8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 7, 2018

Twenty-First Century Fox, Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 001-32352

 

Delaware   26-0075658

(State of other jurisdiction of

incorporation)

 

(IRS Employer

Identification No.)

1211 Avenue of the Americas, New York, New York 10036

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(212) 852-7000

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

NOT APPLICABLE

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ☐

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


ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On November 7, 2018, Twenty-First Century Fox, Inc. (the “Company”) released its financial results for the quarter ended September 30, 2018. A copy of the Company’s press release is attached as Exhibit 99.1 to this Form 8-K and incorporated herein by reference.

The information in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits.

 

Exhibit

Number

  

Description

99.1   

Press release issued by Twenty-First Century Fox, Inc., dated November 7, 2018, announcing Twenty-First Century Fox, Inc.’s financial results for the quarter ended September 30, 2018.


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1   

Press release issued by Twenty-First Century Fox, Inc., dated November  7, 2018, announcing Twenty-First Century Fox, Inc.’s financial results for the quarter ended September 30, 2018.


SIGNATURES

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

 

TWENTY-FIRST CENTURY FOX, INC.

(REGISTRANT)

By:

 

/s/ Janet Nova

 

Janet Nova

 

Executive Vice President and

Deputy Group General Counsel

Dated: November 7, 2018

EX-99.1

Exhibit 99.1

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

21ST CENTURY FOX REPORTS FIRST QUARTER INCOME FROM CONTINUING

OPERATIONS ATTRIBUTABLE TO 21ST CENTURY FOX STOCKHOLDERS OF

$1.29 BILLION

TOTAL SEGMENT OPERATING INCOME BEFORE DEPRECIATION AND

AMORTIZATION OF $1.87 BILLION INCREASES 5% FROM THE PRIOR YEAR

QUARTER ON REVENUE GROWTH OF 2%

NEW YORK, NY, November 7, 2018 – Twenty-First Century Fox, Inc. (“21st Century Fox” or the “Company” — NASDAQ: FOXA, FOX) today reported financial results for the three months ended September 30, 2018.

The Company reported quarterly income from continuing operations attributable to 21st Century Fox stockholders of $1.29 billion ($0.69 per share), a 54% increase compared to $839 million ($0.45 per share) reported in the prior year quarter. The current quarter income from continuing operations attributable to 21st Century Fox stockholders includes a non-cash tax benefit of approximately $220 million, or $0.11 per share, related to the Company’s decision on September 26, 2018 to sell its interest in Sky plc (“Sky”). Adjusted quarterly earnings per share from continuing operations attributable to 21st Century Fox stockholders1 was $0.52, 6% higher than the adjusted result of $0.49 reported in the same quarter of the prior year.

The Company reported total quarterly revenues of $7.18 billion, a 2% increase from the $7.00 billion of revenues reported in the prior year quarter. This increase principally reflects higher affiliate and advertising revenues reported at the Television and Cable segments partially offset by lower theatrical revenue reported at the Filmed Entertainment segment. The impact of foreign exchange rates adversely impacted revenue growth by approximately $110 million, or 2% in total.

Quarterly income from continuing operations before income tax expense of $1.48 billion increased 15% from the $1.30 billion reported in the prior year quarter. Quarterly total segment OIBDA of $1.87 billion was 5% higher than the prior year quarter driven by higher contributions reported at our Television, Cable Network Programming and Filmed Entertainment segments. The impact of foreign exchange rates negatively impacted quarterly OIBDA growth by $58 million, or 3%.

Commenting on the results, Executive Chairmen Rupert and Lachlan Murdoch said:

“We continue to deliver against our growth plan even as we make important strides toward completing our Disney transaction and launching FOX in the first half of 2019. We have assembled a stellar leadership team for FOX, giving us further confidence in the new company’s ability to capture opportunities in live programming while delivering long-term value for shareholders. Our quarterly performance builds on the operational and financial achievements of last year and sets up our businesses for continued momentum under both the enlarged Disney and the future FOX.”

 

1 

Excludes net income effects of Impairment and restructuring charges, adjustments to Equity earnings of affiliates, Other, net, and Sky non-cash tax benefit. See page 14 for a reconciliation of reported income and earnings per share from continuing operations attributable to 21st Century Fox stockholders to adjusted income and adjusted earnings per share from continuing operations attributable to 21st Century Fox stockholders, which may be considered non-GAAP financial measures. See footnote (a) on page 14 for a description of the adjustments to Equity earnings of affiliates.

