News Corp Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

nws-20201231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 December 31, 2020


☐			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

_________________________________________

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)

(212) 416-3400

(Registrant’s telephone number, including area code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	NWSA	The Nasdaq Global Select Market
Class B Common Stock, par value $0.01 per share	NWS	The Nasdaq Global Select Market
Class A Preferred Stock Purchase Rights	N/A	The Nasdaq Global Select Market
Class B Preferred Stock Purchase Rights	N/A	The Nasdaq Global Select Market

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 29, 2021, 391,092,888 shares of Class A Common Stock and 199,630,240 shares of Class B Common Stock were outstanding.

Table of Contents

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, 2020 and 2019 (unaudited)			2
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 2020 and 2019 (unaudited)			3
Consolidated Balance Sheets as of December 31, 2020 (unaudited) and June 30, 20 20 (audited)			4
Consolidated Statements of Cash Flows for the six months ended December 31, 2020 and 2019 (unaudited)			5
Notes to the Unaudited Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			46
Part II. Other Information
Item 1. Legal Proceedings			48
Item 1A. Risk Factors			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 3. Defaults Upon Senior Securities			48
Item 4. Mine Safety Disclosures			48
Item 5. Other Information			48
Item 6. Exhibits			48
Signature			49

Table of Contents

PART I

ITEM 1. FINANCIAL STATEMENTS

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	2020		2019		2020		2019
Revenues:
Circulation and subscription		$	1,030	$	990	$	2,032	$	1,985
Advertising		448		677		780		1,285
Consumer		523		421		964		808
Real estate		281		242		516		460
Other		132		149		239		281
Total Revenues	2	2,414		2,479		4,531		4,819
Operating expenses		(1,198)		(1,351)		(2,362)		(2,689)
Selling, general and administrative		(719)		(773)		(1,404)		(1,554)
Depreciation and amortization		(167)		(162)		(331)		(324)
Impairment and restructuring charges	4	(23)		(29)		(63)		(326)
Equity losses of affiliates	5	(3)		(3)		(4)		(5)
Interest expense, net		(12)		(8)		(20)		(4)
Other, net	13	54		2		71		6
Income (loss) before income tax expense		346		155		418		(77)
Income tax expense	11	(85)		(52)		(110)		(31)
Net income (loss)		261		103		308		(108)
Less: Net income attributable to noncontrolling interests		(30)		(18)		(43)		(34)
Net income (loss) attributable to News Corporation stockholders		$	231	$	85	$	265	$	(142)
Net income (loss) attributable to News Corporation stockholders per share:	9
Basic		$	0.39	$	0.15	$	0.45	$	(0.24)
Diluted		$	0.39	$	0.14	$	0.45	$	(0.24)

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

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NEWS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; millions)


	For the three months ended December 31,				For the six months ended December 31,
	2020		2019		2020		2019
Net income (loss)	$	261	$	103	$	308	$	(108)
Other comprehensive income (loss):
Foreign currency translation adjustments	315		199		422		14
Net change in the fair value of cash flow hedges(a)	—		—		(2)		(14)
Benefit plan adjustments, net(b)	(7)		(13)		1		(2)
Other comprehensive income (loss)	308		186		421		(2)
Comprehensive income (loss)	569		289		729		(110)
Less: Net income attributable to noncontrolling interests	(30)		(18)		(43)		(34)
Less: Other comprehensive (income) loss attributable to noncontrolling interests	(63)		(36)		(80)		9
Comprehensive income (loss) attributable to News Corporation stockholders	$	476	$	235	$	606	$	(135)

(a) Net of income tax benefit of nil for the three months ended December 31, 2020 and 2019, respectively, and income tax benefit of nil and $3 million for the six months ended December 31, 2020 and 2019, respectively.

(b) Net of income tax benefit of $3 million and $4 million for three months ended December 31, 2020 and 2019, respectively, and income tax benefit of nil and $1 million for the six months ended December 31, 2020 and 2019, respectively.

