UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|
☒ |
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2016 |
or
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☐ |
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission file number 001-32352
TWENTY-FIRST CENTURY FOX, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
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26-0075658 |
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(State or Other Jurisdiction |
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(I.R.S. Employer |
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1211 Avenue of the Americas, New York, New York |
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10036 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code (212) 852-7000
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☒ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 28, 2016, 1,056,810,730 shares of Class A Common Stock, par value $0.01 per share, and 798,520,953 shares of Class B Common Stock, par value $0.01 per share, were outstanding.
TWENTY-FIRST CENTURY FOX, INC.
FORM 10-Q
TABLE OF CONTENTS
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Page |
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Part I. Financial Information |
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Item 1. |
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Financial Statements |
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1 |
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2 |
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Consolidated Balance Sheets as of September 30, 2016 (unaudited) and June 30, 2016 (audited) |
3 |
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4 |
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5 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
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Item 3. |
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33 |
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Item 4. |
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35 |
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Part II. Other Information |
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Item 1. |
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36 |
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Item 1A. |
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37 |
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Item 2. |
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42 |
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Item 3. |
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42 |
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Item 4. |
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42 |
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Item 5. |
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42 |
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Item 6. |
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43 |
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44 |
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TWENTY-FIRST CENTURY FOX, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
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For the three months ended September 30, |
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2016 |
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2015 |
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Revenues |
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$ |
6,506 |
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$ |
6,077 |
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Operating expenses |
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|
(3,864 |
) |
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|
(3,673 |
) |
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Selling, general and administrative |
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(866 |
) |
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(889 |
) |
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Depreciation and amortization |
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(135 |
) |
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(128 |
) |
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Equity earnings of affiliates |
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35 |
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35 |
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Interest expense, net |
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(300 |
) |
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(295 |
) |
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Interest income |
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9 |
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|
|
9 |
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Other, net |
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(148 |
) |
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(83 |
) |
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|
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|
|
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|
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Income from continuing operations before income tax expense |
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1,237 |
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|
|
1,053 |
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Income tax expense |
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(343 |
) |
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(313 |
) |
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|
|
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|
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|
|
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Income from continuing operations |
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|
894 |
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|
|
740 |
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Loss from discontinued operations, net of tax |
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(6 |
) |
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(3 |
) |
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|
|
|
|
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Net income |
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|
888 |
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|
|
737 |
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Less: Net income attributable to noncontrolling interests |
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(67 |
) |
|
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(62 |
) |
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Net income attributable to Twenty-First Century Fox, Inc. stockholders |
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$ |
821 |
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$ |
675 |
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Earnings per share data |
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Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders - basic and diluted |
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$ |
827 |
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$ |
678 |
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Weighted average shares: |
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Basic |
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1,861 |
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2,009 |
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Diluted |
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1,863 |
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|
2,012 |
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Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders per share - basic and diluted |
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$ |
0.44 |
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$ |
0.34 |
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Net income attributable to Twenty-First Century Fox, Inc. stockholders per share - basic and diluted |
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$ |
0.44 |
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$ |
0.34 |
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The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
1
TWENTY-FIRST CENTURY FOX, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN MILLIONS)
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For the three months ended September 30, |
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2016 |
|
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2015 |
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||
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Net income |
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$ |
888 |
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$ |
737 |
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Other comprehensive loss, net of tax: |
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|
|
|
|
|
|
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Foreign currency translation adjustments |
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2 |
|
|
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(66 |
) |
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Cash flow hedges |
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8 |
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|
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4 |
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Unrealized holding losses on securities |
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- |
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|
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(4 |
) |
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Benefit plan adjustments |
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9 |
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4 |
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Equity method investments |
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(59 |
) |
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(87 |
) |
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|
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Other comprehensive loss, net of tax |
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(40 |
) |
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(149 |
) |
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Comprehensive income |
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|
848 |
|
|
|
588 |
|
|
|
|
|
|
|
|
|
|
|
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Less: Net income attributable to noncontrolling interests(a) |
|
|
(67 |
) |
|
|
(62 |
) |
|
Less: Other comprehensive income attributable to noncontrolling interests |
|
|
(1 |
) |
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|
- |
|
|
|
|
|
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Comprehensive income attributable to Twenty-First Century Fox, Inc. stockholders |
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$ |
780 |
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|
$ |
526 |
|
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(a) |
Net income attributable to noncontrolling interests includes $27 million and $28 million for the three months ended September 30, 2016 and 2015, respectively, relating to redeemable noncontrolling interests. |
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
2
TWENTY-FIRST CENTURY FOX, INC.