 

Page 1


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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

REVIEW OF SEGMENT OPERATING RESULTS

 

    

Three Months Ended

September 30,

 
     2018     2017  
     US $ Millions  

Revenues:

    

Cable Network Programming

   $ 4,347     $ 4,196  

Television

     1,276       1,065  

Filmed Entertainment

     1,816       1,963  

Other, Corporate and Eliminations

     (262     (222
  

 

 

   

 

 

 

Total revenues

   $ 7,177     $ 7,002  
  

 

 

   

 

 

 

Segment OIBDA:

    

Cable Network Programming

   $ 1,537     $ 1,511  

Television

     168       122  

Filmed Entertainment

     277       256  

Other, Corporate and Eliminations

     (109     (98
  

 

 

   

 

 

 

Total Segment OIBDA(a)

   $ 1,873     $ 1,791  
  

 

 

   

 

 

 

 

(a)

Total segment OIBDA may be considered a non-GAAP financial measure. See page 12 for a description of total segment OIBDA and for a reconciliation from income from continuing operations before income tax expense to total segment OIBDA.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

CABLE NETWORK PROGRAMMING

Cable Network Programming reported quarterly segment OIBDA of $1.54 billion, a 2% increase over the prior year quarter as 4% revenue growth on higher affiliate and advertising revenues was partially offset by a 5% increase in expenses. The increase in expenses was primarily due to higher global sports programming costs reflecting the impact of the FIFA World Cup at both FS1 and FOX Networks Group International (“FNG International”) and contractual increases at the Regional Sports Networks (“RSNs”). Foreign exchange fluctuations, primarily in Latin America, adversely impacted segment OIBDA growth by 4%.

Domestic cable revenue increased 7% led by higher affiliate and advertising revenues partially offset by lower content revenue due to lower third-party licensing of scripted content at FX Networks. Domestic affiliate revenue increased 9% reflecting continued contractual rate increases across all of our domestic brands, and domestic advertising revenue increased 7% from the prior year period largely due to higher pricing at FOX News. Domestic OIBDA contributions increased 6% over the prior year quarter led by higher contributions from FOX News and the RSNs.

International cable revenue declined 4% as higher constant currency affiliate revenue was more than offset by a 9% adverse impact from the strengthened U.S. dollar. International affiliate revenue decreased 1% as 10% local currency growth at FNG International and STAR was more than offset by an 11% adverse impact from the strengthened U.S. dollar. International advertising revenue decreased 8% as the adverse impact from the strengthened U.S. dollar and lower local currency advertising revenue at FNG International more than offset local currency advertising growth at STAR. International OIBDA contributions were 24% lower than the prior year quarter primarily due to the adverse impact from the strengthened U.S. dollar.

TELEVISION

Television reported quarterly segment OIBDA of $168 million, an increase of $46 million, or 38%, over the amount reported in the prior year quarter on revenue growth of 20%. Advertising revenue was 22% higher than the prior year quarter reflecting a higher volume of sports broadcast in the current year quarter, including FIFA World Cup matches and more National Football League games, as well as higher political advertising revenue related to the midterm U.S. elections at the TV stations. Retransmission consent revenue grew 19% over the prior year reflecting contractual rate increases. The revenue increases were partially offset by 17% higher expenses due to higher sports programming costs reflecting the higher volume of National Football League games and FIFA World Cup matches in the current year.

FILMED ENTERTAINMENT

Filmed Entertainment generated quarterly segment OIBDA of $277 million, an 8% increase over the $256 million reported in the prior year quarter. The OIBDA increase reflects higher contributions from the television production studio led by higher SVOD licensing of animated product. Quarterly segment revenues decreased 7% to $1.82 billion, primarily reflecting lower theatrical revenue at the film studio from a lower volume and mix of films released in the current quarter partially offset by higher SVOD revenue at the television production studio.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

REVIEW OF EQUITY EARNINGS OF AFFILIATES’ RESULTS

The Company’s share of equity earnings of affiliates is as follows:

 

         

Three Months Ended

September 30,

 
    % Owned     2018     2017  
          US $ Millions  

Sky

    39 %(1)    $ 147     $ 110  

Hulu

    30     (114     (62

Other equity affiliates

    Various(2)       2       12  
   

 

 

   

 

 

 

Total equity earnings of affiliates

    $ 35     $ 60  
   

 

 

   

 

 

 

 

(1)

On October 9, 2018, the Company disposed of its investment in Sky. See page 5 for more details.

