | $ | 1,612 | | | $ | 1,276 | |
| | | | | | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Receivables | $ | 1,569 | | | $ | 1,276 | |
| Less: allowances | (71) | | | (73) | |
| Receivables, net | $ | 1,498 | | | $ | 1,203 | |
The Company’s receivables did not represent significant concentrations of credit risk as of June 30,
20182021 or June 30,
20172020 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.
Inventory primarily consists of programming rights, books, newsprint and printing ink. Program rights are recorded at the lower of amortized cost or net realizable value. In accordance with ASC 920, “Entertainment-Broadcasters,“Entertainment—Broadcasters,” programming rights and the related liabilities are recorded at the gross amount of the liabilities when the license period has begun, the cost of the program is determinable and the program is accepted and available for airing. Programming costs incurred in acquiring program rights are capitalized and amortized based on the expected pattern of consumption over the license period or expected useful life of each program. If estimatesThe pattern of future cash flowsconsumption is based primarily on consumer viewership information as well as other factors. The Company regularly reviews its programming assets to ensure they continue to reflect fair value. Changes in circumstances may result in a write-down of the asset to fair value.
The Company’s programming rights are
insufficient to support the carrying value or if theresubstantially all monetized as a film group. The amortization expense of programming costs, which is
no plan to broadcast certain programming, an impairment charge is recognizedreflected within Operating expenses in the
Consolidated Financial Statements.Statements of Operations, was $262 million for the fiscal year ended June 30, 2021. Approximately $139 million, $54 million and $22 million of the unamortized programming costs as of June 30, 2021 are expected to be amortized in each of the fiscal years ending June 30, 2022, 2023 and 2024, respectively.
Inventory for books
newsprint and
printing inknewsprint are valued at the lower of cost or
market.net realizable value. Cost for
non-programming inventory is determined by the weighted average cost method. The Company records a reserve for excess and obsolete inventory based upon a calculation using the historical usage rates, sales patterns of its products and specifically identified obsolete inventory.
The Company makes investments in various businesses in the normal course of business. The Company evaluates its relationships with other entities to identify whether they are VIEs in accordance with ASC810-10 and whether the Company is the primary beneficiary. In determining whether the Company is the primary beneficiary of a VIE, it assesses whether it has the power to direct matters that most significantly impact the activities of the VIE and has the obligation to absorb losses or the right to receive
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
benefits from the VIE that could potentially be significant to the VIE. The Company would consolidate any investments in which it was determined to be the primary beneficiary of a VIE.
Investments in and advances to equity investments or joint ventures in which the Company has significant influence, but is not the primary beneficiary, and has less than a controlling voting interest, are accounted for using the equity method. Significant influence is generally presumed to exist when the Company owns an interest between 20% and 50% or when the Company has the ability to exercise significant influence. Under the equity method of accounting, the Company includes its investments and amounts due to and from
its equity methodsuch investments in its Balance Sheets. The Company’s Statements of Operations include the Company’s share of the investees’ earnings (losses) and the Company’s Statements of Cash Flows include all cash received from or paid to the investee.
The difference between the Company’s investment and its share of the fair value of the underlying net
tangible assets of the investee upon acquisition is first allocated to either finite-lived intangibles, indefinite-lived intangibles or other assets and liabilities and the balance is attributed to goodwill. The Company follows ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), which requires that equity method finite-lived intangibles be amortized over their estimated useful life. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. Indefinite-lived intangibles and goodwill are not amortized.
Investments in which the Company has no significant influence (generally less than a 20% ownership interest) or does not have the ability to exercise significant influence are designated asavailable-for-sale investments ifaccounted for in accordance with ASC 825-10, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASC 825-10”). Gains and losses on equity securities with readily determinable fair market values are available. The Company reportsavailable-for-sale investmentsrecorded in Other, net in the Statement of Operations. Equity securities without readily determinable fair market values are valued at cost, less any impairment, plus or minus changes in fair value based on quoted market prices. Unrealized gains and losses onavailable-for-sale investments are included
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
resulting from observable price changes in Accumulated other comprehensive loss, netorderly transactions for an identical or similar investment of applicable taxes and other adjustments, until the investment is sold or considered impaired. If an investment’s fair value is not readily determinable, the Company accounts for its investment at cost.
same issuer. See Note 6—Investments.
Financial instruments and derivatives
The carrying value of the Company’s financial instruments, including cash and cash equivalents, approximate fair value. The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange,
ortrading in an
over-the-counter market which are considered to be Level 2
measurements or unobservable inputs that require the Company to use its own best estimates about market participant assumptions which are considered to be Level 3 measurements.
The Company did not estimate the fair value of certain cost method investments because it was not practicable to do so.See Note 11—Financial Instruments and Fair Value Measurements.
ASC 815, “Derivatives and Hedging” (“ASC 815”) requires derivative instruments to be recorded on the balance sheet at fair value as either an asset or a liability. ASC 815 also requires that changes in the fair value of recorded derivatives be recognized currently in the Statements of Operations unless specific hedge accounting criteria are met.
For derivatives that will be accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. On an ongoing basis, the Company
formally assesses whether the financial instruments used in hedging transactions continue to be
highly effective.
The ineffective portion of a financial instrument’s change in fair value is immediately recognized in the Statement of Operations.The Company determines the fair values of its derivatives using standard valuation models. The notional amounts of the derivative financial instruments do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of the Company’s exposure to the financial
risks described above.risks. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates and foreign currency exchange rates. The Company does not view the fair values of its derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying hedged transactions or other exposures. All of the Company’s derivatives are
over-the-counter instruments with liquid markets. The carrying values of the derivatives reflect the impact of master netting agreements which allow the Company to net settle positive and negative positions with the same counterparty. As the Company does not intend to settle any derivatives at their net positions, derivative instruments are presented gross in the Balance Sheets.
See Note 11—Financial Instruments and Fair Value Measurements.
The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of June 30,
2018,2021, the Company did not anticipate nonperformance by any of the counterparties.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cash flow hedges are used to mitigate the Company’s exposure to variability in cash flows that is attributable to particular risk associated with a highly probable forecasted transaction or a recognized asset or liability which could affect income or expenses. The effective portion of the gain or loss on the hedging instrument is recognized directly in Accumulated other comprehensive income, while the ineffective portion is recognized in the Statements of Operations.loss. Amounts recorded in Accumulated other comprehensive incomeloss are recognized in the Statements of Operations when the hedged forecasted transaction impacts income or if the forecasted transaction is no longer expected to occur.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Upon adoption of Accounting Standards Update (“ASU”) 2017-12 in fiscal 2020, the Company reclassified $5 million in gains from Accumulated deficit to Accumulated other comprehensive loss related to amounts previously recorded for the ineffective portion of outstanding derivative instruments designated as cash flow hedges. During the fiscal years ended June 30, 2021 and 2020, the Company excluded the cross-currency basis spread from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.
Fair value hedges are used to mitigate the Company’s exposure to changes in the fair value of a recognized asset or liability, or an identified portion thereof that is attributable to a particular risk and could affect income or expenses. The hedged item is adjusted for gains and losses attributable to the risk being hedged and the derivative is remeasured to fair value. The Company records the changes in the fair value of these items in the Statements of Operations.
Derivatives not designated as accounting hedge relationships
or for which hedge accounting has been discontinued are referred to as economic hedges. Economic hedges are those derivatives which the Company uses to mitigate
theirits exposure to variability in the cash flows of a
forecastforecasted transaction or the fair value of a recognized asset or liability, but which do not qualify for hedge accounting in accordance with ASC 815.
When a derivative is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, the Company discontinues hedge accounting prospectively. The economic hedges are adjusted to fair value each period in
Other, net in the Statements of Operations.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over an estimated useful life of
32 to 50 years. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or the life of the lease. Costs associated with the repair and maintenance of property, plant and equipment are expensed as incurred. Changes in circumstances, such as technological advances or changes to the Company’s business model or capital strategy, could result in the actual useful lives differing from the Company’s estimates. In those cases where the Company determines that the useful life of buildings and equipment should be changed, the Company would depreciate the asset over its revised remaining useful life, thereby increasing or decreasing depreciation expense.
Operating
Leases
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria.
The Company’s operating leases primarily consist of real estate, including office space, warehouse space and printing facilities, and satellite transponders for purposes of providing its subscription video services to consumers and its finance leases consist of satellite transponders. For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the applicable lease terms.
TheFor finance leases, lease expense consists of the depreciation of the right-of-use asset, as well as interest expense recognized on the lease liability based on the effective interest method using the rate implicit in the lease or the Company's incremental borrowing rate. A lease's term
used for straight-line rent expense is calculated beginningbegins on the date that the Company obtains possession of the leased premises
and goes through the expected lease termination date.
See Note 10—Leases.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In accordance with ASC
350–40“Internal-use350-40, “Internal-use Software,” the Company capitalizes certain costs incurred in connection with developing or obtaining
internal-use software. Costs incurred in the preliminary project stage are expensed. All direct costs incurred to develop
internal-use software during the development stage are capitalized and amortized using the straight-line method over the estimated useful life, generally 2 to
1013 years. Costs such as maintenance and training are expensed as incurred. Research and development costs are also expensed as incurred.
In accordance with ASC 350-24, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”, the Company evaluates upfront costs, including implementation, set-up or other costs (collectively, “implementation costs”), for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized as prepaid assets within Other Current Assets in the Balance Sheet. Capitalized implementation costs are amortized on a straight-line basis over the expected term of the hosting arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewals. Amortization of capitalized implementation costs is included in the same line item in the Statements of Operations as the expense for fees for the associated hosting arrangement.
Royalty advances to authors
Royalty advances are initially capitalized and subsequently expensed as related revenues are earned or when the Company determines future recovery is not probable. The Company has a long history of providing authors with royalty advances, and it tracks each advance earned with respect to the sale of the related publication. Historically, the longer the unearned portion of the advance remains outstanding, the less likely it is that the
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Company will recover the advance through the sale of the publication. The Company applies this historical experience to its existing outstanding royalty advances to estimate the likelihood of recovery and a provision is established towrite-off the unearned advance, usually between 612 and 1224 months after publication.initial publication of the first format. Additionally, the Company reviews its portfolio of royalty advances for unpublished titles to determine if individual royalty advances are not recoverable for discrete reasons, such as the death of an author prior to completion of a title or titles, a Company decision to not publish a title, poor market demand or other relevant factors that could impact recoverability. Based on this information, the portion of any advance that the Company believes is not recoverable is expensed.
Goodwill and intangible assets
The Company has goodwill and intangible assets, including trademarks and tradenames, newspaper mastheads,
distribution networks, publishing imprints, radio broadcast licenses, publishing rights and customer relationships. Goodwill is recorded as the difference between the cost of acquiring entities or businesses and amounts assigned to their tangible and identifiable intangible net assets. In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually during the fourth quarter for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair values below their carrying amounts. Intangible assets with finite lives are amortized over their estimated useful lives.
Goodwill is reviewed for impairment at a reporting unit level. Reporting units are determined based on an evaluation of the Company’s operating segments and the components making up those operating segments. For purposes of its goodwill impairment review, the Company has identified Dow Jones, the Australian newspapers, the U.K. newspapers, News America Marketing, Unruly Holdings Limited (“Unruly”)the New York Post, Storyful Limited (“Storyful”), Wireless Group plc (“Wireless Group)Group”), newthe Foxtel AustraliaGroup, Australian News Channel Pty Ltd (“ANC”), HarperCollins, REA Group and Move, Inc. (“Move”), as its reporting units. During the third quarter of fiscal 2017, the Company early adoptedASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”(“ASU 2017-04”) which eliminates Step 2 from the goodwill impairment test and instead requires an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit
In accordance with
its carrying amount and to recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.Under ASU2017-04,ASC 350, in assessing goodwill for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is not required to perform any additional tests in assessing goodwill for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of a reporting unit with its carrying amount, including goodwill. If through a quantitative analysis the Company determines the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not to be impaired. If the Company concludes that the fair value of the reporting unit is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company also performs impairment reviews on its indefinite-lived intangible assets, including trademarks and tradenames, newspaper mastheads, distribution networks, publishing imprints and radio broadcast licenses. Newspaper mastheads and book publishing imprints are reviewed on an aggregated basis in accordance with ASC 350. Distribution networks, trademarksTrademarks and tradenames and radio broadcast licenses are reviewed
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
individually. In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through a quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.
The methods used to estimate the fair value measurements of the Company’s reporting units and indefinite-lived intangible assets include those based on the income approach (including the discounted cash flow, relief-from-royalty and excess earnings methods) and those based on the market approach (primarily the guideline public company method). The resulting fair value measurements of the assets are considered to be Level 3 measurements. Determining fair value requires the exercise of significant judgments, including judgments about appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s estimated outlook and various growth rates are assumed for years beyond the long-term business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable public company trading values.
When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method.
Loans and borrowings are initially recognized at the fair value of the consideration received. Transaction costs are recorded within current borrowings (current portion) and
non-current borrowings (long-term portion) in the Consolidated Balance Sheets. They are subsequently recognized at amortized cost using the effective interest method. Debt may be considered extinguished when it has been modified and the terms of the new debt instruments and old debt instruments are substantially different, as that term is defined in the debt modification guidance in ASC
470-50 “Debt—Modifications and
Extinguishments”.Extinguishments.” The Company classifies the current portion of long term debt as
non-current liabilities on the Balance Sheets when it has the intent and ability to refinance the obligation on a long-term basis, in accordance with ASC
470-50 470 “Debt.”
Retirement benefit obligations
The Company provides defined benefit pension, postretirement healthcare and defined contribution benefits to the Company’s eligible employees and retirees. The Company accounts for its defined benefit pension, postretirement healthcare and defined contribution plans in accordance with ASC 715, “Compensation—Retirement Benefits” (“ASC 715”). The expense recognized by the Company is determined using certain assumptions, including the discount rate, expected long-term rate of return of pension assets and mortality rates, among others. The Company recognizes the funded status of its defined benefit plans (other than multiemployer plans) as an asset or liability in the Balance Sheets and recognizes changes in the funded status in the year in which the changes occur through Accumulated other comprehensive loss in the Balance Sheets. The Company recognizes the other non-service cost components of net periodic benefit (income) cost in Other, net in the Statements of Operations.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value measurements
The Company has various financial instruments that are measured at fair value on a recurring basis, including certain marketable securities and derivatives. The Company also applies the provisions of fair value measurement to variousnon-recurring measurements for the Company’snon-financial assets and liabilities. With the exception of investments measured using the net asset value per share practical expedient prescribed inASU 2015-07, accordance with ASC 820, “Fair Value Measurements” (“ASC 820”)” or ASC 825-10
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
described above, the Company measures assets and liabilities in accordance with ASC 820,
“Fair Value Measurements” (“ASC 820”), using inputs from the following three levels of the fair value hierarchy: (i) inputs that are quoted prices in active markets for identical assets or liabilities (“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) unobservable inputs that require the entity to use its own best estimates about market participant assumptions (“Level 3”).
See Note 11—Financial Instruments and Fair Value Measurements.
The Company’s assets measured at fair value on a nonrecurring basis include investments, long-lived assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually
as of June 30during the fourth quarter for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements.
Equity method investments are regularly reviewed to determine whether a significant event or change in circumstances has occurred that may impact the fair value of each investment. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of time and extent to which the market value has been below cost, the financial condition and near-term prospects of the issuer, the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value and other factors influencing the fair market value, such as general market conditions.
The Company regularly reviewsavailable-for-sale investment securities for other-than-temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security.
The Company regularly reviews investments accounted for at cost for other-than-temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related estimated fair value, the duration of the estimated fair value decline, the Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security.
ASC 360, “Property, Plant, and Equipment” (“ASC 360”) and ASC 350 require the Company to periodically review the carrying amounts of its long-lived assets, including property, plant and equipment and finite-lived intangible assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment adjustment is recognized if the carrying value of such asset exceeds its
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
fair value. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is necessary to estimate the fair value of assets,assets; accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less their costs to sell.
The Company accounts for treasury stock using the cost method. Upon the retirement of treasury stock, the Company allocates the value of treasury shares between common stock, additional
paid-in capital and retained earnings. All shares repurchased to date have been retired.
See Note 12—Stockholders' Equity.
Revenue recognition
Revenue
Circulation and subscription revenues
Circulation and subscription revenues include subscription and single-copy sales of digital and print news products, information services subscription revenues and pay television broadcast and streaming subscription revenues. Circulation revenues are based on the number of copies of the printed news products (through home-delivery subscriptions and single-copy sales) and/or digital subscriptions sold, and the associated rates charged to the customers. Single-copy revenue is recognized when persuasive evidenceat a point in time on the date the news products are sold to distribution outlets, net of an arrangement exists,provisions for related returns.
Revenues from home delivery and digital subscriptions are recognized over the
feessubscription term as the news products and/or digital subscriptions are
fixed or determinable, the product or service has been delivered and collectability is reasonably assured. The Company considers the terms of each arrangement to determine the appropriate accounting treatment.News anddelivered. Information Services
Advertisingservices subscription revenues are recognized over time as the subscriptions are delivered. Payments from subscribers are generally due at the beginning of the month and are recorded as deferred revenue. Such amounts are recognized as revenue as the associated subscription is delivered.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue generated from subscriptions to receive pay television broadcast, streaming, broadband and phone services for residential and commercial subscribers is recognized over time on a monthly basis as the services are provided. Payment is generally received monthly in advance of providing services, and is deferred upon receipt. Such amounts are recognized as revenue as the related services are provided.
Advertising revenues
Revenue from print advertising is recognized at the point in time the print advertisement is published. Broadcast advertising revenue is recognized over the time that the broadcast advertisement is aired. For impressions-based digital advertising, revenues are recognized as impressions are delivered over the term of the arrangement, while revenue from non-impressions-based digital advertising is recognized over the period when advertising is printed, broadcast or placed on digital platforms,that the advertisements are displayed. Such amounts are recognized net of agency commissions and provisions for estimated sales incentives, including rebates, rate adjustments andor discounts.
Advertising revenues earned from integrated marketing services are recognized at the point in time when free-standing inserts are published or over the time period in whichpublished. Revenues earned from in-store marketing services are performed. partially recognized upon installation, with the remaining revenue recognized over the in-store campaign.
The Company enters into transactions that involve the exchange of advertising, in part, for other products and services, which are recorded at the estimated fair value of the product or service received. If the fair value of the product or service received cannot be reliably determined, the value is measured indirectly by reference to the standalone selling price of the advertising provided by the Company. Revenue from nonmonetary transactions is recognized when services are performed, and expenses are recognized when products are received or services are incurred.
Billings to clients and payments received in advance of
the performance of services or delivery of products are recorded as deferred revenue until the services are performed or the product is delivered.
Circulation Payment for advertising services is typically due shortly after the Company has satisfied its performance obligation to print, broadcast or place the advertising specified in the contract. For advertising campaigns that extend beyond one month, the Company generally invoices the advertiser in arrears based on the number of advertisements that were printed, broadcast or placed, or impressions delivered during the month.
Consumer revenues
Revenue from the sale of physical books and information services revenues include single-copyelectronic books (“e-books”) is recognized at the point in time of physical receipt by the customer or electronic delivery. Such amounts are recorded net of provisions for returns and subscription revenues. Circulation revenuespayments to customers. If the Company prohibits its customer from selling a physical book until a future date, it recognizes revenue when that restriction lapses.
Revenue is recognized net of any amounts billed to customers for taxes remitted to government authorities. Payments for the sale of physical books and e-books are generally collected within one to three months of sale or delivery and are based on the number of copiesphysical books or e-books sold.
Real Estate revenues
Real estate revenues are derived from the sale of digital real estate listing and lead generation products and advanced client management and reporting products, as well as services to agents, brokers and developers. Revenue is typically recognized over the contractual period during which the services are provided. Payments are generally due monthly over the subscription term.
The Company also provides certain leads to agents and brokers at no upfront cost with the Company receiving a portion of the printed newspaper (through home-delivery subscriptions and single-copy sales) and digital subscriptions sold andagent sales commission at the rates charged totime a home transaction is closed. As the respective customers. Single-copyamount of revenues is based on several factors outside of the Company’s control including home prices, revenue is recognized based on date of publication, net of provisions for related returns. Proceeds from printwhen a real estate transaction is closed and digital information services subscriptionany variability no longer exists.
Other revenues
are deferred at the time of sale and are recognized in earnings on a pro rata basis over the terms of the subscriptions. Other revenues are recognized when the related services are performed or the product has been delivered.
Book Publishing
Revenue from the sale
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Advertising revenues are recognized in the period when
Contracts with multiple performance obligations
The Company has certain revenue contracts which contain multiple performance obligations such as print and digital advertising
is placed onbundles, digital
platforms, net of commissions and
provisions for estimated sales incentives including rebates, rate adjustmentsprint newspaper subscription bundles and
discounts.Subscription revenues from licensing of advanced reporting products are typically recognized ratably over thebundled video service period of the related subscription.
Subscription Video Services
Subscriber revenue is primarily earned from pay television broadcast services. Revenue is recognized in the period that the services are provided.Non-refundable subscriptions billed before the underlying service is provided to the customer are recorded as deferred revenue in the Consolidated Balance Sheets. This revenue is then recognized over the service period. Advertising revenues are recognized, net of agency commissions, in the period that the advertisements are aired.
Prior to the completion of the Transaction, affiliate fees received from cable television systems, direct broadcast satellite operators and other distribution systems were recognized as revenue in the period that services were provided.
Multiple element arrangements
subscriptions. Revenues derived from a single sales contractcontracts that containscontain multiple products and services are allocated based on the relative fair valuestandalone selling price of each itemperformance obligation to be delivered and recognized in accordance with the applicable revenue recognition criteriadelivered. Standalone selling price is typically determined based on prices charged to customers for the specific unitsame or similar goods or services on a standalone basis. If observable standalone prices are not available, the Company estimates standalone selling price by maximizing the use of accounting.
Grossobservable inputs to most accurately reflect the price of each individual performance obligation. Revenue is recognized as each performance obligation included in the contract is satisfied.
Identification of a customer and gross versus net revenue recognition
In the normal course of business, the Company acts as or uses an intermediary or agent in executing transactions with third parties. In connection with these arrangements,When the intermediary or agent is determined to be the Company’s customer, the Company must determine whether to reportrecords revenue based on the gross amount billedit expects to the ultimate customer or on the net amount receivedreceive from the customer after commissions andagent or intermediary.
In other
payments to third parties.Thecircumstances, the determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as a principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. The determination of whether the Company is acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of the arrangement. The Company serves as the principal in transactions in which it has substantial riskscontrols the goods or services prior to being transferred to the ultimate customer.
Sales returns
Certain of the Company’s products, such as books and
rewardsnewspapers, are sold with the right of
ownership.return. The Company records the estimated impact of such returns as a reduction of revenue. To estimate product sales that will be returned and the related products that are expected to be placed back into inventory, the Company analyzes historical returns, current economic trends, changes in customer demand and acceptance of the Company’s products. Based on this information, the Company reserves a percentage of each dollar of product sales that provide the customer with the right of return.
Subscriber acquisition costs
Costs related to the acquisition of subscription video service customers primarily consist of amounts paid for third-party customer acquisitions, which consist of the cost of commissions paid to authorized retailers and dealers for subscribers added through their respective distribution channels and the cost of hardware and installation subsidies for subscribers. All costs, including hardware, installation and commissions, are expensed upon activation, except where legal ownership of the equipment is retained, in which case the cost of the equipment and direct and indirect installation costs are capitalized and depreciated over the respective useful life.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Barter transactions
The Company enters into transactions that involve the exchange of advertising, in part, for other products and services, which are recorded at the lesser of estimated fair value of the advertising given or product or service received in accordance with the provisions of ASC605-20-25, “Advertising Barter Transactions.” Revenue from barter transactions is recognized when advertising is provided, and expenses are recognized when products are received or services are incurred.
Sales returns
Consistent with industry practice, certain of the Company’s products, such as books and newspapers, are sold with the right of return. The Company records, as a reduction of revenue, the estimated impact of such returns. In determining the estimate of product sales that will be returned, management analyzes historical returns, current economic trends, changes in customer demand and acceptance of the Company’s products. Based on this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return.
Advertising expenses
The Company expenses advertising costs as incurred in accordance with ASC
720-35, “Other Expenses—Advertising Cost.” Advertising and promotional expenses recognized totaled
$663$550 million,
$587$525 million and
$607$669 million for the fiscal years ended June 30,
2018, 20172021, 2020 and
2016,2019, respectively.
Costs incurred for shipping and handling are reflected in Operating expenses in the Statements of Operations.
Translation of foreign currencies
The financial results and position of foreign subsidiaries and affiliates are translated into U.S. dollars using the current rate method, whereby operating results are converted at the average rate of exchange for the period and assets and liabilities are converted at the closing rates on the period end date. The resulting translation adjustments are accumulated as a component of
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accumulated other comprehensive loss. Gains and losses from foreign currency transactions are generally included in income for the period.
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established where management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense.
The Company has not provided for taxes on undistributed earnings attributable to certain foreign subsidiaries. It is the Company’s intention to reinvest in these subsidiaries indefinitely as the Company does not anticipate the need to repatriate funds to satisfy domestic liquidity needs. An actual repatriation from these subsidiaries could be subject to foreign withholding taxes and U.S. state taxes. Calculation of the unrecognized tax liabilities is not practicable.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Following the enactment of the Tax Act (See Note 19—Income Taxes), the Company has elected to account for the tax on GILTI as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax. However, the Company has considered the potential impact of GILTI and BEAT on its U.S. federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions. As such, the Company has recorded a valuation allowance on its U.S. federal NOL carryforward for the reduction in the projected tax benefit upon utilization.
Earnings (loss) per share
Basic earnings (loss) per share for Class A Common Stock and Class B Common Stock is calculated by dividing Net income (loss)
availableattributable to News Corporation stockholders by the weighted average number of shares of Class A Common Stock and Class B Common Stock
outstanding.outstanding during the period. Diluted earnings (loss) per share for Class A Common Stock and Class B Common Stock is calculated similarly, except that the calculation includes the dilutive effect of the assumed issuance of shares issuable under the Company’s equity-based compensation plans. See Note 14—Earnings (Loss) Per Share.
Equity-based compensation
Equity-based awards are accounted for in accordance with ASC 718, “Compensation—Stock Compensation” (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the Consolidated Financial Statements. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-based payment transactions with employees.
Recently Issued Accounting Pronouncements
Adopted
In March 2016, the issued Accounting Standards Update (“ASU”)2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU2016-09”). The amendments in ASU2016-09 address several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU2016-09 is effective for the Company for annual and interim reporting periods beginning July 1, 2017. The adoption did not have a material impact on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (“ASU2016-16”). The amendments in ASU2016-16 require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in ASU2016-16 eliminate the exception for an intra-entity transfer of an asset other than inventory. As permitted by ASU2016-16, the Company early-adopted this standard on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings to reduce complexity in financial reporting. The adjustment did not have a material impact on the Company’s consolidated financial statements.
In March 2018, the FASB issued ASU2018-05—Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU2018-05”). ASU2018-05 provides guidance for companies related to the U.S. government-enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). ASU2018-05 allows 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. The Company’s accounting for the tax effects of the Tax Act will be completed during this measurement period.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Issued
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU2014-09”). ASU2014-09 removes inconsistencies and differences in existing revenue recognition requirements between GAAP and International Financial Reporting Standards and requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU2015-14, delaying the effective date for adoption. ASU2014-09 is now effective for interim and annual reporting periods beginning after July 1, 2018, however, early adoption is permitted. Once effective, the Company can elect to apply ASU2014-09 retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initial adoption recognized at the date of initial application. The Company has determined that it will adopt ASU2014-09 using a modified retrospective approach.
The FASB has also issued several standards which provide additional clarification and implementation guidance on the previously issued ASU2014-09 and have the same effective date as the original standard.
The Company is working to finalize its evaluation of the impact of ASU2014-09 on its consolidated financial statements, however based on the preliminary conclusions reached to date, the Company believes the adoption of ASU2014-09 will not have a material impact. The Company’s implementation team, including external advisers, continues to finalize the Company’s assessment of ASU2014-09 across its various business units and geographies. In addition, the Company is still in the process of finalizing the assessment of the adoption of the new standard with Foxtel, following the consolidation of the business in the fourth quarter of fiscal 2018 (See Note 3—Acquisitions, Disposals and Other Transactions). Discussions regarding changes to the Company’s current accounting policies and practices remain ongoing and preliminary conclusions are subject to change. Based on the current guidance, the new framework will become effective on a modified retrospective basis for the Company on July 1, 2018.
In January 2016, the FASB issued ASU2016-01, “Financial Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU2016-01”). The amendments in ASU2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU2016-01 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. As of June 30, 2018, the Company had $93 million inavailable-for-sale securities with net unrealized gains of $16 million and $127 million in cost method investments. In accordance with ASU2016-01, the cumulative net unrealized gains (losses) contained within Accumulated other comprehensive loss will be reclassified through Retained earnings as of July 1, 2018, and changes in the fair value ofavailable-for-sale securities will be recorded in the Company’s Statement of Operations beginning July 1, 2018. The Company is evaluating the impact ASU2016-01 may have on its cost method investments.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)” (“ASU2016-02”). The amendments in ASU2016-02 address certain aspects in lease accounting, with the most significant impact for lessees. The amendments in ASU2016-02 require lessees to recognize all leases on the balance sheet by recording aright-of-use asset and a lease liability, and lessor accounting has been updated to align with the new requirements for lessees. The new standard also provides changes to the existing sale-leaseback guidance. ASU2016-02 is effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company is currently evaluating the impact ASU2016-02 will have on its consolidated financial statements.
In June 2016, the FASB issued ASU2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU2016-13”). The amendments in ASU2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount
expected to be collected. The Company adopted the amendments in ASU 2016-13 on a modified retrospective basis as of July 1, 2020 and the adoption did not have a material effect on the Company's Consolidated Financial Statements.In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. The Company adopted the amendments to disclosure requirements in ASU 2018-13 on a prospective basis as of July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.
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 (a consensus of the Emerging Issues Task Force)” (“ASU 2019-02”). The amendments in ASU 2019-02 align the impairment model in Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350) with the fair value model in Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20). The
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
expected
Company adopted the amendments in ASU 2019-02 on a prospective basis as of July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements. Refer to be collected.Note 21—Additional Financial Information for further discussion.
Issued
In December 2019, the FASB issued ASU
2016-13 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The amendments in ASU 2019-12 remove certain exceptions to the general principles in Topic 740 and simplify other areas of Topic 740 including the accounting for and recognition of intraperiod tax allocation, deferred tax liabilities for outside basis differences for certain foreign subsidiaries, year-to-date losses in interim periods, deferred tax assets for goodwill in business combinations and franchise taxes in income tax expense. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July 1,
2020. The Company is currently evaluating the impact ASU2016-13 will have on its consolidated financial statements.In March 2017, the FASB issued ASU2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU2017-07”). The amendments in ASU2017-07 require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs715-30-35-4 and715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. ASU2017-07 is effective for the Company for annual and interim reporting periods beginning July 1, 2018.2021, with early adoption permitted. The Company does not expect the adoption of ASU2017-07to have a significant impactmaterial effect on its consolidated financial statements.
In August 2017,Consolidated Financial Statements.
NOTE 3. REVENUES
On July 1, 2018, the FASB issued ASU2017-12, “DerivativesCompany adopted ASC 606 “Revenue from Contracts with Customers” (“ASC 606”) on a modified retrospective basis for all contracts which were not completed as of the adoption date. Under ASC 606, revenue is recognized when or as the Company satisfies its respective performance obligations under each contract. The Company recorded a $20 million decrease to Accumulated deficit as of July 1, 2018 to reflect the cumulative impact of its adoption of ASC 606.
Disaggregated revenue
The following tables present the Company’s disaggregated revenues by type and Hedging (Topic 815): Targeted Improvementssegment for the fiscal years ended June 30, 2021, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal year ended June 30, 2021 |
| Digital Real Estate Services | | Subscription Video Services | | Dow Jones | | Book Publishing | | News Media | | Other | | Total Revenues |
| (in millions) |
| Revenues: | | | | | | | | | | | | | |
| Circulation and subscription | $ | 25 | | | $ | 1,825 | | | $ | 1,296 | | | $ | 0 | | | $ | 1,060 | | | $ | 0 | | | $ | 4,206 | |
| Advertising | 126 | | | 210 | | | 373 | | | 0 | | | 885 | | | 0 | | | 1,594 | |
| Consumer | 0 | | | 0 | | | 0 | | | 1,908 | | | 0 | | | 0 | | | 1,908 | |
| Real estate | 1,153 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,153 | |
| Other | 89 | | | 37 | | | 33 | | | 77 | | | 260 | | | 1 | | | 497 | |
| Total Revenues | $ | 1,393 | | | $ | 2,072 | | | $ | 1,702 | | | $ | 1,985 | | | $ | 2,205 | | | $ | 1 | | | $ | 9,358 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal year ended June 30, 2020 |
| Digital Real Estate Services | | Subscription Video Services | | Dow Jones | | Book Publishing | | News Media | | Other | | Total Revenues |
| (in millions) |
| Revenues: | | | | | | | | | | | | | |
| Circulation and subscription | $ | 36 | | | $ | 1,673 | | | $ | 1,191 | | | $ | 0 | | | $ | 956 | | | $ | 1 | | | $ | 3,857 | |
| Advertising | 98 | | | 174 | | | 359 | | | 0 | | | 1,562 | | | 0 | | | 2,193 | |
| Consumer | 0 | | | 0 | | | 0 | | | 1,593 | | | 0 | | | 0 | | | 1,593 | |
| Real estate | 862 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 862 | |
| Other | 69 | | | 37 | | | 40 | | | 73 | | | 283 | | | 1 | | | 503 | |
| Total Revenues | $ | 1,065 | | | $ | 1,884 | | | $ | 1,590 | | | $ | 1,666 | | | $ | 2,801 | | | $ | 2 | | | $ | 9,008 | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the fiscal year ended June 30, 2019 |
| Digital Real Estate Services | | Subscription Video Services | | Dow Jones | | Book Publishing | | News Media | | Other | | Total Revenues |
| (in millions) |
| Revenues: | | | | | | | | | | | | | |
| Circulation and subscription | $ | 49 | | | $ | 1,926 | | | $ | 1,120 | | | $ | 0 | | | $ | 1,008 | | | $ | 1 | | | $ | 4,104 | |
| Advertising | 122 | | | 215 | | | 393 | | | 0 | | | 2,007 | | | 1 | | | 2,738 | |
| Consumer | 0 | | | 0 | | | 0 | | | 1,679 | | | 0 | | | 0 | | | 1,679 | |
| Real estate | 908 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 908 | |
| Other | 80 | | | 61 | | | 36 | | | 75 | | | 392 | | | 1 | | | 645 | |
| Total Revenues | $ | 1,159 | | | $ | 2,202 | | | $ | 1,549 | | | $ | 1,754 | | | $ | 3,407 | | | $ | 3 | | | $ | 10,074 | |
Contract liabilities and assets
The Company’s deferred revenue balance primarily relates to Accountingamounts received from customers for Hedging Activities” (“ASU2017-12”).subscriptions paid in advance of the services being provided. The amendments in ASU2017-12 more closely align the results of cash flow and fair value hedge accounting with risk management activities throughfollowing table presents changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments address specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. ASU2017-12 is effectivedeferred revenue balance for the fiscal years ended June 30, 2021 and 2020:
| | | | | | | | | | | |
| For the fiscal year ended June 30, |
| 2021 | | 2020 |
| (in millions) |
| Beginning balance | $ | 398 | | | $ | 428 | |
| Deferral of revenue | 3,152 | | | 3,091 | |
Recognition of deferred revenue (a) | (3,109) | | | (3,064) | |
Other (b) | 32 | | | (57) | |
| Ending balance | $ | 473 | | | $ | 398 | |
________________________
(a)For the fiscal years ended June 30, 2021 and 2020, the Company recognized approximately $381 million and $384 million, respectively, of revenue which was included in the opening deferred revenue balance.