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
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As of September 30, 2016 |
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As of June 30, 2016 |
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(unaudited) |
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(audited) |
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Assets: |
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Current assets: |
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|
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|
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Cash and cash equivalents |
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$ |
4,681 |
|
|
$ |
4,424 |
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Receivables, net |
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6,099 |
|
|
|
6,258 |
|
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Inventories, net |
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|
3,300 |
|
|
|
3,291 |
|
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Other |
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|
841 |
|
|
|
976 |
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|
|
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Total current assets |
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14,921 |
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|
|
14,949 |
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|
|
|
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Non-current assets: |
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|
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Receivables, net |
|
|
465 |
|
|
|
389 |
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Investments |
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|
3,912 |
|
|
|
3,863 |
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Inventories, net |
|
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7,396 |
|
|
|
7,041 |
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Property, plant and equipment, net |
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|
1,669 |
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|
|
1,692 |
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Intangible assets, net |
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|
6,715 |
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|
|
6,777 |
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Goodwill |
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|
12,739 |
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|
|
12,733 |
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Other non-current assets |
|
|
809 |
|
|
|
749 |
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|
|
|
|
|
|
|
|
|
|
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Total assets |
|
$ |
48,626 |
|
|
$ |
48,193 |
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|
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|
|
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Liabilities and Equity: |
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|
|
|
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|
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Current liabilities: |
|
|
|
|
|
|
|
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Borrowings |
|
$ |
454 |
|
|
$ |
427 |
|
|
Accounts payable, accrued expenses and other current liabilities |
|
|
3,438 |
|
|
|
3,181 |
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Participations, residuals and royalties payable |
|
|
1,573 |
|
|
|
1,672 |
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|
Program rights payable |
|
|
1,345 |
|
|
|
1,283 |
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Deferred revenue |
|
|
612 |
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|
|
505 |
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|
|
|
|
|
|
|
|
|
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Total current liabilities |
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7,422 |
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|
|
7,068 |
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|
|
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|
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|
|
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Non-current liabilities: |
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|
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|
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|
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Borrowings |
|
|
19,034 |
|
|
|
19,126 |
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Other liabilities |
|
|
3,780 |
|
|
|
3,678 |
|
|
Deferred income taxes |
|
|
2,782 |
|
|
|
2,888 |
|
|
Redeemable noncontrolling interests |
|
|
553 |
|
|
|
552 |
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Commitments and contingencies |
|
|
|
|
|
|
|
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Equity: |
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|
|
|
|
|
|
|
|
Class A common stock(a) |
|
|
11 |
|
|
|
11 |
|
|
Class B common stock(b) |
|
|
8 |
|
|
|
8 |
|
|
Additional paid-in capital |
|
|
12,232 |
|
|
|
12,211 |
|
|
Retained earnings |
|
|
3,741 |
|
|
|
3,575 |
|
|
Accumulated other comprehensive loss |
|
|
(2,185 |
