Edgar Filing: NEWS CORP

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2015

¨	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 001-35769

LOGO

NEWS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


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)

Registrant’s telephone number, including area code (212) 416-3400

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 x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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 x

As of January 29, 2016, 380,790,614 shares of Class A Common Stock and 199,630,240 shares of Class B Common Stock were outstanding.

NEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS


			Page
Part I. Financial Information

	Item 1.	Financial Statements
		Consolidated Statements of Operations for the three and six months ended December 31, 2015 and 2014 (unaudited)		1
		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 2015 and 2014 (unaudited)		2
		Consolidated Balance Sheets as of December 31, 2015 (unaudited) and June 30, 2015 (audited)		3
		Consolidated Statements of Cash Flows for the six months ended December 31, 2015 and 2014 (unaudited)		4
		Notes to the Unaudited Consolidated Financial Statements		5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		53
	Item 4.	Controls and Procedures		54

Part II. Other Information

	Item 1.	Legal Proceedings		55
	Item 1A.	Risk Factors		59
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		72
	Item 3.	Defaults Upon Senior Securities		72
	Item 4.	Mine Safety Disclosures		72
	Item 5.	Other Information		72
	Item 6.	Exhibits		73
	Signature			74

NEWS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; millions, except per share amounts)


			For the three months ended December 31,						For the six months ended December 31,
	Notes		2015			2014			2015			2014
Revenues:
Advertising			$	976		$	1,038		$	1,856		$	1,958
Circulation and Subscription				621			644			1,260			1,316
Consumer				429			448			821			838
Other				135			128			238			254

Total Revenues				2,161			2,258			4,175			4,366
Operating expenses				(1,193	)		(1,251	)		(2,392	)		(2,533	)
Selling, general and administrative				(688	)		(655	)		(1,338	)		(1,287	)
Depreciation and amortization				(123	)		(127	)		(244	)		(251	)
Impairment and restructuring charges		4		(22	)		(17	)		(39	)		(21	)
Equity earnings of affiliates		5		15			16			23			41
Interest, net				11			13			23			30
Other, net		14		(6	)		10			(1	)		58

Income from continuing operations before income tax (expense) benefit				155			247			207			403
Income tax (expense) benefit		12		(49	)		(65	)		42			(112	)

Income from continuing operations				106			182			249			291
(Loss) income from discontinued operations, net of tax		3		(24	)		(19	)		22			(40	)

Net income				82			163			271			251
Less: Net income attributable to noncontrolling interests				(19	)		(20	)		(33	)		(43	)

Net income attributable to News Corporation stockholders			$	63		$	143		$	238		$	208

Basic and diluted earnings (loss) per share:
Income from continuing operations available to News Corporation stockholders per share			$	0.15		$	0.27		$	0.37		$	0.43
(Loss) income from discontinued operations available to News Corporation stockholders per share				(0.04	)		(0.03	)		0.04			(0.07	)

Net income available to News Corporation stockholders per share			$	0.11		$	0.24		$	0.41		$	0.36

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

NEWS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; millions)


	For the three months ended December 31,						For the six months ended December 31,
	2015			2014			2015			2014
Net income	$	82		$	163		$	271		$	251
Other comprehensive income (loss):
Foreign currency translation adjustments		89			(456	)		(356	)		(930	)
Unrealized holding gains (losses) on securities, net^(a)		9			26			(16	)		5
Benefit plan adjustments, net^(b)		10			15			25			31
Share of other comprehensive income from equity affiliates, net^(c)		(3	)		(6	)		2			(2	)

Other comprehensive income (loss)		105			(421	)		(345	)		(896	)

Comprehensive income (loss)		187			(258	)		(74	)		(645	)
Less: Net income attributable to noncontrolling interests		(19	)		(20	)		(33	)		(43	)
Less: Other comprehensive (income) loss attributable to noncontrolling interests		(3	)		8			4			25

Comprehensive income (loss) attributable to News Corporation stockholders	$	165		$	(270	)	$	(103	)	$	(663	)

^(a)	Net of income tax expense of $5 million and $16 million for the three months ended December 31, 2015 and 2014, respectively, and income tax (benefit) expense of ($7) million and $6 million for the six months ended December 31, 2015 and 2014, respectively.

^(b)	Net of income tax expense of $2 million and $4 million for the three months ended December 31, 2015 and 2014, respectively, and income tax expense of $6 million and $8 million for the six months ended December 31, 2015 and 2014, respectively.

^(c)	Net of income tax benefit of $1 million and $3 million for the three months ended December 31, 2015 and 2014, respectively, and income tax (expense) benefit of ($1) million and $1 million for the six months ended December 31, 2015 and 2014, respectively.

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

NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Millions, except share and per share amounts)


	Notes		As of December 31, 2015			As of June 30, 2015
			(unaudited)			(audited)
Assets:
Current assets:
Cash and cash equivalents			$	1,883		$	1,951
Amounts due from 21st Century Fox				60			63
Receivables, net		14		1,349			1,283
Other current assets		14		503			717

Total current assets				3,795			4,014

Non-current assets:
Investments		5		2,288			2,379
Property, plant and equipment, net				2,554			2,690
Intangible assets, net				2,164			2,203
Goodwill				3,090			3,063
Other non-current assets		14		984			686

Total assets			$	14,875		$	15,035


Liabilities and Equity:
Current liabilities:
Accounts payable			$	248		$	238
Accrued expenses				1,108			1,125
Deferred revenue				337			346
Other current liabilities		14		403			401

Total current liabilities				2,096			2,110

Non-current liabilities:
Retirement benefit obligations		11		291			305
Deferred income taxes				145			166
Other non-current liabilities				344			318

Commitments and contingencies		10

Redeemable preferred stock				20			20

Class A common stock^(a)				4			4
Class B common stock^(b)				2			2
Additional paid-in capital				12,441			12,433
Retained earnings				268			88
Accumulated other comprehensive loss				(923	)		(582	)

Total News Corporation stockholders’ equity				11,792			11,945
Noncontrolling interests				187			171

Total equity		7		11,979			12,116

Total liabilities and equity			$	14,875		$	15,035

^(a)	Class A common stock, $0.01 par value per share (“Class A Common Stock”), 1,500,000,000 shares authorized, 381,625,223 and 381,914,964 shares issued and outstanding, net of 27,368,413 treasury shares at par, at December 31, 2015 and June 30, 2015, respectively.

^(b)	Class B common stock, $0.01 par value per share (“Class B Common Stock”), 750,000,000 shares authorized, 199,630,240 shares issued and outstanding, net of 78,430,424 treasury shares at par, at December 31, 2015 and June 30, 2015, respectively.

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

NEWS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; millions)


			For the six months ended December 31,
	Notes		2015			2014
Operating activities:
Net income			$	271		$	251
Less: Income (loss) from discontinued operations, net of tax				22			(40	)

Income from continuing operations:				249			291
Adjustments to reconcile income from continuing operations to cash provided by operating activities:
Depreciation and amortization				244			251
Equity earnings of affiliates		5		(23	)		(41	)
Cash distributions received from affiliates				30			68
Other, net		14		1			(58	)
Deferred income taxes and taxes payable		12		(98	)		66
Change in operating assets and liabilities, net of acquisitions:
Receivables and other assets				(97	)		(56	)
Inventories, net				72			65
Accounts payable and other liabilities				(15	)		(30	)
Pension and postretirement benefit plans				(17	)		(12	)

Net cash provided by operating activities from continuing operations				346			544

Investing activities:
Capital expenditures				(120	)		(150	)
Acquisitions, net of cash acquired				(101	)		(1,183	)
Investments in equity affiliates and other				(36	)		(246	)
Proceeds from dispositions				2			114
Other				5			—

Net cash used in investing activities from continuing operations				(250	)		(1,465	)

Financing activities:
Repayment of borrowings acquired in the Move acquisition				—			(129	)
Repurchase of shares				(18	)		—
Dividends paid				(74	)		(17	)
Other, net				(7	)		(10	)

Net cash used in financing activities from continuing operations				(99	)		(156	)

Net decrease in cash and cash equivalents from continuing operations				(3	)		(1,077	)
Net decrease in cash and cash equivalents from discontinued operations				(40	)		(85	)
Cash and cash equivalents, beginning of period				1,951			3,145
Exchange movement on opening cash balance				(25	)		(65	)

Cash and cash equivalents, end of period			$	1,883		$	1,918

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

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

News Corporation (together with its subsidiaries, “News Corporation,” “News Corp,” the “Company,” “we,” or “us”) is a global diversified media and information services company comprised of businesses across a range of media, including: news and information services, book publishing, digital real estate services, cable network programming in Australia and pay-TV distribution in Australia.

During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. Unless indicated otherwise, the information in the notes to the unaudited Consolidated Financial Statements relates to the Company’s continuing operations. (See Note 3—Discontinued Operations).

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company, which are referred to herein as the “Financial Statements,” have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Financial Statements. Operating results for the interim period presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2016. The preparation of the Company’s Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the Financial Statements and accompanying disclosures. Actual results could differ from those estimates.

Intracompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not exercise control and is not the primary beneficiary are accounted for using the equity method. Investments in which the Company is not able to exercise significant influence over the investee are designated as available-for-sale if readily determinable fair values are available. If an investment’s fair value is not readily determinable, the Company accounts for its investment under the cost method.

The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are referred to herein as the “Statements of Cash Flows.”

The accompanying 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, 2015 as filed with the Securities and Exchange Commission (“SEC”) on August 13, 2015 (the “2015 Form 10-K”).

Certain reclassifications have been made to the prior period financial statements to conform to the current year presentation. The financial results of the Digital Education segment have been recorded as discontinued operations for all periods presented (See Note 3—Discontinued Operations).

The Company’s fiscal year ends on the Sunday closest to June 30. Fiscal 2016 and fiscal 2015 include 53 and 52 weeks, respectively. All references to the three months ended December 31, 2015 and 2014 relate to the

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

three months ended December 27, 2015 and December 28, 2014, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31.

Recently issued accounting pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 removes inconsistencies and differences in existing revenue requirements between GAAP and International Financial Reporting Standards (“IFRS”) and requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 will require companies to use more judgment and make more estimates, such as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, when determining the amount of revenue to recognize. On July 9, 2015, the FASB approved a one-year deferral of ASU 2014-09. ASU 2014-09 is effective for the Company for annual and interim periods beginning July 1, 2018. Once effective, ASU 2014-09 can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initial adoption recognized at the date of initial application. The Company is currently evaluating the method of adoption to be utilized as well as the impact ASU 2014-09 will have on its Financial Statements.

In June 2014, the FASB issued ASU 2014-12, “Compensation—Stock Compensation (Topic 718)” (“ASU 2014-12”). ASU 2014-12 clarifies guidance and eliminates diversity in practice on how to account for share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is, the employee would be eligible to vest in the award regardless of whether the employee is rendering service on the date the performance target is achieved. ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for the Company for annual and interim periods beginning July 1, 2016, however, early adoption is permitted. The Company does not expect the adoption of ASU 2014-12 to have a significant impact on its Financial Statements.

In April 2015, the FASB issued ASU 2015-04, “Compensation—Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets” (“ASU 2015-04”). ASU 2015-04 allows reporting entities with fiscal year-ends that do not coincide with a month-end to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply this practical expedient consistently from year to year. The practical expedient should be applied consistently to all plans if an entity has more than one plan. ASU 2015-04 is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU 2015-04 should be applied prospectively. The Company does not expect the adoption of ASU 2015-04 to have a significant impact on its Financial Statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”). ASU 2015-05 clarifies guidance about whether a customer’s cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for customer’s accounting for service contracts. In addition, the guidance in this update supersedes paragraph 350-40-25-16. Consequently, all software

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendment can either be adopted prospectively for all arrangements entered into or materially modified after the effective date or retrospectively. ASU 2015-05 is effective for the Company for annual and interim periods beginning July 1, 2016, however, early adoption is permitted. The Company does not expect the adoption of ASU 2015-05 to have a significant impact on its Financial Statements.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16 eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination. Under the amendment, adjustments that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. ASU 2015-16 requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments in ASU 2015-16 are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The Company does not expect the adoption of ASU 2015-16 to have a significant impact on its Financial Statements.

In November 2015, the FASB issued Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 amends existing guidance to require that deferred income tax liabilities and assets be classified as noncurrent in the Consolidated Balance Sheet, and eliminates the prior guidance which required an entity to separate deferred tax liabilities and assets into a current and noncurrent amount in a Consolidated Balance Sheet. As permitted by ASU 2015-17, the Company early-adopted this standard and applied it prospectively. The prior periods have not been retroactively adjusted as a result of the adoption of ASU 2015-17.

NOTE 2. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS

Fiscal 2016

Checkout 51 Mobile Apps ULC

In July 2015, the Company acquired Checkout 51 Mobile Apps ULC (“Checkout 51”) for approximately $13 million in cash at closing and up to approximately $28 million in future cash consideration related to payments contingent upon the achievement of certain performance objectives. Checkout 51 is a data-driven digital coupon company that provides News America Marketing with a leading receipt recognition mobile app which enables retailers to reach consumers with highly personalized marketing campaigns. Checkout 51’s results are included within the Company’s News and Information Services segment.

