Table of Contents
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended MarchDecember 31, 2019

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number:Number
001-35769

LOGO

NEWS CORPORATION

CORP

ORATION
(Exact name of registrant as specified in its charter)

Delaware 46-2950970

Delaware
46-2950970
(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1211 Avenue of the Americas, New York,
New York
 
10036
(Address of principal executive offices)
 
(Zip Code)

(212)
416-3400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Class A Common Stock, par value $0.01 per share
NWSA
The Nasdaq Global Select Market
Class B Common Stock, par value $0.01 per share
NWS
The Nasdaq Global Select Market
Class A Preferred Stock Purchase Rights
N/A
The Nasdaq Global Select Market
Class B Preferred Stock Purchase Rights
N/A
The Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  
☒
    No  
☐

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

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

Large accelerated filer
 
☒
 
Accelerated filer
 
☐
Non-accelerated filer ☐ 
Non-accelerated
filer
☐
Smaller reporting company
 
☐
  
Emerging growth company
 
☐

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

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

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Class A Common Stock, par value $0.01 per shareNWSAThe Nasdaq Global Select Market
Class B Common Stock, par value $0.01 per shareNWSThe Nasdaq Global Select Market
Class A Preferred Stock Purchase RightsN/AThe Nasdaq Global Select Market
Class B Preferred Stock Purchase RightsN/AThe Nasdaq Global Select Market

As of May 3, 2019, 385,531,724 January 31, 2020,
388,635,928
shares of Class A Common Stock and 199,630,240 shares of Class B Common Stock were outstanding.

Table of Contents

NEWS CORPORATION

FORM
10-Q

TABLE OF CONTENTS

Page

Part I. Financial Information

  Page 

Item 1. Financial Statements

 

Consolidated Statements of Operations for the three and ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited)

  
2
 

Consolidated Statements of Comprehensive Income (Loss) for the three and ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited)

  
3
 

Consolidated Balance Sheets as of MarchDecember 31, 2019 (unaudited) and June 30, 20182019 (audited)

  
4
 

Consolidated Statements of Cash Flows for the ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited)

  
5
 

Notes to the Unaudited Consolidated Financial Statements

  
6
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  38
36
 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  64
54
 

Item 4. Controls and Procedures

  64
54
 

Part II. Other Information

 

Item 1. Legal Proceedings

  65
55
 

Item 1A. Risk Factors

  65
55
 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  65
56
 

Item 3. Defaults Upon Senior Securities

  65
56
 

Item 4. Mine Safety Disclosures

  65
56
 

Item 5. Other Information

  65
56
 

Item 6. Exhibits

  66
57
 

Signature

  67
59
 

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

NEWS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; millions, except per share amounts)

       For the three months
ended		  For the nine months
ended		 
       March 31,  March 31, 
   Notes   2019  2018  2019  2018 

Revenues:

       

Circulation and subscription

    $1,025  $659  $3,088  $1,947 

Advertising

     670   702   2,052   2,101 

Consumer

     403   381   1,281   1,220 

Real estate

     218   208   693   633 

Other

     141   143   494   430 
    

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   2    2,457   2,093   7,608   6,331 

Operating expenses

     (1,400)   (1,151)   (4,224)   (3,439) 

Selling, general and administrative

     (810)   (761)   (2,409)   (2,135) 

Depreciation and amortization

     (168)   (100)   (494)   (297) 

Impairment and restructuring charges

   4    (34)   (246)   (71)   (273) 

Equity losses of affiliates

   5    (4)   (974)   (13)   (1,002) 

Interest (expense) income, net

     (14)   2   (45)   9 

Other, net

   14    3   30   30   9 
    

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income tax expense

     30   (1,107)   382   (797) 

Income tax expense

   12    (7)   (3)   (112)   (292) 
    

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

     23   (1,110)   270   (1,089) 

Less: Net income attributable to noncontrolling interests

     (13)   (18)   (64)   (54) 
    

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to News Corporation stockholders

    $10  $(1,128)  $206  $(1,143) 
    

 

 

  

 

 

  

 

 

  

 

 

 

Basic and diluted earnings (loss) per share:

   10      

Net income (loss) available to News Corporation stockholders per share

    $0.02  $(1.94)  $0.35  $(1.96) 

                     
   
For the three months
ended
  
For the six months
ended
 
   
December 31,
  
December 31,
 
 
Notes
  
2019
  
2018
  
2019
  
2018
 
Revenues:
            
 
 
   
Circulation and subscription
    $
990
  $
1,029
  $
1,985
  $
2,063
 
Advertising
     
677
   
718
   
1,285
   
1,382
 
Consumer
     
421
   
478
   
808
   
878
 
Real estate
     
242
   
248
   
460
   
475
 
Other
     
149
   
154
   
281
   
353
 
                     
Total Revenues
  
2
 
   
2,479
   
2,627
   
4,819
   
5,151
 
Operating expenses
     
(1,350
)  
(1,484
)  
(2,687
)  
(2,824
)
Selling, general and administrative
     
(774
)  
(773
)  
(1,556
)  
(1,599
)
Depreciation and amortization
     
(162
)  
(163
)  
(324
)  
(326
)
Impairment and restructuring charges
  
3
 
   
(29
)  
(19
)  
(326
)  
(37
)
Equity losses of affiliates
  
4
 
   
(3
)  
(6
)  
(5
)  
(9
)
Interest expense, net
     
(8
)   
(15
)  
(4
)   
(31
)
Other, net
  
1
3
 
   
2
   
7
   
6
   
27
 
                     
Income (loss) before income tax expense
     
155
   
174
   
(77
)  
352
 
Income tax expense
  
1
1
 
   
(52
)   
(55
)  
(31
)   
(105
)
                     
Net income (loss)
     
103
   
119
   
(108
)  
247
 
Less: Net income attributable to noncontrolling interests
     
(18
)   
(24
)  
(34
)   
(51
)
                     
Net income (loss) attributable to News Corporation stockholders
    $
85
  $
95
  $
(142
) $
196
 
                     
Net income (loss) attributable to News Corporation stockholders per share:
 
  
9
 
             
Basic
    $
0.15
  $
0.16
  $
(0.24
) $
0.34
 
Diluted
    $
0.14
  $
0.16
  $
(0.24
) $
0.33
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

2
Table of Contents
NEWS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; millions)

   For the three months
ended		  For the nine months
ended		 
   March 31,  March 31, 
   2019  2018  2019  2018 

Net income (loss)

  $23  $(1,110)  $270  $(1,089) 

Other comprehensive income (loss):

     

Foreign currency translation adjustments

   75   10   (182)   144 

Net change in the fair value of cash flow hedges(a)

   (5)   —   2   — 

Unrealized holding gains on securities, net(b)

   —   —   —   5 

Benefit plan adjustments, net(c)

   (3)   (9)   10   (14) 

Share of other comprehensive income from equity affiliates, net(d)

   —   —   —   1 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss)

   67   1   (170)   136 
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss)

   90   (1,109)   100   (953) 

Less: Net income attributable to noncontrolling interests

   (13)   (18)   (64)   (54) 

Less: Other comprehensive (income) loss attributable to noncontrolling interests

   (10)   2   46   (1) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to News Corporation stockholders

  $67  $(1,125)  $82  $(1,008) 
  

 

 

  

 

 

  

 

 

  

 

 

 

 
For the three months
ended
  
For the six months
ended
 
 
December 31,
  
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
Net income (loss)
 $
103
  $
119
  $
(108
) $
247
 
Other comprehensive income (loss):
            
Foreign currency translation adjustments
  199   
(147
)  
14
   
(257
)
Net change in the fair value of cash flow hedges
(a)
  
—
   
5
   
(14
)  
7
 
Benefit plan adjustments, net
(b)
  (13)  
8
   
(2
)  
13
 
                 
Other comprehensive income (loss)
  186   
(134
)  
(2
)  
(237
)
                 
Comprehensive income (loss)
  
289
   
(15
)  
(110
)  
10
 
Less: Net income attributable to noncontrolling interests
  
(18
)  
(24
)  
(34
)  
(51
)
Less: Other comprehensive (income) loss attributable to noncontrolling interests
  
(36
)  
28
   9   
56
 
                 
Comprehensive income (loss) attributable to News Corporation stockholders
 $
235
  $
(11
) $
(135
) $
15
 
                 
(a)

Net of income tax expense of nil and $1 million for the three and nine months ended March 31, 2019, respectively.

(b)

Net of income tax expense of $1 million and $3 million for the three and nine months ended March 31, 2018, respectively.

(c)

Net of income tax benefit of NaN for the three months ended December 31, 2019 and 2018, respectively, and income tax (benefit) expense of ($3) million and $1 million for the six months ended December 31, 2019 and 2018, respectively.

(b)Net of income tax (benefit) expense of ($4) million and $2 million for the three months ended MarchDecember 31, 2019 and 2018, respectively, and income tax (benefit) expense (benefit) of $2($1) million and ($4)$3 million for the ninesix months ended MarchDecember 31, 2019 and 2018, respectively.

(d)

Net of income tax expense of nil for the three and nine months ended March 31, 2019 and 2018, respectively.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3
Table of Contents
NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Millions, except share and per share amounts)

       As of  As of 
   Notes   March 31, 2019  June 30, 2018 
       (unaudited)  (audited) 

Assets:

     

Current assets:

     

Cash and cash equivalents

    $1,648  $2,034 

Receivables, net

   14    1,631   1,612 

Inventory, net

     404   376 

Other current assets

     564   372 
    

 

 

  

 

 

 

Total current assets

     4,247   4,394 
    

 

 

  

 

 

 

Non-current assets:

     

Investments

   5    347   393 

Property, plant and equipment, net

     2,557   2,560 

Intangible assets, net

     2,514   2,671 

Goodwill

     5,223   5,218 

Deferred income tax assets

   12    257   279 

Othernon-current assets

   14    913   831 
    

 

 

  

 

 

 

Total assets

    $16,058  $16,346 
    

 

 

  

 

 

 

Liabilities and Equity:

     

Current liabilities:

     

Accounts payable

    $432  $605 

Accrued expenses

     1,364   1,340 

Deferred revenue

   2    460   516 

Current borrowings

   6    678   462 

Other current liabilities

   14    745   372 
    

 

 

  

 

 

 

Total current liabilities

     3,679   3,295 
    

 

 

  

 

 

 

Non-current liabilities:

     

Borrowings

   6    868   1,490 

Retirement benefit obligations

     237   245 

Deferred income tax liabilities

   12    321   389 

Othernon-current liabilities

     495   430 

Commitments and contingencies

   11    

Redeemable preferred stock

   7    —   20 

Class A common stock(a)

     4   4 

Class B common stock(b)

     2   2 

Additionalpaid-in capital

     12,229   12,322 

Accumulated deficit

     (1,927)   (2,163) 

Accumulated other comprehensive loss

     (1,019)   (874) 
    

 

 

  

 

 

 

Total News Corporation stockholders’ equity

     9,289   9,291 

Noncontrolling interests

     1,169   1,186 
    

 

 

  

 

 

 

Total equity

   8    10,458   10,477 
    

 

 

  

 

 

 

Total liabilities and equity

    $16,058  $16,346 
    

 

 

  

 

 

 

 
 
 
 
 
As of
  
As of
 
 
Notes
  
December 31, 2019
  
June 30, 2019
 
   
(unaudited)
  
(audited)
 
Assets:
         
Current assets:
         
Cash and cash equivalents
    $
1,272
  $
1,643
 
Receivables, net
  
1
3
   
1,570
   
1,544
 
Inventory, net
     
358
   
348
 
Other current assets
     
518
   
515
 
             
Total current assets
     
3,718
   
4,050
 
             
Non-current
assets:
         
Investments
  
4
   
325
   
335
 
Property, plant and equipment, net
     
2,476
   
2,554
 
Operating lease
right-of-use
assets
  
6
   
1,299
   
—
 
Intangible assets, net
     
2,257
   
2,426
 
Goodwill
     
4,976
   
5,147
 
Deferred income tax assets
  
11
   
283
   
269
 
Other
non-current
assets
  
1
3
   
948
   
930
 
             
Total assets
    $
16,282
  $
15,711
 
             
Liabilities and Equity:
         
Current liabilities:
         
Accounts payable
    $
375
  $
411
 
Accrued expenses
     
1,072
   
1,328
 
Deferred revenue
  
2
   
411
   
428
 
Current borrowings
  
5
   
—
   
449
 
Other current liabilities
  
1
3
   
869
   
724
 
             
Total current liabilities
     
2,727
   
3,340
 
             
Non-current
liabilities:
         
Borrowings
  
5
   
1,201
   
1,004
 
Retirement benefit obligations
     
258
   
266
 
Deferred income tax liabilities
  
1
1
   
268
   
295
 
Operating lease liabilities
  
6
   
1,343
   
—
 
Other
non-current
liabilities
     
358
   
495
 
Commitments and contingencies
  
1
0
       
Class A common stock
(a)
     
4
   
4
 
Class B common stock
(b)
     
2
   
2
 
Additional
paid-in
capital
     
12,183
   
12,243
 
Accumulated deficit
     
(2,114
)   
(1,979
)
Accumulated other comprehensive loss
     
(1,117
)   
(1,126
)
             
Total News Corporation stockholders’ equity
     
8,958
   
9,144
 
Noncontrolling interests
     
1,169
   
1,167
 
             
Total equity
  
7
   
10,127
   
10,311
 
             
Total liabilities and equity
    $
16,282
  $
15,711
 
             
(a)

Class A common stock
, $0.01 par value per share (“Class A Common Stock”), 1,500,000,000 shares authorized, 385,444,822388,601,457 and 383,385,353385,580,015 shares issued and outstanding, net of 27,368,413 treasury shares at par at MarchDecember 31, 2019 and June 30, 2018,2019, 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 MarchDecember 31, 2019 and June 30, 2018.

2019, respectively
.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4
Table of Contents
NEWS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; millions)

       For the nine months ended 
       March 31, 
   Notes   2019  2018 

Operating activities:

     

Net income (loss)

    $270  $(1,089) 

Adjustments to reconcile net income (loss) to cash provided by operating activities:

     

Depreciation and amortization

     494   297 

Equity losses of affiliates

   5    13   1,002 

Cash distributions received from affiliates

     30   2 

Impairment charges

   4    9   225 

Other, net

   14    (30)   (9) 

Deferred income taxes and taxes payable

   12    22   182 

Change in operating assets and liabilities, net of acquisitions:

     

Receivables and other assets

     37   (86) 

Inventories, net

     (74)   (14) 

Accounts payable and other liabilities

     (110)   (45) 
    

 

 

  

 

 

 

Net cash provided by operating activities

     661   465 
    

 

 

  

 

 

 

Investing activities:

     

Capital expenditures

     (417)   (200) 

Acquisitions, net of cash acquired

     (187)   (62) 

Investments in equity affiliates and other

     (36)   (42) 

Proceeds from property, plant and equipment and other asset dispositions

     99   137 

Other, net

     18   23 
    

 

 

  

 

 

 

Net cash used in investing activities

     (523)   (144) 
    

 

 

  

 

 

 

Financing activities:

     

Borrowings

   6    450   — 

Repayment of borrowings

   6    (801)   (93) 

Dividends paid

     (102)   (99) 

Other, net

     (48)   (42) 
    

 

 

  

 

 

 

Net cash used in financing activities

     (501)   (234) 
    

 

 

  

 

 

 

Net change in cash and cash equivalents

     (363)   87 

Cash and cash equivalents, beginning of period

     2,034   2,016 

Exchange movement on opening cash balance

     (23)   9 
    

 

 

  

 

 

 

Cash and cash equivalents, end of period

    $1,648  $2,112 
    

 

 

  

 

 

 

 
             
   
For the six months ended
 
   
December 31,
 
 
Notes
  
2019
  
2018
 
Operating activities:
         
Net (loss) income
    $
(108
) $
247
 
Adjustments to reconcile net (loss) income to cash provided by operating activities:
         
Depreciation and amortization
     
324
   
326
 
Operating lease expense
  
6
   
86
   
—
 
Equity losses of affiliates
  
4
   5   
9
Cash distributions received from affiliates
     
5
   
27
 
Impairment charges
  
3
   
292
   
—
 
Other, net
  
13
   
(6
)   
(27
)
Deferred income taxes and taxes payable
  
11
   
(35
)   
40
 
Change in operating assets and liabilities, net of acquisitions:
         
Receivables and other assets
     
(1,661
)   
(140
)
Inventories, net
     
3
   
(43
)
Accounts payable and other liabilities
     
1,287
   
(81
)
             
Net cash provided by operating activities
     
192
   
358
 
             
Investing activities:
         
Capital expenditures
     
(237
)   
(264
)
Acquisitions, net of cash acquired
     
(2
)   
(185
)
Investments in equity affiliates and other
     
(8
)   
(13
)
Proceeds from business dispositions
     
—
   
5
 
Proceeds from property, plant and equipment and other asset dispositions
     
10
   
32
 
Other, net
     
3
   
16
 
             
Net cash used in investing activities
     
(234
)   
(409
)
             
Financing activities:
         
Borrowings
  
5
   
917
   
263
 
Repayment of borrowings
  
5
   
(1,161
)   
(470
)
Dividends paid
     
(81
)   
(81
)
Other, net
     
(3
)   
(45
)
             
Net cash used in financing activities
     
(328
)   
(333
)
             
Net change in cash and cash equivalents
     
(370
)   
(384
)
Cash and cash equivalents, beginning of year
     
1,643
   
2,034
 
Exchange movement on opening cash balance
     
(1
)   
(32
)
             
Cash and cash equivalents, end of year
    $
1,272
  $
1,618
 
             
The accompanying notes are an integral part of these unaudited consolidated financial statements.

5
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NEWS CORPORATION

NOTES TO THE UNAUDITED 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,” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including: news and information services, subscription video services in Australia, book publishing and digital real estate services.

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, 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; Note 5—Investments; Note 6—Borrowings; and Note 9—Financial Instruments and Fair Value Measurements.

Basis of Presentation

The accompanying unaudited 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”) for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Consolidated Financial Statements. Operating results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019.2020. 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.

Intercompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not exercise control and is not the primary beneficiary are accounted for using the equity method. In accordance with ASU2016-01, investmentsInvestments in which the Company is not able to exercise significant influence over the investee are measured at fair value, if the fair value is readily determinable. If an investment’s fair value is not readily determinable, the Company will measure the investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

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 accompanying Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form
10-K
for the fiscal year ended June 30, 20182019 as filed with the Securities and Exchange Commission (the “SEC”) on August 15, 201813, 2019 (the “2018“2019 Form
10-K”).

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current year presentation. Specifically, in the first quarter of fiscal 2019, the Company reclassified Conference Sponsorship revenues at its Dow Jones reporting unitthe costs associated with certain initiatives previously included within the Other segment to the News and Merchandising revenues at News America Marketing from Other revenues to Advertising revenuesInformation Services segment as the Company believes that the reclassification more accurately reflects the nature of those revenue streams. These revenue reclassifications totaled $15 million and $42 million forthese initiatives directly benefit this segment. For the three and ninesix months ended MarchDecember 31, 2018, respectively,these reclassifications increased Selling, general and $57administrative by $8 million and $15 million, respectively, for the fiscal year ended June 30, 2018.

News and Information Services segment.

The Company’s fiscal year ends on the Sunday closest to June 30. Fiscal 20192020 and fiscal 20182019 include 52 weeks.weeks. All references to the three and ninesix months ended MarchDecember 31, 2019 and 2018 relate to the three and ninesix months ended March 31,December 29, 2019 and April 1,December 30, 2018, respectively. For convenience purposes, the Company continues to date its Consolidated Financial Statements as of MarchDecember 31.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

Adopted

In May 2014,February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU2014-09”), which amended the FASB Accounting Standards Codification by creating Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). ASU2014-09 removes inconsistencies and differences in 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. The Company adopted ASU2014-09 on a modified retrospective basis as of July 1, 2018. As a result, 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. See Note 2—Revenues.

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. The Company adopted the guidance on a cumulative-effect basis for its investments with readily determinable fair values effective July 1, 2018. In accordance with ASU2016-01, the cumulative net unrealized gains (losses) for these investments contained within Accumulated other comprehensive loss were reclassified through Accumulated deficit as of July 1, 2018, and the Company recorded a $22 million decrease to Accumulated deficit. The Company has elected to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. There was no financial statement impact upon adoption for these investments. See Note 5—Investments and Note 14—Additional Financial Information.

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 periodic benefit cost (income) 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. ASU2017-07 allows for a practical expedient that permits a company to use the amounts disclosed in its pension and other postretirement benefit plans note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. ASU2017-07 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company adopted ASU2017-07 utilizing the practical expedient. The other components of net periodic benefit cost (income) are included in Other, net in the Statements of Operations. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In June 2018, the FASB issued ASU2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU2018-07”). The amendments in ASU2018-07 expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. As permitted by ASU2018-07, the Company early-adopted this standard and the adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU2018-15, “Intangibles—Goodwill andOther—Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)” (“ASU2018-15”). The amendments in ASU2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software (and hosting arrangements that include aninternal-use software license). As permitted by ASU2018-15, the Company early-adopted this standard on a prospective basis. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

2016-02,

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Issued

In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)” (“ASU

2016-02”).
 The amendments in ASU
2016-02
 require lessees to recognize all leases on the balance sheet by recording a
right-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 FASB has also issued additional standards which provide additional clarification and implementation
guidance, on the previously issued ASU2016-02 and have the same effective date as the original standard. ASU
2016-02.
The Company plans to apply this guidanceadopted ASU
 2016-02
 on a modified retrospective basis at the beginningas of July 
1
,
2019
. As a result of the periodadoption, the Company recorded operating lease
right-of-use
assets, current lease liabilities and noncurrent lease liabilities for its operating leases of adoption through a cumulative-effect adjustment to retained earnings, with no restatementapproximately $
1.4
 billion, $
0.2
 billion and
$1.4 billion, respectively, on July 1,
6
Table of prior periods.Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2019. The Company has selected its lease management system and isalso recorded a $
9
 million adjustment related to previous sale leaseback transactions, which decreased the Accumulated deficit balance as of July 1, 2019. The Company’s adoption of ASU
2016-02
also resulted in the processreclassification of completing its inventory of itsprepaid and deferred rent to Operating lease contracts and implementing processes and controls to enable the preparation of the required financial information for this standard. 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. ASU2016-13 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.

right-of-use
assets. See Note 6—Leases.
In August 2017, the FASB issued ASU
2017-12, “Derivatives
“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU
2017-12”).
The amendments in ASU
2017-12
more closely align the results of cash flow and fair value hedge accounting with risk management activities through 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. ASU
2017-12
is effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company is currently evaluatingadopted the guidance on a cumulative-effect basis for its outstanding cash flow hedges that qualified for hedge accounting as of July 1, 2019. The adoption did not have a material impact ASU2017-12 will have on its consolidated financial statements.

the Company’s Consolidated Financial Statements.

In February 2018, the FASB issued ASU
2018-02, “Income
“Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”(“ (“ASU
 2018-02”).
The amendments in ASU
2018-02
provide a reclassification from Accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (as defined below)(the “Tax Act”). See Note 12— Income Taxes. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. ASU
2018-02
is effective for the Company for annual and interim reporting periods beginning July 1, 2019. The Company adopted the guidance as of July 1, 2019 and elected to not reclassify the stranded tax effects resulting from the Tax Act from Accumulated other comprehensive loss to Accumulated deficit. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.
In April 2019, the FASB issued ASU
2019-04,
“Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (“ASU
 2019-04”).
The amendments in ASU
2019-04
clarify certain aspects of accounting for credit losses, hedging activities and financial instruments. For entities that have adopted ASU
2017-12,
the effective date and transition requirements for ASU
2019-04
are the same as the effective date and transition requirements for ASU
2017-12.
For entities that have adopted ASU
2016-01,
“Financial Instruments—Overall (Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU
2016-01”),
ASU
2019-04
is effective for annual and interim reporting periods beginning July 1, 2020 and early adoption is permitted. For clarifications around credit losses, the effective date will be the same as the effective date in ASU
2016-13
(described below)
.
The Company adopted the amendments in ASU
2019-04
related to ASU
2017-12
and ASU
2016-01
as of July 1, 2019. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.
Issued
In June 2016, the FASB issued ASU
2016-13,
“Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The amendments in ASU
2016-13
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. ASU
2016-13
must be adopted on a modified-retrospective
basis
and is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company is currently evaluating the impact ASU2018-02
2016-13
will have on its consolidated financial statements.

Consolidated Financial Statements.

In August 2018, the FASB issued ASU
2018-13, “Fair
“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 amendments in ASU
2018-13
related to disclosure requirements must be applied prospectively and all other amendments must be applied retrospectively. ASU
2018-13
is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The Company is currently evaluating the impact ASU
2018-13
will have on its consolidated financial statements.

Consolidated Financial Statements.

7
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In August 2018,March 2019, the FASB issued ASU2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General
2019-02,
“Entertainment—Films—Other Assets—Film Costs (Subtopic715-20)
926-20)
and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic
920-350): Disclosure Framework—Changes
Improvements to Accounting for Costs of Films and License Agreements for Program Materials (a consensus of the Disclosure Requirements for Defined Benefit Plans”Emerging Issues Task Force)” (“ASU2018-14”
2019-02”).
The amendments in ASU2018-14 modify
2019-02
align the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. ASU2018-14 eliminatesimpairment model in Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic
920-350)
with the disclosures for amountsfair value model in Accumulated other comprehensive loss expected toEntertainment—Films—Other Assets—Film Costs (Subtopic
926-20).
ASU
2019-02
must be recognized asadopted on a component of net periodic benefit cost (income)prospective basis and the effect of a percentage change in health care cost trend rate. ASU2018-14 is effective for the Company for annual and interim reporting periods beginning July 1, 2021.2020, with early adoption permitted. The Company is currently evaluating the impact ASU
2019-02
will comply withhave on its Consolidated Financial Statements.
In December 2019, the new disclosure requirementsFASB issued ASU
2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU
2019-12”).
The amendments in ASU2018-14 beginning with its Annual Report on Form10-K
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
g
oodwill in business combinations and franchise taxes in income tax expense. ASU
2019-12
is effective for the fiscal year ending June 30, 2019.

Company for annual and interim reporting periods beginning July 1, 2021, with early adoption permitted. The Company is currently evaluating the impact ASU
2019-12

will have on its Consolidated Financial Statements.