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

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NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Millions, except share and per share amounts)


	Notes	As of December 31, 2020		As of June 30, 2020
		(unaudited)		(audited)
Assets:
Current assets:
Cash and cash equivalents		$	1,562	$	1,517
Receivables, net	13	1,444		1,203
Inventory, net		203		348
Other current assets		387		393
Total current assets		3,596		3,461
Non-current assets:
Investments	5	353		297
Property, plant and equipment, net		2,315		2,256
Operating lease right-of-use assets		1,074		1,061
Intangible assets, net		1,934		1,864
Goodwill		4,292		3,951
Deferred income tax assets	11	337		332
Other non-current assets	13	1,193		1,039
Total assets		$	15,094	$	14,261
Liabilities and Equity:
Current liabilities:
Accounts payable		$	291	$	351
Accrued expenses		1,094		1,019
Deferred revenue	2	400		398
Current borrowings	6	212		76
Other current liabilities	13	864		838
Total current liabilities		2,861		2,682
Non-current liabilities:
Borrowings	6	1,044		1,183
Retirement benefit obligations		254		277
Deferred income tax liabilities	11	339		258
Operating lease liabilities		1,160		1,146
Other non-current liabilities		362		326
Commitments and contingencies	10
Class A common stock(a)		4		4
Class B common stock(b)		2		2
Additional paid-in capital		12,091		12,148
Accumulated deficit		(2,976)		(3,241)
Accumulated other comprehensive loss		(990)		(1,331)
Total News Corporation stockholders’ equity		8,131		7,582
Noncontrolling interests		943		807
Total equity	7	9,074		8,389
Total liabilities and equity		$	15,094	$	14,261

(a) Class A common stock, $0.01 par value per share (“Class A Common Stock”), 1,500,000,000 shares authorized, 391,082,746 and 388,922,752 shares issued and outstanding, net of 27,368,413 treasury shares at par at December 31, 2020 and June 30, 2020, 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, 2020 and June 30, 2020, respectively.

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

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NEWS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; millions)


		For the six months ended December 31,
	Notes	2020		2019
Operating activities:
Net income (loss)		$	308	$	(108)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		331		324
Operating lease expense		64		86
Equity losses of affiliates	5	4		5
Cash distributions received from affiliates		7		5
Impairment charges		—		292
Other, net	13	(71)		(6)
Deferred income taxes and taxes payable	11	21		(35)
Change in operating assets and liabilities, net of acquisitions:
Receivables and other assets		(172)		(1,661)
Inventories, net		27		3
Accounts payable and other liabilities		(36)		1,287
Net cash provided by operating activities		483		192
Investing activities:
Capital expenditures		(173)		(237)
Acquisitions, net of cash acquired		(90)		(2)
Investments in equity affiliates and other		(11)		(8)

Proceeds from property, plant and equipment and other asset dispositions		3		10
Other, net		(5)		3
Net cash used in investing activities		(276)		(234)
Financing activities:
Borrowings	6	146		917
Repayment of borrowings	6	(248)		(1,161)
Dividends paid		(80)		(81)
Other, net		(37)		(3)
Net cash used in financing activities		(219)		(328)
Net change in cash and cash equivalents		(12)		(370)

Cash and cash equivalents, beginning of period		1,517		1,643
Exchange movement on opening cash balance		57		(1)
Cash and cash equivalents, end of period		$	1,562	$	1,272

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

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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: digital real estate services, subscription video services in Australia, news and information services and book publishing.

During the fourth quarter of fiscal 2020, in connection with the Company's sale of its News America Marketing reporting unit and its annual review of its reportable segments, the Company determined to disaggregate its Dow Jones operating segment as a separate reportable segment in accordance with Accounting Standard Codification (“ASC”) 280, “Segment Reporting.” Previously, the financial information for this operating segment was aggregated with the businesses within the News Media operating segment and, together, formed the News and Information Services reportable segment. Following the sale of its News America Marketing business in the fourth quarter of fiscal 2020 and in conjunction with the Company’s annual budgeting process, the Company determined that aggregation was no longer appropriate as certain of the remaining businesses no longer shared similar economic characteristics. As a result, the Company has revised its historical disclosures for the prior periods to reflect the new Dow Jones and News Media reportable segments.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company, which are referred to herein as the “Consolidated 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 Consolidated 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, 2021. 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. The business and economic uncertainty resulting from the impacts of the ongoing novel coronavirus (“COVID-19”) pandemic has been considered in making those estimates and assumptions. Actual results could differ from those estimates.