Unruly Holdings Limited

On September 30, 2015, the Company acquired Unruly Holdings Limited (“Unruly”) for approximately £60 million (approximately $90 million) in cash and up to £56 million (approximately $86 million) in future cash consideration related to payments primarily contingent upon the achievement of certain performance objectives. As a result of the acquisition, the Company recognized a liability of approximately $40 million related to the contingent consideration. The fair value of the contingent consideration was estimated by applying a probability-weighted income approach. In accordance with ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), $42 million of the purchase price has been allocated to acquired technology with a weighted-average useful life of 7 years, $25 million has been allocated to customer relationships and tradenames with a weighted-average useful

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

life of 6 years and $67 million has been allocated to goodwill. The values assigned to the acquired assets and liabilities are based on estimates of fair value available as of the date of this filing and will be adjusted upon completion of final valuations of certain assets and liabilities. Any changes in these fair values could potentially result in an adjustment to the goodwill recorded for this transaction. Unruly is a leading global video distribution platform that is focused on delivering branded video advertising across websites and mobile devices. Unruly’s results of operations are included within the Company’s News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.

Fiscal 2015

Harlequin Enterprises Limited

In August 2014, the Company acquired Harlequin Enterprises Limited (“Harlequin”) from Torstar Corporation for $414 million in cash, net of $19 million of cash acquired. Harlequin is a leading publisher of women’s fiction and extends HarperCollins’ global platform, particularly in Europe and Asia Pacific. Harlequin is a subsidiary of HarperCollins, and its results are included within the Book Publishing segment. As a result of the acquisition, the Company recorded net tangible assets of approximately $115 million, primarily consisting of accounts receivable, accounts payable, author advances, property, plant and equipment and inventory, at their estimated fair values at the date of acquisition. In addition, the Company recorded approximately $165 million of intangible assets, comprised of approximately $105 million of imprints which have an indefinite life and $60 million related to finite lived intangible assets with a weighted average life of approximately 5 years, and recorded an associated deferred tax liability of approximately $35 million. In accordance with ASC 350, the excess of the purchase price over the fair values of the net tangible and intangible assets of approximately $185 million was recorded as goodwill on the transaction.

Move, Inc.

In November 2014, the Company acquired all of the outstanding shares of Move, Inc. (“Move”), which was a publicly traded company, for $21.00 per share in cash. Move is a leading provider of online real estate services, and the acquisition expanded the Company’s digital real estate services business into the U.S., one of the largest real estate markets. Move primarily operates realtor.com^®, a premier real estate information and services marketplace. Move also offers a number of professional software and services products, including Top Producer^®, TigerLead^® and ListHub^TM. Move’s results of operations are included within the Digital Real Estate Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The aggregate cash payment at closing to acquire the outstanding shares of Move was approximately $864 million, which was funded with cash on hand. The Company also assumed outstanding Move equity-based compensation awards with a fair value of $67 million, consisting of vested and unvested stock options, restricted stock units (“RSUs”) and restricted stock awards. Of the total fair value of the assumed equity-based compensation awards, $28 million was allocated to pre-combination services and included in total consideration transferred and $39 million was allocated to future services and is being expensed over the weighted average remaining service period of 2.5 years. Refer to Note 8 for further details on the conversion of Move’s equity-based compensation awards. In addition, following the acquisition, the Company utilized approximately $129 million of cash to settle all of Move’s outstanding indebtedness that was assumed as part of the transaction. The total transaction value for the Move acquisition is set forth below (in millions):


Cash paid for Move equity	$	864
Assumed equity-based compensation awards—pre-combination services		28

Total consideration transferred	$	892

Plus: Assumed debt		129
Plus: Assumed equity-based compensation awards—post-combination services		39
Less: Cash acquired		(108	)

Total transaction value	$	952

REA Group Limited (“REA Group”), in which the Company holds a 61.6% interest, acquired a 20% interest in Move upon closing of the transaction. In connection with the acquisition, the Company granted REA Group a put option to require the Company to purchase REA Group’s interest in Move, which can be exercised at any time beginning two years from the date of acquisition at fair value.

Under the purchase method of accounting, the total consideration transferred is allocated to net tangible and intangible assets based upon the fair value as of the date of completion of the acquisition. The excess of the total consideration transferred 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	$	108
Other current assets		28
Intangible assets		216
Deferred income taxes		153
Goodwill		552
Other noncurrent assets		69

Total assets acquired	$	1,126

Liabilities assumed:
Current liabilities	$	50
Deferred income taxes		52
Borrowings		129
Other noncurrent liabilities		3

Total liabilities assumed		234

Net assets acquired	$	892

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The acquired intangible assets relate to the license of the realtor.com^® trademark, which has a fair value of approximately $116 million and an indefinite life, and customer relationships, other tradenames and certain multiple listing service agreements with an aggregate fair value of approximately $100 million, which is being amortized over a weighted-average useful life of approximately 15 years. The Company also acquired technology, primarily associated with the realtor.com^® website, that has a fair value of approximately $39 million which is being amortized over 4 years. The acquired technology has been recorded in Property, Plant and Equipment, net in the Consolidated Balance Sheet at December 31, 2015.

Move had U.S. federal net operating loss carryforwards (“NOLs”) of $947 million ($332 million tax-effected) at the date of acquisition. These NOLs are subject to limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and subject to review by the Internal Revenue Service. The utilization of these NOLs is dependent on generating sufficient U.S. taxable income prior to expiration which begins in varying amounts starting in 2017. Valuation allowances and unrecognized tax benefits were recorded against these NOLs in the amount of $484 million ($170 million tax-effected) as part of the purchase price allocation. The deferred tax assets established for these NOLs, net of valuation allowance and unrecognized benefits, are included in Other non-current assets on the Balance Sheets. Based on this, the Company expected approximately $463 million of the NOLs could be utilized, and accordingly, the Company had recorded a net deferred tax asset of $162 million as part of the purchase price allocation. As a result of management’s plan to dispose of the digital education business, the Company increased its estimated utilization of the Move NOLs by $167 million ($58 million tax-effected) and released the valuation allowance equal to that amount. As of December 31, 2015, the expected utilization of the Move NOLs is $630 million ($220 million tax-effected).

NOTE 3. DISCONTINUED OPERATIONS

During the first quarter of fiscal 2016, management approved a plan to dispose of the Company’s digital education business. As a result of the plan and the discontinuation of further significant business activities in the Digital Education segment, the assets and liabilities of this segment were classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented in accordance with ASC 205-20, “Discontinued Operations.”

In the first quarter of fiscal 2016, the Company recognized a pre-tax non-cash impairment charge of $76 million reflecting a write down of the digital education business to its fair value less costs to sell. In addition, the Company recognized a tax benefit of $144 million upon reclassification of the Digital Education segment to discontinued operations. These amounts are included in Loss before income tax benefit and Income tax benefit, respectively, in the table below for the six months ended December 31, 2015.

On September 30, 2015, the Company sold the Amplify Insight and Amplify Learning businesses. Included within Loss before income tax benefit for the three and six months ended December 31, 2015 was approximately $17 million in severance and lease termination costs which were incurred in conjunction with the sale.

The following table summarizes the results of operations from the discontinued segment:


	For the three months ended December 31,						For the six months ended December 31,
	2015			2014			2015			2014
	(in millions)
Revenues	$	1		$	22		$	27		$	64

Loss before income tax benefit		(29	)		(32	)		(151	)		(63	)
Income tax benefit		5			13			173			23

(Loss) income from discontinued operations, net of tax	$	(24	)	$	(19	)	$	22		$	(40	)

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the cash flows from discontinued operations:


	For the six months ended December 31,
	2015			2014
	(in millions)
Net cash used in operating activities	$	(59	)	$	(52	)
Net cash used in investing activities		19			(33	)
Net cash used in financing activities		—			—

Net decrease in cash and cash equivalents	$	(40	)	$	(85	)

Assets and liabilities held for sale related to discontinued operations as of December 31, 2015 and June 30, 2015 are included in Other current assets and Other current liabilities, respectively, in the Balance Sheets as follows:


	As of December 31, 2015			As of June 30, 2015
	As of December 31, 2015			As of June 30, 2015
	(in millions)
Current assets	$	1		$	54
Non-current assets		—			100

Total assets	$	1		$	154


Current liabilities		18			46
Non-current liabilities		—			16

Total liabilities	$	18		$	62

Net (liabilities) assets held for sale	$	(17	)	$	92

NOTE 4. RESTRUCTURING AND IMPAIRMENT

Fiscal 2016

During the three and six months ended December 31, 2015, the Company recorded restructuring charges of $22 million and $39 million, respectively, of which $20 million and $32 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in fiscal 2016 were primarily for employee termination benefits.

Fiscal 2015

During the three and six months ended December 31, 2014, the Company recorded restructuring charges of $17 million and $21 million, respectively, of which $14 million and $18 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in fiscal 2015 were primarily for employee termination benefits.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Changes in restructuring program liabilities were as follows:


	For the three months ended December 31,
	2015										2014
	One time employee termination benefits			Facility related costs		Other costs		Total			One time employee termination benefits			Facility related costs		Other costs			Total



	(in millions)
Balance, beginning of period	$	34		$	5	$	6	$	45		$	14		$	6	$	—		$	20
Additions		21			1		—		22			10			—		7			17
Payments		(28	)		—		—		(28	)		(5	)		—		—			(5	)
Other		—			—		—		—			(2	)		—		(1	)		(3	)

Balance, end of period	$	27		$	6	$	6	$	39		$	17		$	6	$	6		$	29


	For the six months ended December 31,
	2015										2014
	One time employee termination benefits			Facility related costs		Other costs		Total			One time employee termination benefits			Facility related costs			Other costs			Total



	(in millions)
Balance, beginning of period	$	47		$	5	$	6	$	58		$	21		$	7		$	—		$	28
Additions		38			1		—		39			14			—			7			21
Payments		(54	)		—		—		(54	)		(16	)		(1	)		—			(17	)
Other		(4	)		—		—		(4	)		(2	)		—			(1	)		(3	)

Balance, end of period	$	27		$	6	$	6	$	39		$	17		$	6		$	6		$	29

As of December 31, 2015, restructuring liabilities of approximately $29 million were included in the Balance Sheet in Other current liabilities and $10 million were included in Other non-current liabilities.

NOTE 5. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership Percentage as of December 31, 2015			As of December 31, 2015		As of June 30, 2015



				(in millions)
Equity method investments:
Foxtel^(a)		50	%	$	1,402	$	1,476
Other equity method investments^(b)		various			194		168
Loan receivable from Foxtel^(c)		N/A			329		345
Available-for-sale securities^(d)		various			159		185
Cost method investments^(e)		various			204		205

Total Investments				$	2,288	$	2,379

^(a)	The change in the Foxtel investment for the six months ended December 31, 2015 was primarily due to the impact of foreign currency fluctuations.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

^(b)

In July 2014, REA Group purchased a 17.22% interest in iProperty Group Limited (ASX:IPP) (“iProperty”) for total cash consideration of approximately $100 million. iProperty has online property advertising operations primarily in Malaysia, Indonesia, Hong Kong, Thailand and Singapore. In December 2014, REA Group sold Squarefoot, its Hong Kong based business, to iProperty in exchange for an additional 2.2% interest in iProperty. As of December 31, 2015, REA Group owned an approximate 22.7% interest in iProperty.

On November 2, 2015, REA Group announced a proposed transaction to acquire all of the outstanding shares of iProperty Group Limited (ASX:IPP) (“iProperty”) it does not already own. iProperty shareholders could elect to receive A$4.00 per share in cash or A$1.20 cash and 0.7 shares in a newly-formed company, subject to a maximum 20% indirect equity interest in iProperty. The total cash consideration for the transaction will be approximately A$480 million (approximately US$340 million) which will be funded primarily by debt with the remainder from REA Group’s existing cash. The transaction has received iProperty shareholder and court approval and is expected to be completed in February 2016. The acquisition of iProperty extends REA Group’s market leading business in Australia to attractive markets throughout Southeast Asia.

^(c)

In May 2012, Foxtel purchased Austar United Communications Ltd. The transaction was funded by Foxtel bank debt and pro rata capital contributions made by Foxtel shareholders in the form of subordinated shareholder notes based on their respective ownership interests. The Company’s share of the subordinated shareholder notes was approximately A$451 million ($329 million and $345 million as of December 31, 2015 and June 30, 2015, respectively). The subordinated shareholder notes can be repaid beginning in July 2022 provided that Foxtel’s senior debt has been repaid. The subordinated shareholder notes have a maturity date of July 15, 2027, with interest of 12% payable on June 30 each year and at maturity. Upon maturity, the principal advanced will be repayable.

^(d)	During fiscal 2015, the Company purchased a 14.99% interest in APN News and Media Limited (“APN”) for approximately $112 million. APN operates a portfolio of Australian and New Zealand radio and outdoor media assets and small regional print interests.

