☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
CORP
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) |
Symbol(s)
on which registeredThe Nasdaq Global Select Market The Nasdaq Global Select Market The Nasdaq Global Select Market The Nasdaq Global Select Market (§ Non-accelerated filer ☐
Securities registered pursuant to Section 12(b) of the Act:
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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 | ||||||||||||||||
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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 | |||||||||||||||
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Income (loss) before income tax expense | 30 | (1,107 | ) | 382 | (797 | ) | ||||||||||||||
Income tax expense | 12 | (7 | ) | (3 | ) | (112 | ) | (292 | ) | |||||||||||
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Net income (loss) | 23 | (1,110 | ) | 270 | (1,089 | ) | ||||||||||||||
Less: Net income attributable to noncontrolling interests | (13 | ) | (18 | ) | (64 | ) | (54 | ) | ||||||||||||
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Net income (loss) attributable to News Corporation stockholders | $ | 10 | $ | (1,128 | ) | $ | 206 | $ | (1,143 | ) | ||||||||||
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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 |
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 | ||||||||||||
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Other comprehensive income (loss) | 67 | 1 | (170 | ) | 136 | |||||||||||
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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 | ) | ||||||||||
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Comprehensive income (loss) attributable to News Corporation stockholders | $ | 67 | $ | (1,125 | ) | $ | 82 | $ | (1,008 | ) | ||||||
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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) |
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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 |
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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 | ||||||||||
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Total current assets | 4,247 | 4,394 | ||||||||||
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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 | |||||||||
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Total assets | $ | 16,058 | $ | 16,346 | ||||||||
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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 | |||||||||
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Total current liabilities | 3,679 | 3,295 | ||||||||||
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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 | ) | ||||||||
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Total News Corporation stockholders’ equity | 9,289 | 9,291 | ||||||||||
Noncontrolling interests | 1,169 | 1,186 | ||||||||||
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Total equity | 8 | 10,458 | 10,477 | |||||||||
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Total liabilities and equity | $ | 16,058 | $ | 16,346 | ||||||||
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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) |
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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 | ) | ||||||||
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Net cash provided by operating activities | 661 | 465 | ||||||||||
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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 | ||||||||||
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Net cash used in investing activities | (523 | ) | (144 | ) | ||||||||
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Financing activities: | ||||||||||||
Borrowings | 6 | 450 | — | |||||||||
Repayment of borrowings | 6 | (801 | ) | (93 | ) | |||||||
Dividends paid | (102 | ) | (99 | ) | ||||||||
Other, net | (48 | ) | (42 | ) | ||||||||
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Net cash used in financing activities | (501 | ) | (234 | ) | ||||||||
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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 | |||||||||
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Cash and cash equivalents, end of period | $ | 1,648 | $ | 2,112 | ||||||||
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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 | ||||||||
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.
News and Information Services segment.
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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.
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Issued
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)” (“ASUnew 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 on the previously issued ASU2016-02 and have the same effective date as the original standard. ASUplans to apply this guidanceadopted ASUat the beginningas of July periodadoption, the Company recorded operating leaseadoption through a cumulative-effect adjustment to retained earnings, with no restatementapproximately $
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.
the Company’s Consolidated Financial Statements.
Consolidated Financial Statements.
Consolidated Financial Statements.
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 | ||||||||||||
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 | ||||||||||||
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.
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 | ||||||||
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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 | ||||||||
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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 | ||||||||||||||||||
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Total Revenues | $ | 1,224 | $ | 539 | $ | 421 | $ | 272 | $ | 1 | $ | 2,457 | ||||||||||||
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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 | ||||||||||||||||||
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Total Revenues | $ | 3,729 | $ | 1,666 | $ | 1,335 | $ | 876 | $ | 2 | $ | 7,608 | ||||||||||||
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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
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 | ) | ||||
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Balance, end of period | $ | 460 | $ | 460 | ||||
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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 |
Practical expedients2019 and other2018.
During
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 | |||
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Fair value of net assets | $ | 1,540 | ||
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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 | |||
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Total assets acquired | $ | 4,225 | ||
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Liabilities assumed: | ||||
Current liabilities | $ | 611 | ||
Long-term borrowings | 1,751 | |||
Othernon-current liabilities | 323 | |||
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Total liabilities assumed | 2,685 | |||
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Net assets acquired | $ | 1,540 | ||
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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.
the Company recognized a
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.