(2)

Primarily comprised of Endemol Shine Group and Tata Sky.

Quarterly equity earnings of affiliates were $35 million as compared to $60 million reported in the same period a year-ago. The $25 million decrease in earnings primarily reflects higher equity losses at Hulu partially offset by higher equity earnings at Sky.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

OTHER ITEMS

Acquisition by Disney and Spin-Off of FOX

On June 20, 2018, the Company entered into an amended and restated merger agreement (the “Disney Merger Agreement”) with The Walt Disney Company (NYSE: DIS) pursuant to which Disney has agreed to acquire, for a price of $38 per Company share, the Company, including the Twentieth Century Fox Film and Television studios and certain cable and international television businesses. Prior to the acquisition by Disney, the Company will separate the FOX Broadcasting Company, FOX Television Stations, FOX News Channel, FOX Business Network, FS1, FS2, Big Ten Network and certain other assets and liabilities into a newly formed subsidiary, FOX, and distribute all of the issued and outstanding common stock of FOX to the Company’s stockholders on a pro rata basis. The closing of the transactions contemplated by the Disney Merger Agreement are subject to the satisfaction of certain conditions, including, among others, regulatory approvals and the receipt of certain tax opinions with respect to the treatment of the transaction under U.S. and Australian tax laws. The pending acquisition of the Company by Disney was cleared by the Antitrust Division of the United States Department of Justice on June 27, 2018 and by the European Commission on November 6, 2018.

On July 27, 2018 at a special meeting of the Company’s stockholders, the Company’s stockholders approved the Disney Merger Agreement and approved the other proposals voted on at the special meeting.

The Company anticipates the transactions closing in the first half of calendar 2019.

Disposition of Sky Shares

Following the recommended revised cash offer by Comcast Corporation (“Comcast”) for the entire issued and to be issued share capital of Sky at a price of £17.28 for each Sky share, the Company announced during the quarter that it intended to dispose of its stake in Sky. On October 9, 2018, the Company sold its 672,783,139 Sky shares to Comcast for total proceeds of £11.6 billion, or $15.1 billion.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

To access a copy of this press release through the Internet, access 21st Century Fox’s corporate Web site located at http://www.21cf.com.

Cautionary Statement Concerning Forward-Looking Statements

This document contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from these expectations due to changes in global economic, business, competitive market and regulatory factors, and the proposed Disney transaction may not be consummated in a timely manner or at all. More detailed information about these and other factors that could affect future results is contained in our filings with the Securities and Exchange Commission, and more detailed information about these and other factors and risks associated with the proposed Disney transaction are more fully discussed in the updated joint proxy statement/prospectus included in the Form S-4 that was declared effective by the SEC on June 28, 2018 and will be more fully discussed in the registration statement with respect to FOX. Investors and shareholders of the Company are urged to read the joint proxy statement/prospectus and other relevant documents filed or to be filed with the SEC carefully when they become available because they will contain important information about the proposed Disney transaction. The “forward-looking statements” included in this document are made only as of the date of this document and we do not have any obligation to publicly update any “forward-looking statements” to reflect subsequent events or circumstances, except as required by law.

 

CONTACTS:

 

Reed Nolte, Investor Relations

  Julie Henderson, Press Inquiries

212-852-7092

Mike Petrie, Investor Relations

212-852-7130

 

310-369-0773

Nathaniel Brown, Press Inquiries

212-852-7746

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    

Three Months Ended

September 30,

 
     2018     2017  
     US $ Millions, except
per share amounts
 

Revenues

   $ 7,177     $ 7,002  

Operating expenses

     (4,424     (4,381

Selling, general and administrative

     (890     (848

Depreciation and amortization

     (158     (142

Impairment and restructuring charges

     (16     (21

Equity earnings of affiliates

     35       60  

Interest expense, net

     (300     (313

Interest income

     8       10  

Other, net

     52       (72
  

 

 

   

 

 

 

Income from continuing operations before income tax expense

     1,484       1,295  

Income tax expense

     (126     (391
  

 

 

   

 

 

 

Income from continuing operations

     1,358       904  

(Loss) income from discontinued operations, net of tax

     (7     16  
  

 

 

   

 

 

 

