Answer To: Nike Commission File No. 1-10635 _____________________________________________ NIKE, INC (Exact name...
Lovenesh answered on Apr 07 2021
Document and Entity Information
Document and Entity Information - USD ($) 12 Months Ended
Jun. 30, 2018 Aug. 08, 2018 Dec. 29, 2017
Document And Entity Information [Line Items]
Document Type 10-K
Amendment Flag false
Document Period End Date Jun. 30,
2018
Document Fiscal Year Focus 2,018
Document Fiscal Period Focus FY
Entity Registrant Name TWENTY-FIRST CENTURY FOX, INC.
Entity Central Index Key 1,308,161
Current Fiscal Year End Date --06-30
Entity Filer Category Large Accelerated Filer
Entity Well-known Seasoned Issuer Yes
Entity Current Reporting Status Yes
Entity Voluntary Filers No
Class A Common Stock
Document And Entity Information [Line Items]
Trading Symbol FOXA
Entity Common Stock, Shares Outstanding 1,054,053,200
Entity Public Float $ 35,990,236,822
Class B Common Stock
Document And Entity Information [Line Items]
Trading Symbol FOX
Entity Common Stock, Shares Outstanding 798,520,953
Entity Public Float $ 14,817,685,121
Cons income statement
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions 12 Months Ended Common Size
Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016 Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016
Income Statement [Abstract]
Revenues Operating $ 30,400 $ 28,500 $ 27,326 100% 100% 100%
Operating expenses Operating (19,769) (18,094) (17,419) -65% -63% -64%
Selling, general and administrative Operating (3,668) (3,298) (3,385) -12% -12% -12%
Depreciation and amortization Non operating (584) (553) (530) -2% -2% -2%
Impairment and restructuring charges Operating $ (72) $ (315) $ (323) -0% -1% -1%
Equity losses of affiliates Operating $ (138) $ (41) $ (34) -0% -0% -0%
Interest expense, net Non operating (1,248) (1,219) (1,184) -4% -4% -4%
Interest income Non operating 39 36 38 0% 0% 0%
Other, net Non operating (550) (327) (335) -2% -1% -1%
Income from continuing operations before income tax benefit (expense) Non operating 4,410 4,689 4,154 15% 16% 15%
Income tax benefit (expense) Non operating 364 (1,419) (1,130) 1% -5% -4%
Income from continuing operations Non operating 4,774 3,270 3,024 16% 11% 11%
Loss from discontinued operations, net of tax Non operating (12) (44) (8) -0% -0% -0%
Net income Non operating 4,762 3,226 3,016 16% 11% 11%
Less: Net income attributable to noncontrolling interests Non operating (298) (274) (261) -1% -1% -1%
Net income attributable to Twenty-First Century Fox, Inc. stockholders Non operating 4,464 2,952 2,755 15% 10% 10%
EARNINGS PER SHARE DATA Non operating
Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders Non operating $ 4,476 $ 2,996 $ 2,763
Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders per share - basic Non operating $ 2.42 $ 1.62 $ 1.42
Income from continuing operations attributable to Twenty-First Century Fox, Inc. stockholders per share - diluted Non operating 2.41 1.61 1.42
Net income attributable to Twenty-First Century Fox, Inc. stockholders per share - basic Non operating 2.41 1.59 1.42
Net income attributable to Twenty-First Century Fox, Inc. stockholders per share - diluted Non operating $ 2.40 $ 1.59 $ 1.42
Interest and other income, net (1,759) (1,510) (1,481)
Tax shield at 35% (616) (529) (518)
Tax on operating profit (252) (1,948) (1,648)
Net operating profit after tax (NOPAT) 4,662 6,637 5,802
Interest expense, gross (derived from footnotes)
Revenue $ 30,400 $ 28,500 $ 27,326
Operating expenses 19,769
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18,094 17,419
GROSS PROFIT $ 10,631 $ 10,406 $ 9,907
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions 12 Months Ended
Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income $ 4,762 $ 3,226 $ 3,016
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (160) 62 (147)
Cash flow hedges (1) 28 (12)
Unrealized holding gains (losses) on securities 132 0 (4)
Benefit plan adjustments 100 102 (98)
Equity method investments (51) (60) (321)
Other comprehensive income (loss), net of tax 20 132 (582)
Comprehensive income $ 4,782 $ 3,358 $ 2,434
Less: Net income attributable to noncontrolling interests (298) (274) (261)
Less: Other comprehensive (income) loss attributable to noncontrolling interests (3) (6) 8
Comprehensive income attributable to Twenty-First Century Fox, Inc. stockholders $ 4,481 $ 3,078 $ 2,181
CONSOLIDATED STATEMENTS OF COM4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions 12 Months Ended
Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income attributable to redeemable noncontrolling interests $ 118 $ 138 $ 114
Cons bal sheet
Common Size
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016 Jun. 30, 2015 Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016 Jun. 30, 2015
Current assets
Cash and cash equivalents non operating $ 7,622 $ 6,163 $ 4,424 $ 8,428 14% 12% 9% 17%
Receivables, net Operating $ 7,120 $ 6,625 $ 6,258 $ 5,912 13% 13% 13% 12%
Inventories, net Operating $ 3,669 $ 3,101 $ 3,291 $ 2,749 7% 6% 7% 5%
Other Operating $ 922 $ 545 $ 976 $ 259 2% 1% 2% 1%
Total current assets non operating 19,333 16,434 14,949 17,348 36% 32% 31% 35%
Non-current assets 0% 0% 0% 0%
Receivables, net Operating $ 724 $ 543 $ 389 $ 394 1% 1% 1% 1%
Investments non operating 4,112 3,902 3,863 4,529 8% 8% 8% 9%
Inventories, net Operating $ 7,518 $ 7,452 $ 7,041 $ 6,411 14% 15% 15% 13%
Property, plant and equipment, net Operating $ 1,956 $ 1,781 $ 1,692 $ 1,722 4% 4% 3% 3%
Intangible assets, net Operating $ 6,101 $ 6,574 $ 6,777 $ 6,320 11% 13% 14% 13%
Goodwill Operating $ 12,768 $ 12,792 $ 12,733 $ 12,513 24% 25% 26% 25%
Other non-current assets Operating $ 1,319 $ 1,394 $ 921 $ 802 2% 3% 2% 2%
Total assets non operating 53,831 50,872 48,365 50,039 100% 100% 100% 100%
Current liabilities
Borrowings non operating 1,054 457 427 244 2% 1% 1% 0%
Accounts payable, accrued expenses and other current liabilities Operating $ 3,248 $ 3,451 $ 3,181 $ 3,717 6% 7% 7% 7%
Participations, residuals and royalties payable non operating 1,748 1,657 1,672 1,632 3% 3% 3% 3%
Program rights payable non operating 1,368 1,093 1,283 1,001 3% 2% 3% 2%
Deferred revenue Operating $ 826 $ 728 $ 505 $ 448 2% 1% 1% 1%
Total current liabilities 8,244 7,386 7,068 7,042 15% 15% 15% 14%
Non-current liabilities 0% 0% 0% 0%
Borrowings non operating 18,469 19,456 19,298 18,795 34% 38% 40% 38%
Other liabilities operating 3,664 3,616 3,678 3,105 7% 7% 8% 6%
Deferred income taxes Operating $ 1,892 $ 2,782 $ 2,888 $ 2,290 4% 5% 6% 5%
Redeemable noncontrolling interests non operating 764 694 552 621 1% 1% 1% 1%
Commitments and contingencies non operating
Equity
Additional paid-in capital non operating 12,612 12,406 12,211 13,427 23% 24% 25% 27%
Retained earnings non operating 8,934 5,315 3,575 5,343 17% 10% 7% 11%
Accumulated other comprehensive loss non operating (2,001) (2,018) (2,144) (1,570) -4% -4% -4% -3%
Total Twenty-First Century Fox, Inc. stockholders' equity 19,545 15,703 13,642 17,200 36% 31% 28% 34%
Noncontrolling interests non operating 1,234 1,216 1,220 966 2% 2% 3% 2%
Total equity 20,779 16,919 14,862 18,166 39% 33% 31% 36%
Total liabilities and equity 53,831 50,872 48,365 50,039 100% 100% 100% 100%
Class A Common Stock non operating
Equity
Common stock non operating 11 11 11 12
Class B Common Stock non operating
Equity
Common stock non operating $ 8 $ 8 $ 8 $ 8