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 | ||||||||||||||||||||||||
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Balance, end of period | $ | 28 | $ | 2 | $ | 10 | $ | 40 | $ | 24 | $ | 4 | $ | 10 | $ | 38 | ||||||||||||||||
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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 | |||||||||||||||||||||
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Balance, end of period | $ | 28 | $ | 2 | $ | 10 | $ | 40 | $ | 24 | $ | 4 | $ | 10 | $ | 38 | ||||||||||||||||
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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 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.
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 | |||||||||
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Total Investments | $ | 347 | $ | 393 | ||||||||
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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 |
(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. |
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 | ||||||||||||
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Unrealized gains (losses) recognized on equity securities held at end of period | $ | 6 | $ | 1 | $ | (23 | ) | $ | 8 | |||||||
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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
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 | ) | ||||||||
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Total Equity losses of affiliates | $ | (4 | ) | $ | (974 | ) | $ | (13 | ) | $ | (1,002 | ) | ||||
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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
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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 |
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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 | |||||||||||
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Total borrowings | 1,546 | 1,952 | ||||||||||||||
Less: current portion(g) | (678 | ) | (462 | ) | ||||||||||||
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Long-term borrowings | $ | 868 | $ | 1,490 | ||||||||||||
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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) | 3.94 | % | Nov 22, 2022 | 425 | — | |||||||||||
Term loan facility 2019 (d) | 6.25 | % | Nov 22, 2024 | 174 | — | |||||||||||
Working capital facility 201 7 (a) (c) | 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) | 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 2.00% and the Australian BBSY plus an applicable margin of betweenper annum |
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(d) | During November 2019, the Foxtel Debt Group entered into an A $250 millionterm loan facility maturing in 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 $40 A million and increased the |
(f) | As of |
(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. |
(h) | The carrying |
(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. |
Borrowings under these facilities bear interest at a floating rate of the Australian BBSY plus a margin of between 0.85% and |
(k) | During December 2021 Credit Facility”). |
(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 ASC470-50 “Debt.” |
NOTE 7. REDEEMABLE PREFERRED STOCK
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 | ||||||||
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 |
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 | ||
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 | |||||||||||||||||||||||||||||
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Balance, March 31, 2019 | 385 | $ | 4 | 200 | $ | 2 | $ | 12,229 | $ | (1,927 | ) | $ | (1,019 | ) | $ | 9,289 | $ | 1,169 | $ | 10,458 | ||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||
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Balance, March 31, 2018 | 383 | $ | 4 | 200 | $ | 2 | $ | 12,310 | $ | (1,792 | ) | $ | (829 | ) | $ | 9,695 | $ | 296 | $ | 9,991 | ||||||||||||||||||||
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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 |
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 | ||||||||||||||||||||||||||||
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Balance, March 31, 2019 | 385 | $ | 4 | 200 | $ | 2 | $ | 12,229 | $ | (1,927 | ) | $ | (1,019 | ) | $ | 9,289 | $ | 1,169 | $ | 10,458 | ||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||
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Balance, March 31, 2018 | 383 | $ | 4 | 200 | $ | 2 | $ | 12,310 | $ | (1,792 | ) | $ | (829 | ) | $ | 9,695 | $ | 296 | $ | 9,991 | ||||||||||||||||||||
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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 | ||||||||||||||||||||
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 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 |
| ||
|
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total assets | $ | 72 | $ | 149 | $ | 115 | $ | 336 | $ | 93 | $ | 118 | $ | — | $ | 211 | ||||||||||||||||
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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 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total liabilities | $ | — | $ | 34 | $ | 12 | $ | 46 | $ | — | $ | 32 | $ | 12 | $ | 44 | ||||||||||||||||
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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 4 —Investments. |
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) |
As a result of the adoption of ASU 2016-01 during the first quarter of |
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 | ) | ||||
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| |||||
Balance - end of period | $ | 12 | $ | 92 | ||||
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|
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%. |
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 | ) |
customer premise equipment.
(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 | ||||||||||||||
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Total | $ | 15 | $ | — | $ | (9 | ) | $ | — | |||||||||||
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(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 | ||||||||||||||
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Total | $ | (3 | ) | $ | — | $ | 1 | $ | — | |||||||||||
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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 therc omprehensivel ossfor the six months ended | o therc omprehensivel ossfor 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 | ) | |||||||
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s primary interest rate risk arises from its borrowings acquired as a part of the Transaction.
NaN.