(b)For the fiscal year ended June 30, 2021, includes $16 million of deferred revenue acquired as a result of the acquisition of IBD. For the fiscal year ended June 30, 2020, the Company disposed of $51 million of deferred revenue in connection with the sale of News America Marketing. See Note 4—Acquisitions, Disposals and Other Transactions.
Contract assets were immaterial for annualdisclosure as of June 30, 2021 and interim reporting periods beginning July 1, 2019. 2020.
Other revenue disclosures
The Company
typically expenses sales commissions incurred to obtain a customer contract as those amounts are incurred as the amortization period is
currently evaluating12 months or less. These costs are recorded within Selling, general and administrative in the
impact ASU2017-12 will have on its consolidated financial statements.In February 2018,Statements of Operations. The Company also does not capitalize significant financing components when the FASB issued ASU2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassificationtransfer of Certain Tax Effects from Accumulated Other Comprehensive Income”(“ASU 2018-02”). The amendments provide a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. Consequently,good or service is paid within 12 months or less, or the amendments eliminatereceipt of consideration is received within 12 months or less of the stranded tax effects resulting fromtransfer of the Tax Act and will improvegood or service.
During the usefulness of information reported to financial statement users. ASU2018-02 is effective forfiscal year ended June 30, 2021, the Company recognized approximately $392 million in revenues related to performance obligations that were satisfied or partially satisfied in a prior reporting period. The remaining transaction price related to unsatisfied performance obligations as of June 30, 2021 was approximately $820 million, of which approximately $302 million is expected to be recognized during fiscal 2022, $244 million is expected to be recognized in fiscal 2023 and $169 million is expected to be recognized in fiscal 2024, with the remainder to be recognized thereafter. These amounts do not include (i) contracts with an expected duration of one year or less, (ii) contracts for annualwhich variable consideration is determined based on the customer’s subsequent sale or usage and interim reporting periods beginning July 1, 2019. The Company is currently evaluating(iii) variable consideration allocated to performance obligations accounted for under the impact ASU2018-02 will have on its consolidated financial statements.series guidance that meets the allocation objective under ASC 606.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3.4. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS
Fiscal
2018Hometrack Australia Pty Ltd
2021
Avail
In June 2018, REA GroupDecember 2020, the Company acquired Hometrack Australia Pty LtdRentalutions, Inc. (“Hometrack Australia”Avail”) for A$130initial cash consideration of approximately $36 million, (approximately $100 million) in cash, which was funded with a mixnet of $4 million of cash on handacquired, and debt of A$70up to $8 million (approximately $53 million). Hometrack Australia is a provider of property data services to the financial sector and allows REA Group to deliver more property data and insights to its customers. Under the acquisition method of accounting, the totalin future cash consideration is allocated to net tangible assets and identifiable intangible assets based upon the fair value asachievement of the date of completion of the acquisition. The excess of the total considerationcertain performance objectives over the fair value of the net tangible assets and identifiable intangible assets acquired was recorded as goodwill. The
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Company recorded approximately $25 million of intangible assets consisting of technology, primarily associated with the Hometrack.com website, and customer relationships which have useful lives of 8 years and 15 years, respectively.next three years. The Company recorded a $4 million liability related to the contingent consideration, representing the estimated fair value. Included in the initial cash consideration was approximately $74$6 million of goodwill onthat is being held back to satisfy post-closing claims. Avail is a platform that improves the transaction. Hometrack Australiarenting experience for do-it-yourself landlords and tenants with online tools, educational content and world-class support. The acquisition helps realtor.com® further expand into the rental space, extend its support for landlords, augment current rental listing content, grow its audience and build brand affinity and long-term relationships with renters. Avail is a subsidiary of REA GroupMove, and its results are included within the Digital Real Estate Services segment. The values assigned
As a result of the acquisition, the Company recorded approximately $7 million related to the technology platform with a weighted average useful life of five years. In accordance with ASC 350, the excess of the total consideration over the fair values of the net tangible and intangible assets of approximately $32 million was recorded as goodwill on the transaction.
Elara
In December 2020, the Company acquired
assetsa controlling interest in Elara Technologies Pte. Ltd. (“Elara”) through a subscription for newly-issued preference shares and
liabilities are based on estimatesthe buyout of
certain minority shareholders. The total aggregate purchase price associated with the acquisition at the completion date is $138 million which primarily consists of $69 million of cash, the fair value
available as of
noncontrolling interests of $37 million and the
date of this filing and will be adjusted upon completion of final valuations of certain assets and liabilities. Any changes in these fair
values could potentially result in an adjustment to the goodwill recorded for this transaction.New Foxtel
In April 2018, News Corp and Telstra combined their respective 50% interests in Foxtel and News Corp’s 100% interest in FOX SPORTS Australia into a new company (the “Transaction”). Following the completion of the Transaction, News Corp owns a 65% interest in the combined business, with Telstra owning the remaining 35%. Consequently, the Company began consolidating Foxtel in the fourth quarter of fiscal 2018. The combination allows Foxtel and FOX SPORTS Australia to leverage their media platforms and content to improve services for consumers and advertisers. The results of new Foxtel are reported within the Subscription Video Services segment (formerly the Cable Network Programming segment), and new Foxtel is considered a separate reporting unit for purposesvalue of the Company’s annual goodwill impairment review.
previously held equity interest in Elara of $22 million. The Transactionacquisition of Elara was accounted for in accordance with ASC 805 “Business Combinations” (“ASC 805”)Combinations,” which requires the Company tore-measure its previously held equity interest in FoxtelElara at its Transaction completionacquisition date fair value. The carrying amount of the Company’s previously held equity interest in FoxtelElara was equal to its fair value as of the Transaction completion date, as$15 million and, accordingly, the Company wrote its investmentrecognized a gain on remeasurement of $7 million which was recorded in Foxtel down to fair value during the third quarter of fiscal 2018. In accordance with ASC 805, as the Company did not relinquish control of its investment in FOX SPORTS Australia, the reductionOther, net in the Company’s ownership interest to 65% was accounted for as a common control transaction on a carryover basis. See Note 6—Investments.
The total aggregate purchase price associated with the Transaction at the completion date is set forth below (in millions):
| | | | |
Consideration transferred(a) | | $ | 331 | |
Fair value of News Corp previously held equity interest in Foxtel | | | 631 | |
Fair value of noncontrolling interest(b) | | | 578 | |
| | | | |
Fair value of net assets | | $ | 1,540 | |
| | | | |
a) | Primarily represents the fair value of 35% of FOX SPORTS Australia exchanged as consideration in the Transaction and has been included in noncontrolling interest
|
b) | Primarily represents the fair value of 35% of Foxtel, which includes the impact of certain market participant synergies
|
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Under the acquisition methodStatement of accounting, the aggregate purchase price, based on a valuation of 100% of Foxtel, was allocated to net tangible and intangible assets based upon their fair value as of the date of completion of the Transaction. The excess of the aggregate purchase price over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The allocation is as follows (in millions):
| | | | |
Assets acquired: | | | | |
Cash | | $ | 78 | |
Current assets | | | 526 | |
Property, plant and equipment | | | 967 | |
Intangible assets | | | 868 | |
Goodwill | | | 1,574 | |
Othernon-current assets | | | 292 | |
| | | | |
Total assets acquired | | $ | 4,305 | |
| | | | |
Liabilities assumed: | | | | |
Current liabilities | | $ | 609 | |
Long-term borrowings | | | 1,751 | |
Othernon-current liabilities | | | 405 | |
| | | | |
Total liabilities assumed | | | 2,765 | |
| | | | |
Net assets acquired | | $ | 1,540 | |
| | | | |
Operations.
As a result of the
Transaction,transactions, REA Group’s shareholding in Elara increased from 13.5% to 59.7%, while News Corporation’s shareholding increased from 22.1% to 39.0%. During the three months ended March 31, 2021, REA Group acquired an additional 0.8% interest in Elara. REA Group and News Corporation now hold all Elara board seats, and the Company
recorded tangible assets of approximately $849 million, excluding long-term borrowings, primarily consisting of property, plant and equipment which mainly relatebegan consolidating Elara in December 2020. The Company’s ownership in REA Group was diluted by 0.2% to
digital set top units and installations and technical equipment, as well as accounts receivable, inventory, accounts payable and accruals at their estimated fair values at the completion date of the Transaction. The Company recorded outstanding borrowings of approximately $1.8 billion,61.4% as a result of the
Transaction. See Note 9—Borrowings.In addition,transactions. Subsequent to June 30, 2021, REA Group provided additional funding to Elara in exchange for further equity which increased REA Group’s ownership interest to 65.5% and diluted News Corporation’s interest to 34.3%. The acquisition of Elara allows REA Group to be at the forefront of long-term growth opportunities within India and the digitization of the real estate sector. Elara is a subsidiary of REA Group, and its results are reported within the Digital Real Estate Services segment.
As a result of the acquisition, the Company recorded net tangible liabilities of $5 million and approximately $0.9 billion$31 million of identifiable intangible assets, of which $468$19 million has been allocatedprimarily related to subscriber relationshipsElara technology platforms with a weighted-averageweighted average useful life of 10five years $277and $12 million has been allocatedrelated to the tradenames which has antrade names with indefinite life and approximately $123 million has been allocated to advertiser relationships with a weighted-average useful life of 15 years.lives. In accordance with ASC 350, the excess of the purchase pricetotal consideration over the fair values of the net tangible and intangible assets of approximately $1.6 billion$113 million was recorded as goodwill on the transaction.
Investor’s Business Daily
In May 2021, the Company acquired Investor’s Business Daily (“IBD”) for $275 million in cash. IBD is a digital-first financial news and research business with unique investing content, analytical products and educational resources, including the Investors.com website. The values assignedacquisition expands Dow Jones’s offerings with the addition of proprietary data and tools to help professional and retail investors identify top-performing stocks. IBD is operated by Dow Jones, and its results are included within the Dow Jones segment.
The purchase price allocation has been prepared on a preliminary basis and changes to the
acquired assetspreliminary purchase price allocations may occur as additional information concerning asset and
liabilities are based on estimates of fair value available as of the date of this filing and will be adjusted upon completion of finalliability valuations
of certain assets and liabilities. Any changes in these fair values could potentially result in an adjustment to the goodwill recorded for this transaction.is finalized. As a result of the Transaction,acquisition, the Company recognized a $337recorded net tangible liabilities of approximately $16 million loss in Other, net, primarily related to deferred revenue and approximately $123 million of identifiable intangible assets, consisting primarily of approximately $51 million related to the Company’s settlementIBD tradename with an indefinite life, approximately $43 million of itspre-existing contractual arrangement between Foxtelsubscriber relationships with a useful life of seven years and FOX SPORTS Australia which resulted inapproximately $20 million related to technology with a $317 millionwrite-offuseful life of its channel distribution agreement intangible asset atseven years. In accordance with ASC 350, the timeexcess of the Transaction.
Smartline Home Loans Pty Limited
In July 2017, REA Group acquired an 80.3% interest in Smartline Home Loans Pty Limited (“Smartline”) for approximately A$70 million in cash (approximately $55 million). The minority shareholders have the option to sell the remaining 19.7% interest to REA Group beginning three years after closing at a price dependent on the
total
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
financial performance
consideration over the fair values of Smartline. If the optionnet tangible and intangible assets of approximately $166 million was recorded as goodwill on the transaction.
HMH Books & Media
In May 2021, the Company acquired the Books & Media segment of Houghton Mifflin Harcourt (“HMH Books & Media”) for $349 million in cash. HMH Books & Media publishes renowned and awarded children’s, young adult, fiction, non-fiction, culinary and reference titles. The acquisition adds an extensive and successful backlist, a strong frontlist in the lifestyle and children’s segments and a productions business that provides opportunities to expand HarperCollins’s intellectual property across different formats. HMH Books & Media is not exercised,a subsidiary of HarperCollins and its results are included in the minority interest will become mandatorily redeemable four years after closing.Book Publishing segment.
The purchase price allocation has been prepared on a preliminary basis and changes to the preliminary purchase price allocations may occur as additional information concerning asset and liability valuations is finalized. As a result REA Group recognized a liability of $12 million in the three months ended September 30, 2017 for the present value of the amount expected to be paid foracquisition, the remaining interest based on the formula specified in the acquisition agreement. Smartline is one of Australia’s premier mortgage broking franchise groups, and the acquisition provides REA Group’s financial services business with greater scale and capability. Under the acquisition method of accounting, the total consideration is allocated toCompany recorded net tangible assets of approximately $89 million, primarily consisting of accounts receivable, accounts payable, author advances and identifiableroyalty payables and inventory. In addition, the Company recorded approximately $141 million of intangible assets, based uponconsisting primarily of $104 million of publishing rights for backlist titles with a useful life of nine years and $32 million of publishing licenses with a useful life of nine years. In accordance with ASC 350, the fair value as of the date of completion of the acquisition. The excess of the total consideration over the fair valuevalues of the net tangible assets and identifiable intangible assets acquired was recorded as goodwill. The acquired intangible assets of approximately $19$119 million primarily relate to customer relationships which have a useful life of 16 years. The Companywas recorded approximately $49 million ofas goodwill on the transaction.
Mortgage Choice
In June 2021, REA Group acquired Mortgage Choice Limited (“Mortgage Choice”) for approximately A$244 million in cash (approximately $183 million based on exchange rates as of the closing date), funded by an increase in REA Group’s debt facilities. Control was transferred and the acquisition became effective and binding on Mortgage Choice shareholders on June 18, 2021 upon court approval. Mortgage Choice is a leading Australian mortgage broking business, and the acquisition complements REA Group’s existing Smartline
broker footprint and accelerates REA Group’s financial services strategy to establish a leading mortgage broking business with national scale. Mortgage Choice is a subsidiary of REA Group and its results are included
withinin the Digital Real Estate Services segment.
Fiscal 2017
Wireless Group plc
In September 2016,
The purchase price allocation has been prepared on a preliminary basis and changes to the preliminary purchase price allocations may occur as additional information concerning asset and liability valuations is finalized. As a result of the acquisition, the Company completed its acquisition of Wireless Group for a purchase price of 315 pence per share in cash, or approximately £220 million (approximately $285 million) in the aggregate, plus $23 million of assumed debt which was repaid subsequent to closing. Wireless Group operates talkSPORT, the leading sports radio network in the U.K., and a portfolio of radio stations in the U.K. and Ireland. The acquisition broadens the Company’s range of services in the U.K., Ireland and internationally, and the Company continues to closely align Wireless Group’s operations with those ofThe SunandThe Times. The Company utilized the restricted cash which was specifically set aside at June 30, 2016 for purposes of funding the acquisition and therefore the Company had no restricted cash as of June 30, 2017.The total transaction value for the Wireless Group acquisition is set forth below (in millions):
| | | | |
Cash paid for Wireless Group equity | | $ | 285 | |
Plus: Assumed debt | | | 23 | |
| | | | |
Total transaction value | | $ | 308 | |
| | | | |
Under the acquisition method of accounting, the total consideration is allocated torecorded net tangible assets of A$66 million (US$50 million) consisting primarily of commission contract receivables and payables and approximately A$74 million (US$56 million) of identifiable intangible assets, based uponconsisting of A$46 million (US$35 million) related to franchisee relationships with a useful life of 17 years, A$17 million (US$13 million) of software with useful lives ranging from one to five years and A$11 million (US$8 million) primarily related to the fair value as ofMortgage Choice tradenames with indefinite lives. In accordance with ASC 350, the date of completion of the acquisition. The excess of the total consideration over the fair valuevalues of the net tangible and intangible assets acquiredof approximately A$104 million (US$79 million) was recorded as goodwill.goodwill on the transaction.
Fiscal 2020
News America Marketing
On May 5, 2020, the Company sold its News America Marketing business, a reporting unit within its News Media segment (the “Disposition”). The
allocation is as follows (in millions): | | | | |
Assets Acquired: | | | | |
Intangible assets | | $ | 220 | |
Goodwill | | | 115 | |
Net liabilities | | | (50 | ) |
| | | | |
Total net assets acquired | | $ | 285 | |
| | | | |
The acquired intangible assets primarily relateaggregate purchase price for the Disposition consists of (a) up to broadcast licenses, which haveapproximately $235 million, comprised of (i) $50 million in cash at closing, subject to working capital and other adjustments, less cash reinvested to acquire a fair value5% equity interest in the business at closing, and (ii) additional deferred cash payments payable on or before the fifth anniversary of closing in an aggregate amount of between $125 million and approximately $185 million, tradenames,depending on the timing of such payments, and (b) a warrant to purchase up to an additional 10% equity interest in the business, which have a fair valuethe Company exercised in fiscal 2021. An immaterial gain related to the Disposition was recorded within Other, net. In the Disposition, the Company retained certain liabilities relating to News America Marketing, including those arising from its legal proceedings with Valassis Communications, Inc. (“Valassis”) and Insignia Systems, Inc. (“Insignia”). See Note 16—Commitments and Contingencies.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
REA Group European Business
In December 2016, REA Group,
The major classes of assets and liabilities disposed of were as follows:
| | | | | |
| As of May 5, 2020 |
| (in millions) |
| |
| Receivables, net | $ | 214 | |
| Other current assets | 26 | |
| Intangible assets, net | 225 | |
| Other non-current assets | 29 | |
Impairment charge on disposal group (a) | (175) | |
| Total assets | $ | 319 | |
| Accounts payable | $ | 33 | |
| Accrued expenses | 65 | |
| Deferred revenue | 51 | |
| Other current liabilities | 46 | |
| Other non-current liabilities | 7 | |
| Total liabilities | $ | 202 | |
________________________
(a)See Note 8—Goodwill and Other Intangible Assets.
(Loss) income before income tax relating to News America Marketing included in
which the
Company holds a 61.6% interest, sold its European business for approximately $140Statements of Operations was $(416) million
(approximately €133 million) in cash, which resulted in apre-tax gain of $107and $22 million for the fiscal
yearyears ended June 30,
2017. The sale allows REA Group to focus on its core businesses in Australia2020 and
Asia.2019, respectively.
Unruly
In addition to the acquisitions noted above and the investments referenced in Note 6—Investments,January 2020, the Company used $62sold Unruly to Tremor International Ltd (“Tremor”) for approximately 7% of Tremor’s outstanding shares. The Company agreed not to sell the Tremor shares for a period of 18 months after closing. At closing, the Company and Tremor entered into a three year commercial arrangement which granted Tremor the exclusive right to sell outstream video advertising on all of the Company’s digital properties in exchange for a total minimum revenue guarantee for News Corp of £30 million.
Fiscal 2019
Opcity
In October 2018, the Company acquired Opcity Inc. (“Opcity”), a market-leading real estate technology platform that matches qualified home buyers and sellers with real estate professionals in real time. The total transaction value was approximately $210 million, consisting of approximately $182 million in cash, net of $7 million of cash for additional acquisitions during fiscal 2017, primarily consisting of Australian Regional Media (“ARM”). ARM’s results are included within the Newsacquired, and Information Services segment.Fiscal 2016
Unruly Holdings Limited
On September 30, 2015, the Company acquired Unruly for approximately £60 million (approximately $90 million) in cash and up to £56 million (approximately $86 million) in future cash consideration related to payments primarily contingent upon the achievement of certain performance objectives. As a result of the acquisition, the Company recognized a liability of approximately $40 million related to the contingent consideration. The fair value of the contingent consideration was estimated by applying a probability-weighted income approach. In accordance with ASC 350, $43 million of the purchase price was allocated to acquired technology with a weighted-average useful life of 7 years, $21 million was allocated to customer relationships and tradenames with a weighted-average useful life of 6 years and $68 million was allocated to goodwill. Unruly is a global video advertising marketplace that is focused on delivering branded video advertising across websites and mobile devices. Unruly’s results are included within the News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.
iProperty Group Limited
In February 2016, REA Group increased its investment in iProperty Group Limited (“iProperty”) from 22.7% to approximately 86.9% for A$482$28 million in cash (approximately $340 million). The remaining 13.1% interest was mandatorily redeemable during fiscal 2018. As a result,deferred payments and restricted stock unit awards for Opcity’s founders and qualifying employees, which is being recognized as compensation expense over the Company recognized a liability of approximately $76 million atthree years following the time of acquisition, which reflected the present value of the amount expected to be paid for the remaining interest based on the formula specified in the acquisition agreement.closing. The acquisition was funded primarily with the proceeds from borrowings under an unsecured syndicated revolving loan facility (the “REA Facility”). See Note 9—Borrowings. The acquisition of iProperty extends REA Group’s market leading business in Australiabroadens realtor.com
®’s lead generation product portfolio, allowing real estate professionals to attractive markets throughout Southeast Asia. iPropertychoose between traditional lead products or a referral-based model that provides highly vetted, transaction-ready leads. Opcity is a subsidiary of REA Group,Move, and its results are included within the Digital Real Estate Services segment. As a result of the acquisition, the Company recorded approximately $73 million of assets, of which $49 million primarily related to the Opcity technology and data platform with a weighted average useful life of 12 years and $24 million primarily related to intangible assets resulting from previously acquired leads and customer relationships with a weighted average useful life of 9 years. In accordance with ASC
805, REA Group recognized a gain of $29 million resulting from350 the
revaluation of its previously held equity interest in iProperty in Other, net in the Statement of Operations for the fiscal year ended June 30, 2016. The total fair value of iProperty at the acquisition date is set forth below (in millions): | | | | |
Cash paid for iProperty equity | | $ | 340 | |
Deferred consideration | | | 76 | |
| | | | |
Total consideration | | | 416 | |
| | | | |
Fair value of previously held iProperty investment | | | 120 | |
| | | | |
Total fair value | | $ | 536 | |
| | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Under the acquisition method of accounting, the total consideration was allocated to net tangible and intangible assets based upon the fair value as of the date of completion of the acquisition. The excess of the total consideration over the fair valuevalues of the net tangible and intangible assets acquiredof approximately $124 million was recorded as goodwill. The allocation is as follows (in millions):
| | | | |
Assets Acquired: | | | | |
Goodwill | | $ | 498 | |
Intangible assets | | | 72 | |
Net liabilities | | | (34 | ) |
| | | | |
Net assets acquired | | $ | 536 | |
| | | | |
The acquired intangible assets primarily relate to tradenames which have an indefinite life.
In addition togoodwill on the acquisitions noted above, the Company used $90 million of cash for additional acquisitions during fiscal 2016, primarily consisting of DIAKRIT, Flatmates.com.au Pty Ltd (“Flatmates”) and Checkout 51 Mobile Apps ULC (“Checkout 51”). DIAKRIT and Flatmates’ results are included within the Digital Real Estate Services segment. Checkout 51’s results are included within the News and Information Services segment.
NOTE 4. DISCONTINUED OPERATIONS
During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented in accordance with ASC205-20, “Discontinued Operations.”
In the first quarter of fiscal 2016, the Company recognized apre-taxnon-cash impairment charge of $76 million reflecting a write down of the digital education business to its fair value less costs to sell. The Company completed the sale of the Amplify Insight and Amplify Learning businesses on September 30, 2015 and incurred approximately $17 million in severance and lease termination costs in conjunction with the sale. These amounts are included in Loss before income tax benefit in the table below for the fiscal year ended June 30, 2016. Additionally, during the first quarter of fiscal 2016, the Company recognized a tax benefit of $144 million upon reclassification of the Digital Education segment to discontinued operations. This amount is included in Income tax benefit in the table below for the fiscal year ended June 30, 2016.
The following table summarizes the results of operations from the discontinued segment:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Revenues | | $ | — | | | $ | — | | | $ | 27 | |
| | | |
Loss before income tax benefit | | | — | | | | — | | | | (159 | ) |
Income tax benefit | | | — | | | | — | | | | 174 | |
| | | | | | | | | | | | |
Income from discontinued operations, net of tax | | $ | — | | | $ | — | | | $ | 15 | |
| | | | | | | | | | | | |
NOTE 5. RESTRUCTURING PROGRAMS
The Company recorded restructuring charges of $71$168 million, $142$140 million and $89$92 million for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, respectively, of which $58$122 million, $133$84 million and $79$68 million, respectively, related to the News Media segment. The increase in restructuring charges in fiscal 2021 was primarily as a result of exit costs associated with the anticipated closure of the Company’s Bronx print plant, the termination of a third-party printing contract and the Company’s global cost
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the News and Information Services segment, respectively.
reduction initiatives. The restructuring charges recorded in fiscal
2018, 20172020 and
20162019 were
primarily for employee termination benefits.
The increase in restructuring charges during the fiscal year ended June 30, 2020 was primarily as a result of initiatives undertaken by the Company in response to COVID-19.
Changes in the restructuring program liabilities were as follows:
| | | | | | | | | | | | | | | | |
| | | One-time
employee
termination
benefits | | | Facility
related
costs | | | Other
costs | | | Total | |
| | | (in millions) | |
Balance, June 30, 2015 | | $ | 47 | | | $ | 5 | | | $ | 6 | | | $ | 58 | |
Additions | | | 86 | | | | 1 | | | | 2 | | | | 89 | |
Payments | | | (95 | ) | | | (1 | ) | | | — | | | | (96 | ) |
Other | | | (5 | ) | | | — | | | | (2 | ) | | | (7 | ) |
| | | | | | | | | | | | | | | | |
Balance, June 30, 2016 | | $ | 33 | | | $ | 5 | | | $ | 6 | | | $ | 44 | |
Additions | | | 137 | | | | — | | | | 5 | | | | 142 | |
Payments | | | (135 | ) | | | (1 | ) | | | (1 | ) | | | (137 | ) |
Other | | | (2 | ) | | | 2 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Balance, June 30, 2017 | | $ | 33 | | | $ | 6 | | | $ | 10 | | | $ | 49 | |
Additions | | | 69 | | | | — | | | | 2 | | | | 71 | |
Payments | | | (73 | ) | | | (2 | ) | | | (1 | ) | | | (76 | ) |
Other | | | — | | | | (2 | ) | | | — | | | | (2 | ) |
| | | | | | | | | | | | | | | | |
Balance, June 30, 2018 | | $ | 29 | | | $ | 2 | | | $ | 11 | | | $ | 42 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| One-time employee termination benefits | | Facility related costs | | Other costs | | Total |
| (in millions) |
| Balance, June 30, 2018 | $ | 29 | | | $ | 2 | | | $ | 11 | | | $ | 42 | |
| Additions | 92 | | | 0 | | | 0 | | | 92 | |
| Payments | (91) | | | 0 | | | (2) | | | (93) | |
| Other | (2) | | | 0 | | | 1 | | | (1) | |
| Balance, June 30, 2019 | $ | 28 | | | $ | 2 | | | $ | 10 | | | $ | 40 | |
| Additions | 140 | | | 0 | | | 0 | | | 140 | |
| Payments | (109) | | | 0 | | | (1) | | | (110) | |
| Other | 5 | | | (2) | | | 0 | | | 3 | |
| Balance, June 30, 2020 | $ | 64 | | | $ | 0 | | | $ | 9 | | | $ | 73 | |
| Additions | 83 | | | 0 | | | 85 | | | 168 | |
| Payments | (97) | | | 0 | | | (55) | | | (152) | |
| Other | 1 | | | 0 | | | (4) | | | (3) | |
| Balance, June 30, 2021 | $ | 51 | | | $ | 0 | | | $ | 35 | | | $ | 86 | |
As of June 30,
2018,2021 and June 30, 2020 restructuring liabilities of approximately
$31$58 million
and $64 million, respectively, were included in the Balance Sheet in Other current liabilities and
$11$28 million
and $9 million, respectively, were included in Other
non-current liabilities.
The Company’s investments were comprised of the following:
| | | | | | | | | | | | |
| | | Ownership
Percentage
as of June 30,
2018 | | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | | | | (in millions) | |
Equity method investments: | | | | | | | | | | | | |
Foxtel(a) | | | 65% | | | $ | — | | | $ | 1,208 | |
Other equity method investments(b) | | | various | | | | 173 | | | | 133 | |
Loan receivable from Foxtel(a) | | | N/A | | | | — | | | | 370 | |
Available-for-sale securities(c) | | | various | | | | 93 | | | | 97 | |
Cost method investments(d) | | | various | | | | 127 | | | | 219 | |
| | | | | | | | | | | | |
Total Investments | | | | | | $ | 393 | | | $ | 2,027 | |
| | | | | | | | | | | | |
(a) | Following completion of the Transaction in April 2018, News Corp owns a 65% interest in new Foxtel, and Telstra owns the remaining 35%. Consequently, the Company ceased accounting for Foxtel as an equity method investment and began consolidating its results in the fourth quarter of fiscal 2018. See Note 3—Acquisitions, Disposals and Other Transactions.
|
| | | | | | | | | | | | | | | | | |
| Ownership Percentage as of June 30, 2021 | | As of June 30, |
| 2021 | | 2020 |
| | | (in millions) |
Equity method investments(a) | various | | $ | 71 | | | $ | 120 | |
Equity securities(b) | various | | 280 | | | 177 | |
| Total Investments | | | $ | 351 | | | $ | 297 | |
________________________
(a)As of June 30, 2020, equity method investments were primarily comprised of Foxtel’s investment in Nickelodeon Australia Joint Venture and Elara, which operates PropTiger.com and Housing.com. In May 2012, Foxtel purchased Austar United Communications Ltd. December 2020, the Company acquired a controlling interest in Elara and began consolidating its results. Refer to Note 4—Acquisitions, Disposals and Other Transactions for further discussion.
(b)Equity securities are primarily comprised of certain investments in China, Tremor and the Company’s investment in HT&E Limited, which operates a portfolio of Australian radio and outdoor media assets.
The transaction was funded by Foxtel bank debt and pro rata capital contributions made by Foxtel shareholdersCompany has equity securities with quoted prices in active markets as well as equity securities without readily determinable fair market values. Equity securities without readily determinable fair market values are valued at cost, less any impairment, plus or minus changes in fair value resulting from observable price changes in orderly transactions for an identical or similar investment of the formsame issuer.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
shareholder notes based
The components comprising total gains and losses on their respective ownership interests. equity securities are set forth below:
| | | | | | | | | | | | | | | | | |
| For the fiscal year ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Total gains (losses) recognized on equity securities | $ | 81 | | | $ | (21) | | | $ | (23) | |
| Less: Net losses recognized on equity securities sold or impaired | (1) | | | 0 | | | 0 | |
| Unrealized gains (losses) recognized on equity securities held at end of period | $ | 82 | | | $ | (21) | | | $ | (23) | |
Equity Losses of Affiliates
The Company’s share of the
subordinated shareholder notes was approximately A$481 million ($370 million) as of June 30, 2017. During the three months ended September 30, 2017, Foxtel’s shareholders madepro-rata capital contributions to Foxtel by way of promissory notes. The Company’s share of the capital contributions was A$494 million ($388 million) at September 28, 2017, and the Company’s investment in Foxtel increased by this amount. Foxtel utilized the shareholders’ capital contributions to repay its subordinated shareholder notes and interest accrued in the three months ended September 30, 2017. As a result, such notes were considered to be repaid as of September 30, 2017.(b) | Other equity method investments are primarily comprised of Elara Technologies Pte. Ltd., which operates PropTiger.com, Makaan.com and Housing.com and new Foxtel’s investment in Nickelodeon Australia Joint Venture.
|
(c) | Available-for-sale securities are primarily comprised of the Company’s investment in HT&E Limited, which operates a portfolio of Australian radio and outdoor media assets.
|
(d) | Cost method investments are primarily comprised of certain investments in China as of June 30, 2018. During the third quarter of fiscal 2018, the Company sold its investment in SEEKAsia Limited for $122 million in cash and recognized a $32 million gain in Other, net. See Note 21—Additional Financial Information.
|
The Company measures the fair market values ofavailable-for-sale securities as Level 1 financial instruments under ASC 820 as such investments have quoted prices in active markets. The cost basis, unrealized gains, unrealized losses and fair market value ofavailable-for-sale securities are set forth below:
| | | | | | | | |
| | | As of
June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Cost basis ofavailable-for-sale securities | | $ | 77 | | | $ | 99 | |
Accumulated gross unrealized gain | | | 16 | | | | — | |
Accumulated gross unrealized loss | | | — | | | | (2 | ) |
| | | | | | | | |
Fair value ofavailable-for-sale securities | | $ | 93 | | | $ | 97 | |
| | | | | | | | |
Net deferred tax asset | | $ | — | | | $ | (1 | ) |
| | | | | | | | |
Equity (Losses) Earnings of Affiliates
The Company’s share of the (losses) earnings of its equity affiliates was as follows:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Foxtel(a) | | $ | (974 | ) | | $ | (265 | ) | | $ | 38 | |
Other equity affiliates, net(b) | | | (32 | ) | | | (30 | ) | | | (8 | ) |
| | | | | | | | | | | | |
Total Equity (losses) earnings of affiliates | | $ | (1,006 | ) | | $ | (295 | ) | | $ | 30 | |
| | | | | | | | | | | | |
(a) | During the third quarter of fiscal 2018, the Company recognized a $957$65 million, $47 million and $17 millionnon-cash write-down of the carrying value of its investment in Foxtel. The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2018. In the third quarter of fiscal 2018, as part of the long range planning process and in preparation for the Transaction, the Company assessed the long-term prospects for Foxtel, on both a stand-alone and combined basis. As a result of lower-
|
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| than-expected revenues from certain new products and broadcast subscribers at Foxtel, the Company revised its outlook for Foxtel, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company concluded that the fair value of its investment in Foxtel declined below its carrying value. The assumptions utilized in the income approach valuation method were a discount rate of 10.25% and a long-term growth rate of 2.0%.
|
During the secondfiscal years ended June 30, 2021, 2020 and 2019, respectively. In fiscal 2021, the losses primarily reflect the $54 million non-cash write-down of the Foxtel Group’s investment in the Nickelodeon Australia Joint Venture. In the fourth quarter of fiscal 2017,2021, Foxtel and ViacomCBS entered into a separate programming rights agreement which will result in the Company recognized a $227 millionnon-cash write-downwindup of the carrying value of its investment in Foxtel. As a result of Foxtel’s performanceNickelodeon Australia Joint Venture in the first half of fiscal 2017 and2022. In fiscal 2020, the competitive operating environment inlosses primarily reflect non-cash write-downs of $32 million on certain equity method investments. In fiscal 2019, the Australianpay-TV market,losses primarily reflect those from the Company revised its future outlook for the business in the second quarter of fiscal 2017, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company determined that the fair value of its investment in Foxtel declined below its carrying value, which included the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). The write-down is reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal year ended June 30, 2017. The assumptions utilized in the income approach valuation method were a discount rate of 9.0% and a long-term growth rate of 2.5%. The assumptions utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%.
In November 2012, the Company acquired CMH, a media investment company that operates in Australia. CMH owned a 25%Company’s interest in Foxtel through its 50% interest in FOX SPORTS Australia. The CMH acquisition was accounted for in accordance with ASC 805 which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company’s previously held equity interest in FOX SPORTS Australia, through which the Company held its indirect 25% interest in Foxtel, was revalued to fair value as of the acquisition date, resulting in astep-up andnon-cash gain of approximately $1.3 billion for the fiscal year ended June 30, 2013, of which $0.9 billion related to Foxtel.
Additionally, in accordance with ASC 350, the Company amortized $49 million, $68 million, and $52 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2018, 2017 and 2016, respectively. Such amortization is reflected in Equity (losses) earnings of affiliates in the Statements of Operations. The Company began consolidating the results of Foxtel in the fourth quarter of fiscal 2018 as a result of the Transaction.