Short-term debt 1,054 457 427 244
Long-term debt 18,469 19,456 19,298 18,795
Nonoperating liabilities $ 19,523 $ 19,913 $ 19,725 $ 19,039
Cash and cash equivalents 7,622 6,163 4,424 8,428
Investments 4,112 3,902 3,863 4,529
Nonoperating assets $ 11,734 $ 10,065 $ 8,287 $ 12,957
Net nonoperating obligations (NNO) $ 7,789 $ 9,848 $ 11,438 $ 6,082
Weighted Average Shares Outstanding(neet) $ 3,567 $ 3,570 $ 1,234 $ 1,235
Current Receivables (derived from 10-K)
Accounts Receivable $ 7,120 $ 6,625 $ 6,258 $ 5,912
Other receivables net $ 724 $ 543 $ 389 $ 394
Allowance for Doubtful Accounts
Gross Accounts Receivables $ 7,844 $ 7,168 $ 6,647 $ 6,306
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares Jun. 30, 2018 Jun. 30, 2017
Class A Common Stock
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 6,000,000,000 6,000,000,000
Common stock, shares issued and outstanding net of treasury stock 1,054,032,541 1,052,536,963
Common stock, treasury shares 123,687,371 123,687,371
Class B Common Stock
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 3,000,000,000 3,000,000,000
Common stock, shares issued and outstanding net of treasury stock 798,520,953 798,520,953
Common stock, treasury shares 356,993,807 356,993,807
Cons cash flow
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions 12 Months Ended
Jun. 30, 2018 Jun. 30, 2017 Jun. 30, 2016
OPERATING ACTIVITIES
Net income $ 4,762 $ 3,226 $ 3,016
Less: Loss from discontinued operations, net of tax (12) (44) (8)
Income from continuing operations 4,774 3,270 3,024
Adjustments to reconcile income from continuing operations to cash provided by operating activities
Depreciation and amortization 584 553 530
Amortization of cable distribution investments 69 65 75
Impairment and restructuring charges 72 315 323
Equity-based compensation 204 126 196
Equity losses of affiliates 138 41 34
Cash distributions received from affiliates 235 186 351
Other, net 550 327 335
- - (420)
Deferred income taxes and other taxes (903) 89 466
Change in operating assets and liabilities, net of acquisitions and dispositions
Receivables (801) (441) (332)
Inventories net of program rights payable (422) (1,030) (721)
Accounts payable and accrued expenses 401 221 46
Other changes, net (674) 73 (765)
Net cash provided by operating activities from continuing operations 4,227 3,795 3,142
INVESTING ACTIVITIES 4,227 3,795 3,562
Property, plant and equipment (551) (377) (263)
Acquisitions, net of cash acquired (7) (75) (916)
Investments in equity affiliates (444) (128) (182)
Proceeds from dispositions, net 365 0 0
Other investing activities, net (540) (172) (277)
Net cash used in investing activities from continuing operations (1,177) (752) (1,638)
FINANCING ACTIVITIES
Borrowings 1,469 918 1,360
Repayment of borrowings (1,872) (573) (687)
Repurchase of shares 0 (619) (4,904)
Dividends paid and distributions (993) (943) (821)
Purchase of subsidiary shares from noncontrolling interests 0 (1) (290)
Other financing activities, net (68) (73) (82)
Net cash used in financing activities from continuing operations (1,464) (1,291) (5,424)
Net decrease in cash and cash equivalents from discontinued operations (61) (28) (20)
Net increase (decrease) in cash and cash equivalents 1,525 1,724 (3,940)
Cash and cash equivalents, beginning of year 6,163 4,424 8,428
Exchange movement on cash balances (66) 15 (64)
Cash and cash equivalents, end of year 7,622 6,163 4,424
0 0 0 Check
Adjustments to reconcile income from continuing operations to cash provided by operating activities
Financial Ratios
Part 11: Financial Analysis of Company's Past and Present
2018 2017 2016 2018 2017 2016 Disney 3years Ave. Industry Ave. 21st Cent.