NOTE 2. REVENUES
The following tables presents the Company’s disaggregated revenues for the three and six months ended December 31, 2019 and 2018:
                         
 
For the three months ended December 31, 2019
 
 
News and
Information
Services
  
Subscription
Video
Services
  
Book
Publishing
  
Digital Real
Estate
Services
  
Other
  
Total
Revenues
 
 
(in millions)
 
Revenues:
                  
Circulation and subscription
 $
541
  $
439
  $
 —
  $
9
  $
 1
  $
990
 
Advertising
  
599
   
53
   
—
   
25
   
—
   
677
 
Consumer
  
—
   
—
   
421
   
—
   
—
   
421
 
Real estate
  
—
   
—
   
—
   
242
   
—
   
242
 
Other
  
101
   
9
   
21
   
18
   
—
   
149
 
                         
Total Revenues
 $
1,241
  $
501
  $
442
  $
294
  $
 1
  $
2,479
 
                         
                         
                         
 
For the three months ended December 31, 2018
 
 
News and
Information
Services
 
 
Subscription
Video
Services
 
 
Book
Publishing
 
 
Digital Real
Estate
Services
 
 
Other
 
 
Total
Revenues
 
 
(in millions)
 
Revenues:
                  
Circulation and subscription
 $
526
  $
490
  $
—
  $
13
  $
—
  $
1,029
 
Advertising
  
632
   
55
   
—
   
31
   
—
   
718
 
Consumer
  
—
   
—
   
478
   
—
   
—
   
478
 
Real estate
  
—
   
—
   
—
   
248
   
—
   
248
 
Other
  
99
   
17
   
18
   
19
   
1
   
154
 
                         
Total Revenues
 $
1,257
  $
562
  $
496
  $
311
  $
1
  $
2,627
 
                         
                         
8
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. REVENUES

On July 1, 2018, the Company adopted ASC 606 on a modified retrospective basis for all contracts which were not completed as

                         
 
For the six months ended December 31, 2019
 
 
News and
Information
Services
  
Subscription
Video
Services
  
Book
Publishing
  
Digital Real
Estate
Services
  
Other
  
Total
Revenues
 
 
(in millions)
 
Revenues:
                  
Circulation and subscription
 $
1,075
  $
890
  $
 —
  $
19
  $
 
1
  $
1,985
 
Advertising
  
1,129
   
104
   
—
   
52
   
—
   
1,285
 
Consumer
  
—
   
—
   
808
   
—
   
—
   
808
 
Real estate
  
—
   
—
   
—
   
460
   
—
   
460
 
Other
  
186
   
21
   
39
   
35
   
—
   
281
 
                         
Total Revenues
 $
2,390
  $
1,015
  $
847
  $
566
  $
 1
  $
4,819
 
                         
                         
 
For the six months ended December 31, 2018
 
 
News and
Information
Services
  
Subscription
Video
Services
  
Book
Publishing
  
Digital Real
Estate
Services
  
Other
  
Total
Revenues
 
 
(in millions)
 
Revenues:
                  
Circulation and subscription
 $
1,055
  $
981
  $
—
  $
27
  $
—
  $
2,063
 
Advertising
  
1,208
   
112
   
—
   
62
   
—
   
1,382
 
Consumer
  
—
   
—
   
878
   
—
   
—
   
878
 
Real estate
  
—
   
—
   
—
   
475
   
—
   
475
 
Other
  
242
   
34
   
36
   
40
   
1
   
353
 
                         
Total Revenues
 $
2,505
  $
1,127
  $
914
  $
604
  $
1
  $
5,151
 
                         
9
Table of the adoption date. Results for reporting periods beginning after July 1, 2018 are presented under ASC 606 while prior periods have not been restated. 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.

When implementing ASC 606, the Company applied the practical expedient to reflect the aggregate effect of all contract modifications occurring before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The adoption of ASC 606 primarily resulted in the following changes related to the Company’s revenue recognition policies:

Contents

Reclassification of certain payments to customers

For certain revenue streams within the Subscription Video Services, Book Publishing and News and Information Services segments, the Company previously recorded certain marketing and sales incentive payments to customers within Operating expenses and Selling, general and administrative expenses. In accordance with ASC 606, such payments are now recorded as a reduction of revenue. For the three and nine months ended March 31, 2019, revenues were $22 million and $84 million lower, respectively, as a result of this reclassification, with no impact on the Company’s net income.

Deferred installation revenues in the Subscription Video Services segment

Under ASC 606, each customer subscription sold is accounted for as a distinct performance obligation. Installation services are not accounted for as a distinct performance obligation and are instead included within the overall services being provided. Therefore, installation revenues are deferred and recognized over the respective customer contract term. Historically, installation revenues were deferred and recognized over the estimated customer life. For the three and nine months ended March 31, 2019, revenues were $5 million and $18 million higher, respectively, as a result of the adoption of ASC 606.

Acceleration of revenue associated with REA Group’s financial services business

The Company has historically delayed the recognition of trailing commission revenue associated with REA Group’s financial services business until such amounts became fixed or determinable. Under ASC 606, trailing commission revenue is recognized when the related mortgage loan is established. As a result, the Company established a commission receivable of $121 million and a broker commission payable of $94 million as of July 1, 2018. The current portion of the commission receivable and broker commission payable are classified in Receivables, net and Other current liabilities, respectively, with thenon-current portion of each classified within Othernon-current assets and liabilities, respectively, in the Balance Sheets. The change in accounting for trailing commission revenue did not have a material impact on the Statement of Operations.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s revenues and expenses for the three and nine months ended March 31, 2019 and the opening balance sheet as of July 1, 2018 under both ASC 606 and the prior standard, ASC 605 are as follows:

   For the three months ended March 31, 2019 
   ASC 605  Effects of Adoption  ASC 606 
   (in millions) 

Revenue:

    

Circulation and subscription

  $1,019  $6  $1,025 

Advertising

   673   (3)   670 

Consumer

   420   (17)   403 

Real estate

   218   —   218 

Other

   144   (3)   141 
  

 

 

  

 

 

  

 

 

 

Total Revenues

  $2,474  $(17)  $2,457 

Operating expenses and Selling, general and administrative

  $(2,228)  $18  $(2,210) 

Net income

  $22  $1  $23 
   For the nine months ended March 31, 2019 
   ASC 605  Effects of Adoption  ASC 606 
   (in millions) 

Revenue:

    

Circulation and subscription

  $3,076  $12  $3,088 

Advertising

   2,055   (3)   2,052 

Consumer

   1,328   (47)   1,281 

Real estate

   693   —   693 

Other

   510   (16)   494 
  

 

 

  

 

 

  

 

 

 

Total Revenues

  $7,662  $(54)  $7,608 

Operating expenses and Selling, general and administrative

  $(6,706)  $73  $(6,633) 

Net income

  $256  $14  $270 

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

   As of July 1, 2018 
   ASC 605  Effects of Adoption  ASC 606 
   (in millions) 

Assets:

    

Receivables, net

  $1,612  $200  $1,812 

Other current assets

   372   (4)   368 

Deferred income tax assets

   279   2   281 

Othernon-current assets

   831   92   923 

Liabilities and Equity:

    

Deferred revenue

  $516  $(6)  $510 

Other current liabilities

   372   194   566 

Deferred income tax liabilities

   389   11   400 

Othernon-current liabilities

   430   71   501 

Accumulated deficit

   (2,163)   20   (2,143) 

Disaggregated revenue

The following table presents revenue by type and segment for the three and nine months ended March 31, 2019:

   For the three months ended March 31, 2019 
   News and
Information
Services		   Subscription
Video
Services		   Book
Publishing		   Digital Real
Estate
Services		   Other   Total
Revenues		 
   (in millions) 

Revenues:

            

Circulation and subscription

  $538   $474   $—   $12   $1   $1,025 

Advertising

   593    50    —    27    —    670 

Consumer

   —    —    403    —    —    403 

Real estate

   —    —    —    218    —    218 

Other

   93    15    18    15    —    141 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

  $1,224   $539   $421   $272   $1   $2,457 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

   For the nine months ended March 31, 2019 
   News and
Information
Services		   Subscription
Video
Services		   Book
Publishing		   Digital Real
Estate
Services		   Other   Total
Revenues		 
   (in millions) 

Revenues:

 ��          

Circulation and subscription

  $1,593   $1,455   $—   $39   $1   $3,088 

Advertising

   1,801    162    —    89    —    2,052 

Consumer

   —    —    1,281    —    —    1,281 

Real estate

   —    —    —    693    —    693 

Other

   335    49    54    55    1    494 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues

  $3,729   $1,666   $1,335   $876   $2   $7,608 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disclosures regarding the nature, timing and uncertainty of the Company’s revenue streams across its segments are as follows:

Circulation and subscription revenues

Circulation and subscription revenues include single-copy newspaper, newspaper subscription, information services subscription and pay television broadcast subscription revenues. Circulation revenues are based on the number of copies of the printed newspaper (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 at a point in time on the date the newspapers are sold to distribution outlets, net of provisions for related returns.

Revenues from home delivery and digital subscriptions are recognized over the subscription term as the newspapers and/or digital subscriptions are delivered. Information services 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.

Revenue generated from subscriptions to receive pay television broadcast services, broadband and home 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 circulated. 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 fromnon-impressions-based digital advertising is recognized over the period that the advertisements are displayed. Such amounts are recognized net of agency commissions and provisions for estimated sales incentives, including rebates, rate adjustments or discounts.

Advertising revenues earned from integrated marketing services are recognized at the point in time when free-standing inserts are published. Revenues earned fromin-store marketing services are partially recognized upon installation, with the remaining revenue recognized over thein-store campaign.

Billings to clients and payments received in advance of performance of services or delivery of products are recorded as deferred revenue until the services are performed or the product is delivered. 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.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Consumer revenues

Revenue from the sale of physical books and electronic 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 payments to customers when a distinct good or service is not received. 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 ande-books are generally collected within one to three months of sale or delivery and are based on the number of physical books ore-books sold.

Real Estate revenues

Real estate revenues are derived from the sale of online real estate listing 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.

Other revenues

Other revenues are recognized when the related services are performed or the product has been delivered.

Areas of judgment

Contracts with multiple performance obligations

The Company has certain revenue contracts which contain multiple performance obligations such as print and digital advertising bundles and bundled video service subscriptions. Revenues derived from sales contracts that contain multiple products and services are allocated based on the relative standalone selling price of each performance obligation to be delivered. Standalone selling price is typically determined based on prices charged to customers for the same 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 observable 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. When the intermediary or agent is determined to be the Company’s customer, the Company records revenue based on the amount it expects to receive from the agent or intermediary.

In other circumstances, 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 controls the goods or services prior to being transferred to the ultimate customer.

Sales returns

Certain of the Company’s products, such as books and newspapers, are sold with the right of 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. As a result of the adoption of ASC 606, the Company reclassified its sales returns reserve from Receivables, net to Other current liabilities.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Contract liabilities and assets

The Company’s deferred revenue balance primarily relates to amounts received from customers for subscriptions paid in advance of the services being provided. The following table presents changes in the deferred revenue balance for the three and ninesix months ended MarchDecember 31, 2019:

   For the three months
ended March 31, 2019		  For the nine months
ended March 31, 2019		 
   (in millions)  (in millions) 

Balance, beginning of period

  $430  $510 

Deferral of revenue

   934   2,271 

Recognition of deferred revenue(a)

   (883)   (2,300) 

Other

   (21)   (21) 
  

 

 

  

 

 

 

Balance, end of period

  $460  $460 
  

 

 

  

 

 

 

2019 and 2018:
                 
 
For the three months
ended
December 31,
  
For the six months
ended
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
Balance, beginning of period
 $
 448
  $
436
  $
 428
  $
510
 
Deferral of revenue
  
754
   
742
   
1,575
   
1,337
 
Recognition of deferred revenue
(a)
  
(797
)   
(747
)  
(1,591
)   
(1,417
)
Other
  
6
   
(1
)  
(1
)   
—
 
                 
Balance, end of period
 $
 411
  $
430
  $
 411
  $
430
 
                 
(a)

For the three and ninesix months ended MarchDecember 31, 2019, the Company recognized approximately $241$232 million and $461$329 million, respectively, of revenue which was included in the opening deferred revenue balance for eachbalance. For the three and six months ended December 31, 2018, the Company recognized $267 million and $421 million, respectively, of revenue which was included in the respective periods.

opening deferred revenue balance.

Contract assets were immaterial for disclosure as of MarchDecember 31, 2019.

Practical expedients2019 and other2018.

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 twelve months or less. These costs are recorded within Selling, general and administrative in the Statements of Operations. The Company also applies the practical expedient fordoes not capitalize significant financing components when the transfer of the good or service is paid within twelve months or less, or the receipt of consideration is received within twelve months or less of the transfer of the good or service.

During

For
the three and ninesix months ended MarchDecember 31, 2019
,
 the Company recognized approximately $75$74 million
 and $227$154 million, respectively,
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 MarchDecember 31, 2019 was approximately $297$543 million, of which approximately $39$111 million is expected to be recognized over the remainder of fiscal 2019,2020, approximately $133$196 million is expected to be recognized in fiscal 2020, $982021, approximately $87 million is expected to be recognized in fiscal 2021,2022, and approximately $36 million is expected to be recognized in fiscal 2023, 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 which variable consideration is determined based on the customer’s subsequent sale or usage and (iii) variable consideration allocated to performance obligations accounted for under the series guidance that meets the allocation objective under ASC 606.

NOTE 3. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS

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 acquired, and approximately $28 million in deferred payments and restricted stock unit awards for Opcity’s founders and qualifying

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

employees, which is being recognized as compensation expense over the three years following the closing. Included in the cash amount was approximately $20 million that is being held back for approximately 18 months after closing. The acquisition broadens realtor.com®’s lead generation product portfolio, allowing real estate professionals to choose between traditional lead products or a concierge-based model that provides highly vetted, transaction-ready leads. Opcity is a subsidiary of Move, and its results are included within the Digital Real Estate Services segment.

Under the acquisition method of accounting, the total consideration was first allocated to net tangible assets and identifiable intangible assets based upon their fair values as of the date of completion of the acquisition. 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 350, “Intangibles – Goodwill and Other” (“ASC 350”) the excess of the total consideration over the fair values of the net tangible and intangible assets of approximately $124 million was recorded as goodwill on the 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. 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 purposes of the Company’s annual goodwill impairment review.

The Transaction was accounted for in accordance with ASC 805 “Business Combinations” (“ASC 805”) which requires the Company tore-measure its previously held equity interest in Foxtel at its Transaction completion date fair value. The carrying amount of the Company’s previously held equity interest in Foxtel was equal to its fair value as of the Transaction completion date, as the Company wrote its investment 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 reduction in the Company’s ownership interest to 65% was accounted for as a common control transaction on a carryover basis. See Note 5—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 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Under the acquisition method 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

   492 

Property, plant and equipment

   967 

Intangible assets

   861 

Goodwill

   1,559 

Othernon-current assets

   268 
  

 

 

 

Total assets acquired

  $4,225 
  

 

 

 

Liabilities assumed:

  

Current liabilities

  $611 

Long-term borrowings

   1,751 

Othernon-current liabilities

   323 
  

 

 

 

Total liabilities assumed

   2,685 
  

 

 

 

Net assets acquired

  $1,540 
  

 

 

 

As a result of the Transaction, the Company recorded net tangible assets of approximately $871 million, excluding long-term borrowings, primarily consisting of property, plant and equipment, which mainly relate 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 as a result of the Transaction. See Note 6—Borrowings.

In addition, the Company recorded approximately $0.9 billion of intangible assets of which $468 million has been allocated to subscriber relationships with a weighted-average useful life of 10 years, $270 million has been allocated to the tradenames which have an indefinite life and approximately $123 million has been allocated to advertiser relationships with a weighted-average useful life of 15 years. In accordance with ASC 350, the excess of the purchase price over the fair values of the net tangible and intangible assets of approximately $1.6 billion was recorded as goodwill on the transaction.

As a result of the Transaction, the Company recognized a $337 million loss in Other, net in the fourth quarter of fiscal 2018, primarily related 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.

NOTE 4.3. IMPAIRMENT AND RESTRUCTURING CHARGES

Fiscal 2020
During the three months ended December 31, 2019,

the Company recognized a

non-cash
impairment charge of
$19 million
related to a reporting unit in the News and Information Services segment.
10
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
During the six months ended December 31, 2019, the Company recognized
non-cash
impairment charges of $292 million, primarily related to the impairment of goodwill and indefinite-lived intangible assets at the News America Marketing reporting unit. As a result of the Company’s continued 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 a $122 million
non-cash
impairment charge to goodwill and a $113 million
non-cash
impairment charge to intangible assets. The assumptions utilized in the income approach valuation method for News America Marketing were
discount rates (ranging from
17.0%-18.5%)
and long-term growth rates (ranging from
0.6%-1.5%).
During the three and ninesix months ended MarchDecember 31, 2019, the Company recorded restructuring charges of $25$10 million and $62$34 million, respectively, of which $23$7 million and $55$26 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in fiscal 2020 were for employee termination benefits.
Fiscal 2019
During the three and six months ended December 31, 2018, the Company recorded restructuring charges of $19 million and $37 million, respectively, of which $15 million and $32 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in fiscal 2019 were for employee termination benefits.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2018

During the three and nine months ended March 31, 2018, the Company recorded restructuring charges of $21 million and $48 million, respectively, of which $13 million and $38 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in fiscal 2018 were primarily for employee termination benefits.

During the three and nine months ended March 31, 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.

The Company recognized a $165 millionnon-cash impairment of goodwill and indefinite-lived intangible assets at its News America Marketing reporting unit. Due to the impact of adverse trends on the future expected performance of the business, the Company revised its future outlook which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company determined that the fair value of the reporting unit was less than its carrying value. The assumptions 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%.

The Company recognized a $41 millionnon-cash impairment of goodwill at its FOX SPORTS Australia reporting unit. As a result of lower-than-expected revenues at Foxtel, the Company revised its future outlook for FOX SPORTS Australia 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. The assumptions 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 5—Investments.

Changes in restructuring program liabilities were as follows:

   For the three months ended March 31, 
   2019  2018 
   One time            One time          
   employee  Facility         employee  Facility       
   termination  related         termination  related       
   benefits  costs   Other costs  Total  benefits  costs  Other costs  Total 
   (in millions) 

Balance, beginning of period

  $20  $2   $11  $33  $22  $4  $10  $36 

Additions

   25   —    —   25   21   —   —   21 

Payments

   (17)   —    (1)   (18)   (22)   —   —   (22) 

Other

   —   —    —   —   3   —   —   3 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of period

  $28  $2   $10  $40  $24  $4  $10  $38 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   For the nine months ended March 31, 
   2019  2018 
   One time            One time          
   employee  Facility         employee  Facility       
   termination  related         termination  related       
   benefits  costs   Other costs  Total  benefits  costs  Other costs  Total 
   (in millions) 

Balance, beginning of period

  $29  $2   $11  $42  $33  $6  $10  $49 

Additions

   62   —    —   62   47   —   1   48 

Payments

   (61)   —    (2)   (63)   (60)   (1)   (1)   (62) 

Other

   (2)   —    1   (1)   4   (1)   —   3 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of period

  $28  $2   $10  $40  $24  $4  $10  $38 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
For the three months ended December 31,
 
 
2019
  
2018
 
 
One time
        
One time
       
 
employee
  
Facility
      
employee
  
Facility
     
 
termination
  
related
      
termination
  
related
     
 
benefits
  
costs
  
Other costs
  
Total
  
benefits
  
costs
  
Other costs
  
Total
 
 
(in millions)
 
Balance, beginning of period
 $
22
  $
—
  $
10
  $
32
  $
23
  $
2
  $
11
  $
36
 
Additions
  
10
   
—
   
—
   
10
   
19
   
—
   
—
   
19
 
Payments
  
(17
)  
—
   
(1
)   
(18
)  
(21
)  
—
   
—
   
(21
)
Other
  
1
   
—
   
—
   
1
   
(1
)  
—
   
—
   
(1
)
                                 
Balance, end of period
 $
16
  $
—
  $
9
  $
25
  $
20
  $
2
  $
11
  $
33
 
                                 

 
For the six months ended December 31,
 
 
2019
  
2018
 
 
One time
 
 
 
 
 
 
 
 
One time
 
 
 
 
 
 
 
 
employee
 
 
Facility
 
 
 
 
 
 
employee
 
 
Facility
 
 
 
 
 
 
termination
 
 
related
 
 
 
 
 
 
termination
 
 
related
 
 
 
 
 
 
benefits
 
 
costs
 
 
Other costs
 
 
Total
 
 
benefits
 
��
costs
 
 
Other costs
 
 
Total
 
 
(in millions)
 
Balance, beginning of period
 $
28
  $
2
  $
10
  $
40
  $
29
  $
2
  $
11
  $
42
 
Additions
  
34
   
—
   
—
   
34
   
37
   
—
   
—
   
37
 
Payments
  
(46
)  
—
   
(1
)  
(47
)  
(44
)  
—
   
(1
)  
(45
)
Other
  
—
   
(2
)  
—
   
(2
)  
(2
)  
—
   
1
   
(1
)
                                 
Balance, end of period
 $
16
  $
 —
  $
9
  $
25
  $
20
  $
2
  $
11
  $
33
 
                                 
As of December 31, 2019, restructuring liabilities of approximately $16 million were included in the Balance Sheet in Other current liabilities and $9 million were included in Other
non-current
liabilities.
11
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2019, restructuring liabilities of approximately $30 million were included in the Balance Sheets in Other current liabilities and $10 million were included in Othernon-current liabilities.

NOTE 5.
4
. INVESTMENTS

The Company’s investments were comprised of the following:

   Ownership         
   Percentage   As of   As of 
   as of March 31,   March 31,   June 30, 
   2019   2019   2018 
       (in millions) 

Equity method investments(a)

   various   $160   $173 

Equity securities(b)

   various    187    220 
    

 

 

   

 

 

 

Total Investments

    $347   $393 
    

 

 

   

 

 

 

 
Ownership
Percentage
as of December 31,
2019
  
As of
December 31,
2019
  
As of
June 30,
2019
 
   
(in millions)
 
Equity method investments
(a)
  
various
  $
139
  $
148
 
Equity securities
(b)
  
various
   
186
   
187
 
             
Total Investments
    $
325
  $
335
 
             
(a)

Equity method investments are primarily comprised of new Foxtel’s investment in Nickelodeon Australia Joint Venture and Elara Technologies Pte. Ltd. (“Elara”), which operates PropTiger.com, Makaan.com.Makaan.com and Housing.com.

(b)

Equity securities are primarily comprised of certain investments in China and the Company’s investment in HT&E Limited, which operates a portfolio of Australian radio and outdoor media assets.

The Company 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 same issuer. The components comprising total gains and losses on equity securities are set forth below:

   For the three months
ended March 31,		   For the nine months
ended March 31,		 
   2019   2018   2019  2018 
   (in millions)   (in millions) 

Total gains (losses) recognized on equity securities

  $6   $30   $(23)  $13 

Less: Net gains recognized on equity securities sold or impaired

   —    29    —   5 
  

 

 

   

 

 

   

 

 

  

 

 

 

Unrealized gains (losses) recognized on equity securities held at end of period

  $6   $1   $(23)  $8 
  

 

 

   

 

 

   

 

 

  

 

 

 

 
For the three months
ended 
December 31,
  
For the six months
ended 
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
 
(in millions)
  
(in millions)
 
Total losses recognized on equity securities
 $
 (6
)  $
(44
) $
 (5
)  $
(29
)
Less: Net gains recognized on equity securities sold
  
—
   
—
   
—
   
—
 
                 
Unrealized losses recognized on equity securities held at end of period
 $
 (6
)  $
(44
) $
 (5
)  $
(29
)
                 

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Equity Losses of Affiliates

The Company’s share of the losses of its equity affiliates was as follows:

   For the three months ended
March 31,		  For the nine months ended
March 31,		 
   2019  2018  2019  2018 
   (in millions)  (in millions) 

Foxtel(a)

  $—  $(970)  $—  $(974) 

Other equity affiliates, net(b)

   (4)   (4)   (13)   (28) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Equity losses of affiliates

  $(4)  $(974)  $(13)  $(1,002) 
  

 

 

  

 

 

  

 

 

  

 

 

 

(a)

Following completion of the Transaction in April 2018, News Corp 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.

During the three$3 million and nine months ended March 31, 2018, the Company recognized a $957$5 millionnon-cash write-down of the carrying value of its investment in Foxtel. In the third quarter of fiscal 2018, the Company assessed the long-term prospects for Foxtel, on both a stand-alone and combined basis. As a result of lower-than-expected revenues from certain 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%. The write-down was reflected in Equity losses of affiliates in the Statements of Operations for the three and ninesix months ended MarchDecember 31, 2018.

In accordance with ASC 350, the Company amortized $172019, respectively, and $6 million and $49$9 million, related to excess cost over

respe
ctively
,
for the Company’s proportionate sharecorresponding periods of its investment’s underlying net assets allocated to finite-lived intangible assets during the three and nine months ended March 31, 2018, respectively. Such amortization was reflected in Equity lossesfiscal 2019.
12
Table of affiliates in the Statement of Operations.

(b)

Other equity affiliates, net for the three and nine months ended March 31, 2019 include losses primarily from the Company’s interest in Elara. During the nine months ended March 31, 2018, the Company recognized $13 million innon-cash write-downs of certain equity method investments’ carrying values. The write-downs were reflected in Equity losses of affiliates in the Statements of Operations for the nine months ended March 31, 2018.

Summarized financial information for Foxtel, presented in accordance with U.S. GAAP, was as follows:

   For the nine
months ended
March 31,		 
   2018 
   (in millions) 

Revenues

  $1,818 

Operating income(a)

   155 

Net income

   64 

(a)

Includes Depreciation and amortization of $187 million for the nine months ended March 31, 2018. Operating income before depreciation and amortization was $342 million for the nine months ended March 31, 2018.

Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.
5
. BORROWINGS

The Company’s total borrowings consist of the following:

   Interest rate at
March 31, 2019		  Due date at
March 31, 2019		   As of
March 31,
2019		  As of
June 30,
2018		 
          (in millions) 

Foxtel Group

      

Credit facility 2013(a)(b)

   3.55%   Apr 7, 2019   $—  $222 

Credit facility 2014 — tranche 1(a)

   3.55%   May 30, 2019    142   148 

Credit facility 2014 — tranche 2(a)

   3.65%   Jan 31, 2020    142   148 

Credit facility 2015(a)

   3.70%   Jul 31, 2020    284   296 

Credit facility 2016(a)(c)

   4.25%   Sept 11, 2021    53   108 

Working capital facility 2017(a)(c)

   3.85%   Jul 3, 2020    57   59 

US private placement 2009 — tranche 3

   6.20%   Sept 24, 2019    74   75 

US private placement 2012 — USD portion — tranche 1(d)

   3.68%   Jul 25, 2019    150   150 

US private placement 2012 — USD portion — tranche 2(d)

   4.27%   Jul 25, 2022    198   196 

US private placement 2012 — USD portion — tranche 3(d)

   4.42%   Jul 25, 2024    148   146 

US private placement 2012 — AUD portion

   7.04%   Jul 25, 2022    78   83 

REA Group

      

Credit facility 2016 — tranche 2(e)(f)

   —   Dec 31, 2018    —   89 

Credit facility 2016 — tranche 3(e)(f)

   3.01%   Dec 31, 2019    170   178 

Credit facility 2018(e)

   2.71%   Apr 27, 2021    50   54 
     

 

 

  

 

 

 

Total borrowings

      1,546   1,952 

Less: current portion(g)

      (678)   (462) 
     

 

 

  

 

 

 

Long-term borrowings

     $868  $1,490 
     

 

 

  

 

 

 

foll
o
wing:
 
Interest rate
at
December 31,
2019
  
Maturity at

December 31,
2019
  
As of
December 31,
2019
  
As of
June 30,
2019
 
     
(in millions)
 
Foxtel Group
            
Credit facility 2014 — tranche 2
(a)
  
—
   
Jan 31, 2020
  $
—
  $
56
 
Credit facility 2015
(a)
  
—
   
Jul 31, 2020
   
—
   
281
 
Credit facility 2016
(a)
  
—
   
Sept 11, 2021
   
—
   
193
 
Credit facility 2019
(b)
 
(c)
 
   3.94%  
Nov 22, 2022
   
425
   
—
 
Term loan facility 2019
(d)
 
   6.25%  
Nov 22, 2024
   
174
   
—
 
Working capital facility 201
7
 
(a) (c)
 
(e)
 
(f)
  
3.90
%  
Nov 22, 2022
   
12
   
56
 
US private placement 2009 — tranche 3
(
g
)
  
—
   
Sept 24, 2019
   
—
   
75
 
US private placement 2012 — USD portion — tranche 1
(
g
)
  
—
   
Jul 25, 2019
   
—
   
150
 
US private placement 2012 — USD portion — tranche 2
(
h
)
  
4.27
%  
Jul 25, 2022
   
199
   
199
 
US private placement 2012 — USD portion — tranche 3
(
h
)
  
4.42
%  
Jul 25, 2024
   
148
   
149
 
US private placement 2012 — AUD portion
  
7.04
%  
Jul 25, 2022
   
75
   
77
 
REA Group
            
Credit facility 2016 — tranche 3
(
i
)
  
—
   
Dec 31, 2019
   
—
   
168
 
Credit facility 2018
(
j
)
  
1.93
%  
Apr 27, 2021
   
49
   
49
 
Credit facility 2019
(j)
 
(k)
 
  1.95%  
Dec 2, 2021
    119   — 
Total borrowings
        
1,201
   
1,453
 
Less: current portion
(
l
)
        
—
   
(449​​​​​​​
)
                 
Long-term borrowings
       $
1,201
  $
1,004
 
                 
(a)

During November 2019, certain subsidiaries of NXE Australia Pty Limited (“Foxtel” and together with such subsidiaries, the “Foxtel Debt Group”) repaid the outstanding borrowings under these facilities using a combination of new indebtedness and an
A$200 million shareholder loan provided by the Company.
(b)
During November 2019, the Foxtel Debt Group entered into an A$610 million revolving credit facility maturing in November 2022 (the “2019
Credit
Facility”).
(c)
Borrowings under these facilities bear interest at a floating rate of
the
Australian BBSY plus an applicable margin of between 1.10%
2.00% and 2.70% 3.75%
per annum payable quarterly.