^(e)

Cost method investments primarily include the Company’s investment in SEEKAsia Limited (“SEEK Asia”) and certain investments in China. In November 2014, SEEK Asia, in which the Company owned a 12.1% interest, acquired the online employment businesses of JobStreet Corporation Berhad (“JobStreet”), which were combined with JobsDB, Inc., SEEK Asia’s existing online employment business. The transaction was funded primarily through additional contributions by SEEK Asia shareholders which did not have an impact on the Company’s ownership. The Company’s share of the funding contribution was approximately $60 million. In June 2015, the Company purchased an additional 0.8% interest in SEEK Asia for approximately $7 million, which increased the Company’s investment to approximately 12.9%.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company measures the fair market values of available-for-sale investments as Level 1 financial instruments under ASC 820, “Fair Value Measurement,” as such investments have quoted prices in active markets. The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below:


	As of December 31, 2015			As of June 30, 2015
	(in millions)
Cost basis of available-for-sale investments	$	164		$	164
Accumulated gross unrealized gain		48			46
Accumulated gross unrealized loss		(53	)		(25	)

Fair value of available-for-sale investments	$	159		$	185

Net deferred tax liability	$	(3	)	$	(11	)

Equity Earnings of Affiliates

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


	For the three months ended December 31,				For the six months ended December 31,
	2015		2014		2015		2014
	(in millions)
Foxtel^(a)	$	13	$	15	$	22	$	40
Other equity affiliates, net		2		1		1		1

Total Equity earnings of affiliates	$	15	$	16	$	23	$	41

^(a)

In accordance with ASC 350, the Company amortized $13 million and $25 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the three and six months ended December 31, 2015, respectively, and $14 million and $30 million in the corresponding periods of fiscal 2015, respectively. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations.

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


	For the six months ended December 31,
	2015		2014
	(in millions)
Revenues	$	1,185	$	1,408
Operating income^(a)		184		255
Net income		94		140

^(a)	Includes Depreciation and amortization of $111 million and $168 million for the six months ended December 31, 2015 and 2014, respectively. Operating income before depreciation and amortization was $295 million and $423 million for the six months ended December 31, 2015 and 2014, respectively.

For the six months ended December 31, 2015, Foxtel’s revenues decreased $223 million, or 16%, as a result of the negative impact of foreign currency fluctuations, which more than offset higher revenues in local currency. Operating income decreased primarily due to the negative impact of foreign currency fluctuations, a planned increase in programming costs to support subscriber growth, increased costs associated with higher sales

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

volumes, the public launch of Triple Play and continued investment in Presto, partially offset by lower depreciation expense resulting from Foxtel’s reassessment of the useful lives of cable and satellite installations due to lower subscriber churn. Net income decreased as a result of the lower operating income noted above, partially offset by lower income tax expense.

NOTE 6. CREDIT FACILITY

The Company’s Credit Agreement (as amended, the “Credit Agreement”) provides for an unsecured $650 million revolving credit facility (the “Facility”) that can be used for general corporate purposes. The Facility has a sublimit of $100 million available for issuances of letters of credit. Under the Credit Agreement, the Company may request increases in the amount of the Facility up to a maximum amount of $900 million. Subject to certain conditions stated in the Credit Agreement, the Company may borrow, prepay and reborrow amounts under the Facility during the term of the Credit Agreement.

In October 2015, the Company entered into an amendment to the Credit Agreement (the “Amendment”) which, among other things, extended the original term of the Facility by two years and lowered the commitment fee payable by the Company. As a result of the Amendment, amounts under the Credit Agreement are now due on October 23, 2020, unless the commitments are terminated earlier either at the request of the Company or, if an event of default occurs, by the designated agent at the request or with the consent of the lenders (or automatically in the case of certain bankruptcy-related events). The Company may request that the commitments be extended under certain circumstances as set forth in the Credit Agreement for up to two additional one-year periods.

The Credit Agreement contains certain customary affirmative and negative covenants and events of default, with customary exceptions, including limitations on the ability of the Company and the Company’s subsidiaries to engage in transactions with affiliates, incur liens, merge into or consolidate with any other entity, incur subsidiary debt or dispose of all or substantially all of its assets or all or substantially all of the stock of its subsidiaries taken as a whole. In addition, the Credit Agreement requires the Company to maintain an adjusted operating income leverage ratio of not more than 3.0 to 1.0 and an interest coverage ratio of not less than 3.0 to 1.0. If any of the events of default occur and are not cured within applicable grace periods or waived, any unpaid amounts under the Credit Agreement may be declared immediately due and payable. As of December 31, 2015, the Company was in compliance with all of the applicable debt covenants.

Interest on borrowings under the Facility is based on either (a) a Eurodollar Rate formula or (b) the Base Rate formula, each as set forth in the Credit Agreement. The applicable margin and the commitment fee are based on the pricing grid in the Credit Agreement, which varies based on the Company’s adjusted operating income leverage ratio. As of December 31, 2015, the Company was paying a commitment fee of 0.225% on any undrawn balance and an applicable margin of 0.50% for a Base Rate borrowing and 1.50% for a Eurodollar Rate borrowing.

As of the date of this filing, the Company has not borrowed any funds under the Facility.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. EQUITY

The following table summarizes changes in equity:


	For the six months ended December 31,
	2015									2014
	News Corporation stockholders			Noncontrolling Interests			Total Equity			News Corporation stockholders			Noncontrolling Interests			Total Equity


	(in millions)
Balance, beginning of period	$	11,945		$	171		$	12,116		$	13,243		$	156		$	13,399
Net income		238			33			271			208			43			251
Other comprehensive (loss) income		(341	)		(4	)		(345	)		(871	)		(25	)		(896	)
Dividends		(59	)		(15	)		(74	)		(1	)		(16	)		(17	)
Stock repurchases		(16	)		—			(16	)		—			—			—
Other		25			2			27			31			(1	)		30

Balance, end of period	$	11,792		$	187		$	11,979		$	12,610		$	157		$	12,767

Stock Repurchases

In May 2013, the Company’s Board of Directors (the “Board of Directors”) authorized the Company to repurchase up to an aggregate of $500 million of its Class A Common Stock. On May 10, 2015, the Company announced it had begun repurchasing shares of Class A Common Stock under the stock repurchase program. Through January 29, 2016, the Company repurchased approximately 4.3 million shares of Class A Common Stock for an aggregate cost of approximately $61 million. The remaining authorized amount under the stock repurchase program as of January 29, 2016 was approximately $439 million. All decisions regarding any future stock repurchases are at the sole discretion of a duly appointed committee of the Board of Directors and management. The committee’s decisions regarding future stock repurchases will be evaluated from time to time in light of many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the committee may deem relevant. The stock repurchase authorization may be modified, extended, suspended or discontinued at any time by the Board of Directors and the Board of Directors cannot provide any assurances that any additional shares will be repurchased.

Dividends

In August 2015, the Board of Directors declared a semi-annual cash dividend of $0.10 per share of Class A Common Stock and Class B Common Stock. This dividend was paid on October 21, 2015 to stockholders of record at the close of business on September 16, 2015. The timing, declaration, amount and payment of future dividends to stockholders, if any, is within the discretion of the Board of Directors. The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, including the Company’s financial condition, earnings, capital requirements and debt facility covenants, other contractual restrictions, as well as legal requirements, regulatory constraints, industry practice, market volatility and other factors that the Board of Directors deems relevant.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. EQUITY BASED COMPENSATION

Employees of the Company participate in the News Corporation 2013 Long-Term Incentive Plan (the “2013 LTIP”) under which equity-based compensation, including stock options, performance stock units (“PSUs”), restricted stock awards, RSUs and other types of awards can be granted. The Company has the ability to award up to 30 million shares of Class A Common Stock under the terms of the 2013 LTIP.

In connection with the acquisition of Move, the Company assumed Move’s equity incentive plans and substantially all of the awards outstanding under such plans. The stock options, RSUs and restricted stock awards that were assumed continue to have the same terms and conditions that applied to those awards immediately prior to the acquisition, except that such assumed awards were converted into awards with the right to be settled in, or by reference to, the Company’s Class A Common Stock in accordance with the acquisition agreement, using a formula designed to preserve the value of the awards based on the price per share paid in the acquisition. The Company assumed and converted approximately 4.3 million stock options and approximately 2.5 million RSUs and restricted stock awards in connection with the transaction. During the three and six months ended December 31, 2015, approximately 0.1 million and 0.3 million of the assumed options were exercised, respectively. Approximately 0.1 million of the assumed RSUs and restricted stock awards vested during the three and six months ended December 31, 2015.

The Company recognized $14 million and $31 million of equity-based compensation expense for the three and six months ended December 31, 2015, respectively, and $9 million and $21 million for the corresponding periods of fiscal 2015, respectively.

Performance Stock Units

Fiscal 2016

During the three and six months ended December 31, 2015, the Company granted 0.3 million and 4.0 million PSUs, respectively, at target, of which 0.3 million and 2.9 million, respectively, will be settled in Class A Common Stock with the remaining, having been granted to executive directors and to employees in certain foreign locations, being settled in cash. Cash settled awards are marked-to-market each reporting period.

During the six months ended December 31, 2015, approximately 1.2 million PSUs vested, of which approximately 1.0 million were settled in shares of Class A Common Stock before statutory tax withholdings. The remaining 0.2 million PSUs settled during the six months ended December 31, 2015 were settled in cash for approximately $3.3 million before statutory tax withholdings.

Fiscal 2015

During the six months ended December 31, 2014, the Company granted 3.1 million PSUs at target, of which 2.0 million will be settled in Class A Common Stock with the remaining, having been granted to executive directors and to employees in certain foreign locations, being settled in cash. Cash settled awards are marked-to-market each reporting period.

During the six months ended December 31, 2014, approximately 2.0 million PSUs vested, of which approximately 1.5 million were settled in shares of Class A Common Stock before statutory tax withholdings. The remaining 0.5 million PSUs settled during the six months ended December 31, 2014 were settled in cash for approximately $8.2 million before statutory tax withholdings.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

Fiscal 2016

During the six months ended December 31, 2015, the Company granted 0.2 million RSUs, all of which will be settled in Class A Common Stock.

During the six months ended December 31, 2015, approximately 0.1 million RSUs vested, all of which were settled in shares of Class A Common Stock.

Fiscal 2015

During the six months ended December 31, 2014, approximately 0.4 million RSUs vested, of which approximately 0.3 million were settled in shares of Class A Common Stock before statutory tax withholdings. The remaining 0.1 million RSUs settled during the six months ended December 31, 2014 were settled in cash for approximately $0.9 million before statutory tax withholdings.

NOTE 9. EARNINGS PER SHARE

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


	For the three months ended December 31,						For the six months ended December 31,
	2015			2014			2015			2014
	(in millions, except per share amounts)
Income from continuing operations	$	106		$	182		$	249		$	291
Less: Net income attributable to noncontrolling interests		(19	)		(20	)		(33	)		(43	)
Less: Redeemable preferred stock dividends^(a)		(1	)		(1	)		(1	)		(1	)

Income from continuing operations available to News Corporation stockholders		86			161			215			247
(Loss) income from discontinued operations, net of tax, available to News Corporation stockholders		(24	)		(19	)		22			(40	)

Net income available to News Corporation stockholders	$	62		$	142		$	237		$	207

Weighted-average number of shares of common stock outstanding—basic		581.2			580.2			581.1			579.8
Dilutive effect of equity awards		1.5			2.3			1.6			1.4

Weighted-average number of shares of common stock outstanding—diluted		582.7			582.5			582.7			581.2

Income from continuing operations available to News Corporation stockholders per share—basic and diluted	$	0.15		$	0.27		$	0.37		$	0.43
(Loss) income from discontinued operations available to News Corporation stockholders per share—basic and diluted	$	(0.04	)	$	(0.03	)	$	0.04		$	(0.07	)

Net income available to News Corporation stockholders per share—basic and diluted	$	0.11		$	0.24		$	0.41		$	0.36

^(a)	In connection with the Separation, as defined in Note 10, Twenty-First Century Fox, Inc. (“21st Century Fox”) sold 4,000 shares of cumulative redeemable preferred stock with a par value of $5,000 per share of a

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

newly formed U.S. subsidiary of the Company. The preferred stock pays dividends at a rate of 9.5% per annum, payable quarterly. The preferred stock is callable by the Company at any time after the fifth year and is puttable at the option of the holder after 10 years.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Commitments

The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. Except as noted below, the Company’s commitments as of December 31, 2015 have not changed significantly from the disclosures included in the 2015 Form 10-K.

In November 2015, the Company entered into a sports programming rights agreement with the National Rugby League to license certain media rights for a five year period from 2018 to 2022 for approximately $775 million (A$1.1 billion).

In August 2015, the Company entered into a sports programming rights agreement with the Australian Football League to license certain media rights for a six year period from 2017 to 2022 for approximately $850 million (A$1.2 billion).

Contingencies

The Company routinely is involved in various legal proceedings, claims and governmental inspections or investigations, including those discussed below. The outcome of these matters and claims is subject to significant uncertainty, and the Company often cannot predict what the eventual outcome of pending matters will be or the timing of the ultimate resolution of these matters. Fees, expenses, fines, penalties, judgments or settlement costs which might be incurred by the Company in connection with the various proceedings could adversely affect its results of operations and financial condition.