(b) | Other equity affiliates, net for the fiscal years ended June 30, 2018 and 2017, include losses primarily from the Company’s interest in Elara. Additionally, during the fiscal years ended June 30, 2018 and 2017, the Company recognizednon-cash write-downs of $13 million and $9 million, respectively, on certain other equity method investments. The write-downs are reflected in Equity (losses) earnings of affiliates in the Statements of Operations for the fiscal years ended June 30, 2018 and 2017.
|
Impairments of Other Investments
The Company regularly reviews its investments for impairments based on criteria that include the extent to which the investment’s carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and the investment’s financial strength and specific prospects. The Company recorded write-offs and impairments of certainavailable-for-sale securities in the fiscal years ended June 30, 2018, 2017 and 2016 of $33 million, $21 million and $17 million, respectively, which were reclassified out of Accumulated other comprehensive income and included in Other, net. The Company recorded write-offs and impairments of certain cost method investments of $4 million in fiscal 2016 in Other, net. These write-offs and impairments were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarized Financial Information
Summarized financial information for Foxtel for periods through April 2, 2018, presented in accordance with U.S. GAAP, was as follows:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Revenues | | $ | 1,818 | | | $ | 2,411 | | | $ | 2,379 | |
Operating income(a) | | | 155 | | | | 353 | | | | 373 | |
Net income | | | 64 | | | | 59 | | | | 180 | |
(a) | Includes Depreciation and amortization of $187 million for the period ended April 2, 2018 and $215 million and $231 million for the fiscal years ended June 30, 2017 and 2016, respectively. Operating income before depreciation and amortization was $342 million for the period ended April 2, 2018 and $568 million, and $604 million for the fiscal years ended June 30, 2017 and 2016, respectively.
|
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Current assets | | $ | — | | | $ | 642 | |
Non-current assets | | | — | | | | 2,517 | |
Current liabilities | | | — | | | | 758 | |
Non-current liabilities | | | — | | | | 2,557 | |
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | | | | | |
| | | Useful
Lives | | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | | | | (in millions) | |
Land | | | | | | $ | 150 | | | $ | 153 | |
Buildings and leaseholds | | | 3 to 50 years | | | | 1,742 | | | | 1,733 | |
Digital set top units and installations | | | 3 to 7 years | | | | 744 | | | | — | |
Machinery and equipment(a) | | | 3 to 20 years | | | | 3,131 | | | | 2,985 | |
| | | | | | | | | | | | |
| | | | | | | 5,767 | | | | 4,871 | |
Less: accumulated depreciation and amortization(b) | | | | | | | (3,352 | ) | | | (3,339 | ) |
| | | | | | | | | | | | |
| | | | | | | 2,415 | | | | 1,532 | |
Construction in progress | | | | | | | 145 | | | | 92 | |
| | | | | | | | | | | | |
Total Property, plant and equipment, net | | | | | | $ | 2,560 | | | $ | 1,624 | |
| | | | | | | | | | | | |
(a) | The increase in Machinery and equipment primarily relates to technical equipment acquired in the Transaction. Includes capitalized software of approximately $1,189 million and $997 million as of June 30, 2018 and 2017, respectively.
|
(b) | Includes accumulated amortization of capitalized software of approximately $734 million and $691 million as of June 30, 2018 and 2017, respectively.
|
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| Useful Lives | | As of June 30, |
| 2021 | | 2020 |
| | | (in millions) |
| Land | | | $ | 131 | | | $ | 123 | |
| Buildings and leaseholds | 3 to 50 years | | 1,692 | | | 1,473 | |
| Digital set top units and installations | 5 to 10 years | | 1,151 | | | 1,006 | |
| Machinery and equipment | 2 to 20 years | | 1,809 | | | 1,680 | |
| Capitalized software | 2 to 13 years | | 1,632 | | | 1,402 | |
| Finance lease right-of-use assets | 15 years | | 138 | | | 124 | |
| | | 6,553 | | | 5,808 | |
Less: accumulated depreciation and amortization(a) | | | (4,460) | | | (3,667) | |
| | | 2,093 | | | 2,141 | |
| Construction in progress | | | 179 | | | 115 | |
| Total Property, plant and equipment, net | | | $ | 2,272 | | | $ | 2,256 | |
________________________
(a)Includes accumulated amortization of capitalized software of approximately $1,100 million and $921 million as of June 30, 2021 and 2020, respectively.
Depreciation and amortization related to property, plant and equipment was
$372$568 million,
$358$537 million and
$415$533 million for the fiscal years ended June 30,
2018, 20172021, 2020 and
2016,2019, respectively. This includes amortization of capitalized software of
$175$250 million,
$168$231 million and
$194$218 million for the fiscal years ended June 30,
2018, 20172021, 2020 and
2016,2019, respectively.
Total operating lease expense was approximately $183 million, $156 million and $164 million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
During the fiscal year ended June 30,
2017,2020, the Company recognized total fixed asset impairment charges of
$679$203 million
primarily at News UK and News Corp Australia.
During the fourth quarter of fiscal 2017, as As part of the Company’s long-range planning process, the Company reduced its outlook for the U.K. and Australian newspapers due to the impact of adverse print advertising and print circulation trends on the future expected performance of the business.business, which were accelerated by the COVID-19 pandemic. As a result, the Company recognized anon-cash impairment chargecharges of approximately $360$148 million and $55 million related to the write-down of fixed assets at theits U.K. newspapers.newspapers and Australian newspapers reporting units, respectively. The write-down was comprised of approximately $252 millionwrite-downs were primarily related to print sites, $85 million related to printing presses and print related equipment and $23 million related to capitalized software. Significant unobservable inputs utilized in the income approach valuation method for News UK were a discount rate of 8.5%9.5% and a-1.0% long term long-term growth rate.
During the second quarterrate of fiscal 2017, the Company recognized anon-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. The write-down was a result of the impact of adverse trends on the future expected performance of the Australian newspapers, where revenue declines from continued weakness in the print advertising market accelerated during the second quarter. The write-down was comprised of approximately $149 million related to printing presses(1.0)% and print related equipment, $77 million related to facilities, $66 million related to capitalized software and $18 million related to tradenames. Significant unobservable inputs utilized in the income approach valuation methodfor News Australia were a discount rate of 11.5% and no long-term growth.
a 0.0% long term growth rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying values of the Company’s intangible assets and related accumulated amortization for the fiscal years ended June 30,
20182021 and June 30,
20172020 were as follows:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Intangible Assets Not Subject to Amortization | | | | | | | | |
Trademarks and tradenames | | $ | 441 | | | $ | 179 | |
Newspaper mastheads | | | 298 | | | | 299 | |
Distribution networks | | | 308 | | | | 390 | |
Imprints | | | 239 | | | | 237 | |
Radio broadcast licenses | | | 188 | | | | 185 | |
| | | | | | | | |
Total intangible assets not subject to amortization | | | 1,474 | | | | 1,290 | |
| | | | | | | | |
| | |
Intangible Assets Subject to Amortization | | | | | | | | |
Channel distribution agreements(a) | | | — | | | | 335 | |
Publishing rights(b) | | | 299 | | | | 329 | |
Customer relationships(c) | | | 849 | | | | 310 | |
Other(d) | | | 49 | | | | 17 | |
| | | | | | | | |
Total intangible assets subject to amortization, net | | | 1,197 | | | | 991 | |
| | | | | | | | |
Total Intangible assets, net | | $ | 2,671 | | | $ | 2,281 | |
| | | | | | | | |
(a) | Net of accumulated amortization of $76 million as of June 30, 2017. As a result of the Transaction, the Company settled thepre-existing contractual arrangement between FOX SPORTS Australia and Foxtel. The settlement resulted in awrite-off of the channel distribution agreement intangible asset, which was reflected in Other, net in the Statements of Operations. See Note 3—Acquisition, Disposals and Other Transactions.
|
(b) | Net of accumulated amortization of $213 million and $181 million as of June 30, 2018 and 2017, respectively. The useful lives of publishing rights range from 4 to 30 years primarily based on the weighted-average remaining contractual terms of the underlying publishing contracts and the Company’s estimates of the period within those terms that the asset is expected to generate a majority of its future cash flows.
|
(c) | Net of accumulated amortization of $447 million and $399 million as of June 30, 2018 and 2017, respectively. The useful lives of customer relationships range from 2 to 25 years. The useful lives of these assets are estimated by applying historical attrition rates and determining the resulting period over which a majority of the accumulated undiscounted cash flows related to the customer relationships are expected to be generated.
|
(d) | Net of accumulated amortization of $87 million and $83 million as of June 30, 2018 and 2017, respectively. The useful lives of other intangible assets range from 2 to 15 years. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows. During fiscal 2018, New America Marketing’s FSI media distribution network was determined to no longer have an indefinite life due to the impact of changes from print circulation trends within the newspaper industry which is expected to continue to contract in the future, as consumers move to more digital products.
|
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Intangible Assets Not Subject to Amortization | | | |
| Trademarks and tradenames | $ | 389 | | | $ | 321 | |
| Newspaper mastheads | 282 | | | 281 | |
| | | |
| Imprints | 250 | | | 224 | |
| Radio broadcast licenses | 136 | | | 121 | |
| Total intangible assets not subject to amortization | 1,057 | | | 947 | |
| Intangible Assets Subject to Amortization | | | |
Publishing rights(a) | 383 | | | 261 | |
Customer relationships(b) | 697 | | | 647 | |
Other(c) | 42 | | | 9 | |
| Total intangible assets subject to amortization, net | 1,122 | | | 917 | |
| Total Intangible assets, net | $ | 2,179 | | | $ | 1,864 | |
________________________
(a)Net of accumulated amortization of $275 million and $252 million as of June 30, 2021 and 2020, respectively. The useful lives of publishing rights range from 3 to 30 years primarily based on the weighted-average remaining contractual terms of the underlying publishing contracts and the Company’s estimates of the period within those terms that the asset is expected to generate a majority of its future cash flows.
(b)Net of accumulated amortization of $693 million and $592 million as of June 30, 2021 and 2020, respectively. The useful lives of customer relationships range from 3 to 25 years. The useful lives of these assets are estimated by applying historical attrition rates and determining the resulting period over which a majority of the accumulated undiscounted cash flows related to the customer relationships are expected to be generated.
(c)Net of accumulated amortization of $81 million and $79 million as of June 30, 2021 and 2020, respectively. The useful lives of other intangible assets range from 2 to 15 years. The useful lives represent the periods over which these intangible assets are expected to contribute directly or indirectly to the Company’s future cash flows.
The Company recognized impairment charges on its intangible assets of $50$194 million and $58$47 million for the fiscal years ended June 30, 20182020 and 2017,2019, respectively, primarily related to indefinite-lived intangible assets.assets in the News Media segment.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amortization expense related to amortizable intangible assets was $100$112 million, $91$108 million and $91$126 million for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, respectively.
Based on the current amount of amortizable intangible assets, the estimated amortization expense for each of the succeeding five fiscal years is as follows:
2019—2022—$
120130 million;
2020—2023—$
112124 million;
2021—2024—$
108118 million;
2022—2025—$
103115 million; and
2023—2026—$
97113 million.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The changes in the carrying value of goodwill, by segment, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | News and
Information
Services | | | Book
Publishing | | | Digital Real
Estate
Services | | | Subscription
Video Services | | | Other | | | Total
Goodwill | |
| | | (in millions) | |
Balance, June 30, 2016 | | $ | 1,765 | | | $ | 260 | | | $ | 1,209 | | | $ | 476 | | | $ | 4 | | | $ | 3,714 | |
Acquisitions | | | 136 | | | | 10 | | | | 2 | | | | 11 | | | | — | | | | 159 | |
Impairments(a) | | | (20 | ) | | | — | | | | (24 | ) | | | — | | | | (4 | ) | | | (48 | ) |
Dispositions(b) | | | — | | | | — | | | | (20 | ) | | | — | | | | — | | | | (20 | ) |
Foreign currency movements | | | 3 | | | | 1 | | | | 16 | | | | 13 | | | | — | | | | 33 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2017 | | $ | 1,884 | | | $ | 271 | | | $ | 1,183 | | | $ | 500 | | | $ | — | | | $ | 3,838 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Acquisitions(c) | | | 2 | | | | — | | | | 123 | | | | 1,574 | | | | — | | | | 1,699 | |
Impairments(d) | | | (158 | ) | | | — | | | | (19 | ) | | | (41 | ) | | | — | | | | (218 | ) |
Dispositions | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Foreign currency movements | | | 2 | | | | (4 | ) | | | (26 | ) | | | (73 | ) | | | — | | | | (101 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2018 | | $ | 1,730 | | | $ | 267 | | | $ | 1,261 | | | $ | 1,960 | | | $ | — | | | $ | 5,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(a) | In the News and Information Services segment, the write-down of goodwill primarily relates to a reporting unit in the U.K. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit.
|
(b) | Relates to REA Group’s sale of its European business.
|
(c) | Primarily relates to the Transaction in the Subscription Video Services segment and the acquisition of Smartline and Hometrack in the Digital Real Estate Services segment.
|
(d) | In the News and Information Services segment, the write-down of goodwill primarily relates to the News America Marketing reporting unit, and in the Subscription Video Services segment the write-down primarily relates to the FOX SPORTS Australia reporting unit. In the Digital Real Estate Services segment, the write-down of goodwill relates to the Company’s DIAKRIT reporting unit.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Digital Real
Estate
Services | | Subscription
Video Services | | Dow Jones | | Book
Publishing | | News Media | | Total
Goodwill |
| (in millions) |
| Balance, June 30, 2019 | $ | 1,350 | | | $ | 1,844 | | | $ | 1,368 | | | $ | 266 | | | $ | 319 | | | $ | 5,147 | |
| Acquisitions | 0 | | | 0 | | | 0 | | | 10 | | | 2 | | | 12 | |
| Impairments | 0 | | | (882) | | | 0 | | | 0 | | | (216) | | | (1,098) | |
| Dispositions | (2) | | | 0 | | | 0 | | | 0 | | | 0 | | | (2) | |
| Foreign exchange and other | (15) | | | (77) | | | 0 | | | (12) | | | (4) | | | (108) | |
| Balance, June 30, 2020 | $ | 1,333 | | | $ | 885 | | | $ | 1,368 | | | $ | 264 | | | $ | 101 | | | $ | 3,951 | |
Acquisitions(a) | 224 | | | 0 | | | 166 | | | 124 | | | 0 | | | 514 | |
| Impairments | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Dispositions | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | (1) | |
| Foreign exchange and other | 60 | | | 93 | | | (2) | | | 26 | | | 12 | | | 189 | |
| Balance, June 30, 2021 | $ | 1,617 | | | $ | 978 | | | $ | 1,532 | | | $ | 413 | | | $ | 113 | | | $ | 4,653 | |
________________________
(a)See Note 4—Acquisitions, Disposals and Other Transactions for the primary drivers of increases in goodwill by segment.
The carrying amount of goodwill as of June 30,
20182021 and 2020 both reflected accumulated impairments
of $4.8 billion principally relating to
impairments at the
Dow Jones and News
and Information Services segment,Media segments that were recognized prior to the Company’s separation of
$3.6 billion.its businesses from Twenty-First Century Fox, Inc. (“21st Century Fox”) on June 28, 2013 (the “Separation”).
Annual Impairment Assessments
In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets are tested annually in the fourth quarter for impairment or earlier if events occur or circumstances change that would more likely than not reduce the fair values
of below their carrying amounts. See Note 2—Summary of Significant Accounting Policies.
The performance of the Company’s annual impairment analysis resulted in 0 impairments of $43 million ofto goodwill and indefinite-lived intangible assets in fiscal 2018.2021. Significant unobservable inputs utilized in the
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
income approach valuation method were discount rates (ranging from8.5%-25.0% 8.0% to 22.0%), long-term growth rates (ranging from (1.0)%-3.0%0.0% to 3.0%) and royalty rates (ranging from0.5%-7.5% 0.25% to 6.0%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%premiums (ranging from 5.0% to 10.0%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.
During the third quarter of fiscal 2018, due to the impact of adverse trends on the future expected performance of the business, the Company revised its future outlook with respect to the News America Marketing reporting unit which resulted in a reduction in expected future cash flows. As a result, the Company determined that the fair value of this reporting unit declined below its carrying value and recorded a $165 million impairment of goodwill and indefinite-lived intangible assets. For this reporting unit and intangible asset, significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from12.5%-14%), long-term growth rates (ranging from(1.9%)-0.9%) and a royalty rate of 2.5%.
Additionally, during the third quarter of fiscal 2018, as part of the Company’s long range planning process and in preparation for the Transaction, the Company assessed the long-term prospects for Foxtel and FOX SPORTS Australia. As a result of lower-than-expected revenues at Foxtel, the Company revised its future outlook for the FOX SPORTS Australia reporting unit, whose revenues are heavily predicated on Foxtel subscribers. Based on the revised projections, the Company determined that the fair value of the reporting unit was less than its carrying value and recorded a $41 million impairment of goodwill in the fiscal year ended June 30, 2018. For the impaired reporting unit, significant unobservable inputs utilized in the income approach valuation method were a discount rate of 9.5% and a long-term growth rate of 2.0%. See Note 6—Investments.
The performance of the Company’s annual impairment analysis resulted in
impairments of $88$89 million of
impairments to goodwill and indefinite-lived intangible assets in fiscal
2017.2020, primarily related to goodwill at a reporting unit within the News Media segment. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from
9.0%-25.0% to 22.5%), long-term growth rates (ranging from
0.0%-3.3% to 3.0%) and royalty rates (ranging from
0.5%-7.5% 0.25% to 6.0%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from
10%-15% 5.0% to 10.0%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher (lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.
Foxtel: During the third quarter of fiscal 2020, the Company recognized non-cash impairment charges totaling $931 million related to the goodwill and indefinite-lived intangible assets at its Foxtel reporting unit. Due to the impact of adverse trends
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
resulting from lower expected broadcast subscribers and the impact that COVID-19 was expected to have on advertising, streaming and commercial subscriber revenues in the near term, the Company revised its future outlook which resulted in a reduction in expected future cash flows of the business. As a result, the Company determined that the fair value of the reporting unit was less than its carrying value and recorded non-cash impairment charges of $882 million to goodwill and $49 million to indefinite-lived intangible assets. The assumptions utilized in the income approach valuation method for Foxtel were discount rates ranging from 10.5% to 11.5%, a long-term growth rate of 2.0% and a royalty rate of 1.5%. The assumptions utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10.0%.
News America Marketing: During the third quarter of fiscal 2020, the Company recognized a non-cash impairment charge of $175 million on the disposal group as a result of the reclassification of its News America Marketing reporting unit to assets held for sale. See Note 4—Acquisitions, Disposals and Other Transactions. During the fiscal year ended June 30, 2020, in addition to the write-down to fair value less costs to sell, the Company recognized non-cash impairment charges of $235 million related to goodwill and indefinite-lived intangible assets at the News America Marketing reporting unit. In the first quarter of fiscal 2020, as a result of the Company’s review of strategic options for the News America Marketing business and other market indicators, the Company determined that the fair value of the reporting unit was less than its carrying value. As a result, the Company recorded non-cash impairment charges of $122 million to goodwill and $113 million to indefinite-lived intangible assets. The assumptions utilized in the income approach valuation method for News America Marketing were discount rates ranging from 17.0% to 18.5% and long-term growth rates ranging from 0.6% to 1.5%.
The performance of the Company’s annual impairment analysis did not resultresulted in any impairments of $87 million to goodwill orand indefinite-lived intangible assets in fiscal 2016.2019, primarily related to goodwill at a reporting unit within the News Media segment. Significant unobservable inputs utilized in the income approach valuation method were discount rates (ranging from9%-14.5% 9.0% to 25.0%), long-term growth rates (ranging from0%-3.5% 0.0% to 3.0%) and royalty rates (ranging from0.5%-3.4% to 6.0%). Significant unobservable inputs utilized in the market approach valuation method were EBITDA multiples from guideline public companies operating in similar industries and control premiums (ranging from 5% to 10%-15%). Significant increases (decreases) in royalty rates, growth rates, control premiums and multiples, assuming no change in discount rates, would result in a significantly higher
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(lower) fair value measurement. Significant decreases (increases) in discount rates, assuming no changes in royalty rates, growth rates, control premiums and multiples, would result in a significantly higher (lower) fair value measurement.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s total borrowings consist of the following:
| | | | | | | | | | | | | | | | |
| | | Interest rate at
June 30,
2018 | | | Due date at
June 30,
2018 | | | As of
June 30,
2018 | | | As of
June 30,
2017 | |
| | | | | | | | | (in millions) | |
Foxtel Group | | | | | | | | | | | | | | | | |
Credit facility 2013(a) | | | 3.86 | % | | | Apr 7, 2019 | | | $ | 222 | | | $ | — | |
Credit facility 2014—tranche 1(a) | | | 3.86 | % | | | May 30, 2019 | | | | 148 | | | | — | |
Credit facility 2014—tranche 2(a) | | | 3.96 | % | | | Jan 31, 2020 | | | | 148 | | | | — | |
Credit facility 2015(a) | | | 4.01 | % | | | Jul 31, 2020 | | | | 296 | | | | — | |
Credit facility 2016(a)(b) | | | 4.56 | % | | | Sept 11, 2021 | | | | 108 | | | | — | |
Working capital facility 2017(a)(b) | | | 4.16 | % | | | Jul 3, 2020 | | | | 59 | | | | — | |
US private placement 2009—tranche 3 | | | 6.20 | % | | | Sept 24, 2019 | | | | 75 | | | | — | |
US private placement 2012—USD portion—tranche 1(c) | | | 3.68 | % | | | Jul 25, 2019 | | | | 150 | | | | — | |
US private placement 2012—USD portion—tranche 2(c) | | | 4.27 | % | | | Jul 25, 2022 | | | | 196 | | | | — | |
US private placement 2012—USD portion—tranche 3(c) | | | 4.42 | % | | | Jul 25 2024 | | | | 146 | | | | — | |
US private placement 2012—AUD portion | | | 7.04 | % | | | Jul 25, 2022 | | | | 83 | | | | — | |
REA Group | | | | | | | | | | | | | | | | |
Credit facility 2016—tranche 1(d) | | | — | | | | Dec 31, 2017 | | | | — | | | | 92 | |
Credit facility 2016—tranche 2(d) | | | 3.11 | % | | | Dec 31, 2018 | | | | 89 | | | | 92 | |
Credit facility 2016—tranche 3(d) | | | 3.21 | % | | | Dec 31, 2019 | | | | 178 | | | | 184 | |
Credit facility 2018(d) | | | 3.01 | % | | | April 27, 2021 | | | | 54 | | | | — | |
Other Obligations | | | | | | | Feb 2, 2018 | | | | — | | | | 11 | |
| | | | | | | | | | | | | | | | |
Total borrowings | | | | | | | | | | | 1,952 | | | | 379 | |
Less: current portion(e) | | | | | | | | | | | (462 | ) | | | (103 | ) |
| | | | | | | | | | | | | | | | |
Long-term borrowings | | | | | | | | | | $ | 1,490 | | | $ | 276 | |
| | | | | | | | | | | | | | | | |
(a) | Borrowings under these facilities bear interest at a floating rate of Australian BBSY plus an applicable margin of between 1.10% and 2.70% per annum payable quarterly.
|
(b) | As of June 30, 2018, the Foxtel Group has undrawn commitments of $198 million under these facilities for which it pays a commitment fee in the range of 40% and 45% of the applicable margin.
|
(c) | The carrying value of the borrowings include any fair value adjustments related to the Company’s fair value hedges. See Note 11—Financial Instruments and Fair Value Measurements.
|
(d) | Borrowings under this facility bear interest at a floating rate of the Australian BBSY plus a margin in the range of 0.85% and 1.45% depending on REA Group’s net leverage ratio. As of June 30, 2018, REA Group was paying a margin of between 0.95% and 1.05%.
|
(e) | The Company classifies the current portion of long term debt asnon-current liabilities on the Balance Sheets when it has the intent and ability to refinance the obligation on a long-term basis, in accordance withASC 470-50 “Debt.”
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate at June 30,
2021 | | Maturity at June 30,
2021 | | As of June 30, 2021 | | As of June 30, 2020 |
| | | | | (in millions) |
| News Corporation | | | | | | | |
| 2021 Senior notes | 3.875 | % | | May 15, 2029 | | 985 | | | 0 | |
Foxtel Group (a) | | | | | | | |
2019 Credit facility (b) | 2.33 | % | | May 31, 2024 | | 232 | | | 371 | |
| 2019 Term loan facility | 6.25 | % | | Nov 22, 2024 | | 190 | | | 171 | |
2017 Working capital facility (b) | 2.33 | % | | May 31, 2024 | | 0 | | | 0 | |
| Telstra facility | 7.83 | % | | Dec 22, 2027 | | 60 | | | 11 | |
2012 US private placement—USD portion—tranche 2 (c) | 4.27 | % | | Jul 25, 2022 | | 202 | | | 200 | |
2012 US private placement—USD portion—tranche 3 (c) | 4.42 | % | | Jul 25, 2024 | | 152 | | | 150 | |
| 2012 US private placement—AUD portion | 7.04 | % | | Jul 25, 2022 | | 78 | | | 73 | |
REA Group (a) | | | | | | | |
| 2018 Credit facility | 0 | % | | Apr 27, 2021 | | 0 | | | 48 | |
| 2019 Credit facility | 0 | % | | Dec 2, 2021 | | 0 | | | 117 | |
| 2020 Credit facility | 0 | % | | Dec 2, 2021 | | 0 | | | 0 | |
2021 Bridge facility (d) | 0.86 | % | | Jul 31, 2022 | | 314 | | | 0 | |
| Finance Lease Liability | See Note 10 | | 100 | | | 118 | |
| Total borrowings | | | | | 2,313 | | | 1,259 | |
Less: current portion (e) | | | | | (28) | | | (76) | |
| Long-term borrowings | | | | | 2,285 | | | 1,183 | |
________________________
(a)These borrowings were incurred by certain subsidiaries of NXE Australia Pty Limited (the “Foxtel Group” and together with such subsidiaries, the “Foxtel Debt Group”) and REA Group and certain of its subsidiaries (REA Group and certain of its subsidiaries, the “REA Debt Group”), consolidated but non wholly-owned subsidiaries of News Corp, and are only guaranteed by the Foxtel Group and REA Group and their respective subsidiaries, as applicable, and are non-recourse to News Corp.
(b)As of June 30, 2021, the Foxtel Debt Group had total undrawn commitments of A$334 million available under these facilities.
(c)The carrying values of the borrowings include any fair value adjustments related to the Company’s fair value hedges. See Note 11—Financial Instruments and Fair Value Measurements.
(d)As of June 30, 2021, REA Group had total undrawn commitments of A$107 million available under this facility.
(e)The Company classifies the current portion of long term debt as non-current liabilities on the Balance Sheets when it has the intent and ability to refinance the obligation on a long-term basis, in accordance with ASC 470-50 “Debt.” $28 million and $28 million relates to the current portion of finance lease liabilities as of June 30, 2021 and 2020, respectively.
News Corporation Borrowings
In April 2021, the Company issued $1 billion of senior notes due 2029 (the “2021 Senior Notes”). The 2021 Senior Notes bear interest at a fixed rate of 3.875% per annum, payable in cash semi-annually on May 15 and November 15 of each year, commencing November 15, 2021. The notes will mature on May 15, 2029.
The 2021 Senior Notes are the senior unsecured obligations of the Company and rank equally in right of payment with the Company’s existing and future senior debt, including its existing revolving credit facility. The Company may redeem all or a part of the 2021 Senior Notes upon payment of the redemption prices and applicable premiums, if any, set forth in the indenture governing the 2021 Senior Notes (the “Indenture”), plus any accrued and unpaid interest. In addition, prior to May 15, 2024, the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Company may redeem up to 40% of the aggregate principal amount of the 2021 Senior Notes with the net cash proceeds of certain equity offerings at the redemption price set forth in the Indenture, plus any accrued and unpaid interest. In the event of specified change of control events, the Company must offer to purchase the outstanding 2021 Senior Notes from the holders at a purchase price equal to 101% of the principal amount, plus any accrued and unpaid interest.
There are no financial maintenance covenants with respect to the 2021 Senior Notes. The Indenture contains other covenants that, among other things and subject to certain exceptions, (i) limit the Company’s ability and the ability of its subsidiaries to incur any liens securing indebtedness for borrowed money and (ii) limit the Company’s ability to consolidate or merge with or into another person or sell or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole).
Foxtel Group Borrowings
Upon
The Foxtel Group has borrowings under the completion of the Transaction, the Company consolidated $1.8 billion offollowing facilities, as well as outstanding debt incurred by certain subsidiaries of new Foxtel (together with new Foxtel, the “Foxtel Group”), including its U.S. private placement senior unsecured notesnotes:
•An A$610 million 2019 revolving credit facility and drawnA$40 million 2017 working capital facility. Borrowings under these facilities bore interest at a floating rate of the Australian BBSY plus an applicable margin of between 2.00% and 3.75% per annum, depending on the Foxtel Debt Group’s net leverage ratio, until April 2021, when the facilities were amended to extend the debt maturity and reduce the upper limit of the margin range to 3.25%. The Foxtel Debt Group pays a commitment fee of 45% of the applicable margin for any undrawn amounts under its revolving credit facilities,these facilities.
•A fully drawn A$250 million term loan facility. Borrowings under this facility bear interest at a fixed rate of 6.25% per annum.
•An A$170 million subordinated shareholder loan facility agreement with maturities ranging from 2019Telstra Corporation Limited (the “Telstra Facility”), which owns a 35% interest in the Foxtel Group. Borrowings under the Telstra Facility can be used to 2024. In accordance with ASC 805, these debt instruments were recorded at fair value as of the acquisition date.During the fourth quarter of fiscal 2018,finance cable transmission costs due to Telstra under a services arrangement between the Foxtel Group had repaymentsand Telstra and bear interest at a variable rate of $119 millionthe Australian BBSY plus a margin of 7.75%. The terms of the Telstra Facility allow for the capitalization of accrued interest to the principal outstanding. The Company excludes borrowings under this facility from the Statements of Cash Flows as they are non-cash.
The agreements governing the Foxtel Debt Group’s external borrowings (revolving credit facilities, the term loan facility and
borrowings of $42 million under its working capital facility.U.S. Private Placement Senior Unsecured Notes
At June 30, 2018, $74 million (A$100 million) of the U.S. private placement senior unsecured notes is in a fair value hedge relationship,notes) contain customary affirmative and $296 million (A$400) million is in a cash flow hedge relationship.
Covenants, Collateralnegative covenants and Unamortized borrowing costs
The Foxtel Group’s external borrowings (revolving credit facilities and U.S. private placement senior unsecured notes) require the Foxtel Group to complyevents of default, with customary exceptions, including specified financial andnon-financial covenants calculated in accordance with Australian International Financial Reporting Standards. Subject to certain exceptions, these covenants restrict or prohibit members of the Foxtel Debt Group from, among other things, undertaking certain transactions, disposing of certain properties or assets (including subsidiary stock), merging or consolidating with any other person, making financial accommodation available, giving guarantees, entering into certain other financing arrangements, creating or permitting certain liens, engaging in transactions with affiliates, making repayments of certain other loans and undergoing fundamental business changes. The financial covenantsIn addition, the agreements require the Foxtel Debt Group to maintain a totalratio of net debt to Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) ratio, as adjusted under the applicable agreements, of not more than 3.753.50 to 1.0 for fiscal 2021 and annot more than 3.25 to 1.0 for fiscal 2022 and thereafter. The agreements also require the Foxtel Debt Group to maintain a net interest coverage ratio of nonot less than 3.503.5 to 1.0. Foxtel Group’s external borrowingsThere are only guaranteed by certain members of the Foxtel Group. The Foxtel Group is in compliance with these covenants as of June 30, 2018. There were no assets pledged as collateral for any of the borrowings.
REA Group Facilities
During the second quarter of fiscal 2018, REA Group repaid approximately $93 million (A$120 million) for the first tranche of its A$480 million unsecured revolving loan facility, which matured in December 2017.
During the fourth quarter of fiscal 2018,
In June 2021, REA Group entered into an A$520 million Bridge Facility due July 2022 (the “2021 Bridge Facility”). Borrowings under this facility bear interest at a floating rate of the Australian BBSY plus a margin of between 0.80% and 1.40% depending on the time to maturity. Drawdowns under the 2021 Bridge Facility were used to repay and terminate REA Group’s A$170 million 2019 Credit Facility (the “2019 Credit Facility”) in June 2021, while cash on hand was used to repay the A$70 million unsecured revolving loan facility2018 Credit Facility (the “2018 Credit Facility”) at maturity. Borrowings under the 2018 Credit Facility bore interest at a floating rate of the Australian BBSY plus a margin of between 0.85% and 2.75% depending on REA Group’s net leverage ratio. Borrowings under the 2019 Credit Facility bore interest at a floating rate of the Australian BBSY plus a margin of between 0.85% and 2.00% depending on REA Group’s net leverage ratio. The undrawn A$148.5 million 2020 Credit Facility and A$20 million 2020 Overdraft Facility were also terminated in June 2021.
The agreement
and drew downgoverning the
full amount available of $53 million to fund the acquisition of Hometrack Australia.The facilities require2021 Bridge Facility requires REA Group to maintain a net leverage ratio of not more than 3.25 to 1.0 and an interest coverage ratio of not less than 3.0 to 1.0 and an adjusted net leverage ratio of not greater than 3.5 to 1.0. As of June 30, 2018,The agreement also contains certain other customary affirmative and negative covenants. Subject to certain exceptions, these covenants restrict or prohibit REA Group wasand its
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
subsidiaries from, among other things, incurring or guaranteeing debt, disposing of certain properties or assets, merging or consolidating with any other person, making financial accommodation available, entering into certain other financing arrangements, creating or permitting certain liens, engaging in
compliancenon arms’ length transactions with
all of the applicable debt covenants.affiliates, undergoing fundamental business changes and making restricted payments.
News Corp Revolving Credit Facility
The Company’sCompany has access to a credit agreement (the “2019 Credit Agreement (as amended, the “Credit Agreement”) which provides for an unsecured $650$750 million revolving credit facility (the “Facility”“2019 News Corp Credit Facility”) that can be used for general corporate purposes. The 2019 News Corp Credit Facility has a sublimit of $100 million available for issuances of letters of credit. Under the 2019 Credit Agreement, the Company may request increases in the amount of the Facilityfacility up to a maximum amount of $900 million.$1 billion. The lenders’
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
commitments underto make the 2019 News Corp Credit AgreementFacility available terminate on October 23, 2020 providedDecember 12, 2024, and the Company may request that the commitments be extended under certain circumstances for up to 2 additional one-year periods.
Interest on borrowings under the 2019 News Corp Credit Facility is based on either (a) a Eurodollar Rate formula or (b) the Base Rate formula, each as set forth in the
2019 Credit Agreement. The applicable margin and the commitment fee are based on the pricing grid in the 2019 Credit Agreement,
which varies based on the Company’s adjusted operating income net leverage ratio. As of June 30, 2021, the Company was paying a commitment fee of 0.20% on any undrawn balance and an applicable margin of 0.375% for
up to two additionalone-year periods.a Base Rate borrowing and 1.375% for a Eurodollar Rate borrowing. As of June 30, 2021, the Company had not borrowed any funds under the 2019 News Corp Credit Facility.