A. a. Gross Profit Gross Profit / Revenue Gross Profit $ 26,708 $ 24,831 $ 25,639 45% 45.0% 46.1% 45%
Revenue $ 59,434 $ 55,137 $ 55,632
B. b. Net Income as a percent of Revenues Net Income from Continuing Operations / Revenue Net Income from Continuing Operations $ 12,598 $ 8,980 $ 9,391 21% 16.3% 16.9% 18%
Measures the operating income generated by each dollar of sales Revenue $ 59,434 $ 55,137 $ 55,632
C. c. Earnings per Share Net Income - Preferred Dividends / Weighted Average Number of Shares Outstanding Net Income - Preferred Dividends $ 12,598 $ 8,980 $ 9,391 $ 8.36 $ 5.69 $ 5.73 $ 6.59
Measures net income earned on each share of common stock Weighted Average Number of Shares Outstanding $ 1,507 $ 1,578 $ 1,639
D. d. Effective Tax Rate Income Tax Expense / Pretax Income Income Tax Expense $ (1,663) $ (4,422) $ (5,078) 11% 32.1% 34.2% 26%
Measurement of a company's tax rate Pretax Income $ 14,729 $ 13,788 $ 14,868
E. e. Return on Equity Net Income / Average Stockholder's Equity Net Income $ 12,598 $ 8,980 $ 9,391 6.48% 4.78% 5.21% 5.49%
Measures the return the company has earned on the book value of the shareholders' investment Average Stockholder's Equity $ 194,387 $ 187,822 $ 180,215
F. f. Return on Assets Net Income / Average Total Assets Net Income $ 12,598 $ 8,980 $ 9,391 6.48% 4.8% 5.2% 5.49%
Measures profitability of assets Average Total Assets $ 194,387 $ 187,822 $ 180,215
G. g Profitability and Productivity of ROA
i. Profit Margin Net Income / Revenue Net Income $ 12,598 $ 8,980 $ 9,391 21.20% 16.3% 16.9% 18.12%
Measures net income generated by each dollar of revenue Revenue $ 59,434 $ 55,137 $ 55,632
ii. Asset Turnover Revenue / Average Total Assets Revenue $ 59,434 $ 55,137 $ 55,632 0.31 0.29 0.31 0.30
Measures how efficiently assets are used to generate sales Average Total Assets $ 194,387 $ 187,822 $ 180,215
H. Net Operating Profit After Taxes (NOPAT) Income before income taxes - Tax on Operating Profit Income before income taxes $ 14,729 $ 13,788 $ 14,868 $ 16,383 $ 18,317 $ 20,037 $ 18,246
h. Measure of profit that excludes the costs and tax benefits of debt Tax on Operating Profit $ (1,654) $ (4,529) $ (5,169)
Tax on Operating Profit = Tax Expense + (Pretax Net Nonoperating Expense x Statutory Tax rate)
Assumed Statutory Rate of 35%
I. i Net Operating Assets (NOA) Operating Assets - Operating Liabilities Operating Assets $ 123,018 $ 118,267 $ 108,873 $ 99,249 $ 93,921 $ 84,333 $ 92,501
Measures the operating assets of a business directly related to its operating liabilities Operating Liabilities $ 23,769 $ 24,346 $ 24,540
J. j Return on Net Operating Assets (RNOA) NOPAT / Average NOA NOPAT $ 16,383 $ 18,317 $ 20,037 13.58% 15.18% 16.6% 15.12%
Relates net operating profit after tax to the average net operating assets Average NOA $ 120,643 $ 120,643 $ 120,643
i. Net Operating Profit Margin (NOPM) NOPAT / Revenue NOPAT $ 16,383 $ 18,317 $ 20,037 27.56% 33.2% 36.0% 32.27%
Measures how much operating profit the company earns from each sales dollar Revenue $ 59,434 $ 55,137 $ 55,632
ii. Net Operating Asset Turnover (NOAT) Revenue / Average NOA Revenue 59,434 $ 55,137 $ 55,632 0.49 0.46 0.46 0.47
Measures the productivity of the company's net operating assets Average NOA 120,643 $ 120,643 $ 120,643
K. k Net Nonoperating Expense (NNE) NOPAT - Consolidated Net Income NOPAT $ 16,383 $ 18,317 $ 20,037 $ 3,785 $ 9,337 $ 10,646 $ 7,923