The Company establishes an accrued liability for legal claims when it determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Legal fees associated with litigation and similar proceedings are expensed as incurred. Except as otherwise provided below, for the contingencies disclosed for which there is at least a reasonable possibility that a loss may be incurred, the Company was unable to estimate the amount of loss or range of loss.

U.K. Newspaper Matters and Related Investigations and Litigation

On July 19, 2011, a purported class action lawsuit captioned Wilder v. News Corp., et al. was filed on behalf of all purchasers of 21st Century Fox’s common stock between March 3, 2011 and July 11, 2011, in the U.S. District Court for the Southern District of New York (the “Wilder Litigation”). The plaintiff brought claims under Section 10(b) and Section 20(a) of the Securities Exchange Act, alleging that false and misleading statements were issued regarding alleged acts of voicemail interception at The News of the World. The suit named as defendants 21st Century Fox, Rupert Murdoch, James Murdoch and Rebekah Brooks, and sought compensatory damages, rescission for damages sustained and costs.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On June 5, 2012, the District Court issued an order appointing the Avon Pension Fund (“Avon”) as lead plaintiff and Robbins Geller Rudman & Dowd as lead counsel. Avon filed an amended consolidated complaint on July 31, 2012, which among other things, added as defendants the Company’s subsidiary, NI Group Limited (now known as News Corp UK & Ireland Limited), and Les Hinton, and expanded the class period to comprise February 15, 2011 to July 18, 2011. Defendants filed motions to dismiss the litigation, which were granted by the District Court on March 31, 2014. Plaintiffs were allowed to amend their complaint, and on April 30, 2014, plaintiffs filed a second amended consolidated complaint, which generally repeated the allegations of the amended consolidated complaint and also expanded the class period to comprise July 8, 2009 to July 18, 2011. Defendants moved to dismiss the second amended consolidated complaint, and on September 30, 2015, the District Court granted defendants’ motions in their entirety and dismissed all of plaintiffs’ claims. In its memorandum, opinion and order relating to the dismissal, the District Court gave plaintiffs until November 6, 2015 to file a motion for leave to amend their complaint. On October 21, 2015, plaintiffs filed a motion for reconsideration of the District Court’s memorandum, opinion and order, which defendants have opposed. The Company’s management believes these claims are entirely without merit and intends to vigorously defend this action. As described below, the Company will be indemnified by 21st Century Fox for certain payments made by the Company that relate to, or arise from, the U.K. Newspaper Matters, including all payments in connection with the Wilder Litigation.

In addition, governmental authorities in the U.K. conducted various investigations beginning in 2011 relating to voicemail interception, illegal data access and inappropriate payments to public officials at the Company’s former publication, The News of the World, and related matters, as well as various investigations at The Sun (the “U.K. Newspaper Matters”). On December 11, 2015, the U.K.’s Crown Prosecution Service announced that it would not bring any charges against the Company relating to voicemail interception at The News of the World. The Metropolitan Police Service previously notified the Company that it had concluded its corporate investigation relating to payments to public officials at The News of the World and at The Sun. All criminal investigations of the Company relating to the U.K. Newspaper Matters have now been concluded.

Civil claims have also been brought against the Company with respect to certain U.K. Newspaper Matters. The Company has admitted liability in many civil cases and has settled a number of cases. The Company has also settled a number of claims through a private compensation scheme established by the Company under which parties could pursue claims against it. While additional civil lawsuits may be filed, no additional civil claims may be brought under the compensation scheme after April 8, 2013.

In connection with the Company’s separation of its businesses (the “Separation”) from 21st Century Fox on June 28, 2013 (the “Distribution Date”), the Company and 21st Century Fox agreed in the Separation and Distribution Agreement that 21st Century Fox will indemnify the Company for payments made after the Distribution Date arising out of civil claims and investigations relating to the U.K. Newspaper Matters as well as legal and professional fees and expenses paid in connection with the criminal matters, other than fees, expenses and costs relating to employees (i) who are not directors, officers or certain designated employees or (ii) with respect to civil matters, who are not co-defendants with the Company or 21st Century Fox. In addition, violations of law may result in criminal fines or penalties for which the Company will not be indemnified by 21st Century Fox. 21st Century Fox’s indemnification obligations with respect to these matters will be settled on an after-tax basis.

The Company incurred gross legal and professional fees related to the U.K. Newspaper Matters and costs for civil settlements totaling approximately $12 million and $23 million for the three months ended December 31, 2015 and 2014, respectively, and approximately $23 million and $51 million for the six months ended December 31, 2015 and 2014, respectively. These costs are included in Selling, general and administrative

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

expenses in the Company’s Statements of Operations. With respect to the fees and costs incurred during the three months ended December 31, 2015 and 2014, the Company has been or will be indemnified by 21st Century Fox for $5 million, net of tax, and $10 million, net of tax, respectively, pursuant to the indemnification arrangements described above. With respect to the fees and costs incurred during the six months ended December 31, 2015 and 2014, the Company has been or will be indemnified by 21st Century Fox for $11 million, net of tax, and $24 million, net of tax, respectively, pursuant to the indemnification arrangements described above. Accordingly, the Company recorded a contra expense in Selling, general and administrative expenses for the after-tax costs that were or will be indemnified of $5 million and $10 million for the three months ended December 31, 2015 and 2014, respectively, and $11 million and $24 million for the six months ended December 31, 2015 and 2014, respectively, and recorded a corresponding receivable from 21st Century Fox. Therefore, the net impact on Selling, general and administrative expenses was $7 million and $13 million for the three months ended December 31, 2015 and 2014, respectively, and $12 million and $27 million for the six months ended December 31, 2015 and 2014, respectively.

Refer to the table below for the net impact of the U.K. Newspaper Matters on Selling, general and administrative expenses recorded in the Statements of Operations:


	For the three months ended December 31,						For the six months ended December 31,
	2015			2014			2015			2014
	(in millions)
Gross legal and professional fees related to the U.K. Newspaper Matters	$	12		$	23		$	23		$	51
Indemnification from 21st Century Fox		(5	)		(10	)		(11	)		(24	)

Net impact on Selling, general and administrative expenses	$	7		$	13		$	12		$	27

As of December 31, 2015, the Company has provided for its best estimate of the liability for the claims that have been filed and costs incurred, including liabilities associated with employment taxes, and has accrued approximately $111 million, of which approximately $60 million will be indemnified by 21st Century Fox, and a corresponding receivable was recorded in Amounts due from 21st Century Fox on the Balance Sheet as of December 31, 2015. It is not possible to estimate the liability or corresponding receivable for any additional claims that may be filed given the information that is currently available to the Company. If more claims are filed and additional information becomes available, the Company will update the liability provision and corresponding receivable for such matters.

The Company is not able to predict the ultimate outcome or cost of the civil claims or criminal matters. It is possible that these proceedings and any adverse resolution thereof, including any fines or other penalties associated with any plea, judgment or similar result for which the Company will not be indemnified, could damage its reputation, impair its ability to conduct its business and adversely affect its results of operations and financial condition.

HarperCollins

In 2011 and 2012, various civil lawsuits and governmental investigations were commenced against certain publishers, including the Company’s subsidiary, HarperCollins Publishers L.L.C. (“HarperCollins”), relating to alleged violations of antitrust and unfair competition laws arising out of the decisions by those publishers to sell their e-books pursuant to an agency relationship.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The publishers, including HarperCollins, entered into various settlement agreements to resolve these matters. These included a settlement with the DOJ, which, among other things, required that HarperCollins terminate its agreements with certain e-book retailers and placed certain restrictions on any agreements subsequently entered into with such retailers. Additional information about this settlement can be found on the DOJ’s website. The publishers, including HarperCollins, also entered into substantially similar settlements with the European Commission and the Canadian Competition Bureau (“CCB”). The settlements with the DOJ and the European Commission received final approval in September and December 2012, respectively. The consent agreement with respect to the settlement with the CCB was registered with the Competition Tribunal on February 7, 2014. However, on February 21, 2014, Kobo Inc. (“Kobo”) filed an application to rescind or vary the consent agreement with the Competition Tribunal, and, on March 18, 2014, the Competition Tribunal issued an order staying the registration of the consent agreement. The stay will remain in effect pending further order of the Competition Tribunal or final disposition of Kobo’s application.

The Company is not able to predict the ultimate outcome or cost of the unresolved HarperCollins matter described above. The legal and professional fees and settlement costs incurred in connection with the other settlements referred to above were not material.

News America Marketing

In-Store Marketing and FSI Purchasers

On April 8, 2014, in connection with a pending action in the U.S. District Court for the Southern District of New York in which The Dial Corporation, Henkel Consumer Goods, Inc., H.J. Heinz Company, H.J. Heinz Company, L.P., Foster Poultry Farms, Smithfield Foods, Inc., HP Hood LLC and BEF Foods, Inc. (collectively, the “Named Plaintiffs”) allege various claims under federal and state antitrust law against News Corporation, News America Incorporated (“NAI”), News America Marketing FSI L.L.C. (“NAM FSI”), and News America Marketing In-Store Services L.L.C. (“NAM In-Store Services” and, together with News Corporation, NAI and NAM FSI, the “NAM Group”), the Named Plaintiffs filed a fourth amended complaint on consent of the parties. The fourth amended complaint asserts federal and state antitrust claims both individually and on behalf of two putative classes in connection with the purchase of in-store marketing services and free-standing insert coupons. The complaint seeks treble damages, injunctive relief and attorneys’ fees.

On August 11, 2014, the Named Plaintiffs filed a motion seeking certification of a class of all persons residing in the United States who purchased in-store marketing services on or after April 5, 2008, and have not purchased those services pursuant to contracts with mandatory arbitration clauses. The Named Plaintiffs did not, however, move to certify a class of purchasers of free-standing insert coupons. On June 18, 2015, the District Court granted the Named Plaintiffs’ motion for class certification, and on July 2, 2015, the NAM Group filed a petition for leave to appeal the District Court’s decision to the U.S. Court of Appeals for the Second Circuit, which the Named Plaintiffs opposed. On November 10, 2015, the Court of Appeals for the Second Circuit denied the NAM Group’s petition.

On September 10, 2015, the District Court granted a stipulation dismissing with prejudice the Named Plaintiffs’ claims relating to free-standing insert coupons, and on September 30, 2015, the NAM Group moved for summary judgment on all remaining claims in the fourth amended complaint. On January 15, 2016, the District Court denied the motion, and trial is scheduled to begin on February 29, 2016.

While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this action, the NAM Group believes it has been compliant with applicable antitrust laws and intends to defend itself vigorously.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Valassis Communications, Inc.

On November 8, 2013, Valassis Communications, Inc. (“Valassis”) initiated legal proceedings against certain of the Company’s subsidiaries alleging violations of various antitrust laws. These proceedings are described in further detail below.

•

Valassis previously initiated an action against NAI, NAM FSI and NAM In-Store Services (collectively, the “NAM Parties”), captioned Valassis Communications, Inc. v. News America Incorporated, et al., No. 2:06-cv-10240 (E.D. Mich.), alleging violations of federal antitrust laws, which was settled in February 2010. On November 8, 2013, Valassis filed a motion for expedited discovery in the previously settled case based on its belief that defendants had engaged in activities prohibited under an order issued by the U.S. District Court for the Eastern District of Michigan in connection with the parties’ settlement.

On February 4, 2014, the magistrate judge granted Valassis’s motion for expedited discovery. The NAM Parties objected to the magistrate judge’s ruling before the District Court and filed a motion to enforce the parties’ settlement agreement that sought an order that certain of Valassis’s claims, if they are allowed to proceed, must be considered by a panel of antitrust experts. On May 20, 2014, the District Court overruled the NAM Parties’ objections to the magistrate judge’s ruling and terminated the motion to enforce the parties’ settlement agreement as the issues raised in the motion would be addressed in connection with the NAM Group’s motion to dismiss Valassis’s newly filed complaint, described below.

On October 7, 2014, the NAM Group filed a motion for an order requiring Valassis to show cause why its allegations that the NAM Group engaged in unlawful bundling and tying of in-store marketing services and free-standing insert coupons should not be referred to a panel of antitrust experts for resolution pursuant to the parties’ settlement. On November 19, 2014, the magistrate judge denied the NAM Group’s motion for an order to show cause. The NAM Group objected to the magistrate judge’s order, and Valassis opposed those objections. On January 20, 2015, the NAM Parties filed a motion for expedited discovery in the previously settled case, which was granted by the magistrate judge on April 14, 2015.

On February 3, 2015, Valassis filed a Notice of Violation of an order issued by the District Court in the previously settled case. The Notice contains allegations that are substantially similar to the allegations Valassis made in the new complaint, described below, and seeks treble damages, injunctive relief and attorneys’ fees. The Notice also re-asserts claims of unlawful bundling and tying which the magistrate judge had previously recommended be dismissed from the action described below on the grounds that such claims could only be brought before the panel of antitrust experts. On March 2, 2015, the NAM Group filed a motion to refer the Notice to the panel of antitrust experts or, in the alternative, strike the Notice, which Valassis has opposed.

