fox-10q_20160930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2016

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from             to             

Commission file number 001-32352

 

TWENTY-FIRST CENTURY FOX, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

26-0075658

(State or Other Jurisdiction
of Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

1211 Avenue of the Americas, New York, New York

 

10036

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code (212) 852-7000

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes       No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes       No  

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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

As of October 28, 2016, 1,056,810,730 shares of Class A Common Stock, par value $0.01 per share, and 798,520,953 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

 

 

 

 

 


 

TWENTY-FIRST CENTURY FOX, INC.

FORM 10-Q

TABLE OF CONTENTS

 

     

Page

Part I. Financial Information  

 

    Item 1.

 

Financial Statements

   

 

Unaudited Consolidated Statements of Operations for the three months ended September 30, 2016 and 2015      

1

   

 

Unaudited Consolidated Statements of Comprehensive Income for the three months ended September 30, 2016 and 2015

2

   

 

Consolidated Balance Sheets as of September 30, 2016 (unaudited) and June 30, 2016 (audited)

3

   

 

Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2016 and 2015

4

   

 

Notes to the Unaudited Consolidated Financial Statements

5

    Item 2.

 

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

25

    Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

33

    Item 4.

 

Controls and Procedures

35

Part II. Other Information

 

    Item 1.

 

Legal Proceedings

36

    Item 1A.

 

Risk Factors

37

    Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

42

    Item 3.

 

Defaults Upon Senior Securities

42

    Item 4.

 

Mine Safety Disclosures

42

    Item 5.

 

Other Information

42

    Item 6.

 

Exhibits

43

Signature

44

 

 

 

 

 


 

TWENTY-FIRST CENTURY FOX, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 

 

 

For the three months ended

September 30,

 

 

 

2016

 

 

2015

 

Revenues

 

$

6,506

 

 

$

6,077

 

Operating expenses

 

 

(3,864

)

 

 

(3,673

)

Selling, general and administrative

 

 

(866

)

 

 

(889

)

Depreciation and amortization

 

 

(135

)

 

 

(128

)

Equity earnings of affiliates

 

 

35

 

 

 

35

 

Interest expense, net

 

 

(300

)

 

 

(295

)

Interest income

 

 

9

 

 

 

9

 

Other, net

 

 

(148

)

 

 

(83

)

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax expense

 

 

1,237

 

 

 

1,053

 

Income tax expense

 

 

(343

)

 

 

(313

)

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

894

 

 

 

740

 

Loss from discontinued operations, net of tax

 

 

(6

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

Net income

 

 

888

 

 

 

737

 

Less: Net income attributable to noncontrolling interests

 

 

(67

)

 

 

(62

)

 

 

 

 

 

 

 

 

 

Net income attributable to Twenty-First Century Fox, Inc. stockholders

 

$

821

 

 

$

675

 

 

 

 

 

 

 

 

 

 

Earnings per share data

 

 

 

 

 

 

 

 

Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders - basic and diluted

 

$

827

 

 

$

678

 

 

 

 

 

 

 

 

 

 

Weighted average shares:

 

 

 

 

 

 

 

 

Basic

 

 

1,861

 

 

 

2,009

 

Diluted

 

 

1,863

 

 

 

2,012

 

 

 

 

 

 

 

 

 

 

Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders per share - basic and diluted

 

$

0.44

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

Net income attributable to Twenty-First Century Fox, Inc. stockholders per share - basic and diluted

 

$

0.44

 

 

$

0.34

 

 

 

 

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

1


 

TWENTY-FIRST CENTURY FOX, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN MILLIONS)

 

 

 

For the three months ended

September 30,

 

 

 

2016

 

 

2015

 

Net income

 

$

888

 

 

$

737

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

2

 

 

 

(66

)

Cash flow hedges

 

 

8

 

 

 

4

 

Unrealized holding losses on securities

 

 

-

 

 

 

(4

)

Benefit plan adjustments

 

 

9

 

 

 

4

 

Equity method investments

 

 

(59

)

 

 

(87

)

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax

 

 

(40

)

 

 

(149

)

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

848

 

 

 

588

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests(a)

 

 

(67

)

 

 

(62

)

Less: Other comprehensive income attributable to noncontrolling interests

 

 

(1

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Twenty-First Century Fox, Inc. stockholders

 

$

780

 

 

$

526

 

 

(a)

Net income attributable to noncontrolling interests includes $27 million and $28 million for the three months ended September 30, 2016 and 2015, respectively, relating to redeemable noncontrolling interests.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

2


 

TWENTY-FIRST CENTURY FOX, INC.

CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)

 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(unaudited)

 

 

(audited)

 

Assets:

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,681

 

 

$

4,424

 

Receivables, net

 

 

6,099

 

 

 

6,258

 

Inventories, net

 

 

3,300

 

 

 

3,291

 

Other

 

 

841

 

 

 

976

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

14,921

 

 

 

14,949

 

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

 

Receivables, net

 

 

465

 

 

 

389

 

Investments

 

 

3,912

 

 

 

3,863

 

Inventories, net

 

 

7,396

 

 

 

7,041

 

Property, plant and equipment, net

 

 

1,669

 

 

 

1,692

 

Intangible assets, net

 

 

6,715

 

 

 

6,777

 

Goodwill

 

 

12,739

 

 

 

12,733

 

Other non-current assets

 

 

809

 

 

 

749

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

48,626

 

 

$

48,193

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Borrowings

 

$

454

 

 

$

427

 

Accounts payable, accrued expenses and other current liabilities

 

 

3,438

 

 

 

3,181

 

Participations, residuals and royalties payable

 

 

1,573

 

 

 

1,672

 

Program rights payable

 

 

1,345

 

 

 

1,283

 

Deferred revenue

 

 

612

 

 

 

505

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

7,422

 

 

 

7,068

 

 

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Borrowings

 

 

19,034

 

 

 

19,126

 

Other liabilities

 

 

3,780

 

 

 

3,678

 

Deferred income taxes

 

 

2,782

 

 

 

2,888

 

Redeemable noncontrolling interests

 

 

553

 

 

 

552

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Class A common stock(a)

 

 

11

 

 

 

11

 

Class B common stock(b)

 

 

8

 

 

 

8

 

Additional paid-in capital

 

 

12,232

 

 

 

12,211

 

Retained earnings

 

 

3,741

 

 

 

3,575

 

Accumulated other comprehensive loss

 

 

(2,185

)

 

 

(2,144

)

 

 

 

 

 

 

 

 

 

Total Twenty-First Century Fox, Inc. stockholders' equity

 

 

13,807

 

 

 

13,661

 

Noncontrolling interests

 

 

1,248

 

 

 

1,220

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

15,055

 

 

 

14,881

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

48,626

 

 

$

48,193

 

 

(a)

Class A common stock, $0.01 par value per share, 6,000,000,000 shares authorized, 1,057,115,617 shares and 1,071,302,532 shares issued and outstanding, net of 123,687,371 treasury shares at par as of September 30, 2016 and June 30, 2016, respectively.

(b)

Class B common stock, $0.01 par value per share, 3,000,000,000 shares authorized, 798,520,953 shares issued and outstanding, net of 356,993,807 treasury shares at par as of September 30, 2016 and June 30, 2016.

 

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

3


 

TWENTY-FIRST CENTURY FOX, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

 

 

 

For the three months ended

September 30,

 

 

 

2016

 

 

2015

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

888

 

 

$

737

 

Less: Loss from discontinued operations, net of tax

 

 

(6

)

 

 

(3

)

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

894

 

 

 

740

 

Adjustments to reconcile income from continuing operations to cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

135

 

 

 

128

 

Amortization of cable distribution investments

 

 

15

 

 

 

20

 

Equity-based compensation

 

 

42

 

 

 

86

 

Equity earnings of affiliates

 

 

(35

)

 

 

(35

)

Cash distributions received from affiliates

 

 

2

 

 

 

6

 

Other, net

 

 

148

 

 

 

83

 

CLT20 contract termination costs(a)

 

 

-

 

 

 

(420

)

Deferred income taxes and other taxes

 

 

(12

)

 

 

175

 

Change in operating assets and liabilities, net of acquisitions and dispositions:

 

 

 

 

 

 

 

 

Receivables

 

 

86

 

 

 

(144

)

Inventories net of program rights payable

 

 

(343

)

 

 

(516

)

Accounts payable and accrued expenses

 

 

(51

)

 

 

(332

)

Other changes, net

 

 

99

 

 

 

(96

)

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities from continuing operations

 

 

980

 

 

 

(305

)

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

(53

)

 

 

(34

)

Investments in equity affiliates

 

 

(6

)

 

 

(86

)

Other investments

 

 

(63

)

 

 

(163

)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities from continuing operations

 

 

(122

)

 

 

(283

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Borrowings

 

 

37

 

 

 

91

 