Net income

     1,351       920  
  

 

 

   

 

 

 

Less: Net income attributable to noncontrolling interests

     (66     (65
  

 

 

   

 

 

 

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

   $ 1,285     $ 855  
  

 

 

   

 

 

 

Weighted average shares:

     1,863       1,853  

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

   $ 0.69     $ 0.45  

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

   $ 0.69     $ 0.46  

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

CONSOLIDATED BALANCE SHEETS

 

     September 30,
2018
    June 30,
2018
 
     US $ Millions  

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 7,083     $ 7,622  

Receivables, net

     7,326       7,120  

Inventories, net

     3,804       3,669  

Other

     915       922  
  

 

 

   

 

 

 

Total current assets

     19,128       19,333  
  

 

 

   

 

 

 

Non-current assets:

    

Receivables, net

     892       724  

Investments

     4,640       4,112  

Inventories, net

     7,760       7,518  

Property, plant and equipment, net

     1,949       1,956  

Intangible assets, net

     6,032       6,101  

Goodwill

     12,755       12,768  

Other non-current assets

     1,356       1,319  
  

 

 

   

 

 

 

Total assets

   $ 54,512     $ 53,831  
  

 

 

   

 

 

 

Liabilities and Equity:

    

Current liabilities:

    

Borrowings

   $ 872     $ 1,054  

Accounts payable, accrued expenses and other current liabilities

     3,381       3,248  

Participations, residuals and royalties payable

     1,634       1,748  

Program rights payable

     1,151       1,368  

Deferred revenue

     764       826  
  

 

 

   

 

 

 

Total current liabilities

     7,802       8,244  
  

 

 

   

 

 

 

Non-current liabilities:

    

Borrowings

     18,379       18,469  

Other liabilities

     3,907       3,664  

Deferred income taxes

     1,949       1,892  

Redeemable noncontrolling interests

     551       764  

Commitments and contingencies

    

Equity:

    

Class A common stock, $0.01 par value

     11       11  

Class B common stock, $0.01 par value

     8       8  

Additional paid-in capital

     12,534       12,612  

Retained earnings

     10,499       8,934  

Accumulated other comprehensive loss

     (2,354     (2,001
  

 

 

   

 

 

 

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

     20,698       19,564  

Noncontrolling interests

     1,226       1,234  
  

 

 

   

 

 

 

Total equity

     21,924       20,798  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 54,512     $ 53,831  
  

 

 

   

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Three Months Ended
September 30,
 
     2018     2017  
     US $ Millions  

Operating activities:

    

Net income

   $ 1,351     $ 920  

Less: (Loss) income from discontinued operations, net of tax

     (7     16  
  

 

 

   

 

 

 

Income from continuing operations

     1,358       904  

Adjustments to reconcile income from continuing operations to cash provided by operating activities

    

Depreciation and amortization

     158       142  

Amortization of cable distribution investments

     10       18  

Impairment and restructuring charges

     16       21  

Equity-based compensation

     19       27  

Equity earnings of affiliates

     (35     (60

Cash distributions received from affiliates

     3       5  

Other, net

     (52     72  

Deferred income taxes

     10       (11

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

    

Receivables

     37       (287

Inventories net of program rights payable

     (725     (183

Accounts payable and accrued expenses

     (296     (100

Other changes, net

     77       200  
  

 

 

   

 

 

 

Net cash provided by operating activities from continuing operations

     580       748  
  

 

 

   

 

 

 

Investing activities:

    

Property, plant and equipment

     (100     (81

Investments in equity affiliates

     (141     (101

Proceeds from dispositions, net

     29       362  

Other investing activities, net

     (253     (29
  

 

 

   

 

 

 

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

     (465     151  
  

 

 

   

 

 

 

Financing activities:

    

Borrowings

     75       —    

Repayment of borrowings

     (343     (67

Dividends paid and distributions

     (94     (67

Other financing activities, net

     (184     (32
  

 

 

   

 

 

 

Net cash used in financing activities from continuing operations

     (546     (166
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents from discontinued operations

     (11     (9

Net (decrease) increase in cash and cash equivalents

     (442     724  

Cash and cash equivalents, beginning of year

     7,622       6,163  

Exchange movement on cash balances

     (97     14  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 7,083     $ 6,901  
  

 

 

   

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

SEGMENT INFORMATION

 

    