The 2019 Credit Agreement contains certain customary affirmative and negative covenants and events of default with customary exceptions, including limitations on the ability of the Company and itsthe Company's subsidiaries to engage in transactions with affiliates, incur liens, merge into or consolidate with any other entity, incur subsidiary debt or dispose of all or substantially all of its assets or all or substantially all of the stock of its subsidiaries.all subsidiaries taken as a whole. In addition, the 2019 Credit Agreement requires the Company to maintain an adjusted operating income net leverage ratio of not more than 3.0 to 1.0, subject to certain adjustments following a material acquisition, and ana net interest coverage ratio of not less than 3.0 to 1.0. As
Covenants
The Company’s borrowings and those of
June 30, 2018,its consolidated subsidiaries contain customary representations, covenants, and events of default, including those discussed above. If any of the
events of default occur and are not cured within applicable grace periods or waived, any unpaid amounts under the Company’s debt agreements may be declared immediately due and payable. The Company was in compliance with all
of the applicable debt covenants.Interest on borrowings under the Facility is based on either (a) a Eurodollar Rate formula or (b) the Base Rate formula, each as set forth in the Credit Agreement. The applicable margin and the commitment fee are based on the pricing grid in the Credit Agreement, which varies based on the Company’s adjusted operating income leverage ratio. As ofsuch covenants at June 30, 2018, the Company was paying a commitment fee of 0.225% on any undrawn balance and an applicable margin of 0.50% for a Base Rate borrowing and 1.50% for a Eurodollar Rate borrowing.
As of the date of this filing, the Company has not borrowed any funds under the Facility.
2021.
The following table summarizes the Company’s debt maturities,
excluding debt issuance costs and finance lease liabilities, as of June 30,
2018: | | | | |
| | | As of
June 30, 2018 | |
| | | (in millions) | |
Fiscal 2019 | | $ | 462 | |
Fiscal 2020 | | | 551 | |
Fiscal 2021 | | | 406 | |
Fiscal 2022 | | | 108 | |
Fiscal 2023 | | | 279 | |
Thereafter | | | 146 | |
2021:
| | | | | |
| As of June 30, 2021 |
| (in millions) |
| Fiscal 2022 | $ | 0 | |
| Fiscal 2023 | 592 | |
| Fiscal 2024 | 232 | |
| Fiscal 2025 | 340 | |
| Fiscal 2026 | 0 | |
| Thereafter | 1,060 | |
NOTE 10.
REDEEMABLE PREFERRED STOCKIn connectionLEASES
On July 1, 2019, the Company adopted ASU 2016-02 on a modified retrospective basis and recognized a $9 million cumulative-effect adjustment to the opening balance of Accumulated deficit related to previous sale leaseback transactions.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summary of leases
The Company's operating leases primarily consist of real estate, including office space, warehouse space and printing facilities, and satellite transponders. During the fourth quarter of fiscal 2020, the Company modified its contract related to its satellite transponders which resulted in certain transponders being classified as finance leases. Certain leases for satellite transponders were determined to be operating leases in accordance with ASU 2016-02. The Company’s operating leases generally include options to extend the lease term or terminate the lease. Such options do not impact the Company’s separation of its businesses (the “Separation”) from Twenty-First Century Fox, Inc. (“21st Century Fox”) on June 28, 2013 (the “Distribution Date”), 21st Century Fox sold 4,000 shares of cumulative redeemable preferred stock with a par value of $5,000 per share of a newly formed U.S. subsidiarylease term assessment until the Company is reasonably certain that the option will be exercised.
Certain of the Company. Company’s leases include rent adjustments which may be indexed to various metrics, including the consumer price index or other inflationary indexes. As a general matter, the Company’s real estate lease arrangements typically require adjustments resulting from changes in real estate taxes and other costs to operate the leased asset.
Other required lease disclosures
The preferred stock paid dividends at a ratetotal lease cost for operating and finance leases included in the Statements of 9.5% per annum, payable quarterly, in arrears. The preferred stockOperations was callable byas follows:
| | | | | | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, |
| | | 2021 | | 2020 |
| Income Statement Location | | (in millions) |
| Operating lease costs | Selling, general and administrative | | $ | 135 | | | $ | 139 | |
| Operating lease costs | Operating expenses | | 37 | | | 64 | |
| Finance lease costs | Depreciation and amortization | | 27 | | | 6 | |
| Finance lease costs | Interest expense, net | | 4 | | | 1 | |
| Short term lease costs | Operating expenses | | 15 | | | 9 | |
| Variable lease costs | Selling, general and administrative | | 28 | | | 41 | |
| Total lease costs | | | $ | 246 | | | $ | 260 | |
Total operating lease expense was approximately $195 million for the Company at any time afterfiscal year ended June 30, 2019.
Additional information related to the fifth yearCompany’s operating and puttable at the optionfinance leases under ASU 2016-02:
| | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 | | As of June 30, 2020 |
| Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
| Weighted-average remaining lease term | 11.8 years | | 3.7 years | | 12.2 years | | 4.7 years |
| Weighted-average incremental borrowing rate | 3.54 | % | | 3.64 | % | | 3.49 | % | | 3.64 | % |
| | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 |
| (in millions) |
| Cash paid - Operating lease liabilities | $ | 184 | | | $ | 224 | |
| Cash paid - Finance lease liabilities - principal | 30 | | | 7 | |
| Cash paid - Finance lease liabilities - interest | 4 | | | 1 | |
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | 25 | | | 225 | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments as of June 30, 2018 and 2017, $20 million was included in Redeemable preferred stock on the Balance Sheets. In July 2018, the Company exercised its call option and redeemed 100% of the outstanding redeemable preferred stock.2021 are as follows:
| | | | | | | | | | | |
| As of June 30, 2021 |
| Operating Leases | | Finance Leases |
| (in millions) |
| Fiscal 2022 | $ | 185 | | | $ | 31 | |
| Fiscal 2023 | 171 | | | 29 | |
| Fiscal 2024 | 156 | | | 29 | |
| Fiscal 2025 | 143 | | | 17 | |
| Fiscal 2026 | 127 | | | 0 | |
| Thereafter | 780 | | | 0 | |
| Total future minimum lease payments | $ | 1,562 | | | $ | 106 | |
| Less: interest | (303) | | | (6) | |
| Present value of minimum payments | $ | 1,259 | | | $ | 100 | |
NOTE 11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
In accordance with ASC 820, fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories:
•Level 1—Quoted prices in active markets for identical assets or liabilities.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•Level 2—Observable inputs other than quoted prices included in Level 1. The Company could value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.
•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. For the Company, this primarily includes the use of forecasted financial information and other valuation related assumptions such as discount rates and long term growth rates in the income approach as well as the market approach which utilizes certain market and transaction multiples.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Under ASC 820, certain assets and liabilities are required to be remeasured to fair value at the end of each reporting period. The following table
summarizesummarizes those assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2018 | | | June 30, 2017 | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| | | (in millions) | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency derivatives—cash flow hedges(a) | | $ | — | | | $ | 3 | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Cross currency interest rate derivatives—fair value hedges(a) | | | — | | | | 29 | | | | — | | | | 29 | | | | — | | | | — | | | | — | | | | — | |
Cross currency interest rate derivatives—economic hedges(a) | | | — | | | | 10 | | | | — | | | | 10 | | | | — | | | | — | | | | — | | | | — | |
Cross currency interest rate derivatives—cash flow hedges(a) | | | — | | | | 76 | | | | — | | | | 76 | | | | — | | | | — | | | | — | | | | — | |
Available—for—sale securities(b) | | | 93 | | | | — | | | | — | | | | 93 | | | | 97 | | | | — | | | | — | | | | 97 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 93 | | | $ | 118 | | | $ | — | | | $ | 211 | | | $ | 97 | | | $ | — | | | $ | — | | | $ | 97 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate derivatives—cash flow hedges(a) | | $ | — | | | $ | 20 | | | $ | — | | | $ | 20 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Mandatorily redeemable noncontrolling interests(c) | | | — | | | | — | | | | 12 | | | | 12 | | | | — | | | | — | | | | 79 | | | | 79 | |
Cross currency interest rate derivatives—cash flow hedges(a) | | | — | | | | 12 | | | | — | | | | 12 | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | $ | — | | | $ | 32 | | | $ | 12 | | | $ | 44 | | | $ | — | | | $ | — | | | $ | 79 | | | $ | 79 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | As a result of the Transaction, the Company now consolidates certain derivative instruments that were outstanding as of the Transaction date. As part of purchase accounting, certain derivatives which were previously designated in hedging relationships were dedesignated and redesignated as of such date and recorded at fair value. See Note 3—Acquisitions, Disposals and Other Transactions.
|
(b) | See Note 6—Investments.
|
(c) | Primarily related to REA Group’s mandatorily redeemable noncontrolling interest associated with the acquisition of iProperty. The fair value is determined based on the formula specified in the acquisition agreement and REA Group management’s expectations of the business’ performance. The mandatorily redeemable noncontrolling interest was redeemed in April 2018, and the amount paid was based on the actual performance of the business against the targets stipulated in the acquisition agreement.
|
There have been
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | June 30, 2020 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| (in millions) |
| Assets: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Cross-currency interest rate derivatives—fair value hedges | $ | 0 | | | $ | 18 | | | $ | 0 | | | $ | 18 | | | $ | 0 | | | $ | 24 | | | $ | 0 | | | $ | 24 | |
| | | | | | | | | | | | | | | |
| Cross-currency interest rate derivatives—cash flow hedges | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 98 | | | 0 | | | 98 | |
Cross-currency interest rate derivatives(a) | 0 | | | 73 | | | 0 | | | 73 | | | 0 | | | 0 | | | 0 | | | 0 | |
Equity securities(b) | 164 | | | 0 | | | 116 | | | 280 | | | 54 | | | 0 | | | 123 | | | 177 | |
| Total assets | $ | 164 | | | $ | 91 | | | $ | 116 | | | $ | 371 | | | $ | 54 | | | $ | 122 | | | $ | 123 | | | $ | 299 | |
| Liabilities: | | | | | | |
| | | | | | | |
|
| Foreign currency derivatives—cash flow hedges | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 3 | | | $ | 0 | | | $ | 3 | |
| Interest rate derivatives—cash flow hedges | 0 | | | 9 | | | 0 | | | 9 | | | 0 | | | 16 | | | 0 | | | 16 | |
| | | | | | | | | | | | | | | |
| Cross-currency interest rate derivatives—cash flow hedges | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 18 | | | 0 | | | 18 | |
Cross-currency interest rate derivatives(a) | 0 | | | 13 | | | 0 | | | 13 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Total liabilities | $ | 0 | | | $ | 22 | | | $ | 0 | | | $ | 22 | | | $ | 0 | | | $ | 37 | | | $ | 0 | | | $ | 37 | |
________________________
(a)The Company determined that its cross-currency interest rate derivatives are no transfers between levelslonger considered highly effective as of December 31, 2020 primarily due to changes in foreign exchange and interest rates.
(b)See Note 6—Investments.
During the three months ended December 31, 2020, the Company reclassified its investment in Tremor from Level 3 to Level 1 within the fair value hierarchy, duringas the periods presented.sale restrictions are expected to lapse within 12 months.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Available-for-saleEquity securities
The fair values of
investmentsequity securities with quoted prices in
available-for-sale securities active markets are determined
using the quoted market prices from active markets based on the closing price at the end of each reporting period. These
investmentssecurities are classified as Level 1 in the fair value hierarchy outlined above.
Mandatorily redeemable noncontrolling interests
The Company has liabilities recorded in its Balance Sheets for its mandatorily redeemable noncontrolling interests. These liabilities represent management’s best estimate of the amounts expected to be paid in accordance with the contractual terms of the underlying acquisition agreements. The fair values of these liabilitiesequity securities without readily determinable fair market values are determined based on the contractual payout formulas includedcost, less any impairment, plus or minus changes in the acquisition agreements taking into account the expected performancefair value resulting from observable price changes in orderly transactions for an identical or similar investment of the business. Any remeasurements or accretion related to the Company’s mandatorily redeemable noncontrolling interestssame issuer. These securities are recorded through Interest, net in the Statements of Operations. As the fair value does not rely on observable market inputs, the Company classifies these liabilitiesclassified as Level 3 in the fair value hierarchy.
hierarchy outlined above.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A rollforward of the Company’s
mandatorily redeemable noncontrolling interest liabilitiesequity securities classified as Level 3 is as follows:
| | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Balance—beginning of year | | $ | 79 | | | $ | 82 | |
Additions | | | 12 | | | | — | |
Payments | | | (81 | ) | | | — | |
Measurement adjustments | | | — | | | | (8 | ) |
Accretion | | | 3 | | | | 3 | |
Foreign exchange movements | | | (1 | ) | | | 2 | |
| | | | | | | | |
Balance—end of year | | $ | 12 | | | $ | 79 | |
| | | | | | | | |
| | | | | | | | | | | |
| For the fiscal year ended June 30, |
| 2021 | | 2020 |
| (in millions) |
| Balance—beginning of year | $ | 123 | | | $ | 113 | |
Additions (a) | 11 | | | 19 | |
| | | |
| Measurement adjustments | 21 | | | (4) | |
Foreign exchange and other (b) | (39) | | | (5) | |
| Balance—end of year | $ | 116 | | | $ | 123 | |
________________________
(a)Includes purchases of equity securities as well as the equity securities received as consideration for the sale of Unruly to Tremor in the third quarter of fiscal 2020.
(b)During the three months ended December 31, 2020, the Company reclassified its investment in Tremor from Level 3 to Level 1 within the fair value hierarchy, as the sale restrictions are expected to lapse within 12 months.
The Company is directly and indirectly affected by risks associated with changes in certain market conditions. When deemed appropriate, the Company uses derivative instruments to mitigate the potential impact of these market risks. The primary market risks managed by the Company through the use of derivative instruments include:
•foreign currency exchange rate risk: arising primarily through Foxtel Debt Group borrowings denominated in U.S. dollars, and payments for license fees;customer premise equipment and
certain programming rights; and•interest rate risk: arising from fixed and floating rate Foxtel Debt Group borrowings.
The Company formally designates qualifying derivatives as hedge relationships (“hedges”) and applies hedge accounting when considered appropriate. For economic hedges where no hedge relationship has been designated, changes in fair value are included as a component of net income in each reporting period within Other, net in the Statements of Operations. The Company does not use derivative financial instruments for trading or speculative purposes.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
HedgesDerivatives are classified as current ornon-current in the Consolidated Balance Sheets based on their maturity dates. Refer to the table below for further details:
| | | | | | | | | | | | |
| | | | | | Fair value as of June 30, | |
| | | Balance Sheet Location | | | 2018 | | | 2017 | |
| | | | | | (in millions) | |
Foreign currency derivatives—cash flow hedges | | | Other current assets | | | $ | 3 | | | $ | — | |
Cross currency interest rate derivatives—fair value hedges | | | Other non-current assets | | | | 29 | | | | — | |
Cross currency interest rate derivatives—economic hedges | | | Other non-current assets | | | | 10 | | | | — | |
Cross currency interest rate derivatives—cash flow hedges | | | Other non-current assets | | | | 76 | | | | — | |
Interest rate derivatives—cash flow hedges | | | Other non-current liabilities | | | | (20 | ) | | | — | |
Cross currency interest rate derivatives—cash flow hedges | | | Other non-current liabilities | | | | (12 | ) | | | — | |
| | | | | | | | | | | | | | | | | |
| | | Fair value as of June 30, |
| Balance Sheet Location | | 2021 | | 2020 |
| | | (in millions) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cross-currency interest rate derivatives—fair value hedges | Other non-current assets | | $ | 18 | | | $ | 24 | |
| Cross-currency interest rate derivatives—cash flow hedges | Other non-current assets | | 0 | | | 98 | |
Cross-currency interest rate derivatives (a) | Other non-current assets | | 73 | | | 0 | |
| | | | | |
| Foreign-currency derivatives—cash flow hedges | Other current liabilities | | 0 | | | (3) | |
| Interest rate derivatives—cash flow hedges | Other current liabilities | | (6) | | | 0 | |
| Interest rate derivatives—cash flow hedges | Other non-current liabilities | | (3) | | | (16) | |
| Cross-currency interest rate derivatives—cash flow hedges | Other non-current liabilities | | 0 | | | (18) | |
Cross-currency interest rate derivatives (a) | Other non-current liabilities | | (13) | | | 0 | |
(a)The Company determined that its cross-currency interest rate derivatives are no longer considered highly effective as of December 31, 2020 primarily due to changes in foreign exchange and interest rates.
The Company utilizes a combination of foreign currency derivatives interest rate derivatives and cross currency interest rate derivatives to mitigate currency exchange and interest rate risk in relation to future interest and principal payments and payments for license feescustomer premise equipment and future interest payments. certain programming rights.
The total notional value of foreign
exchangecurrency contract derivatives designated for hedging was
$100$18 million as of June 30,
2018.2021. The maximum hedged term over which the Company is hedging exposure to foreign currency fluctuations is one year. As of June 30,
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2021, the Company estimates that approximately $1 million of net derivative losses related to its foreign currency contract derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statements of Operations within the next 12 months.
The total notional value of interest rate swap derivatives designated
as cash flow hedgesfor hedging was
$518approximately A$300 million
(A$700 million) as of June 30,
2018.2021. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to September 2022.
As of June 30, 2021, the Company estimates that approximately $5 million of net derivative losses related to its interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statements of Operations within the next 12 months.
Cash flow derivatives
The Company utilizes cross-currency interest rate derivatives to mitigate currency exchange and interest rate risk in relation to future interest and principal payments. The Company determined that these cash flow hedges no longer qualified as highly effective as of December 31, 2020 primarily due to changes in foreign exchange and interest rates. Amounts recognized in Accumulated other comprehensive loss during the periods the hedges were considered highly effective will continue to be reclassified out of Accumulated other comprehensive loss over the remaining term of the derivatives. Changes in the fair values of these derivatives will be recognized within Other, net in the Statements of Operations on a prospective basis.
The total notional value of
the cross currencycross-currency interest rate swaps
that were designated as cash flow hedgesfor which the Company discontinued hedge accounting was
$296approximately $280 million
(A$400 million) as of June 30,
2018.2021. The maximum hedged term over which the Company is hedging exposure to variability in interest
and principal payments is to July 2024.
The following table presents the impact of changes in the fair values of derivatives designated as cash flow hedges had on AOCI and earnings during the fiscal year ended June 30, 2018. The Company did not have any such hedges in fiscal 2017 or fiscal 2016.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Gain (loss) recognized in
Accumulated Other
Comprehensive
Income for the Fiscal
year ended June 30, | | | Gain (loss) reclassified from
Accumulated Other
Comprehensive
Income for the
Fiscal year ended June 30, | | | Income statement
location |
| | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | | | |
| | | (in millions) | | | |
Derivative instruments designated as cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency derivatives—cash flow hedges | | $ | 3 | | | $ | — | | | $ | — | | | $ | (1 | ) | | $ | — | | | $ | — | | | Operating expenses |
Cross currency interest rate derivatives—cash flow hedges | | | 8 | | | | — | | | | — | | | | 9 | | | | — | | | | — | | | Interest, net |
Interest rate derivatives—cash flow hedges | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | Interest, net |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 11 | | | $ | — | | | $ | — | | | $ | 7 | | | $ | — | | | $ | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During fiscal 2018, the amount recognized in the Statement of Operations for the ineffective portion of derivative instruments designated as cash flow hedges was nil, and the Company did not exclude any component of the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.
As of June 30, 2018,2021, the Company estimates that approximately $3$5 million of net derivative gains related to its foreign currencycross-currency interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the StatementStatements of Operations within the next 12 monthsmonths.
The following table presents the impact that changes in the fair values had on
Accumulated other comprehensive loss and the
assumption that there are no change toStatements of Operations during the
exchange rates and interest rates atfiscal years ended June 30,
2018.2021, 2020 and 2019 for both derivatives designated as cash flow hedges that continue to be highly effective and derivatives initially designated as cash flow hedges but for which hedge accounting was discontinued as of December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (loss) recognized in Accumulated Other Comprehensive Loss for the fiscal year ended June 30, | Income statement location |
| 2021 | | 2020 | | 2019 | | |
| (in millions) | |
| Foreign currency derivatives—cash flow hedges | $ | 3 | | | $ | (2) | | | $ | 2 | | | Operating expenses |
| Cross-currency interest rate derivatives | (15) | | | 0 | | | 9 | | | Interest expense, net |
| Interest rate derivatives—cash flow hedges | 0 | | | (7) | | | (9) | | | Interest expense, net |
| Total | $ | (12) | | | $ | (9) | | | $ | 2 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (Gain) loss reclassified from Accumulated Other Comprehensive Loss for the fiscal year ended June 30, | | Income statement location |
| 2021 | | 2020 | | 2019 | | |
| (in millions) | | |
| Foreign currency derivatives—cash flow hedges | $ | (1) | | | $ | (2) | | | $ | (3) | | | Operating expenses |
| Cross-currency interest rate derivatives | 11 | | | 3 | | | (4) | | | Interest expense, net |
| Interest rate derivatives—cash flow hedges | 5 | | | (3) | | | 8 | | | Interest expense, net |
| Total | $ | 15 | | | $ | (2) | | | $ | 1 | | | |
The gain resulting from the changes in fair value of cross-currency interest rate derivatives that were discontinued as cash flow hedges due to hedge ineffectiveness as of December 31, 2020 was approximately $11 million for the fiscal year ended June 30, 2021.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair value hedges
The Company’s primary interest rate risk arises from its borrowings acquired as a part of the Transaction.
Borrowings issued at fixed rates and in U.S. dollars expose
new Foxtelthe Company to fair value interest rate risk and currency exchange rate risk. The Company manages fair value interest rate risk and currency exchange rate risk through the use of cross-currency interest rate swaps under which the Company exchanges fixed interest payments equivalent to the interest payments on the U.S. dollar denominated debt for floating rate Australian dollar denominated interest payments. The changes in fair value of derivatives designated as fair value hedges and the offsetting changes in fair value of the hedged items are recognized in Other, net.
As ofDuring the fiscal year ended June 30,
2018,2021, such adjustments
decreasedincreased the carrying value of borrowings by
nil.NaN.
The total notional value of the fair value hedges was
$74approximately $70 million
(A$100 million) as of June 30,
2018.2021. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024.
During fiscal
2018,2021, 2020 and 2019, the amount recognized in
earningsthe Statements of Operations on derivative instruments designated as fair value hedges related to the ineffective portion was nil and the Company
did not exclude any component ofexcluded the currency basis from the changes in fair value of the derivative instruments from the assessment of hedge effectiveness.
Economic(non-designated) hedges
In addition to derivative instruments that are designated and qualify for hedge accounting,
The following sets forth the
Company also uses certain derivatives not designated as accounting hedges to mitigate foreign currency and interest rate risk. These are referred to as economic hedges. The changes ineffect of fair value
of economic hedges are immediately recognized into earnings. The total notional value of cross currency interest rate derivatives was $75 millionhedging relationships on hedged items in the Balance Sheets as of June 30,
2018, which relate to the U.S. private placement 2009 debt.2021 and 2020:
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| Borrowings: | (in millions) |
| Carrying amount of hedged item | $ | 71 | | | $ | 71 | |
| Cumulative hedging adjustments included in the carrying amount | 5 | | | 6 | |
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are remeasured at fair value on a recurring basis, the Company has certain assets, primarily goodwill, intangible assets, equity method investments and property, plant and equipment, that are not required to be remeasured to fair value at the end of each reporting period. On an ongoing basis, the Company monitors whether events occur or circumstances change that would more likely than not reduce the fair values of these assets below their carrying amounts. If the Company determines that these assets are impaired, the Company would write down these assets to fair value. These nonrecurring fair value measurements are considered to be Level 3 in the fair value hierarchy.
During the fourth quarter of fiscal 2020, the Company recognized non-cash impairment charges of $203 million related to fixed assets in the U.K. and Australia. See Note 7—Property, Plant and Equipment. The carrying values of property, plant and equipment subsequent to the impairment charges at the Australian and U.K. newspapers reporting units were $235 million and $207 million, respectively.
During the third quarter of fiscal 2018,2020, the Company recognized a $957non-cash impairment charges of $882 millionnon-cash write-down of the and $49 million related to goodwill and indefinite-lived intangible assets, respectively, at its Foxtel reporting unit. The carrying value of its investment ingoodwill at Foxtel decreased from $1,588$1,668 million to $631$786 million and the value of indefinite-lived intangible assets decreased from $189 million to $140 million. See Note 8—Goodwill and Other Intangible Assets.
During the
secondfirst quarter of fiscal
2017,2020, the Company recognized
a $227 millionnon-cash write-down of the carrying value of its investment in Foxtel from $1,432 million to $1,205 million. See Note 6—Investments.During the third quarter of fiscal 2018, the Company recognizednon-cash impairment charges of $120$122 million and $45$113 million related to goodwill and indefinite-lived intangible assets, respectively, at the News America Marketing reporting unit.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The carrying value of goodwill at News America Marketing decreased from $301$122 million to $181 millionNaN and the carrying value of indefinite-lived intangible assets decreased from $391$308 million to $346$195 million. See Note 8—Goodwill and Other Intangible Assets.
During the third quarter of fiscal 2018, the Company recognized a $41 millionnon-cash impairment charge to goodwill at the FOX SPORTS Australia reporting unit. The carrying value of goodwill decreased from $490 million to $449 million. See Note 8—Goodwill and Other Intangible Assets.
During the fourth quarter of fiscal 2017, the Company recognized anon-cash impairment charge of approximately $360 million related to the write-down of fixed assets at the U.K. newspapers. The carrying value of fixed assets decreased from $731 million to $371 million. See Note 7—Property, Plant and Equipment.
During the second quarter of fiscal 2017, the Company recognized anon-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at News Corp Australia. The carrying value of fixed assets decreased from $667 million to $375 million and the carrying value of the intangible assets decreased from $48 million to $30 million. See Note 7—Property, Plant and Equipment.
Other Fair Value Measurements
As of June 30, 2018,2021, the carrying value of the Company’s outstanding borrowings approximates the fair valuevalue. The 2021 Senior Notes and isthe U.S. private placement borrowings are classified as Level 2 and the remaining borrowings are classified as Level 3 in the fair value hierarchy. As
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. STOCKHOLDERS’ EQUITY
The Company’s authorized capital stock consists of 1,500,000,000 shares of Class A Common Stock, par value $0.01 per share, 750,000,000 shares of Class B Common Stock, par value $0.01 per share, 25,000,000 shares of Series Common Stock, par value $0.01 per share, and 25,000,000 shares of Preferred Stock, par value $0.01 per share.
Common Stock and Preferred Stock
Shares Outstanding—As of June 30, 2018,2021, the Company had approximately 380391 million shares of Class A Common Stock outstanding at a par value of $0.01 per share and approximately 200 million shares of Class B Common Stock outstanding at a par value of $0.01 per share. As of June 30, 2018,2021, the Company had no0 shares of Series Common Stock andor Preferred Stock outstanding.
Dividends—The following table summarizes the dividends declared and paid per share on both the Company’s Class A Common Stock and Class B Common Stock: | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Cash dividends paid per share | | $ | 0.20 | | | $ | 0.20 | | | $ | 0.20 | |
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| Cash dividends paid per share | $ | 0.20 | | | $ | 0.20 | | | $ | 0.20 | |
The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Company’s Board of Directors (the “Board of Directors”). The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Voting Rights—Holders of the Company’s Class A Common Stock are entitled to vote only in the limited circumstances set forth in the Company’s Restated Certificate of Incorporation (the “Charter”). Holders of the Company’s Class B Common Stock are entitled to one1 vote for each share held of record on all matters submitted to a vote of the stockholders.
Liquidation Rights—In the event of a liquidation or dissolution of the Company, holders of Class A Common Stock and Class B Common Stock shall be 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 shall generally be entitled to receive substantially identical per share consideration. Under the Company’s Charter, the Board of Directors is authorized to issue shares of preferred stock or series common stock at any time, without stockholder approval, in one or more series and to fix the number of shares, designations, voting powers, if any, preferences and relative, participating, optional and other rights of such series, as well as any applicable qualifications, limitations or restrictions, to the full extent permitted by Delaware law, subject to the limitations set forth in the Charter, including stockholder approval requirements with respect to the issuance of preferred stock or series common stock entitling holders thereof to more than one vote per share.
In May 2013, the Board of Directors authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. NoNaN stock repurchases were made during the fiscal yearyears ended June 30, 2018. Through August 7, 2018,2021, 2020 and 2019. Over the life of the program through July 30, 2021, the Company cumulatively repurchased approximately 5.2 million shares of Class A Common Stock for an aggregate cost of approximately $71 million. The remaining authorized amount under the stock repurchase program as of August 7, 2018July 30, 2021 was approximately $429 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased.
The
total number and valueCompany did not purchase any of
shares repurchased forits Class A or Class B Common Stock during the fiscal years ended June 30,
2018, 20172021, 2020 and
2016 are as follows: | | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Total cost of repurchases | | $ | — | | | $ | — | | | $ | 39 | |
Total number of shares repurchased | | | — | | | | — | | | | 3.1 | |
2019.
Stockholder Rights Agreement
During fiscal 2018,2021, the Board of Directors adopted the thirdfourth amended and restated rights agreement, which is referred to below as the “rights agreement.” Under the rights agreement, each outstanding share of common stock of the Company has attached to it one1 right. Initially, the rights are represented by the common stock of the Company, are not traded separately from the common stock and are not exercisable. The rights, unless redeemed or exchanged, will become exercisable for common stock of the Company 10 business days after the earlier of
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
public announcement that a person or group has obtained beneficial ownership (defined to include stock which a person has the right to acquire, regardless of whether such right is subject to the passage of time or the satisfaction of conditions) of 15% or more of the outstanding shares of the Company’s Class B Common Stock or launch of a tender offer to do so. Following such acquisition of beneficial ownership, each right will entitle its holder (other than the acquiring person or group) to purchase, at the exercise price (subject to adjustments provided in the rights agreement), a number of shares of the Company’s Class A or Class B Common Stock, as applicable, having a then-current market value of twice the exercise price, and in the event of a subsequent merger or other acquisition of the Company or transfer of more than 50% of the Company or its assets, to purchase, at the exercise price, a number of shares of common stock of the acquiring entity having a then-current market value of twice the exercise price. The exercise price for the Company rights will be $90.00, subject to certain adjustments.
The rights will not become exercisable by virtue of (i) any person’s or group’s beneficial ownership, as of
the Distribution Date,June 28, 2013 (the “Distribution Date”), of 15% or more of the Class B Common Stock of the Company, unless such person or group acquires beneficial ownership of additional shares of the Company’s Class B Common Stock after June
18, 2018;16, 2021; (ii) the repurchase of the Company’s shares that causes a holder to become the beneficial owner of 15% or more of the Company’s Class B Common Stock, unless such holder acquires beneficial ownership of additional shares representing one percent or more of the Company’s Class B Common Stock; (iii) acquisitions by way of a pro rata stock dividend or a stock split; (iv) acquisitions solely as a result of any unilateral grant of any security by the Company or through the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees pursuant to any equity incentive or award plan; or (v) certain acquisitions determined by the Board of Directors to be inadvertent, provided, that following such acquisition, the acquirer promptly, but in any case within 10 business days, divests a sufficient number of shares so that such person would no longer otherwise qualify as an acquiring person.
The rights will expire on June 18, 2021,2022, unless the rights agreement is earlier terminated or such date is advanced or extended by the Company, or the rights are earlier redeemed or exchanged by the Company. The description of the Rights Agreementrights agreement is qualified in its entirety by reference to the Rights Agreement,rights agreement, including the form of the Certificate of Designations attached as an exhibit thereto.
NOTE 13. EQUITY-BASED COMPENSATION
Employees,
Directors and other service providers of the Company
(“participants”) are eligible to participate in the News Corporation 2013 Long-Term Incentive Plan
(the(as amended and restated, the “2013 LTIP”),
under which
provides for equity-based compensation including
stock options, performance stock units (“PSUs”), restricted stock units (“RSUs”) and other types of
awards can be granted.awards. The Company has the ability to award up to
3050 million shares of Class A Common Stock under the terms of the 2013
LTIP. All shares of Class A Common Stock reserved for cancelled or forfeited equity-based compensation awards under the 2013 LTIP
inbecome available for future grants. In addition,
shares of Class A Common Stock are issuable pursuant to
certain stock option awards assumed
by the Company in connection with
the Separation and with acquisitions.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s equity-based compensation expense
from continuing operations reported in the Statements of Operations:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Total Equity compensation expense | | $ | 76 | | | $ | 38 | | | $ | 55 | |
| | | | | | | | | | | | |
Total intrinsic value of stock options exercised | | $ | 1 | | | $ | 2 | | | $ | 3 | |
| | | | | | | | | | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Total equity compensation expense | $ | 128 | | | $ | 69 | | | $ | 73 | |
| Total intrinsic value of stock options exercised | $ | 1 | | | $ | 1 | | | $ | 1 | |
As of June 30, 2018,2021, the total compensation cost not yet recognized for all plans presented related to unvested awards held by the Company’s employeesparticipants was approximately $56$70 million and is expected to be recognized over a weighted average period of between one and two years. The total intrinsic value of all outstanding awards was approximately $275 million as of June 30, 2021.
The tax benefit recognized on PSUs and RSUs for
the Company’s employeesparticipants that vested and stock options that were exercised by
the Company’s employees,participants during the applicable fiscal year was
$9$18 million,
$17$24 million and
$11$16 million for the fiscal years ended June 30,
2018, 20172021, 2020 and
2016,2019, respectively.
Summary of Incentive Plans
The fair value of equity-based compensation granted under the 2013 LTIP is calculated according to the type of award issued.
Cash settledCash-settled awards are
marked-to-market at the end of each reporting period.
PSUs are grants that entitle the holder to shares of the Company’s Class A Common Stock or the cash equivalent value of such shares based on the achievement of
pre-established performance metrics over the applicable performance period. The fair value of PSUs is determined on the date of grant and expensed using a straight-line method over the applicable vesting period. The expense is adjusted to reflect the number of shares expected to vest based on management’s determination of the probable achievement of the
pre-established performance metrics. The Company records a cumulative adjustment in periods in which its estimate of the number of shares expected to vest changes.
Additionally, the Company ultimately adjusts the expense recognized to reflect the actual vested shares following the final determination of the achievement of the performance conditions. Any person who holds PSUs shall have no ownership interest in the shares or cash to which such PSUs relate unless and until the shares or cash are delivered to the holder.
All shares ofEach PSU is entitled to receive dividend equivalents for each regular cash dividend on the Class A Common Stock
reserved for cancelled or forfeited equity-based compensation awards become available for future grants. Dividend equivalents have been granted to participants beginning withpaid by the
fiscal 2017-2019 PSUCompany during the award
and areperiod, subject to the same terms
and conditions as
apply to the
related PSU awards.Inunderlying award.
During fiscal 2021, 2020 and 2019, certain participants in the first quarters of fiscal 2018, 2017 and 2016, certain employees of the Company2013 LTIP received grants of PSUs which have a three-year performance measurement period. The number of shares that cliff vest afterwill be issued upon vesting of these PSUs can range from 0% to 200% of the completion of three fiscal years,target award, subject to three-yearthree-year performance conditions consisting ofpre-defined targets based on a combination of cumulative business-unit-specific revenue, EBITDA (as defined in Note 9—Borrowings) and free cash flow, or the Company’s cumulative earnings per share, cumulative free cash flow and three-yearthree-year total shareholderstockholder return (“TSR”) relative to that of the companies that comprise the Standard and Poor’s 500 Index, or beginning with PSUs granted in fiscal 2018, the Standard and Poor’s 1500 Media Index. The fair value of the TSR condition is determined using a Monte Carlo simulation model.In the first quarter of fiscal 2018, certain employees of the Company received grants of PSUs that have graded vesting after the completion of one and two fiscal years, subject toone-year performance conditions consisting ofpre-defined targets and grants of PSUs that cliff vest after the completion of three fiscal years, subject to three-year performance conditions consisting ofpre-defined targets. Theone-year performance conditions are based on a combination of business-unit-specific free cash flow and revenue or Company earnings per share, or EPS and free cash flow. The three-year performance conditions are based on a combination of business-unit-specific revenue, EBITDA (as defined in Note 20—Segment Information) and free cash flow or Company EPS, cumulative free cash flow and three-year TSR relative to that of theindividual companies that comprise the Standard and Poor’s 1500 Media Index.