•

On November 8, 2013, Valassis also filed a new complaint in the U.S. District Court for the Eastern District of Michigan against the NAM Group alleging violations of federal and state antitrust laws and common law business torts. The complaint seeks treble damages, injunctive relief and attorneys’ fees and costs. On December 19, 2013, the NAM Group filed a motion to dismiss the newly filed complaint.

The District Court referred the NAM Group’s motion to dismiss to the magistrate judge for determination, and on July 16, 2014, the magistrate judge recommended that the District Court grant the NAM Group’s motion in part with respect to certain claims and stay the remainder of the action. Valassis has objected to the magistrate judge’s recommendation that the action be stayed.

While it is not possible at this time to predict with any degree of certainty the ultimate outcome of these actions, the NAM Group believes it has been compliant with applicable laws and intends to defend itself vigorously in both actions.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Other

The Company’s operations are subject to tax in various domestic and international jurisdictions and as a matter of course, it is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its financial condition, future results of operations or liquidity. As subsidiaries of 21st Century Fox prior to the Separation, the Company and each of its domestic subsidiaries have joint and several liability with 21st Century Fox for the consolidated U.S. federal income taxes of the 21st Century Fox consolidated group relating to any taxable periods during which the Company or any of the Company’s domestic subsidiaries were a member of the 21st Century Fox consolidated group. Consequently, the Company could be liable in the event any such liability is incurred, and not discharged, by any other member of the 21st Century Fox consolidated group. In conjunction with the Separation, the Company entered into the Tax Sharing and Indemnification Agreement with 21st Century Fox, which requires 21st Century Fox to indemnify the Company for any such liability. Disputes or assessments could arise during future audits by the IRS or other taxing authorities in amounts that the Company cannot quantify.

NOTE 11. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company provides pension, postretirement health care, defined contribution and medical benefits primarily in the U.S., U.K. and Australia to the Company’s eligible employees and retirees. The Company funds amounts, at a minimum, in accordance with statutory requirements for all plans. Plan assets consist principally of common stocks, marketable bonds and government securities.

The amortization of amounts related to unrecognized prior service (credits) and deferred losses were reclassified out of other comprehensive income as a component of net periodic benefit costs. The components of net periodic benefits costs were as follows:


	Pension benefits												Postretirement benefits
	Domestic						Foreign						Postretirement benefits
	For the three months ended December 31,
	2015			2014			2015			2014			2015			2014
	(in millions)
Service cost benefits earned during the period	$	—		$	—		$	3		$	3		$	—		$	—
Interest costs on projected benefit obligations		4			4			12			13			1			2
Expected return on plan assets		(5	)		(6	)		(16	)		(18	)		—			—
Amortization of deferred losses		1			1			3			3			—			—
Amortization of prior service (credits)		—			—			—			—			(2	)		(3	)
Settlements, curtailments and other		—			—			—			—			—			—

Net periodic benefits costs	$	—		$	(1	)	$	2		$	1		$	(1	)	$	(1	)

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	Pension benefits												Postretirement benefits
	Domestic						Foreign						Postretirement benefits
	For the six months ended December 31,
	2015			2014			2015			2014			2015			2014
	(in millions)
Service cost benefits earned during the period	$	—		$	—		$	5		$	6		$	—		$	—
Interest costs on projected benefit obligations		8			8			23			26			2			3
Expected return on plan assets		(10	)		(11	)		(32	)		(37	)		—			—
Amortization of deferred losses		2			2			7			6			—			—
Amortization of prior service (credits)		—			—			—			—			(3	)		(6	)
Settlements, curtailments and other		—			—			(1	)		—			—			—

Net periodic benefits costs	$	—		$	(1	)	$	2		$	1		$	(1	)	$	(3	)

During the six months ended December 31, 2015 and 2014, the Company contributed approximately $18 million and $9 million, respectively, to its various pension and postretirement plans, of which $7 million and $5 million, were contributed in the three months ended December 31, 2015 and 2014, respectively.

NOTE 12. INCOME TAXES

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

The Company’s effective tax rate for the three months ended December 31, 2015 was lower than the U.S. statutory tax rate primarily due to the impact from foreign operations which are subject to lower tax rates, partially offset by the impact of nondeductible items. The Company’s effective tax rate for the six months ended December 31, 2015 was lower than the U.S. statutory tax rate primarily due to a tax benefit of approximately $106 million related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business in the first quarter of fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration.

In addition, the Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations for the six months ended December 31, 2015.

The Company’s effective income tax rate for the three and six months ended December 31, 2014 was lower than the U.S. statutory tax rate, primarily due to the impact from foreign operations which are subject to lower tax rates, partially offset by the impact of nondeductible items.

The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in its tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid, however, these liabilities may need to be adjusted as new information becomes known and as tax examinations continue to progress.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company paid gross income taxes of $57 million and $50 million during the six months ended December 31, 2015 and 2014, respectively, and received income tax refunds of $1 million and $3 million, respectively.

NOTE 13. SEGMENT INFORMATION

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

•

News and Information Services—The News and Information Services segment includes the global print and digital product offerings of The Wall Street Journal and Barron’s publications, MarketWatch, and the Company’s suite of professional information products, including Factiva, Dow Jones Risk & Compliance, Dow Jones Newswires, Dow Jones Private Markets and DJX.

The Company also owns, among other publications, The Australian, The Daily Telegraph, Herald Sun and The Courier Mail in Australia, The Times, The Sunday Times, The Sun and The Sun on Sunday in the U.K. and the New York Post in the U.S. This segment also includes both News America Marketing, a leading provider of free-standing inserts, in-store marketing products and services and digital marketing solutions, including Checkout 51’s mobile application, as well as Unruly, a leading global video advertising distribution platform.

•

Book Publishing—The Book Publishing segment consists of HarperCollins, the second largest consumer book publisher in the world, with operations in 18 countries and particular strengths in general fiction, nonfiction, children’s and religious publishing. HarperCollins includes over 120 branded publishing imprints, including Avon, Harper, HarperCollins Children’s Books, William Morrow, Harlequin and Christian publishers Zondervan and Thomas Nelson, and publishes works by well-known authors such as Harper Lee, Mitch Albom, Veronica Roth, Rick Warren and Agatha Christie and popular titles such as The Hobbit, Goodnight Moon, To Kill a Mockingbird and the Divergent series.

•

Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s interests in REA Group and Move. REA Group is a publicly traded company listed on the ASX (ASX: REA) that is a leading multinational digital advertising business specializing in property. REA Group operates Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au, as well as property sites in Europe and Asia. The Company holds a 61.6% interest in REA Group.

Move, acquired in November 2014, is a leading provider of online real estate services in the U.S. and primarily operates realtor.com^®, a premier real estate information and services marketplace. Move also offers a number of professional software and services products, including Top Producer^®, TigerLead^® and ListHub^TM. The Company owns an 80% interest in Move, with the remaining 20% being held by REA Group.

•

Cable Network Programming—The Cable Network Programming segment consists of FOX SPORTS Australia, the leading sports programming provider in Australia, with seven high definition television channels distributed via cable, satellite and IP, several interactive viewing applications and broadcast rights to live sporting events in Australia including: National Rugby League, the domestic football league, English Premier League, international cricket and Australian Rugby Union.

•

Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy and Creative Group, and costs related to the U.K. Newspaper Matters. The Company’s corporate Strategy and Creative Group was formed to identify new products and services across its businesses to increase revenues and profitability and to target and assess potential acquisitions and investments.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company has determined its operating segments in accordance with its internal management structure, which is organized based on operating activities, and has aggregated its newspaper and information services business with its integrated marketing services business into one reportable segment due to their similarities. The Company evaluates performance based upon several factors, of which the primary financial measure is Segment EBITDA.

Total Segment EBITDA is 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 and excludes items, such as depreciation and amortization and impairment and restructuring charges, which are significant components in assessing the Company’s financial performance.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business. Segment EBITDA provides management, investors and equity analysts with a measure to analyze operating performance of the Company’s business and its enterprise value against historical data and competitors’ data, although historical results, including Segment EBITDA, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences). The following table reconciles Total Segment EBITDA to Income from continuing operations.


	For the three months December 31,						For the six months ended December 31,
	For the three months December 31,						For the six months ended December 31,
	2015			2014			2015			2014
	(in millions)
Revenues:
News and Information Services	$	1,400		$	1,523		$	2,690		$	2,974
Book Publishing		446			469			855			875
Digital Real Estate Services		208			154			399			266
Cable Network Programming		106			112			230			251
Other		1			—			1			—

Total Revenues		2,161			2,258			4,175			4,366

Segment EBITDA:
News and Information Services	$	158		$	216		$	241		$	321
Book Publishing		57			77			99			132
Digital Real Estate Services		73			57			130			114
Cable Network Programming		39			54			67			86
Other		(47	)		(52	)		(92	)		(107	)

Total Segment EBITDA		280			352			445			546

Depreciation and amortization		(123	)		(127	)		(244	)		(251	)
Impairment and restructuring charges		(22	)		(17	)		(39	)		(21	)
Equity earnings of affiliates		15			16			23			41
Interest, net		11			13			23			30
Other, net		(6	)		10			(1	)		58

Income from continuing operations before income tax (expense) benefit		155			247			207			403
Income tax (expense) benefit		(49	)		(65	)		42			(112	)

Income from continuing operations	$	106		$	182		$	249		$	291


	As of December 31, 2015		As of June 30, 2015
	As of December 31, 2015		As of June 30, 2015
	(in millions)
Total assets:
News and Information Services	$	6,768	$	6,749
Book Publishing		2,016		2,022
Digital Real Estate Services		1,271		1,278
Cable Network Programming		1,070		1,163
Other^(a)		1,462		1,352
Investments		2,288		2,379
Assets held for sale		—		92

Total assets	$	14,875	$	15,035

^(a)	The Other segment primarily includes Cash and cash equivalents.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	As of December 31, 2015		As of June 30, 2015
	As of December 31, 2015		As of June 30, 2015
	(in millions)
Goodwill and intangible assets, net:
News and Information Services	$	2,678	$	2,593
Book Publishing		856		896
Digital Real Estate Services		834		835
Cable Network Programming		883		938
Other		3		4

Total goodwill and intangible assets, net	$	5,254	$	5,266

NOTE 14. ADDITIONAL FINANCIAL INFORMATION

Receivables, net

Receivables are presented net of an allowance for returns and doubtful accounts, which is an estimate of amounts that may not be collectible. In determining the allowance for returns, management analyzes historical returns, current economic trends and changes in customer demand and acceptance of the Company’s products. Based on this information, management reserves a certain portion of revenues that provide the customer with the right of return. The allowance for doubtful accounts is estimated based on historical experience, receivable aging, current economic trends and specific identification of certain receivables that are at risk of not being collected.

Receivables, net consist of:


	As of			As of
	December 31, 2015			June 30, 2015
	(in millions)
Receivables	$	1,587		$	1,503
Allowances for returns and doubtful accounts		(238	)		(220	)

Receivables, net	$	1,349		$	1,283

The Company’s receivables did not contain significant concentrations of credit risk as of December 31, 2015 or June 30, 2015 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.

Other Current Assets

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


	As of December 31, 2015		As of June 30, 2015
	As of December 31, 2015		As of June 30, 2015
	(in millions)
Inventory^(a)	$	254	$	299
Deferred tax assets		—		63
Assets held for sale		—		92
Prepayments and other current assets		249		263

Total Other current assets	$	503	$	717

^(a)	Inventory at December 31, 2015 and June 30, 2015 was primarily comprised of books, newsprint, printing ink and programming rights.

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Other Non-Current Assets

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


	As of December 31, 2015		As of June 30, 2015
	As of December 31, 2015		As of June 30, 2015
	(in millions)
Royalty advances to authors	$	296	$	304
Notes receivable^(a)		36		39
Deferred tax assets		518		219
Other		134		124

Total Other non-current assets	$	984	$	686

^(a)	Notes receivable relates to the Company’s sale of its former U.K. newspaper division headquarters.

Other Current Liabilities

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


	As of December 31, 2015		As of June 30, 2015
	As of December 31, 2015		As of June 30, 2015
	(in millions)
Current tax payable	$	28	$	27
Royalties and commissions payable		201		163
Other		174		211

Total Other current liabilities	$	403	$	401

Other, net

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


	For the three months ended December 31,					For the six months ended December 31,
	2015			2014		2015			2014
	(in millions)
Gain on sale of marketable securities^(a)	$	—		$	—	$	—		$	29
Dividends received from cost method investments		—			3		—			20
Other, net		(6	)		7		(1	)		9

Total Other, net	$	(6	)	$	10	$	(1	)	$	58

^(a)

In August 2014, REA Group completed the sale of a minority interest held in marketable securities for total cash consideration of $104 million. As a result of the sale, REA Group recognized a pre-tax gain of $29 million, which was reclassified out of accumulated other comprehensive income and included in Other, net in the Statement of Operations.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document, including the following discussion and analysis, contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. All statements that are not statements of historical fact are forward-looking statements. The words “expect,” “estimate,” “anticipate,” “predict,” “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this discussion and analysis and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things, trends affecting the Company’s financial condition or results of operations and the outcome of contingencies such as litigation and investigations. Readers are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth under the heading “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q. The Company does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review this document and the other documents filed by the Company with the Securities and Exchange Commission (the “SEC”). This section should be read together with the unaudited Consolidated Financial Statements of News Corporation and related notes set forth elsewhere herein and News Corporation’s Annual Report on Form 10-K for the fiscal year ended June 30, 2015 as filed with the SEC on August 13, 2015 (the “2015 Form 10-K”).

