Exhibit 99.1
Fox Corporation Supplemental Financial Data
Fox Corporation, a Delaware corporation (FOX or the Company), is a news, sports and entertainment company, which manages and reports its businesses in the following segments: Cable Network Programming, Television and Other, Corporate and Eliminations.
Distribution
On March 19, 2019, the Company became a standalone publicly traded company through the pro rata distribution by Twenty-First Century Fox, Inc. (21CF) of all of the issued and outstanding common stock of FOX to 21CF stockholders (other than holders that were subsidiaries of 21CF) (the Distribution) in accordance with the Amended and Restated Distribution Agreement and Plan of Merger, dated as of June 20, 2018, by and between 21CF and 21CF Distribution Merger Sub, Inc. Following the Distribution, 354 million and 266 million shares of the Companys Class A Common Stock and Class B Common Stock, respectively, began trading independently on The Nasdaq Global Select Market. In connection with the Distribution, the Company entered into the Separation and Distribution Agreement, dated as of March 19, 2019 with 21CF, which effected the internal restructuring (the Separation) whereby 21CF transferred to FOX a portfolio of 21CFs news, sports and broadcast businesses, including FOX News, FOX Business, FOX Broadcasting Company (the FOX Network), FOX Sports, FOX Television Stations Group, and sports cable networks FS1, FS2, FOX Deportes and Big Ten Network, and certain other assets, and FOX assumed from 21CF the liabilities associated with such businesses and certain other liabilities. The Separation and Distribution were effected as part of a series of transactions contemplated by the Amended and Restated Merger Agreement and Plan of Merger, dated as of June 20, 2018 (the 21CF Disney Merger Agreement), by and among 21CF, The Walt Disney Company (Disney), TWDC Holdco 613 Corp., a wholly-owned subsidiary of Disney (New Disney), and certain other subsidiaries of Disney, pursuant to which, among other things, Disney merged with and into a subsidiary of New Disney and each of Disney and 21CF became wholly-owned subsidiaries of New Disney.
Basis of Presentation
The Companys Supplemental Financial Data (as defined in the Form 8-K to which this Exhibit 99.1 is attached) was prepared on a standalone basis, derived from the consolidated financial statements and accounting records of 21CF. The Supplemental Financial Data reflects the combined historical results of operations of 21CFs domestic news, national sports and broadcast businesses and certain other assets and liabilities associated with such businesses in accordance with U.S. generally accepted accounting principles (GAAP).
The Supplemental Financial Data should be read in conjunction with the audited and unaudited combined financial statements and notes thereto included in the Companys Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the SEC) on January 7, 2019 and the unaudited combined financial statements and notes thereto included in the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, filed with the SEC on March 18, 2019.
The Supplemental Financial Data is presented as if such businesses had been combined for all periods presented. The assets and liabilities in the Supplemental Financial Data have been reflected on a historical cost basis, as immediately prior to the Distribution all of the assets and liabilities presented were wholly owned by 21CF and were transferred to the combined FOX group at carry-over basis. The Supplemental Financial Data includes allocations for certain support functions that were provided on a centralized basis within 21CF and not recorded at the business unit level, such as certain expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others. 21CF did not routinely allocate these costs to any of its business units. These expenses have been allocated to FOX on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures. Management believes the assumptions underlying the Supplemental Financial Data, including the assumptions regarding allocating general corporate expenses from 21CF, are reasonable. Nevertheless, the Supplemental Financial Data may not include all of the actual expenses that would have been incurred by FOX and may not reflect FOXs combined results of operations had it
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been a standalone company during the periods presented. Actual costs that would have been incurred if FOX had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.
The Supplemental Financial Data includes certain assets and liabilities that were historically held at 21CFs corporate level but are specifically identifiable or otherwise attributable to the Company. All significant intracompany transactions and accounts within the Companys combined businesses have been eliminated.
Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Supplemental Financial Data.
The income tax (expense) benefit in the Supplemental Financial Data has been calculated as if FOX filed a separate tax return and was operating as a standalone business. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of FOXs actual tax balances prior to or subsequent to the Distribution.