For In addition, in the first quarter of fiscal years ended June 30, 2018, 20172019, certain participants other than named executive officers of the Company also received grants of PSUs which have a one-year performance measurement period. The number of shares that will be issued upon vesting of these PSUs can range from 0% to 200% of the target award, subject to one-year performance conditions consisting of a combination of business-unit-specific revenue and 2016,free cash flow or Company earnings per share and free cash flow.
During fiscal 2021, 2020 and 2019, the Company granted approximately 4.41.6 million, 5.52.1 million and 4.26.0 million PSUs, respectively, at target to the Company’s employees,participants, of which approximately 3.20.8 million, 4.11.2 million and 3.04.3 million PSUs, respectively, will be settled in Class A Common Stock, with the remaining PSUs, which are granted to executive directorsDirectors and to employees in certain foreign locations, being settled in cash, assuming performance conditions are met.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For theDuring fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, approximately 1.63.6 million, 2.86.3 million and 1.24.2 million PSUs respectively, vested, of which approximately 0.51.2 million, 1.01.6 million and 0.21.1 million PSUs, respectively, were settled in cash for approximately $6.6$18 million, $13.1$21 million and $3.3$15 million, respectively, before statutory tax withholdings.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Units
RSU awards
RSUs are grants that entitle the holder to shares of the Company’s Class A Common
Stock.Stock or the cash equivalent value of such shares. The fair value of RSUs is based upon the fair market value of the shares underlying the awards on the grant
date.date and expensed using a straight-line method over the applicable vesting period. Any person who holds RSUs shall have no ownership interest in the shares
or cash to which such RSUs relate unless and until the shares
or cash are delivered to the holder.
Each RSU is entitled to receive dividend equivalents for each regular cash dividend on the Class A Common Stock paid by the Company during the award period, subject to the same terms and conditions as apply to the underlying award.
During fiscal
2018, 20172021, 2020 and
2016,2019, certain
employees ofparticipants in the
Company2013 LTIP received grants of time-vested RSUs. Vesting of the awards is subject to the participants’ continued
employmentservice with the Company through the applicable vesting date. During the fiscal years ended June 30,
2018, 20172021, 2020 and
2016, 0.32019, 3.4 million,
0.44.2 million and
0.31.1 million RSUs, respectively, were granted to
participants. Of the
Company’s employees.awards granted during fiscal 2021 and fiscal 2020, approximately 1.0 million and 0.9 million RSUs, respectively, which are granted to employees in certain foreign locations, will be settled in cash, with the remaining RSUs outstanding being settled in Class A Common Stock. These RSUs have graded vesting primarily over
two to fourthree years.
During fiscal 2021, approximately 1.6 million RSUs vested, of which approximately 0.3 million RSUs were settled in cash for approximately $4 million before statutory tax withholdings.
The following table summarizes the activity
from continuing and discontinued operations related to the target PSUs and RSUs granted to
the Company’s employeesparticipants that will be settled in shares of the Company (PSUs and RSUs in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal 2018 | | | Fiscal 2017 | | | Fiscal 2016 | |
| | | Number
of
shares | | | Weighted
average
grant-
date fair
value | | | Number
of
shares | | | Weighted
average
grant-
date fair
value | | | Number
of
shares | | | Weighted
average
grant-
date fair
value | |
PSUs and RSUs | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested units at beginning of the year | | | 8,652 | | | $ | 15.57 | | | | 7,773 | | | $ | 17.34 | | | | 8,355 | | | $ | 16.77 | |
Granted(a) | | | 3,510 | | | | 13.47 | | | | 4,502 | | | | 14.69 | | | | 3,472 | | | | 15.51 | |
Vested(b) | | | (1,467 | ) | | | 16.70 | | | | (2,387 | ) | | | 18.38 | | | | (1,913 | ) | | | 13.56 | |
Cancelled(c) | | | (1,354 | ) | | | 16.04 | | | | (1,236 | ) | | | 17.08 | | | | (2,141 | ) | | | 15.76 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Unvested units at the end of the year(d) | | | 9,341 | | | $ | 14.54 | | | | 8,652 | | | $ | 15.57 | | | | 7,773 | | | $ | 17.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(a) | For fiscal 2018, includes 3.2 million target PSUs and 0.3 million RSUs granted.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal 2021 | | Fiscal 2020 | | Fiscal 2019 |
| Number of shares | | Weighted average grant- date fair value | | Number of shares | | Weighted average grant- date fair value | | Number of shares | | Weighted average grant- date fair value |
| PSUs and RSUs | | | | | | | | | | | |
| Unvested units at beginning of the year | 7,717 | | | $ | 13.39 | | | 10,280 | | | $ | 13.70 | | | 9,341 | | | $ | 14.54 | |
Granted(a) | 3,546 | | | 15.59 | | | 4,468 | | | 12.79 | | | 5,445 | | | 12.98 | |
Vested(b) | (3,676) | | | 13.30 | | | (5,565) | | | 14.12 | | | (3,534) | | | 14.72 | |
Cancelled(c) | (565) | | | 15.05 | | | (1,466) | | | 10.97 | | | (972) | | | 14.02 | |
| Unvested units at the end of the year | 7,022 | | | $ | 14.61 | | | 7,717 | | | $ | 13.39 | | | 10,280 | | | $ | 13.70 | |
________________________
(a)For fiscal 2017,2021, includes 4.10.8 million target PSUs and 0.4 million RSUs granted.For fiscal 2016, includes 3.0 million target PSUs and 0.32.4 million RSUs granted and a payout adjustment of 0.2
0.3 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 20132018 that vested during fiscal 2016.(b) | The fair value of PSUs and RSUs held by the Company’s employees that vested during the fiscal years ended June 30, 2018, 2017 and 2016 was $25 million, $44 million and $26 million, respectively.
|
(c) | For fiscal 2018, includes 0.6 million of target PSUs and 0.1 million RSUs cancelled and a payout adjustment of 0.7 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2015 that vested during fiscal 2018.
|
2021.
For fiscal 2017,2020, includes 0.71.1 million target PSUs and 3.3 million RSUs granted and a payout adjustment of 0.1 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2019 that vested during fiscal 2020.
For fiscal 2019, includes 3.8 million target PSUs and 1.1 million RSUs granted and a payout adjustment of 0.5 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2018 that vested during fiscal 2019.
(b)The fair value of PSUs and RSUs held by participants that vested during the fiscal years ended June 30, 2021, 2020 and 2019 was $49 million, $79 million and $52 million, respectively.
(c)For fiscal 2021, includes 0.3 million of target PSUs and 0.10.3 million RSUs cancelled.
For fiscal 2020, includes 0.4 million of target PSUs and 0.7 million RSUs cancelled and a payout adjustment of 0.4 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 20142017 that vested during fiscal 2017.2020.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For fiscal 2016,2019, includes 0.80.6 million of target PSUs and 0.30.1 million RSUs cancelled and a payout adjustment of 1.00.3 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 20132016 that vested during fiscal 2016.
(d) | The intrinsic value of these unvested RSUs and target PSUs was approximately $145 million as of June 30, 2018.
|
2019.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about stock option transactions for the employee stock option plans (options in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal 2018 | | | Fiscal 2017 | | | Fiscal 2016 | |
| | | Options | | | Weighted
average
exercise
price | | | Options | | | Weighted
average
exercise
price | | | Options | | | Weighted
average
exercise
price | |
| | | | | | (in US$) | | | | | | (in US$) | | | | | | (in US$) | |
Outstanding at the beginning of the year | | | 666 | | | $ | 7.74 | | | | 1,238 | | | $ | 9.03 | | | | 2,008 | | | $ | 8.82 | |
Exercised | | | (189 | ) | | | 8.04 | | | | (354 | ) | | | 7.78 | | | | (508 | ) | | | 7.34 | |
Cancelled | | | (4 | ) | | | 9.04 | | | | (218 | ) | | | 15.00 | | | | (262 | ) | | | 10.75 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding at the end of the year(a) | | | 473 | | | $ | 7.61 | | | | 666 | | | $ | 7.74 | | | | 1,238 | | | $ | 9.03 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Exercisable at the end of the year(b) | | | 470 | | | | | | | | 585 | | | | | | | | 945 | | | | | |
(a) | The intrinsic value of options outstanding held by the Company’s employees as of June 30, 2018, 2017 and 2016 was $3.7 million, $4.0 million and $3.0 million, respectively. The weighted average remaining contractual life of options outstanding as of June 30, 2018 was 4.06 years.
|
(b) | The weighted average remaining contractual life of options exercisable as of June 30, 2018 was 4.04 years.
|
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal 2021 | | Fiscal 2020 | | Fiscal 2019 |
| Options | | Weighted average exercise price | | Options | | Weighted average exercise price | | Options | | Weighted average exercise price |
| Outstanding at the beginning of the year | 232 | | | $ | 8.45 | | | 335 | | | $ | 8.04 | | | 473 | | | $ | 7.61 | |
| Exercised | (150) | | | 8.65 | | | (103) | | | 8.25 | | | (136) | | | 6.58 | |
| Cancelled | 0 | | | 0 | | | 0 | | | 0 | | | (2) | | | 5.90 | |
Outstanding at the end of the year(a) | 82 | | | $ | 8.10 | | | 232 | | | $ | 8.45 | | | 335 | | | $ | 8.04 | |
Exercisable at the end of the year(a) | 82 | | | | | 232 | | | | | 335 | | | |
________________________
(a)The weighted average remaining contractual life of options outstanding and exercisable as of June 30, 2021 was approximately 2.00 years.
NOTE 14.
EARNINGS (LOSS)
EARNINGS PER SHARE
The following tables set forth the computation of basic and diluted
earnings (loss)
earnings per share under ASC 260, “Earnings per Share”:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions, except per share amounts) | |
(Loss) income from continuing operations | | $ | (1,444 | ) | | $ | (643 | ) | | $ | 235 | |
Less: Net income attributable to noncontrolling interests | | | (70 | ) | | | (95 | ) | | | (71 | ) |
Less: Redeemable preferred stock dividends(a) | | | (2 | ) | | | (2 | ) | | | (2 | ) |
| | | | | | | | | | | | |
(Loss) income from continuing operations available to News Corporation stockholders | | | (1,516 | ) | | | (740 | ) | | | 162 | |
Income from discontinued operations, net of tax, available to News Corporation stockholders | | | — | | | | — | | | | 15 | |
| | | | | | | | | | | | |
Net (loss) income available to News Corporation stockholders | | $ | (1,516 | ) | | $ | (740 | ) | | $ | 177 | |
| | | | | | | | | | | | |
Weighted-average number of shares of common stock outstanding—basic | | | 582.7 | | | | 581.4 | | | | 580.6 | |
Dilutive effect of equity awards(b) | | | — | | | | — | | | | 1.9 | |
| | | | | | | | | | | | |
Weighted-average number of shares of common stock outstanding—diluted | | | 582.7 | | | | 581.4 | | | | 582.5 | |
| | | | | | | | | | | | |
(Loss) income from continuing operations available to News Corporation stockholders per share—basic and diluted | | $ | (2.60 | ) | | $ | (1.27 | ) | | $ | 0.28 | |
Income from discontinued operations available to News Corporation stockholders per share—basic and diluted | | $ | — | | | $ | — | | | $ | 0.02 | |
| | | | | | | | | | | | |
Net (loss) income available to News Corporation stockholders per share—basic and diluted | | $ | (2.60 | ) | | $ | (1.27 | ) | | $ | 0.30 | |
| | | | | | | | | | | | |
(a) | Refer to Note 10—Redeemable Preferred Stock
|
(b) | The dilutive impact of the Company’s PSUs, RSUs and stock options has been excluded from the calculation of diluted (loss) earnings per share for the fiscal years ended June 30, 2018 and 2017 because their inclusion would have an antidilutive effect on the net loss per share.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions, except per share amounts) |
| Net income (loss) | $ | 389 | | | $ | (1,545) | | | $ | 228 | |
| Less: Net (income) loss attributable to noncontrolling interests | (59) | | | 276 | | | (73) | |
| | | | | |
| Net income (loss) attributable to News Corporation stockholders | $ | 330 | | | $ | (1,269) | | | $ | 155 | |
| Weighted-average number of shares of common stock outstanding—basic | 590.4 | | | 587.9 | | | 584.7 | |
Dilutive effect of equity awards(a) | 3.0 | | | 0 | | | 3.2 | |
| Weighted-average number of shares of common stock outstanding—diluted | 593.4 | | | 587.9 | | | 587.9 | |
| Net income (loss) attributable to News Corporation stockholders per share - basic | $ | 0.56 | | | $ | (2.16) | | | $ | 0.27 | |
| Net income (loss) attributable to News Corporation stockholders per share - diluted | $ | 0.56 | | | $ | (2.16) | | | $ | 0.26 | |
________________________
(a)The dilutive impact of the Company’s PSUs, RSUs and stock options has been excluded from the calculation of diluted loss per share for the fiscal year ended June 30, 2020 because their inclusion would have an antidilutive effect on the net loss per share.
NOTE 15. RELATED PARTY TRANSACTIONS
Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties to purchase and/or sell advertising and administrative services. The Company has also previously entered into transactions with related parties to sell certain broadcast rights.
The following table sets forth the net revenue from related parties included in the Statements of Operations:
| | | | | | | | | | | | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Related party revenue, net of expense(a) | | $ | 240 | | | $ | 307 | | | $ | 319 | |
(a) | Related party revenue, net of expenses, includes nine months of affiliate fees earned by FOX SPORTS Australia from Foxtel.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Related party revenue (expense), net | $ | (35) | | | $ | (69) | | | $ | (96) | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the amount of receivables due from and
payablepayables due to related parties outstanding on the Balance Sheets:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Accounts receivable from related parties | | $ | 32 | | | $ | 92 | |
Notes receivable from related parties | | | — | | | | 370 | |
Accounts payable to related parties | | | 17 | | | | 13 | |
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Accounts receivable from related parties | $ | 8 | | | $ | 4 | |
| Accounts payable to related parties | 2 | | | 4 | |
NOTE 16. COMMITMENTS AND CONTINGENCIES
The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the
current and future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments as of June 30,
2018: | | | | | | | | | | | | | | | | | | | | |
| | | As of June 30, 2018 | |
| | | Payments Due by Period | |
| | | Total | | | Less than
1 year | | | 1-3 years | | | 3-5 years | | | More than
5 years | |
| | | (in millions) | |
Purchase obligations(a) | | $ | 1,165 | | | $ | 505 | | | $ | 409 | | | $ | 168 | | | $ | 83 | |
Sports programming rights(b) | | | 2,316 | | | | 490 | | | | 966 | | | | 750 | | | | 110 | |
Programming costs(c) | | | 239 | | | | 120 | | | | 100 | | | | 19 | | | | — | |
Operating leases(d) | | | | | | | | | | | | | | | | | | | | |
Transmission costs(e) | | | 480 | | | | 66 | | | | 122 | | | | 118 | | | | 174 | |
Land and buildings | | | 1,585 | | | | 168 | | | | 291 | | | | 244 | | | | 882 | |
Plant and machinery | | | 26 | | | | 7 | | | | 10 | | | | 8 | | | | 1 | |
Borrowings(f) | | | 1,937 | | | | 459 | | | | 962 | | | | 373 | | | | 143 | |
Interest payments on borrowings(g) | | | 196 | | | | 19 | | | | 56 | | | | 77 | | | | 44 | |
| | | | | | | | | | | | | | | | | | | | |
Total commitments and contractual obligations | | $ | 7,944 | | | $ | 1,834 | | | $ | 2,916 | | | $ | 1,757 | | | $ | 1,437 | |
| | | | | | | | | | | | | | | | | | | | |
(a) | The Company has commitments under purchase obligations related to minimum subscriber guarantees for license fees, printing contracts, capital projects, marketing agreements, production services and other legally binding commitments.
|
(b) | The Company has sports programming rights commitments with National Rugby League, Australian Football League, Cricket Australia, the domestic football league and Australian Rugby Union as well as certain other broadcast rights which are payable through fiscal 2024. In April 2018, new Foxtel entered into a sports programming rights agreement with Cricket Australia to broadcast domestic cricket for a six year period from 2018 to 2024. The sports rights commitments are included in the table above.
|
(c) | The Company has programming rights commitments with various suppliers for programming content.
|
(d) | The Company leases office facilities, warehouse facilities, printing plants, satellite service agreements and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2062. This amount includes approximately $175 million of land and office facilities that have been subleased from 21st Century Fox.
|
(e) | The Company has contractual commitments for satellite transmission services. The transponder services arrangements extend through 2029 and are accounted for as operating leases.
|
(f) | See Note 9—Borrowings.
|
2021:
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(g) | Reflects the Company’s expected future interest payments on borrowings outstanding and interest rates applicable at June 30, 2018. Such rates are subject to change in future periods. See Note 9—Borrowings.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 |
| Payments Due by Period |
| Total | | Less than 1 year | | 1-3 years | | 3-5 years | | More than 5 years |
| (in millions) |
Purchase obligations(a) | $ | 1,042 | | | $ | 444 | | | $ | 402 | | | $ | 106 | | | $ | 90 | |
Sports programming rights(b) | 2,022 | | | 402 | | | 938 | | | 446 | | | 236 | |
Programming costs(c) | 745 | | | 265 | | | 430 | | | 36 | | | 14 | |
Operating leases(d) |
| | | | | | | | |
Transmission costs(e) | 207 | | | 30 | | | 54 | | | 37 | | | 86 | |
| Land and buildings | 1,313 | | | 153 | | | 267 | | | 224 | | | 669 | |
| Plant and machinery | 13 | | | 7 | | | 5 | | | 1 | | | 0 | |
| Finance leases | | | | | | | | | |
Transmission costs(e) | 106 | | | 31 | | | 58 | | | 17 | | | 0 | |
Borrowings(f) | 2,224 | | | 0 | | | 824 | | | 340 | | | 1,060 | |
Interest payments on borrowings(g) | 438 | | | 87 | | | 136 | | | 92 | | | 123 | |
| Total commitments and contractual obligations | $ | 8,110 | | | $ | 1,419 | | | $ | 3,114 | | | $ | 1,299 | | | $ | 2,278 | |
________________________
(a)The Company has commitments under purchase obligations related to minimum subscriber guarantees for license fees, printing contracts, capital projects, marketing agreements, production services and other legally binding commitments.
(b)The Company has sports programming rights commitments with the National Rugby League, Australian Football League and Cricket Australia, as well as certain other broadcast rights which are payable through fiscal 2028.
(c)The Company has programming rights commitments with various suppliers for programming content.
(d)The Company leases office facilities, warehouse facilities, printing plants, satellite services and equipment. These leases, which are classified as operating leases, are expected to be paid at certain dates through fiscal 2048. Amounts reflected represent only the Company’s lease obligations for which it has firm commitments.
(e)The Company has contractual commitments for satellite transmission services. The Company’s satellite transponder services arrangements extend through fiscal 2032 and are accounted for as operating or finance leases, based on the underlying terms of those arrangements.
(f)See Note 9—Borrowings.
(g)Reflects the Company’s expected future interest payments on borrowings outstanding and interest rates applicable at June 30, 2021. Such rates are subject to change in future periods. See Note 9—Borrowings.
The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed below. The outcome of these matters and claims is subject to significant uncertainty, and the Company often
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition.
The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. Except as otherwise provided below, for the contingencies disclosed for which there is at least a reasonable possibility that a loss may be incurred, the Company was unable to estimate the amount of loss or range of loss. The Company recognizes gain contingencies when the gain becomes realized or realizable.
News America Marketing
Valassis Communications, Inc.
On November 8, 2013, Valassis Communications, Inc. (“Valassis”) initiated legal proceedings against
In May 2020, the Company
and/or certain ofsold its
subsidiaries alleging violations of various antitrust laws. These proceedings are described in further detail below.Valassis previously initiated an action against News America Incorporated, News America Marketing FSI L.L.C.business. In the Disposition, the Company retained certain liabilities, including those arising from the legal proceedings with Insignia and News America MarketingIn-Store Services L.L.C. (collectively, the “NAM Parties”), captioned Valassis Communications,described below.
Insignia Systems, Inc. v. News America Incorporated, et al.,No. 2:06-cv-10240 (E.D. Mich.) (“Valassis I”), alleging violations of federal antitrust laws, which was settled in February 2010.
On November 8, 2013, ValassisJuly 11, 2019, Insignia filed a motion for expedited discoverycomplaint in the previously settled case based on its belief that defendants had engaged in activities prohibited under an order issued by the U.S. District Court for the Eastern District of Michigan in connection with the parties’ settlement, which motion was granted by the magistrate judge.
Valassis subsequently filed a Notice of Violation of the order issued by the District Court in Valassis I (the “Notice”). The Noticere-asserted claims of unlawful bundling and tying which the magistrate judge had previously recommended be dismissed from Valassis II, described below, on the grounds that such claims could only be brought before a panel of antitrust experts previously appointed in Valassis I (the “Antitrust Expert Panel”), and sought treble damages, injunctive relief and attorneys’ fees on those claims. On March 30, 2016, the District Court ordered that the Notice be referred to the Antitrust Expert Panel.
On November 8, 2013, Valassis also filed a new complaint in the District CourtMinnesota against News CorporationAmerica Marketing FSI L.L.C. (“NAM FSI”), News America Marketing In-Store Services L.L.C. (“NAM In-Store”) and the NAM PartiesNews Corporation (together, the “NAM Group”Parties”) alleging violations of federal and state antitrust laws and common law business torts (“Valassis II”).torts. The complaint soughtseeks treble damages, injunctive relief and attorneys’ fees and costs. On December 19, 2013,August 14, 2019, the NAM Group filed a motion to dismissParties answered the newly filed complaint and on March 30, 2016, the District Court orderedasserted a counterclaim against Insignia for breach of contract, alleging that Valassis’s
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| bundling and tying claims be dismissed without prejudice to Valassis’s rights to pursue relief for those claims in Valassis I and that all remaining claims in the NAM Group’s motion to dismiss be referred to the Antitrust Expert Panel.
|
The Antitrust Expert Panel was convenedInsignia violated a prior settlement agreement between NAM In-Store and on February 8, 2017, recommended that Valassis I be dismissed andInsignia. On July 10, 2020, each of the NAM Group’s counterclaims in Valassis II be dismissed with leave to replead three of the four counterclaims. The NAM Group filed an amended counterclaim on February 27, 2017. Valassis did not object to the Antitrust Expert Panel’s recommendation to dismiss Valassis I, but it filed motions with the District Court asserting that the referral of Valassis II to the Antitrust Expert Panel was no longer validParties and seeking either tore-open Valassis II in the District Court or to transfer the case to the U.S. District Court for the Southern District of New York (the “N.Y. District Court”). On September 25, 2017, the District Court dismissed Valassis I, granted Valassis’s motions and transferred Valassis II to the N.Y. District Court. On April 13, 2018, the NAM GroupInsignia filed a motion for summary judgment dismissing Valassis II withon the N.Y. District Court.counterclaim. On December 7, 2020, the court denied Insignia’s motion and granted the NAM Parties’ motion in part and denied it in part. The court found that Insignia had breached the prior settlement agreement and struck the allegations in Insignia’s complaint that violated the agreement. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, the NAM Parties believe they have been compliant with applicable laws and intend to defend themselves vigorously.
Valassis Communications, Inc.
On November 8, 2013, Valassis filed a complaint in the U.S. District Court for the Eastern District of Michigan (the “District Court”) against the NAM Parties and News America Incorporated (together, the “NAM Group”) alleging violations of federal and state antitrust laws and common law business torts. The complaint seeks treble damages, injunctive relief and attorneys’ fees and costs.
On December 19, 2013, the NAM Group filed a motion to dismiss the complaint and on March 30, 2016, the District Court dismissed Valassis’s bundling and tying claims. On September 25, 2017, the District Court granted Valassis’s motion to transfer the case to the U.S. District Court for the Southern District of New York (the “N.Y. District Court”). On April 13, 2018, the NAM Group filed a motion for summary judgment dismissing the case which was granted in part and denied in part by the N.Y. District Court on February 21, 2019. The N.Y. District Court found that the NAM Group’s bidding practices were lawful but denied its motion with respect to claims arising out of certain other alleged contracting practices. In addition, the N.Y. District Court also dismissed Valassis’s claims relating to free-standing insert products. The trial began on June 29, 2021 and on July 18, 2021, the parties agreed to settle the litigation, and Valassis’s claims were dismissed with prejudice on July 19, 2021.
HarperCollins
Beginning in February 2021, a number of purported class action complaints have been filed in the N.Y. District Court against Amazon.com, Inc. and certain publishers, including the Company’s subsidiary, HarperCollins Publishers, L.L.C. (“HarperCollins”), alleging violations of antitrust and competition laws. The complaints seek treble damages, injunctive relief and attorneys’ fees and costs. While it is not possible at this time to predict with any degree of certainty the ultimate outcome of these actions, HarperCollins believes it has been compliant with applicable laws and intends to defend itself vigorously.
In-Store Marketing and FSI Purchasers
On February 29, 2016, the parties agreed to settle the litigation in the N.Y. District Court in which The Dial Corporation, Henkel Consumer Goods, Inc., H.J. Heinz Company, H.J. Heinz Company, L.P., Foster Poultry Farms, Smithfield Foods, Inc., HP Hood LLC and BEF Foods, Inc. alleged various claims under federal and state antitrust law against the NAM Group. Pursuant to the terms
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Civil claims have been brought against the Company with respect to, among other things, voicemail interception and inappropriate payments to public officials at the Company’s former publication,The News of the World, and atThe Sun, and related matters (the “U.K. Newspaper Matters”). The Company has admitted liability in many civil cases and has settled a number of cases. The Company also settled a number of claims through a private compensation scheme which was closed to new claims after April 8, 2013. In connection with the Separation, the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that 21st Century Fox would indemnify the Company for payments made after the Distribution Date arising out of civil claims and investigations relating to the U.K. Newspaper Matters as well as legal and professional fees and expenses paid in connection with the previously concluded criminal matters, other than fees, expenses and costs relating to employees (i) who are not directors, officers or certain designated employees or (ii) with respect to civil matters, who are not
co-defendants with the Company or 21st Century Fox. 21st Century Fox’s indemnification obligations with respect to these matters
will beare settled on an
after-tax basis.
In March 2019, as part of the separation of FOX Corporation (“FOX”) from 21st Century Fox, the Company, News Corp Holdings UK & Ireland, 21st Century Fox and FOX entered into a Partial Assignment and Assumption Agreement, pursuant to which, among other things, 21st Century Fox assigned, conveyed and transferred to FOX all of its indemnification obligations with respect to the U.K. Newspaper Matters.
The net (benefit) expense related to the U.K. Newspaper Matters in Selling, general and administrative expenses was $(35) million, $10 million, $8 million and $19$10 million for the fiscal years ended June 30, 2018,2021, June 30, 20172020 and June 30, 2016,2019, respectively. As of June 30, 2018,2021, the Company has provided for its best estimate of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $52$47 million. The amount to be indemnified by 21st Century FoxFOX of approximately $49$55 million was recorded as a receivable in Other current assets on the Balance Sheet as of June 30, 2018.2021. The
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
net benefitexpense for the fiscal year ended June 30, 2018 and the accrual and receivable recorded as of that date reflect2020 reflects a $46$5 million impact from the reversal of a portion of the Company’s previously accrued liability and the corresponding receivable from 21st Century FoxFOX as the result of an agreement reached with the relevant tax authority with respect to certain employment taxes. It is not possible to estimate the liability or corresponding receivable for any additional claims that may be filed given the information that is currently available to the Company. If more claims are filed and additional information becomes available, the Company will update the liability provision and corresponding receivable for such matters.
The Company is not able to predict the ultimate outcome or cost of the civil claims. It is possible that these proceedings and any adverse resolution thereof could damage its reputation, impair its ability to conduct its business and adversely affect its results of operations and financial condition.
Zillow Settlement
On June 6, 2016, the parties agreed to settle the litigation in the Superior Court of the State of Washington in which Move, the National Association of Realtors® (“NAR”) and three related entities filed a complaint against Zillow, Inc. (“Zillow”), Errol Samuelson and Curt Beardsley alleging, among other things, misappropriation of trade secrets, tortious interference, breach of fiduciary duties and breach of contract. Pursuant to the terms of the settlement agreement and release, Zillow paid the plaintiffs $130 million and the pending litigation was dismissed with prejudice. Under the terms of an agreement with Move, NAR received 10% of the settlement proceeds after deduction of Move’s litigation-related costs and fees, and Move received the remainder. As a result, the Company recognized a $122 million gain in NAM Group and Zillow settlements, net in the Company’s Statement of Operations for the fiscal year ended June 30, 2016.
The Company’s tax returns are subject to
on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in the Company’s tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable.
The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid; however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress, or as settlements or litigations occur.
NOTE 17. RETIREMENT BENEFIT OBLIGATIONS
The Company’s employees participate in various defined benefit pension and postretirement plans sponsored by the Company and its subsidiaries. Plans in the U.S., U.K., Australia, and other foreign plans are accounted for as defined benefit pension plans. Accordingly, the funded and unfunded position of each plan is recorded in the Balance Sheets. Actuarial gains and losses that have not yet been recognized through net income are recorded in Accumulated other comprehensive loss, net of taxes, until they are amortized as a component of net periodic benefit cost. The determination of benefit obligations and the recognition of expenses related to the plans are dependent on various assumptions. The major assumptions primarily relate to discount rates, expected long-term rates of return on plan assets and mortality rates. Management develops each assumption using relevant company experience in conjunction with market-related data for each individual country in which such plans exist. The funded
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
status of the plans can change from year to year, but the assets of the funded plans have been sufficient to pay all benefits that came due in each of fiscal 2018, 20172021, 2020 and 2016.2019.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summary of Funded Status
The Company uses a June 30 measurement date for all pension and postretirement benefit plans. The combined domestic and foreign pension and postretirement benefit plans resulted in a net pension and postretirement benefits liability of
$120$102 million and
$312$194 million at June 30,
20182021 and
2017,2020, respectively. The Company recognized these amounts in the Balance Sheets at June 30,
20182021 and
20172020 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | Postretirement
benefits | | | | |
| | | Domestic | | | Foreign | | | Total | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| | | (in millions) | |
Othernon-current assets | | $ | — | | | $ | — | | | $ | 135 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | 135 | | | $ | 17 | |
Other current liabilities | | | — | | | | — | | | | (1 | ) | | | (1 | ) | | | (9 | ) | | | (9 | ) | | | (10 | ) | | | (10 | ) |
Retirement benefit obligations | | | (74 | ) | | | (91 | ) | | | (74 | ) | | | (120 | ) | | | (97 | ) | | | (108 | ) | | | (245 | ) | | | (319 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net amount recognized | | $ | (74 | ) | | $ | (91 | ) | | $ | 60 | | | $ | (104 | ) | | $ | (106 | ) | | $ | (117 | ) | | $ | (120 | ) | | $ | (312 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | | | | | | | |
| Domestic | | Foreign | | Postretirement
benefits | | Total |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) |
| Other non-current assets | $ | 0 | | | $ | 0 | | | $ | 120 | | | $ | 94 | | | $ | 0 | | | $ | 0 | | | $ | 120 | | | $ | 94 | |
| Other current liabilities | (1) | | | 0 | | | (2) | | | (2) | | | (8) | | | (9) | | | (11) | | | (11) | |
| Retirement benefit obligations | (53) | | | (95) | | | (80) | | | (82) | | | (78) | | | (100) | | | (211) | | | (277) | |
| Net amount recognized | $ | (54) | | | $ | (95) | | | $ | 38 | | | $ | 10 | | | $ | (86) | | | $ | (109) | | | $ | (102) | | | $ | (194) | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the change in the projected benefit obligation, change in the fair value of the Company’s plan assets and funded status:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | Postretirement
Benefits | | | | |
| | | Domestic | | | Foreign | | | Total | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| | | (in millions) | |
Projected benefit obligation, beginning of the year | | $ | 368 | | | $ | 396 | | | $ | 1,216 | | | $ | 1,201 | | | $ | 117 | | | $ | 126 | | | $ | 1,701 | | | $ | 1,723 | |
Service cost | | | — | | | | — | | | | 6 | | | | 9 | | | | — | | | | — | | | | 6 | | | | 9 | |
Interest cost | | | 12 | | | | 12 | | | | 29 | | | | 29 | | | | 3 | | | | 3 | | | | 44 | �� | | | 44 | |
Benefits paid | | | (27 | ) | | | (23 | ) | | | (45 | ) | | | (39 | ) | | | (8 | ) | | | (8 | ) | | | (80 | ) | | | (70 | ) |
Settlements(a) | | | — | | | | (13 | ) | | | (29 | ) | | | (23 | ) | | | — | | | | — | | | | (29 | ) | | | (36 | ) |
Actuarial loss/(gain)(b) | | | (19 | ) | | | (4 | ) | | | (151 | ) | | | 54 | | | | (6 | ) | | | (3 | ) | | | (176 | ) | | | 47 | |
Foreign exchange rate changes | | | — | | | | — | | | | 14 | | | | (15 | ) | | | — | | | | — | | | | 14 | | | | (15 | ) |
Amendments, transfers and other | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | (1 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Projected benefit obligation, end of the year | | | 334 | | | | 368 | | | | 1,040 | | | | 1,216 | | | | 106 | | | | 117 | | | | 1,480 | | | | 1,701 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in the fair value of plan assets for the Company’s benefit plans: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of plan assets, beginning of the year | | | 277 | | | | 287 | | | | 1,112 | | | | 1,080 | | | | — | | | | — | | | | 1,389 | | | | 1,367 | |
Actual return on plan assets | | | 9 | | | | 23 | | | | 26 | | | | 83 | | | | — | | | | — | | | | 35 | | | | 106 | |
Employer contributions | | | 1 | | | | 3 | | | | 28 | | | | 23 | | | | — | | | | — | | | | 29 | | | | 26 | |
Benefits paid | | | (27 | ) | | | (23 | ) | | | (45 | ) | | | (39 | ) | | | — | | | | — | | | | (72 | ) | | | (62 | ) |
Settlements(a) | | | — | | | | (13 | ) | | | (29 | ) | | | (23 | ) | | | — | | | | — | | | | (29 | ) | | | (36 | ) |
Foreign exchange rate changes | | | — | | | | — | | | | 8 | | | | (12 | ) | | | — | | | | — | | | | 8 | | | | (12 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of plan assets, end of the year | | | 260 | | | | 277 | | | | 1,100 | | | | 1,112 | | | | — | | | | — | | | | 1,360 | | | | 1,389 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funded status | | $ | (74 | ) | | $ | (91 | ) | | $ | 60 | | | $ | (104 | ) | | $ | (106 | ) | | $ | (117 | ) | | $ | (120 | ) | | $ | (312 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | | | | | | | |
| Domestic | | Foreign | | Postretirement
Benefits | | Total |
| As of June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) |
| Projected benefit obligation, beginning of the year | $ | 353 | | | $ | 350 | | | $ | 1,051 | | | $ | 1,025 | | | $ | 109 | | | $ | 109 | | | $ | 1,513 | | | $ | 1,484 | |
| Service cost | 0 | | | 0 | | | 2 | | | 2 | | | 0 | | | 0 | | | 2 | | | 2 | |
| Interest cost | 7 | | | 11 | | | 16 | | | 20 | | | 2 | | | 3 | | | 25 | | | 34 | |
| Benefits paid | (18) | | | (17) | | | (45) | | | (39) | | | (8) | | | (8) | | | (71) | | | (64) | |
Settlements(a) | (12) | | | (30) | | | (10) | | | (27) | | | 0 | | | 0 | | | (22) | | | (57) | |
Actuarial loss (gain)(b) | 9 | | | 39 | | | (18) | | | 102 | | | (1) | | | 5 | | | (10) | | | 146 | |
| Foreign exchange rate changes | 0 | | | 0 | | | 128 | | | (32) | | | 1 | | | 0 | | | 129 | | | (32) | |
| Amendments, transfers and other | 0 | | | 0 | | | 0 | | | 0 | | | (17) | | | 0 | | | (17) | | | 0 | |
| Projected benefit obligation, end of the year | 339 | | | 353 | | | 1,124 | | | 1,051 | | | 86 | | | 109 | | | 1,549 | | | 1,513 | |
| Change in the fair value of plan assets for the Company’s benefit plans: | | | | | | | | | | | | | | | |
| Fair value of plan assets, beginning of the year | 258 | | | 263 | | | 1,061 | | | 1,062 | | | 0 | | | 0 | | | 1,319 | | | 1,325 | |
| Actual return on plan assets | 36 | | | 25 | | | 12 | | | 85 | | | 0 | | | 0 | | | 48 | | | 110 | |
| Employer contributions | 21 | | | 17 | | | 14 | | | 13 | | | 0 | | | 0 | | | 35 | | | 30 | |
| Benefits paid | (18) | | | (17) | | | (45) | | | (39) | | | 0 | | | 0 | | | (63) | | | (56) | |
Settlements(a) | (12) | | | (30) | | | (10) | | | (27) | | | 0 | | | 0 | | | (22) | | | (57) | |
| Foreign exchange rate changes | 0 | | | 0 | | | 130 | | | (33) | | | 0 | | | 0 | | | 130 | | | (33) | |
| Fair value of plan assets, end of the year | 285 | | | 258 | | | 1,162 | | | 1,061 | | | 0 | | | 0 | | | 1,447 | | | 1,319 | |
| Funded status | $ | (54) | | | $ | (95) | | | $ | 38 | | | $ | 10 | | | $ | (86) | | | $ | (109) | | | $ | (102) | | | $ | (194) | |
________________________
(a)Amounts related to payments made to former employees of the Company in full settlement of their deferred pension benefits. The U.S. plan settlements in fiscal 2021 and fiscal 2020 are primarily the result of the disposition of the Company's News America Marketing business in May 2020.