INTRODUCTION

The consolidated unaudited financial statements are referred to herein as the “Financial Statements.” The consolidated statements of operations are referred to herein as the “Statements of Operations.” The consolidated balance sheets are referred to herein as the “Balance Sheets.” The consolidated statements of cash flows are referred to herein as the “Statements of Cash Flows.” The Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company’s financial condition, changes in financial condition and results of operations. This discussion is organized as follows:

•

Overview of the Company’s Business—This section provides a general description of the Company’s businesses, as well as developments that occurred to date during fiscal 2016 and in the six months ended December 31, 2014 that the Company believes are important in understanding its financial condition and results of operations or to disclose known trends.

•

Results of Operations—This section provides an analysis of the Company’s results of operations for the three and six months ended December 31, 2015 and 2014. This analysis is presented on both a consolidated basis and a segment basis. In addition, a brief description is provided of significant transactions and events that have an impact on the comparability of the results being analyzed.

•

Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for the six months ended December 31, 2015 and 2014 as well as a discussion of the Company’s financial arrangements and outstanding commitments, both firm and contingent, that existed during fiscal 2016.

OVERVIEW OF THE COMPANY’S BUSINESSES

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

•

Digital Real Estate Services—The Digital Real Estate Services segment consists of the Company’s interests in REA Group Limited (“REA Group”) and Move, Inc. (“Move”). REA Group is a publicly traded company listed on the ASX (ASX: REA) that is a leading multinational digital advertising business specializing in property. REA Group operates Australia’s leading residential and commercial property websites, realestate.com.au and realcommercial.com.au, as well as property sites in Europe and Asia. The Company holds a 61.6% interest in REA Group.

•

Other—The Other segment consists primarily of general corporate overhead expenses, the corporate Strategy and Creative Group, and costs related to the U.K. Newspaper Matters (as defined in “Item 1. Legal Proceedings”). The Company’s corporate Strategy and Creative Group was formed to identify new products and services across its businesses to increase revenues and profitability and to target and assess potential acquisitions and investments.

News and Information Services

Revenue at the News and Information Services segment is derived from the sale of advertising, circulation and subscriptions, as well as licensing. Adverse changes in general market conditions for advertising continue to affect revenues. Advertising revenues at the News and Information Services segment are also subject to seasonality, with revenues typically being highest in the Company’s second fiscal quarter due to the end-of-year holiday season in its main operating geographies. Circulation and subscription revenues can be greatly affected by changes in the prices of the Company’s and/or competitors’ products, as well as by promotional activities.

Operating expenses include costs related to paper, production, distribution, third party printing, editorial and commissions. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overhead.

The News and Information Services segment’s advertising volume, circulation and the price of paper are the key variables whose fluctuations can have a material effect on the Company’s operating results and cash flow. The Company has to anticipate the level of advertising volume, circulation and paper prices in managing its businesses to maximize operating profit during expanding and contracting economic cycles. The Company continues to be exposed to risks associated with paper used for printing. Paper is a basic commodity and its price is sensitive to the balance of supply and demand. The Company’s expenses are affected by the cyclical increases and decreases in the price of paper. The News and Information Services segment’s products compete for readership and advertising with local and national competitors and also compete with other media alternatives in their respective markets. Competition for circulation and subscriptions is based on the content of the products provided, pricing and, from time to time, various promotions. The success of these products also depends upon advertisers’ judgments as to the most effective use of their advertising budgets. Competition for advertising is based upon the reach of the products, advertising rates and advertiser results. Such judgments are based on factors such as cost, availability of alternative media, distribution and quality of readership demographics.

Like other newspaper groups, the Company faces challenges to its traditional print business model from new media formats and shifting consumer preferences. The Company is also exposed to the impact of long-term structural movements in advertising spending, in particular, the move in classified advertising from print to digital. These new media formats could impact the Company’s overall performance, positively or negatively.

As a multi-platform news provider, the Company recognizes the importance of maximizing revenues from new media, both in terms of paid-for content and in new advertising models, and continues to invest in its digital products. Technologies such as smartphones, tablets and similar devices and their related applications provide continued opportunities for the Company to make its journalism available to a new audience of readers, introduce new or different pricing schemes, develop its products to continue to attract advertisers and/or affect the relationship between publisher and consumer. The Company continues to develop and implement strategies to exploit its content in new media channels, including the implementation of digital subscriptions.

Book Publishing

The Book Publishing segment derives revenues from the sale of general fiction, nonfiction, children’s and religious books in the U.S. and internationally. The revenues and operating results of the Book Publishing segment are significantly affected by the timing of releases and the number of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand during the end-of-year holiday season in its main operating geographies. This marketplace continues to change due to technical innovations, electronic book devices and other factors. Each book is a separate and distinct product, and its financial success depends upon many factors, including public acceptance.

Major new title releases represent a significant portion of the Book Publishing segment’s sales throughout the fiscal year. Print-based consumer books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Book Publishing segment is subject to global trends and local economic conditions.

Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, promotional, art and design expenses. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.

Digital Real Estate Services

The Digital Real Estate Services segment sells online advertising services on its residential real estate and commercial property sites and also licenses certain professional software products on a subscription basis. Significant expenses associated with these sites and software solutions include development costs, advertising and promotional expenses, hosting and support services, salaries, employee benefits and other routine overhead expenses.

Consumers are increasingly turning to the Internet and mobile devices for real estate information. The Digital Real Estate Services segment’s success depends on its continued innovation to provide products and services that make its websites and mobile applications useful for consumers and real estate and mortgage professionals and attractive to its advertisers.

Cable Network Programming

The Cable Network Programming segment consists of FOX SPORTS Australia, which offers the following seven channels in high definition: FOX SPORTS 1, FOX SPORTS 2, FOX SPORTS 3, FOX SPORTS 4, FOX SPORTS 5, FOX FOOTY and FOX SPORTS NEWS. Revenue is primarily derived from monthly affiliate fees received from pay-tv providers (mainly Foxtel) based on the number of subscribers.

FOX SPORTS Australia competes primarily with ESPN, beIN SPORTS, the Free-To-Air (“FTA”) channels and certain telecommunications companies in Australia.

The most significant operating expenses of the Cable Network Programming segment are the acquisition and production expenses related to programming and the expenses related to operating the technical facilities of the broadcast operations. The expenses associated with licensing programming rights are recognized during the applicable season or event, which can cause results at the Cable Network Programming Segment to fluctuate based on the timing and mix of the Company’s local and international sports programming. Other expenses include marketing and promotional expenses related to improving the market visibility and awareness of the channels and their programming. Additional expenses include salaries, employee benefits, rent and other routine overhead expenses.

Other

The Other segment primarily consists of general corporate overhead expenses, the corporate Strategy and Creative Group and costs related to the U.K. Newspaper Matters. The Company’s corporate Strategy and Creative Group was formed to identify new products and services across the Company’s businesses to increase revenues and profitability and to target and assess potential acquisitions and investments.

OTHER BUSINESS DEVELOPMENTS

On November 2, 2015, REA Group announced a proposed transaction to acquire all of the outstanding shares of iProperty Group Limited (ASX:IPP) (“iProperty”) it does not already own. iProperty shareholders could elect to receive A$4.00 per share in cash or A$1.20 cash and 0.7 shares in a newly-formed company, subject to a maximum 20% indirect equity interest in iProperty. The total cash consideration for the transaction will be approximately A$480 million (approximately US$340 million) which will be funded primarily by debt with the remainder from REA Group’s existing cash. The transaction has received iProperty shareholder and court approval and is expected to be completed in February 2016. iProperty has online property advertising operations primarily in Malaysia, Indonesia, Hong Kong, Thailand and Singapore. The acquisition of iProperty extends REA Group’s market leading business in Australia to attractive markets throughout Southeast Asia. REA Group

previously purchased a 17.22% interest in iProperty in July 2014 for total cash consideration of approximately $100 million. In December 2014, REA Group sold Squarefoot, its Hong Kong based business, to iProperty in exchange for an additional 2.2% interest in iProperty. As of December 31, 2015, REA Group owned an approximate 22.7% interest in iProperty.

On September 30, 2015, the Company acquired Unruly Holdings Limited (“Unruly”) for approximately £60 million (approximately $90 million) in cash and up to £56 million (approximately $86 million) in future cash consideration related to payments primarily contingent upon the achievement of certain performance objectives. Unruly is a leading global video distribution platform that is focused on delivering branded video advertising across websites and mobile devices. Unruly’s results of operations are included within the Company’s News and Information Services segment, and it is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.

In November 2014, the Company completed its acquisition of Move, a leading provider of online real estate services. The acquisition expanded the Company’s digital real estate services business into the U.S., one of the largest real estate markets. The aggregate cash payment at closing to acquire the outstanding shares of Move was approximately $864 million, which was funded with cash on hand. The Company also assumed equity-based compensation awards with a fair value of $67 million, of which $28 million was allocated to pre-combination services and included in total consideration transferred for Move. The remaining $39 million was allocated to future services and is being expensed over the weighted average remaining service period of 2.5 years. In addition, the Company assumed Move’s outstanding indebtedness of approximately $129 million, which the Company settled following the acquisition, and acquired approximately $108 million of cash.

The total transaction value for the Move acquisition is set forth below (in millions):


Cash paid for Move equity	$	864
Assumed equity-based compensation awards—pre-combination services		28

Total consideration transferred	$	892

Plus: Assumed debt		129
Plus: Assumed equity-based compensation awards—post-combination services		39
Less: Cash acquired		(108	)

Total transaction value	$	952

Move’s results of operations are included within the Digital Real Estate Services segment, and is considered a separate reporting unit for purposes of the Company’s annual goodwill impairment review.

In November 2014, SEEK Asia Limited (“SEEK Asia”), in which the Company owned a 12.1% interest, acquired the online employment businesses of JobStreet Corporation Berhad (“JobStreet”), which were combined with JobsDB, Inc., SEEK Asia’s existing online employment business. The transaction was funded primarily through additional contributions by SEEK Asia shareholders which did not have an impact on the Company’s ownership. The Company’s share of the funding contribution was approximately $60 million. In June 2015, the Company purchased an additional 0.8% interest in SEEK Asia for approximately $7 million, which increased the Company’s investment to approximately 12.9%.

RESULTS OF OPERATIONS

Results of Operations—For the three and six months ended December 31, 2015 versus the three and six months ended December 31, 2014

The following table sets forth the Company’s operating results for the three and six months ended December 31, 2015 as compared to the three and six months ended December 31, 2014.


	For the three months ended December 31,									For the six months ended December 31,
	2015		2014		Change		% Change			2015		2014		Change		% Change
(in millions, except %)					Better/(Worse)									Better/(Worse)
Revenues:
Advertising	$	976	$	1,038	$	(62)		(6)	%	$	1,856	$	1,958	$	(102)		(5)	%
Circulation and Subscription		621		644		(23)		(4)	%		1,260		1,316		(56)		(4)	%
Consumer		429		448		(19)		(4)	%		821		838		(17)		(2)	%
Other		135		128		7		5	%		238		254		(16)		(6)	%

Total Revenues		2,161		2,258		(97)		(4)	%		4,175		4,366		(191)		(4)	%
Operating expenses		(1,193)		(1,251)		58		5	%		(2,392)		(2,533)		141		6	%
Selling, general and administrative		(688)		(655)		(33)		(5)	%		(1,338)		(1,287)		(51)		(4)	%
Depreciation and amortization		(123)		(127)		4		3	%		(244)		(251)		7		3	%
Impairment and restructuring charges		(22)		(17)		(5)		(29)	%		(39)		(21)		(18)		(86)	%
Equity earnings of affiliates		15		16		(1)		(6)	%		23		41		(18)		(44)	%
Interest, net		11		13		(2)		(15)	%		23		30		(7)		(23)	%
Other, net		(6)		10		(16)		*	*		(1)		58		(59)		*	*

Income from continuing operations before income tax (expense) benefit		155		247		(92)		(37)	%		207		403		(196)		(49)	%
Income tax (expense) benefit		(49)		(65)		16		25	%		42		(112)		154		*	*

Income from continuing operations		106		182		(76)		(42)	%		249		291		(42)		(14)	%
(Loss) income from discontinued operations, net of tax		(24)		(19)		(5)		(26)	%		22		(40)		62		*	*

Net income		82		163		(81)		(50)	%		271		251		20		8	%
Less: Net income attributable to noncontrolling interests		(19)		(20)		1		5	%		(33)		(43)		10		23	%

Net income attributable to News Corporation	$	63	$	143	$	(80)		(56)	%	$	238	$	208	$	30		14	%

**	not meaningful

Revenues—Revenues decreased $97 million, or 4%, and $191 million, or 4%, for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015.