Repayment of borrowings

 

 

(105

)

 

 

(119

)

Repurchase of shares

 

 

(467

)

 

 

(1,889

)

Dividends paid and distributions

 

 

(54

)

 

 

(56

)

Other financing activities, net

 

 

(19

)

 

 

8

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities from continuing operations

 

 

(608

)

 

 

(1,965

)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents from discontinued operations

 

 

(6

)

 

 

(7

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

244

 

 

 

(2,560

)

Cash and cash equivalents, beginning of year

 

 

4,424

 

 

 

8,428

 

Exchange movement on cash balances

 

 

13

 

 

 

(38

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

4,681

 

 

$

5,830

 

 

(a)

See Note 5 – Restructuring Programs under the heading “Fiscal 2016” in the 2016 Form 10-K as defined in Note 1 – Basis of Presentation.

 

 

 

 

 

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

4


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Twenty-First Century Fox, Inc., a Delaware corporation, and its subsidiaries (together, “Twenty-First Century Fox” or the “Company”) is a diversified global media and entertainment company, which currently manages and reports its businesses in the following four segments: Cable Network Programming, Television, Filmed Entertainment and Other, Corporate and Eliminations.

The accompanying Unaudited Consolidated Financial Statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Unaudited Consolidated Financial Statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2017.

These interim Unaudited Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 as filed with the Securities and Exchange Commission (“SEC”) on August 11, 2016 (the “2016 Form 10-K”).

The Unaudited Consolidated Financial Statements include the accounts of Twenty-First Century Fox. All significant intercompany accounts and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees. Investments in and advances to entities or joint ventures in which the Company has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Investments in which the Company has no significant influence are designated as available-for-sale investments if readily determinable market values are available. If an investment’s fair value is not readily determinable, the Company accounts for its investment at cost.

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Actual results may differ from those estimates.

Certain fiscal 2016 amounts have been reclassified to conform to the fiscal 2017 presentation. Unless indicated otherwise, the information in the notes to the Unaudited Consolidated Financial Statements relates to the Company’s continuing operations.

Recently Adopted and Recently Issued Accounting Guidance

Adopted

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). To simplify the presentation of debt issuance costs, ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. On July 1, 2016, the Company adopted ASU 2015-03 on a retrospective basis (See Note 6 – Borrowings).

Issued

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company is currently evaluating the impact ASU 2016-15 will have on its consolidated financial statements.

 

 

NOTE 2. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS

The Company’s acquisitions support the Company’s strategic priority of increasing its brand presence and reach in key domestic and international markets and acquiring greater control of investments that complement its portfolio of businesses.

For recent acquisitions, the accounting for the business combination, including consideration transferred, is based on provisional amounts and the allocation of the excess purchase price is not final. The amounts allocated to intangibles and goodwill, the estimates of useful lives and the related amortization expense are subject to changes pending the completion of the final valuations of certain assets and liabilities. A change in the purchase price allocations and any estimates of useful lives could result in a change in the value allocated to the intangible assets that could impact future amortization expense.

5


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fiscal 2016

See Note 3 – Acquisitions, Disposals and Other Transactions in the 2016 Form 10-K under the heading “Fiscal 2016”. The accounting for the National Geographic Partners and MAA Television Network transactions in Fiscal 2016 continue to be based on provisional amounts and the allocation of the excess purchase price is not final.

 

 

NOTE 3. INVENTORIES, NET

The Company’s inventories were comprised of the following:

 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Programming rights and other(a)

 

$

6,601

 

 

$

6,359

 

Filmed entertainment costs:

 

 

 

 

 

 

 

 

Films:

 

 

 

 

 

 

 

 

Released or completed

 

 

1,562

 

 

 

1,569

 

In production

 

 

789

 

 

 

825

 

In development or preproduction

 

 

236

 

 

 

196

 

 

 

 

-

 

 

 

 

 

 

 

 

2,587

 

 

 

2,590

 

 

 

 

 

 

 

 

 

 

Television productions:

 

 

 

 

 

 

 

 

Released

 

 

931

 

 

 

1,067

 

In production, development or preproduction

 

 

577

 

 

 

316

 

 

 

 

 

 

 

 

 

 

 

 

 

1,508

 

 

 

1,383

 

 

 

 

 

 

 

 

 

 

Total filmed entertainment costs, less accumulated amortization(b)

 

 

4,095

 

 

 

3,973

 

 

 

 

 

 

 

 

 

 

Total inventories, net

 

 

10,696

 

 

 

10,332

 

Less: current portion of inventories, net(c)

 

 

(3,300

)

 

 

(3,291

)

 

 

 

 

 

 

 

 

 

Total non-current inventories, net

 

$

7,396

 

 

$

7,041

 

 

(a)

Other includes DVDs, Blu-rays and other merchandise.