) |
|
|
(2,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Twenty-First Century Fox, Inc. stockholders' equity |
|
|
13,807 |
|
|
|
13,661 |
|
|
Noncontrolling interests |
|
|
1,248 |
|
|
|
1,220 |
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
15,055 |
|
|
|
14,881 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
48,626 |
|
|
$ |
48,193 |
|
|
(a) |
Class A common stock, $0.01 par value per share, 6,000,000,000 shares authorized, 1,057,115,617 shares and 1,071,302,532 shares issued and outstanding, net of 123,687,371 treasury shares at par as of September 30, 2016 and June 30, 2016, respectively. |
|
(b) |
Class B common stock, $0.01 par value per share, 3,000,000,000 shares authorized, 798,520,953 shares issued and outstanding, net of 356,993,807 treasury shares at par as of September 30, 2016 and June 30, 2016. |
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
3
TWENTY-FIRST CENTURY FOX, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
|
|
|
For the three months ended September 30, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
888 |
|
|
$ |
737 |
|
|
Less: Loss from discontinued operations, net of tax |
|
|
(6 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
894 |
|
|
|
740 |
|
|
Adjustments to reconcile income from continuing operations to cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
135 |
|
|
|
128 |
|
|
Amortization of cable distribution investments |
|
|
15 |
|
|
|
20 |
|
|
Equity-based compensation |
|
|
42 |
|
|
|
86 |
|
|
Equity earnings of affiliates |
|
|
(35 |
) |
|
|
(35 |
) |
|
Cash distributions received from affiliates |
|
|
2 |
|
|
|
6 |
|
|
Other, net |
|
|
148 |
|
|
|
83 |
|
|
CLT20 contract termination costs(a) |
|
|
- |
|
|
|
(420 |
) |
|
Deferred income taxes and other taxes |
|
|
(12 |
) |
|
|
175 |
|
|
Change in operating assets and liabilities, net of acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
Receivables |
|
|
86 |
|
|
|
(144 |
) |
|
Inventories net of program rights payable |
|
|
(343 |
) |
|
|
(516 |
) |
|
Accounts payable and accrued expenses |
|
|
(51 |
) |
|
|
(332 |
) |
|
Other changes, net |
|
|
99 |
|
|
|
(96 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities from continuing operations |
|
|
980 |
|
|
|
(305 |
) |
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
(53 |
) |
|
|
(34 |
) |
|
Investments in equity affiliates |
|
|
(6 |
) |
|
|
(86 |
) |
|
Other investments |
|
|
(63 |
) |
|
|
(163 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities from continuing operations |
|
|
(122 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
37 |
|
|
|
91 |
|
|
Repayment of borrowings |
|
|
(105 |
) |
|
|
(119 |
) |
|
Repurchase of shares |
|
|
(467 |
) |
|
|
(1,889 |
) |
|
Dividends paid and distributions |
|
|
(54 |
) |
|
|
(56 |
) |
|
Other financing activities, net |
|
|
(19 |
) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities from continuing operations |
|
|
(608 |
) |
|
|
(1,965 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents from discontinued operations |
|
|
(6 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
244 |
|
|
|
(2,560 |
) |
|
Cash and cash equivalents, beginning of year |
|
|
4,424 |
|
|
|
8,428 |
|
|
Exchange movement on cash balances |
|
|
13 |
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
4,681 |
|
|
$ |
5,830 |
|
|
(a) |
See Note 5 – Restructuring Programs under the heading “Fiscal 2016” in the 2016 Form 10-K as defined in Note 1 – Basis of Presentation. |
The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.
4
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Twenty-First Century Fox, Inc., a Delaware corporation, and its subsidiaries (together, “Twenty-First Century Fox” or the “Company”) is a diversified global media and entertainment company, which currently manages and reports its businesses in the following four segments: Cable Network Programming, Television, Filmed Entertainment and Other, Corporate and Eliminations.
The accompanying Unaudited Consolidated Financial Statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Unaudited Consolidated Financial Statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2017.
These interim Unaudited Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 as filed with the Securities and Exchange Commission (“SEC”) on August 11, 2016 (the “2016 Form 10-K”).
The Unaudited Consolidated Financial Statements include the accounts of Twenty-First Century Fox. All significant intercompany accounts and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees. Investments in and advances to entities or joint ventures in which the Company has significant influence, but less than a controlling voting interest, are accounted for using the equity method. Investments in which the Company has no significant influence are designated as available-for-sale investments if readily determinable market values are available. If an investment’s fair value is not readily determinable, the Company accounts for its investment at cost.
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Actual results may differ from those estimates.
Certain fiscal 2016 amounts have been reclassified to conform to the fiscal 2017 presentation. Unless indicated otherwise, the information in the notes to the Unaudited Consolidated Financial Statements relates to the Company’s continuing operations.