Economic(non-designated) hedges
In addition to derivative instruments that are designated and qualify for hedge accounting,
2019:
As of | ||||
December 31, 2019 | ||||
(in millions) | ||||
Borrowings: | ||||
Carrying amount of hedged item | $ | 68 | ||
Cumulative hedging adjustments included in the carrying amount | $ | (3 | ) |
In
In the third quarter of fiscal 2018, the Company recognizednon-cash
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
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 | ) | |||||||||||
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Net income (loss) available to News Corporation stockholders | $ | 10 | $ | (1,128 | ) | $ | 206 | $ | (1,144 | ) | ||||||
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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 | — | ||||||||||||
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Weighted-average number of shares of common stock outstanding - diluted | 588.8 | 582.8 | 587.2 | 582.6 | ||||||||||||
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| |||||||||
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 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) |
|
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 |
NOTE 11. COMMITMENTS AND
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. |
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.
For the three months ended March 31, 2018, the Company recorded income tax expense
|
NEWS CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
| 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, andHillbilly Elegy . |
|
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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 | ||||||||||||
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Total revenues | $ | 2,457 | $ | 2,093 | $ | 7,608 | $ | 6,331 | ||||||||
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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 | ||||||||||||
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| |||||||||
Income (loss) before income tax expense | 30 | (1,107 | ) | 382 | (797 | ) | ||||||||||
Income tax expense | (7 | ) | (3 | ) | (112 | ) | (292 | ) | ||||||||
|
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|
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| |||||||||
Net income (loss) | $ | 23 | $ | (1,110 | ) | $ | 270 | $ | (1,089 | ) | ||||||
|
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|
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 | ||||||
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| |||||
Total assets | $ | 16,058 | $ | 16,346 | ||||
|
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|
|
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. |
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 | ||||||
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Total Goodwill and intangible assets, net | $ | 7,737 | $ | 7,889 | ||||
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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 | ||||
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 | ) | ||||
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Receivables, net | $ | 1,631 | $ | 1,612 | ||||
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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 | ||||
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 | ||||||
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Total Othernon-current assets | $ | 913 | $ | 831 | ||||
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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
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 | ||||||
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Total Other current liabilities | $ | 745 | $ | 372 | ||||
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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. |
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 | |||||||||||
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Total Other, net | $ | 3 | $ | 30 | $ | 30 | $ | 9 | ||||||||
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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 | ||||||||
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 |
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.
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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 % | |||||||||||||||||||||||
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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 | ** | |||||||||||||||||||||||
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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 % | |||||||||||||||||||
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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)% | |||||||||||||||||||
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Net income (loss) attributable to News Corporation stockholders | $ | 10 | $ | (1,128 | ) | $ | 1,138 | ** | $ | 206 | $ | (1,143 | ) | $ | 1,349 | ** | ||||||||||||||||
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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 | ) | ** | ||||||||||||||
2019.
2019.
2019.
2019.
2019.
2019.
2019.
2019.
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.
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% | ||||||||||||||||||||
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Total Equity losses of affiliates | $ | (4 | ) | $ | (974 | ) | $ | 970 | 100% | $ | (13 | ) | $ | (1,002 | ) | $ | 989 | 99% | ||||||||||||||
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** not meaningful
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restructuring charges
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
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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.
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.
2019.
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.
$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 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.
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 | ||||||||||||
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Total Segment EBITDA | $ | 247 | $ | 181 | $ | 975 | $ | 757 | ||||||||
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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 | ||||||||
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 | ) | ||||||||||
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Total | $ | 2,457 | $ | 247 | $ | 2,093 | $ | 181 | ||||||||
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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 | ) | ||||||||||
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Total | $ | 7,608 | $ | 975 | $ | 6,331 | $ | 757 | ||||||||
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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 | ||||||||
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 | ||||||||
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 % | |||||||||||||||||||||||
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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 % | ||||||||||||||||||||
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Segment EBITDA | $ | 73 | $ | 87 | $ | (14 | ) | (16)% | $ | 309 | $ | 302 | $ | 7 | 2 % | |||||||||||||||||
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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 | )% | |||||||||||||||
2019.
2019.
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.
2019.
Corp Australia
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.
2019. Advertising
UK
cover price increases across mastheads and digital subscriber growth.