(b)Actuarial losses for fiscal 2021 related to domestic pension plans and for fiscal 2020 related to domestic and foreign pension plans primarily relate to the decrease in discount rates used in measuring plan obligations as of June 30, 2021 and 2020, respectively. Actuarial gains for fiscal 2021 related to international pension plans primarily relate to the increase in discount rates used in measuring plan obligations as of June 30, 2021.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) | Amounts related to payments made to former employees of the Company in full settlement of their deferred pension benefits.
|
(b) | Fiscal 2018 actuarial gains related to domestic and foreign pension plans primarily relates to the increase in discount rates for the U.S. and U.K. plans used in measuring plan obligations as of June 30, 2018. Fiscal 2017 actuarial losses for the Company’s foreign pension plans are primarily related to the decrease in discount rates used in measuring plan obligations as of June 30, 2017. Fiscal 2017 actuarial gains related to domestic pension plans primarily relate to the increase in discount rates for the U.S. plans used in measuring plan obligations as of June 30, 2017.
|
Amounts recognized in Accumulated other comprehensive loss consist of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | Postretirement
Benefits | | | | |
| | | Domestic | | | Foreign | | | Total | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| | | (in millions) | |
Actuarial losses (gains) | | $ | 126 | | | $ | 142 | | | $ | 316 | | | $ | 453 | | | $ | (7 | ) | | $ | (1 | ) | | $ | 435 | | | $ | 594 | |
Prior service (benefit) cost | | | — | | | | — | | | | — | | | | — | | | | (28 | ) | | | (31 | ) | | | (28 | ) | | | (31 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net amounts recognized | | $ | 126 | | | $ | 142 | | | $ | 316 | | | $ | 453 | | | $ | (35 | ) | | $ | (32 | ) | | $ | 407 | | | $ | 563 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts in Accumulated other comprehensive loss expected to be recognized as a component of net periodic benefit cost in fiscal 2019 consist of:
| | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | Postretirement
Benefits | | | | |
| | | Domestic | | | Foreign | | | Total | |
| | | As of June 30, 2018 | |
| | | (in millions) | |
Actuarial losses (gains) | | $ | 4 | | | $ | 10 | | | $ | — | | | $ | 14 | |
Prior service (benefit) cost | | | — | | | | — | | | | (3 | ) | | | (3 | ) |
| | | | | | | | | | | | | | | | |
Net amounts recognized | | $ | 4 | | | $ | 10 | | | $ | (3 | ) | | $ | 11 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | | | | | | | |
| Domestic | | Foreign | | Postretirement
Benefits | | Total |
| As of June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) |
| Actuarial losses | $ | 130 | | | $ | 153 | | | $ | 403 | | | $ | 368 | | | $ | 6 | | | $ | 6 | | | $ | 539 | | | $ | 527 | |
| Prior service cost (benefit) | 0 | | | 0 | | | 9 | | | 8 | | | (36) | | | (22) | | | (27) | | | (14) | |
| Net amounts recognized | $ | 130 | | | $ | 153 | | | $ | 412 | | | $ | 376 | | | $ | (30) | | | $ | (16) | | | $ | 512 | | | $ | 513 | |
Accumulated pension benefit obligations as of June 30, 20182021 and 20172020 were $1,364$1,457 million and $1,567$1,397 million, respectively.
Below is information about funded and unfunded pension
plans. | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Domestic Pension Benefits | |
| | | Funded Plans | | | Unfunded
Plans | | | Total | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| | | (in millions) | |
Projected benefit obligation | | $ | 320 | | | $ | 354 | | | $ | 14 | | | $ | 14 | | | $ | 334 | | | $ | 368 | |
Accumulated benefit obligation | | | 320 | | | | 354 | | | | 14 | | | | 14 | | | | 334 | | | | 368 | |
Fair value of plan assets | | | 260 | | | | 277 | | | | — | | | | — | | | | 260 | | | | 277 | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | Foreign Pension Benefits | | | Domestic Pension Benefits |
| | | Funded Plans | | | Unfunded
Plans | | | Total | | | Funded Plans | | Unfunded Plans | | Total |
| | | As of June 30, | | | As of June 30, |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (in millions) | | | (in millions) |
Projected benefit obligation | | $ | 971 | | | $ | 1,144 | | | $ | 69 | | | $ | 72 | | | $ | 1,040 | | | $ | 1,216 | | Projected benefit obligation | $ | 330 | | | $ | 343 | | | $ | 9 | | | $ | 10 | | | $ | 339 | | | $ | 353 | |
Accumulated benefit obligation | | | 961 | | | | 1,126 | | | | 69 | | | | 72 | | | | 1,030 | | | | 1,198 | | Accumulated benefit obligation | 330 | | | 343 | | | 9 | | | 10 | | | 339 | | | 353 | |
Fair value of plan assets | | | 1,100 | | | | 1,112 | | | | — | | | | — | | | | 1,100 | | | | 1,112 | | Fair value of plan assets | 285 | | | 258 | | | 0 | | | 0 | | | 285 | | | 258 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Pension Benefits |
| Funded Plans | | Unfunded Plans | | Total |
| As of June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) |
| Projected benefit obligation | $ | 1,043 | | | $ | 978 | | | $ | 81 | | | $ | 73 | | | $ | 1,124 | | | $ | 1,051 | |
| Accumulated benefit obligation | 1,037 | | | 971 | | | 81 | | | 73 | | | 1,118 | | | 1,044 | |
| Fair value of plan assets | 1,162 | | | 1,061 | | | 0 | | | 0 | | | 1,162 | | | 1,061 | |
The accumulated benefit obligation exceeds the fair value of plan assets for all domestic pension plans.
Below is information about foreign pension plans in which the accumulated benefit obligation exceeds the fair value of the plan
assets. | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Foreign Pension Benefits | |
| | | Funded Plans | | | Unfunded
Plans | | | Total | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
| | | (in millions) | |
Projected benefit obligation | | $ | 235 | | | $ | 550 | | | $ | 69 | | | $ | 72 | | | $ | 304 | | | $ | 622 | |
Accumulated benefit obligation | | | 235 | | | | 550 | | | | 69 | | | | 72 | | | | 304 | | | | 622 | |
Fair value of plan assets | | | 229 | | | | 509 | | | | — | | | | — | | | | 229 | | | | 509 | |
assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign Pension Benefits |
| Funded Plans | | Unfunded Plans | | Total |
| As of June 30, |
| 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| (in millions) |
| Projected benefit obligation | $ | 59 | | | $ | 259 | | | $ | 81 | | | $ | 73 | | | $ | 140 | | | $ | 332 | |
| Accumulated benefit obligation | 59 | | | 259 | | | 81 | | | 73 | | | 140 | | | 332 | |
| Fair value of plan assets | 58 | | | 249 | | | 0 | | | 0 | | | 58 | | | 249 | |
Summary of Net Periodic Benefit Costs
The Company recorded $3$(1) million, $1$7 million and $8$(2) million in net periodic benefit (income) costs in the Statements of Operations for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, respectively. In fiscal 2017,The Company utilizes the Company changed the method usedfull yield-curve approach to estimate the service and interest cost components of net periodic benefit (income) costs for its pension and other postretirement benefit plans. For fiscal 2016 and previous periods presented, the Company estimated the service and interest cost components utilizing a single weighted-average discount rate for each country derived from a yield curve used to measure the benefit obligation. The new method utilized a full yield curve approach in the estimation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The amortization of amounts related to unrecognized prior service costs (credits), deferred losses and settlements, curtailments and other were reclassified out of Other comprehensive income as a component of net periodic benefit costs. The components of net periodic benefits
(income) costs
(income) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | | | | | | | | | | | | | | | | | |
| | | Domestic | | | Foreign | | | Postretirement
Benefits | | | Total | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Service cost benefits earned during the period | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | 9 | | | $ | 10 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | 9 | | | $ | 10 | |
Interest costs on projected benefit obligations | | | 12 | | | | 12 | | | | 17 | | | | 29 | | | | 29 | | | | 44 | | | | 3 | | | | 3 | | | | 5 | | | | 44 | | | | 44 | | | | 66 | |
Expected return on plan assets | | | (18 | ) | | | (18 | ) | | | (19 | ) | | | (53 | ) | | | (57 | ) | | | (62 | ) | | | — | | | | — | | | | — | | | | (71 | ) | | | (75 | ) | | | (81 | ) |
Amortization of deferred losses | | | 5 | | | | 5 | | | | 4 | | | | 18 | | | | 16 | | | | 14 | | | | — | | | | — | | | | — | | | | 23 | | | | 21 | | | | 18 | |
Amortization of prior service costs | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (3 | ) | | | (4 | ) | | | (7 | ) | | | (3 | ) | | | (4 | ) | | | (7 | ) |
Settlements, curtailments and other | | | — | | | | 3 | | | | — | | | | 4 | | | | 3 | | | | 2 | | | | — | | | | — | | | | — | | | | 4 | | | | 6 | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net periodic benefits costs (income)—Total | | $ | (1 | ) | | $ | 2 | | | $ | 2 | | | $ | 4 | | | $ | — | | | $ | 8 | | | $ | — | | | $ | (1 | ) | | $ | (2 | ) | | $ | 3 | | | $ | 1 | | | $ | 8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Pension Benefits | | | Postretirement
Benefits | |
| | | Domestic | | | Foreign | |
| | | For the fiscal years ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | | | 2018 | | | 2017 | | | 2016 | |
Additional information: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted-average assumptions used to determine benefit obligations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate | | | 4.2 | % | | | 3.8 | % | | | 3.7 | % | | | 2.8 | % | | | 2.7 | % | | | 2.9 | % | | | 4.0 | % | | | 3.5 | % | | | 3.4 | % |
Rate of increase in future compensation | | | N/A | | | | N/A | | | | N/A | | | | 3.1 | % | | | 2.8 | % | | | 2.7 | % | | | N/A | | | | N/A | | | | N/A | |
Weighted-average assumptions used to determine net periodic benefit cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discount rate for PBO | | | 3.8 | % | | | 3.8 | % | | | 4.5 | % | | | 2.7 | % | | | 2.9 | % | | | 3.7 | % | | | 3.5 | % | | | 3.4 | % | | | 4.2 | % |
Discount rate for Service Cost | | | 4.0 | % | | | 4.1 | % | | | 4.5 | % | | | 3.8 | % | | | 3.1 | % | | | 3.7 | % | | | 3.9 | % | | | 3.7 | % | | | 4.2 | % |
Discount rate for Interest on PBO | | | 3.3 | % | | | 3.0 | % | | | 4.5 | % | | | 2.4 | % | | | 2.5 | % | | | 3.7 | % | | | 2.9 | % | | | 2.6 | % | | | 4.2 | % |
Discount rate for Interest on Service Cost | | | 3.8 | % | | | 3.8 | % | | | 4.5 | % | | | 3.4 | % | | | 2.9 | % | | | 3.7 | % | | | 3.5 | % | | | 3.2 | % | | | 4.2 | % |
Expected return on plan assets | | | 6.5 | % | | | 6.5 | % | | | 6.5 | % | | | 4.7 | % | | | 5.5 | % | | | 5.5 | % | | | N/A | | | | N/A | | | | N/A | |
Rate of increase in future compensation | | | N/A | | | | N/A | | | | 3.0 | % | | | 2.8 | % | | | 2.7 | % | | | 2.9 | % | | | N/A | | | | N/A | | | | N/A | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | | | | | | | | | | | |
| Domestic | | Foreign | | Postretirement Benefits | | Total |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| (in millions) |
| Service cost benefits earned during the period | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2 | | | $ | 2 | | | $ | 2 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2 | | | $ | 2 | | | $ | 2 | |
| Interest costs on projected benefit obligations | 7 | | | 11 | | | 13 | | | 16 | | | 20 | | | 25 | | | 2 | | | 3 | | | 4 | | | 25 | | | 34 | | | 42 | |
| Expected return on plan assets | (13) | | | (16) | | | (15) | | | (37) | | | (43) | | | (46) | | | 0 | | | 0 | | | 0 | | | (50) | | | (59) | | | (61) | |
| Amortization of deferred losses | 5 | | | 5 | | | 4 | | | 15 | | | 11 | | | 10 | | | 0 | | | 0 | | | 0 | | | 20 | | | 16 | | | 14 | |
| Amortization of prior service credits | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (4) | | | (3) | | | (3) | | | (4) | | | (3) | | | (3) | |
| Settlements, curtailments and other | 5 | | | 12 | | | 0 | | | 1 | | | 5 | | | 4 | | | 0 | | | 0 | | | 0 | | | 6 | | | 17 | | | 4 | |
| Net periodic benefit (income) costs – Total | $ | 4 | | | $ | 12 | | | $ | 2 | | | $ | (3) | | | $ | (5) | | | $ | (5) | | | $ | (2) | |
| $ | 0 | | | $ | 1 | | | $ | (1) | | | $ | 7 | | | $ | (2) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pension Benefits | | | | | | |
| Domestic | | Foreign | | Postretirement Benefits |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| Additional information: | | | | | | | | | | | | | | | | | |
| Weighted-average assumptions used to determine benefit obligations | | | | | | | | | | | | | | | | | |
| Discount rate | 2.9 | % | | 2.9 | % | | 3.6 | % | | 1.9 | % | | 1.7 | % | | 2.3 | % | | 2.4 | % | | 2.5 | % | | 3.3 | % |
| Rate of increase in future compensation | N/A | | N/A | | N/A | | 3.6 | % | | 3.1 | % | | 3.4 | % | | N/A | | N/A | | N/A |
| Weighted-average assumptions used to determine net periodic benefit cost | | | | | | | | | | | | | | | | | |
| Discount rate for PBO | 2.9 | % | | 3.6 | % | | 4.2 | % | | 1.7 | % | | 2.3 | % | | 2.8 | % | | 2.5 | % | | 3.3 | % | | 4.0 | % |
| Discount rate for Service Cost | 3.4 | % | | 3.9 | % | | 4.3 | % | | 1.8 | % | | 2.5 | % | | 3.7 | % | | 2.9 | % | | 3.6 | % | | 4.3 | % |
| Discount rate for Interest on PBO | 2.2 | % | | 3.2 | % | | 3.9 | % | | 1.5 | % | | 2.0 | % | | 2.5 | % | | 1.8 | % | | 2.9 | % | | 3.6 | % |
| Discount rate for Interest on Service Cost | 2.9 | % | | 3.6 | % | | 4.3 | % | | 1.3 | % | | 2.2 | % | | 3.3 | % | | 2.3 | % | | 3.3 | % | | 4.1 | % |
| Expected return on plan assets | 5.5 | % | | 6.0 | % | | 6.0 | % | | 3.3 | % | | 4.2 | % | | 4.4 | % | | N/A | | N/A | | N/A |
| Rate of increase in future compensation | N/A | | N/A | | N/A | | 3.1 | % | | 3.4 | % | | 3.1 | % | | N/A | | N/A | | N/A |
________________________
The following assumed health care cost trend rates as of June 30 were also used in accounting for postretirement benefits:
| | | | | | | | |
| | | Postretirement benefits | |
| | | Fiscal 2018 | | | Fiscal 2017 | |
Health care cost trend rate | | | 6.8 | % | | | 6.8 | % |
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | | | 4.6 | % | | | 4.6 | % |
Year that the rate reaches the ultimate trend rate | | | 2027 | | | | 2027 | |
| | | | | | | | | | | |
| Postretirement benefits |
| Fiscal 2021 | | Fiscal 2020 |
| Health care cost trend rate | 6.6 | % | | 6.4 | % |
| Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) | 4.7 | % | | 4.6 | % |
| Year that the rate reaches the ultimate trend rate | 2030 | | 2027 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Assumed health care cost trend rates could have a significant effect on the amounts reported for the postretirement health care plan. The effect of a one percentage point increase and one percentage point decrease in the assumed health care cost trend rate would have the following effects on the results for fiscal 2018:
| | | | | | | | |
| | | Service and
Interest Costs | | | Benefit
Obligation | |
| | | (in millions) | |
One percentage point increase | | $ | — | | | $ | 2 | |
One percentage point decrease | | $ | — | | | $ | (2 | ) |
The following table sets forth the estimated benefit payments for the next five fiscal years, and in aggregate for the five fiscal years thereafter. The expected benefits are estimated based on the same assumptions used to measure the Company’s benefit obligation at the end of the fiscal year and include benefits attributable to estimated future employee service:
| | | | | | | | | | | | | | | | |
| | | Expected Benefit Payments | |
| | | Pension Benefits | | | Postretirement
Benefits | | | | |
| | | Domestic | | | Foreign | | | Total | |
| | | (in millions) | |
Fiscal year: | | | | | | | | | | | | | | | | |
2019 | | $ | 25 | | | $ | 47 | | | $ | 9 | | | $ | 81 | |
2020 | | | 21 | | | | 49 | | | | 9 | | | | 79 | |
2021 | | | 20 | | | | 49 | | | | 9 | | | | 78 | |
2022 | | | 20 | | | | 51 | | | | 8 | | | | 79 | |
2023 | | | 20 | | | | 53 | | | | 8 | | | | 81 | |
2024-2028 | | | 103 | | | | 256 | | | | 37 | | | | 396 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Expected Benefit Payments |
| Pension Benefits | | Postretirement
Benefits | | Total |
| Domestic | | Foreign | |
| (in millions) |
| Fiscal year: | | | | | | | |
| 2022 | $ | 25 | | | $ | 55 | | | $ | 8 | | | $ | 88 | |
| 2023 | 19 | | | 53 | | | 8 | | | 80 | |
| 2024 | 19 | | | 53 | | | 7 | | | 79 | |
| 2025 | 19 | | | 51 | | | 7 | | | 77 | |
| 2026 | 19 | | | 49 | | | 7 | | | 75 | |
| 2027-2031 | 95 | | | 249 | | | 27 | | | 371 | |
The Company applies the provisions of ASC 715, which requires disclosures including: (i) investment policies and strategies; (ii) the major categories of plan assets; (iii) the inputs and valuation techniques used to measure plan assets; (iv) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and (v) significant concentrations of risk within plan assets.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the Company’s plan assets by level within the fair value hierarchy, as described in Note 2—Summary of Significant Accounting Policies, as of June 30, 20182021 and 2017:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of June 30, 2018 | | | As of June 30, 2017 | |
| | | | | | Fair Value Measurements at
Reporting Date Using | | | | | | Fair Value Measurements at
Reporting Date Using | |
| | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | NAV | | | Total | | | Level 1 | | | Level 2 | | | Level 3 | | | NAV | |
| | | (in millions) | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pooled funds:(a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Domestic equity funds | | $ | 73 | | | $ | — | | | $ | — | | | $ | — | | | $ | 73 | | | $ | 78 | | | $ | — | | | $ | — | | | $ | — | | | $ | 78 | |
International equity funds | | | 206 | | | | — | | | | — | | | | — | | | | 206 | | | | 196 | | | | — | | | | — | | | | — | | | | 196 | |
Domestic fixed income funds | | | 142 | | | | — | | | | — | | | | — | | | | 142 | | | | 151 | | | | — | | | | — | | | | — | | | | 151 | |
International fixed income funds | | | 679 | | | | — | | | | — | | | | — | | | | 679 | | | | 642 | | | | — | | | | — | | | | — | | | | 642 | |
Balanced funds | | | 186 | | | | — | | | | 107 | | | | — | | | | 79 | | | | 255 | | | | — | | | | 182 | | | | — | | | | 73 | |
Other | | | 74 | | | | 64 | | | | — | | | | 10 | | | | — | | | | 67 | | | | 55 | | | | 1 | | | | 11 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,360 | | | $ | 64 | | | $ | 107 | | | $ | 10 | | | $ | 1,179 | | | $ | 1,389 | | | $ | 55 | | | $ | 183 | | | $ | 11 | | | $ | 1,140 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Open-ended pooled funds that are registered and/or available to the general public are valued at the daily published net asset value (“NAV”). Other pooled funds are valued at the NAV provided by the fund issuer.
|
2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Fiscal 2021 | | | | Fiscal 2020 |
| | | Fair Value Measurements at
Reporting Date Using | | | | Fair Value Measurements at
Reporting Date Using |
| Total | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total | | Level 1 | | Level 2 | | Level 3 | | NAV |
| (in millions) |
| Assets | | | | | | | | | | | | | | | | | | | |
Pooled funds:(a) | | | | | | | | | | | | | | | | | | | |
| Domestic equity funds | $ | 61 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 61 | | | $ | 60 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 60 | |
| International equity funds | 199 | | | 0 | | | 0 | | | 0 | | | 199 | | | 186 | | | 0 | | | 0 | | | 0 | | | 186 | |
| Domestic fixed income funds | 144 | | | 0 | | | 0 | | | 0 | | | 144 | | | 145 | | | 0 | | | 0 | | | 0 | | | 145 | |
| International fixed income funds | 882 | | | 0 | | | 0 | | | 0 | | | 882 | | | 720 | | | 0 | | | 0 | | | 0 | | | 720 | |
| Balanced funds | 67 | | | 0 | | | 67 | | | 0 | | | 0 | | | 130 | | | 0 | | | 65 | | | 0 | | | 65 | |
| Other | 94 | | | 53 | | | 0 | | | 10 | | | 31 | | | 78 | | | 59 | | | 0 | | | 9 | | | 10 | |
| Total | $ | 1,447 | | | $ | 53 | | | $ | 67 | | | $ | 10 | | | $ | 1,317 | | | $ | 1,319 | | | $ | 59 | | | $ | 65 | | | $ | 9 | | | $ | 1,186 | |
________________________
(a)Open-ended pooled funds that are registered and/or available to the general public are valued at the daily published net asset value (“NAV”). Other pooled funds are valued at the NAV provided by the fund issuer.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below sets forth a summary of changes in the fair value of investments reflected as Level 3 assets as of June 30,
20182021 and
2017: | | | | |
| | | Level 3
Investments | |
| | | (in millions) | |
Balance, June 30, 2016 | | $ | 11 | |
Actual return on plan assets: | | | | |
Relating to assets still held at end of period | | | — | |
Relating to assets sold during the period | | | — | |
Purchases, sales, settlements and issuances | | | — | |
Transfers in and out of Level 3 | | | — | |
| | | | |
Balance, June 30, 2017 | | $ | 11 | |
Actual return on plan assets: | | | | |
Relating to assets still held at end of period | | | — | |
Relating to assets sold during the period | | | — | |
Purchases, sales, settlements and issuances | | | (1 | ) |
Transfers in and out of Level 3 | | | — | |
| | | | |
Balance, June 30, 2018 | | $ | 10 | |
| | | | |
2020:
| | | | | |
| Level 3
Investments |
| (in millions) |
| Balance, June 30, 2019 | $ | 9 | |
| Actual return on plan assets: | |
| Relating to assets still held at end of period | 1 | |
| Relating to assets sold during the period | 0 | |
| Purchases, sales, settlements and issuances | (1) | |
| Transfers in and out of Level 3 | 0 | |
| Balance, June 30, 2020 | $ | 9 | |
| Actual return on plan assets: | |
| Relating to assets still held at end of period | 1 | |
| Relating to assets sold during the period | 0 | |
| Purchases, sales, settlements and issuances | 0 | |
| Transfers in and out of Level 3 | 0 | |
| Balance, June 30, 2021 | $ | 10 | |
The Company’s investment strategy for its pension plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits while maintaining adequate funding levels. The Company’s practice is to conduct a periodic strategic review of its asset allocation. The Company’s current broad strategic targets are to have a pension asset portfolio comprised of 23%20% equity securities, 65%73% fixed income securities and 12%7% in cash and other investments. In developing the expected long-term rate of return, the Company considered the pension asset portfolio’s past average rate of
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
returns and future return expectations of the various asset classes. A portion of the other allocation is reserved in cash to provide for expected benefits to be paid in the short term. The Company’s equity portfolios are managed in such a way as to achieve optimal diversity. The Company’s fixed income portfolio is investment grade in the aggregate. The Company does not manage any assets internally.
The Company’s benefit plan weighted-average asset allocations, by asset category, are as follows:
| | | | | | | | |
| | | Pension benefits | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
Asset Category: | | | | | | | | |
Equity securities | | | 23 | % | | | 22 | % |
Debt securities | | | 65 | % | | | 62 | % |
Cash and other | | | 12 | % | | | 16 | % |
| | | | | | | | |
Total | | | 100 | % | | | 100 | % |
| | | | | | | | |
| | | | | | | | | | | |
| Pension Assets |
| As of June 30, |
| 2021 | | 2020 |
| Asset Category: | | | |
| Equity securities | 19 | % | | 20 | % |
| Debt securities | 73 | % | | 68 | % |
| Cash and other | 8 | % | | 12 | % |
| Total | 100 | % | | 100 | % |
Required pension plan contributions for the next fiscal year are expected to be approximately $17$15 million; however, actual contributions may be affected by pension asset and liability valuation changes during the year. The Company will continue to make voluntary contributions as necessary to improve funded status.
NOTE 18. OTHER POSTRETIREMENT BENEFITS
Multiemployer Pension and Postretirement Plans
The Company contributes to various multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover certain of its union-represented employees, primarily at the newspaper businesses. The risks of participating in these multiemployer pension plans are different from single-employer pension plans in that (i) contributions made by the Company to the multiemployer pension plans may be used to provide benefits to employees of other participating
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
employers; (ii) if the Company chooses to stop participating in certain of these multiemployer pension plans, it may be required to pay those plans an amount based on the underfunded status of the plan, which is referred to as a withdrawal liability; and (iii) actions taken by a participating employer that lead to a deterioration of the financial health of a multiemployer pension plan may result in the unfunded obligations of the multiemployer pension plan being borne by its remaining participating employers. While no multiemployer pension plan that the Company contributed to is individually significant to the Company, the Company was listed on certain Form 5500s as providing more than 5% of total contributions based on the current information available. The financial health of a multiemployer plan is indicated by the zone status, as defined by the Pension Protection Act of 2006, which represents the funded status of the plan as certified by the plan’s actuary. In general, plans in the red zone are less than 65% funded, plans in the yellow zone are between 65% and 80% funded, and plans in the green zone are at least 80% funded. The funded status for
two2 of the plans for which the Company was listed as providing more than 5% of total contributions reported green zone status for the most recent available plan year. The funded status for
one1 of the plans for which the Company was listed as providing more than 5% of total contributions reported red zone status for the most recent available plan year. Total contributions made by the Company to multiemployer pension plans for each of the fiscal years ended June 30,
2018, 20172021, 2020 and
20162019 were approximately $5 million.
Defined Contribution Plans
The Company has defined contribution plans for the benefit of substantially all employees meeting certain eligibility requirements. Employer contributions to such plans were $145$142 million, $137$154 million and $132$145 million for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, respectively.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred Compensation Plan
The Company has
non-qualified deferred compensation plans for the benefit of certain management employees. The investment funds offered to the participants generally correspond to the funds offered in the Company’s 401(k) plan, and the account balance fluctuates with the investment returns on those funds. The unfunded obligations of the plans included in Other liabilities as of June 30,
20182021 and
20172020 were
$41$51 million and
$40$46 million, respectively, and the majority of these plans are closed to new employees.
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including, among other things, lowering the U.S. statutory federal tax rate to 21%. As the Company has a June 30 fiscalyear-end, the impact of the lower tax rate will be phased in resulting in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ended June 30, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter. There are also certain transitional impacts of the Tax Act. As part of the transition to a new partial territorial tax system, the Tax Act imposed a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”). In addition, the reduction of the U.S. corporate tax rate caused us to adjust our U.S. deferred tax assets and liabilities to the lower federal rate of 21%. The Tax Act also adds many new provisions, some of which do not apply until fiscal 2019, including changes to bonus depreciation, limits on deductions for executive compensation and interest expense, a tax on global intangiblelow-taxed income (“GILTI”), the base erosion anti-abuse tax (“BEAT”) and a deduction for foreign-derived intangible income. The Company has elected to account for the tax on GILTI and BEAT as a period cost and thus has not adjusted any net deferred tax assets of its foreign subsidiaries for the new tax. However, the Company has considered the potential impact of GILTI and BEAT on its U.S. federal net operating loss (“NOL”) carryforward and determined that the projected tax benefit to be received from its NOL carryforward may be reduced due to these provisions.
The changes included in the Tax Act are broad and complex. The SEC issued Staff Accounting Bulletin No. 118 (SAB 118), as amended by ASU2018-05, which provides guidance for companies related to the Tax Act. ASU2018-05 allows 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. The Company’s accounting for the tax effects of the Tax Act will be completed during this measurement period and is expected to be finalized in the second quarter of fiscal 2019 pending further SEC guidance. The final transition impacts of the Tax Act may differ from the Company’s current estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition impacts.
In accordance with ASU2018-05, the Company has made provisional estimates related to (1) there-measurement of U.S. deferred tax balances for the reduction in the tax rate, (2) the liability for the transition tax and (3) the partial valuation allowance recorded against its federal NOL carryforward due to the impact of the GILTI and BEAT provisions. As a result, the Company recognized a net provisional
Income (loss) before income tax expense was attributable to the following jurisdictions:
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| U.S. | $ | 266 | | | $ | (310) | | | $ | 99 | |
| Foreign | 184 | | | (1,214) | | | 255 | |
| Income (loss) before income tax expense | $ | 450 | | | $ | (1,524) | | | $ | 354 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The components of the provisional amounts recognized as part of the Tax Act are as follows:
| | | | |
| | | For the fiscal year ended
June 30, 2018 | |
| | | (in millions) | |
Re-measurement of U.S. deferred tax balances | | $ | 141 | |
Valuation allowance recorded due to impact of GILTI and BEAT | | | 64 | |
Transition tax | | | 26 | |
Other | | | 6 | |
| | | | |
Income tax expense | | $ | 237 | |
| | | | |
(Loss) income from continuing operations before income tax expense (benefit) was attributable to the following jurisdictions:
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
U.S. | | $ | (55 | ) | | $ | 84 | | | $ | (125 | ) |
Foreign | | | (1,034 | ) | | | (699 | ) | | | 306 | |
| | | | | | | | | | | | |
(Loss) income from continuing operations before income tax expense (benefit) | | $ | (1,089 | ) | | $ | (615 | ) | | $ | 181 | |
| | | | | | | | | | | | |
The significant components of the Company’s income tax expense
(benefit) were as follows:
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Current: | | | | | | | | | | | | |
U.S. | | | | | | | | | | | | |
Federal | | $ | 4 | | | $ | 1 | | | $ | 15 | |
State & Local | | | 8 | | | | 4 | | | | 5 | |
Foreign | | | 107 | | | | 118 | | | | 102 | |
| | | | | | | | | | | | |
Total current tax | | | 119 | | | | 123 | | | | 122 | |
| | | | | | | | | | | | |
Deferred: | | | | | | | | | | | | |
U.S. | | | | | | | | | | | | |
Federal | | | 269 | | | | 57 | | | | (71 | ) |
State & Local | | | (9 | ) | | | (1 | ) | | | (106 | ) |
Foreign | | | (24 | ) | | | (151 | ) | | | 1 | |
| | | | | | | | | | | | |
Total deferred tax | | | 236 | | | | (95 | ) | | | (176 | ) |
| | | | | | | | | | | | |
Total income tax expense (benefit)(a) | | $ | 355 | | | $ | 28 | | | $ | (54 | ) |
| | | | | | | | | | | | |
(a) | The Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal year 2016. In addition, a tax benefit of $30 million related to the operations of the Digital Education segment was recorded to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal year 2016. The tax expense (benefit) shown above excludes the tax benefit of the Company’s digital education business in fiscal year 2016.
|
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Current: | | | | | |
| U.S. | | | | | |
| Federal | $ | 5 | | | $ | (4) | | | $ | 5 | |
| State & Local | 9 | | | 3 | | | 2 | |
| Foreign | 133 | | | 102 | | | 118 | |
| Total current tax | 147 | | | 101 | | | 125 | |
| Deferred: | | | | | |
| U.S. | | | | | |
| Federal | (30) | | | (45) | | | 26 | |
| State & Local | (1) | | | (4) | | | 5 | |
| Foreign | (55) | | | (31) | | | (30) | |
| Total deferred tax | (86) | | | (80) | | | 1 | |
| Total income tax expense | $ | 61 | | | $ | 21 | | | $ | 126 | |
The reconciliation between the Company’s actual effective tax rate and the statutory U.S. Federal income tax rate was as follows:
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
U.S. federal income tax rate(a) | | | 28 | % | | | 35 | % | | | 35 | % |
State and local taxes, net | | | (1 | ) | | | — | | | | (8 | ) |
Effect of foreign operations(b) | | | (2 | ) | | | (17 | ) | | | (1 | ) |
Change in valuation allowance(c) | | | 1 | | | | (7 | ) | | | (62 | ) |
Non-deductible goodwill and asset impairments(d) | | | (32 | ) | | | (7 | ) | | | — | |
Impact of the Tax Act(e) | | | (22 | ) | | | — | | | | — | |
Write-off of channel distribution agreement(f) | | | (9 | ) | | | — | | | | — | |
Income tax audit settlements(g) | | | 5 | | | | (10 | ) | | | — | |
Non-deductible compensation and benefits | | | (1 | ) | | | (1 | ) | | | 3 | |
R&D credits | | | — | | | | 1 | | | | (2 | ) |
Other, net | | | — | | | | 1 | | | | 5 | |
| | | | | | | | | | | | |
Effective tax rate(h) | | | (33 | )% | | | (5 | )% | | | (30 | )% |
| | | | | | | | | | | | |
(a) | As the Company has a June 30 fiscalyear-end, the impact of the lower tax rate from the Tax Act will be phased in resulting in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ended June 30, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter.