(b)

Does not include $265 million and $273 million of net intangible film library costs as of September 30, 2016 and June 30, 2016, respectively, which were included in intangible assets subject to amortization in the Consolidated Balance Sheets.

(c)

Current portion of inventories, net as of September 30, 2016 and June 30, 2016 was comprised of programming rights ($3,198 million and $3,212 million, respectively), DVDs, Blu-rays and other merchandise.

 

 

NOTE 4. INVESTMENTS

The Company’s investments were comprised of the following:

 

 

 

 

 

Ownership

percentage

as of

September 30,

2016

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

 

 

 

 

 

 

(in millions)

 

Sky(a)(b)

 

European direct broadcast satellite operator

 

 

39%

 

 

$

3,024

 

 

$

2,972

 

Endemol Shine Group(b)

 

Global multi-platform content provider

 

 

50%

 

 

 

414

 

 

 

445

 

Other investments

 

 

 

various

 

 

 

474

 

 

 

446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

 

 

 

 

 

 

$

3,912

 

 

$

3,863

 

 

(a)

The Company’s investment in Sky plc (“Sky”) had a market value of $7.8 billion as of September 30, 2016 determined using its quoted market price on the London Stock Exchange (a Level 1 measurement as defined in Note 5 – Fair Value).

(b)

Equity method investment.

6


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Hulu

In August 2016, Hulu, LLC (“Hulu”) issued a 10% equity interest to a new investor thereby diluting the Company’s ownership to 30%. For a period of up to 36 months, under certain limited circumstances, including those arising from regulatory review, the new investor may put its shares to Hulu or Hulu may call the shares from the new investor. If Hulu is required to fund the repurchase of shares from the new investor, the Company has agreed to make an additional capital contribution of up to approximately $300 million to Hulu. As a result of these conditions, the Company will record a gain on the dilution of its ownership interest upon resolution of the contingency. The Company will continue to account for its interest in Hulu as an equity method investment.

 

 

NOTE 5. FAIR VALUE

In accordance with ASC 820, “Fair Value Measurement,” fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”).

The tables below present information about financial assets and liabilities carried at fair value on a recurring basis. As of September 30, 2016 and June 30, 2016, there were no assets or liabilities in the Level 1 category.

 

 

 

Fair value measurements

 

 

 

As of September 30, 2016

 

Description

 

Total

 

 

Level 2

 

 

Level 3

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives(a)

 

$

3

 

 

$

3

 

 

$

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives(a)

 

 

(35

)

 

 

(35

)

 

 

-

 

Contingent consideration(b)

 

 

(3

)

 

 

-

 

 

 

(3

)

Redeemable noncontrolling interests(c)

 

 

(553

)

 

 

-

 

 

 

(553

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

(588

)

 

$

(32

)

 

$

(556

)

 

 

 

 

As of June 30, 2016

 

Description

 

Total

 

 

Level 2

 

 

Level 3

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives(a)

 

$

6

 

 

$

6

 

 

$

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives(a)

 

 

(50

)

 

 

(50

)

 

 

-

 

Contingent consideration(b)

 

 

(36

)

 

 

-

 

 

 

(36

)

Redeemable noncontrolling interests(c)

 

 

(552

)

 

 

-

 

 

 

(552

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

(632

)

 

$

(44

)

 

$

(588

)

 

(a)

Represents derivatives associated with the Company’s foreign currency forward contracts and interest rate swap contracts.

(b)

Represents contingent consideration related to past acquisitions.

(c)

The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity” (“ASC 480-10-S99-3A”), because their exercise is outside the control of the Company. The redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in certain of the Company’s majority-owned sports networks. The Company utilizes the market, income or cost approaches or a combination of these valuation techniques for its Level 3 fair value measures, using observable inputs such as market data obtained from independent sources. To the extent observable inputs are not available, the Company utilizes unobservable inputs based upon the assumptions market participants would use in valuing the asset (liability). As of September 30, 2016, one minority shareholder’s put right will become exercisable in March 2017 and one minority shareholder’s put right will become exercisable in July 2017. The remaining redeemable noncontrolling interests are currently not exercisable.