The revenue decrease for the three months ended December 31, 2015 was mainly due to a decrease in revenues at the News and Information Services segment of $123 million, primarily resulting from the negative impact of foreign currency fluctuations and weakness in the print advertising market. This decrease was offset in part by increased revenues at the Digital Real Estate Services segment of $54 million, primarily as a result of the acquisition of Move in November 2014.

The revenue decrease for the six months ended December 31, 2015 was primarily due to a decrease in revenues at the News and Information Services segment of $284 million, primarily resulting from the negative impact of foreign currency fluctuations and weakness in the print advertising market. The revenue decreases were partially offset by an increase in revenues at the Digital Real Estate Services segment of $133 million, primarily as a result of the acquisition of Move in November 2014.

Operating Expenses—Operating expenses decreased $58 million, or 5%, and $141 million, or 6%, for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015.

The decrease in Operating expenses for the three months ended December 31, 2015 was mainly due to a decrease in operating expenses at the News and Information Services segment of $80 million, primarily as a result of the positive impact of foreign currency fluctuations, lower newsprint, production and distribution costs and the impact of cost savings initiatives. The decrease in Operating expenses was partially offset by higher operating expenses at the Digital Real Estate Services segment due to the acquisition of Move in November 2014 and higher sports rights programming costs at the Cable Network Programming segment primarily related to the Rugby World Cup, which more than offset the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an Operating expense decrease of $57 million for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

The decrease in Operating expenses for the six months ended December 31, 2015 was mainly due to a decrease in operating expenses at the News and Information Services segment of $193 million, primarily as a result of the positive impact of foreign currency fluctuations, lower newsprint, production and distribution costs and the impact of cost savings initiatives. The decrease in Operating expenses was partially offset by higher operating expenses at the Digital Real Estate Services segment due to the acquisition of Move in November 2014 and higher operating costs at the Book Publishing segment as a result of the acquisition of Harlequin in August 2014. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in an operating expense decrease of $144 million for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Selling, general and administrative expenses—Selling, general and administrative expenses increased $33 million, or 5%, and $51 million, or 4%, for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015.

The increase in Selling, general and administrative expenses for the three months ended December 31, 2015 was primarily due to higher expenses at the Digital Real Estate Services segment as a result of the acquisition of Move, as well as increased promotion and marketing expenses in the News and Information Services segment, primarily at the U.K. newspapers. These increases were partially offset by the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $59 million for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

The increase in Selling, general and administrative expenses for the six months ended December 31, 2015 was primarily due to higher expenses at the Digital Real Estate Services segment as a result of the acquisition of Move, as well as increased promotion and marketing expenses in the News and Information Services segment, primarily at the U.K. newspapers and Dow Jones. These increases were partially offset by the positive impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Selling, general and administrative expense decrease of $131 million for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Depreciation and amortization—Depreciation and amortization expense decreased 3% for the three and six months ended December 31, 2015 as compared to the corresponding periods of fiscal 2015 due to lower

depreciation and amortization expense at the News and Information Services segment of $7 million and $20 million, respectively, primarily resulting from the positive impact of foreign currency fluctuations, partially offset by increased depreciation at the Digital Real Estate Services segment due to the acquisition of Move in November 2014. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a depreciation and amortization expense decrease of $8 million and $20 million for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015.

Impairment and restructuring charges—During the three and six months ended December 31, 2015, the Company recorded restructuring charges of $22 million and $39 million, respectively, of which $20 million and $32 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in the three and six months ended December 31, 2015 were primarily for employee termination benefits.

During the three and six months ended December 31, 2014, the Company recorded restructuring charges of $17 million and $21 million, respectively, of which $14 million and $18 million, respectively, related to the News and Information Services segment. The restructuring charges recorded in the three and six months ended December 31, 2014 were primarily for employee termination benefits.

Equity earnings of affiliates—Equity earnings of affiliates decreased $1 million for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015 as a result of lower net income at Foxtel due to the negative impact of foreign currency fluctuations. Equity earnings of affiliates decreased $18 million for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015 as a result of lower net income at Foxtel, primarily due to the negative impact of foreign currency fluctuations, a planned increase in programming costs to support subscriber growth, increased costs associated with higher sales volumes, the public launch of Triple Play, and continued investment in Presto, partially offset by lower depreciation expense resulting from Foxtel’s reassessment of the useful lives of cable and satellite installations due to lower subscriber churn and lower tax expense.


	For the three months ended December 31,										For the six months ended December 31,
	2015		2014		Change			% Change			2015		2014		Change			% Change
(in millions, except %)					Better/(Worse)										Better/(Worse)
Foxtel^(a)	$	13	$	15	$	(2	)		(13	)%	$	22	$	40	$	(18	)		(45	)%
Other equity affiliates, net		2		1		1			100	%		1		1		—			—

Total Equity earnings of affiliates	$	15	$	16	$	(1	)		(6	)%	$	23	$	41	$	(18	)		(44	)%

^(a)

In accordance with ASC 350, the Company amortized $13 million and $25 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the three and six months ended December 31, 2015, respectively, as compared to $14 million and $30 million in the three and six months ended December 31, 2014, respectively. Such amortization is reflected in Equity earnings of affiliates in the Statements of Operations.

Interest, net—Interest, net decreased $2 million and $7 million for the three and six months ended December 31, 2015 as compared to the corresponding periods of fiscal 2015, primarily due to the impact of foreign currency fluctuations.

Other, net


	For the three months ended December 31,					For the six months ended December 31,
(in millions)	2015			2014		2015			2014
Gain on sale of marketable securities^(a)	$	—		$	—	$	—		$	29
Dividends received from cost method investments		—			3		—			20
Other, net		(6	)		7		(1	)		9

Total Other, net	$	(6	)	$	10	$	(1	)	$	58

^(a)

Income tax (expense) benefit—The Company’s effective tax rate for the three months ended December 31, 2015 was lower than the U.S. statutory tax rate of 35% primarily due to the impact from foreign operations which are subject to lower tax rates, partially offset by the impact of nondeductible items.

The Company’s effective tax rate for the six months ended December 31, 2015 was lower than the U.S. statutory tax rate primarily due to a tax benefit of approximately $106 million related to the release of previously established valuation allowances related to certain U.S. federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business in the first quarter of fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration.

The Company’s effective tax rate for the three and six months ended December 31, 2014 was lower than the U.S. statutory tax rate primarily due to the impact from foreign operations which are subject to lower tax rates partially offset by the impact of nondeductible items.

(Loss) income from discontinued operations, net of tax—For the three months ended December 31, 2015, the Company recorded a loss from discontinued operations, net of tax, of $24 million as compared to a loss of $19 million in the corresponding period of fiscal 2015. The loss recognized in the three months ended December 31, 2015 was primarily related to severance and lease termination costs of $17 million which were incurred in conjunction with the sale of the Company’s Amplify Insight and Amplify Learning businesses. For the six months ended December 31, 2015, the Company recorded income from discontinued operations, net of tax, of $22 million, as compared to a loss of $40 million in the corresponding period of fiscal 2015. The change was primarily due to the impact of a $144 million tax benefit recognized upon reclassification of the Digital Education segment to discontinued operations and lower operating losses as a result of the sale of Amplify Insight and Amplify Learning, which more than offset the pre-tax non-cash impairment charge recognized in the first quarter of fiscal 2016 of $76 million and the severance and lease termination charges discussed above. (See Note 3 – Discontinued Operations in the accompanying Unaudited Consolidated Financial Statements).

Net income—Net income decreased $81 million for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015, primarily due to lower Total Segment EBITDA and lower Other, net.

Net income for the six months ended December 31, 2015 increased $20 million as compared to the corresponding period of fiscal 2015, primarily due to the tax benefit and income from discontinued operations discussed above, partially offset by lower Total Segment EBITDA, lower contribution from Other, net, lower equity earnings from Foxtel and higher restructuring expenses.

Net income attributable to noncontrolling interests—Net income attributable to noncontrolling interests decreased by $1 million and $10 million for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015, due to the negative impact of foreign currency fluctuations.

Segment Analysis

Segment EBITDA is defined as revenues less operating expenses and selling, general and administrative expenses. Segment EBITDA does not include: Depreciation and amortization, impairment and restructuring charges, equity earnings of affiliates, interest, net, other, net, income tax (expense) benefit and net income attributable to noncontrolling interests. Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources within the Company’s businesses. Segment EBITDA provides management, investors and equity analysts with a measure to analyze the operating performance of each of the Company’s business segments and its enterprise value against historical data and competitors’ data, although historical results may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).


	For the three months ended December 31,												For the six months ended December 31,
	2015			2014			Change			% Change			2015			2014			Change			% Change
(in millions, except %)							Better/(Worse)												Better/(Worse)
Revenues	$	2,161		$	2,258		$	(97	)		(4	)%	$	4,175		$	4,366		$	(191	)		(4	)%
Operating expenses		(1,193	)		(1,251	)		58			5	%		(2,392	)		(2,533	)		141			6	%
Selling, general and administrative		(688	)		(655	)		(33	)		(5	)%		(1,338	)		(1,287	)		(51	)		(4	)%

Total Segment EBITDA		280			352			(72	)		(20	)%		445			546			(101	)		(18	)%
Depreciation and amortization		(123	)		(127	)		4			3	%		(244	)		(251	)		7			3	%
Impairment and restructuring charges		(22	)		(17	)		(5	)		(29	)%		(39	)		(21	)		(18	)		(86	)%
Equity earnings of affiliates		15			16			(1	)		(6	)%		23			41			(18	)		(44	)%
Interest, net		11			13			(2	)		(15	)%		23			30			(7	)		(23	)%
Other, net		(6	)		10			(16	)		*	*		(1	)		58			(59	)		*	*

Income from continuing operations before income tax (expense) benefit		155			247			(92	)		(37	)%		207			403			(196	)		(49	)%
Income tax (expense) benefit		(49	)		(65	)		16			25	%		42			(112	)		154			*	*

Income from continuing operations	$	106		$	182		$	(76	)		(42	)%	$	249		$	291		$	(42	)		(14	)%

** not meaningful


	For the three months ended December 31,
	2015					2014
	Revenues		Segment EBITDA			Revenues		Segment EBITDA
(in millions)
News and Information Services	$	1,400	$	158		$	1,523	$	216
Book Publishing		446		57			469		77
Digital Real Estate Services		208		73			154		57
Cable Network Programming		106		39			112		54
Other		1		(47	)		—		(52	)

Total	$	2,161	$	280		$	2,258	$	352


	For the six months ended December 31,
	2015					2014
	Revenues		Segment EBITDA			Revenues		Segment EBITDA
	Revenues		Segment EBITDA			Revenues		Segment EBITDA
(in millions)
News and Information Services	$	2,690	$	241		$	2,974	$	321
Book Publishing		855		99			875		132
Digital Real Estate Services		399		130			266		114
Cable Network Programming		230		67			251		86
Other		1		(92	)		—		(107	)

Total	$	4,175	$	445		$	4,366	$	546

News and Information Services (64% and 68% of the Company’s consolidated revenues in the six months ended December 31, 2015 and 2014, respectively)


	For the three months ended December 31,												For the six months ended December 31,
	2015			2014			Change			% Change			2015			2014			Change			% Change
(in millions, except %)							Better/(Worse)												Better/(Worse)
Revenues:
Advertising	$	769		$	877		$	(108	)		(12	)%	$	1,450		$	1,660		$	(210	)		(13	)%
Circulation and Subscription		515			540			(25	)		(5	)%		1,039			1,099			(60	)		(5	)%
Other		116			106			10			9	%		201			215			(14	)		(7	)%

Total Revenues		1,400			1,523			(123	)		(8	)%		2,690			2,974			(284	)		(10	)%
Operating expenses		(799	)		(879	)		80			9	%		(1,594	)		(1,787	)		193			11	%
Selling, general and administrative		(443	)		(428	)		(15	)		(4	)%		(855	)		(866	)		11			1	%

Segment EBITDA	$	158		$	216		$	(58	)		(27	)%	$	241		$	321		$	(80	)		(25	)%

Revenues at the News and Information Services segment decreased $123 million, or 8%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The revenue decrease was primarily due to lower advertising revenues of $108 million as compared to the corresponding period of fiscal 2015, primarily resulting from weakness in the print advertising market and the negative impact of foreign currency fluctuations. Circulation and subscription revenues for the three months ended December 31, 2015 decreased $25 million as compared to the corresponding period of fiscal 2015 as a result of the negative impact of foreign currency fluctuations. These decreases were partially offset by an increase in other revenues of $10 million, primarily due to the acquisition of Unruly, which contributed $18 million in the quarter ended December 31, 2015, and more than offset lower other revenues at the U.K. newspapers and the negative impact of foreign currency fluctuations.

Segment EBITDA at the News and Information Services segment decreased $58 million, or 27%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily due to a decrease of $27 million at the U.K. newspapers resulting from lower revenues and higher

promotion and marketing costs, a decrease at the Australian newspapers of $22 million, primarily due to lower revenues, which more than offset the impact of lower newsprint, production and distribution costs and cost savings initiatives, and approximately $5 million in costs related to the acquisition of Unruly.