Measures nonoperating expenses and revenues, net tax Consolidated Net Income $ 12,598 $ 8,980 $ 9,391
L. l Net Nonoperating Obligations (NNO) Nonoperating Liabilities - Nonoperating Assets Nonoperating Liabilities $ 20,874 $ 25,291 $ 20,170 $ 13,825 $ 18,072 $ 11,280 $ 14,392
Measures the excess of interest-bearing debt over investments in nonoperating assets Nonoperating Assets $ 7,049 $ 7,219 $ 8,890
M. m Financial Leverage (FLEV) Average NNO / Average Total Stockholder's Equity Average NNO $ 31,897 $ 29,352 $ 21,704 0.35 0.35 0.25 0.32
Relates debt to equity Average Total Stockholder's Equity $ 90,088 $ 84,580 $ 87,790
N. n Spread Return on Net Operating Assets Percent - Net Nonoperating Expense Percent RNOA 0.14 0.15 0.17 1.71% -16.6% -32.4% -15.79%
The difference between the return on net operating assets and net nonoperating expense percent NNEP (NNE / Average NNO) 0.12 0.32 0.49
O. o Nonoperating Return FLEV x Spread FLEV 0.35 0.35 0.25 0.01 (0.06) (0.08) (0.04)
Measures the extent to which a company is using debt to increase its return on equity Spread 1.71% -16.6% -32.4%
P. p Working Capital Current Assets - Current Liabilities Current Assets $ 16,825 $ 15,889 $ 16,966 (1,035) (3,706) 124 (1,539)
The difference between current assets and current liabilities Current Liabilities $ 17,860 $ 19,595 $ 16,842
Q. q Credit Risk Ratios
i. Times Interest (Earnings before tax and Interest expense) / Interest Expense, gross Earnings before tax + Interest expense $ 14,155 $ 13,403 $ 14,608 $ 24.66 34.8 56.2 $ 38.55
The operating income available to pay interest expense Interest Expense (gross) $ (574) $ (385) $ (260)
ii. EBITDA Coverage (Earnings before tax + Interest expense + Depreciation + Amortization) / Interest Expense Earnings before tax + Interest expense + Depreciation + Amortization $ 17,740 $ 16,570 $ 17,395 30.91 43.0 66.9 $ 46.95
Measures the amount of cash available to cover debt Interest Expense $ (574) $ (385) $ (260)
iii. Cash from Operations to Total Debt Cash from Operations / Total Debt Cash from Operations $ 14,295 $ 12,343 $ 13,136 0.14 0.13 0.14 0.14
Relates cash from operations to total debt Total Debt $ 98,598 $ 95,789 $ 92,033
iv. Current Ratio Current Assets / Current Liabilities Current Assets $ 16,825 $ 15,889 $ 16,966 0.94 0.81 1.01 0.92
Relates current assets to current liabilities Current Liabilities $ 17,860 $ 19,595 $ 16,842
v. Quick Ratio (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities Cash + Marketable Securities + Accounts Receivable $ 13,892 $ 13,024 $ 13,981 0.78 0.66 0.83 0.76
Relates quick assets to current liabilities Current Liabilities $ 17,860 $ 19,595 $ 16,842
vi. Debt to Equity Total Long-Term Debt / Stockholder's Equity Total Long-Term Debt $ 20,874 $ 25,291 $ 20,170 0.43 0.61 0.47 0.50
Relates total liabilities to total stockholder's equity Stockholder's Equity $ 48,773 $ 41,315 $ 43,265
R. r Accounts Receivable Turnover (ART) Revenue / Average Accounts Receivable (Gross) Revenue $ 8,565 $ 8,294 $ 8,502 0.91 0.90 0.96 0.93
Relates annual net sales to average accounts receivable Average Accounts Receivable (Gross) $ 9,375 $ 9,189 $ 8,852
S. s Average Sales Outstanding Accounts Receivable (Gross) / Average Daily Sales Accounts Receivable (Gross) $ 9,742 $ 9,007 $ 9,371 415 396.4 402.3 405