(b)

Duringdepending on the three and nine months ended MarchFoxtel Debt Group’s net leverage ratio. As of December 31, 2019, the Foxtel Debt Group repaid its A$300was paying a margin of 3.00% on drawn amounts under these facilities.

(d)
During November 2019,
the Foxtel Debt Group entered into an A
$250 million (approximately $216 million)
term loan facility maturing in AprilNovember 2024 (the “2019 Term Loan Facility”). Borrowings under the 2019 using A$300Term Loan Facility bear interest at a fixed rate of
6.25%
 per annum.
(e)
During November 2019, the Foxtel Debt Group amended its 2017 Working Capital Facility which, among other things, extended the remaining term to three years, decreased the capacity under the facility from A
$100
 million of shareholder loans provided byto
A
$40 
million and increased the Company.

applicable margin.
(c)
(f)

As of MarchDecember 31, 2019, the Foxtel Debt Group has undrawn commitments of $241$11 million under these facilitiesthis facility for which it pays a commitment fee in the range of 40% to 45% of the applicable margin.

(g)
During the first quarter of fiscal 2020, the Foxtel Debt Group repaid $
150 
million aggregate principal amount of senior unsecured notes which matured in July 2019 and $
75
 million aggregate principal amount of senior unsecured notes which matured in September 2019.
(d)
(h)

The carrying valuevalues of the borrowings include any fair value adjustments related to the Company’s fair value hedges. See Note 98 —Financial Instruments and Fair Value Measurements.

(i)
During December
2019, REA Group repaid the final A$
240
 million tranche of its A$
480
million revolving loan facility using a combination of cash on hand and new indebtedness.
13
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(e)(j)

Borrowings under these facilities bear interest at a floating rate of the Australian BBSY plus a margin of between 0.85% and 1.45%1.40% depending on REA Group’s net leverage ratio. As of MarchDecember 31, 2019, REA Group was paying a margin of between 0.85% and 1.05%.

on drawn amounts under these facilities.
(f)
(k)

During the nine months ended March 31,December 2019, REA Group repaidentered into an A$120170 million (approximately $87 million) of the A$480 millionunsecured syndicated revolving loan facility. Remaining borrowings under facility maturing in
December
20
21
(the facility of A$240 million (approximately $170 million) will mature in fiscal 2020.

“2019 REA Group
Credit
Facility”).
(g)
(l)

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.
“Debt.”

Foxtel Group Borrowings
In November 2019, the Foxtel Debt Group completed a debt refinancing resulting in the repayment of A$1.1 billion of
debt
capacity
consisting of
its A$
200
 million credit facility maturing in January 2020, its A$400 million credit facility maturing in July 2020, its A$400 million credit facility maturing in September 2021 and amounts outstanding under the 2017 Working Capital Facility. The repayments were funded with approximately A$1.1 billion of new facilities which included proceeds from the 2019 Credit Facility, the 2019 Term Loan Facility and an A$200 million shareholder loan
from
the Company. In addition, the Foxtel Debt Group amended its 2017 Working Capital Facility which, among other things, extended the remaining term to three years, decreased the capacity under the facility from A$100 million to A$40 million and increased the applicable margin.
Borrowings under the 2019 Credit Facility bear 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 and carry a commitment fee of 45% of the applicable margin on any undrawn balance. Borrowings under the 2019 Term Loan Facility bear interest at a fixed rate of 6.25%. As of December 31, 2019, the Foxtel Debt Group had drawn down the full A$610 million available under the 2019 Credit Facility and A$250 million available under the 2019 Term Loan Facility.
The agreements governing the 2019 Credit Facility and 2019 Term Loan Facility contain customary affirmative and negative covenants and events of default, with customary exceptions, including covenants restricting or prohibiting members of the Foxtel Debt Group from, among other things, undertaking certain transactions, disposing of certain properties or assets, merging or consolidating with any other person, making financial accommodation available, giving guarantees, creating or permitting certain liens and undergoing fundamental business changes. In addition, the agreements
require the Foxtel Debt Group to maintain a ratio of net debt to Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”), as adjusted under the applicable agreements, of not more than 3.75 to 1.0 for fiscal 2020, not more than 3.50 to 1.0 for fiscal 2021 and not more than 3.25 to 1.0 for fiscal 2022 and thereafter. The 2019 Credit Facility and the 2019 Term Loan Facility require the Foxtel Debt Group to maintain a net interest coverage ratio of not less than 3.5 to
1.0. Borrowings under the 2019 Credit Facility and 2019 Term Loan Facility are only guaranteed by the members of the Foxtel Debt Group, and there are no assets pledged as collateral for any of the borrowings.
In February
2020, the Foxtel Debt Group entered into a subordinated shareholder loan facility agreement (the “Telstra Facility”) with Telstra, an Australian Securities Exchange (“ASX”)-listed telecommunications company which owns a 35% interest in Foxtel. The Telstra Facility provides Foxtel with up to A$170 million that can be used to finance cable transmission costs due to Telstra under a services arrangement between Foxtel and Telstra. The Telstra Facility bears interest at a variable rate of the Australian BBSY plus an applicable margin of 7.75% and matures in December 2027. The terms of the Telstra Facility allow for the capitalization of accrued interest to the principal outstanding.
REA Group Facilities
In December 2019, REA Group completed a debt refinancing
in which it repaid
the final A$240 million tranche of its A$480
million revolving loan facility with the proceeds of the new 2019 REA Group Credit Facility and cash on hand. Borrowings under the 2019 REA Group Credit Facility bear interest at a floating rate of the Australian BBSY plus a margin of
 between 0.85% and 1.30% depending on REA Group’s net leverage ratio and carry a commitment fee of 40% of the applicable margin on any undrawn balance. As of December 31, 2019, REA Group had drawn down the full A$170 million available under the 2019 REA Group
 Cred
it
 Facility.
The 2019 REA Group
Cre
dit
Facility requires REA Group to maintain a net leverage ratio of not more than
3.25
to 1.0 and a net interest coverage ratio of not less than
3.0
to 1.0.
14
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. REDEEMABLE PREFERRED STOCK

News Corp Revolving Credit Facility
In connection withDecember 2019, the Company terminated its existing unsecured $650 million revolving credit facility, and entered into a new credit agreement (the “2019 Credit Agreement”) which provides for an unsecured $750 million revolving credit facility (the “2019 News Corp
Cred
it
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 facility up to a maximum amount of $1 billion. The lenders’ commitments to make the 2019 News Corp
 Credit
Facility available terminate on
December 12, 2024
,
and
the Company may request that the commitments be extended under certain circumstances for up to two 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 separationadjusted operating income
net
leverage ratio. As of December 31, 2019, the Company was paying a commitment fee of 0.20% on any undrawn balance and an applicable margin of 0.375% for a Base Rate borrowing and 1.375% for a Eurodollar Rate borrowing. As of December 31, 2019, the Company has
0
t borrowed any funds under the 2019 News Corp 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 the 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 businesses (the “Separation”) from Twenty-First Century Fox, Inc. (“21st Century Fox”) assets or all or substantially all of the stock of 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 a net interest coverage ratio of not less than 3.0 to 1.0.
Covenants
The Company’s borrowings 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 such covenants at December 31, 2019.
NOTE 6. LEASES
On July 1, 2019, the Company adopted ASU
2016-02
on June 28, 2013 (the “Distribution Date”), 21st Century Fox sold 4,000 sharesa modified retrospective basis and recognized a $9 million cumulative-effect adjustment to the opening balance of cumulative redeemable preferred stock withAccumulated deficit related to previous sale leaseback transactions. ASU
2016-02
requires lessees to recognize all operating leases on the balance sheet by recording a parlease liability and a
right-of-use
asset. The lease liability represents the present value of $5,000 per share ofthe Company’s lease obligations over the lease term. The discount rate used was calculated using the Company’s incremental borrowing rate (“IBR”) which represents the interest rate at which the Company would be expected to borrow an amount equal to the lease payments on a newly formed U.S. subsidiarysecured basis over a similar term. To derive the IBR, the Company utilizes unsecured borrowing rates and adjusts those rates using the notching method to approximate a collateralized rate. Further adjustments are made to reflect the primary geographies in which the Company operates. The
right-of-use
asset represents the Company’s right to use, or control the use of, the Company.underlying asset for the lease term at lease commencement. The preferred stock paid dividendsCompany recorded operating lease
right-of-use
assets, current operating lease liabilities and noncurrent operating lease liabilities for its operating leases of approximately $1.4 billion, $0.2 billion and $1.4 billion, respectively, on July 1, 2019.
The Company assesses whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a ratelease that is accounted for separately, the classification and initial measurement of 9.5% per annum, payable quarterly,the
right-of-use
asset and lease liability is determined at lease commencement, which is the date the underlying asset becomes available for use. The Company recognized the current and noncurrent portion of its lease liabilities within Other current liabilities and Operating lease liabilities, respectively, and its
right-of-use
assets within Operating lease
right-of-use
assets in arrears. The preferred stock was callable byits Balance Sheet.
Rent expense is recognized for operating leases on a straight-line basis over the Company at any time afterlease term. Such amounts are presented within either Selling, general and administrative or Operating expenses in the fifth year and puttable atStatement of Operations based on the optionnature of the holder after 10 years. In July 2018,lease. Variable lease payments are expensed in the Company exercised its call optionperiod incurred. The Company’s variable lease payments consist of payments dependent on various external indicators, including common area maintenance, real estate taxes and redeemed 100%utility charges.
15
Table of the outstanding redeemable preferred stock.

Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company applied the package of practical expedients permitted under ASU
2016-02
transition guidance. Accordingly, the Company did not reassess: (1) whether an expired or existing contract is a lease or contains an embedded lease; (2) lease classification of an expired or existing lease; (3) capitalization of initial direct costs for an expired or existing lease; (4) existing land easements for lease accounting treatment.
In addition, the Company elected
to apply
the short term lease exemption to not record leases on the Balance Sheet that have a term of 12 months or less and do not contain purchase options reasonably certain of being exercised. The Company recognizes rent expense related to these leases on a straight-line basis over the lease term.
In circumstances where the Company is the lessee, the Company elected to account for lease and
non-lease
components as a single lease component for all asset classes. Additionally, the Company has contracts that contain customer premise equipment (i.e.,
set-top
units) for which we apply the lessor lease and
non-lease
component practical expedient and account for lease components and
non-lease
components (e.g., service revenue) as a single performance obligation pursuant to ASU
2014-09.
The Company applies this practical expedient when the lease component would be classified as an operating lease, if accounted for separately, and the service revenue component is the predominant component in the arrangement.
Summary of leases
The Company primarily leases real estate, including office space, warehouse space and printing facilities. It also leases satellite transponders for purposes of providing its subscription video service to consumers. These leases 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 lease term assessment until the Company is reasonably certain that the option will be exercised.
Certain of the 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 total lease cost for operating leases included in the Statement of Operations was as follows:
   
For the
three months ended
December 31,
  
For the
six months ended
December 31,
 
 
Income Statement Location
  
2019
  
2019
 
   
(in millions)
 
Operating lease costs
  
Selling, general and administrative
  $
51
  $
99
 
Operating lease costs
  
Operating expenses
   
3
   
6
 
Short term lease costs
  
Operating expenses
   
3
   
5
 
Variable lease costs
  
Selling, general and administrative
   
10
   
19
 
             
Total lease costs
    $
67
  $
129
 
             
16
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Additional information related to the Company’s operating leases under ASU
2016-02:
 
As of 
December 31, 2019
 
Weighted-average remaining lease term
  
11.3 years
 
Weighted-average incremental borrowing rate
  
3.25
%
    
 
For the
six months ended
December 31,
 
 
2019
 
 
(in millions)
 
Cash paid
 
-
 
Operating lease liabilities
 $
116
 
Operating lease
right-of-use
asset obtained in exchange for operating lease liabilities
 $
225
 
Future minimum lease payments under
non-cancellable
leases as of December 31, 2019 are as follows:
 
As of
December 31, 2019
 
 
(in millions)
 
Fiscal 2020 (six months remaining)
 $
119
 
Fiscal 2021
  
207
 
Fiscal 2022
  
206
 
Fiscal 2023
  
193
 
Fiscal 2024
  
177
 
Thereafter
  
968
 
     
Total future minimum lease payments
  
1,870
 
Less: interest
  
344
 
     
Present value of minimum payments
 $
1,526
 
     
17
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8.
7
. EQUITY

The following tables summarize changes in equity for the three and ninesix months ended MarchDecember 31, 2019 and 2018:

   For the three months ended March 31, 2019 
                         Accumulated          
   Class A   Class B   Additional     Other  Total News       
   Common Stock   Common Stock   Paid-in  Accumulated  Comprehensive  Corporation  Noncontrolling  Total 
   Shares   Amount   Shares   Amount   Capital  Deficit  Loss  Equity  Interests  Equity 
   (in millions) 

Balance, December 31, 2018

   385   $4    200   $2   $12,271  $(1,937)  $(1,076)  $9,264  $1,170  $10,434 

Net income

   —    —    —    —    —   10   —   10   13   23 

Other comprehensive income

   —    —    —    —    —   —   57   57   10   67 

Dividends

   —    —    —    —    (58)   —   —   (58)   (20)   (78) 

Other

   —    —    —    —    16   —   —   16   (4)   12 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2019

   385   $4    200   $2   $12,229  $(1,927)  $(1,019)  $9,289  $1,169  $10,458 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   For the three months ended March 31, 2018 
                         Accumulated          
   Class A   Class B   Additional     Other  Total News       
   Common Stock   Common Stock   Paid-in  Accumulated  Comprehensive  Corporation  Noncontrolling  Total 
   Shares   Amount   Shares   Amount   Capital  Deficit  Loss  Equity  Interests  Equity 
   (in millions) 

Balance, December 31, 2017

   383   $4    200   $2   $12,350  $(664)  $(832)  $10,860  $298  $11,158 

Net (loss) income

   —    —    —    —    —   (1,128)   —   (1,128)   18   (1,110) 

Other comprehensive income (loss)

   —    —    —    —    —   —   3   3   (2)   1 

Dividends

   —    —    —    —    (59)   —   —   (59)   (19)   (78) 

Other

   —    —    —    —    19   —   —   19   1   20 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2018

   383   $4    200   $2   $12,310  $(1,792)  $(829)  $9,695  $296  $9,991 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                                         
 
 
For the three months ended December 31, 2019
 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
Accumulated
  
 
  
 
  
 
 
 
 
Class A
  
Class B
  
Additional
  
 
  
Other
  
Total
  
 
  
 
 
 
 
Common Stock
  
Common Stock
  
Paid-in
  
Accumulated
  
Comprehensive
  
News Corp
  
Non-controlling
  
Total
 
 
 
Shares
  
Amount
  
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
  
Equity
  
Interests
  
Equity
 
 
 
(in millions)
 
Balance, September 30,
2019		  388  $4   200  $2  $ 12,174  $ (2,200)  $ (1,266)  $ 8,714  $ 1,115  $ 9,829 
Net income  —   —   —   —   —   85   —   85   18   103 
Other comprehensive
income
  —   —   —   —   —   —   150   150   36   186 
Dividends  —   —   —   —   —   —   —   —   —   — 
Other  1   —   —   —   9   1   (1)   9   —   9 
Balance, December 31, 2019  389  $ 4   200  $ 2  $ 12,183  $ (2,114)  $ (1,117)  $ 8,958  $ 1,169  $ 10,127 
    
 
 
For the three months ended December 31, 2018
 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
Accumulated
  
 
  
 
  
 
 
 
 
Class A
  
Class B
  
Additional
  
 
  
Other
  
Total
  
 
  
 
 
 
 
Common Stock
  
Common Stock
  
Paid-in
  
Accumulated
  
Comprehensive
  
News Corp
  
Non-controlling
  
Total
 
 
 
Shares
  
Amount
  
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
  
Equity
  
Interests
  
Equity
 
 
 
(in millions)
 
Balance, September 30, 2018  385  $4   200  $2  $12,257  $(2,032) $(970) $9,261  $1,169  $10,430 
Net income  —   —   —   —   —   
95
   —   95   24   119 
Other comprehensive loss  —   —   —   —   —   —   
(106
)  
(106
)  
(28
)  
(134
)
Dividends  —   —   —   —   —   —   —   —   —   — 
Other  —   —   —   —   14   —   —   14   5   19 
Balance, December 31, 2018  385  $4   200  $2  $12,271  $(1,937) $(1,076) $9,264  $1,170  $10,434 
1
8
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

   For the nine months ended March 31, 2019 
                         Accumulated          
   Class A   Class B   Additional     Other  Total News       
   Common Stock   Common Stock   Paid-in  Accumulated  Comprehensive  Corporation  Noncontrolling  Total 
   Shares   Amount   Shares   Amount   Capital  Deficit  Loss  Equity  Interests  Equity 
   (in millions) 

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

   —    —    —    —    —   206   —   206   64   270 

Other comprehensive loss

   —    —    —    —    —   —   (124)   (124)   (46)   (170) 

Dividends

   —    —    —    —    (117)   —   —   (117)   (43)   (160) 

Other

   2    —    —    —    24   (2)   1   23   (2)   21 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2019

   385   $4    200   $2   $12,229  $(1,927)  $(1,019)  $9,289  $1,169  $10,458 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   For the nine months ended March 31, 2018 
                         Accumulated          
   Class A   Class B   Additional     Other  Total News       
   Common Stock   Common Stock   Paid-in  Accumulated  Comprehensive  Corporation  Noncontrolling  Total 
   Shares   Amount   Shares   Amount   Capital  Deficit  Loss  Equity  Interests  Equity 
   (in millions) 

Balance, June 30, 2017

   382   $4    200   $2   $12,395  $(648)  $(964)  $10,789  $284  $11,073 

Net (loss) income

   —    —    —    —    —   (1,143)   —   (1,143)   54   (1,089) 

Other comprehensive income

   —    —    —    —    —   —   135   135   1   136 

Dividends

   —    —    —    —    (118)   —   —   (118)   (40)   (158) 

Other

   1    —    —    —    33   (1)   —   32   (3)   29 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2018

   383   $4    200   $2   $12,310  $(1,792)  $(829)  $9,695  $296  $9,991 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                                         
 
For the six months ended December 31, 2019
 
             
Accumulated
       
 
Class A
  
Class B
  
Additional
    
Other
  
Total
     
 
Common Stock
  
Common Stock
  
Paid-in
  
Accumulated
  
Comprehensive
  
News
Corp
  
Non
-
controlling
  
Total
 
 
Shares
  
Amount
  
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
  
Equity
  
Interests
  
Equity
 
 
(in millions)
 
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 standards
  
—
   
—
   
—
   
—
   
—
   
6
   
3
   
9
   
—
   
9
 
Net
(
loss
)
 
income
  
—
   
—
   
—
   
—
   
—
   
(142
)   
—
   
(142
)   
34
   
(108
) 
Other comprehensive
income (
loss
)
  
—
   
—
   
—
   
—
   
—
   
—
   
7
   
7
   
(9
)   
(2
) 
Dividends
  
—
   
—
   
—
   
—
   
(59
)   
—
   
—
   
(59
)   
(22
)   
(81
) 
Other
  
3
   
—
   
—
   
—
   
(1
)   
1
   
(1
)   
(1
)   
(1
)   
(2
) 
                                         
Balance, December 31, 2019
  
389
  $
 4
   
200
  $
 2
  $
 12,183
  $
 (2,114
)  $
 (1,117
)  $
 8,958
  $
 1,169
  $
 10,127
 
                                         
    
 
For the six months ended December 31, 2018
 
             
Accumulated
       
 
Class A
  
Class B
  
Additional
    
Other
  
Total
     
 
Common Stock
  
Common Stock
  
Paid-in
  
Accumulated
  
Comprehensive
  
News
Corp
  
Non
-
controlling
  
Total
 
 
Shares
  
Amount
  
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
  
Equity
  
Interests
  
Equity
 
 
(in millions)
 
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 standards
  
—
   
—
   
—
   
—
   
—
   
32
   
(22
)  
10
   
10
   
20
 
Net income
  
—
   
—
   
—
   
—
   
—
   
196
   
—
   
196
   
51
   
247
 
Other comprehensive
loss
  
—
   
—
   
—
   
—
   
—
   
—
   
(181
)  
(181
)  
(56
)  
(237
)
Dividends
  
—
   
—
   
—
   
—
   
(59
)  
—
   
—
   
(59
)  
(23
)  
(82
)
Other
  
2
   
—
   
—
   
—
   
8
   
(2
)  
1
   
7
   
2
   
9
 
                                         
Balance, December 31, 2018
  
385
  $
4
   
200
  $
2
  $
12,271
  $
(1,937
) $
(1,076
) $
9,264
  $
1,170
  $
10,434
 
                                         
1
9
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Stock Repurchases

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. NoNaN stock repurchases were made during the ninesix months ended MarchDecember 31, 2019.2019 and 2018. Through May 3, 2019,January 31, 2020, 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 May 3, 2019January 31, 2020 was approximately $429 million. All decisions regarding any future stock

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 0t purchase any of its Class B Common Stock during the six months ended December 31, 2019 and 2018.
Dividends

In FebruaryAugust 2019, 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 AprilOctober 16, 2019 to stockholders of record at the close on business on September 11, 2019. In August 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 October 17, 20192018 to stockholders of record at the close of business on March 13, 2019.September 12, 2018. 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 sets forth the cash dividend declared per share for the three and nine months ended March 31, 2019 and 2018:

   For the three months
ended March 31,		   For the nine months
ended March 31,		 
   2019   2018   2019   2018 

Cash dividend declared per share

  $0.10   $0.10   $0.20   $0.20 

NOTE 9.
8
. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

In accordance with ASC 820, “Fair Value Measurements” (“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.
•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 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In accordance with ASC 820, “Fair Value Measurements” (“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.
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.
Under ASC 820, certain assets and liabilities are required to be remeasured to fair value at the end of each reporting period.
20
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes those assets and liabilities measured at fair value on a recurring basis:

   As of March 31, 2019   As of June 30, 2018 
   Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 
   (in millions) 

Assets:

                

Foreign currency derivatives - cash flow hedges

  $—   $3   $—   $3   $—   $3   $—   $3 

Cross currency interest rate derivatives - fair value hedges

   —    27    —    27    —    29    —    29 

Cross currency interest rate derivatives - economic hedges

   —    12    —    12    —    10    —    10 

Cross currency interest rate derivatives - cash flow hedges

   —    107    —    107    —    76    —    76 

Equity securities(a)

   72    —    115    187    93    —    —    93 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $72   $149   $115   $336   $93   $118   $—   $211 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

                

Interest rate derivatives - cash flow hedges

  $—   $19   $—   $19   $—   $20   $—   $20 

Mandatorily redeemable noncontrolling interests

   —    —    12    12    —    —    12    12 

Cross currency interest rate derivatives - cash flow hedges

   —    15    —    15    —    12    —    12 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $—   $34   $12   $46   $—   $32   $12   $44 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

                                 
 
As of December 31, 2019
  
As of June 30, 2019
 
 
Level 1
  
Level 2
  
Level 3
  
Total
  
Level 1
  
Level 2
  
Level 3
  
Total
 
 
(in millions)
 
Assets:
                        
Foreign currency derivatives - cash flow hedges
 $
 —
  $
 —
  $
 —
  $
 —
  $
 —
  $
1
  $
 —
  $
1
 
Cross currency interest rate derivatives - fair value hedges
  
—
   
21
   
—
   
21
   
—
   
29
   
—
   
29
 
Cross currency interest rate derivatives - economic hedges
  
—
   
—
   
—
   
—
   
—
   
12
   
—
   
12
 
Cross currency interest rate derivatives - cash flow hedges
  
—
   
82
   
—
   
82
   
—
   
116
   
—
   
116
 
Equity securities
(a)
  
77
   
—
   
109
   
186
   
74
   
—
   
113
   
187
 
                                 
Total assets
 $
 77
  $
 103
  $
 109
  $
289
  $
74
  $
158
  $
113
  $
345
 
                                 
Liabilities:
                        
Foreign currency derivatives - cash flow hedges
 
$
 
—  $2  $—  $
2
  $—  $—  $—  
$
— 
Interest rate derivatives - cash flow hedges
  
 —
   
 16
   
 —
   
 16
   
 —
   
20
   
 —
   
20
 
Mandatorily redeemable noncontrolling interests
  
—
   
—
   
—
   
—
   
—
   
—
   
11
   
11
 
Cross currency interest rate derivatives - cash flow hedges
  
—
   
17
   
—
   
17
   
—
   
18
   
—
   
18
 
                                 
Total liabilities
 $
 —
  $
 35
  $
 —
  $
 35
  $
 —
  $
38
  $
11
  $
49
 
                                 
(a)

See Note 5 —Investments.

4
—Investments.

There have been no transfers between levels of the fair value hierarchy during the periods presented.

Equity securities

The fair values of equity securities with quoted prices in active markets are determined based on the closing price at the end of each reporting period. These securities are classified as Level 1 in the fair value hierarchy outlined above. The fair values of equity securities without readily determinable fair market values are determined based on 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 same issuer. These securities are classified as Level 3 in the fair value hierarchy outlined above.

21
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A rollforward of the Company’s equity securities classified as Level 3 is as follows:

   For the nine months
ended March 31,		 
   2019 
   (in millions) 

Balance - beginning of period(a)

  $127 

Purchases

   7 

Sales

   (10) 

Foreign exchange and other

   (9) 
  

 

 

 

Balance - end of period

  $115 
  

 

 

 

 
For the six months ended December 31,
 
 
2019
 
 
2018
 
 
(in millions)
 
Balance - beginning of period
(a)
 $
 113
  
$
 
127
 
Purchases
  
1
   
6
 
Sales
  
—
   
(10
)
Measurement adjustments
  (3)  — 
Foreign exchange and other
  
(2
)   
(8
)
Balance - end of period
 $
109
  $
115
 
(a)

Includes impact from

As a result of the adoption of ASU2016-01. See Note 1—Description
2016-01
during the first quarter of Business and Basisfiscal 2019, the cumulative net unrealized gains (losses) for these investments contained within Accumulated other comprehensive loss were reclassified through Accumulated deficit as of Presentation.