Revenues at the News and Information Services segment decreased $284 million, or 10%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The revenue decrease was primarily due to lower advertising revenues of $210 million as compared to the corresponding period of fiscal 2015, primarily resulting from the negative impact of foreign currency fluctuations and weakness in the print advertising market and at News America Marketing. Circulation and subscription revenues for the six months ended December 31, 2015 decreased $60 million as compared to the corresponding period of fiscal 2015 as a result of the negative impact of foreign currency fluctuations, which more than offset higher circulation and subscription revenues at the Australian newspapers and Dow Jones. Other revenues for the six months ended December 31, 2015 decreased $14 million, primarily due to lower other revenues at the U.K. newspapers and the negative impact of foreign currency fluctuations, partially offset by the acquisition of Unruly in the quarter ended December 31, 2015.

Segment EBITDA at the News and Information Services segment decreased $80 million, or 25%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily due to a decrease of $46 million at the Australian newspapers, primarily resulting from lower advertising revenues and the negative impact of foreign currency fluctuations, which more than offset the impact of lower newsprint, production and distribution costs. Segment EBITDA was also impacted by a decrease at the U.K. newspapers of $21 million, primarily due to lower revenues and higher promotion and marketing costs, a decrease at News America Marketing of $10 million due to lower revenues, which were partially offset by lower operating expenses, and approximately $5 million in costs related to the acquisition of Unruly.

News Corp Australia

Revenues at the Australian newspapers for the three months ended December 31, 2015 decreased 21% compared to the corresponding period of fiscal 2015, with the impact of foreign currency fluctuations of the U.S. dollar against the Australian dollar resulting in a revenue decrease of $64 million, or 15%. Advertising revenues decreased $73 million, primarily as a result of the negative impact of foreign currency fluctuations and weakness in the print advertising market in Australia. Circulation and subscription revenues decreased $16 million due to the negative impact of foreign currency fluctuations, as price increases and digital subscriber growth offset print volume declines.

Revenues at the Australian newspapers for the six months ended December 31, 2015 decreased 23% compared to the corresponding period of fiscal 2015, with the impact of foreign currency fluctuations of the U.S. dollar against the Australian dollar resulting in a revenue decrease of $151 million, or 17%. Advertising revenues declined $157 million, primarily as a result of the negative impact of foreign currency fluctuations and weakness in the print advertising market in Australia. Circulation and subscription revenues declined $37 million due to the negative impact of foreign currency fluctuations, as price increases and digital subscriber growth offset volume declines.

News UK

For the three months ended December 31, 2015, revenues at the U.K. newspapers decreased 10% as compared to the corresponding period of fiscal 2015. Advertising revenues decreased $16 million, primarily due to print market declines and the negative impact of foreign currency fluctuations. Circulation and subscription revenues decreased $11 million, primarily due to the negative impact of foreign currency fluctuations, the change in the digital strategy at The Sun and single-copy volume declines. These decreases were partially offset by cover price increases and higher subscriptions at The Times and The Sunday Times. Other revenues decreased $11 million due to a reduction in newsprint sales to third parties. The impact of the revenue decrease was offset in large part by lower operating expenses. The impact of foreign currency fluctuations of the U.S. dollar against the British pound resulted in a revenue decrease of $15 million, or 4%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

For the six months ended December 31, 2015, revenues at the U.K. newspapers decreased 11% as compared to the corresponding period of fiscal 2015. Advertising revenues decreased $27 million, primarily due to the negative impact of foreign currency fluctuations and print market declines. Circulation and subscription revenues decreased $26 million, primarily due to the negative impact of foreign currency fluctuations, single-copy volume declines, primarily at The Sun, as well as the change in the digital strategy at The Sun. These decreases were partially offset by cover price increases and higher subscriptions at The Times and The Sunday Times. Other revenues decreased $26 million due to a reduction in newsprint sales to third parties. The impact of the revenue decrease was offset in large part by lower operating expenses. The impact of foreign currency fluctuations of the U.S. dollar against the British pound resulted in a revenue decrease of $41 million, or 6%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Dow Jones

Revenues at Dow Jones decreased modestly for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. Advertising revenues decreased $12 million, as weakness in the print advertising market was partially offset by higher digital advertising revenues. This decrease was partially offset by growth in circulation revenues at The Wall Street Journal and modest growth in subscription revenues in the professional information business, partially offset by the negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $4 million, or 1%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Revenues at Dow Jones decreased modestly for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. Advertising revenues decreased $10 million, as lower print advertising was partially offset by higher digital advertising revenues. This decrease was partially offset by higher circulation and subscription revenues, primarily due to price increases and digital volume growth at The Wall Street Journal and increased subscription revenues in the professional information business, partially offset by the negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations resulted in a revenue decrease of $9 million, or 1%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

News America Marketing

Revenues at News America Marketing decreased 3% and 4% for the three and six months ended December 31, 2015, respectively, as compared to the corresponding periods of fiscal 2015, primarily due to decreased revenues for free-standing insert products of $16 million and $25 million, respectively, partially offset by higher domestic in-store product revenues and digital revenues.

Book Publishing (20% of the Company’s consolidated revenues in the six months ended December 31, 2015 and 2014)


	For the three months ended December 31,												For the six months ended December 31,
	2015			2014			Change			% Change			2015			2014			Change			% Change
(in millions, except %)							Better/(Worse)												Better/(Worse)
Revenues:
Consumer	$	429		$	448		$	(19	)		(4	)%	$	821		$	838		$	(17	)		(2	)%
Other		17			21			(4	)		(19	)%		34			37			(3	)		(8	)%

Total Revenues		446			469			(23	)		(5	)%		855			875			(20	)		(2	)%
Operating expenses		(307	)		(306	)		(1	)		—			(597	)		(577	)		(20	)		(3	)%
Selling, general and administrative		(82	)		(86	)		4			5	%		(159	)		(166	)		7			4	%

Segment EBITDA	$	57		$	77		$	(20	)		(26	)%	$	99		$	132		$	(33	)		(25	)%

Revenues at the Book Publishing segment decreased $23 million, or 5%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily the result of an industry-wide decline in e-book sales and the negative impact of foreign currency fluctuations, as lower revenues from the Divergent series by Veronica Roth were more than offset by higher print book sales, primarily related to sales of The Pioneer Woman Cooks: Dinnertime by Ree Drummond. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $12 million, or 3%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. Digital sales, which consist of revenues generated through the sale of e-books and digital audio books, represented 16% of Consumer revenues during the three months ended December 31, 2015. Digital sales decreased 19% as compared to the corresponding period of fiscal 2015 due to an industry-wide decline in e-book sales and the lower contribution from the Divergent series.

Segment EBITDA at the Book Publishing segment decreased $20 million, or 26%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily due to an industry-wide decline in e-book sales, the mix of titles sold and lower contribution from the Divergent series.

Revenues at the Book Publishing segment decreased $20 million, or 2%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily the result of lower revenues from the Divergent series by Veronica Roth of $30 million, an industry-wide decline in e-book sales and the negative impact of foreign currency fluctuations. These decreases were partially offset by higher print book sales, primarily related to sales of Go Set a Watchman by Harper Lee of $42 million and The Pioneer Woman Cooks: Dinnertime by Ree Drummond, and $23 million related to the acquisition of Harlequin in August 2014. The company sold one million net units of the Divergent series in the six months ended December 31, 2015 as compared to 5.2 million net units in the corresponding period of fiscal 2015. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $27 million, or 3%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. Digital sales represented 18% of Consumer revenues during the six months ended December 31, 2015. Digital sales decreased 15% as compared to the corresponding period of fiscal 2015 due to an industry-wide decline in e-book sales and the lower contribution from the Divergent series. During the six months ended December 31, 2015, HarperCollins had 114 titles on The New York Times Bestseller List, with 15 titles reaching the number one position.

Segment EBITDA at the Book Publishing segment decreased $33 million, or 25%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The decrease was primarily due to the industry-wide decline in e-book sales and lower contribution from the Divergent series, partially offset by the contribution of Go Set a Watchman by Harper Lee.

Digital Real Estate Services (10% and 6% of the Company’s consolidated revenues in the six months ended December 31, 2015 and 2014, respectively)


	For the three months ended December 31,												For the six months ended December 31,
	2015			2014			Change			% Change			2015			2014			Change			% Change
(in millions, except %)							Better/(Worse)												Better/(Worse)
Revenues:
Advertising	$	192		$	147		$	45			31	%	$	368		$	259		$	109			42	%
Circulation and Subscription		16			7			9			*	*		31			7			24			*	*

Total Revenues		208			154			54			35	%		399			266			133			50	%
Operating expenses		(24	)		(10	)		(14	)		*	*		(47	)		(10	)		(37	)		*	*
Selling, general and administrative		(111	)		(87	)		(24	)		(28	)%		(222	)		(142	)		(80	)		(56	)%

Segment EBITDA	$	73		$	57		$	16			28	%	$	130		$	114		$	16			14	%

**	not meaningful

Revenues at the Digital Real Estate Services segment increased $54 million, or 35%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015, primarily due to the acquisition of Move in November 2014, which contributed $53 million. At REA Group, higher revenues from greater residential listing depth product penetration were offset by the negative impact of foreign currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $23 million, or 15%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Segment EBITDA at the Digital Real Estate Services segment increased $16 million, or 28%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. The increase was due to higher EBITDA at Move resulting from the absence of one-time transaction costs of $16 million which did not recur in the current quarter and higher revenues at REA Group which were partially offset by the negative impact of currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Segment EBITDA decrease of $14 million, or 25%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Revenues at the Digital Real Estate Services segment increased $133 million, or 50%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015, due to the acquisition of Move in November 2014, which contributed $138 million. This increase was partially offset by the negative impact of foreign currency fluctuations which more than offset higher revenues resulting from greater residential listing depth product penetration at REA Group. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a revenue decrease of $51 million, or 19%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Segment EBITDA at the Digital Real Estate Services segment increased $16 million, or 14%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015. This increase was due to higher EBITDA at Move resulting from the absence of one-time transaction costs of $18 million which did not recur in the current year period and higher revenues at REA Group which were partially offset by the negative impact of currency fluctuations. The impact of foreign currency fluctuations of the U.S. dollar against local currencies resulted in a Segment EBITDA decrease of $30 million, or 26%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Cable Network Programming (6% of the Company’s consolidated revenues in the six months ended December 31, 2015 and 2014)


	For the three months ended December 31,												For the six months ended December 31,
	2015			2014			Change			% Change			2015			2014			Change			% Change
(in millions, except %)							Better/(Worse)												Better/(Worse)
Revenues:
Advertising	$	15		$	14		$	1			7	%	$	38		$	39		$	(1	)		(3	)%
Circulation and Subscription		90			97			(7	)		(7	)%		190			210			(20	)		(10	)%
Other		1			1			—			—			2			2			—			—

Total Revenues		106			112			(6	)		(5	)%		230			251			(21	)		(8	)%
Operating expenses		(62	)		(54	)		(8	)		(15	)%		(152	)		(155	)		3			2	%
Selling, general and administrative		(5	)		(4	)		(1	)		(25	)%		(11	)		(10	)		(1	)		(10	)%

Segment EBITDA	$	39		$	54		$	(15	)		(28	)%	$	67		$	86		$	(19	)		(22	)%

For the three months ended December 31, 2015, revenues and Segment EBITDA at the Cable Network Programming segment decreased $6 million, or 5%, and $15 million, or 28%, respectively, as compared to the corresponding period of fiscal 2015. The revenue decrease was due to the negative impact of foreign currency fluctuations, which more than offset higher affiliate and advertising revenues. The decrease in Segment EBITDA was primarily the result of increased programming and production costs related to the Rugby World Cup of $11 million, higher programming and production costs for other sports programming and the negative impact of foreign currency fluctuations, which more than offset the higher affiliate and advertising revenues noted above. The impact of foreign currency fluctuations of the U.S. dollar against the Australian dollar resulted in a revenue decrease of $17 million, or 15%, and a Segment EBITDA decrease of $3 million, or 6%, for the three months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

For the six months ended December 31, 2015, revenues and Segment EBITDA at the Cable Network Programming segment decreased $21 million, or 8%, and $19 million, or 22%, respectively, as compared to the corresponding period of fiscal 2015. The revenue decrease was primarily due to the unfavorable impact of foreign currency fluctuations, which more than offset higher affiliate and advertising revenues. The decrease in Segment EBITDA was primarily the result of higher programming rights and production costs related to the Rugby World Cup of $16 million, higher programming and production costs for other sports programming and the negative impact of foreign currency fluctuations, which more than offset the higher affiliate and advertising revenues noted above. The impact of foreign currency fluctuations of the U.S. dollar against the Australian dollar resulted in a revenue decrease of $46 million, or 18%, and a Segment EBITDA decrease of $10 million, or 12%, for the six months ended December 31, 2015 as compared to the corresponding period of fiscal 2015.

Other (0% of the Company’s consolidated revenues in the six months ended December 31, 2015 and 2014)

For the three months ended December 31,

For the six months ended December 31,

2015

2014

Change

% Change

2015

2014

Change

% Change

(in millions, except %)

Better/(Worse)

Revenues

—

Operating expenses

(1</