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(b) | The Company’s effective tax rate is impacted by the geographic mix of itspre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”) which prior to fiscal year ended June 30, 2018 had lower income tax rates than the U.S.
|
(c) | For the fiscal year ended June 30, 2017, valuation allowance increased by $40 million related to foreign net operating losses, which more likely than not will not be utilized.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| U.S. federal income tax rate | 21 | % | | 21 | % | | 21 | % |
| State and local taxes, net | 2 | | | 1 | | | 2 | |
Effect of foreign operations (a) | 12 | | | (2) | | | 9 | |
Change in valuation allowance (b) | (16) | | | 0 | | | 0 | |
Non-deductible goodwill and asset impairments (c) | 1 | | | (22) | | | 5 | |
| | | | | |
| | | | | |
| | | | | |
| Non-deductible compensation and benefits | 4 | | | 0 | | | 1 | |
Remeasurement of deferred tax assets (d) | (7) | | | 0 | | | 0 | |
| R&D credits | (2) | | | 1 | | | (2) | |
| Other, net | (1) | | | 0 | | | 0 | |
Effective tax rate (e) | 14 | % | | (1) | % | | 36 | % |
________________________
(a)The Company’s effective tax rate is impacted by the geographic mix of its pre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”). Australia has a higher income tax rate than the U.S. and the U.K. has a lower tax rate than the U.S.
(b)For the fiscal year ended June 30, 2016, included in2021, the change in valuation allowance is a tax benefit of $106 million related to the release of previously establishedCompany released valuation allowances related to certain U.S. federal NOLsFederal, State and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business during fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize theseforeign deferred tax assets prior to expiration.(d) | For the fiscal year ended June 30, 2018, the Company recordednon-cash charges of $218 million related to the impairment of goodwill and a write-down of assets and investments of approximately $1.1 billion, which reduced the Company’s tax benefit by $54 million and $301 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a tax benefit is not recorded.
|
of $64 million, $5 million and $6 million, respectively.
(c)For the fiscal year ended June 30, 2017,2020, the Company recordednon-cash charges of $48$1,690 million related to the impairment of goodwill which wasnon-deductible,and a write-down of $360 million on U.K. fixedindefinite-lived intangible assets, a portion of which werenon-deductible, which reduced the Company’s tax expense by $262 million. These write-downs have an impact on our effective tax rate to the extent a lower tax benefit is recorded.
For the fiscal year ended June 30, 2019, the Company recorded non-cash charges of $96 million related to the impairment of goodwill and indefinite-lived intangible assets, which reduced the Company’s tax expense by $12 million and $29 million, respectively.$10 million. These impairments and write-downs have an impact on our effective tax rate to the extent a lower tax benefit is not recorded.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(e) | As a result of the Tax Act, the Company recognized a net provisional income tax expense of $237 million primarily related to the re-measurement of U.S. deferred tax balances for the reduction in tax rate, valuation allowances recorded on certain deferred tax assets, and the liability for the transition tax.
|
(f) | Represents the tax effect of thewrite-off of the FOX SPORTS Australia channel distribution agreement intangible asset as a result of the Transaction as well as other costs directly attributable to the Transaction.
|
(g) | In the fiscal year ended June 30, 2018, certainpre-Separation tax matters were effectively settled with the Internal Revenue Service. As a result of the settlement, the Company recorded a net income tax benefit of $49 million, comprised of a current tax benefit of $2 million and a deferred tax benefit of $47 million.
|
In(d)For the fiscal year ended June 30, 2017,2021, the Company reached an agreement with a foreignremeasured U.K. deferred tax authority to settle certainassets which includes the enacted corporate income tax issues related toincrease resulting from the Finance Act 2021.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(e)For the fiscal years 2010 through 2015. As a resultended June 30, 2021 and 2019, the effective tax rates of the settlement, the Company recorded net14% and 36%, respectively, represent income tax expense when compared to consolidated pre-tax book income. For the fiscal year ended June 30, 2020, the effective tax rate of $63 million. See “Uncertain Tax Positions” below.(h) | For the fiscal years ended June 30, 2018 and June 30, 2017, the effective tax rates of (33)% and (5)%, respectively, represents income tax expense when compared to consolidatedpre-tax book loss. For the fiscal year ended June 30, 2016, the effective tax rate of (30)% represents income tax benefit when compared to consolidatedpre-tax book income.
|
(1)% represents income tax expense when compared to consolidated pre-tax book loss.
The Company recognized deferred income taxes in the Balance Sheets
at June 30, 2018 and 2017, respectively, as follows:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Deferred income tax assets | | $ | 279 | | | $ | 525 | |
Deferred income tax liabilities | | | (389 | ) | | | (61 | ) |
| | | | | | | | |
Net deferred tax (liabilities) assets | | $ | (110 | ) | | $ | 464 | |
| | | | | | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Deferred income tax assets | $ | 378 | | | $ | 332 | |
| Deferred income tax liabilities | (260) | | | (258) | |
| Net deferred tax assets (liabilities) | $ | 118 | | | $ | 74 | |
The significant components of the Company’s deferred tax assets and liabilities were as follows:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Deferred tax assets: | | | | | | | | |
Accrued liabilities | | $ | 95 | | | $ | 80 | |
Capital loss carryforwards | | | 889 | | | | 904 | |
Retirement benefit obligations | | | 38 | | | | 101 | |
Net operating loss carryforwards | | | 348 | | | | 473 | |
Business tax credits | | | 62 | | | | 69 | |
Other | | | 294 | | | | 284 | |
| | | | | | | | |
Total deferred tax assets | | | 1,726 | | | | 1,911 | |
| | | | | | | | |
Deferred tax liabilities: | | | | | | | | |
Asset basis difference and amortization | | | (362 | ) | | | (204 | ) |
Other | | | (89 | ) | | | (56 | ) |
| | | | | | | | |
Total deferred tax liabilities | | | (451 | ) | | | (260 | ) |
| | | | | | | | |
Net deferred tax asset before valuation allowance | | | 1,275 | | | | 1,651 | |
Less: valuation allowance (See Note 22—Valuation and Qualifying Accounts) | | | (1,385 | ) | | | (1,187 | ) |
| | | | | | | | |
Net deferred tax (liabilities) assets | | $ | (110 | ) | | $ | 464 | |
| | | | | | | | |
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Deferred tax assets: | | | |
| Accrued liabilities | $ | 169 | | | $ | 100 | |
| Capital loss carryforwards | 1,126 | | | 886 | |
| Retirement benefit obligations | 34 | | | 56 | |
| Net operating loss carryforwards | 484 | | | 578 | |
| Business tax credits | 115 | | | 93 | |
| Operating lease liabilities | 365 | | | 302 | |
| Other | 153 | | | 197 | |
| Total deferred tax assets | 2,446 | | | 2,212 | |
| Deferred tax liabilities: | | | |
| Asset basis difference and amortization | (161) | | | (269) | |
| Operating lease right-of-use asset | (339) | | | (276) | |
| Other | (63) | | | (47) | |
| Total deferred tax liabilities | (563) | | | (592) | |
| Net deferred tax asset before valuation allowance | 1,883 | | | 1,620 | |
| Less: valuation allowance (See Note 22—Valuation and Qualifying Accounts) | (1,765) | | | (1,546) | |
| Net deferred tax assets (liabilities) | $ | 118 | | | $ | 74 | |
As of June 30,
2018,2021, the Company had income tax
NOL Carryforwardsnet operating loss (“NOL”) carryforwards (gross, net of uncertain tax benefits)
, in various jurisdictions as follows:
| | | | | | |
Jurisdiction | | Expiration | | Amount
(in millions) | |
U.S. Federal | | 2021 to 2037 | | $ | 635 | |
U.S. States | | Various | | | 455 | |
Australia | | Indefinite | | | 304 | |
U.K. | | Indefinite | | | 4 | |
Other Foreign | | Various | | | 423 | |
| | | | | | | | | | | | | | |
| Jurisdiction | | Expiration | | Amount
(in millions) |
| U.S. Federal | | 2022 to 2037 | | $ | 273 | |
| U.S. Federal | | Indefinite | | 471 | |
| U.S. States | | Various | | 647 | |
| Australia | | Indefinite | | 605 | |
| U.K. | | Indefinite | | 29 | |
| Other Foreign | | Various | | 459 | |
Utilization of the NOLs is dependent on generating sufficient taxable income from our operations in each of the respective jurisdictions to which the NOLs relate, while taking into account tax filing methodologies and limitations and/or restrictions on our ability to use them. Certain of our U.S. federal NOLs were acquired as part of the acquisitions of Move and Harlequin and are
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
subject to limitations as promulgated under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code limits the amount of
NOLNOLs that we can use on an annual basis to offset consolidated U.S. taxable income. The NOLs are also subject to review by relevant tax authorities in the jurisdictions to which they relate.
The Company recorded a deferred tax asset of $348$484 million and $473$578 million associated with its NOLs (net of approximately $45$62 million and $46$53 million, respectively, of unrecognized tax benefits recorded against deferred tax assets) as of June 30, 20182021 and 2017,2020, respectively. Significant judgment is applied in assessing our ability to realize our NOLs. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets within the applicable expiration period.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On the basis of this evaluation, valuation allowances of $195$206 million and $149$269 million have been established to reduce the deferred tax asset associated with the Company’s NOLs to an amount that will more likely than not be realized as of June 30, 20182021 and 2017,2020, respectively. InFor the fiscal year ended June 30, 2018,2021, the increase inCompany released valuation allowance includesallowances related to U.S. Federal NOLs of $64 million related toas the impacts of the GILTI and BEAT provisions under the Tax Act.
Company concluded that these deferred tax assets will more likely than not be realized.
As of June 30,
2018,2021, the Company had approximately
$2.0$2.3 billion, $1.7 billion and
$1.7 billion$15 million of capital loss carryforwards in Australia,
the U.K. and the
U.K.U.S.,
respectively, whichrespectively. Australia and U.K capital loss carryforwards may be carried forward
indefinitely.indefinitely and the U.S. carryforward will expire in 2026. The capital loss carryforwards are also subject to review by relevant tax authorities in the jurisdictions to which they relate. Realization of our capital losses is dependent on generating capital gain taxable income and satisfying certain continuity of business requirements. The Company recorded a deferred tax asset of
$889$1,126 million and
$904$886 million as of June 30,
20182021 and
2017,2020, respectively, for these capital loss carryforwards. However, it is more likely than not that the Company will not generate capital gain income in the normal course of business in these jurisdictions. Accordingly, valuation allowances of
$889$1,126 million and
$904$886 million have been established to reduce the capital loss carryforward deferred tax asset to an amount that will more likely than not be realized as of June 30,
20182021 and
2017,2020, respectively.
For the fiscal year ended June 30, 2021, the Company released valuation allowances related to U.K. capital losses of $6 million as the Company concluded that these deferred tax assets will more likely than not be realized.
As of June 30,
2018,2021, the Company had approximately
$36$72 million of U.S. federal tax credit carryforwards which includes
$24$32 million of foreign tax credits and
$9$40 million of research and development credits, which begin to expire in
20252026 and 2036,
respectively, and $3 million of alternative minimum tax credits which will be carried forward indefinitely.respectively.
As of June 30,
2018,2021, the Company had approximately
$19$31 million of
non-U.S. tax credit carryforwards which expire in various amounts beginning in
20252026 and
$7$12 million of state tax credit carryforwards (net of U.S. federal benefit), which expire in various amounts beginning in
2018.2021.
In accordance with the Company’s accounting policy, a valuation allowance of
$45$58 million has been established to reduce the deferred tax asset associated with the Company’s U.S. foreign tax credits,
non-U.S. and state credit carryforwards to an amount that will more likely than not be realized as of June 30,
2018.2021. For the fiscal year ended June 30, 2021, the Company released valuation allowances related to state tax credits of $5 million as the Company concluded that these deferred tax assets will more likely than not be realized.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the change in the Company’s unrecognized tax benefits, excluding interest and penalties:
| | | | | | | | | | | | |
| | | For the fiscal years
ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Balance, beginning of period | | $ | 64 | | | $ | 86 | | | $ | 129 | |
Additions for prior year tax positions | | | 2 | | | | 107 | | | | 6 | |
Additions for current year tax positions | | | 3 | | | | 5 | | | | 4 | |
Reduction for prior year tax positions | | | (4 | ) | | | (9 | ) | | | (40 | ) |
Lapse of the statute of limitations | | | (3 | ) | | | (8 | ) | | | (2 | ) |
Settlement—cash | | | — | | | | (21 | ) | | | (2 | ) |
Settlement—tax attributes | | | (2 | ) | | | (94 | ) | | | — | |
Impact of currency translations | | | 2 | | | | (2 | ) | | | (9 | ) |
| | | | | | | | | | | | |
Balance, end of period | | $ | 62 | | | $ | 64 | | | $ | 86 | |
| | | | | | | | | | | | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Balance, beginning of period | $ | 63 | | | $ | 58 | | | $ | 62 | |
| Additions for prior year tax positions | 0 | | | 4 | | | 0 | |
| Additions for current year tax positions | 4 | | | 8 | | | 4 | |
| Reduction for prior year tax positions | (2) | | | (1) | | | 0 | |
| Lapse of the statute of limitations | (3) | | | (3) | | | (6) | |
| | | | | |
| Settlement—tax attributes | 0 | | | (2) | | | 0 | |
| Impact of currency translations | 7 | | | (1) | | | (2) | |
| Balance, end of period | $ | 69 | | | $ | 63 | | | $ | 58 | |
The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. The Company recognized
interest and penalty charges of $1 million and $11 million for the fiscal years ended June 30, 2018 and June 30, 2017, respectively, and a benefit related to interest and penalties of $1 million,
NaN and $1 million for the fiscal
yearyears ended June 30,
2016.2021, 2020 and 2019, respectively. The Company recorded liabilities for accrued interest and penalties of approximately
$3$4 million, $3 million and
$6$3 million as of June 30,
2018, 2017,2021, 2020 and
2016,2019, respectively.
In the fiscal year ended June 30, 2018, certainpre-Separation tax matters were effectively settled with the Internal Revenue Service. As a result of the settlement, the Company recorded a net income tax benefit of $49 million, comprised of a current tax benefit of $2 million and a deferred tax benefit of $47 million.
In the fiscal year ended June 30, 2017, the Company reached an agreement with a foreign tax authority to settle certain tax issues related to fiscal years 2010 through 2015. As a result of the settlement, the Company recorded net income tax expense, including interest and penalties of $63 million comprised of a current tax expense of $20 million and a deferred tax expense of $43 million.
The Company’s tax returns are subject to
on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations in the U.S., various states and foreign jurisdictions. During the
fiscal year ended June 30, 2018, the Internal Revenue Service commenced an audit of the Company for the
fiscal year ended June 30, 2014.
The Company effectively settled this audit with no material changes in February 2020. During the fiscal year ended June 30, 2021 the statute of limitations related to our US federal income tax returns for the fiscal years ended June 30, 2014, 2016 and 2017 expired. No adjustments to our tax provision were recorded as a result of these statute expirations. The Internal Revenue Service has commenced an audit for the fiscal year ended June 30, 2018. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, the Company may need to accrue additional income tax expense and our liability may need to be adjusted as new information becomes known and as these tax examinations continue to progress, or as settlements or litigations occur.
The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that could be audited by the respective taxing authorities.
| | | | | | | | |
Jurisdiction | | Fiscal Years Open to Examination |
U.S. federal | | 2014-20172018-2020 |
U.S. state states | | Various |
Australia | | 2014-20172017-2020 |
U.K. | | 2011-20172016-2020 |
It is reasonably possible that uncertain tax positions may increase or decrease in the next fiscal year, however, actual developments in this area could differ from those currently expected. As of June 30,
2018,2021, approximately
$35$44 million would affect the Company’s effective income tax rate, if and when recognized in future fiscal years. It is reasonably possible, the amount of uncertain tax liabilities which may be resolved within the next fiscal year is between the range of approximately
nilNaN and
$18$35 million, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Prior to the passage of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), the Company asserted that substantially all of theits undistributed earnings were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Pursuant to the provisions promulgated in the Tax Act these earnings were subjected to the one-time transition tax, for which a provisional charge was recorded.tax. It is the Company’s intention to reinvest in these subsidiaries indefinitely as the Company
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
does not anticipate the need to repatriate funds to satisfy domestic liquidity needs. An actual repatriation from these subsidiaries could be subject to foreign withholding taxes and U.S. state taxes. Calculation of the unrecognized tax liabilities is not practicable. Undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested amounted to approximately $2.6$2.9 billion as of June 30, 2018.
2021.
During the fiscal years ended June 30, 2018, 20172021, 2020 and 2016,2019, the Company paid gross income taxes of $160$176 million, $132$99 million and $103$144 million, respectively, and received income tax refunds of $7$14 million, $9$25 million and $10$18 million, respectively.
NOTE 20. SEGMENT INFORMATION
The Company manages and reports its businesses in the following
five6 segments:
| • | | News and Information Services—The News and Information Services segment includes the Company’s global print, digital and broadcast radio media platforms. These product offerings include the global print and digital versions ofThe Wall Street Journal and the Dow Jones Media Group, which includesBarron’s and MarketWatch, the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires and DJX and its live journalism events. The Company also owns, among other publications, The Australian, The Daily Telegraph, Herald Sun, The Courier Mail andThe Advertiser in Australia, The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. and the New York Post in the U.S. This segment also includes News America Marketing, a leading provider of home-delivered shopper media,in-store marketing products and services and digital marketing solutions, including Checkout 51’s mobile application, as well as Unruly, a global video advertising marketplace, Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency.
|
| • | | Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 18 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well-known authors such as Harper Lee, Patricia Cornwell, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird, Jesus Calling andHillbilly Elegy.
|
| • | | Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s 61.6% interest in REA Group and 80% interest in Move. The remaining 20% interest in Move is held by REA Group. REA Group is a market-leading digital media business specializing in property and is listed on the Australian Securities Exchange (“ASX”) (ASX: REA). REA Group advertises property and property-related services on its websites and mobile applications across Australia and Asia, including Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au, and property portals in Asia. In addition, REA Group provides property-related data to the financial sector and financial services through anend-to-end digital property search and financing experience and a mortgage broking offering.
|
| | Move is a leading provider of online real estate services in the U.S. and primarily operates realtor.com®, a premier real estate information and services marketplace. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM for Buyers and AdvantageSM Pro products. Move also offers a number of professional software and services products, including Top Producer®, FiveStreet® and ListHubTM.
|
•Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s 61.4% interest in REA Group and 80% interest in Move. The remaining 20% interest in Move is held by REA Group. REA Group is a market-leading digital media business specializing in property and is listed on the Australian Securities Exchange (“ASX”) (ASX: REA). REA Group advertises property and property-related services on its websites and mobile apps, including Australia’s leading residential, commercial and share property websites, realestate.com.au, realcommercial.com.au and Flatmates.com.au, and property portals in India and East Asia. In addition, REA Group provides property-related data to the financial sector and financial services through an end-to-end digital property search and financing experience and a mortgage broking offering.
Move is a leading provider of digital real estate services in the U.S. and primarily operates realtor.com®, a premier real estate information, advertising and services platform. Move offers real estate advertising solutions to agents and brokers, including its ConnectionsSM Plus and AdvantageSM Pro products as well as its referral-based services. Move also offers online tools and services to do-it-yourself landlords and tenants, as well as professional software and services products.
•Subscription Video Services—The Company’s Subscription Video Services segment provides sports, entertainment and news services to pay-TV and streaming subscribers and other commercial licensees, primarily via cable, satellite and internet distribution, and consists of (i) the Company’s 65% interest in the Foxtel Group (with the remaining 35% interest held by Telstra, an ASX-listed telecommunications company) and (ii) Australian News Channel (“ANC”). The Foxtel Group is the largest Australian-based subscription television provider, with nearly 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news. Foxtel and the Kayo Sports streaming service offer the leading sports programming content in Australia, with broadcast rights to live sporting events including: National Rugby League, Australian Football League, Cricket Australia and various motorsports programming. The Foxtel Group also operates BINGE, its on-demand entertainment streaming service, and Foxtel Now, a streaming service that provides access across Foxtel’s live and on-demand content.
ANC operates the SKY NEWS network, Australia’s 24-hour multi-channel, multi-platform news service. ANC channels are distributed throughout Australia and New Zealand and available on Foxtel and Sky Network Television NZ. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including web, mobile and third party providers.
•Dow Jones—The Dow Jones segment consists of Dow Jones, a global provider of news and business information, which distributes its content and data through a variety of media channels including newspapers, newswires, websites, applications, or apps, for mobile devices, tablets and e-book readers, newsletters, magazines, proprietary databases, live journalism, video and podcasts. The Dow Jones segment’s products, which target individual consumer and enterprise customers, include The Wall Street Journal, Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Barron’s, MarketWatch and Investor’s Business Daily.
•Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 17 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins owns more than 120 branded publishing imprints, including
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| • | | Subscription Video Services—The Company’s Subscription Video Services segment provides video sports, entertainment and news services topay-TV subscribers and other commercial licensees, primarily via cable, satellite and Internet Protocol, or IP, distribution, and consists of (i) its 65% interest in new Foxtel and (ii) Australian News Channel Pty Ltd (“ANC”). The remaining 35% interest in new Foxtel is held by Telstra, anASX-listed telecommunications company. New Foxtel is the largestpay-TV provider in Australia, with over 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news and broadcast rights to live sporting events in Australia including: National Rugby League, Australian Football League, Cricket Australia, the domestic football league, the Australian Rugby Union and various motorsports programming.
|
| | ANC operates the SKY NEWS network, Australia’s24-hour multi-channel, multi-platform news service. ANC channels are distributed throughout Australia and New Zealand and available on Foxtel and Sky Network Television NZ. ANC also owns and operates the international Australia Channel IPTV service and offers content across a variety of digital media platforms, including mobile, podcasts and social media websites.
|
| • | | Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy Group and costs related to the U.K. Newspaper Matters. The Company’s Strategy Group identifies new products and services across its businesses to increase revenues and profitability and targets and assesses potential acquisitions, investments and dispositions.
|
Harper, William Morrow, HarperCollins Children’s Books, Avon, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well-known authors such as Harper Lee, George Orwell, Agatha Christie and Zora Neale Hurston, as well as global author brands including J.R.R. Tolkien, C.S. Lewis, Daniel Silva, Karin Slaughter and Dr. Martin Luther King, Jr. It is also home to many beloved children’s books and authors and a significant Christian publishing business.
•News Media—The News Media segment consists primarily of News Corp Australia, News UK and the New York Post and includes, among other publications, The Australian, The Daily Telegraph, Herald Sun, The Courier Mail and The Advertiser in Australia and The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. This segment also includes Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency. The segment included News America Marketing until the completion of the sale of the business on May 5, 2020.
•Other—The Other segment consists primarily of general corporate overhead expenses, costs related to the U.K. Newspaper Matters and transformation costs associated with the Company’s ongoing cost reduction initiatives.
Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses and excluding the NAM Group and Zillow legal settlements.expenses. Segment EBITDA does not include: depreciation and amortization, impairment and restructuring charges, equity losses of affiliates, interest (expense) income, net, other, net and income tax (expense) benefit and net income attributable to noncontrolling interests. benefit.
Segment EBITDA may not be comparable to similarly titled measures reported by other companies, since companies and investors may differ as to what items should be included in the calculation of Segment EBITDA.
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Segment EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Revenues: | | | | | | | | | | | | |
News and Information Services | | $ | 5,119 | | | $ | 5,069 | | | $ | 5,338 | |
Book Publishing | | | 1,758 | | | | 1,636 | | | | 1,646 | |
Digital Real Estate Services | | | 1,141 | | | | 938 | | | | 822 | |
Subscription Video Services | | | 1,004 | | | | 494 | | | | 484 | |
Other | | | 2 | | | | 2 | | | | 2 | |
| | | | | | | | | | | | |
Total Revenues | | $ | 9,024 | | | $ | 8,139 | | | $ | 8,292 | |
| | | | | | | | | | | | |
Segment EBITDA: | | | | | | | | | | | | |
News and Information Services | | $ | 392 | | | $ | 414 | | | $ | 214 | |
Book Publishing | | | 244 | | | | 199 | | | | 185 | |
Digital Real Estate Services | | | 401 | | | | 324 | | | | 344 | |
Subscription Video Services | | | 173 | | | | 123 | | | | 124 | |
Other | | | (138 | ) | | | (175 | ) | | | (183 | ) |
Depreciation and amortization | | | (472 | ) | | | (449 | ) | | | (505 | ) |
Impairment and restructuring charges | | | (351 | ) | | | (927 | ) | | | (89 | ) |
Equity (losses) earnings of affiliates | | | (1,006 | ) | | | (295 | ) | | | 30 | |
Interest, net | | | (7 | ) | | | 39 | | | | 43 | |
Other, net | | | (325 | ) | | | 132 | | | | 18 | |
| | | | | | | | | | | | |
(Loss) income from continuing operations before income tax (expense) benefit | | | (1,089 | ) | | | (615 | ) | | | 181 | |
Income tax (expense) benefit | | | (355 | ) | | | (28 | ) | | | 54 | |
| | | | | | | | | | | | |
Net (loss) income from continuing operations | | $ | (1,444 | ) | | $ | (643 | ) | | $ | 235 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | For the fiscal years
ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Depreciation and amortization: | | | | | | | | | | | | |
News and Information Services | | $ | 223 | | | $ | 283 | | | $ | 347 | |
Book Publishing | | | 52 | | | | 52 | | | | 55 | |
Digital Real Estate Services | | | 87 | | | | 78 | | | | 69 | |
Subscription Video Services | | | 107 | | | | 32 | | | | 29 | |
Other | | | 3 | | | | 4 | | | | 5 | |
| | | | | | | | | | | | |
Total Depreciation and amortization | | $ | 472 | | | $ | 449 | | | $ | 505 | |
| | | | | | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | |
| | | For the fiscal years
ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Capital expenditures: | | | | | | | | | | | | |
News and Information Services | | $ | 173 | | | $ | 165 | | | $ | 174 | |
Book Publishing | | | 17 | | | | 11 | | | | 9 | |
Digital Real Estate Services | | | 78 | | | | 66 | | | | 64 | |
Subscription Video Services | | | 81 | | | | 14 | | | | 8 | |
Other | | | 15 | | | | — | | | | 1 | |
| | | | | | | | | | | | |
Total Capital expenditures | | $ | 364 | | | $ | 256 | | | $ | 256 | |
| | | | | | | | | | | | |
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Total assets: | | | | | | | | |
News and Information Services | | $ | 6,039 | | | $ | 6,142 | |
Book Publishing | | | 1,898 | | | | 1,845 | |
Digital Real Estate Services | | | 2,171 | | | | 2,307 | |
Subscription Video Services | | | 4,738 | | | | 1,194 | |
Other(a) | | | 1,107 | | | | 1,037 | |
Investments | | | 393 | | | | 2,027 | |
| | | | | | | | |
Total assets | | $ | 16,346 | | | $ | 14,552 | |
| | | | | | | | |
(a) | The Other segment primarily includes Cash and cash equivalents.
|
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Goodwill and intangible assets, net: | | | | | | | | |
News and Information Services | | $ | 2,730 | | | $ | 2,952 | |
Book Publishing | | | 804 | | | | 835 | |
Digital Real Estate Services | | | 1,502 | | | | 1,420 | |
Subscription Video Services | | | 2,853 | | | | 912 | |
Other | | | — | | | | — | |
| | | | | | | | |
Total Goodwill and intangible assets, net | | $ | 7,889 | | | $ | 6,119 | |
| | | | | | | | |
Geographic Segments
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Revenues:(a) | | | | | | | | | | | | |
U.S. and Canada(b) | | $ | 3,998 | | | $ | 3,880 | | | $ | 3,920 | |
Europe(c) | | | 1,766 | | | | 1,671 | | | | 1,873 | |
Australasia and Other(d) | | | 3,260 | | | | 2,588 | | | | 2,499 | |
| | | | | | | | | | | | |
Total Revenues | | $ | 9,024 | | | $ | 8,139 | | | $ | 8,292 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Revenues: | | | | | |
| Digital Real Estate Services | $ | 1,393 | | | $ | 1,065 | | | $ | 1,159 | |
| Subscription Video Services | 2,072 | | | 1,884 | | | 2,202 | |
| Dow Jones | 1,702 | | | 1,590 | | | 1,549 | |
| Book Publishing | 1,985 | | | 1,666 | | | 1,754 | |
| News Media | 2,205 | | | 2,801 | | | 3,407 | |
| Other | 1 | | | 2 | | | 3 | |
| Total Revenues | $ | 9,358 | | | $ | 9,008 | | | $ | 10,074 | |
| Segment EBITDA: | | | | | |
| Digital Real Estate Services | $ | 514 | | | $ | 345 | | | $ | 378 | |
| Subscription Video Services | 359 | | | 323 | | | 379 | |
| Dow Jones | 332 | | | 236 | | | 208 | |
| Book Publishing | 303 | | | 214 | | | 252 | |
| News Media | 52 | | | 53 | | | 182 | |
| Other | (287) | | | (158) | | | (155) | |
| Depreciation and amortization | (680) | | | (644) | | | (659) | |
| Impairment and restructuring charges | (168) | | | (1,830) | | | (188) | |
| Equity losses of affiliates | (65) | | | (47) | | | (17) | |
| Interest expense, net | (53) | | | (25) | | | (59) | |
| Other, net | 143 | | | 9 | | | 33 | |
| Income (loss) before income tax expense | 450 | | | (1,524) | | | 354 | |
| Income tax expense | (61) | | | (21) | | | (126) | |
| Net income (loss) | $ | 389 | | | $ | (1,545) | | | $ | 228 | |
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Depreciation and amortization: | | | | | |
| Digital Real Estate Services | $ | 101 | | | $ | 93 | | | $ | 97 | |
| Subscription Video Services | 332 | | | 283 | | | 292 | |
| Dow Jones | 119 | | | 113 | | | 103 | |
| Book Publishing | 36 | | | 33 | | | 42 | |
| News Media | 84 | | | 115 | | | 120 | |
| Other | 8 | | | 7 | | | 5 | |
| Total Depreciation and amortization | $ | 680 | | | $ | 644 | | | $ | 659 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(a) | Revenues are attributed to region based on location of customer.
|
(b) | Revenues include approximately $3.9 billion for fiscal 2018, $3.7 billion for fiscal 2017 and $3.8 billion for fiscal 2016 from customers in the U.S.
|
(c) | Revenues include approximately $1.4 billion for fiscal 2018, $1.3 billion for fiscal 2017 and $1.5 billion for fiscal 2016 from customers in the U.K.
|
(d) | Revenues include approximately $2.9 billion for fiscal 2018, $2.3 billion for fiscal 2017 and $2.3 billion for fiscal 2016 from customers in Australia.
|
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Long-lived assets:(a) | | | | | | | | |
U.S. and Canada | | $ | 937 | | | $ | 960 | |
Europe | | | 682 | | | | 560 | |
Australasia and Other | | | 1,772 | | | | 546 | |
| | | | | | | | |
Total long-lived assets | | $ | 3,391 | | | $ | 2,066 | |
| | | | | | | | |
(a) | Reflects total assets less current assets, goodwill, intangible assets, investments and deferred income tax assets.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Capital expenditures: | | | | | |
| Digital Real Estate Services | $ | 78 | | | $ | 80 | | | $ | 78 | |
| Subscription Video Services | 142 | | | 199 | | | 307 | |
| Dow Jones | 62 | | | 59 | | | 66 | |
| Book Publishing | 16 | | | 12 | | | 7 | |
| News Media | 84 | | | 76 | | | 106 | |
| Other | 8 | | | 12 | | | 8 | |
| Total Capital expenditures | $ | 390 | | | $ | 438 | | | $ | 572 | |
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Total assets: | | | |
| Digital Real Estate Services | $ | 3,146 | | | $ | 2,322 | |
| Subscription Video Services | 3,515 | | | 3,459 | |
| Dow Jones | 2,798 | | | 2,480 | |
| Book Publishing | 2,713 | | | 2,212 | |
| News Media | 2,209 | | | 1,994 | |
Other(a) | 2,039 | | | 1,497 | |
| Investments | 351 | | | 297 | |
| Total assets | $ | 16,771 | | | $ | 14,261 | |
________________________
(a)The Other segment primarily includes Cash and cash equivalents.
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Goodwill and intangible assets, net: | | | |
| Digital Real Estate Services | $ | 1,871 | | | $ | 1,555 | |
| Subscription Video Services | 1,612 | | | 1,513 | |
| Dow Jones | 1,995 | | | 1,722 | |
| Book Publishing | 1,046 | | | 748 | |
| News Media | 308 | | | 277 | |
| Other | 0 | | | 0 | |
| Total Goodwill and intangible assets, net | $ | 6,832 | | | $ | 5,815 | |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Geographic Segments
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
Revenues:(a) | | | | | |
U.S. and Canada(b) | $ | 3,550 | | | $ | 3,763 | | | $ | 4,044 | |
Europe(c) | 1,672 | | | 1,502 | | | 1,664 | |
Australasia and Other(d) | 4,136 | | | 3,743 | | | 4,366 | |
| Total Revenues | $ | 9,358 | | | $ | 9,008 | | | $ | 10,074 | |
________________________
(a)Revenues are attributed to region based on location of customer.
(b)Revenues include approximately $3.5 billion for fiscal 2021, $3.7 billion for fiscal 2020 and $3.9 billion for fiscal 2019 from customers in the U.S.
(c)Revenues include approximately $1.3 billion for fiscal 2021, $1.2 billion for fiscal 2020 and $1.3 billion for fiscal 2019 from customers in the U.K.
(d)Revenues include approximately $3.9 billion for fiscal 2021, $3.5 billion for fiscal 2020 and $4.0 billion for fiscal 2019 from customers in Australia.
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
Long-lived assets:(a) | | | |
| U.S. and Canada | $ | 1,429 | | | $ | 1,413 | |
| Europe | 887 | | | 805 | |
| Australasia and Other | 2,438 | | | 2,138 | |
| Total long-lived assets | $ | 4,754 | | | $ | 4,356 | |
________________________
(a)Reflects total assets less current assets, goodwill, intangible assets, investments and deferred income tax assets.
There is no material reliance on any single customer. Revenues are attributed to countries based on location of customers.
Australasia comprises Australia, Asia, Papua New Guinea and New Zealand.