July 1, 2018.

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 liabilities are based on the contractual payout formulas included in the acquisition agreements taking into account the expected performance of the business. Any remeasurements or accretion related to the Company’s mandatorily redeemable noncontrolling interests are recorded through Interest (expense) income,expense, net in the Statements of Operations. As the fair value does not rely on observable market inputs, the Company classifies these liabilities as Level 3 in the fair value hierarchy.

A rollforward of the Company’s mandatorily redeemable noncontrolling interest liabilities classified as Level 3 is as follows:

   For the nine months ended March 31, 
   2019  2018 
   (in millions) 

Balance - beginning of period

  $12  $79 

Additions

   —   12 

Accretion

   1   2 

Foreign exchange movements

   (1)   (1) 
  

 

 

  

 

 

 

Balance - end of period

  $12  $92 
  

 

 

  

 

 

 

 
For the six months ended December 31,
 
 
2019
  
2018
 
 
(in millions)
 
Balance - beginning of period
 $
12
  $
12
 
Payments
(a)
  
(11
)  
—
 
Other
  
(1
)  
—
 
         
Balance - end of period
 $
 —
  $
12
 
         
(a)In July 2019, REA Group acquired the remaining 19.7% interest in Smartline Home Loans Pty Limited for approximately $11 million, increasing REA Group’s ownership to 100%.
Derivative Instruments

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

interest rate risk: arising from fixed and floating rate Foxtel Debt Group borrowings.

2
2
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

Hedges are classified as current or
non-current
in the Balance Sheets based on their maturity dates. Refer to the table below for further details:

       Fair value as of 
   Balance Sheet Location   March 31, 2019  June 30, 2018 
       (in millions) 

Foreign currency derivatives - cash flow hedges

   Other current assets   $3  $3 

Cross currency interest rate derivatives - fair value hedges

   Other current assets    8   — 

Cross currency interest rate derivatives - economic hedges

   Other current assets    12   — 

Cross currency interest rate derivatives - cash flow hedges

   Other current assets    32   — 

Cross currency interest rate derivatives - fair value hedges

   Other non-current assets    19   29 

Cross currency interest rate derivatives - cash flow hedges

   Othernon-current assets    75   76 

Cross currency interest rate derivatives - economic hedges

   Othernon-current assets    —   10 

Interest rate derivatives - cash flow hedges

   Other current liabilities    (3)   — 

Interest rate derivatives - cash flow hedges

   Other non-current liabilities    (16)   (20) 

Cross currency interest rate derivatives - cash flow hedges

   Othernon-current liabilities    (15)   (12) 

 
Balance Sheet Location
  
As of
December 31,
2019
  
As of
June 30,
2019
 
   
(in millions)
 
Foreign currency derivatives - cash flow hedges
  
Other current assets
  $
—
  $
1
 
Cross currency interest rate derivatives - fair value hedges
  
Other current assets
   
—
   
8
 
Cross currency interest rate derivatives - economic hedges
  
Other current assets
   
—
   
12
 
Cross currency interest rate derivatives - cash flow hedges
  
Other current assets
   
—
   
33
 
Cross currency interest rate derivatives - fair value hedges
  
Other non-current assets
   
21
   
21
 
Cross currency interest rate derivatives - cash flow hedges
  
Other non-current assets
   
82
   
83
 
Foreign currency derivatives - cash flow hedges  Other current liabilities   
(2
)  — 
Interest rate derivatives - cash flow hedges
  
Other current liabilities
   
—
   
(2
)
Interest rate derivatives - cash flow hedges
  
Other non-current liabilities
   
(16
)   
(18
)
Cross currency interest rate derivatives - cash flow hedges
  
Other non-current liabilities
   
(17
)   
(18
)
Cash flow hedges

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 fees and future interest payments.

customer premise equipment.

The total notional value of foreign currency contract derivatives designated for hedging was $34$58 million as of MarchDecember 31, 2019. The maximum hedged term over which the Company is hedging exposure to foreign currency fluctuations is to June 2019.September 2020. As of March 31,
Dec
ember 3
1
, 2019, the Company estimates that
 approximately $3 
$
2
million of
net derivative gains
losses
related to its foreign currency contract derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

The total notional value of interest rate swap derivatives designated as cash flow hedges was approximately A$700300 million as of MarchDecember 31, 2019. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to September 2022. As of MarchDecember 31, 2019, the Company estimates that approximately $4 million
$
3
mi
l
lion of
net derivative gains related to its interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

The total notional value of the cross currency interest rate swaps that were designated as cash flow hedges was approximately A$400$280 million as of MarchDecember 31, 2019. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024. As of MarchDecember 31, 2019, the Company estimates that
 approximately $1
$
2
million of
net derivative gains related to its cross currency interest rate swap derivative cash flow hedges included in Accumulated other comprehensive loss will be reclassified into the Statement of Operations within the next 12 months.

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the impact that changes in the fair values of derivatives designated as cash flow hedges had on Accumulated other comprehensive loss and the Statement of Operations during the three and ninesix months ended March 31, 2019. The Company did not have any such hedges in the three and nine months ended March 31, 2018.

  

(Gain) loss recognized in

Accumulated

   

Gain (loss) reclassified from

Accumulated

     
  

Other Comprehensive Loss

for the three months ended

   Other Comprehensive Loss
for the three months ended		   Income statement 
  March 31,   March 31,   location 
  2019  2018   2019  2018     
  (in millions)     

Derivative instruments designated as cash flow hedges:

       

Foreign currency derivatives - cash flow hedges

 $2  $—   $—  $—    Operating expenses 

Cross currency interest rate derivatives - cash flow hedges

  9   —    (7)   —    Interest (expense) income, net 

Interest rate derivatives - cash flow hedges

  4   —    (2)   —    Interest (expense) income, net 
 

 

 

  

 

 

   

 

 

  

 

 

   

Total

 $15  $—   $(9)  $—   
 

 

 

  

 

 

   

 

 

  

 

 

   
  

(Gain) loss recognized in

Accumulated

   

Gain (loss) reclassified from

Accumulated

     
  

Other Comprehensive Loss

for the nine months ended

   

Other Comprehensive Loss

for the nine months ended

   Income statement 
  March 31,   March 31,   location 
  2019  2018   2019  2018     
  (in millions)     

Derivative instruments designated as cash flow hedges:

       

Foreign currency derivatives - cash flow hedges

 $(2)  $—   $2  $—    Operating expenses 

Cross currency interest rate derivatives - cash flow hedges

  (7)   —    5   —    Interest (expense) income, net 

Interest rate derivatives - cash flow hedges

  6   —    (6)   —    Interest (expense) income, net 
 

 

 

  

 

 

   

 

 

  

 

 

   

Total

 $(3)  $—   $1  $—   
 

 

 

  

 

 

   

 

 

  

 

 

   

During the three and nine months ended MarchDecember 31, 2019 and 2018.

 
Gain (loss) recognized in
Accumulated
  
(Gain) loss reclassified from
Accumulated
  
 
other comprehensive loss
for the three months ended
  
other comprehensive loss
for the three months ended
  
Income statement
 
December 31,
  
December 31,
  
location
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
(in millions)
  
Derivative instruments designated as cash flow hedges:
             
Foreign currency derivatives - cash flow hedges
 $
(1
) $
2
  $
 —
  $
(1
) 
Operating expenses
Cross currency interest rate derivatives - cash flow hedges
  
(13
)  
30
   
12
   
(26
) 
Interest expense, net
Interest rate derivatives - cash flow hedges
  
1
   
(1
)  
1
   
2
  
Interest expense, net
                   
Total
 $
(13
) $
31
  $
13
  $
(25
) 
                   
         
 
Gain (loss) recognized in
Accumulated
  
(Gain) loss reclassified from
Accumulated
  
 
o
ther
c
omprehensive
l
oss
for the six months ended
  
o
ther
c
omprehensive
l
oss
for the six months ended
  
Income statement
 
December 31,
  
December 31,
  
location
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
(in millions)
  
Derivative instruments designated as cash flow hedges:
             
Foreign currency derivatives - cash flow hedges
 $
(2
) $
4
  $
(2
) $
(2
) 
Operating expenses
Cross currency interest rate derivatives - cash flow hedges
  
(8
)  
16
   
3
   
(12
) 
Interest expense, net
Interest rate derivatives - cash flow hedges
  
(3
)
 
  
(2
)  
(5
)  
4
  
Interest expense, net
                   
Total
 $
(13
) $
18
  $
(4
) $
(10
) 
                   
Upon adoption of ASU
2017-12,
the amount recognizedCompany reclassified $5 million in the Statement of Operationsgains 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 was approximately $2 million and $3 million, respectively, andhedges. During the three months ended December 31, 2018, 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.

NEWS CORPORATION

NOTES TO THE UNAUDITED 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
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NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
hedged items are recognized in Other, net. As of MarchFor the six months ended December 31, 2019, such adjustments increased the carrying value of borrowings by approximately $3 million.

NaN.

The total notional value of the fair value hedges was approximately A$100$70 million as of MarchDecember 31, 2019. The maximum hedged term over which the Company is hedging exposure to variability in interest payments is to July 2024.

During the three and ninesix months ended MarchDecember 31, 2019 and 2018, the amount recognized in the Statement of Operations on derivative instruments designated as fair value hedges related to the ineffective portion was nilNaN 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 currency exchange and interest rate risk. These are referred to as economic hedges. The changes ineffect of fair value of economic hedges are immediately recognizedhedging relationships on hedged items in the Statement of Operations. The total notional value of these cross currency interest rate derivatives was $75 millionBalance Sheets as of MarchDecember 31, 2019, which relate to the U.S. private placement 2009 debt.

2019:

 
As of
 
 
December 31, 2019
 
 
(in millions)
 
Borrowings:
   
Carrying amount of hedged item
 $
68
 
Cumulative hedging adjustments included in the carrying amount
 
$
(3
)
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.

In

During the thirdfirst quarter of fiscal 2018,2020, the Company recognized a $957 million
non-cash write-down of the carrying value of its equity method investment in Foxtel from $1,588 million to $631 million. In the second quarter of fiscal 2018, the Company recognizednon-cash write-downs of certain equity method investments of approximately $13 million. The carrying value of these equity method investments decreased from $136 million to $123 million. See Note 5 – Investments.

In 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. The carrying value of goodwill at News America Marketing decreased from $301$122 million to $181NaN and the value of indefinite-lived intangible assets decreased from $308 million to $195 million. See Note 3 – Impairment and Restructuring Charges.
The Company did not recognize any write-downs on the carrying value of intangibleits assets decreased from $391 million to $346 million. See Note 4 – Impairment during the three
and Restructuring Charges.

In the third quarter of fiscal 2018, the Company recognized a $41 millionnon-cash impairment charge related to goodwill at the FOX SPORTS Australia reporting unit. The carrying value of goodwill at FOX SPORTS Australia decreased from $490 million to $449 million. See Note 4 – Impairment and Restructuring Charges.

six

months ended December 31, 201
8
.
Other Fair Value Measurements

As of MarchDecember 31, 2019, the carrying value of the Company’s outstanding borrowings approximates the fair valuevalue. The U.S. private placement borrowings are classified as
L
evel 2 and isthe remaining borrowings are classified as Level
L
evel 3 in the fair value hierarchy.

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10.9. EARNINGS (LOSS) PER SHARE

The following tables set forth the computation of basic and diluted earnings
 (loss)
 per share under ASC 260, “Earnings per Share”:

   For the three months
ended March 31,		  For the nine months
ended March 31,		 
   2019  2018  2019  2018 
   (in millions, except per share amounts) 

Net income (loss)

  $23  $(1,110)  $270  $(1,089) 

Less: Net income attributable to noncontrolling interests

   (13)   (18)   (64)   (54) 

Less: Redeemable preferred stock dividends(a)

   —   —   —   (1) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) available to News Corporation stockholders

  $10  $(1,128)  $206  $(1,144) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted-average number of shares of common stock outstanding - basic

   585.0   582.8   584.6   582.6 

Dilutive effect of equity awards(b)

   3.8   —   2.6   — 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted-average number of shares of common stock outstanding - diluted

   588.8   582.8   587.2   582.6 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) available to News Corporation stockholders per share - basic and diluted

  $0.02  $(1.94)  $0.35  $(1.96) 

 
For the three months
ended December 31,
  
For the six months
 
ended
December 31,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
(in millions, except per share amounts)
 
Net income (loss)
 $
103
  $
119
  $
(108
) $
247
 
Less: Net income attributable to noncontrolling interests
  
(18
)  
(24
)  
(34
)  
(51
)
Net income (loss) attributable to News Corporation stockholders
 $
85
  $
95
  $
(142
) $
196
 
Weighted-average number of shares of common stock outstanding - basic
  
588.2
   
584.9
   
587.4
   
584.4
 
Dilutive effect of equity awards
(a)
  
2.1
   
2.2
   
—
   
1.9
 
Weighted-average number of shares of common stock outstanding - diluted
  
590.3
   
587.1
   
587.4
   
586.3
 
Net income (loss) attributable to News Corporation stockholders per share - basic
 $
0.15
  $
0.16
  $
(0.24
) $
0.34
 
Net income (loss) attributable to News Corporation stockholders per share - diluted
 $
0.14
  $
0.16
  $
(0.24
) $
0.33
 
(a)

In connection with the Separation, 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. subsidiary of the Company. The preferred stock paid dividends at a rate of 9.5% per annum, payable quarterly, in arrears. The preferred stock was callable by the Company at any time after the fifth year and puttable at the option of the holder after 10 years. In July 2018, the Company exercised its call option and redeemed 100% of the outstanding redeemable preferred stock.

(b)

The dilutive impact of the Company’s performance stock units, restricted stock units and stock options has been excluded from the calculation of diluted loss per share for the three and ninesix months ended MarchDecember 31, 20182019 because their inclusion would have an antidilutive effect on the net loss per share.

NOTE 11. COMMITMENTS AND

Note 10. Commitments and CONTINGENCIES

Commitments

The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. As a result of the refinancing transactions that occurred during the three months ended December 31, 2019, the Company has presented its commitments associated with its borrowings and the related interest payments in the table below. See Note 5 —Borrowings. The Company’s remaining commitments as of MarchDecember 31, 2019 have not changed significantly from the disclosures included in the 20182019 Form
10-K.

 
As of December 31, 2019
 
 
Payments Due by Period
 
 
Total
 
 
Less than 1
year
 
 
1-3
 years
 
 
3-5
 years
 
 
More than
5
years
 
 
(in millions)
 
Borrowings
 $
1,199
  $
 —
  $
875
  $
324
  $
 —
 
Interest payments on borrowings
(a)
 
$
170
  
$
 
50
  
$
 
89
  
$
 
31
  
$
 
—
 
(a)
Reflects the Company’s expected future interest payments based on borrowings outstanding and interest rates applicable at December 31, 2019. Such outstanding amounts and rates are subject to change in future periods. See Note 5 —Borrowings.
26
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NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Contingencies

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 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
Insignia Systems, Inc.
On July 11, 2019, Insignia Systems, Inc. (“Insignia”) filed a complaint in the U.S. District Court for the District of Minnesota against News America Marketing FSI L.L.C. (“NAM FSI”), News America Marketing
In-Store
Services L.L.C. (“NAM
In-Store”)
and News Corporation (together, the “NAM Parties”) 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 August 14, 2019, the NAM Parties answered the complaint and asserted a counterclaim against Insignia for breach of contract, alleging that Insignia violated a prior settlement agreement between NAM
In-Store
and Insignia. The NAM Parties subsequently filed a motion seeking dismissal of the complaint on October 21, 2019. On November 11, 2019, Insignia filed an opposition to the NAM Parties’ motion and a cross-motion seeking dismissal of the counterclaim, which the NAM Parties opposed. The court held a hearing on the motion and cross-motion on January 14, 2020. 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.
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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Valassis Communications, Inc.

On November 8, 2013, Valassis Communications, Inc. (“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 News America Marketing FSI L.L.C., News America MarketingIn-Store Services L.L.C. and News Corporation (together, the “NAM Group”) alleging violations of federal and state antitrust laws and common law business torts.torts, including unfair competition. The complaint soughtseeks treble damages, injunctive relief and attorneys’ fees and costs. NAM
In-Store
and NAM FSI asserted a counterclaim against Valassis for unfair competition, alleging that Valassis has engaged in the same practices that it alleges to be
unfair. In November 2019, the parties agreed to discontinue the unfair competition claim and counterclaim.
On December 19, 2013, the NAM Group filed a motion to dismiss the complaint and on March 30, 2016, the District Court ordered thatdismissed 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,claims. On September 25, 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 orgranted 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 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 withwhich was granted in part and denied in part by the N.Y. District Court and on February 21, 2019, the N.Y. District Court granted the NAM Group’s motion in part and denied it in part.2019. The N.Y. District Court found that the NAM Group’s bidding practices were lawful but denied the NAM Group’sits motion with respect to claims arising out of certain other alleged contracting practices. ValassisIn addition, the N.Y. District Court also ceased to pursue itsdismissed Valassis’s claims relating to free-standing insert products, and those claims were dismissed. products. On December 20, 2019, at a final
pre-trial
conference, the N.Y. District Court granted the NAM Group’s motion to exclude the testimony of Valassis’s sole damages expert. Valassis filed a motion for clarification or
, in the alternative,
reconsideration of the N.Y. District Court’s ruling.
On February 6, 2020, the N.Y. District Court denied the motion for reconsideration but clarified that Valassis could seek the court’s permission to prove damages through evidence other than its expert’s excluded testimony. The N.Y. District Court has set a trial date of
June 1, 2020.
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 at
The 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,separation of the Company from Twenty-First Century Fox, Inc. (“21st Century Fox”) on June 28, 2013, 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 Datesuch 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 are 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 (benefit) related to the U.K. Newspaper Matters in Selling, general and administrative was $2
(
$
1
)
 million and $
4
 million for each of the three months ended March December 
31
,
2019
and
2018
, respectively, and
$
1
million
and 2018 and $8 million and ($38)$
6
 million for the ninesix months ended March December 
31
,
2019
and
2018
, respectively. As of March December 
31
,
2019
, the Company has provided for its best estimate estima
t
e
of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $54$58 million. The amount to be indemnified by FOX of approximately $51$60 million was recorded as a receivable in Other current assets on the Balance Sheet as of MarchDecember 31, 2019.
The net benefit(benefit) expense for the ninethree and six months ended MarchDecember 31, 20182019 reflects a $46$5 million impact from the reversal of a portion of the Company’s previously accrued liability and the corresponding receivable from 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.

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

Other

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 12.11. INCOME TAXES

At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. In addition, the effects of changes in enacted tax laws or rates or tax status are recognized in the interim period in which the change occurs.

For the three months ended MarchDecember 31, 2019, the Company recorded income tax expense of $7$52 million on
pre-tax
income of $30$155 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact of foreign operations which are subject to higher tax rates.
For the six months ended December 31, 2019, the Company recorded an income tax expense of $31 million on a
pre-tax
loss of $77 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The tax rate was impacted by the lower tax benefit recorded on the impairment of News America Marketing’s goodwill and indefinite-lived intangible assets, by valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and by the impact of foreign operations which are subject to higher tax rates.
For the three months ended December 31, 2018, the Company recorded income tax expense of $55 million on
pre-tax
income of $174 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

For the ninesix months ended MarchDecember 31, 2019,2018, the Company recorded income tax expense of $112$105 million on
pre-tax
income of $382$352 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

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%. The reduction of the U.S. corporate tax rate caused the Company to adjust its U.S. deferred tax assets and liabilities to the lower federal rate of 21% at the fiscal year ended June 30, 2018. The Tax Act also added many new provisions, including aone-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries (“transition tax”), 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 were completed in the second quarter of fiscal 2019. Although the Company believes the effects of the Tax Act have been appropriately recorded, it will continue to monitor, among other things, changes in interpretations of the Tax Act, any legislative action arising because of the Tax Act and any

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

changes in accounting standards for income taxes or related interpretations in response to the Tax Act. The Company intends to monitor and assess the impact of any future changes in legislative interpretations or standards and adjust its provision as new information becomes available. In accordance with SAB 118, the Company has made reasonable estimates related to (1) the remeasurement of its U.S. deferred tax balances for the reduction in the statutory 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 tax expense of $237 million associated with these items in the fiscal year ended June 30, 2018. In the second quarter of fiscal 2019, the Company determined that there were no material changes to the provisional amounts recorded as of June 30, 2018.

Management assesses available evidence to determine whether sufficient future taxable income will be generated to permit the use of existing 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. U.S
.
Federal, State and foreign jurisdictions may not be realized and therefore, a valuation allowance has been established against those tax assets.

For the three months ended March 31, 2018, the Company recorded income tax expense

2
9
Table of $3 million on apre-tax loss of $1,107 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 lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., and valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses.

For the nine months ended March 31, 2018, the Company recorded income tax expense of $292 million on apre-tax loss of $797 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 lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the tax charge resulting from the enactment of the Tax Act which caused an increase in income tax expense of $174 million.

Contents

NEWS CORPORATION
NOTES TO THE UNAUDITED 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 our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations by the Internal Revenue Service (“IRS”(the “IRS”), and various U.S. state and foreign jurisdictions. During the fiscal year ended June 30, 2018, the IRS commenced an audit of the Company for the
fiscal
year ended June 30, 2014. 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 itsour 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 Company paid gross income taxes of $107$69 million and $116$75 million during the ninesix months ended MarchDecember 31, 2019 and 2018, respectively, and received tax refunds of $17$3 million and $6$10 million, respectively.

NOTE 13.12. SEGMENT INFORMATION

The Company manages and reports its businesses in the following five5 segments:

•

News and InformationServices—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 Barron’s 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 andThe Sun on Sunday in the U.K. and theNew 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.

NEWS CORPORATION

NOTES TO THE UNAUDITED 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, an Australian Securities Exchange (“ASX”)-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. New Foxtel also operates Kayo Sports, a sports-only streaming service.

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 of
 The Wall Street Journal
 and Barron’s Group, which includes
 Barron’s
 and MarketWatch, the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance and Dow Jones Newswires, and its live journalism events. The Company also owns, among other publications,
 The Australian
,
 The Daily Telegraph, Herald Sun, The Courier Mail
 and
 The 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 in-store marketing products and services, home-delivered shopper media and digital marketing solutions, including Checkout 51’s mobile app, as well as Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency.
Subscription Video Services
—The Company’s Subscription
Video Services segment provides video sports, entertainment and news services to
 pay-TV
 subscribers and other commercial licensees, primarily via cable, satellite and internet distribution, and consists of (i) the Company’s 65% interest in Foxtel (with the remaining 35% interest in Foxtel held by Telstra, an ASX
-
listed telecommunications company) and (ii) Australian News Channel (“ANC”). Foxtel is the largest
 pay-TV
 provider in Australia, with nearly 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news. Foxtel offers the leading sports programming content in Australia, with broadcast rights to live sporting events including: National Rugby League, Australian Football League, Cricket Australia, the domestic football league, the Australian Rugby Union and various motorsports programming. Foxtel also operates Foxtel Now, an
 over-the-top,
 or OTT, service and Kayo, a sports-only OTT service.
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 mobile, podcasts and social media websites.

•

•
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, 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
and
Hillbilly 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 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.

30
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 ASX (ASX: REA). REA Group advertises property and property-related services on its websites and mobile apps across Australia and Asia, including Australia’s leading residential, commercial and share property websites, realestate.com.au, realcommercial.com.au, Flatmates.com.au and spacely.com.au, and property portals in 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 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 Connections
SM
 Plus and Advantage
SM
 Pro products as well as its Opcity performance-based product.performance and subscription-based services. Move also offers a number of professional software and services products, including Top Producer
®, FiveStreet®
and ListHub
TM
.

•

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.

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.
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. 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).

3
1
Table of Contents
NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Segment information is summarized as follows:

   For the three months ended
March 31,		  For the nine months ended
March 31,		 
   2019  2018  2019  2018 
   (in millions) 

Revenues:

     

News and Information Services

  $1,224  $1,286  $3,729  $3,825 

Subscription Video Services

   539   129   1,666   394 

Book Publishing

   421   398   1,335   1,268 

Digital Real Estate Services

   272   279   876   842 

Other

   1   1   2   2 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenues

  $2,457  $2,093  $7,608  $6,331 
  

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA:

     

News and Information Services

  $73  $87  $309  $302 

Subscription Video Services

   98   16   295   76 

Book Publishing

   53   41   209   167 

Digital Real Estate Services

   74   88   300   302 

Other

   (51)   (51)   (138)   (90) 

Depreciation and amortization

   (168)   (100)   (494)   (297) 

Impairment and restructuring charges

   (34)   (246)   (71)   (273) 

Equity losses of affiliates

   (4)   (974)   (13)   (1,002) 

Interest (expense) income, net

   (14)   2   (45)   9 

Other, net

   3   30   30   9 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income tax expense

   30   (1,107)   382   (797) 

Income tax expense

   (7)   (3)   (112)   (292) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  $23  $(1,110)  $270  $(1,089) 
  

 

 

  

 

 

  

 

 

  

 

 

 

   As of
March 31, 2019		   As of
June 30, 2018		 
   (in millions) 

Total assets:

    

News and Information Services

  $5,840   $6,039 

Subscription Video Services

   4,495    4,738 

Book Publishing

   2,073    1,898 

Digital Real Estate Services

   2,209    2,171 

Other(a)

   1,094    1,107 

Investments

   347    393 
  

 

 

   

 

 

 

Total assets

  $16,058   $16,346 
  

 

 

   

 

 

 

                 
 
For the three months
ended
December 31,
  
For the six months
ended
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
 
(in millions)
 
Revenues:
            
News and Information Services
 $
1,241
  $
1,257
  $
2,390
  $
2,505
 
Subscription Video Services
  
501
   
562
   
1,015
   
1,127
 
Book Publishing
  
442
   
496
   
847
   
914
 
Digital Real Estate Services
  
294
   
311
   
566
   
604
 
Other
  
1
   
1
   
1
   
1
 
                 
Total revenues
 $
2,479
  $
2,627
  $
4,819
  $
5,151
 
                 
Segment EBITDA:
            
News and Information Services
 $
142
  $
112
  $
198
  $
221
 
Subscription Video Services
  
70
   
84
   
151
   
197
 
Book Publishing
  
63
   
88
   
112
   
156
 
Digital Real Estate Services
  
118
   
121
   
200
   
226
 
Other
  
(38
)  
(35
)  
(85
)  
(72
)
Depreciation and amortization
  
(162
)  
(163
)  
(324
)  
(326
)
Impairment and restructuring charges
  
(29
)  
(19
)  
(326
)  
(37
)
Equity losses of affiliates
  
(3
)  
(6
)  
(5
)  
(9
)
Interest expense, net
  
(8
)   
(15
)  
(4
)   
(31
)
Other, net
  
2
   
7
   
6
   
27
 
                 
Income (loss) before income tax expense
  
155
   
174
   
(77
)  
352
 
Income tax expense
  
(52
)   
(55
)  
(31
)   
(105
)
                 
Net income (loss)
 $
103
  $
119
  $
(108
) $
247
 
                 
         
 
As of 
December 31
, 2019
 
 
As of
June 30
, 2019
 
 
(in millions)
 
Total assets:
    
 
 
 
 
 
 
 
 
 
 
 
 
 
  
News and Information Services
 $
5,638
  $
5,482
 
Subscription Video Services
  
4,683
   
4,406
 
Book Publishing
  
2,214
   
2,074
 
Digital Real Estate Services
  
2,257
   
2,229
 
Other
(a)
  
1,165
   
1,185
 
Investments
  
325
   
335
 
Total assets
 $
16,282
  $
15,711
 
         
(a)

The Other segment primarily includes Cash and cash equivalents.