 

7


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and cost method investments, approximates fair value.

 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

23,977

 

 

$

23,986

 

 

 

 

 

 

 

 

 

 

Carrying value

 

$

19,488

 

 

$

19,553

 

 

Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market (a Level 1 measurement).

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts primarily to hedge certain exposures to foreign currency exchange rate risks associated with revenues and the cost of producing or acquiring films and television programming.

 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional amount

 

$

280

 

 

$

409

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

(19

)

 

$

(25

)

 

For foreign currency forward contracts designated as cash flow hedges, the Company expects to reclassify the cumulative changes in fair values, included in Accumulated other comprehensive loss, within the next three years. 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Economic hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional amount

 

$

84

 

 

$

44

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

-

 

 

$

-

 

 

Interest Rate Swap Contracts

The Company uses interest rate swap contracts to hedge certain exposures to interest rate risks associated with certain borrowings.

 

 

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional amount

 

$

695

 

 

$

701

 

 

 

 

 

 

 

 

 

 

Fair value

 

$

(13

)

 

$

(19

)

 

For interest rate swap contracts designated as cash flow hedges, the Company expects to reclassify the cumulative changes in fair values, included in Accumulated other comprehensive loss, within the next three years.

8


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Concentrations of Credit Risk

Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.

The Company’s receivables did not represent significant concentrations of credit risk as of September 30, 2016 or June 30, 2016 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.

The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of September 30, 2016, the Company did not anticipate nonperformance by any of the counterparties.

 

 

NOTE 6. BORROWINGS

 

Description

 

As of

September 30,

2016

 

 

As of

June 30,

2016

 

 

 

(in millions)

 

Bank loans

 

$

1,378

 

 

$

1,446

 

Public debt

 

 

 

 

 

 

 

 

- Predecessor indentures

 

 

10,579

 

 

 

10,579

 

- Senior notes issued under August 2009 indenture

 

 

7,700

 

 

 

7,700

 

 

 

 

 

 

 

 

 

 

Total public debt

 

 

18,279

 

 

 

18,279

 

 

 

 

 

 

 

 

 

 

Total principal amount

 

 

19,657

 

 

 

19,725

 

Less: unamortized discount and debt issuance costs(a)

 

 

(169

)

 

 

(172

)

Total borrowings

 

 

19,488

 

 

 

19,553

 

Less: current borrowings

 

 

(454

)

 

 

(427

)

 

 

 

 

 

 

 

 

 

Non-current borrowings

 

$

19,034

 

 

$

19,126

 

 

(a)

The adoption of ASU 2015-03 resulted in a $172 million decrease in Other non-current assets and Non-current Borrowings in the Consolidated Balance Sheet as of June 30, 2016.

Current Borrowings

Included in Borrowings within Current liabilities as of September 30, 2016 was $400 million of 8.00% Senior Notes which were retired in October 2016 and principal payments on the Yankees Entertainment and Sports Network term loan facility of $54 million that are due in the next 12 months.

 

 

9


TWENTY-FIRST CENTURY FOX, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. STOCKHOLDERS’ EQUITY

The following table summarizes changes in stockholders’ equity:

 

 

 

For the three months ended September 30,

 

 

 

2016

 

 

2015

 

 

 

Twenty-First Century Fox stockholders

 

 

Noncontrolling interests

 

 

Total

equity

 

 

Twenty-First Century Fox stockholders

 

 

Noncontrolling interests

 

 

Total

equity

 

 

 

(in millions)

 

Balance, beginning of period

 

$

13,661

 

 

$

1,220

 

 

$

14,881

 

 

$

17,220

 

 

$

966

 

 

$

18,186

 

Net income

 

 

821

 

 

 

40

 

(a)

 

861

 

 

 

675

 

 

 

34

 

(a)

 

709

 

Other comprehensive (loss) income

 

 

(41

)

 

 

1

 

 

 

(40

)

 

 

(149

)

 

 

-

 

 

 

(149

)

Cancellation of shares, net

 

 

(390

)

 

 

-

 

 

 

(390

)

 

 

(1,826

)

 

 

-

 

 

 

(1,826

)

Dividends declared

 

 

(335

)

 

 

-

 

 

 

(335

)

 

 

(299

)

 

 

-

 

 

 

(299

)

Other

 

 

91

 

 

 

(13

)

(b)

 

78

 

 

 

(340

)

 

 

(26

)

(b)

 

(366

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, end of period

 

$

13,807

 

 

$

1,248

 

 

$