Recently Adopted and Recently Issued Accounting Guidance
Adopted
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). To simplify the presentation of debt issuance costs, ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. On July 1, 2016, the Company adopted ASU 2015-03 on a retrospective basis (See Note 6 – Borrowings).
Issued
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company is currently evaluating the impact ASU 2016-15 will have on its consolidated financial statements.
NOTE 2. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS
The Company’s acquisitions support the Company’s strategic priority of increasing its brand presence and reach in key domestic and international markets and acquiring greater control of investments that complement its portfolio of businesses.
For recent acquisitions, the accounting for the business combination, including consideration transferred, is based on provisional amounts and the allocation of the excess purchase price is not final. The amounts allocated to intangibles and goodwill, the estimates of useful lives and the related amortization expense are subject to changes pending the completion of the final valuations of certain assets and liabilities. A change in the purchase price allocations and any estimates of useful lives could result in a change in the value allocated to the intangible assets that could impact future amortization expense.
5
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
See Note 3 – Acquisitions, Disposals and Other Transactions in the 2016 Form 10-K under the heading “Fiscal 2016”. The accounting for the National Geographic Partners and MAA Television Network transactions in Fiscal 2016 continue to be based on provisional amounts and the allocation of the excess purchase price is not final.
NOTE 3. INVENTORIES, NET
The Company’s inventories were comprised of the following:
|
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Programming rights and other(a) |
|
$ |
6,601 |
|
|
$ |
6,359 |
|
|
Filmed entertainment costs: |
|
|
|
|
|
|
|
|
|
Films: |
|
|
|
|
|
|
|
|
|
Released or completed |
|
|
1,562 |
|
|
|
1,569 |
|
|
In production |
|
|
789 |
|
|
|
825 |
|
|
In development or preproduction |
|
|
236 |
|
|
|
196 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
2,587 |
|
|
|
2,590 |
|
|
|
|
|
|
|
|
|
|
|
|
Television productions: |
|
|
|
|
|
|
|
|
|
Released |
|
|
931 |
|
|
|
1,067 |
|
|
In production, development or preproduction |
|
|
577 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,508 |
|
|
|
1,383 |
|
|
|
|
|
|
|
|
|
|
|
|
Total filmed entertainment costs, less accumulated amortization(b) |
|
|
4,095 |
|
|
|
3,973 |
|
|
|
|
|
|
|
|
|
|
|
|
Total inventories, net |
|
|
10,696 |
|
|
|
10,332 |
|
|
Less: current portion of inventories, net(c) |
|
|
(3,300 |
) |
|
|
(3,291 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total non-current inventories, net |
|
$ |
7,396 |
|
|
$ |
7,041 |
|
|
(a) |
Other includes DVDs, Blu-rays and other merchandise. |
|
(b) |
Does not include $265 million and $273 million of net intangible film library costs as of September 30, 2016 and June 30, 2016, respectively, which were included in intangible assets subject to amortization in the Consolidated Balance Sheets. |
|
(c) |
Current portion of inventories, net as of September 30, 2016 and June 30, 2016 was comprised of programming rights ($3,198 million and $3,212 million, respectively), DVDs, Blu-rays and other merchandise. |
NOTE 4. INVESTMENTS
The Company’s investments were comprised of the following:
|
|
|
|
|
Ownership percentage as of September 30, 2016 |
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
|||
|
|
|
|
|
|
|
|
|
(in millions) |
|
|||||
|
Sky(a)(b) |
|
European direct broadcast satellite operator |
|
|
39% |
|
|
$ |
3,024 |
|
|
$ |
2,972 |
|
|
Endemol Shine Group(b) |
|
Global multi-platform content provider |
|
|
50% |
|
|
|
414 |
|
|
|
445 |
|
|
Other investments |
|
|
|
various |
|
|
|
474 |
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
|
|
|
|
|
|
$ |
3,912 |
|
|
$ |
3,863 |
|
|
(a) |
The Company’s investment in Sky plc (“Sky”) had a market value of $7.8 billion as of September 30, 2016 determined using its quoted market price on the London Stock Exchange (a Level 1 measurement as defined in Note 5 – Fair Value). |
|
(b) |
Equity method investment. |
6
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In August 2016, Hulu, LLC (“Hulu”) issued a 10% equity interest to a new investor thereby diluting the Company’s ownership to 30%. For a period of up to 36 months, under certain limited circumstances, including those arising from regulatory review, the new investor may put its shares to Hulu or Hulu may call the shares from the new investor. If Hulu is required to fund the repurchase of shares from the new investor, the Company has agreed to make an additional capital contribution of up to approximately $300 million to Hulu. As a result of these conditions, the Company will record a gain on the dilution of its ownership interest upon resolution of the contingency. The Company will continue to account for its interest in Hulu as an equity method investment.