3
2
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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

   As of
March 31, 2019		   As of
June 30, 2018		 
   (in millions) 

Goodwill and intangible assets, net:

    

News and Information Services

  $2,695   $2,730 

Subscription Video Services

   2,662    2,853 

Book Publishing

   778    804 

Digital Real Estate Services

   1,602    1,502 
  

 

 

   

 

 

 

Total Goodwill and intangible assets, net

  $7,737   $7,889 
  

 

 

   

 

 

 
         
 
As of
December 31, 2019
  
As of
June 30, 2019
 
 
(in millions)
 
Goodwill and intangible assets, net:
      
News and Information Services
 $
2,338
  $
2,617
 
Subscription Video Services
  
2,552
   
2,595
 
Book Publishing
  
767
   
772
 
Digital Real Estate Services
  
1,576
   
1,589
 
         
Total Goodwill and intangible assets, net
 $
7,233
  $
7,573
 
         

NOTE 14.13. ADDITIONAL FINANCIAL INFORMATION

Receivables, net

Receivables are presented net of an allowance for doubtful accounts, which is an estimate of amounts that may not be collectible. The allowance for doubtful accounts is estimated based on historical experience, receivable aging, current economic trends and specific identification of certain receivables that are at risk of not being collected.

Receivables, net consist of:

   As of
March 31, 2019		  As of
June 30, 2018		 
   (in millions) 

Receivables

  $1,681  $1,829 

Allowance for sales returns(a)

   —   (171) 

Allowance for doubtful accounts

   (50)   (46) 
  

 

 

  

 

 

 

Receivables, net

  $1,631  $1,612 
  

 

 

  

 

 

 

(a)

As a result of the adoption of the new revenue recognition standard during the first quarter of fiscal 2019, the Company reclassified the allowance for sales returns from Receivables, net to Other current liabilities. See Note 2—Revenues.

         
 
As of
December 31, 2019
  
As of
June 30, 2019
 
 
(in millions)
 
Receivables
 $
1,624
  $
1,590
 
Allowance for doubtful accounts
  
(54
)   
(46
)
         
Receivables, net
 $
1,570
  $
1,544
 
         
33
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Other
Non-Current
Assets

The following table sets forth the components of Other
non-current
assets:

   As of
March 31, 2019		   As of
June 30, 2018		 
   (in millions) 

Royalty advances to authors

  $340   $312 

Retirement benefit assets

   155    135 

Inventory(a)

   123    143 

Other

   295    241 
  

 

 

   

 

 

 

Total Othernon-current assets

  $913   $831 
  

 

 

   

 

 

 

         
 
As of
December 31, 2019
 
 
As of
June 30, 2019
 
 
(in millions)
 
Royalty advances to authors
 $
338
  $
343
 
Retirement benefit assets
  
137
   
117
 
Inventory
(a)
  
143
   
155
 
Other
  
330
   
315
 
         
Total Other
non-current
assets
 $
948
  $
930
 
(a)

Primarily consists of the
non-current
portion of programming rights.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Other Current Liabilities

The following table sets forth the components of Other current liabilities:

   As of
March 31, 2019		   As of
June 30, 2018		 
   (in millions) 

Royalties and commissions payable

  $241   $187 

Allowance for sales returns

   198    — 

Current tax payable

   15    17 

Other

   291    168 
  

 

 

   

 

 

 

Total Other current liabilities

  $745   $372 
  

 

 

   

 

 

 

         
 
As of
December 31, 2019
  
As of
June 30, 2019
 
 
(in millions)
 
Royalties and commissions payable
 $
218
  $
211
 
Current operating lease liabilities
(a)
  
183
   
—
 
Allowance for sales returns
  
180
   
192
 
Current tax payable
  
19
   
22
 
Other
  
269
   
299
 
         
Total Other current liabilities
 $
869
  $
724
 
         
(a)As a result of the adoption of ASU
2016-02
during the first quarter of fiscal 2020, the Company has included the current portion of its operating lease liabilities within Other current liabilities as of December 31, 2019.
Other, net

The following table sets forth the components of Other, net:

   For the three months ended
March 31,		  For the nine months ended
March 31,		 
   2019  2018  2019  2018 
   (in millions) 

Dividends received from equity security investments

  $1  $—  $24  $— 

Remeasurement of equity securities(a)

   6   —   (23)   — 

Write-down ofavailable-for-sale securities(b)

   —   (3)   —   (33) 

Gain on sale of Australian property

   2   —   14   — 

Gain on sale of SEEKAsia(c)

   —   32   —   32 

Other, net(d)

   (6)   1   15   10 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Other, net

  $3  $30  $30  $9 
  

 

 

  

 

 

  

 

 

  

 

 

 

(a)

As a result of the adoption of ASU2016-01 during the first quarter of fiscal 2019, the Company has included the impact from the remeasurement of equity securities in Other, net in the Statement of Operations for the three and nine months ended March 31, 2019. During the three and nine months ended March 31, 2018, the impact from the remeasurement of equity securities was included in Accumulated other comprehensive loss in the Balance Sheets.

(b)

For the three and nine months ended March 31, 2018, the write-downs ofavailable-for-sale securities were reclassified out of Accumulated other comprehensive loss and included in Other, net in the Statements of Operations.

(c)

During the three months ended March 31, 2018, the Company sold its investment in SEEKAsia for $122 million in cash and recognized a $32 million gain in Other, net in the Statements of Operations.

(d)

As a result of the adoption of ASU2017-07 during the first quarter of fiscal 2019, the Company has included the othernon-service cost components of net periodic benefit cost (income) in Other, net in the Statements of Operations for the three and nine months ended March 31, 2019 and 2018.

                 
 
For the three months
ended
December 31,
  
For the six months
ended
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
 
(in millions)
 
Dividends received from equity security investments
 $
—
  $
22
  $
1
  $
23
 
Remeasurement of equity securities
  
(6
)   
(44
)  
(5
)   
(29
)
Gain on sale of Australian property
  
—
   
12
   
—
   
12
 
Other, net
  
8
   
17
   
10
   
21
 
                 
Total Other, net
 $
2
  $
7
  $
6
  $
27
 
                 
34
Table of Contents
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Cash Flow Information

The following table sets forth the Company’s cash paid for taxes and interest:

   For the nine months ended March 31, 
   2019   2018 
   (in millions) 

Cash paid for interest

  $67   $8 

Cash paid for taxes

   107    116 

         
 
For the six months ended
December 31,
 
 
2019
 
 
2018
 
 
(in millions)
 
Cash paid for interest
 $
33
  $
45
 
Cash paid for taxes
 
$
69
  
$
75
 
NOTE 14. SUBSEQUENT EVENTS
In January 2020, the Company sold Unruly to Tremor International Ltd (“Tremor”) for approximately 7% of Tremor’s outstanding shares. The transaction is subject to certain cash adjustments, and 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.
In
Febr
uary 2020, the Foxtel Debt Group entered into a subordinated shareholder loan facility agreement (the “Telstra Facility”) with Telstra, an ASX-listed telecommunications company which owns a 35% interest in Foxtel. The Telstra Facility provides Foxtel with up to A$170 million that can be used to finance cable transmission costs due to Telstra under a services arrangement between Foxtel and Telstra. The Telstra Facility bears interest at a variable rate of Australian BBSY plus an applicable margin of 7.75% and matures in December 2027. The terms of the Telstra Facility allow for the capitalization of accrued interest to the principal outstanding.
In February 2020, 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 is payable on April 15, 2020 to stockholders of record as of March 11, 2020.
35
Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document, including the following 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,” “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 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, 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 Part I, Item 1A in News Corporation’s Annual Report on Form
10-K
for the fiscal year ended June 30, 20182019 as filed with the Securities and Exchange Commission (the “SEC”) on August 15, 201813, 2019 (the “2018“2019 Form
10-K”),
and Part II, Item 1A of this Form
10-Q,
and as may be updated in this and other subsequent Quarterly Reports on Form
10-Q.
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 SEC. This section should be read together with the unaudited consolidated financial statements of News Corporation and related notes set forth elsewhere herein and the audited consolidated financial statements of News Corporation and related notes set forth in the 20182019 Form
10-K.

INTRODUCTION

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: news and information services, subscription video services in Australia, book publishing and digital real estate services.

Certain reclassifications were made to the prior period consolidated financial statements to conform to the current year presentation. Specifically, the Company reclassified the costs associated with certain initiatives previously included within the Other segment to the News and Information Services segment as these initiatives directly benefit this segment. For the three and six months ended December 31, 2018, these reclassifications increased Selling, general and administrative by $8 million and $15 million, respectively, for the News and Information Services segment.
The unaudited 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”).

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, 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). To enhance the comparability of the financial information provided to users, the Company has supplementally included pro forma financial information for the three and nine months ended March 31, 2018 reflecting the Transaction within its discussion and analysis below.

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 Businesses - This section provides a general description of the Company’s businesses, as well as developments that occurred to date during fiscal 2019 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 three and nine months ended March 31, 2019 and 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 the three and nine months ended March 31, 2018 reflecting the Transaction within its discussion and analysis below.

•

Liquidity and Capital Resources - This section provides an analysis of the Company’s cash flows for the nine months ended March 31, 2019 and 2018, as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed as of March 31, 2019.

Overview of the Company’s Businesses
-
This section provides a general description of the Company’s businesses, as well as developments that occurred to date during fiscal 2020 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 three and six months ended December 31, 2019 and 2018. 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.
36
Table of Contents
Liquidity and Capital Resources
-
This section provides an analysis of the Company’s cash flows for the six months ended December 31, 2019 and 2018, as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed as of December 31, 2019.
OVERVIEW OF THE COMPANY’S BUSINESSES

The Company manages and reports its businesses in the following five 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 Barron’s 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.

•

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, an Australian Securities Exchange (“ASX”)-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. New Foxtel also operates Kayo Sports, a sports-only streaming service.

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 of
The Wall Street Journal
and Barron’s Group, which includes
Barron’s
and MarketWatch, the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance and Dow Jones Newswires, and its live journalism events. The Company also owns, among other publications,
The Australian
,
The Daily Telegraph
,
Herald Sun
,
The Courier Mail
and
The 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
in-store
marketing products and services, home-delivered shopper media and digital marketing solutions, including Checkout 51’s mobile app, as well as Wireless Group, operator of talkSPORT, the leading sports radio network in the U.K., and Storyful, a social media content agency.
Subscription Video Services
—The Company’s Subscription Video Services segment provides video sports, entertainment and news services to
pay-TV
subscribers and other commercial licensees, primarily via cable, satellite and internet distribution, and consists of (i) the Company’s 65% interest in Foxtel (with the remaining 35% interest in Foxtel held by Telstra, an Australian Securities Exchange (“ASX”)-listed telecommunications company) and (ii) Australian News Channel (“ANC”). Foxtel is the largest
pay-TV
provider in Australia, with nearly 200 channels covering sports, general entertainment, movies, documentaries, music, children’s programming and news. Foxtel offers the leading sports programming content in Australia, with broadcast rights to live sporting events including: National Rugby League, Australian Football League, Cricket Australia, the domestic football league, the Australian Rugby Union and various motorsports programming. Foxtel also operates Foxtel Now, an
over-the-top,
or OTT, service, and Kayo, a sports-only OTT service.
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 mobile, podcasts and social media websites.

•

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, Chip and Joanna Gaines, Rick Warren, Sarah Young and Agatha Christie and popular titles such asThe 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 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.

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, 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
and
Hillbilly 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 ASX (ASX: REA). REA Group advertises property and property-related services on its websites and mobile apps across Australia and Asia, including Australia’s leading residential, commercial and share property websites, realestate.com.au, realcommercial.com.au, Flatmates.com.au and spacely.com.au, and property portals in 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.
37
Table of Contents
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 Connections
SM
Plus and Advantage
SM
Pro products as well as its Opcity performance-based product.performance and subscription-based services. Move also offers a number of professional software and services products, including Top Producer
®, FiveStreet®
and ListHub
TM
.

•

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 Note 11 to the Consolidated Financial Statements). 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.

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 Note 10—Commitments and Contingencies to the Consolidated Financial Statement). 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.
Other Business Developments

The Company previously announced that it was reviewing strategic options for News America Marketing, including a potential sale, and is engaged in negotiations to sell the business. However, there is no assurance regarding the timing or completion of any transaction. 
In October 2018,January 2020, the Company acquired Opcity Inc.sold Unruly to Tremor International Ltd (“Opcity”Tremor”), 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 acquired, and approximately $28 million in deferred payments and restricted stock unit awards for Opcity’s founders and qualifying employees, which is being recognized as compensation expense over the three years following the closing. Included in the cash amount was approximately $20 million that is being held back for approximately 7% of Tremor’s outstanding shares. The transaction is subject to certain cash adjustments, and the Company agreed not to sell the Tremor shares for a period of 18 months after closing. Opcity isAt closing, the Company and Tremor entered into a subsidiarythree year commercial arrangement which granted Tremor the exclusive right to sell outstream video advertising on all of Move, and its results are included within the Digital Real Estate Services segment.

Company’s digital properties in exchange for a total minimum revenue guarantee for News Corp of £30 million.

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Table of Contents
RESULTS OF OPERATIONS

Results of Operations—For the three and ninesix months ended MarchDecember 31, 2019 versus the three and ninesix months ended MarchDecember 31, 2018 (as reported)

The following table sets forth the Company’s operating results for the three and ninesix months ended MarchDecember 31, 2019 as compared to the three and ninesix months ended MarchDecember 31, 2018.

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Revenues:

          

Circulation and subscription

  $1,025  $659  $366   56 %   $3,088  $1,947  $1,141   59 % 

Advertising

   670   702   (32)   (5)%    2,052   2,101   (49)   (2)% 

Consumer

   403   381   22   6 %    1,281   1,220   61   5 % 

Real estate

   218   208   10   5 %    693   633   60   9 % 

Other

   141   143   (2)   (1)%    494   430   64   15 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   2,457   2,093   364   17 %    7,608   6,331   1,277   20 % 

Operating expenses

   (1,400)   (1,151)   (249)   (22)%    (4,224)   (3,439)   (785)   (23)% 

Selling, general and administrative

   (810)   (761)   (49)   (6)%    (2,409)   (2,135)   (274)   (13)% 

Depreciation and amortization

   (168)   (100)   (68)   (68)%    (494)   (297)   (197)   (66)% 

Impairment and restructuring charges

   (34)   (246)   212   86 %    (71)   (273)   202   74 % 

Equity losses of affiliates

   (4)   (974)   970   100 %    (13)   (1,002)   989   99 % 

Interest (expense) income, net

   (14)   2   (16)   **    (45)   9   (54)   ** 

Other, net

   3   30   (27)   (90)%    30   9   21   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income tax expense

   30   (1,107)   1,137   **    382   (797)   1,179   ** 

Income tax expense

   (7)   (3)   (4)   **    (112)   (292)   180   62 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

   23   (1,110)   1,133   **    270   (1,089)   1,359   ** 

Less: Net income attributable to noncontrolling interests

   (13)   (18)   5   28 %    (64)   (54)   (10)   (19)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to News Corporation stockholders

  $10  $(1,128)  $1,138   **   $206  $(1,143)  $1,349   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

                                 
 
For the three months ended December 31,
  
For the six months ended December 31,
 
 
2019
  
2018
  
Change
  
% Change
  
2019
  
2018
  
Change
  
% Change
 
(in millions, except %)
     
Better/(Worse)
      
Better/(Worse)
 
Revenues:
                        
Circulation and subscription
 $
990
  $
1,029
  $
(39
)  
(4
)% $
1,985
  $
2,063
  $
(78
)  
(4
)%
Advertising
  
677
   
718
   
(41
)  
(6
)%  
1,285
   
1,382
   
(97
)  
(7
)%
Consumer
  
421
   
478
   
(57
)  
(12
)%  
808
   
878
   
(70
)  
(8
)%
Real estate
  
242
   
248
   
(6
)  
(2
)%  
460
   
475
   
(15
)  
(3
)%
Other
  
149
   
154
   
(5
)  
(3
)%  
281
   
353
   
(72
)  
(20
)%
                                 
Total Revenues
  
2,479
   
2,627
   
(148
)  
(6
)%  
4,819
   
5,151
   
(332
)  
(6
)%
Operating expenses
  
(1,350
)  
(1,484
)  
134
   
9
%  
(2,687
)  
(2,824
)  
137
   
5
%
Selling, general and administrative
  
(774
)  
(773
)  
(1
)  
—  
   
(1,556
)  
(1,599
)  
43
   
3
%
Depreciation and amortization
  
(162
)  
(163
)  
1
   
1
%  
(324
)  
(326
)  
2
   
1
%
Impairment and restructuring charges
  
(29
)  
(19
)  
(10
)  
(53
)%  
(326
)  
(37
)  
(289
)  
**
 
Equity losses of affiliates
  
(3
)  
(6
)  
3
   
50
%  
(5
)  
(9
)  
4
   
44
%
Interest expense, net
  
(8
)  
(15
)  
7
   
47
%  
(4
)  
(31
)  
27
   
87
%
Other, net
  
2
   
7
   
(5
)  
(71
)%  
6
   
27
   
(21
)  
(78
)%
                                 
Income (loss) before income tax expense
  
155
   
174
   
(19
)  
(11
)%  
(77
)  
352
   
(429
)  
**
 
Income tax expense
  
(52
)  
(55
)  
3
   
5
%  
(31
)  
(105
)  
74
   
70
%
                                 
Net income (loss)
  
103
   
119
   
(16
)  
(13
)%  
(108
)  
247
   
(355
)  
**
 
Less: Net income attributable to noncontrolling interests
  
(18
)  
(24
)  
6
   
25
%  
(34
)  
(51
)  
17
   
33
%
                                 
Net income (loss) attributable to News Corporation stockholders
 $
85
  $
95
  $
(10
)  
(11
)% $
(142
) $
196
  $
(338
)  
**
 
                                 
** not meaningful

Revenues
— Revenues increased $364decreased $148 million, or 17%6%, and $1,277$332 million, or 20%6%, for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019.

The Revenue increasedecrease for the three months ended MarchDecember 31, 2019 was primarily due in part to higherlower revenues at the Subscription Video Services segment of $410$61 million, resulting in large part from the Transaction, which contributed $418 million to the increase. The Revenue increase was also attributable to higher revenues of $23 million at the Book Publishing segment. These increases were partially offset by lower revenues at the News and Information Services segment of $62 million, primarilymainly due to lower subscription revenues resulting from lower broadcast subscribers and changes in the $52subscriber package mix and the $25 million negative impact of foreign currency fluctuations, weakness in the print advertising market andfluctuations. The decrease was also due to lower revenues at the Book Publishing segment of $54 million primarily due to lower sales of
Homebody: A Guide to Creating Spaces You Never Want to Leave
by Joanna Gaines,
Girl, Wash Your Face
by Rachel Hollis as well as lower sales of other backlist titles. Additionally, revenues at the Digital Real Estate Services and News America Marketing of $20and Information Services segments decreased $17 million partially offset by cover and subscription price increases and digital subscriber growth, primarily at The Wall Street Journal and in Australia.$16 million, respectively. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Revenue decrease of $90$50 million for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

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Table of Contents
The Revenue increasedecrease for the ninesix months ended MarchDecember 31, 2019 was primarily due to higher revenues at the Subscription Video Services segment of $1,272 million resulting in large part from the Transaction, which contributed $1,289 million to the increase. The Revenue increase was also attributable to higher revenues of $67 million and $34 million at the Book Publishing and Digital Real Estate Services segments, respectively, partially offset by lower revenues at the News and Information Services segment of $96$115 million, primarily due to weakness in the $114print advertising market, the $50 million negative impact of foreign currency fluctuations, weakness the absence of the $48 million benefit related to News UK’s exit from the partnership for
Sun Bets
in the print advertising marketfirst quarter of fiscal 2019 and lower revenues at News America Marketing of $47$28 million, partially offset by cover and subscription price increases and digital subscriber growth across key mastheads. The decrease was also due to lower revenues at the Subscription Video Services segment of $112 million, primarily at The Wall Street Journaldue to the $59 million negative impact of foreign currency fluctuations and lower subscription revenues, resulting from lower broadcast subscribers and changes in Australia.the subscriber package mix, partially offset by $38 million of higher revenues from Kayo and Foxtel Now. Additionally, revenues at the Book Publishing and Digital Real Estate Service segments decreased $67 million and $38 million, respectively. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Revenue decrease of $206$134 million for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

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 $249decreased $134 million, or 22%9%, and $785$137 million, or 23%5%, for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019.

The increasedecrease in Operating expenses for the three months ended MarchDecember 31, 2019 was mainly due to higherlower operating expenses at the Subscription Video Services segment of $272$70 million, primarily resulting from lower entertainment programming costs, the Transaction.$17 million positive impact of foreign currency fluctuations and lower transmission costs. The decrease in Operating expenses was also due to lower expenses at the News and Information Services segment of $42 million, primarily due to cost savings initiatives, lower newsprint, production and distribution costs, the $22 million impact from the
one-time
benefit from the settlement of certain warranty-related claims pertaining to previously incurred and ongoing repairs and maintenance costs for News UK’s printing business and the $7 million positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense decrease of $47$25 million for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

The increasedecrease in Operating expenses for the ninesix months ended MarchDecember 31, 2019 was mainly due to higherlower operating expenses at the News and Information Services segment of $81 million, primarily due to cost savings initiatives, lower newsprint, production and distribution costs, the $25 million positive impact of foreign currency fluctuations and the $22 million impact from the
one-time
benefit from the settlement of certain warranty-related claims pertaining to previously incurred and ongoing repairs and maintenance costs for News UK’s printing business. The decrease was also due to lower operating expenses at the Subscription Video Services segment of $825$50 million, primarily resulting fromdue to the Transaction.$39 million positive impact of foreign currency fluctuations, partially offset by higher operating expenses at the Digital Real Estate Services segment of $10 million, mainly due to the acquisition of and continued investment in Opcity. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense decrease of $97$69 million for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

Selling, general and administrative
—Selling, general and administrative expenses increased $49$1 million
for the three months ended December 31, 2019 and decreased $43 million, or 6%, and $274 million, or 13%3%, for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019.

The increase in Selling, general and administrative expenses for the three months ended MarchDecember 31, 2019 was primarily due to higher expenses of $56$23 million at the Subscription Video Services segment, primarily as a resultlargely offset by lower expenses at the Digital Real Estate Services, News and Information Services and Book Publishing segments of the Transaction.$14 million, $4 million and $4 million, respectively. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $34$15 million for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

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Table of Contents
The increasedecrease in Selling, general and administrative expenses for the ninesix months ended MarchDecember 31, 2019 was primarily due to higherlower expenses of $228$22 million at the Digital Real Estate Services segment, primarily due to lower marketing costs, and lower expenses at the Subscription Video Services segment of $16 million, primarily as a result of the Transaction,due to lower overhead costs and the absence$10 million positive impact of 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 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 decrease of $76$42 million for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

Depreciation and amortization
— Depreciation and amortization expense increased $68decreased $1 million, or 68%1%, and $197$2 million, or 66%1%, for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.2019. The increase forimpact of foreign currency fluctuations of the three and nine months ended March 31, 2019 was primarily asU.S. dollar against local currencies resulted in a result of an additional $66 million and $195 million, respectively, of depreciation and amortization expense at the Subscription Video Services segment, primarily due to the Transaction.

Impairment and restructuring charges— During the three and nine months ended March 31, 2019, the Company recorded restructuring chargesdecrease of $25$5 million and $62 million, respectively. During the three and nine months ended March 31, 2018, the Company recorded restructuring charges of $21 million and $48 million, respectively.

During the three and nine months ended March 31, 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 4—Impairment and Restructuring Charges in the accompanying Consolidated Financial Statements.

The Company continually evaluates whether current factors or indicators require the performance of an interim impairment assessment of goodwill, long-lived assets and investments. The valuation of goodwill and long-lived assets requires assumptions and estimates of many factors, including revenue and market growth, operating cash flows, market multiples and discount rates. In the quarter ended December 31, 2018, the Company revised its future outlook for a reporting unit within the Subscription Video Services segment primarily due to declines in Australian broadcast subscribers during the first half of fiscal 2019.

As a result, the Company determined that this reporting unit has goodwill and an indefinite-lived tradename that are considered to be at risk for future impairment because the fair value of the reporting unit exceeded its carrying value by approximately 6% as of December 31, 2018. Significant unobservable inputs utilized in the income approach valuation method for this reporting unit and the indefinite-lived tradename were discount rates (ranging from10.0%-11.0%), long-term growth rates (2.0%) and royalty rates (1.5%). 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%. For the analysis performed, a 75 basis point increase in the discount rate or a 100 basis point decrease in the long-term growth rate would have resulted in the reporting unit failing the interim impairment analysis. Any change in assumptions related to the valuation of the indefinite-lived tradename would have resulted in an impairment of such asset.

Including the reporting unit within the News and Information Services segment disclosed in the 2018 Form10-K, the Company has reporting units with goodwill and an indefinite-lived tradename of approximately $2.3 billion at March 31, 2019 that are at risk for future impairment, of which $2.1 billion related to the Subscription Video Services segment and $0.2 billion related to the News and Information Services segment.

Equity losses of affiliates— Equity losses of affiliates improved $970 million and $989$12 million for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018. The decrease in losses for the three2019.

Impairment and nine months ended March 31, 2019 was primarily due to the absence of a $957 millionnon-cash write-down of the carrying value of the Company’s investment in Foxtel recognized in the third quarter of fiscal 2018.

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change   % Change   2019  2018  Change   % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Foxtel(a)

  $—  $(970)  $970    **   $—  $(974)  $974    ** 

Other equity affiliates, net(b)

   (4)   (4)   —    —        (13)   (28)   15    54% 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total Equity losses of affiliates

  $(4)  $(974)  $970    100%   $(13)  $(1,002)  $989    99% 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

** not meaningful

(a)

Following completion of the Transaction in April 2018, News Corp 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 and Note 5—Investments in the accompanying Consolidated Financial Statements.

restructuring charges

— During the three and ninesix months ended MarchDecember 31, 2019, the Company recorded restructuring charges of $10 million and $34 million, respectively. During the three and six months ended December 31, 2018, the Company recorded restructuring charges of $19 million and $37 million, respectively.
During the three months ended December 31, 2019, the Company recognized a $957
non-cash
impairment charge of $19 million related to a reporting unit in the News and Information Services segment.
During the six months ended December 31, 2019, the Company recognized
non-cash write-down
impairment charges of $292 million primarily related to the carrying valueimpairment of its investment in Foxtel. goodwill and indefinite-lived intangible assets at the News America Marketing reporting unit.
See Note 5—Investments3—Impairment and Restructuring Charges in the accompanying Consolidated Financial Statements.

In accordance with ASC 350, “Intangibles—Goodwill and Other”, the Company amortized $17 million and $49 million related to excess cost over the Company’s proportionate share

Equity losses of its investment’s underlying net assets allocated to finite-lived intangible assets during the three and nine months ended March 31, 2018, respectively. Such amortization was reflected inaffiliates
— Equity losses of affiliates in the Statements of Operations.