Three Months Ended

September 30,

 
     2018     2017  
     US $ Millions  

Revenues:

    

Cable Network Programming

   $ 4,347     $ 4,196  

Television

     1,276       1,065  

Filmed Entertainment

     1,816       1,963  

Other, Corporate and Eliminations

     (262     (222
  

 

 

   

 

 

 

Total revenues

   $ 7,177     $ 7,002  
  

 

 

   

 

 

 

Segment OIBDA:

    

Cable Network Programming

   $ 1,537     $ 1,511  

Television

     168       122  

Filmed Entertainment

     277       256  

Other, Corporate and Eliminations

     (109     (98
  

 

 

   

 

 

 

Total Segment OIBDA(a)

   $ 1,873     $ 1,791  
  

 

 

   

 

 

 

Depreciation and amortization:

    

Cable Network Programming

   $ 97     $ 85  

Television

     26       27  

Filmed Entertainment

     25       23  

Other, Corporate and Eliminations

     10       7  
  

 

 

   

 

 

 

Total depreciation and amortization

   $ 158     $ 142  
  

 

 

   

 

 

 

 

(a)

Total segment OIBDA may be considered a non-GAAP financial measure. See page 12 for a description of total segment OIBDA and for a reconciliation from income from continuing operations before income tax expense to total segment OIBDA.

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

CONSOLIDATED REVENUES BY COMPONENT BY SEGMENT

 

    

Three Months Ended

September 30,

 
     2018     2017  
     US $ Millions  

Revenues by Component:

    

Affiliate fee

   $ 3,495     $ 3,236  

Advertising

     1,772       1,623  

Content

     1,771       2,019  

Other

     139       124  
  

 

 

   

 

 

 

Total revenues

   $ 7,177     $ 7,002  
  

 

 

   

 

 

 

Revenues by Segment by Component:

    

Cable Network Programming

    

Affiliate fee

   $ 3,097     $ 2,902  

Advertising, content and other

     1,250       1,294  
  

 

 

   

 

 

 

Total Cable Network Programming revenues

     4,347       4,196  
  

 

 

   

 

 

 

Television

    

Advertising

     799       655  

Affiliate fee, content and other

     477       410  
  

 

 

   

 

 

 

Total Television revenues

     1,276       1,065  
  

 

 

   

 

 

 

Filmed Entertainment

    

Content

     1,725       1,891  

Advertising and other

     91       72  
  

 

 

   

 

 

 

Total Filmed Entertainment revenues

     1,816       1,963  
  

 

 

   

 

 

 

Other, Corporate and Eliminations

     (262     (222
  

 

 

   

 

 

 

Total revenues

   $ 7,177     $ 7,002  
  

 

 

   

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

NOTE 1 – TOTAL SEGMENT OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

The Company evaluates the performance of its operating segments based on segment operating income before depreciation and amortization (“OIBDA”), and management uses total segment OIBDA as a measure of the performance of operating businesses separate from non-operating factors. Total segment OIBDA may be considered a non-GAAP measure and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements. This measure excludes items, such as depreciation and amortization as well as impairment charges, that are significant components in assessing the Company’s financial performance.

Management believes that total segment OIBDA is an appropriate measure for evaluating the operating performance of the Company’s business and provides investors and equity analysts a measure to analyze operating performance of the Company’s business and enterprise value against historical data and competitors’ data. Segment OIBDA is the primary measure used by our chief operating decision maker to evaluate the performance of and allocate resources to the Company’s business segments.

Segment OIBDA does not include depreciation and amortization and the amortization of cable distribution investments and eliminates the variable effect across all business segments of depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and, as such, it is excluded from segment operating income before depreciation and amortization.

In addition, total segment OIBDA does not include: (Loss) income from discontinued operations, net of tax, Impairment and restructuring charges, Equity earnings of affiliates, Interest expense, net, Interest income, Other, net, Income tax expense and Net income attributable to noncontrolling interests.