Pursuant to the 21CF Disney Merger Agreement, immediately prior to the Distribution, the Company paid to 21CF a dividend in the amount of $8.5 billion. The final determination of the taxes in respect of the Separation and Distribution for which the Company is responsible pursuant to the 21CF Disney Merger Agreement and a prepayment of the estimated taxes in respect of divestitures (collectively the, Transaction Tax) was $6.5 billion. Following the Distribution, on March 20, 2019 the Company received a cash payment in the amount of $2.0 billion from Disney, which had the net effect of reducing the $8.5 billion cash dividend the Company paid to 21CF. The Transaction Tax included a prepayment of the Companys share of the estimated tax liabilities resulting from the anticipated divestitures by Disney of certain assets, principally the FOX Sports Regional Sports Networks. This prepayment was in the amount of approximately $700 million and is subject to adjustment in the future, when the actual amounts of the tax liabilities are reported on the federal income tax returns of 21CF or Disney.
As a result of the Separation and the Distribution, the Company obtained a tax basis in its assets equal to their respective fair market values. This will result in estimated annual tax deductions of approximately $1.5 billion, principally over the next 15 years related to the amortization of the additional tax basis. This amortization is estimated to reduce the Companys annual cash tax liability by $360 million per year at the current combined federal and state applicable tax rate of 24%. Such estimates are subject to revisions, which could be material, based upon, among other things, final appraisals.
The Companys fiscal year ends on June 30 of each year. Certain fiscal 2018 amounts have been reclassified to conform to the fiscal 2019 presentation.
Segment Information
The Companys operating segments have been determined in accordance with the Companys internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measure is segment operating income before depreciation and amortization, or Segment OIBDA. Due to the integrated nature of these operating segments, estimates and judgments are made in allocating certain assets, revenues and expenses.
Segment OIBDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses. Segment OIBDA does not include: Amortization of cable distribution investments, Depreciation and amortization, Impairment and restructuring charges, Interest expense, Other, net and Income tax (expense) benefit. Management believes that Segment OIBDA is an appropriate measure for evaluating the operating performance of the Companys business segments because it is the primary measure used by the Companys chief operating decision maker to evaluate the performance of and allocate resources to the Companys businesses.
Management believes that information about Total Segment OIBDA assists all users of the Companys combined financial statements by allowing them to evaluate changes in the operating results of the Companys portfolio of businesses separate from non-operational factors that affect net income, thus providing insight into both operations and the other factors that affect reported results. Total Segment OIBDA provides management, investors and equity analysts a measure to analyze the operating performance of the Companys business and its enterprise value against historical data and competitors data, although historical results, including Segment OIBDA and Total Segment OIBDA, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).
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Total Segment OIBDA may be considered a non-GAAP measure and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment charges, which are significant components in assessing the Companys financial performance.
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The following tables present the Companys combined statements of operations (i) for the three months ended September 30, 2018 and December 31, 2018 (unaudited) and for the six months ended December 31, 2018 (unaudited); and (ii) for the three months ended September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018 (unaudited) and for the fiscal year ended June 30, 2018 (audited):
For the three months ended | For the six months ended |
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September 30, 2018 | December 31, 2018 | December 31, 2018 | ||||||||||
(in millions) | ||||||||||||
Revenues |
$ | 2,541 | $ | 3,583 | $ | 6,124 | ||||||
Operating expenses |
(1,491 | ) | (2,818 | ) | (4,309 | ) | ||||||
Selling, general and administrative |
(299 | ) | (329 | ) | (628 | ) | ||||||
Depreciation and amortization |
(43 | ) | (51 | ) | (94 | ) | ||||||
Interest expense |
(16 | ) | (15 | ) | (31 | ) | ||||||
Other, net |
139 | (339 | ) | (200 | ) | |||||||
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Income before income tax expense |
831 | 31 | 862 | |||||||||
Income tax expense |
(216 | ) | (7 | ) | (223 | ) | ||||||
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Net income |
615 | 24 | 639 | |||||||||
Less: Net income attributable to noncontrolling interests |
(11 | ) | (16 | ) | (27 | ) | ||||||
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Net income attributable to Fox Corporation stockholders |