(b)

Other equity affiliates, net for the three and nine months ended March 31, 2019 include losses primarily from the Company’s interest in Elara. During the nine months ended March 31, 2018, the Company recognized $13 million innon-cash write-downs of certain equity method investments’ carrying values. The write-downs were reflected in Equity losses of affiliates in the Statements of Operations for the nine months ended March 31, 2018.

Interest (expense) income, net— Interest (expense) income, net was ($14)improved by $3 million and ($45)$4 million for the three and ninesix months ended March 31, 2019, respectively, as compared to $2 million and $9 million, respectively, in the corresponding periods of fiscal 2018. The increase in interest expense during the three and nine months ended March 31, 2019 was primarily due to higher interest expense as a result of the Transaction. As a result of the Transaction, the Company consolidated outstanding debt of approximately $1.8 billion. See Note 6—Borrowings in the accompanying Consolidated Financial Statements.

Other, net— Other, net deteriorated by $27 million and improved by $21 million for the three and nine months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.2019. See Note 14—4—Investments in the accompanying Consolidated Financial Statements.

Interest expense, net
— Interest expense, net improved by $7 million and $27 million for the three and six months ended December 31, 2019, respectively, as compared to the corresponding periods of fiscal 2019. Interest expense, net improved for the three months ended December 31, 2019 primarily due to lower third party interest expense
resulting from repayments
of maturing debt facilities. Interest expense, net improved for the six months ended December 31, 2019 primarily due to the settlement of cash flow hedges related to debt maturities occurring in the first quarter of fiscal 2020 and lower third party interest expense due to repayments of maturing debt facilities.
Other, net
— Other, net decreased by $5 million and $21 million for the three and six months ended December 31, 2019, respectively, as compared to the corresponding periods of fiscal 2019. See Note 13—Additional Financial Information in the accompanying Consolidated Financial Statements.

Income tax expense
— For the three months ended MarchDecember 31, 2019, the Company recorded income tax expense of $7$52 million on
pre-tax
income of $30$155 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact of foreign operations which are subject to higher tax rates.
For the six months ended December 31, 2019, the Company recorded an income tax expense of $31 million on a
pre-tax
loss of $77 million resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The tax rate was impacted by the lower tax benefit recorded on the impairment of News America Marketing’s goodwill and indefinite-lived intangible assets, by valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and by the impact of foreign operations which are subject to higher tax rates.
For the three months ended December 31, 2018, the Company recorded income tax expense of $55 million on
pre-tax
income of $174 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

41
Table of Contents
For the ninesix months ended MarchDecember 31, 2019,2018, the Company recorded income tax expense of $112$105 million on
pre-tax
income of $382$352 million resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

For the three months ended March 31, 2018, the Company recorded income tax expense of $3 million on apre-tax loss of $1,107 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 lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., and valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses.

For the nine months ended March 31, 2018, the Company recorded income tax expense of $292 million on apre-tax loss of $797 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 lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the tax charge resulting from the enactment of the Tax Act which caused an increase in income tax expense of $174 million.

Management assesses available evidence to determine whether sufficient future taxable income will be generated to permit the use of existing 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 jurisdictions may not be realized and therefore, a valuation allowance has been established against those tax assets.

Net income (loss)
— Net income improved(loss) deteriorated by $1,133$16 million and $1,359$355 million for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019.

The improvementchange in netNet income during the three months ended MarchDecember 31, 2019 was primarily due to lower Equity losses of affiliates resulting fromTotal Segment EBITDA.
The change in Net income (loss) during the absence of the $957 millionsix months ended December 31, 2019 was primarily due to
non-cash write-down of the carrying value of the Company’s investment in Foxtel, lower Impairment and restructuring charges resulting from the absence ofnon-cash
impairment charges of $225$292 million primarily related to the impairment of goodwill and indefinite-lived intangible assets at the News America Marketing reporting unit and impairment of goodwill at the FOX SPORTS Australia reporting unit and higherlower Total Segment EBITDA, partially offset by higher Depreciationlower interest and amortization.

tax expense.

The improvement in net income during the nine months ended March 31, 2019 was primarily due to lower Equity losses of affiliates resulting from the absence of the $957 millionnon-cash write-down of the carrying value of the Company’s investment in Foxtel, lower Impairment and restructuring charges resulting from the absence ofnon-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, higher Total Segment EBITDA and the absence of the $174 million negative impact of the Tax Act recognized in the second quarter of fiscal 2018, partially offset by higher Depreciation and amortization.

Net income attributable to noncontrolling interests
—Net income attributable to noncontrolling interests decreased by $5$6 million and increased $10$17 million for the three and ninesix months ended MarchDecember 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019.

The decrease in Net income attributable to noncontrolling interests for the three and six months ended MarchDecember 31, 2019 was primarily due to the noncontrolling interest in new Foxtel.

The increase in Net income attributable to noncontrolling interests for the nine months ended March 31, 2019 was primarily due to higherlower results at REA Group partially offset by the noncontrolling interest in newand Foxtel.

Segment Analysis

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. 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).

42
Table of Contents
Total Segment EBITDA is a
non-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 certain
one-time
or
non-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 income (loss) to Total Segment EBITDA for the three and ninesix months ended MarchDecember 31, 2019 and 2018:

   For the three months ended
March 31,		  For the nine months ended
March 31,		 
   2019  2018  2019  2018 
(in millions, except %)             

Net income (loss)

  $23  $(1,110)  $270  $(1,089) 

Add:

     

Income tax expense

   7   3   112   292 

Other, net

   (3)   (30)   (30)   (9) 

Interest expense (income), net

   14   (2)   45   (9) 

Equity losses of affiliates

   4   974   13   1,002 

Impairment and restructuring charges

   34   246   71   273 

Depreciation and amortization

   168   100   494   297 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Segment EBITDA

  $247  $181  $975  $757 
  

 

 

  

 

 

  

 

 

  

 

 

 

                 
 
For the three months
ended December 31,
  
For the six months ended
December 31,
 
 
2019
  
2018
  
2019
  
2018
 
(in millions, except %)
        
Net income (loss)
 $
103
  $
119
  $
(108
) $
247
 
Add:
            
Income tax expense
  
52
   
55
   
31
   
105
 
Other, net
  
(2
)  
(7
)  
(6
)  
(27
)
Interest expense, net
  
8
   
15
   
4
   
31
 
Equity losses of affiliates
  
3
   
6
   
5
   
9
 
Impairment and restructuring charges
  
29
   
19
   
326
   
37
 
Depreciation and amortization
  
162
   
163
   
324
   
326
 
                 
Total Segment EBITDA
 $
355
  $
370
  $
576
  $
728
 
                 
The following tables set forth the Company’s Revenues and Segment EBITDA for the three and ninesix months ended MarchDecember 31, 2019 and 2018:

   For the three months ended March 31, 
   2019  2018 
(in millions)  Revenues   Segment
EBITDA		  Revenues   Segment
EBITDA		 

News and Information Services

  $1,224   $73  $1,286   $87 

Subscription Video Services

   539    98   129    16 

Book Publishing

   421    53   398    41 

Digital Real Estate Services

   272    74   279    88 

Other

   1    (51)   1    (51) 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $2,457   $247  $2,093   $181 
  

 

 

   

 

 

  

 

 

   

 

 

 

   For the nine months ended March 31, 
   2019  2018 
(in millions)  Revenues   Segment
EBITDA		  Revenues   Segment
EBITDA		 

News and Information Services

  $3,729   $309  $3,825   $302 

Subscription Video Services

   1,666    295   394    76 

Book Publishing

   1,335    209   1,268    167 

Digital Real Estate Services

   876    300   842    302 

Other

   2    (138)   2    (90) 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $7,608   $975  $6,331   $757 
  

 

 

   

 

 

  

 

 

   

 

 

 

                 
 
For the three months ended December 31,
 
 
2019
  
2018
 
   
Segment
    
Segment
 
(in millions)
 
Revenues
  
EBITDA
  
Revenues
  
EBITDA
 
News and Information Services
 $
1,241
  $
142
  $
1,257
  $
112
 
Subscription Video Services
  
501
   
70
   
562
   
84
 
Book Publishing
  
442
   
63
   
496
   
88
 
Digital Real Estate Services
  
294
   
118
   
311
   
121
 
Other
  
1
   
(38
)  
1
   
(35
)
                 
Total
 $
2,479
  $
355
  $
2,627
  $
370
 
                 

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Table of Contents
                 
 
For the six months ended December 31,
 
 
2019
  
2018
 
   
Segment
    
Segment
 
(in millions)
 
Revenues
  
EBITDA
  
Revenues
  
EBITDA
 
News and Information Services
 $
2,390
  $
198
  $
2,505
  $
221
 
Subscription Video Services
  
1,015
   
151
   
1,127
   
197
 
Book Publishing
  
847
   
112
   
914
   
156
 
Digital Real Estate Services
  
566
   
200
   
604
   
226
 
Other
  
1
   
(85
)  
1
   
(72
)
                 
Total
 $
4,819
  $
576
  $
5,151
  $
728
 
                 
News and Information Services (49%
(50% and 61%48% of the Company’s consolidated revenues in the ninesix months ended MarchDecember 31, 2019 and 2018, respectively)

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Revenues:

          

Circulation and subscription

  $538  $536  $2   —   $1,593  $1,578  $15   1 % 

Advertising

   593   649   (56)   (9)%    1,801   1,936   (135)   (7)% 

Other

   93   101   (8)   (8)%    335   311   24   8 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   1,224   1,286   (62)   (5)%    3,729   3,825   (96)   (3)% 

Operating expenses

   (700)   (738)   38   5  %    (2,122)   (2,196)   74   3  % 

Selling, general and administrative

   (451)   (461)   10   2  %    (1,298)   (1,327)   29   2  % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA

  $73  $87  $(14)   (16)%   $309  $302  $7   2 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

                                 
 
For the three months ended December 31,
  
For the six months ended December 31,
 
 
2019
  
2018
  
Change
  
% Change
  
2019
  
2018
  
Change
  
% Change
 
(in millions, except %)
     
Better/(Worse)
      
Better/(Worse)
 
Revenues:
                        
Circulation and subscription
 $
541
  $
526
  $
15
   
3
% $
1,075
  $
1,055
  $
20
   
2
%
Advertising
  
599
   
632
   
(33
)  
(5
)%  
1,129
   
1,208
   
(79
)  
(7
)%
Other
  
101
   
99
   
2
   
2
%  
186
   
242
   
(56
)  
(23
)%
                                 
Total Revenues
  
1,241
   
1,257
   
(16
)  
(1
)%  
2,390
   
2,505
   
(115
)  
(5
)%
Operating expenses
  
(671
)  
(713
)  
42
   
6
%  
(1,341
)  
(1,422
)  
81
   
6
%
Selling, general and administrative
  
(428
)  
(432
)  
4
   
1
%  
(851
)  
(862
)  
11
   
1
%
                                 
Segment EBITDA
 $
142
  $
112
  $
30
   
27
% $
198
  $
221
  $
(23
)  
(10
)%
                                 
Revenues at the News and Information Services segment decreased $62$16 million, or 5%1%, for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.2019. The revenue decrease was primarily due to lower Advertising revenues of $56$33 million mainly due to weakness in the print advertising market, the $23 million negative impact of foreign currency fluctuations andprimarily in Australia, lower revenues at News America Marketing of $20 million. Other$7 million and the $7 million negative impact of foreign currency fluctuations. Circulation and subscription revenues for the three months ended MarchDecember 31, 2019 decreased $8increased $15 million as compared to the corresponding period of fiscal 2018,2019 primarily due to the $7 million negative impact of foreign currency fluctuationsprice increases, mainly in Australia and the absence of revenues fromSun Bets as a result of News UK’s exit from the partnership in the first quarter of fiscal 2019. Circulation and subscription revenues for the three months ended March 31, 2019 increased $2 million as compared to the corresponding period of fiscal 2018 primarily due to cover and subscription price increases,U.K., digital subscriber growth primarily atacross key mastheads, led by
The
Wall Street Journal,
and in Australia, higher professional information business revenues at Dow Jones and the impact of the adoption of the new revenue recognition standard in Australia.led by Risk & Compliance. These increases were partially offset by the $22 million negative impact of foreign currency fluctuations and print volume declines in Australia and in the U.K., primarily at
The Sun.
, and the $6 million negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $52$15 million for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

Segment EBITDA at the News and Information Services segment decreased $14increased $30 million, or 16%27%, for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.2019. The decreaseincrease was mainly due to higher contribution from News UK of $44 million primarily due to cost savings initiatives, lower newsprint, production and distribution costs and the $22 million impact from the
one-time
benefit from the settlement of certain warranty-related claims pertaining to previously incurred and ongoing repairs and maintenance costs. The increase was also due to higher contribution from Dow Jones of $4 million and lower losses at the
New York Post
of $4 million due to higher revenues, partially offset by lower contribution from
News Corp Australia of $8 million and from News America Marketing of $13$8 million primarily relateddue to lower revenues.

Revenues at the News and Information Services segment decreased $96$115 million, or 3%5%, for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.2019. The revenue decrease was primarily due to lower Advertising revenues of $135$79 million mainly due to weakness in the print advertising market, the $56 million negative impact of foreign currency fluctuations and primarily in Australia,
lower revenues at News America Marketing of $47$28 million and the $22 million negative
44
Table of Contents
impact of foreign currency fluctuations, partially offset by digital advertising growth, primarilymainly in the U.K and Australia. Other revenues for the ninesix months ended MarchDecember 31, 2019 increased $24decreased $56 million as compared to the corresponding period of fiscal 20182019 primarily due to the $42absence of the $48 million net benefit related to News UK’s exit from the partnership for
Sun Bets
in the first quarter of fiscal 2019, partially offset by the $14 million negative impact of foreign currency fluctuations and lower brand partnership revenues in the U.K.2019. Circulation and subscription revenues increased $15$20 million as compared to the corresponding period of fiscal 2018 mainly2019 primarily due to coverprice increases, mainly in Australia and subscription price increases,the U.K., digital subscriber growth primarily atacross key mastheads, led by
The
Wall Street Journal,
and in Australia, higher professional information business revenues at Dow Jones and the impact of the adoption of the new revenue recognition standard in Australia.led by Risk & Compliance. These increases were partially offset by the $44 million negative impact of foreign currency fluctuations and print volume declines in Australia and in the U.K., primarily at
The Sun,.
and the $21 million negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $114$50 million for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

2019.

Segment EBITDA at the News and Information Services segment increased $7decreased $23 million, or 2%10%, for the ninesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.2019. The increasedecrease was mainly due to lower contribution from News America Marketing and News Corp Australia of $21 million and $18 million, respectively, primarily due to lower revenues. The decrease was partially offset by higher contribution from Dow Jones of $15$14 million, primarily relateddue to higher revenues, and higher contribution from News Corp AustraliaUK of $14$8 million primarily due to cost savings initiatives, lower newsprint, production and distribution costs and cost savings initiatives,the $22 million impact from the
one-time
benefit from the settlement of certain warranty-related claims pertaining to previously incurred and ongoing repairs and maintenance costs, partially offset by lower contribution from News America Marketingthe absence of $17the $48 million primarilybenefit related to lower revenues.

the exit from the partnership for
Sun Bets

in the first quarter of fiscal 2019.

Dow Jones

Revenues were $381$433 million for the three months ended MarchDecember 31, 2019, an increase of $5$16 million, or 1%4%, as compared to revenues of $376$417 million in the corresponding period of fiscal 2018.2019. Circulation and subscription revenues increased $15$19 million, primarily due to the $10$8 million impact from digital subscriber growth and digital subscription price increases at
The Wall Street Journal
, as well as $6$8 million of higher professional information business revenues led by Risk & Compliance.Compliance and higher content licensing revenue. Advertising revenues decreased $8$6 million, primarily due to weakness in the print advertising market and lower digital advertising revenues.

Revenues were $1,160 million for the nine months ended March 31, 2019, an increase of $33 million, or 3%, as compared to revenues of $1,127 million in the corresponding period of fiscal 2018. Circulation and subscription revenues increased $45 million, primarily due to the $34 million impact from digital subscriber growth and digital subscription price increases atThe Wall Street Journal, as well as $15 million of higher professional information business revenues led by Risk & Compliance. Advertising revenues decreased $12 million, primarily due to weakness in the print advertising market.

News Corp Australia

Revenues at the Australian newspapers were $284 million for the three months ended March 31, 2019, a decrease of $22 million, or 7%, compared to revenues of $306 million in the corresponding period of fiscal 2018.revenue. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $29$1 million or 9%, for the three months ended MarchDecember 31, 2019, as compared to the corresponding period of fiscal 2018. Advertising revenues decreased $15 million, primarily due to the $16 million negative impact of foreign currency fluctuations and the $12 million impact of weakness in the print advertising market, partially offset by a $7 million increase from the acquisition of an integrated content marketing agency. Circulation and subscription revenues decreased $7 million primarily due to the $10 million negative impact of foreign currency fluctuations and print volume declines, partially offset by digital subscriber growth, cover price increases and the impact of the adoption of the new revenue recognition standard.

2019.

Revenues at the Australian newspapers were $902$817 million for the ninesix months ended MarchDecember 31, 2019, a decreasean increase of $60$38 million, or 6%5%, as compared to revenues of $962$779 million in the corresponding period of fiscal 2018.2019. Circulation and subscription revenues increased $37 million, primarily due to the $17 million impact from digital subscriber growth and digital subscription price increases at
The Wall Street Journal
, as well as $16 million of higher professional information business revenues led by Risk & Compliance
.
Advertising revenues decreased $4 million, primarily due to weakness in the print advertising market. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $76$3 million or 8%, for the ninesix months ended MarchDecember 31, 2019, as compared to the corresponding period of fiscal 2018. Advertising revenues decreased $50 million, primarily due to the $43 million negative impact of foreign currency fluctuations and the $39 million impact of weakness in the print advertising market, partially offset by the $17 million increase due to digital advertising growth and a $12 million increase from the acquisition of an integrated content marketing agency. Circulation and subscription revenues decreased $14 million primarily due to the $25 million negative impact of foreign currency fluctuations and print volume declines, partially offset by cover price increases, digital subscriber growth and the impact of the adoption of the new revenue recognition standard.

2019.

News UK

Corp Australia

Revenues were $254$282 million for the three months ended MarchDecember 31, 2019, a decrease of $23$27 million, or 8%9%, as compared to revenues of $277$309 million in the corresponding period of fiscal 2018. The decrease was due in part to lower Advertising revenues of $9 million, primarily due to weakness in the print advertising market and the $5 million negative impact of foreign currency fluctuations. Other revenues decreased $8 million, mainly due to the absence of revenues fromSun Bets resulting from the exit of the partnership in the first quarter of fiscal 2019 and the $3 million negative impact of foreign currency fluctuations. Circulation and subscription revenues also decreased $6 million, primarily due to the $9 million negative impact of foreign currency fluctuations, as cover price increases across mastheads offset single-copy volume declines, primarily atThe Sun.2019. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $17$14 million, or 5%, for the three months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018.

Revenues were $794 million for the nine months ended March 31, 2019, a decrease of $19 million, or 2%, as compared to revenues of $813 million in the corresponding period of fiscal 2018. The decrease was due in part to lower2019. Advertising revenues of $23decreased $19 million, primarily due to the $22 million impact of weakness in the print advertising market and the $8 million negative impact of foreign currency fluctuations.Circulation and subscription revenues also decreased $17 million, primarily due to single-copy volume declines,primarily atThe Sun, and the $14$7 million negative impact of foreign currency fluctuations, partially offset by a $5 million increase due to digital advertising growth and a $4 million increase due to the acquisition of an integrated content marketing agency. Circulation and subscription revenues decreased $5 million primarily due to the $5 million negative impact of foreign currency fluctuations, as print volume declines were offset by cover price increases across mastheads.Theand digital subscriber growth.

Revenues were $558 million for the six months ended December 31, 2019, a decrease was partially offset by higher Otherof $60 million, or 10%, compared to revenues of $21$618 million mainly due to the $42 million net benefit related to the exit from the partnership forSun Bets in the first quartercorresponding period of fiscal 2019, partially offset by lower brand partnership revenues.2019. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $26$32 million, or 5%, for the ninesix months ended March
December 31, 2019 as compared to the corresponding period of fiscal 2018.

2019. Advertising

45
Table of Contents
revenues decreased $42 million, primarily due to the $45 million impact of weakness in the print advertising market and the $17 million negative impact of foreign currency fluctuations, partially offset by a $12 million increase due to the acquisition of an integrated content marketing agency and a $10 million increase due to digital advertising growth. Circulation and subscription revenues decreased $13 million primarily due to the $11 million negative impact of foreign currency fluctuations, as print volume declines were largely offset by cover price increases and digital subscriber growth.
News America Marketing

UK

Revenues at News America Marketing were $238$259 million for the three months ended MarchDecember 31, 2019, a decreasean increase of $20$5 million, or 8%2%, as compared to revenues of $258$254 million in the corresponding period of fiscal 2018. 2019. Advertising revenues increased $4 million, primarily due to digital advertising growth, mainly at
The decrease was primarily related to $26Sun
, partially offset by weakness in the print advertising market
.
Circulation and subscription revenues decreased $2 million, of lower home delivered revenues, which include free-standing insert products, mainly due to lowersingle-copy volume declines, primarily at
The Sun,
partially offset by higherin-store revenues, primarily due to higher customer spending.

cover price increases across mastheads and digital subscriber growth.

Revenues at News America Marketing were $657$482 million for the ninesix months ended MarchDecember 31, 2019, a decrease of $47$58 million, or 7%11%, as compared to revenues of $704$540 million in the corresponding period of fiscal 2018. The decrease was primarily related to $512019. Other revenues decreased $53 million, of lower home delivered revenues, which include free-standing insert products, mainly due to lower volume.

Subscription Video Services (22% and 6%the absence of the Company’s consolidated revenues $48 million benefit related to the exit from the partnership for

Sun Bets
in the nine months ended March 31, 2019 and 2018, respectively)

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Revenues:

          

Circulation and subscription

  $474 ��$109  $365   **   $1,455  $327  $1,128   ** 

Advertising

   50   18   32   **    162   60   102   ** 

Other

   15   2   13   **    49   7   42   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   539   129   410   **    1,666   394   1,272   ** 

Operating expenses

   (374)   (102)   (272)   **    (1,109)   (284)   (825)   ** 

Selling, general and administrative

   (67)   (11)   (56)   **    (262)   (34)   (228)   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA

  $98  $16  $82   **   $295  $76  $219   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

** not meaningful

For the three months ended March 31, 2019, revenues at the Subscription Video Services segment increased $410 million and Segment EBITDA increased $82 million as compared to the corresponding periodfirst quarter of fiscal 2018. The revenue2019. Circulation and Segment EBITDA increases for the three months ended March 31, 2019 weresubscription revenues decreased $9 million, primarily due to the Transaction, which contributed $418$7 million negative impact of revenueforeign currency fluctuations, as cover price increases across mastheads and $96digital subscriber growth mostly offset single-copy volume declines, primarily at

The Sun
. Advertising revenues increased $4 million, primarily due to digital advertising growth, mainly at
The Sun
, partially offset by the $4 million negative impact of Segment EBITDA duringforeign currency fluctuations and weakness in the three months ended March 31, 2019.print advertising market. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $13 million, or 3%, for the threesix months ended MarchDecember 31, 2019 as compared to the corresponding period of fiscal 2018. See “Results2019.
News America Marketing
Revenues at News America Marketing were $191 million for the three months ended December 31, 2019, a decrease of Operations—$7 million, or 4%, as compared to revenues of $198 million in the corresponding period of fiscal 2019. The decrease was primarily related to $12 million of lower home delivered revenues, which include free-standing insert products, mainly due to lower volume.
Revenues at News America Marketing were $391 million for the six months ended December 31, 2019, a decrease of $28 million, or 7%, as compared to revenues of $419 million in the corresponding period of fiscal 2019. The decrease was primarily related to $32 million of lower home delivered revenues, which include free-standing insert products, mainly due to lower volume and rates.
Subscription Video Services
(21% and 22% of the Company’s consolidated revenues in the six months ended December 31, 2019 and 2018, respectively)
                                 
 
For the three months ended December 31,
  
For the six months ended December 31,
 
 
2019
  
2018
  
Change
  
% Change
  
2019
  
2018
  
Change
  
% Change
 
(in millions, except %)
     
Better/(Worse)
  
Better/(Worse)
 
Revenues:
                        
Circulation and subscription
 $
439
  $
490
  $
(51
)  
(10
)% $
890
  $
981
  $
(91
)  
(9
)%
Advertising
  
53
   
55
   
(2
)  
(4
)%  
104
   
112
   
(8
)  
(7
)%
Other
  
9
   
17
   
(8
)  
(47
)%  
21
   
34
   
(13
)  
(38
)%
                                 
Total Revenues
  
501
   
562
   
(61
)  
(11
)%  
1,015
   
1,127
   
(112
)  
(10
)%
Operating expenses
  
(341
)  
(411
)  
70
   
17
%  
(685
)  
(735
)  
50
   
7
%
Selling, general and administrative
  
(90
)  
(67
)  
(23
)  
(34
)%  
(179
)  
(195
)  
16
   
8
%
                                 
Segment EBITDA
 $
70
  $
84
  $
(14
)  
(17
)% $
151
  $
197
  $
(46
)  
(23
)%
                                 
46
Table of Contents
For the three and nine months ended March 31, 2019 (as reported) versus the three and nine months ended March 31, 2018 (pro forma)” below for additional details.

For the nine months ended MarchDecember 31, 2019, revenues at the Subscription Video Services segment increased $1,272 million and Segment EBITDA increased $219 million as compared to the corresponding period of fiscal 2018. The revenue and Segment EBITDA increases for the nine months ended March 31, 2019 were primarily due to the Transaction, which contributed $1,289 million of revenue and $236 million of Segment EBITDA during the nine months ended March 31, 2019. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $30 million for the nine months ended March 31, 2019 as compared to the corresponding period of fiscal 2018. See “Results of Operations—For the three and nine months ended March 31, 2019 (as reported) versus the three and nine months ended March 31, 2018 (pro forma)” below for additional details.

Book Publishing (18% and 20% of the Company’s consolidated revenues in the nine months ended March 31, 2019 and 2018, respectively)

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Revenues:

          

Consumer

  $403  $381  $22   6 %   $1,281  $1,220  $61   5 % 

Other

   18   17   1   6 %    54   48   6   13 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   421   398   23   6 %    1,335   1,268   67   5 % 

Operating expenses

   (284)   (275)   (9)   (3)%    (881)   (858)   (23)   (3)% 

Selling, general and administrative

   (84)   (82)   (2)   (2)%    (245)   (243)   (2)   (1)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA

  $53  $41  $12   29 %   $209  $167  $42   25 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

For the three months ended March 31, 2019, revenues at the Book Publishing segment increased $23decreased $61 million, or 6%11%, as compared to the corresponding period of fiscal 2018.2019. The increase was primarily due to strong sales in the Christian publishing category, primarilyGirl, Stop Apologizing by Rachel Hollis andWe Are the Gardeners by Joanna Gaines as well as the continued success ofGirl, Wash Your Face by Rachel Hollis. These increases were partially offset by the $17 million impact of the adoption of the new revenue recognition standard and the $9 million negative impact of foreign currency fluctuations. Digital sales represented approximately 21% of Consumer revenues during the three months ended March 31, 2019. Digital sales increased approximately 5% as compared to the corresponding period of fiscal 2018 primarily due to growth in downloadable audio books.

For the three months ended March 31, 2019, Segment EBITDA at the Book Publishing segment increased $12 million, or 29%, as compared to the corresponding period of fiscal 2018. The increase was primarily due to the higher revenues discussed above.