Intercompany 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 measured at fair value, if the fair value is readily determinable. If an investment’s fair value is not readily determinable, the Company will measure the investment at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

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 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, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2020 (the “2020 Form 10-K”).

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current year presentation. Specifically, the Company reclassified certain costs at the Other segment that were previously included within Selling, general and administrative to Operating expenses. For the three and six months ended December 31, 2019, these reclassifications increased Operating expenses by $1 million and $2 million, respectively.

The Company’s fiscal year ends on the Sunday closest to June 30. Fiscal 2021 and fiscal 2020 include 52 weeks. All references to the three and six months ended December 31, 2020 and 2019 relate to the three and six months ended December 27, 2020 and December 29, 2019, respectively. For convenience purposes, the Company continues to date its Consolidated Financial Statements as of December 31.

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The Company adopted the amendments in ASU 2016-13 on a modified retrospective basis as of July 1, 2020 and the adoption did not have a material effect on the Company's Consolidated Financial Statements. The Company will continue to actively monitor the impact of COVID-19 on expected credit losses.

Allowance for doubtful accounts is calculated by pooling receivables with similar credit risks such as the level of delinquency, types of products or services and geographical locations and reflects the Company’s expected credit losses based on historical experience as well as current and expected economic conditions. Refer to Note 13—Additional Financial Information for further discussion.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, “Fair Value Measurement.” ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. The Company adopted the amendments to disclosure requirements in ASU 2018-13 on a prospective basis as of July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements.

In March 2019, the FASB issued ASU 2019-02, “Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials (a consensus of the Emerging Issues Task Force)” (“ASU 2019-02”). The amendments in ASU 2019-02 align the impairment model in Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350) with the fair value model in Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20). The Company adopted the amendments in ASU 2019-02 on a prospective basis as of July 1, 2020. The adoption did not have a material effect on the Company's Consolidated Financial Statements. Refer to Note 13—Additional Financial Information for further discussion.

Issued

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The amendments in ASU 2019-12 remove certain exceptions to the general principles in Topic 740 and simplify other areas of Topic 740 including the accounting for and recognition of intraperiod tax allocation, deferred tax liabilities for outside basis differences for certain foreign subsidiaries, year-to-date losses in interim periods, deferred tax assets for goodwill in business combinations and franchise taxes in income tax expense. ASU 2019-12 is effective for the Company for annual and interim reporting periods beginning July 1, 2021, with early adoption permitted. The Company is currently evaluating the impact ASU 2019-12 will have on its Consolidated Financial Statements.

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. REVENUES

The following tables present the Company’s disaggregated revenues by type and segment for the three and six months ended December 31, 2020 and 2019:


	For the three months ended December 31, 2020
	Digital Real Estate Services		Subscription Video Services		Dow Jones		Book Publishing		News Media		Other		Total Revenues
	(in millions)
Revenues:
Circulation and subscription	$	8	$	446	$	319	$	—	$	257	$	—	$	1,030
Advertising	30		55		115		—		248		—		448
Consumer	—		—		—		523		—		—		523
Real estate	281		—		—		—		—		—		281
Other	20		10		12		21		68		1		132
Total Revenues	$	339	$	511	$	446	$	544	$	573	$	1	$	2,414


	For the three months ended December 31, 2019
	Digital Real Estate Services		Subscription Video Services		Dow Jones		Book Publishing		News Media		Other		Total Revenues
	(in millions)
Revenues:
Circulation and subscription	$	9	$	439	$	296	$	—	$	245	$	1	$	990
Advertising	25		53		120		—		479		—		677
Consumer	—		—		—		421		—		—		421
Real estate	242		—		—		—		—		—		242
Other	18		9		14		21		87		—		149
Total Revenues	$	294	$	501	$	430	$	442	$	811	$	1	$	2,479