NOTE 5. FAIR VALUE
In accordance with ASC 820, “Fair Value Measurement,” fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”).
The tables below present information about financial assets and liabilities carried at fair value on a recurring basis. As of September 30, 2016 and June 30, 2016, there were no assets or liabilities in the Level 1 category.
|
|
|
Fair value measurements |
|
|||||||||
|
|
|
As of September 30, 2016 |
|
|||||||||
|
Description |
|
Total |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
(in millions) |
|
|||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a) |
|
$ |
3 |
|
|
$ |
3 |
|
|
$ |
- |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a) |
|
|
(35 |
) |
|
|
(35 |
) |
|
|
- |
|
|
Contingent consideration(b) |
|
|
(3 |
) |
|
|
- |
|
|
|
(3 |
) |
|
Redeemable noncontrolling interests(c) |
|
|
(553 |
) |
|
|
- |
|
|
|
(553 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(588 |
) |
|
$ |
(32 |
) |
|
$ |
(556 |
) |
|
|
|
As of June 30, 2016 |
|
|||||||||
|
Description |
|
Total |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
(in millions) |
|
|||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a) |
|
$ |
6 |
|
|
$ |
6 |
|
|
$ |
- |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives(a) |
|
|
(50 |
) |
|
|
(50 |
) |
|
|
- |
|
|
Contingent consideration(b) |
|
|
(36 |
) |
|
|
- |
|
|
|
(36 |
) |
|
Redeemable noncontrolling interests(c) |
|
|
(552 |
) |
|
|
- |
|
|
|
(552 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(632 |
) |
|
$ |
(44 |
) |
|
$ |
(588 |
) |
|
(a) |
Represents derivatives associated with the Company’s foreign currency forward contracts and interest rate swap contracts. |
|
(b) |
Represents contingent consideration related to past acquisitions. |
|
(c) |
The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity” (“ASC 480-10-S99-3A”), because their exercise is outside the control of the Company. The redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in certain of the Company’s majority-owned sports networks. The Company utilizes the market, income or cost approaches or a combination of these valuation techniques for its Level 3 fair value measures, using observable inputs such as market data obtained from independent sources. To the extent observable inputs are not available, the Company utilizes unobservable inputs based upon the assumptions market participants would use in valuing the asset (liability). As of September 30, 2016, one minority shareholder’s put right will become exercisable in March 2017 and one minority shareholder’s put right will become exercisable in July 2017. The remaining redeemable noncontrolling interests are currently not exercisable. |
7
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and cost method investments, approximates fair value.
|
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
$ |
23,977 |
|
|
$ |
23,986 |
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
$ |
19,488 |
|
|
$ |
19,553 |
|
Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market (a Level 1 measurement).
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts primarily to hedge certain exposures to foreign currency exchange rate risks associated with revenues and the cost of producing or acquiring films and television programming.
|
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount |
|
$ |
280 |
|
|
$ |
409 |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
$ |
(19 |
) |
|
$ |
(25 |
) |
For foreign currency forward contracts designated as cash flow hedges, the Company expects to reclassify the cumulative changes in fair values, included in Accumulated other comprehensive loss, within the next three years.
|
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Economic hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount |
|
$ |
84 |
|
|
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
$ |
- |
|
|
$ |
- |
|
Interest Rate Swap Contracts
The Company uses interest rate swap contracts to hedge certain exposures to interest rate risks associated with certain borrowings.
|
|
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount |
|
$ |
695 |
|
|
$ |
701 |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
$ |
(13 |
) |
|
$ |
(19 |
) |
For interest rate swap contracts designated as cash flow hedges, the Company expects to reclassify the cumulative changes in fair values, included in Accumulated other comprehensive loss, within the next three years.