Reflects how well a company manages its accounts receivables Average Daily Sales $ 23.47 $ 22.72 $ 23.29
T. t Accounts Payable Turnover (APT) Cost of Goods Sold / Average Accounts Payable Cost of Goods Sold $ 32,726 $ 30,306 $ 29,993 3.6 3.4 3.5 3.5
Relates cost of goodds sold to average accounts payable Average Accounts Payable $ 9,167 $ 8,993 $ 8,487
U. u Accounts Payable Days Outstanding Accounts Payable / Average Daily Cost of Goods Sold Accounts Payable $ 9,479 $ 8,855 $ 9,130 211.44 213.3 222.2 215.65
Reflects how long it takes a company to pay its iinvoices Average Daily Cost of Goods Sold -45 -42 -41
V. v Free Cash Flow Cash provided by Operations - Capital Expenditures - Cash Dividends Cash provided by Operations $ 14,295 $ 12,343 $ 13,136 $ 9,828 $ 8,718 $ 8,362 $ 8,969
Excess cash flow from which dividends can be paid Capital Expenditures $ 4,465 $ 3,623 $ 4,773
Cash Dividends $ 1.68 $ 1.56 $ 1.42
Cons statement of Equity
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) shares in Millions, $ in Millions Total Common StockClass A Common Stock Common StockClass B Common Stock Additional Paid-In Capital Retained Earnings and Accumulated Other Comprehensive Loss Total Twenty-First Century Fox, Inc. Stockholders' Equity Noncontrolling Interests [1]
Balance at Jun. 30, 2015 $ 18,186 $ 12 $ 8 $ 13,427 $ 3,773 $ 17,220 $ 966
Balance, shares at Jun. 30, 2015 1,240 799
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 2,902 $ 0 $ 0 0 2,755 2,755 147
Other comprehensive (loss) income (582) 0 0 0 (574) (574) (8)
Dividends declared (586) 0 0 0 (586) (586) 0
Shares (repurchased) issued, net, value (4,866) $ (1) $ 0 (1,011) (3,854) (4,866) 0
Shares (repurchased) issued, net, shares (169) 0
Other (173) $ 0 $ 0 (205) (83) (288) 115
Balance at Jun. 30, 2016 14,881 $ 11 $ 8 12,211 1,431 13,661 1,220
Balance, shares at Jun. 30, 2016 1,071 799
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 3,088 $ 0 $ 0 0 2,952 2,952 136
Other comprehensive (loss) income 132 0 0 0 126 126 6
Dividends declared (668) 0 0 0 (668) (668) 0
Shares (repurchased) issued, net, value (522) $ 0 $ 0 (115) (407) (522) 0
Shares (repurchased) issued, net, shares (18) 0
Other 27 $ 0 $ 0 310 (137) 173 (146)
Balance at Jun. 30, 2017 16,938 $ 11 $ 8 12,406 3,297 15,722 1,216
Balance, shares at Jun. 30, 2017 1,053 799
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 4,644 $ 0 $ 0 0 4,464 4,464 180
Other comprehensive (loss) income 20 0 0 0 17 17 3
Dividends declared (667) 0 0 0 (667) (667) 0
Shares issued, value 42 $ 0 $ 0 42 0 42 0
Shares issued, shares 1 0
Other (179) $ 0 $ 0 164 (178) (14) (165)
Balance at Jun. 30, 2018 $ 20,798 $ 11 $ 8 $ 12,612 $ 6,933 $ 19,564 $ 1,234
Balance, shares at Jun. 30, 2018 1,054 799
Fin Ratios
2018 2017 2016 2018 2017 2016 three yrs Avg Disney Avg. Avg Comments for 21st Century
A. Gross Profit Gross Profit / Revenue Gross Profit $ 10,631 $ 10,406 $ 9,907 35% 37% 36% 36% 45% 41% Gross profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018 largely due to selling of some of their international markets, expensive technological innovation in the industry.The profit growth across all operating segments led by higher content revenues at the Filmed Entertainment segment and higher affiliate and advertising revenues at the Cable Network Programming and Television segments.