For the nine months ended March 31, 2019, revenues at the Book Publishing segment increased $67 million, or 5%, as compared to the corresponding period of fiscal 2018. The increase was primarily due to strong sales in the general books category, primarilyHomebody: A Guide to Creating Spaces You Never Want to Leave by Joanna Gaines, strong frontlist and backlist sales in the Christian publishing category, primarily titles by Rachel Hollis includingGirl, Wash Your FaceandGirl, Stop Apologizing, as well as the continued success ofThe Hate U Give by Angie Thomas in the children’s books category. These increases were partially offset by the $47 million impact of the adoption of the new revenue recognition standard and the $19 million negative impact of foreign currency fluctuations. Digital sales represented approximately 20% of Consumer revenues during the nine months ended March 31, 2019. Digital sales increased approximately 10% as compared to the corresponding period of fiscal 2018 primarily due to growth in downloadable audio books.

For the nine months ended March 31, 2019, Segment EBITDA at the Book Publishing segment increased $42 million, or 25%, as compared to the corresponding period of fiscal 2018. The increase was primarily due to the higher revenues discussed above.

Digital Real Estate Services(11% and 13% of the Company’s consolidated revenues in the nine months ended March 31, 2019 and 2018, respectively)

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)        Better/(Worse)         Better/(Worse) 

Revenues:

          

Circulation and subscription

  $12  $14  $(2)   (14)%   $39  $42  $(3)   (7)% 

Advertising

   27   34   (7)   (21)%    89   104   (15)   (14)% 

Real estate

   218   208   10   5 %    693   633   60   9 % 

Other

   15   23   (8)   (35)%    55   63   (8)   (13)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   272   279   (7)   (3)%    876   842   34   4 % 

Operating expenses

   (46)   (36)   (10)   (28)%    (123)   (101)   (22)   (22)% 

Selling, general and administrative

   (152)   (155)   3   2 %    (453)   (439)   (14)   (3)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA

  $74  $88  $(14)   (16)%   $300  $302  $(2)   (1)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

For the three months ended March 31, 2019, revenues at the Digital Real Estate Services segment decreased $7 million, or 3%, as compared to the corresponding period of fiscal 2018. At REA Group, revenues decreased $7 million, or 4%, to $151 million for the three months ended March 31, 2019 from $158 million in the corresponding period of fiscal 2018. The lower revenues were primarily due to the $16 million negative impact of foreign currency fluctuations and softness in listing volumes which are not expected to improve in the short term, partially offset by an increase in Australian residential depth revenue driven by price increases, improved penetration and favorable product mix. Revenues at Move increased $6 million, or 5%, to $121 million for the three months ended March 31, 2019 from $115 million in the corresponding period of fiscal 2018 primarily due to higher Real estate revenues resulting from higher yield per lead, partially offset by lowernon-listing advertising revenues.

For the three months ended March 31, 2019, Segment EBITDA at the Digital Real Estate Services segment decreased $14 million, or 16%, as compared to the corresponding period of fiscal 2018. The decrease in Segment EBITDA was primarily the result of lower contribution from Move of $13 million primarily due to the $15 million impact associated with the acquisition and continued investment in Opcity. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Segment EBITDA decrease of $9 million for the three months ended March 31, 2019 as compared to the corresponding period of fiscal 2018.

For the nine months ended March 31, 2019, revenues at the Digital Real Estate Services segment increased $34 million, or 4%, as compared to the corresponding period of fiscal 2018. Revenues at Move increased $29 million, or 9%, to $361 million for the nine months ended March 31, 2019 from $332 million in the corresponding period of fiscal 2018 primarily due to higher Real estate revenues resulting from growth in leads and higher yield, partially offset by lowernon-listing advertising revenues. At REA Group, revenues increased $19 million, or 4%, to $513 million for the nine months ended March 31, 2019 from $494 million in the corresponding period of fiscal 2018. The higher revenues were primarily due to an increase in Australian residential depth revenue driven by price increases, improved penetration and favorable product mix, as well as the acquisition of Hometrack Australia, partially offset by the $43 million negative impact of foreign currency fluctuations and softness in listing volumes which are not expected to improve in the short term.

For the nine months ended March 31, 2019, Segment EBITDA at the Digital Real Estate Services segment decreased $2 million, or 1%, as compared to the corresponding period of fiscal 2018. The decrease in Segment EBITDA was primarily due to lower contribution from Move of $23 million primarily due to the $22 million impact associated with the acquisition and continued investment in Opcity and $10 million of higher costs associated with new product development and higher revenues, partially offset by the higher revenues noted above. The decrease was partially offset by higher contribution from REA Group of $17 million, primarily due to the higher revenues noted above, partially offset by the $25 million negative impact of foreign currency fluctuations.

Results of Operations—For the three and nine months ended March 31, 2019 (as reported) versus the three and nine months ended March 31, 2018 (pro forma)

The following supplemental unaudited pro forma information for the three and nine months endedMarch 31, 2018 reflects 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. 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. As only the financial results for the Subscription Video Services segment were adjusted due to the presentation of this pro forma supplemental information, the Company is only providing a supplemental analysis for this segment below, under “Segment Analysis (pro forma).” 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” and the Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report.

   Pro Forma (unaudited) 
   For the three months ended March 31, 2018 
   News Corp
Historical (a)		  Foxtel
Historical (b)		  Transaction
Adjustments		  Pro
Forma		 
(in millions, except per share amounts)             

Revenues:

     

Circulation and subscription

  $659  $531  $(93)(c)(d)  $1,097 

Advertising

   702   42   —   744 

Consumer

   381   —   —   381 

Real estate

   208   —   —   208 

Other

   143   14   —   157 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   2,093   587   (93)   2,587 

Operating expenses

   (1,151)   (370)   98(c)(e)   (1,423) 

Selling, general and administrative

   (761)   (113)   2(f)   (872) 

Depreciation and amortization

   (100)   (69)   1(g)(h)(i)   (168) 

Impairment and restructuring charges

   (246)   (2)   (957)(j)   (1,205) 

Equity (losses) earnings of affiliates

   (974)   2   970(j)   (2) 

Interest income (expense), net

   2   (23)   —   (21) 

Other, net

   30   (1)   —   29 
  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income before income tax expense

   (1,107)   11   21   (1,075) 

Income tax expense

   (3)   (3)   —(k)   (6) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

   (1,110)   8   21   (1,081) 

Less: Net (income) loss attributable to noncontrolling interests

   (18)   1   7(l)   (10) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income attributable to News Corporation

  $(1,128)  $9  $28  $(1,091) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss available to News Corporation stockholders per share

  $(1.94)    $(1.87) 
  

 

 

    

 

 

 

   Pro Forma (unaudited) 
   For the nine months ended March 31, 2018 
   News Corp
Historical (a)		  Foxtel
Historical (b)		  Transaction
Adjustments		  Pro
Forma		 
(in millions, except per share amounts)             

Revenues:

     

Circulation and subscription

  $1,947  $1,638  $(278)(c)(d)  $3,307 

Advertising

   2,101   141   —   2,242 

Consumer

   1,220   —   —   1,220 

Real estate

   633   —   —   633 

Other

   430   39   —   469 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   6,331   1,818   (278)   7,871 

Operating expenses

   (3,439)   (1,136)   291(c)(e)   (4,284) 

Selling, general and administrative

   (2,135)   (340)   5(f)   (2,470) 

Depreciation and amortization

   (297)   (187)   (17)(g)(h)(i)   (501) 

Impairment and restructuring charges

   (273)   (5)   (957)(j)   (1,235) 

Equity (losses) earnings of affiliates

   (1,002)   5   974(j)   (23) 

Interest income (expense), net

   9   (76)   —   (67) 

Other, net

   9   (2)   —   7 
  

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) income before income tax expense

   (797)   77   18   (702) 

Income tax expense

   (292)   (13)   5(k)   (300) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

   (1,089)   64   23   (1,002) 

Less: Net (income) loss attributable to noncontrolling interests

   (54)   1   (27)(l)   (80) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income attributable to News Corporation

  $(1,143)  $65  $(4)  $(1,082) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss available to News Corporation stockholders per share

  $(1.96)    $(1.86) 
  

 

 

    

 

 

 

Notes to the unaudited pro forma 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 Statements 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 three and nine months ended March 31, 2018. The Statements of Operations for the three and nine months ended March 31, 2018 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 rate 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 three and nine months ended March 31, 2018. These costs are considered to benon-recurring in nature, and as such, have been excluded from the pro forma Statements of Operations.

(g)

Reflects the adjustment to amortization expense resulting from the recognition of amortizable intangible assets in the preliminary purchase price allocation.

(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 astep-up in the value of such assets.

(i)

Reflects the reversal of amortization expense included in News Corp’s historical Statements of Operations from the Company’s settlement of itspre-existing contractual arrangement between Foxtel and FOX SPORTS Australia, which resulted in awrite-off of its channel distribution agreement intangible asset at the time of the Transaction.

(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, during the three and nine months ended March 31, 2018, News Corp recorded an impairment to its investment in Foxtel within equity losses of affiliates which is reflected in News Corp’s historical results. As this impairment isnon-recurring in nature and is not directly attributable to the Transaction, such amount has not been eliminated and has been reclassified in the pro forma Statements of Operations from equity losses of affiliates into impairment and restructuring charges.

(k)

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 certain 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.

(l)

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 operating results for the three and nine months ended March 31, 2019 and its unaudited pro forma operating results for the three and nine months ended March 31, 2018.

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)  As
reported		  Pro
forma		  Better/(Worse)   As
reported		  Pro
forma		  Better/(Worse) 

Revenues:

          

Circulation and subscription

  $1,025  $1,097  $(72)   (7)%   $3,088  $3,307  $(219)   (7)% 

Advertising

   670   744   (74)   (10)%    2,052   2,242   (190)   (8)% 

Consumer

   403   381   22   6 %    1,281   1,220   61   5 % 

Real estate

   218   208   10   5 %    693   633   60   9 % 

Other

   141   157   (16)   (10)%    494   469   25   5 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   2,457   2,587   (130)   (5)%    7,608   7,871   (263)   (3)% 

Operating expenses

   (1,400)   (1,423)   23   2 %    (4,224)   (4,284)   60   1 % 

Selling, general and administrative

   (810)   (872)   62   7 %    (2,409)   (2,470)   61   2 % 

Depreciation and amortization

   (168)   (168)   —   —    (494)   (501)   7   1 % 

Impairment and restructuring charges

   (34)   (1,205)   1,171   97 %    (71)   (1,235)   1,164   94 % 

Equity losses of affiliates

   (4)   (2)   (2)   (100)%    (13)   (23)   10   43 % 

Interest expense, net

   (14)   (21)   7   33 %    (45)   (67)   22   33 % 

Other, net

   3   29   (26)   (90)%    30   7   23   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income tax expense

   30   (1,075)   1,105   **    382   (702)   1,084   ** 

Income tax expense

   (7)   (6)   (1)   (17)%    (112)   (300)   188   63 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

   23   (1,081)   1,104   **    270   (1,002)   1,272   ** 

Less: Net income attributable to noncontrolling interests

   (13)   (10)   (3)   (30)%    (64)   (80)   16   20 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to News Corporation

  $10  $(1,091)  $1,101   **   $206  $(1,082)  $1,288   ** 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

** not meaningful

Revenues (pro forma)–Revenues decreased $130 million, or 5%, and $263 million, or 3%, for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

The Revenue decrease for the three months ended MarchDecember 31, 2019 was mainly attributable to an $84 million decrease in revenues at the Subscription Video Services segment, primarily due to the $53 million negative impact of foreign currency fluctuations and lower subscription revenues due to lower broadcast subscribers and changes in the subscriber package mix, partially offset by $11 million of higher revenues from Foxtel Now and Kayo Sports, as well as lower revenues at the News and Information Services segment of $62 million, mainly due to the $52 million negative impact of foreign currency fluctuations, weakness in the print advertising market and lower revenues at News America Marketing of $20 million, partially offset by cover and subscription price increases and digital subscriber growth, primarily at The Wall Street Journal and in Australia. The Revenue decrease was partially offset by higher revenues of $23 million at the Book Publishing segment. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Revenue decrease of $130 million for the three months ended March 31, 2019, as compared to the corresponding period of fiscal 2018.

The Revenue decrease for the nine months ended March 31, 2019 was mainly attributable to a $268 million decrease in revenues at the Subscription Video Services segment, primarily due to the $137 million negative impact of foreign currency and lower subscription revenues resulting from lower broadcast subscribers and changes in the subscriber package mix

partially offset by $27 million of higher revenues from Foxtel Now and Kayo Sports, as well as lower revenues at the News and Information Services segment of $96 million, mainly due to the $114$25 million negative impact of foreign currency fluctuations, weakness in the print advertising market and lower revenues at News America Marketing of $47 million, partially offset by cover and subscription price increases and digital subscriber growth, primarily at The Wall Street Journal and in Australia. The Revenue decrease was partially offset by$18 million of higher revenues of $67 millionfrom Kayo and $34 million atFoxtel Now.

For the Book Publishing and Digital Real Estate Services segments, respectively. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Revenue decrease of $313 million for the ninethree months ended MarchDecember 31, 2019, Segment EBITDA decreased $14 million, or 17%, as compared to the corresponding period of fiscal 2018.

Operating expenses (pro forma)–Operating expenses decreased $23 million, or 2%, and $60 million, or 1%, for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

2019. The Segment EBITDA decrease in Operating expenses for the three months ended MarchDecember 31, 2019 was primarily due to the $72 million positive impact of foreign currency fluctuations, partially offset by higher sports programming and production costs at the Subscription Video Services segment, including approximately $25 million related to Cricket Australia.

The decrease in Operating expenses for the nine months ended March 31, 2019 was primarily due to the $163 million positive impact of foreign currency fluctuations, partially offset by higher sports programming and production costs at the Subscription Video Services segment, including approximately $51 million related to Cricket Australia.

Selling, general and administrative (pro forma)–Selling, general and administrative expenses decreased $62 million, or 7%, and $61 million, or 2%, for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

The decrease in Selling, general and administrative expenses for the three months ended March 31, 2019 was primarily due to lower expenses at the Subscription Video Services segment of $55 million primarily resulting from lower customer service and installation costs and lower overhead costs. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $41 million for the three months ended March 31, 2019, as compared to the corresponding period of fiscal 2018.

The decrease in Selling, general and administrative expenses for the nine months ended March 31, 2019 was primarily due to lower expenses at the Subscription Video Services segment of $107 million primarily related to lower customer service and installation costs and lower overhead costs, partially offset by the absence of 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 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 decrease of $97 million for the nine months ended March 31, 2019, as compared to the corresponding period of fiscal 2018.

Depreciation and amortization (pro forma)–Depreciation and amortization expense was flat and decreased $7 million, or 1%, for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of $10 million and $24 million for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

Impairment and restructuring charges (pro forma)–During the three and nine months ended March 31, 2019, the Company recorded restructuring charges of $25 million and $62 million, respectively, primarily related to employee termination benefits at the News and Information Services segment. During the three and nine months ended March 31, 2018, the Company recorded restructuring charges of $21 million and $48 million, respectively, primarily related to employee termination benefits at the News and Information Services segment.

During the three and nine months ended March 31, 2018, the Company recognizednon-cash impairment charges of $1,184 million consisting primarily of a $957 millionnon-cash write-down of the carrying value of its investment in Foxtel and $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.

Equity losses of affiliates (pro forma)– Equity losses of affiliates deteriorated $2 million and improved $10 million for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018. The decrease in losses for the nine months ended March 31, 2019 was primarily due to the absence of $13 million innon-cash write-downs of certain equity method investments recognized in the second quarter of fiscal 2018.

Interest expense, net (pro forma)– Interest expense, net was $14 million and $45 million for the three and nine months ended March 31, 2019, respectively, as compared to $21 million and $67 million in the corresponding periods of fiscal 2018.

The decrease in interest expense for the three months ended March 31, 2019 was primarily due to lower third party interest expense as well as higher interest income.

The decrease in interest expense for the nine months ended March 31, 2019 was primarily due to lower third party interest expense, lower interest expense resulting from the repayment of the Foxtel shareholder note in the first quarter of fiscal 2018 as well as higher interest income.

Other, net (pro forma)– Other, net deteriorated by $26 million and improved by $23 million for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

Other, net deteriorated for the three months ended March 31, 2019 as compared to the corresponding period of fiscal 2018, primarily due to the absence of the gain recognized on the sale of the Company’s investment in SEEKAsia in the third quarter of fiscal 2018.

Other, net improved for the nine months ended March 31, 2019 as compared to the corresponding period of fiscal 2018, primarily due to dividends received from equity method investments in the second quarter of fiscal 2019, partially offset by the absence of the gain recognized on the sale of the Company’s investment in SEEKAsia in the third quarter of fiscal 2018.

Income tax expense (pro forma)– For the three months ended March 31, 2019, the Company recorded income tax expense of $7 million onpre-tax income of $30 million, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

For the nine months ended March 31, 2019, the Company recorded income tax expense of $112 million onpre-tax income of $382 million, resulting in an effective tax rate that was higher than the U.S. statutory tax rate. The higher tax rate was primarily due to valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the impact from foreign operations which are subject to higher tax rates.

For the three months ended March 31, 2018, the Company recorded income tax expense of $6 million on apre-tax loss of $1,075 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 lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., and valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses.

For the nine months ended March 31, 2018, the Company recorded income tax expense of $300 million on apre-tax loss of $702 million, resulting in an effective tax rate that was lower than the U.S. statutory tax rate. The lower tax rate resulted from the lower net tax benefit on thenon-cash write-down of assets and investments in Australia and the U.S., valuation allowances being recorded against tax benefits in certain foreign jurisdictions with operating losses and the tax charge resulting from the enactment of the Tax Act which caused an increase in income tax expense of $174 million.

Net income (loss) (pro forma)– Net income improved by $1,104 million and $1,272 million for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018.

The increase in net income during the three months ended March 31, 2019 was due to lower Impairment and restructuring charges resulting from the absence of $1,184 million ofnon-cash impairment charges consisting primarily of a $957 millionnon-cash write-down of the carrying value of the Company’s investment in Foxtel and $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,revenues discussed above, partially offset by lower Total Segment EBITDA.

entertainment programming and transmission costs.

The increase in net income during

For the ninesix months ended March 31, 2019 was primarily due to lower Impairment and restructuring charges resulting from the absence of $1,184 million ofnon-cash impairment charges consisting primarily of a $957 millionnon-cash write-down of the carrying value of its investment in Foxtel and $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 and the absence of the $174 million negative impact of the Tax Act recognized in the second quarter of fiscal 2018, partially offset by lower Total Segment EBITDA.

Net income attributable to noncontrolling interests(pro forma)– Net income attributable to noncontrolling interests increased by $3 million and decreased by $16 million for the three and nine months ended March 31, 2019, respectively, as compared to the corresponding periods of fiscal 2018. The decrease in Net income attributable to noncontrolling interests for the nine months ended March 31, 2019 was primarily due to lower performance at new Foxtel, partially offset by higher results at REA Group.

Segment Analysis (pro forma)

The following table reconciles unaudited reported and pro forma Net income (loss) to unaudited reported and pro forma Total Segment EBITDA for the three and nine months ended March 31, 2019 and 2018, respectively:

   For the three months ended  For the nine months ended 
   March 31,  March 31, 
   2019  2018  2019  2018 
(in millions)  As reported  Pro forma  As reported  Pro forma 

Net income (loss)

  $23  $(1,081)  $270  $(1,002) 

Add:

     

Income tax expense

   7   6   112   300 

Other, net

   (3)   (29)   (30)   (7) 

Interest expense, net

   14   21   45   67 

Equity losses of affiliates

   4   2   13   23 

Impairment and restructuring charges

   34   1,205   71   1,235 

Depreciation and amortization

   168   168   494   501 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Segment EBITDA

  $247  $292  $975  $1,117 
  

 

 

  

 

 

  

 

 

  

 

 

 

The following tables set forth the Company’s reported Revenues and Segment EBITDA for the three and nine months ended March 31, 2019 and pro forma Revenues and Segment EBITDA for the three and nine months ended March 31, 2018:

   For the three months ended March 31,  For the nine months ended March 31, 
   2019  2018  2019  2018 
   As reported  Pro forma  As reported  Pro forma 
(in millions)  Revenues   Segment
EBITDA		  Revenues   Segment
EBITDA		  Revenues   Segment
EBITDA		  Revenues   Segment
EBITDA		 

News and Information Services

  $1,224   $73  $1,286   $87  $3,729   $309  $3,825   $302 

Subscription Video Services

   539    98   623    127   1,666    295   1,934    436 

Book Publishing

   421    53   398    41   1,335    209   1,268    167 

Digital Real Estate Services

   272    74   279    88   876    300   842    302 

Other

   1    (51)   1    (51)   2    (138)   2    (90) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $2,457   $247  $2,587   $292  $7,608   $975  $7,871   $1,117 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Subscription Video Services(pro forma) (22% and 25% of the Company’s consolidated revenues in the nine months ended March 31, 2019 and 2018, respectively)

   For the three months ended March 31,   For the nine months ended March 31, 
   2019  2018  Change  % Change   2019  2018  Change  % Change 
(in millions, except %)  As reported  Pro forma  Better/(Worse)   As reported  Pro forma  Better/(Worse) 

Revenues:

          

Circulation and subscription

  $474  $547  $(73)   (13)%   $1,455  $1,687  $(232)   (14)% 

Advertising

   50   60   (10)   (17)%    162   201   (39)   (19)% 

Other

   15   16   (1)   (6)%    49   46   3   7 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Total Revenues

   539   623   (84)   (13)%    1,666   1,934   (268)   (14)% 

Operating expenses

   (374)   (374)   —   — %    (1,109)   (1,129)   20   2 % 

Selling, general and administrative

   (67)   (122)   55   45 %    (262)   (369)   107   29 % 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Segment EBITDA

  $98  $127  $(29)   (23)%   $295  $436  $(141)   (32)% 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

For the three months ended MarchDecember 31, 2019, revenues at the Subscription Video Services segment decreased $84$112 million, or 13%10%, as compared to the corresponding period of fiscal 2018.2019. The revenue decrease for the six months ended December 31, 2019 was primarily due to the $53 million negative impact of foreign currency fluctuations and lower subscription revenues due to lower broadcast subscribers and changes in the subscriber package mix, partially offset by $11 million of higher revenues from Foxtel Now and Kayo Sports.

For the three months ended March 31, 2019, Segment EBITDA at the Subscription Video Services segment decreased $29 million, or 23%, as compared to the corresponding period of fiscal 2018. The decrease in Segment EBITDA was primarily due to higher sports programming and production costs, including approximately $25 million related to Cricket Australia, the lower revenues discussed above and approximately $10 million in higher marketing costs related to Kayo Sports, partially offset by lower entertainment programming costs, customer service and installation costs and overhead expenses.

For the nine months ended March 31, 2019, revenues at the Subscription Video Services segment decreased $268 million, or 14%, as compared to the corresponding period of fiscal 2018. The revenue decrease was primarily due to the $137$59 million negative impact of foreign currency fluctuations and lower subscription revenues resulting from lower broadcast subscribers and changes in the subscriber package mix, partially offset by $27$38 million of higher revenues from Kayo and Foxtel Now and Kayo Sports.

Now.

For the ninesix months ended MarchDecember 31, 2019, Segment EBITDA at the Subscription Video Services segment decreased $141$46 million, or 32%23%, as compared to the corresponding period of fiscal 2018.2019. The Segment EBITDA decrease for the six months ended December 31, 2019 was primarily due to the lower revenues discussed above, partially offset by lower overhead and transmission costs and the positive impact of foreign currency fluctuations on expenses.
Book Publishing
(17% and 18% of the Company’s consolidated revenues in the six months ended December 31, 2019 and 2018, respectively)
                                 
 
For the three months ended December 31,
  
For the six months ended December 31,
 
 
2019
  
2018
  
Change
  
% Change
  
2019
  
2018
  
Change
  
% Change
 
(in millions, except %)
     
Better/(Worse)
      
Better/(Worse)
 
Revenues:
                        
Consumer
 $
421
  $
478
  $
(57
)  
(12
)% $
808
  $
878
  $
(70
)  
(8
)%
Other
  
21
   
18
   
3
   
17
%  
39
   
36
   
3
   
8
%
                                 
Total Revenues
  
442
   
496
   
(54
)  
(11
)%  
847
   
914
   
(67
)  
(7
)%
Operating expenses
  
(297
)  
(322
)  
25
   
8
%  
(576
)  
(597
)  
21
   
4
%
Selling, general and administrative
  
(82
)  
(86
)  
4
   
5
%  
(159
)  
(161
)  
2
   
1
%
                                 
Segment EBITDA
 $
63
  $
88
  $
(25
)  
(28
)% $
112
  $
156
  $
(44
)  
(28
)%
                                 
For the three months ended December 31, 2019, revenues at the Book Publishing segment decreased $54 million, or 11%, as compared to the corresponding period of fiscal 2019. The decrease for the three months ended December 31, 2019 was primarily due to lower sales of
Homebody: A Guide to Creating Spaces You Never Want to Leave
by Joanna Gaines,
Girl,
Wash Your Face
by Rachel Hollis,
The Hate U Give
by Angie Thomas and
The Subtle Art Of Not Giving A F*ck
by Mark Manson, as well as the $2 million negative impact of foreign currency fluctuations. The decrease was partially offset by strong sales of
The Pioneer Woman Cooks: The New Frontier
by Ree Drummond and
The Beast Of Buckingham Palace
by David Walliams. Digital sales represented approximately 19% of Consumer revenues during the three months ended December 31, 2019. Digital sales increased approximately 5% as compared to the corresponding period of fiscal 2019, primarily due to growth in downloadable audio books.
For the three months ended December 31, 2019, Segment EBITDA at the Book Publishing segment decreased $25 million, or 28%, as compared to the corresponding period of fiscal 2019. The decrease was primarily due to the lower revenues discussed above and the mix of titles.
For the six months ended December 31, 2019, revenues at the Book Publishing segment decreased $67 million, or 7%, as compared to the corresponding period of fiscal 2019. The decrease for the six months ended December 31, 2019 was primarily due to lower sales of
Homebody: A Guide to Creating Spaces You Never Want to Leave
by Joanna Gaines,
Girl,
Wash Your Face
by Rachel Hollis,
The Hate U Give
by Angie Thomas and
The Subtle Art Of Not Giving A F*ck
by
Mark Manson, as well as the $7 million negative impact of foreign currency fluctuations. The decrease was partially
47
Table of Contents
offset by strong sales of
The Pioneer Woman Cooks: The New Frontier
by Ree Drummond. Digital sales represented approximately 21% of Consumer revenues during the six months ended December 31, 2019. Digital sales decreased approximately 1% as compared to the corresponding period of fiscal 2019, primarily due to the lower revenues discussed above.
For the six months ended December 31, 2019, Segment EBITDA at the Book Publishing segment decreased $44 million, or 28%, as compared to the corresponding period of fiscal 2019. The decrease was primarily due to the lower revenues discussed above and the mix of titles.
Digital Real Estate Services
(12% of the Company’s consolidated revenues in the six months ended December 31, 2019 and 2018)
                                 
 
For the three months ended December 31,
  
For the six months ended December 31,
 
 
2019
  
2018
  
Change
  
% Change
  
2019
  
2018
  
Change
  
% Change
 
(in millions, except %)
     
Better/(Worse)
  
Better/(Worse)
 
Revenues:
                        
Circulation and subscription
 $
9
  $
13
  $
(4
)  
(31
)% $
19
  $
27
  $
(8
)  
(30
)%
Advertising
  
25
   
31
   
(6
)  
(19
)%  
52
   
62
   
(10
)  
(16
)%
Real estate
  
242
   
248
   
(6
)  
(2
)%  
460
   
475
   
(15
)  
(3
)%
Other
  
18
   
19
   
(1
)  
(5
)%  
35
   
40
   
(5
)  
(13
)%
                                 
Total Revenues
  
294
   
311
   
(17
)  
(5
)%  
566
   
604
   
(38
)  
(6
)%
Operating expenses
  
(42
)  
(42
)  
—
   
—
   
(87
)  
(77
)  
(10
)  
(13
)%
Selling, general and administrative
  
(134
)  
(148
)  
14
   
9
%  
(279
)  
(301
)  
22
   
7
%
                                 
Segment EBITDA
 $
118
  $
121
  $
(3
)  
(2
)% $
200
  $
226
  $
(26
)  
(12
)%
                                 
For the three months ended December 31, 2019, revenues at the Digital Real Estate Services segment decreased $17 million, or 5%, as compared to the corresponding period of fiscal 2019. At REA Group, revenues decreased $16 million, or 8%, to $173 million for the three months ended December 31, 2019 from $189 million in the corresponding period of fiscal 2019. The lower revenues were primarily due to the $8 million negative impact of foreign currency fluctuations, a decrease in Australian residential depth revenue driven by declines in listing volumes and lower developer revenue, partially offset by higher yield and improved product
mix in the residential business. Revenues at Move decreased $1 million, or 1%, to $121 million for the three months ended December 31, 2019 from $122 million in the corresponding period of fiscal 2019 primarily due to lower revenues from software and services, partially offset by higher real estate revenues.
For the three months ended December 31, 2019, Segment EBITDA at the Digital Real Estate Services segment decreased $3 million, or 2%, as compared to the corresponding period of fiscal 2019. The decrease in Segment EBITDA was primarily due to the $5 million negative impact of foreign currency fluctuations, as the lower revenues at REA Group discussed above higher sports programming and productionwere more than offset by lower costs including approximately $51at Move.
For the six months ended December 31, 2019, revenues at the Digital Real Estate Services segment decreased $38 million, relatedor 6%, as compared to Cricket Australia, and approximately $19the corresponding period of fiscal 2019. At REA Group, revenues decreased $40 million, or 11%, to $322 million for the six months ended December 31, 2019 from $362 million in the corresponding period of fiscal 2019. The lower revenues were primarily due to a decrease in Australian residential depth revenue driven by declines in listing volumes, the $18 million negative impact of foreign currency fluctuations and lower developer revenue. Revenues at Move increased $4 million, or 2%, to $244 million for the six months ended December 31, 2019 from $240 million in the corresponding period of fiscal 2019 primarily due to 
higher marketing costs related to Kayo Sports,real estate revenues, partially offset by lower entertainment programmingrevenues from software and services.
For the six months ended December 31, 2019, Segment EBITDA at the Digital Real Estate Services segment decreased $26 million, or 12%, as compared to the corresponding period of fiscal 2019. The decrease in Segment EBITDA was primarily the result of the lower revenues at REA Group discussed above, the $16 million impact associated with the acquisition of and continued investment in Opcity and the $10 million negative impact of foreign currency fluctuations, partially offset by lower costs customer service and installation costs and overhead expenses.

at Move.