$ | 604 | $ | 8 | $ | 612 | ||||||
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For the three months ended | For the year ended |
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September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
June 30, 2018 | June 30, 2018 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
$ | 2,188 | $ | 3,108 | $ | 2,463 | $ | 2,394 | $ | 10,153 | ||||||||||
Operating expenses |
(1,264 | ) | (2,346 | ) | (1,444 | ) | (1,451 | ) | (6,505 | ) | ||||||||||
Selling, general and administrative |
(263 | ) | (309 | ) | (324 | ) | (313 | ) | (1,209 | ) | ||||||||||
Depreciation and amortization |
(41 | ) | (42 | ) | (43 | ) | (45 | ) | (171 | ) | ||||||||||
Impairment and restructuring charges |
(1 | ) | 4 | (14 | ) | (5 | ) | (16 | ) | |||||||||||
Interest expense |
(7 | ) | (6 | ) | (7 | ) | (23 | ) | (43 | ) | ||||||||||
Other, net |
(1 | ) | (97 | ) | 23 | 36 | (39 | ) | ||||||||||||
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Income before income tax (expense) benefit |
611 | 312 | 654 | 593 | 2,170 | |||||||||||||||
Income tax (expense) benefit |
(211 | ) | 570 | (188 | ) | (113 | ) | 58 | ||||||||||||
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Net income |
400 | 882 | 466 | 480 | 2,228 | |||||||||||||||
Less: Net income attributable to redeemable noncontrolling interests |
(10 | ) | (13 | ) | (9 | ) | (9 | ) | (41 | ) | ||||||||||
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Net income attributable to Fox Corporation stockholders |
$ | 390 | $ | 869 | $ | 457 | $ | 471 | $ | 2,187 | ||||||||||
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The following tables reconcile Income before income tax (expense) benefit to Total Segment OIBDA (i) for the three months ended September 30, 2018 and December 31, 2018 (unaudited) and for the six months ended December 31, 2018 (unaudited); and (ii) for the three months ended September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018 (unaudited) and for the fiscal year ended June 30, 2018 (audited):
For the three months ended | For the six months ended |
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September 30, 2018 | December 31, 2018 | December 31, 2018 | ||||||||||
(in millions) | ||||||||||||
Income before income tax expense |
$ | 831 | $ | 31 | $ | 862 | ||||||
Add |
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Amortization of cable distribution investments |
10 | 9 | 19 | |||||||||
Depreciation and amortization |
43 | 51 | 94 | |||||||||
Interest expense |
16 | 15 | 31 | |||||||||
Other, net |
(139 | ) | 339 | 200 | ||||||||
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Total Segment OIBDA |
$ | 761 | $ | 445 | $ | 1,206 | ||||||
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For the three months ended | For the year ended |
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September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
June 30, 2018 | June 30, 2018 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Income before income tax (expense) benefit |
$ | 611 | $ | 312 | $ | 654 | $ | 593 | $ | 2,170 | ||||||||||
Add |
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Amortization of cable distribution investments |
12 | 20 | 11 | 10 | 53 | |||||||||||||||
Depreciation and amortization |
41 | 42 | 43 | 45 | 171 | |||||||||||||||
Impairment and restructuring charges |
1 | (4 | ) | 14 | 5 | 16 | ||||||||||||||
Interest expense |
7 | 6 | 7 | 23 | 43 | |||||||||||||||
Other, net |
1 | 97 | (23 | ) | (36 | ) | 39 | |||||||||||||
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Total Segment OIBDA |
$ | 673 | $ | 473 | $ | 706 | $ | 640 | $ | 2,492 | ||||||||||
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The following tables set forth the Companys Revenues and Segment OIBDA (i) for the three months ended September 30, 2018 and December 31, 2018 (unaudited) and for the six months ended December 31, 2018 (unaudited); and (ii) for the three months ended September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018 (unaudited) and for the fiscal year ended June 30, 2018 (audited):
For the three months ended | For the six months ended |
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September 30, 2018 | December 31, 2018 | December 31, 2018 | ||||||||||
(in millions) | ||||||||||||
Revenues |
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Cable Network Programming |
$ | 1,265 | $ | 1,434 | $ | 2,699 | ||||||
Television |
1,277 | 2,149 | 3,426 | |||||||||
Other, Corporate and Eliminations |
(1 | ) | | (1 | ) | |||||||
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Total revenues |
$ | 2,541 | $ | 3,583 | $ | 6,124 | ||||||
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Segment OIBDA |
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Cable Network Programming |
$ | 633 | $ | 519 | $ | 1,152 | ||||||
Television |
171 | (14 | ) | 157 | ||||||||
Other, Corporate and Eliminations |
(43 | ) | (60 | ) | (103 | ) | ||||||
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Total Segment OIBDA |
$ | 761 | $ | 445 | $ | 1,206 | ||||||
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For the three months ended | For the year ended |
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September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