Measures the relationship between net sales revenues and the cost of goods sold Revenue $ 30,400 $ 28,500 $ 27,326
B. Net Income as a percent of Revenues Net Income from Continuing Operations / Revenue Net Income from Continuing Operations $ 4,774 $ 3,270 $ 3,024 16% 11% 11% 13% 18% 15% The company' Net income as percentage of revenue increased for fiscal 2018, as compared to fiscal 2017, and 2016 primarily due to the income tax benefit as a result of the Tax Act.
Measures the operating income generated by each dollar of sales Revenue $ 30,400 $ 28,500 $ 27,326
C. Earnings per Share Net Income - Preferred Dividends / Weighted Average Number of Shares Outstanding Net Income - Preferred Dividends $ 4,774 $ 3,270 $ 3,024 $ 1.34 $ 1.36 $ 2.45 $ 1.72 $ 6.59 $ 4.15 The 1.72 EPS shows there's a 3-4% of profits coming from stocks outstanding for my company.
Measures net income earned on each share of common stock Weighted Average Number of Shares Outstanding $ 3,569 $ 2,402 $ 1,235
D. Effective Tax Rate Income Tax Expense / Pretax Income Income Tax Expense $ 364 $ 1,419 $ 1,130 8% 30% 27% 22% 26% 24% Tax rate of (8)% for 2018 was lower than the statutory rate of 28% primarily due to a provisional $1.5 billion tax benefit which reflects the effects of the legislation in the U.S.
Measurement of a company's tax rate Pretax Income $ 4,410
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$ 4,689 $ 4,154
E. Return on Equity Net Income / Average Stockholder's Equity Net Income $ 4,762 $ 3,226 $ 3,016 25% 20% 18% 21% 5.49% 13% The increase from 2017 to 2018 was a result of Disney buying 21 century Fox shares in June 201th this year
Measures the return the company has earned on the book value of the shareholders' investment Average Stockholder's Equity $ 18,849 $ 15,891 $ 16,514
F. Return on Assets Net Income / Average Total Assets Net Income $ 4,762 $ 3,226 $ 3,016 9% 7% 6% 7% 5.49% 6% The had good returns on their assets by selling some of their controlling interest to Disney and other networks in Uk and Australia. These sales brought good return.
Measures profitability of assets Average Total Assets $ 52,352 $ 49,619 $ 49,202
G. Profitability and Productivity of ROA
i. Profit Margin Net Income / Revenue Net Income $ 4,762 $ 3,226 $ 3,016 16% 11% 11% 13% 18.12% 15% A company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions this has been proven by 21st century Fox
Measures net income generated by each dollar of revenue Revenue $ 30,400 $ 28,500 $ 27,326
ii. Asset Turnover Revenue / Average Total Assets Revenue $ 30,400 $ 28,500 $ 27,326 0.58 0.57 0.56 0.57 0.30 0.44 The 0.57 average by 21st century is better than industry average. They are expending assets well to generate revenue
Measures how efficiently assets are used to generate sales Average Total Assets $ 52,352 $ 49,619 $ 49,202
H. Net Operating Profit After Taxes (NOPAT) Income before income taxes - Tax on Operating Profit Income before income taxes $ 4,410 $ 4,689 $ 4,154 $ 4,158 $ 2,742 $ 2,506 $ 3,135 $ 18,246 $ 10,690 Twenty-First Century Fox Inc.’s provision for income taxes from continuing operations increased from 2016 to 2017 then almost doubled significantly from 2017 to 2018.