NOTE 21. ADDITIONAL FINANCIAL INFORMATION
The following table sets forth the components of Other
non-current assets included in the Balance Sheets:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Royalty advances to authors | | $ | 312 | | | $ | 298 | |
Inventory(a) | | | 143 | | | | 31 | |
Other | | | 376 | | | | 113 | |
| | | | | | | | |
Total Othernon-current assets | | $ | 831 | | | $ | 442 | |
| | | | | | | | |
(a) | Primarily consists of thenon-current portion of programming rights.
|
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Royalty advances to authors | $ | 406 | | | $ | 348 | |
| Retirement benefit assets | 120 | | | 94 | |
Inventory(a) | 279 | | | 133 | |
| News America Marketing deferred consideration | 128 | | | 111 | |
| Other | 514 | | | 353 | |
| Total Other non-current assets | $ | 1,447 | | | $ | 1,039 | |
________________________
(a)The balance as of June 30, 2021 primarily consists of the non-current portion of programming rights. Upon adoption of ASU 2019-02, the Company reclassified the current portion of its programming rights, totaling $151 million, from Inventory, net to Other non-current assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other Current Liabilities
The following table sets forth the components of Other current liabilities:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Current tax payable | | $ | 17 | | | $ | 39 | |
Royalties and commissions payable | | | 187 | | | | 152 | |
Other | | | 168 | | | | 306 | |
| | | | | | | | |
Total Other current liabilities | | $ | 372 | | | $ | 497 | |
| | | | | | | | |
| | | | | | | | | | | |
| As of June 30, |
| 2021 | | 2020 |
| (in millions) |
| Royalties and commissions payable | $ | 206 | | | $ | 169 | |
| Current operating lease liabilities | 143 | | | 131 | |
| Allowance for sales returns | 190 | | | 174 | |
| Current tax payable | 30 | | | 50 | |
| Other | 504 | | | 314 | |
| Total Other current liabilities | $ | 1,073 | | | $ | 838 | |
The following table sets forth the components of Other, net included in the Statements of Operations:
| | | | | | | | | | | | |
| | | For the fiscal years
ended June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Loss on the Transaction(a) | | $ | (337 | ) | | $ | — | | | $ | — | |
Gain on sale of cost method investments | | | 32 | | | | — | | | | — | |
Gain on sale of REA Group’s European business(b) | | | — | | | | 107 | | | | — | |
Impairment of marketable securities and cost method investments(c) | | | (33 | ) | | | (21 | ) | | | (21 | ) |
Other | | | 13 | | | | 46 | | | | 39 | |
| | | | | | | | | | | | |
Total Other, net | | $ | (325 | ) | | $ | 132 | | | $ | 18 | |
| | | | | | | | | | | | |
(a) | See Note 3—Acquisitions, Disposals and Other Transactions.
|
(b) | The Company recognized apre-tax gain of $107 million for the fiscal year ended June 30, 2017 related to REA Group’s sale of its European business. See Note 3—Acquisitions, Disposals and Other Transactions.
|
(c) | See Note 6—Investment.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Remeasurement of equity securities | $ | 81 | | | $ | (21) | | | $ | (23) | |
| Dividends received from equity security investments | 9 | | | 3 | | | 24 | |
| Gain on sale of Australian property | 0 | | | 0 | | | 16 | |
Gain on sale of businesses(a) | 18 | | | 20 | | | 0 | |
| Gain on remeasurement of previously-held interest in Elara | 7 | | | 0 | | | 0 | |
| Other | 28 | | | 7 | | | 16 | |
| Total Other, net | $ | 143 | | | $ | 9 | | | $ | 33 | |
________________________
(a)During the fiscal year ended June 30, 2021, Move sold the assets associated with its Top Producer professional software and service product and recognized an $18 million gain on the sale.
During the fiscal year ended June 30, 2020, REA Group contributed its businesses located in Singapore and Indonesia to a venture with 99.co in return for an equity method investment in the combined entity. As a result of the deconsolidation of these entities, REA Group recognized a $20 million gain in Other, net.
Supplemental Cash Flow Information
The following table sets forth the Company’s gross cash paid for taxes and interest:
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Cash paid for interest | $ | 55 | | | $ | 61 | | | $ | 82 | |
| Cash paid for taxes | 176 | | | 99 | | | 144 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Loss
The components of Accumulated other comprehensive loss were as follows:
| | | | | | | | | | | | |
| | | For the fiscal years ended
June 30, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | (in millions) | |
Accumulated other comprehensive (loss) income, net of tax: | | | | | | | | | | | | |
Unrealized holding gains (losses) on securities: | | | | | | | | | | | | |
Balance, beginning of year | | $ | (5 | ) | | $ | 20 | | | $ | 19 | |
Fiscal year activity(a) | | | 27 | | | | (25 | ) | | | 1 | |
| | | | | | | | | | | | |
Balance, end of year | | | 22 | | | | (5 | ) | | | 20 | |
| | | | | | | | | | | | |
Cash flow hedge adjustments: | | | | | | | | | | | | |
Balance, beginning of year | | | — | | | | — | | | | — | |
Fiscal year activity(b) | | | 4 | | | | — | | | | — | |
| | | | | | | | | | | | |
Balance, end of year | | | 4 | | | | — | | | | — | |
| | | | | | | | | | | | |
Benefit plan adjustments: | | | | | | | | | | | | |
Balance, beginning of year | | | (437 | ) | | | (445 | ) | | | (413 | ) |
Fiscal year activity(c) | | | 128 | | | | 8 | | | | (32 | ) |
| | | | | | | | | | | | |
Balance, end of year | | | (309 | ) | | | (437 | ) | | | (445 | ) |
| | | | | | | | | | | | |
Foreign currency translation adjustments: | | | | | | | | | | | | |
Balance, beginning of year | | | (510 | ) | | | (585 | ) | | | (188 | ) |
Fiscal year activity(d) | | | (81 | ) | | | 75 | | | | (397 | ) |
| | | | | | | | | | | | |
Balance, end of year | | | (591 | ) | | | (510 | ) | | | (585 | ) |
| | | | | | | | | | | | |
Share of other comprehensive income from equity affiliates, net: | | | | | | | | | | | | |
Balance, beginning of year | | | (12 | ) | | | (16 | ) | | | — | |
Fiscal year activity(e) | | | 12 | | | | 4 | | | | (16 | ) |
| | | | | | | | | | | | |
Balance, end of year | | | — | | | | (12 | ) | | | (16 | ) |
| | | | | | | | | | | | |
Total accumulated other comprehensive (loss), net of tax: | | | | | | | | | | | | |
Balance, beginning of year | | | (964 | ) | | | (1,026 | ) | | | (582 | ) |
Fiscal year activity, net of income taxes | | | 90 | | | | 62 | | | | (444 | ) |
| | | | | | | | | | | | |
Balance, end of year | | $ | (874 | ) | | $ | (964 | ) | | $ | (1,026 | ) |
| | | | | | | | | | | | |
(a) | Net of income tax expense (benefit) of $1 million, ($10) million and nil for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
(b) | Net of income tax expense of $2 million, nil and nil for the fiscal years ended June 30, 2018, 2017 and 2016 respectively.
|
(c) | Net of income tax expense (benefit) of $28 million, $8 million and ($14) million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
(d) | Excludes ($42) million, $9 million and ($1) million relating to noncontrolling interests for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
(e) | Net of income tax expense (benefit) of $5 million, $2 million and ($7) million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.
|
| | | | | | | | | | | | | | | | | |
| For the fiscal years ended June 30, |
| 2021 | | 2020 | | 2019 |
| (in millions) |
| Accumulated other comprehensive loss, net of tax: | | | | | |
| Unrealized holding gains (losses) on securities: | | | | | |
| Balance, beginning of year | $ | 0 | | | $ | 0 | | | $ | 22 | |
Fiscal year activity(a) | 0 | | | 0 | | | (22) | |
| Balance, end of year | 0 | | | 0 | | | 0 | |
| Cash flow hedge adjustments: | | | | | |
| Balance, beginning of year | 2 | | | 6 | | | 4 | |
Fiscal year activity(b) | (2) | | | (4) | | | 2 | |
| Balance, end of year | 0 | | | 2 | | | 6 | |
| Benefit Plan Adjustments: | | | | | |
| Balance, beginning of year | (394) | | | (352) | | | (309) | |
Fiscal year activity(c) | 2 | | | (42) | | | (43) | |
| Balance, end of year | (392) | | | (394) | | | (352) | |
| Foreign currency translation adjustments: | | | | | |
| Balance, beginning of year | (939) | | | (780) | | | (591) | |
Fiscal year activity(d) | 390 | | | (159) | | | (189) | |
| Balance, end of year | (549) | | | (939) | | | (780) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Total accumulated other comprehensive loss, net of tax: | | | | | |
| Balance, beginning of year | (1,331) | | | (1,126) | | | (874) | |
| Fiscal year activity, net of income taxes | 390 | | | (205) | | | (252) | |
| Balance, end of year | $ | (941) | | | $ | (1,331) | | | $ | (1,126) | |
________________________
(a)Upon adoption of updated ASC 825-10 guidance, the Company recorded a $22 million decrease to Accumulated deficit to reclassify the cumulative net unrealized gains (losses) for these investments as of July 1, 2018.
(b)Net of income tax (benefit) expense of NaN, $(3) million and $1 million for the fiscal years ended June 30, 2021, 2020 and 2019 respectively.
(c)Net of income tax benefit of $1 million, $11 million and $10 million for the fiscal years ended June 30, 2021, 2020 and 2019, respectively.
(d)Excludes $78 million, $(43) million and $(58) million relating to noncontrolling interests for the fiscal years ended June 30, 2021, 2020 and 2019, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Cash Flow Information
The following table sets forth the Company’s cash paid for taxes and interest:
| | | | | | | | |
| | | As of June 30, | |
| | | 2018 | | | 2017 | |
| | | (in millions) | |
Cash paid for interest | | $ | 29 | | | $ | 12 | |
Cash paid for taxes | | | 160 | | | | 132 | |
NOTE 22. VALUATION AND QUALIFYING ACCOUNTS
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
beginning
of year | | | Additions | | | Acquisitions
and disposals | | | Utilization | | | Foreign
exchange | | | Balance at
end of
year | |
| | | (in millions) | |
Fiscal 2018 | | | | | | | | | | | | | | | | | | | | | | | | |
Allowances for returns and doubtful accounts | | $ | (208 | ) | | $ | (536 | ) | | $ | (5 | ) | | $ | 531 | | | $ | 1 | | | $ | (217 | ) |
Deferred tax valuation allowance | | | (1,187 | ) | | | (409 | ) | | | 169 | | | | 13 | | | | 29 | | | | (1,385 | ) |
| | | | | | |
Fiscal 2017 | | | | | | | | | | | | | | | | | | | | | | | | |
Allowances for returns and doubtful accounts | | $ | (213 | ) | | $ | (603 | ) | | $ | (2 | ) | | $ | 611 | | | $ | (1 | ) | | $ | (208 | ) |
Deferred tax valuation allowance | | | (1,014 | ) | | | (92 | ) | | | (92 | ) | | | 23 | | | | (12 | ) | | | (1,187 | ) |
| | | | | | |
Fiscal 2016 | | | | | | | | | | | | | | | | | | | | | | | | |
Allowances for returns and doubtful accounts | | $ | (220 | ) | | $ | (566 | ) | | $ | (12 | ) | | $ | 582 | | | $ | 3 | | | $ | (213 | ) |
Deferred tax valuation allowance | | | (1,308 | ) | | | (8 | ) | | | 109 | | | | 114 | | | | 79 | | | | (1,014 | ) |
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23. QUARTERLY DATA (UNAUDITED)
For convenience purposes, all references to September 30, 2017 and September 30, 2016 refer to | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at beginning of year | | Additions | | Acquisitions and disposals | | Utilization | | Foreign exchange | | Balance at end of year |
| (in millions) |
| Fiscal 2021 | | | | | | | | | | | |
| Allowances for doubtful accounts | $ | (73) | | | $ | (5) | | | $ | (3) | | | $ | 15 | | | $ | (5) | | | $ | (71) | |
| Allowances for sales returns | (174) | | | (514) | | | (8) | | | 511 | | | (5) | | | (190) | |
| Deferred tax valuation allowance | (1,546) | | | (180) | | | 10 | | | 100 | | | (149) | | | (1,765) | |
| Fiscal 2020 | | | | | | | | | | | |
| Allowances for doubtful accounts | $ | (46) | | | $ | (34) | | | $ | (9) | | | $ | 16 | | | $ | 0 | | | $ | (73) | |
| Allowances for sales returns | (192) | | | (539) | | | (1) | | | 557 | | | 1 | | | (174) | |
| Deferred tax valuation allowance | (1,468) | | | (104) | | | (1) | | | (4) | | | 31 | | | (1,546) | |
| Fiscal 2019 | | | | | | | | | | | |
| Allowances for doubtful accounts | $ | (46) | | | $ | (5) | | | $ | (10) | | | $ | 14 | | | $ | 1 | | | $ | (46) | |
Allowances for sales returns (a) | (171) | | | (615) | | | 0 | | | 593 | | | 1 | | | (192) | |
| Deferred tax valuation allowance | (1,385) | | | (53) | | | (122) | | | 27 | | | 65 | | | (1,468) | |
________________________
(a)As a result of the three months ended October 1, 2017 and October 2, 2016, respectively. All references to December 31, 2017 and December 31, 2016 refer toadoption of the three months ended December 31, 2017 and January 1, 2017, respectively. All references to March 31, 2018 and March 31, 2017 refer to the three months ended April 1, 2018 and April 2, 2017, respectively. | | | | | | | | | | | | | | | | |
| | | For the three months ended | |
| | | September 30, | | | December 31, | | | March 31, | | | June 30, | |
| | | (in millions, except per share amounts) | |
Fiscal 2018 | | | | | | | | | | | | | | | | |
Revenues(a) | | $ | 2,058 | | | $ | 2,180 | | | $ | 2,093 | | | $ | 2,693 | |
Net income (loss)(b) | | | 87 | | | | (66 | ) | | | (1,110 | ) | | | (355 | ) |
Net income (loss) attributable to News Corporation stockholders | | | 68 | | | | (83 | ) | | | (1,128 | ) | | | (371 | ) |
Income (loss) available to News Corporation stockholders per share—basic and diluted | | $ | 0.12 | | | $ | (0.14 | ) | | $ | (1.94 | ) | | $ | (0.64 | ) |
| | | | |
Fiscal 2017 | | | | | | | | | | | | | | | | |
Revenues | | $ | 1,965 | | | $ | 2,116 | | | $ | 1,978 | | | $ | 2,080 | |
Net loss(c) | | | — | | | | (219 | ) | | | — | | | | (424 | ) |
Net loss attributable to News Corporation stockholders | | | (15 | ) | | | (289 | ) | | | (5 | ) | | | (429 | ) |
Loss available to News Corporation stockholders per share—basic and diluted | | $ | (0.03 | ) | | $ | (0.50 | ) | | $ | (0.01 | ) | | $ | (0.74 | ) |
(a) | Revenue for the three months ended June 30, 2018 includes the impact of the consolidation of Foxtel.
|
(b) | Net income (loss) for the fiscal year ended June 30, 2018 includes the impact of the following items:
|
During the third quarter ofnew revenue recognition standard during fiscal 2018,2019, the Company recognized a $957 millionnon-cash write-down ofreclassified the carrying value of its investment in Foxtel.allowance for sales returns from Receivables, net to Other current liabilities. See Note 6—Investments.
During the third quarter2—Summary of fiscal 2018, the Company recognizednon-cash impairment charges of $225 million primarily related to the impairment of goodwill and intangible assets at the News America Marketing reporting unit and impairment of goodwill at the FOX SPORTS Australia reporting unit. See Note 8—Goodwill and Other Intangible Assets.
Significant Accounting Policies.During the fourth quarter of fiscal 2018, the loss on the Transaction primarily relates to the Company’s, settlement of itspre-existing contractual arrangement between Foxtel and FOX SPORTS Australia which resulted in a $317 millionwrite-off of its channel distribution agreement intangible asset at the time of the Transaction. See Note 3—Acquisitions, Disposals and Other Transactions.
(c) | Net loss for the fiscal year ended June 30, 2017 includes the impact of the following items:
|
During the second quarter of fiscal 2017, the Company recognized anon-cash impairment charge of approximately $310 million primarily related to the write-down of fixed assets at the Australian newspapers. See Note 7—Property, Plant and Equipment. The Company also recognized a $227 millionnon-cash write-down of the carrying value of its investment in Foxtel to fair value. See Note 6—Investments.
During the second quarter of fiscal 2017, REA Group sold its European business which resulted in apre-tax gain of $120 million. The gain was partially offset in the third quarter of fiscal 2017 by $13 million related to the impact of foreign currency fluctuations on the receipt of the sales proceeds,
NEWS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| which were received in February 2017, and certain other currency translation impacts. See Note 3—Acquisitions, Disposals and Other Transactions. See Note 7—Property, Plant and Equipment.
|
During the fourth quarter of fiscal 2017, the Company recognized approximately $464 million in impairment charges, primarily related to the write-down of fixed assets at the U.K. newspapers. See Note 7—Property, Plant and Equipment.
NOTE
24.23. SUBSEQUENT EVENTS
Dividend declaration
In August 2018,2021, the Company declared a semi-annual cash dividend of $0.10 per share for Class A Common Stock and Class B Common Stock. This dividend is payable on October 17, 201813, 2021 to stockholders of record as of September 12, 2018.15, 2021.
REA Group sale of Malaysia and Thailand businesses
In August 2021, REA Group acquired an 18% interest (16.6% on a diluted basis) in PropertyGuru Pte. Ltd. (“PropertyGuru”), a leading digital property technology company operating marketplaces in Southeast Asia, in exchange for all shares of REA Group’s entities in Malaysia and Thailand. The transaction was completed after REA Group entered into an agreement to sell its 27% interest in its existing venture with 99.co. REA Group received 1 seat on the board of directors of PropertyGuru as part of the transaction.
Agreement to acquire OPIS
In July 2021, the Company entered into an agreement to acquire the Oil Price Information Service business and related assets (“OPIS”) from S&P Global Inc. (“S&P”) and IHS Markit Ltd. (“IHS”) for $1.15 billion in cash, subject to customary purchase price adjustments. OPIS is a global industry standard for benchmark and reference pricing and news and analytics for the oil, natural gas liquids and biofuels industries. The business also provides pricing and news and analytics for the coal, mining and metals end markets and insights and analytics in renewables and carbon pricing. OPIS will be operated by Dow Jones, and its results will be included in the Dow Jones segment. The acquisition is subject to customary closing conditions, including regulatory approvals and the consummation of the S&P and IHS merger, and is expected to close in the second quarter of fiscal 2022.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
None.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. | CONTROLS AND PROCEDURES
|
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and
15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Annual Report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management’s report and the report of the independent registered public accounting firm thereon are set forth on pages
8660 and
87,61, respectively, and are incorporated herein by reference.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules
13a-15(f) and
15d-15(f) under the Exchange Act) during the Company’s fourth quarter of the fiscal year ended June 30,
20182021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. | OTHER INFORMATION
|
In connection with its regular annual review and approval
ITEM 9B. OTHER INFORMATION
None
ITEM 9C. INFORMATION REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
Table of executive officer compensation, the Compensation Committee of the Board of Directors (the “Compensation Committee”) conducts a competitive review of the executive officers’ target compensation opportunities, considering, in consultation with its independent compensation consultant, compensation data and practices of its compensation peers and current market trends and practices generally, along with the Company’s pay-for-performance philosophy.As a result of such review, the Compensation Committee on August 7, 2018 approved increases to target compensation for Ms. Susan Panuccio, the Company’s Chief Financial Officer, and Mr. David Pitofsky, the Company’s General Counsel, for fiscal 2019. Ms. Panuccio’s annual base salary will be $1,300,000; her performance-based bonus target will be $1,500,000; and her performance-based equity award target will be $1,500,000. Approximately 70% of Ms. Panuccio’s target compensation will be “at risk.” Mr. Pitofsky’s annual base salary will be $1,100,000; his performance-based bonus target will be $1,000,000; and his performance-based equity award target will be $1,250,000. Approximately 67% of Mr. Pitofsky’s target compensation will be “at risk.”
Also as a result of such review and on the recommendation of the Compensation Committee, the Board of Directors on August 8, 2018 approved an increase to target compensation for Mr. Robert Thomson, the Company’s Chief Executive Officer, for fiscal 2019. His annual base salary, which had been unchanged since 2013, will be $3,000,000; his performance-based bonus target will be $5,000,000; and his performance-based equity award target will be $6,000,000. Approximately 79% of Mr. Thomson’s target compensation will be “at risk.”
Contents ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item with respect to the Company’s Directors is contained in the Proxy Statement for the Company’s
20182021 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC under the heading “Proposal No. 1: Election of Directors” and is incorporated by reference in this Annual Report.
The information required by this item with respect to the Company’s executive officers is contained in the Proxy Statement under the heading “Executive Officers of News Corporation” and is incorporated by reference in this Annual Report.
The
To the extent applicable, the information required by this item with respect to compliance with Section 16(a) of the Exchange Act is contained in the Proxy Statement under the heading
“Section"Delinquent Section 16(a)
Beneficial Ownership Reporting Compliance”Reports" and is incorporated by reference in this Annual Report.
The information required by this item with respect to the Company’s Standards of Business Conduct
and Code of Ethics is contained in the Proxy Statement under the heading “Corporate Governance Matters—Corporate Governance Policies” and is incorporated by reference in this Annual Report.
The information required by this item with respect to the procedures by which security holders may recommend nominees to the Board of Directors is contained in the Proxy Statement under the heading “Corporate Governance Matters—Stockholder Recommendation of Director Candidates” and is incorporated by reference in this Annual Report.
The information required by this item with respect to the Company’s Audit Committee, including the Audit Committee’s members and its financial expert, is contained in the Proxy Statement under the heading “Corporate Governance Matters—Board Committees” and is incorporated by reference in this Annual Report.
ITEM 11. | EXECUTIVE COMPENSATION
|
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item with respect to executive compensation and director compensation is contained in the Proxy Statement under the headings “Compensation Discussion and Analysis,” “Executive Compensation,” “Pay Ratio” and “Director Compensation,” respectively, and is incorporated by reference in this Annual Report.
The
To the extent applicable, the information required by this item with respect to compensation committee interlocks and insider participation is contained in the Proxy Statement under the heading “Compensation Committee Interlocks and Insider Participation” and is incorporated by reference in this Annual Report.
The compensation committee report required by this item is contained in the Proxy Statement under the heading “Report of the Compensation Committee” and is incorporated by reference in this Annual Report.
The information required by this item with respect to compensation policies and practices as they relate to the Company’s risk management is contained in the Proxy Statement under the heading “Risks Related to Compensation Policies and Practices” and is incorporated by reference in this Annual Report.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item with respect to securities authorized for issuance under the Company’s equity compensation plans is contained in the Proxy Statement under the heading “Equity Compensation Plan Information” and is incorporated by reference in this Annual Report.
The information required by this item with respect to the security ownership of certain beneficial owners and management is contained in the Proxy Statement under the heading “Security Ownership of News Corporation” and is incorporated by reference in this Annual Report.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item with respect to transactions with related persons is contained in the Proxy Statement under the heading “Corporate Governance Matters—Related Person Transactions Policy” and is incorporated by reference in this Annual Report.
The information required by this item with respect to director independence is contained in the Proxy Statement under the headings “Corporate Governance Matters—Director Independence” and “Corporate Governance Matters—Board Committees” and is incorporated by reference in this Annual Report.
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is contained in the Proxy Statement under the headings “Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee Pre-Approval Policies and Procedures” and is incorporated by reference in this Annual Report.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this report:
1.The Company’s Consolidated Financial Statements required to be filed as part of this Annual Report and the Reports of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data.
2.All other financial statement schedules are omitted because the required information is not applicable, or because the information called for is included in the Company’s Consolidated Financial Statements or the Notes to the Consolidated Financial Statements.
3.Exhibits—The exhibits listed under Part (b) below are filed or incorporated by reference as part of this Annual Report. A “±” identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report, and such listing is incorporated herein by reference.
(a)Exhibits
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(a) | The following documents are filed as part of this report:
|
| 1. | The Company’s Consolidated Financial Statements required to be filed as part of this Annual Report and the Reports of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data.
|
| 2. | All other financial statement schedules are omitted because the required information is not applicable, or because the information called for is included in the Company’s Consolidated Financial Statements or the Notes to the Consolidated Financial Statements.
|
| 3. | Exhibits—The exhibits listed under Part (b) below are filed or incorporated by reference as part of this Annual Report. A “±” identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report, and such listing is incorporated herein by reference.
|
| | | | |
Number
| | | Exhibit Description |
| | |
| 2.1 | 2.1 | | | |
| | |
| 2.2 | 2.2 | | Partial Assignment and Assumption Agreement, dated as of March 18, 2019, among Twenty-First Century Fox, Inc., Fox Corporation, News Corporation and News Corp Holdings UK & Ireland, in respect of the Separation and Distribution Agreement, dated June 28, 2013. (Incorporated by reference to Exhibit 2.1 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on May 10, 2019.) |
| | |
| 2.3 | | | |
| | |
| 2.4 | 2.3 | | | |
| | |
| 2.5 | 2.4 | | | |
| | |
| 3.1 | 3.1 | | | |
| |
| 3.2 | | | Amended and Restated By-laws of News Corporation. (Incorporated by reference to Exhibit 3.1 to the Annual Report of News Corporation on Form 10-K (File No. 001-35769) filed with the Securities and Exchange Commission on August 15, 2018.) |
| | |
| 3.2 | | | |
| | |
| 4.1 | 4.1 | | | |
| | |
| 4.2 | 10.1 | | |
| | |
| 4.3 | | | AmendedIndenture, dated April 15, 2021, between the Company and Restated Employment Agreement, dated March 9, 2016, among News Corporation, NC Transaction, Inc. and Robert Thomson.U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 10.14.1 to the Current Report of News Corporation on Form 8-K (File No. 001-35769) filed with the Securities and Exchange Commission on March 9, 2016.April 15, 2021.)± |
| | | | | | | | |
Exhibit Number | 10.6 | Exhibit Description |
| 10.2 | | | |
| | |
| 10.3 | 10.7 | | |
| | |
| 10.4 | | | |
| | |
| 10.5 | 10.8 | | |
| | |
| 10.6 | | | |
| | |
| 10.7 | 10.9 | | | |
| | |
| 10.8 | 10.10 | | | |
| | |
| 10.9 | 10.11 | | | |
| | |
| 10.10 | 10.12 | | |
| | |
| 10.11 | | | Credit Agreement, dated as of October 23, 2013,December 12, 2019, among News Corporation as administrative borrower, the lenders named therein, the initial issuing banks named therein, JPMorgan Chase Bank, N.A. andas administrative agent, BofA Securities, Inc., Citibank, N.A. and Bank of China, New York Branch as co-administrativesyndication agents and JPMorgan Chase Bank, N.A. as designated agent, Commonwealth, BofA Securities, Inc., Citibank, N.A. and Bank of Australia as syndication agent and J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Commonwealth Bank of AustraliaChina, New York Branch as joint lead arrangers and joint bookrunners. (Incorporated by reference to Exhibit 10.1 to the Current Report of News Corporation on Form 8-K (File No. 001-35769) filed with the Securities and Exchange Commission on October 29, 2013.December 13, 2019.) |
| | | | |
Exhibit
Number
10.12 | | | Exhibit Description
|
| |
| 10.13 | | | Amendment No. 1, dated as of October 23, 2015, to the CreditSyndicated Facility Agreement, dated as of October 23, 2013,November 14, 2019, among News Corporation,Foxtel Management Pty Limited, as initial borrower, the lenders from time to time party thereto, JPMorgan Chaseinitial financiers named therein, the MLABs named therein and Commonwealth Bank N.A. and Citibank, N.A.,of Australia, as co-administrative agents, JPMorgan Chase Bank, N.A., as designated agent, and the other parties thereto.facility agent. (Incorporated by reference to Exhibit 10.1 to the Current Report of News Corporation on Form 8-K (File No. 001-35769) filed with the Securities and Exchange Commission on October 26, 2015.) |
| |
| 10.14 | | | Amendment No. 2, dated as of July 13, 2016, to the Credit Agreement, dated as of October 23, 2013, among the Company, as borrower, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A. and Citibank, N.A., as co-administrative agents, JPMorgan Chase Bank, N.A., as designated agent, and the other parties thereto. (Incorporated by reference to Exhibit 10.110.3 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on November 8, 2016.February 7, 2020.) |
| | |
| 10.13 | 10.15 | | | Amendment No. 3, dated as of March 29, 2018, to the Credit Agreement, dated as of October 23, 2013,April 8, 2021, to the Syndicated Facility Agreement, dated as of November 14, 2019, among the Company,Foxtel Management Pty Limited, as initial borrower, the lenders from time to time party thereto, JPMorgan Chaseinitial financiers named therein, the MLABs named therein and Commonwealth Bank N.A. and Citibank, N.A.,of Australia, as co-administrative agents, JPMorgan Chase Bank, N.A., as designated agent, and the other parties thereto.facility agent. (Incorporated by reference to Exhibit 10.1 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on May 11, 2018.7, 2021.) |
| | |
| 10.14 | 10.16 | | | Syndicated Revolving Facility Agreement, dated as of October 8, 2013,November 15, 2019, among Foxtel Management Pty Limited, as initial borrower, the initial financiers named therein, Goldman Sachs Australia Pty Ltd, as MLAB, and Commonwealth Bank of Australia, as facility agent.* (Incorporated by reference to Exhibit 10.4 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on February 7, 2020.) |
| |
| 10.17 | | | Amendment Letter, dated as of June 17, 2014, in respect of the Syndicated Revolving Facility Agreement, dated as of October 8, 2013, among Foxtel Management Pty Limited, as initial borrower, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.15 | 10.18 | | | Amendment Letter, dated as of June 12, 2015, in respect of the Syndicated Revolving Facility Agreement, dated as of October 8, 2013 (as amended from time to time), among Foxtel Management Pty Limited, as initial borrower, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.19 | | | Syndicated Revolving Facility Agreement, dated as of June 17, 2014, among Foxtel Management Pty Limited and Foxtel Finance Pty Limited, as initial borrowers, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.20 | | | Amendment Letter, dated as of June 12, 2015, in respect of the Syndicated Revolving Facility Agreement, dated as of June 17, 2014, among Foxtel Management Pty Limited and Foxtel Finance Pty Limited, as initial borrowers, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.21 | | | Syndicated Revolving Facility Agreement, dated as of June 12, 2015, among Foxtel Management Pty Limited and Foxtel Finance Pty Limited, as initial borrowers, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.22 | | | Syndicated Revolving Facility Agreement, dated as of September 12, 2016, among Foxtel Management Pty Limited and Foxtel Finance Pty Limited, as initial borrowers, the initial financiers named therein and Commonwealth Bank of Australia, as facility agent.* |
| |
| 10.23 | | | |
| | |
| 10.16 | | | |
| | |
| | | | | | | | |
Number
| | | Exhibit Description |
| 10.17 | | | |
| | |
| 10.18 | 10.24 | | | |
| | |
| 10.19 | 10.25 | | | |
| | |
| 10.20 | 10.26 | | | |
| |
| 10.27 | | | Waiver, Consent and Amendment Number 1,November 15, 2019, to the Note and Guarantee Agreement,Common Terms Deed Poll, dated as of September 24, 2009 among Foxtel Management Pty Limited, Sky Cable Pty Limited, Foxtel Media Pty Limited (formerly Telstra Media Pty Limited) and others.* |
| |
| 10.28 | | | Notice of Security Release and Amendment Number 2, to the Note and Guarantee Agreement, dated as of September 24, 2009 (as amended from time to time), among Foxtel Management Pty Limited, Sky Cable Pty Limited, Foxtel Media Pty Limited (formerly Telstra Media Pty Limited) and others.* |
| |
| 10.29 | | | Deed of Guarantee dated September 24, 2009April 10, 2012, executed by each entity listed in Annex 1the Schedule thereto.* (Incorporated by reference to Exhibit 10.7 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on February 7, 2020.) |
| | |
| 10.21 | 10.30 | | |
| | |
| 10.22 | | | |
| | |
| 10.23 | 10.31 | | Amendment No. 1 and Guarantee Agreement, dated as of November 22, 2019, to the Note and Guarantee Agreement, dated as of July 25, 2012, among Foxtel Management Pty Limited, Sky Cable Pty Limited, Foxtel Media Pty Limited (formerly Telstra Media Pty Limited), NXE Australia Pty Limited and others. (Incorporated by reference to Exhibit 10.8 to the Quarterly Report of News Corporation on Form 10-Q (File No. 001-35769) filed with the Securities and Exchange Commission on February 7, 2020.) |
| | |
| 10.24 | | | |
| | |
| 10.25 | 21.1 | | |
| | |
| 10.26 | | | |
| | |
| 21.1 | | | |
| | |
| 23.1 | 23.1 | | | |
| |
| 23.2 | | | Consent of Ernst & Young with respect to Foxtel Group.* |
| |
| 31.1 | 31.1 | | | |
| | |
| 31.2 | 31.2 | | | |
| | |
| 32.1 | 32.1 | | | |
| | |
| 99.1 | | | Audited Financial Statements of Foxtel Group as of and for the nine month period ended March 31, 2018.* |
| | | |
Exhibit Number | 101 | Exhibit Description |
| 101 | | | The following financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 20182021 formatted in XBRL (eXtensible Business Reporting Language):Inline XBRL: (i) Consolidated Statements of Operations for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016;2019; (ii) Consolidated Statements of Comprehensive LossIncome (Loss) for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016;2019; (iii) Consolidated Balance Sheets as of June 30, 20182021 and 2017;2020; (iv) Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016;2019; (v) Consolidated Statements of Equity for the fiscal years ended June 30, 2018, 20172021, 2020 and 2016;2019; and (vi) Notes to the Consolidated Financial Statements.* |
| | |
| 104 | | | The cover page from News Corporation's Annual Report on Form 10-K for the fiscal year ended June 30, 2021, formatted in Inline XBRL (included as Exhibit 101).* |
± | Management contract or compensatory plan or arrangement
|
________________________
* Filed herewith
** Furnished herewith
± Management contract or compensatory plan or arrangement
ITEM 16. | FORM 10-K SUMMARY
|
ITEM 16. FORM 10-K SUMMARY
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| NEWS CORPORATION
(Registrant)
|
| | | |
By: | By: | | /s/ Susan Panuccio |
| | | Susan Panuccio
Chief Financial Officer
|
Date: August
15, 201810, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
Signature
/s/ Robert J. Thomson | | Title
Chief Executive Officer and Director
(Principal Executive Officer) | | Date
August 10, 2021 |
| Robert J. Thomson | | |
| | | | |
/s/ Robert J. Thomson Robert J. Thomson
Susan Panuccio | | Chief ExecutiveFinancial Officer and Director
(Principal ExecutiveFinancial and Accounting Officer)
| | August 15, 201810, 2021 |
| Susan Panuccio | | |
| | | | |
/s/ Susan Panuccio Susan Panuccio
K. Rupert Murdoch | | Chief Financial Officer
(Principal Financial Officer)
Executive Chairman | | August 15, 201810, 2021 |
| K. Rupert Murdoch | | |
| | | | |
/s/ Kevin P. Halpin Kevin P. Halpin
Lachlan K. Murdoch | | Principal Accounting Officer
Co-Chairman | | August 15, 201810, 2021 |
| Lachlan K. Murdoch | | |
| | | | |
/s/ K. Rupert Murdoch K. Rupert Murdoch
Kelly Ayotte | | Executive Chairman
Director | | August 15, 201810, 2021 |
| Kelly Ayotte | | |
| | | | |
/s/ Lachlan K. Murdoch Lachlan K. Murdoch
José María Aznar | | Co-Chairman
Director | | August 15, 201810, 2021 |
| José María Aznar | | |
| | | | |
/s/ Kelly Ayotte Kelly Ayotte
Natalie Bancroft | | Director | | August 15, 201810, 2021 |
| Natalie Bancroft | | |
| | | | |
/s/ José María Aznar José María Aznar
Peter L. Barnes | | Director | | August 15, 201810, 2021 |
| Peter L. Barnes | | |
| | | | |
/s/ Natalie Bancroft Natalie Bancroft
Ana Paula Pessoa | | Director | | August 15, 201810, 2021 |
| Ana Paula Pessoa | | |
| | |
/s/ Peter L. Barnes
Peter L. Barnes
| | Director
| | August 15, 2018 |
| | |
/s/ Joel I. Klein Joel I. Klein
Masroor Siddiqui | | Director | | August 15, 201810, 2021 |
| Masroor Siddiqui | | |
/s/ James R. Murdoch
James R. Murdoch
| | Director
| | August 15, 2018 |
| | |
/s/ Ana Paula Pessoa
Ana Paula Pessoa
| | Director
| | August 15, 2018 |
| | |
/s/ Masroor Siddiqui
Masroor Siddiqui
| | Director
| | August 15, 2018 |
171