June 30, 2018 | June 30, 2018 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
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Cable Network Programming |
$ | 1,138 | $ | 1,315 | $ | 1,325 | $ | 1,271 | $ | 5,049 | ||||||||||
Television |
1,051 | 1,793 | 1,138 | 1,124 | 5,106 | |||||||||||||||
Other, Corporate and Eliminations |
(1 | ) | | | (1 | ) | (2 | ) | ||||||||||||
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Total revenues |
$ | 2,188 | $ | 3,108 | $ | 2,463 | $ | 2,394 | $ | 10,153 | ||||||||||
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Segment OIBDA |
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Cable Network Programming |
$ | 576 | $ | 462 | $ | 692 | $ | 578 | $ | 2,308 | ||||||||||
Television |
125 | 62 | 81 | 111 | 379 | |||||||||||||||
Other, Corporate and Eliminations |
(28 | ) | (51 | ) | (67 | ) | (49 | ) | (195 | ) | ||||||||||
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Total Segment OIBDA |
$ | 673 | $ | 473 | $ | 706 | $ | 640 | $ | 2,492 | ||||||||||
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Revenues by Segment by Component
For the three months ended | For the six months ended |
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September 30, 2018 | December 31, 2018 | December 31, 2018 | ||||||||||
(in millions) | ||||||||||||
Cable Network Programming |
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Affiliate fee |
$ | 939 | $ | 938 | $ | 1,877 | ||||||
Advertising |
264 | 353 | 617 | |||||||||
Other |
62 | 143 | 205 | |||||||||
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Total Cable Network Programming revenues |
1,265 | 1,434 | 2,699 | |||||||||
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Television |
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Advertising |
799 | 1,634 | 2,433 | |||||||||
Affiliate fee |
398 | 407 | 805 | |||||||||
Other |
80 | 108 | 188 | |||||||||
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Total Television revenues |
1,277 | 2,149 | 3,426 | |||||||||
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Other, Corporate and Eliminations |
(1 | ) | | (1 | ) | |||||||
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Total revenues |
$ | 2,541 | $ | 3,583 | $ | 6,124 | ||||||
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For the three months ended | For the year ended |
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September 30, 2017 |
December 31, 2017 |
March 31, 2018 |
June 30, 2018 | June 30, 2018 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cable Network Programming |
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Affiliate fee |
$ | 830 | $ | 848 | $ | 931 | $ | 932 | $ | 3,541 | ||||||||||
Advertising |
238 | 321 | 266 | 295 | 1,120 | |||||||||||||||
Other |
70 | 146 | 128 | 44 | 388 | |||||||||||||||
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Total Cable Network Programming revenues |
1,138 | 1,315 | 1,325 | 1,271 | 5,049 | |||||||||||||||
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Television |
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Advertising |
650 | 1,411 | 735 | 682 | 3,478 | |||||||||||||||
Affiliate fee |
325 | 326 | 350 | 381 | 1,382 | |||||||||||||||
Other |
76 | 56 | 53 | 61 | 246 | |||||||||||||||
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Total Television revenues |
1,051 | 1,793 | 1,138 | 1,124 | 5,106 | |||||||||||||||
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Other, Corporate and Eliminations |
(1 | ) | | | (1 | ) | (2 | ) | ||||||||||||
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Total revenues |
$ | 2,188 | $ | 3,108 | $ | 2,463 | $ | 2,394 | $ | 10,153 | ||||||||||
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Caution Concerning Forward-Looking Statements
This Exhibit 99.1 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as may, will, should, likely, anticipates, expects, intends, plans, projects, believes, estimates, outlook and similar expressions are used to identify these forward-looking statements. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied. These include, without limitation, risks relating to the Separation and the Distribution, potential future adjustments to the Companys share of estimated tax liabilities and estimates of the Companys annual tax deductions and reductions in the Companys annual cash tax liability and potential revisions to such estimates, as well as the other risks and uncertainties discussed in the documents the Company has filed with or furnished to the SEC, including the Companys Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission on January 7, 2019, and the unaudited combined financial statements and notes thereto and other disclosure included in the Companys Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, filed with the SEC on March 18, 2019.
Statements in this Exhibit 99.1 speak only as of the date they were made, and the Company undertakes no duty to update or release any revisions to any forward-looking statement made in this Exhibit 99.1 or to report any events or circumstances after the date of this news release or to reflect the occurrence of unanticipated events or to conform such statements to actual results or changes in the Companys expectations, except as required by law.
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