	For the six months ended December 31, 2020
	Digital Real Estate Services		Subscription Video Services		Dow Jones		Book Publishing		News Media		Other		Total Revenues
	(in millions)
Revenues:
Circulation and subscription	$	16	$	883	$	630	$	—	$	503	$	—	$	2,032
Advertising	58		105		185		—		432		—		780
Consumer	—		—		—		964		—		—		964
Real estate	516		—		—		—		—		—		516
Other	39		19		17		38		125		1		239
Total Revenues	$	629	$	1,007	$	832	$	1,002	$	1,060	$	1	$	4,531

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NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


	For the six months ended December 31, 2019
	Digital Real Estate Services		Subscription Video Services		Dow Jones		Book Publishing		News Media		Other		Total Revenues
	(in millions)
Revenues:
Circulation and subscription	$	19	$	890	$	585	$	—	$	490	$	1	$	1,985
Advertising	52		104		204		—		925		—		1,285
Consumer	—		—		—		808		—		—		808
Real estate	460		—		—		—		—		—		460
Other	35		21		23		39		163		—		281
Total Revenues	$	566	$	1,015	$	812	$	847	$	1,578	$	1	$

Price	14.17	EPS	-0
Shares	587	P/E	-75
MCap	8,314	P/FCF	14
Net Debt	-112	EBIT	40
TEV	8,202	TEV/EBIT	205
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-12-31	Filed 2021-02-05
10-Q	2020-09-30	Filed 2020-11-06
10-K	2020-06-30	Filed 2020-08-11
10-Q	2020-03-31	Filed 2020-05-08
10-Q	2019-12-31	Filed 2020-02-07
10-Q	2019-09-30	Filed 2019-11-08
10-K	2019-06-30	Filed 2019-08-13
10-Q	2019-03-31	Filed 2019-05-10
10-Q	2018-12-31	Filed 2019-02-08
10-Q	2018-09-30	Filed 2018-11-08
10-K	2018-06-30	Filed 2018-08-15
10-Q	2018-03-31	Filed 2018-05-11
10-Q	2017-12-31	Filed 2018-02-09
10-Q	2017-09-30	Filed 2017-11-13
10-K	2017-06-30	Filed 2017-08-14
10-Q	2017-03-31	Filed 2017-05-10
10-Q	2016-12-31	Filed 2017-02-10
10-Q	2016-09-30	Filed 2016-11-08
10-K	2016-06-30	Filed 2016-08-12
10-Q	2016-03-31	Filed 2016-05-06
10-Q	2015-12-31	Filed 2016-02-05
10-Q	2015-09-30	Filed 2015-11-06
10-K	2015-06-30	Filed 2015-08-13
10-Q	2015-03-31	Filed 2015-05-06
10-Q	2014-12-31	Filed 2015-02-06
10-Q	2014-09-30	Filed 2014-11-06
10-K	2014-06-30	Filed 2014-08-14
10-Q	2014-03-31	Filed 2014-05-09
10-Q	2013-12-31	Filed 2014-02-07
10-Q	2013-09-30	Filed 2013-11-12
10-K	2013-06-30	Filed 2013-09-20

8-K	2020-11-18
8-K	2020-11-18
8-K	2020-11-05
8-K	2020-09-21
8-K	2020-09-17
8-K	2020-08-17
8-K	2020-08-06
8-K	2020-07-31
8-K	2020-06-18
8-K	2020-05-07
8-K	2020-05-05
8-K	2020-04-13
8-K	2020-03-31
8-K	2020-02-06
8-K	2019-12-12
8-K	2019-11-20
8-K	2019-11-07
8-K	2019-08-08
8-K	2019-06-18
8-K	2019-05-10
8-K	2019-05-09
8-K	2019-02-25
8-K	2019-02-07
8-K	2018-11-08
8-K	2018-11-07
8-K	2018-11-06
8-K	2018-08-09
8-K	2018-06-18
8-K	2018-05-10
8-K	2018-04-02
8-K	2018-04-02
8-K	2018-03-05
8-K	2018-02-08

EX-31.1	ex-311xceocertq2fy2021.htm
EX-31.2	ex-312xcfocertq2fy2021.htm
EX-32.1	ex-321xsoxcertq2fy2021.htm

NWS 10Q Quarterly Report

News Corp Earnings 2020-12-31