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
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 | ** | ||||||||||||||||||||||||
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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 | ) | ** | ||||||||||||||||||
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Segment EBITDA | $ | 98 | $ | 16 | $ | 82 | ** | $ | 295 | $ | 76 | $ | 219 | ** | ||||||||||||||||||
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** 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
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 | )% | ||||||||||||||
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 % | ||||||||||||||||||||||||
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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)% | ||||||||||||||||||
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Segment EBITDA | $ | 53 | $ | 41 | $ | 12 | 29 % | $ | 209 | $ | 167 | $ | 42 | 25 % | ||||||||||||||||||
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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)% | ||||||||||||||||||||||
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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)% | |||||||||||||||||||
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Segment EBITDA | $ | 74 | $ | 88 | $ | (14 | ) | (16)% | $ | 300 | $ | 302 | $ | (2 | ) | (1)% | ||||||||||||||||
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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 | ||||||||||||
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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 | |||||||||||
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(Loss) income before income tax expense | (1,107 | ) | 11 | 21 | (1,075 | ) | ||||||||||
Income tax expense | (3 | ) | (3 | ) | — | (k) | (6 | ) | ||||||||
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Net (loss) income | (1,110 | ) | 8 | 21 | (1,081 | ) | ||||||||||
Less: Net (income) loss attributable to noncontrolling interests | (18 | ) | 1 | 7 | (l) | (10 | ) | |||||||||
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Net (loss) income attributable to News Corporation | $ | (1,128 | ) | $ | 9 | $ | 28 | $ | (1,091 | ) | ||||||
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Net loss available to News Corporation stockholders per share | $ | (1.94 | ) | $ | (1.87 | ) | ||||||||||
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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 | ||||||||||||
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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 | |||||||||||
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(Loss) income before income tax expense | (797 | ) | 77 | 18 | (702 | ) | ||||||||||
Income tax expense | (292 | ) | (13 | ) | 5 | (k) | (300 | ) | ||||||||
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Net (loss) income | (1,089 | ) | 64 | 23 | (1,002 | ) | ||||||||||
Less: Net (income) loss attributable to noncontrolling interests | (54 | ) | 1 | (27 | )(l) | (80 | ) | |||||||||
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Net (loss) income attributable to News Corporation | $ | (1,143 | ) | $ | 65 | $ | (4 | ) | $ | (1,082 | ) | |||||
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Net loss available to News Corporation stockholders per share | $ | (1.96 | ) | $ | (1.86 | ) | ||||||||||
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Notes to the unaudited pro forma statements:
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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 % | |||||||||||||||||||||||
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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 | ** | |||||||||||||||||||||||
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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 % | |||||||||||||||||||
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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 % | |||||||||||||||||||
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Net income (loss) attributable to News Corporation | $ | 10 | $ | (1,091 | ) | $ | 1,101 | ** | $ | 206 | $ | (1,082 | ) | $ | 1,288 | ** | ||||||||||||||||
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** 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.
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.
The increase in net income during
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 | ||||||||||||
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Total Segment EBITDA | $ | 247 | $ | 292 | $ | 975 | $ | 1,117 | ||||||||
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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 | ) | ||||||||||||||||||||
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Total | $ | 2,457 | $ | 247 | $ | 2,587 | $ | 292 | $ | 7,608 | $ | 975 | $ | 7,871 | $ | 1,117 | ||||||||||||||||
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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 % | |||||||||||||||||||||||
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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 % | ||||||||||||||||||||
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Segment EBITDA | $ | 98 | $ | 127 | $ | (29 | ) | (23)% | $ | 295 | $ | 436 | $ | (141 | ) | (32)% | ||||||||||||||||
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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.
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, | 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 | )% | ||||||||||||||
at Move.
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.
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 |
distributions received from affiliates of $22 million.
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 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.
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 | ) |
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.
For the nine months ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Net cash provided by operating activities | $ | 661 | $ | 465 | ||||
Less: Capital expenditures | (417 | ) | (200 | ) | ||||
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Less: REA Group free cash flow | (164 | ) | (144 | ) | ||||
Plus: Cash dividends received from REA Group | 69 | 63 | ||||||
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Free cash flow available to News Corporation | $ | 149 | $ | 184 | ||||
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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 | |||
above, partially offset by lower capital expenditures.
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 additionalthe 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.
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. |
(a) | Disclosure Controls and Procedures |
(b) | Internal Control Over Financial Reporting |
On May 9, 2019, the Company and Robert Thomson, Chief Executive Officer
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended | |||
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 |
| ||
NEWS CORPORATION (Registrant) | ||
By: | /s/ Susan Panuccio | |
Susan Panuccio | ||
Chief Financial Officer |
67