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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 MarchDecember 31, 2019, the Company’s cash and cash equivalents were $1.65$1.27 billion. The Company expects these elements of liquidity will enable it to meet its liquidity needs in the foreseeable future, including repayment of indebtedness. 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. 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, its access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) the performance of the Company and/or its operating subsidiaries, as applicable, (ii) the Company’s credit rating or absence of a credit rating and/or the credit rating of its operating subsidiaries, as applicable, (iii) the provisions of any relevant debt instruments, credit agreements, indentures and similar or associated documents, (iv) the liquidity of the overall credit and capital markets 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 II, “Item 1A. Risk Factors” for further discussion.

As of MarchDecember 31, 2019, the Company’s consolidated assets included $714$552 million in cash and cash equivalents that were held by its foreign subsidiaries. Of this amount, $49$63 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. The deemed repatriation tax was determined to be approximately $26 million, which was recorded to income tax expense in fiscal 2018. The U.S. Treasury Department released additional guidance and proposed regulations during the past year. The Company undertook a review of the guidance and proposed regulations and determined that there were no material changes to the deemed repatriation tax of approximately $26 million.

The principal uses of cash that affect the Company’s liquidity position include the following: operational expenditures including employee costs and paper purchases; capital expenditures; income tax payments; investments in associated entities; acquisitions; and 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 ninesix months ended MarchDecember 31, 2019.2019 and 2018. Through May 3, 2019,January 31, 2020, 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 May 3, 2019January 31, 2020 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 B Common Stock during the six months ended December 31, 2019 and 2018.
49
Table of Contents
Dividends

In FebruaryAugust 2019, 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 17,October 16, 2019 to stockholders of record at the close of business on March 13,September 11, 2019. In August 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 October 17, 2018 to stockholders of record at the close of business on September 12, 2018. 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—For the ninesix months ended MarchDecember 31, 2019 versus the ninesix months ended MarchDecember 31, 2018

Net cash provided by operating activities for the ninesix months ended MarchDecember 31, 2019 and 2018 was as follows (in millions):

For the nine months ended March 31,

  2019   2018 

Net cash provided by operating activities

  $661   $465 
    

         
For the six months ended December 31,
 
2019
  
2018
 
Net cash provided by operating activities
 $
192
  $
358
 
Net cash provided by operating activities increaseddecreased by $196$166 million for the ninesix months ended MarchDecember 31, 2019 as compared to the ninesix months ended MarchDecember 31, 2018. The increasedecrease was primarily due to higherlower Total Segment EBITDA partially offset by $59 million in higherand lower cash paid for interest.

distributions received from affiliates of $22 million.

Net cash used in investing activities for the ninesix months ended MarchDecember 31, 2019 and 2018 was as follows (in millions):

For the nine months ended March 31,

  2019  2018 

Net cash used in investing activities

  $(523)  $(144) 

         
For the six months ended December 31,
 
2019
  
2018
 
Net cash used in investing activities
 $
(234
) $
(409
)
During the ninesix months ended MarchDecember 31, 2019, the Company used $417$237 million of cash for capital expenditures, of which $223$129 million related to newFoxtel.
During the six months ended December 31, 2018, the Company used $264 million of cash for capital expenditures, of which $139 million related to Foxtel, and $187$185 million of cash for acquisitions, primarily for the acquisition of Opcity. New Foxtel’s total capital expenditures in fiscal 2019 are now expected to be higher than fiscal 2018 by approximately $25 million.

During the nine months ended March 31, 2018, the Company used $200 million for capital expenditures and $62 million of cash for acquisitions, primarily for the acquisition of Smartline. These expenditures were partially offset by proceeds from the sale of the SEEKAsia cost method investment of $122 million during the nine months ended March 31, 2018.

Net cash used in financing activities for the ninesix months ended MarchDecember 31, 2019 and 2018 was as follows (in millions):

For the nine months ended March 31,

  2019  2018 

Net cash used in financing activities

  $(501)  $(234) 

The increase in net

         
For the six months ended December 31,
 
2019
  
2018
 
Net cash used in financing activities
 $
 (328
) $
 (333
)
Net cash used forin financing activities decreased by $5 million for the ninesix months ended MarchDecember 31, 2019, as compared to the corresponding periodsix months ended December 31, 2018. During the six months ended December 31, 2019, the Company repaid $1.2 billion of borrowings related to Foxtel and REA Group, which includes repayments made as part of the debt refinancings completed in the second quarter of fiscal 2019, and made dividend payments of $81 million to News Corporation stockholders and REA Group minority stockholders. The net cash used in financing activities for the six months ended December 31, 2019 was partially offset by new borrowings related to Foxtel and REA Group of $917 million, which includes drawdowns under the new facilities entered into as part of the debt refinancings referenced above, and the net settlement of hedges of $57 million. See Note 5—Borrowings in the accompanying Consolidated Financial Statements.
During the six months ended December 31, 2018, primarily relates to the repayment ofCompany repaid borrowings of $801$470 million, mainly related to repayment of borrowings for new Foxtel and at REA Group, made dividend payments of $81 million to News Corporation stockholders and the redemption ofREA Group minority stockholders and redeemed the Company’s redeemable preferred stock offor $20 million,million. The net cash used in financing activities for the six months ended December 31, 2018 was partially offset by new borrowings by newrelated to Foxtel of $450$263 million.

50
Table of Contents
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, 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 should be considered in addition to, not as a substitute for, cash flows from 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 operating activities to free cash flow available to News Corporation:

   For the nine months ended March 31, 
   2019  2018 
   (in millions) 

Net cash provided by operating activities

  $661  $465 

Less: Capital expenditures

   (417)   (200) 
  

 

 

  

 

 

 
   244   265 

Less: REA Group free cash flow

   (164)   (144) 

Plus: Cash dividends received from REA Group

   69   63 
  

 

 

  

 

 

 

Free cash flow available to News Corporation

  $149  $184 
  

 

 

  

 

 

 

         
 
For the six months ended December 31,
 
 
2019
  
2018
 
 
(in millions)
 
Net cash provided by operating activities
 $
192
  $
358
 
Less: Capital expenditures
  
(237
)  
(264
)
         
  
(45
)  
94
 
Less: REA Group free cash flow
  
(86
)  
(105
)
Plus: Cash dividends received from REA Group
  
35
   
37
 
         
Free cash flow available to News Corporation
 $
(96
) $
26
 
         
Free cash flow available to News Corporation decreased by $35$122 million in the ninesix months ended MarchDecember 31, 2019 to $149($96) million from $184$26 million in the corresponding period of fiscal 2018,2019, primarily due to higher capital expenditures, partially offset by higherlower cash provided by operating activities as discussed above.

above, partially offset by lower capital expenditures.

Free cash flow available to News Corporation has typically been higher in the second half of the fiscal year.
Borrowings

As of MarchDecember 31, 2019, the Company had total borrowings of $1.55 billion, including the current portion.$1.2 billion. The Company’s borrowings as of such date reflect $1.33$1.0 billion of outstanding debt incurred by certain subsidiaries of new Foxtel (togetherNXE Australia Pty Limited (“Foxtel” and together with new Foxtel,such subsidiaries, the “Foxtel Debt Group”) that. In November 2019, the Company consolidated upon completion ofFoxtel Debt Group completed a debt refinancing in which it repaid its then existing credit facilities with the Transaction.proceeds from a new A$610 million revolving credit facility maturing in November 2022 (the “2019 Credit Facility”), a new A$250 million term loan facility maturing in November 2024 (the “2019 Term Loan Facility”) and the new A$200 million shareholder loan referenced below. In addition, the Foxtel Debt Group amended its 2017 Working Capital Facility which, among other things, extended the remaining term to three years, decreased the capacity under the facility from A$100 million to A$40 million and increased the applicable margin. The Foxtel Debt Group debtindebtedness also includes U.S. private placement senior unsecured notes and drawn amounts under its revolving credit facilities, with maturities ranging from 2019fiscal 2023 to 2024. Approximately $142 million and $366 million aggregate principal amount outstanding will mature during fiscal 2019 and 2020, respectively, and these2025. The debt repayments are expected to be funded primarily through a combination of cash on hand and debt refinancing. The Foxtel Group’s borrowings areis guaranteed by certain members of the Foxtel Debt Group. In accordance with ASC 805, these debt instruments were recorded at fair value as of the Transaction date. During the ninesix months ended MarchDecember 31, 2019, the Foxtel Debt Group had repayments of $714approximately $997 million, including the repayment of $150 million aggregate principal amount of senior unsecured notes maturing in July 2019, $75 million aggregate principal amount of

Table of Contents
senior unsecured notes maturing in September 2019 and, in connection with the refinancing discussed above, the repayment of its outstanding borrowings under its A$300200 million (approximately $216 million)credit facility maturing in April 2019, and borrowings of $450 million. The repayment of theJanuary 2020, its A$300400 million credit facility maturing in AprilJuly 2020, its A$400 million credit facility maturing in September 2021 and its 2017 Working Capital Facility. During the six months ended December 31, 2019, was repaid usingthe Foxtel Debt Group had borrowings of approximately $800 million, including the full drawdown of amounts available under the 2019 Credit Facility and the 2019 Term Loan Facility. As of December 31, 2019, the Foxtel Debt Group had $11 million of undrawn commitments under the 2017 Working Capital Facility. The Company previously provided the Foxtel Debt Group with A$300500 million of shareholder loans in fiscal 2019 and an A$200 million revolving credit facility for working capital purposes during the first quarter of fiscal 2020. During the second quarter of fiscal 2020, the Company provided by the Company.

Foxtel Debt Group with an additional A$200 million shareholder loan. 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 facility bears interest at a variable rate of the Australian BBSY plus an applicable margin ranging from 2.00% to 3.75%, depending on the Foxtel Debt Group’s net leverage ratio, and matures in July 2024. Additionally, in February 2020, the Foxtel Debt Group entered into an A$170 million subordinated shareholder loan facility agreement with Telstra which can be used to finance cable transmission costs due to Telstra. The shareholder loan bears interest at a variable rate of the Australian BBSY plus an applicable margin of 7.75% and matures in December 2027.

The Company’s borrowings as of MarchDecember 31, 2019 also reflect the indebtedness of REA Group. REA Group has outstanding borrowings of $168 million. During the nine months ended Marchsecond quarter of fiscal 2020, REA Group completed a debt refinancing in which it repaid the final A$240 million tranche of its A$480 million revolving loan facility with the proceeds of a new A$170 million unsecured syndicated revolving loan facility maturing in December 2021 (the “2019 REA Group Credit Facility”) and cash on hand. As of December 31, 2019, REA Group repaid $87had drawn down the full A$170 million (A$120 million) for its unsecured loan facility due December 2018.available under the 2019 REA Group had remaining borrowings of $220 million, of which approximately $170 million (A$240 million) will mature inCredit Facility.
In December 2019. The2019, the Company expects REA Group to fund this debt repayment primarily through a combination of cash on hand and debt refinancing.

The Company has additional borrowing capacity underterminated its existing unsecured $650 million revolving credit facility, and entered into a new credit agreement (the “Facility”“2019 Credit Agreement”), which provides for an unsecured $750 million revolving credit facility (the “2019 News Corp Credit Facility”) that can be increasedused 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 facility up to a maximum amount of $900 million at the Company’s request.$1 billion. The lenders’ commitments to make the 2019 News Corp Credit Facility 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 two additional

one-year
periods. As of the date of this filing,December 31, 2019, the Company has not borrowed any funds under the 2019 News Corp Credit Facility. In addition, the Company has $241 million of undrawn commitments under the 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 MarchDecember 31, 2019.

See Note 6—5—Borrowings in the accompanying Consolidated Financial Statements for further details regarding the Company’s outstanding debt, including certain information about interest rates and maturities related to such debt arrangements.

52
Table of Contents
Commitments

The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. As a result of the refinancing transactions that occurred during the three months ended December 31, 2019, the Company has presented its commitments associated with its borrowings and the related interest payments in the table below. See Note 5 —Borrowings in the accompanying Consolidated Financial Statements. The Company’s remaining commitments as of MarchDecember 31, 2019 have not changed significantly from the disclosures included in the 20182019 Form
10-K.

                     
 
As of December 31, 2019
 
 
Payments Due by Period
 
 
Total
  
Less than 1
year
  
1-3
 years
  
3-5
 years
  
More than
5
years
 
 
(in millions)
 
Borrowings
 $
1,199
  $
 —
  $
875
  $
324
  $
 —
 
Interest payments on borrowings
(a)
 $
170
  $
50
  $
89
  $
31
  $
—
 
(a)Reflects the Company’s expected future interest payments based on borrowings outstanding and interest rates applicable at December 31, 2019. Such outstanding amounts and rates are subject to change in future periods. See Note 5 —Borrowings in the accompanying Consolidated Financial Statements.
Contingencies

The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed in Note 1110 to the 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 1110 – 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.

53
Table of Contents
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s 20182019 Form10-K for the fiscal year ended June 30, 2018.

10-K.

ITEM 4. CONTROLS AND PROCEDURES

 (a)

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 quarterly 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.

 (b)

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
15(d)-15(f)
under the Exchange Act) during the Company’s thirdsecond quarter of fiscal 20192020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Table of Contents
PART II

ITEM 1. LEGAL PROCEEDINGS

The following supplements the discussion set forth under “Legal Proceedings” in the Company’s 20182019 Form
10-K.

Valassis Communications, Inc.

As reported in the 20182019 Form
10-K,
 Valassis Communications, Inc. (“Valassis”) filed a complaint in the U.S. District Court for the Eastern District of Michigan (the “District Court”) against News America Incorporated, News America Marketing FSI L.L.C., News America Marketing
In-Store
 Services L.L.C. and News Corporation (together, the “NAM Group”) on November 8, 2013 alleging violations of federal and state antitrust laws and common law business torts, including unfair competition, and seeking treble damages, injunctive relief and attorneys’ fees and costs. NAM
In-Store
and NAM FSI asserted a counterclaim against Valassis for unfair competition, alleging that Valassis has engaged in the same practices that it alleges to be
unfair. In November 2019, the parties agreed to discontinue the unfair competition claim and counterclaim.
On December 19, 2013, the NAM Group filed a motion to dismiss the complaint and on March 30, 2016, the District Court ordered thatdismissed 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,claims. On September 25, 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, among other things,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”), and 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 withwhich was granted in part and denied in part by the N.Y. District Court and on February 21, 2019, the N.Y. District Court granted the NAM Group’s motion in part and denied it in part.2019. The N.Y. District Court found that the NAM Group’s bidding practices were lawful but denied the NAM Group’sits motion with respect to claims arising out of certain other alleged contracting practices. ValassisIn addition, the N.Y. District Court also ceased to pursue itsdismissed Valassis’s claims relating to free-standing insert products, and those claims were dismissed.products. On December 20, 2019, at a final
pre-trial
conference, the N.Y. District Court granted the NAM Group’s motion to exclude the testimony of Valassis’s sole damages expert. Valassis filed a motion for clarification or, in the alternative, reconsideration of the N.Y. District Court’s ruling. On February 6, 2020, the N.Y. District Court denied the motion for reconsideration but clarified that Valassis could seek the court’s permission to prove damages through evidence other than its expert’s excluded testimony. The N.Y. District Court has set a trial date of June 1, 2020. 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.

ITEM 1A.
RISK FACTORS

There have been no material changes to the risk factors discloseddescribed in the Company’s 20182019 Form10-K.

10-K,
except as set forth below:
Certain FCC Rules and Regulations and the Separation and Distribution Agreement May Restrict the Company From Acquiring or Owning Certain Types of Assets in the U.S.
The Federal Communications Commission (“FCC”) has promulgated certain rules and regulations that limit the common ownership of radio and television broadcast stations and the common ownership of broadcast stations and newspapers (the “Broadcast Ownership Rules”) and place commercial restrictions on a cable network programmer in which a cable television operator holds an ownership interest (the “Program Access Rules”). In November 2017, the FCC voted to eliminate the Broadcast Ownership Rules, and the order became effective in February 2018. However, in September 2019, a panel of the U.S. Court of Appeals for the Third Circuit (the “Third Circuit”) issued an Order vacating the FCC’s order and reinstating the Broadcast Ownership Rules. The FCC petitioned the Third Circuit for en banc review in November 2019, which the Third Circuit denied. Following the denial, a mandate reinstating the Broadcast Ownership Rules was issued.
Under the FCC’s rules for determining ownership of the media assets described above, the Murdoch Family Trust’s ownership interest in both the Company and FOX would generally result in each company’s businesses and assets being attributable to the Murdoch Family Trust for purposes of determining compliance with the Broadcast Ownership Rules and the Program Access Rules. Consequently, the Company may be restricted from taking advantage of certain acquisition or investment opportunities, including, for example, the acquisition of a newspaper in the same local market in which FOX owns or operates a television station. In addition, the Company agreed in the Separation and Distribution Agreement, as amended, that if it acquires newspapers, radio or television broadcast stations or television broadcast networks in the U.S. and such acquisition would impede or be reasonably likely to impede FOX’s business under the Broadcast Ownership Rules or any other federal statute or FCC rule that limits, directly or indirectly, the ownership or control of radio broadcast stations,
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television broadcast stations, newspapers and/or television broadcast networks, including FOX’s ability to own and operate its television stations or otherwise comply with such rules or statutes, then the Company will be required to take certain actions, including divesting assets, in order to permit FOX to hold its media interests and to comply with such rules or statutes. The Company also agreed not to acquire an interest in a multichannel video programming distributor, including a cable television operator, if such acquisition would subject FOX to the Program Access Rules to which it is not then subject. This agreement effectively limits the activities or strategic business alternatives available to the Company if such activities or strategic business alternatives implicate the Broadcast Ownership Rules or Program Access Rules or any other federal statute or FCC rule that limits, directly or indirectly, the ownership or control of radio broadcast stations, television broadcast stations, newspapers and/or television broadcast networks, and would impede or be reasonably likely to impede FOX’s business.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM
3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM
4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM
5. OTHER INFORMATION

On May 9, 2019, the Company and Robert Thomson, Chief Executive Officer

Not applicable.
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Table of the Company, entered into an Amended and Restated Employment Agreement (the “Amended and Restated Agreement”), effective immediately. The Amended and Restated Agreement extends Mr. Thomson’s term of employment until June 30, 2023 and provides for (i) an annual base salary of $3,000,000 (the same amount as his fiscal 2019 base salary); (ii) an annual bonus with a target of $5,000,000 (the same amount as his fiscal 2019 target annual bonus); and (iii) an annual long-term equity incentive (the “Equity Bonus”) with a target of $7,000,000 (an increase of $1,000,000 from his fiscal 2019 target Equity Bonus). At least $1,000,000 of the Equity Bonus target shall be solely based on the achievement of relative total stockholder return. The at-risk, performance-based portion of Mr. Thomson’s total annual target compensation under the Amended and Restated Agreement is 80%. All bonus payments and equity grants are subject to the Company’s claw-back policies.

If Mr. Thomson’s employment is terminated by the Company other than for cause (as defined in the Amended and Restated Agreement), death or disability or by Mr. Thomson for good reason (as defined in the Amended and Restated Agreement), the Amended and Restated Agreement provides that Mr. Thomson will receive (i) continued payment of his then-current base salary and annual bonus for two years after the date of termination (with the annual bonus to be based on the then-current target); (ii) a pro rata portion of the annual bonus he would have earned for the fiscal year of termination had no termination occurred (a “Pro-rated Annual Bonus”); and (iii) continued vesting of any Equity Bonus awards granted prior to the date of termination in the same manner as though Mr. Thomson continued to be employed for two years after the date of termination. If Mr. Thomson’s employment is terminated due to death or disability, he or his surviving spouse or estate, as applicable, would be entitled to: (i) salary continuation for 12 months; (ii) any Pro-rated Annual Bonus; and (iii) treatment of his outstanding Equity Bonus awards pursuant to the terms of applicable plan documents. Mr. Thomson’s salary continuation is payable during any period of disability for a period not to exceed 12 months. Payment of any compensation or benefits upon termination is subject to Mr. Thomson’s execution of the Company’s then-standard separation agreement and general release and continued compliance with their terms. The Amended and Restated Agreement continues to have confidentiality, non-competition and other covenants to protect the Company.

In addition, the Amended and Restated Agreement provides that, if Mr. Thomson is entitled to receive any “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended, in connection with a change in control, those payments will either (i) be reduced below the applicable threshold, or (ii) paid in full, whichever is more favorable for Mr. Thomson on a net after-tax basis. Mr. Thomson is not entitled to any golden parachute excise tax “gross-up” payments.

The description of the Amended and Restated Agreement is qualified in its entirety by the full text of the Amended and Restated Agreement, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Contents

ITEM 6. EXHIBITS

(a) Exhibits.

2.1 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.*
3.1 
10.1
Amended and RestatedBy-laws of News Corporation 2013 Long-Term Incentive Plan, as amended and restated effective February  25,November 20, 2019. (Incorporated by reference to Exhibit 3.110.1 to the Current Report of News Corporation on Form8-K (File No.001-35769) filed with the Securities and Exchange Commission on February 25,November 20, 2019.)
10.1 News Corp Restoration Plan, amended and restated as of February 11, 2019.*
10.2 
Amended and Restated EmploymentCredit Agreement, dated May 9,as of December 12, 2019, betweenamong News Corporation, as administrative borrower, the lenders named therein, the initial issuing banks named therein, JPMorgan Chase Bank, N.A. as administrative agent, BofA Securities, Inc., Citibank, N.A. and Robert Thomson.*Bank of China, New York Branch as syndication agents and JPMorgan Chase Bank, N.A., BofA Securities, Inc., Citibank, N.A. and Bank of China, 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 December 13, 2019.)
10.3
Syndicated Facility Agreement, dated as of November 14, 2019, among Foxtel Management Pty Limited, as initial borrower, the initial financiers named therein, the MLABs named therein and Commonwealth Bank of Australia, as facility agent.*
10.4
Syndicated Facility Agreement, dated as of 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.*
10.5
Deed of Amendment, dated as of November 15, 2019, to the Multi-Option Facility Agreement, dated as of June 30, 2017, among Foxtel Management Pty Limited, Foxtel Finance Pty Limited and the other original borrowers listed therein and Commonwealth Bank of Australia, as the original lender.*
10.6
Deed of Amendment, dated as of November 15, 2019, to the Common Terms Deed Poll, dated as of April 10, 2012, made by Foxtel Management Pty Ltd and the other parties thereto acting as initial guarantors in favor of the finance parties defined therein.*
10.7
Guarantor Assumption Deed Poll, dated as of November 15, 2019, to the Common Terms Deed Poll, dated as of April 10, 2012, executed by each entity listed in the Schedule thereto.*
10.8
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.*
10.9
Amendment Deed, dated as of November 22, 2019, to the Deed of Guarantee, dated July 25, 2012, executed by each entity listed in Schedule 1 thereto.*
10.10
Accession Deed Poll, dated as of November 22, 2019, to the Deed of Guarantee, dated July 25, 2012, executed by each entity listed in the Schedule thereto.*
31.1 
Chief Executive Officer Certification required by Rules13a-14 and15d-14 under the Securities Exchange Act of 1934, as amended.*
31.2 
Chief Financial Officer Certification required by Rules13a-14 and15d-14 under the Securities Exchange Act of 1934, as amended.*
32.1 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.**
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101 
101
The following financial information from the Company’s Quarterly Report on Form
10-Q
for the quarter ended MarchDecember 31, 2019 formatted in eXtensible Business Reporting Language:Inline XBRL: (i) Consolidated Statements of Operations for the three and ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited); (ii) Consolidated Statements of Comprehensive Income (Loss) for the three and ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited); (iii) Consolidated Balance Sheets as of MarchDecember 31, 2019 (unaudited) and June 30, 20182019 (audited); (iv) Consolidated Statements of Cash Flows for the ninesix months ended MarchDecember 31, 2019 and 2018 (unaudited); and (v) Notes to the Unaudited Consolidated Financial Statements.*
104
The cover page from News Corporation’s Quarterly Report on Form
10-Q
for the quarter ended December 31, 2019, formatted in Inline XBRL (included as Exhibit 101).*

*

Filed herewith.

**

Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NEWS CORPORATION

(Registrant)

By: 

NEWS CORPORATION
(Registrant)
By:
/s/ Susan Panuccio

 
Susan Panuccio
 
Chief Financial Officer

Date: May 10, 2019

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February 7, 2020

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