8
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.
The Company’s receivables did not represent significant concentrations of credit risk as of September 30, 2016 or June 30, 2016 due to the wide variety of customers, markets and geographic areas to which the Company’s products and services are sold.
The Company monitors its positions with, and the credit quality of, the financial institutions which are counterparties to its financial instruments. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. As of September 30, 2016, the Company did not anticipate nonperformance by any of the counterparties.
NOTE 6. BORROWINGS
|
Description |
|
As of September 30, 2016 |
|
|
As of June 30, 2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Bank loans |
|
$ |
1,378 |
|
|
$ |
1,446 |
|
|
Public debt |
|
|
|
|
|
|
|
|
|
- Predecessor indentures |
|
|
10,579 |
|
|
|
10,579 |
|
|
- Senior notes issued under August 2009 indenture |
|
|
7,700 |
|
|
|
7,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total public debt |
|
|
18,279 |
|
|
|
18,279 |
|
|
|
|
|
|
|
|
|
|
|
|
Total principal amount |
|
|
19,657 |
|
|
|
19,725 |
|
|
Less: unamortized discount and debt issuance costs(a) |
|
|
(169 |
) |
|
|
(172 |
) |
|
Total borrowings |
|
|
19,488 |
|
|
|
19,553 |
|
|
Less: current borrowings |
|
|
(454 |
) |
|
|
(427 |
) |
|
|
|
|
|
|
|
|
|
|
|
Non-current borrowings |
|
$ |
19,034 |
|
|
$ |
19,126 |
|
|
(a) |
The adoption of ASU 2015-03 resulted in a $172 million decrease in Other non-current assets and Non-current Borrowings in the Consolidated Balance Sheet as of June 30, 2016. |
Current Borrowings
Included in Borrowings within Current liabilities as of September 30, 2016 was $400 million of 8.00% Senior Notes which were retired in October 2016 and principal payments on the Yankees Entertainment and Sports Network term loan facility of $54 million that are due in the next 12 months.
9
TWENTY-FIRST CENTURY FOX, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes changes in stockholders’ equity:
|
|
|
For the three months ended September 30, |
|
|||||||||||||||||||||
|
|
|
2016 |
|
|
2015 |
|
||||||||||||||||||
|
|
|
Twenty-First Century Fox stockholders |
|
|
Noncontrolling interests |
|
|
Total equity |
|
|
Twenty-First Century Fox stockholders |
|
|
Noncontrolling interests |
|
|
Total equity |
|
||||||
|
|
|
(in millions) |
|
|||||||||||||||||||||
|
Balance, beginning of period |
|
$ |
13,661 |
|
|
$ |
1,220 |
|
|
$ |
14,881 |
|
|
$ |
17,220 |
|
|
$ |
966 |
|
|
$ |
18,186 |
|
|
Net income |
|
|
821 |
|
|
|
40 |
|
(a) |
|
861 |
|
|
|
675 |
|
|
|
34 |
|
(a) |
|
709 |
|
|
Other comprehensive (loss) income |
|
|
(41 |
) |
|
|
1 |
|
|
|
(40 |
) |
|
|
(149 |
) |
|
|
- |
|
|
|
(149 |
) |
|
Cancellation of shares, net |
|
|
(390 |
) |
|
|
- |
|
|
|
(390 |
) |
|
|
(1,826 |
) |
|
|
- |
|
|
|
(1,826 |
) |
|
Dividends declared |
|
|
(335 |
) |
|
|
- |
|
|
|
(335 |
) |
|
|
(299 |
) |
|
|
- |
|
|
|
(299 |
) |
|
Other |
|
|
91 |
|
|
|
(13 |
) |
(b) |
|
78 |
|
|
|
(340 |
) |
|
|
(26 |
) |
(b) |
|
(366 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
13,807 |
|
|
$ |
1,248 |
|
|
$ |
15,055 |
|
|
$ |
15,281 |
|
|
$ |
974 |
|
|
$ |
16,255 |
|