The following table reconciles income from continuing operations before income tax expense to total segment OIBDA:

 

    

Three Months Ended

September 30,

 
     2018     2017  
     US $ Millions  

Income from continuing operations before income tax expense

   $ 1,484     $ 1,295  

Add:

    

Amortization of cable distribution investments

     10       18  

Depreciation and amortization

     158       142  

Impairment and restructuring charges

     16       21  

Equity earnings of affiliates

     (35     (60

Interest expense, net

     300       313  

Interest income

     (8     (10

Other, net

     (52     72  
  

 

 

   

 

 

 

Total Segment OIBDA

   $ 1,873     $ 1,791  
  

 

 

   

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

 

 

     Three Months Ended September 30, 2018  
     US $ Millions  
     Revenues      Operating
and Selling,
general and
administrative

expenses
     Add:
Amortization

of cable
distribution
investments
     Segment OIBDA  

Cable Network Programming

   $ 4,347      $ (2,820    $ 10      $ 1,537  

Television

     1,276        (1,108      —          168  

Filmed Entertainment

     1,816        (1,539      —          277  

Other, Corporate and Eliminations

     (262      153        —          (109
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated Total

   $ 7,177      $ (5,314    $ 10      $ 1,873  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three Months Ended September 30, 2017  
     US $ Millions  
     Revenues      Operating
and Selling,
general and
administrative

expenses
     Add:
Amortization

of cable
distribution
investments
     Segment OIBDA  

Cable Network Programming

   $ 4,196      $ (2,703    $ 18      $ 1,511  

Television

     1,065        (943      —          122  

Filmed Entertainment

     1,963        (1,707      —          256  

Other, Corporate and Eliminations

     (222      124        —          (98
  

 

 

    

 

 

    

 

 

    

 

 

 

Consolidated Total

   $ 7,002      $ (5,229    $ 18      $ 1,791  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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EARNINGS RELEASE FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

NOTE 2 – ADJUSTED NET INCOME AND ADJUSTED EPS FROM CONTINUING OPERATIONS

The calculation of income and earnings per share (“EPS”) from continuing operations attributable to 21st Century Fox stockholders excluding net income effects of Impairment and restructuring charges, Equity affiliate adjustments, Other, net, and tax provision adjustments (“adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders”) may not be comparable to similarly titled measures reported by other companies. Adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders are not measures of performance under generally accepted accounting principles and should not be construed as substitutes for consolidated net income and EPS as determined under GAAP as a measure of performance. However, management uses these measures in comparing the Company’s historical performance and believes that they provide meaningful and comparable information to investors to assist in their analysis of our performance relative to prior periods and our competitors.

The Company uses adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders to evaluate the performance of the Company’s operations exclusive of certain items that impact the comparability of results from period to period.

The following table reconciles reported income and reported diluted EPS from continuing operations attributable to 21st Century Fox stockholders to adjusted income and diluted EPS from continuing operations attributable to 21st Century Fox stockholders for the three months ended September 30, 2018 and 2017.

 

     Three Months Ended  
     September 30,
2018
     September 30,
2017
 
     Income      EPS      Income      EPS  
     US $ Millions, except per share data  

Income from continuing operations

   $ 1,358         $ 904     

Less: Net income attributable to noncontrolling interests

     (66         (65   
  

 

 

       

 

 

    

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

   $ 1,292      $ 0.69      $ 839      $ 0.45  

Impairment and restructuring charges

     16        0.01        21        0.01  

Equity affiliate adjustments(a)

     (123      (0.07      19        0.01  

Other, net

     (52      (0.03      72        0.04  

Tax provision(b)

     (165      (0.09      (43      (0.02

Rounding

     —          0.01        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

As adjusted

   $ 968      $ 0.52      $ 908      $ 0.49  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Equity earnings of affiliates for the three months ended September 30, 2018 were adjusted to remove (1) from Sky’s results 21st Century Fox’s share of (i) the gain on the sale of an investment, (ii) restructuring costs, (iii) Sky’s purchase price amortization related to its acquisition of the Direct Broadcast Satellite businesses from the Company and (iv) costs related to Sky’s acquisition and (2) from Endemol Shine Group’s results 21st Century Fox’s share of Endemol Shine Group’s debt revaluation movements and restructuring costs.    Equity earnings of affiliates for the three months ended September 30, 2017 were adjusted to remove (1) from Sky’s results 21st Century Fox’s share of (i) Sky’s purchase price amortization related to its acquisition of the Direct Broadcast Satellite businesses from the Company and (ii) restructuring costs and (2) from Endemol Shine Group’s results 21st Century Fox’s share of Endemol Shine Group’s debt revaluation movements and restructuring costs.

 

(b)

Includes the removal of the non-cash tax benefit of approximately $220 million related to the Company’s decision on September 26, 2018 to sell its interest in Sky.

 

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