Measure of profit that excludes the costs and tax benefits of debt Tax on Operating Profit $ 252 $ 1,948 $ 1,648
Tax on Operating Profit = Tax Expense + (Pretax Net Nonoperating Expense x Statutory Tax rate)
Assumed Statutory Rate of 35%
I. Net Operating Assets (NOA) Operating Assets - Operating Liabilities Operating Assets $ 34,977 $ 34,182 $ 33,820 $ 25,347 $ 23,605 $ 23,568 $ 24,173 $ 92,501 $ 58,337 My company's NOA is by far greater than the operating assets. This a healthy looking sign for any business.
Measures the operating assets of a business directly related to its operating liabilities Operating Liabilities $ 9,630 $ 10,577 $ 10,252
J. Return on Net Operating Assets (RNOA) NOPAT / Average NOA NOPAT $ 4,662 $ 6,637 $ 5,802 19% 27% 24% 23% 15.12% 19% on a net basis ,My company's NOA is by far greater than the operating assets. This a healthy looking sign for any business.
Relates net operating profit after tax to the average net operating assets Average NOA $ 24,476 $ 24,476 $ 24,476
i. Net Operating Profit Margin (NOPM) NOPAT / Revenue NOPAT $ 4,662 $ 6,637 $ 5,802 15% 23% 21% 20% 32.27% 26% Considerably it is below industry average because of the size of my company as compared to Comcast, Disney. Their Operations and financial strenght is larger.
Measures how much operating profit the company earns from each sales dollar Revenue $ 30,400 $ 28,500 $ 27,326
ii. Net Operating Asset Turnover (NOAT) Revenue / Average NOA Revenue $ 30,400 $ 28,500 $ 27,326 1.24 1.16 1.12 1.17 0.47 0.82 This has not been goof year after year to due high costs and maintenance of Techs.
Measures the productivity of the company's net operating assets Average NOA $ 24,476 $ 24,476 $ 24,476
K. Net Nonoperating Expense (NNE) NOPAT - Consolidated Net Income NOPAT $ 4,662 $ 6,637 $ 5,802 $ 198 $ 3,685 $ 3,047 $ 2,310 $ 7,923 $ 5,116 This dropped from 2017 to 2018 because they had to sell some of their controlling interests, reduced operations
Measures nonoperating expenses and revenues, net tax Consolidated Net Income $ 4,464 $ 2,952 $ 2,755
L. Net Nonoperating Obligations (NNO) Nonoperating Liabilities - Nonoperating Assets Nonoperating Liabilities $ 19,523 $ 19,913 $ 19,725 $ 7,789 $ 9,848 $ 11,438 $ 9,692 $ 14,392 $ 12,042
Measures the excess of interest-bearing debt over investments in nonoperating assets Nonoperating Assets $ 11,734 $ 10,065 $ 8,287
M. Financial Leverage (FLEV) Average NNO / Average Total Stockholder's Equity Average NNO $ 8,819 $ 10,643 $ 8,760 0.47 0.67 0.53 0.56 0.32 0.44 my company increase its return on equity by having more financial leverage.
Relates debt to equity Average Total Stockholder's Equity $ 18,849 $ 15,891 $ 16,514
N. Spread Return on Net Operating Assets Percent - Net Nonoperating Expense Percent RNOA 0.19 0.27 0.24 850% 78% 68% 332% -15.79% 158%
The difference between the return on net operating assets and net nonoperating expense percent NNEP (NNE / Average NNO) 0.02 0.35 0.35
O. Nonoperating Return FLEV x Spread FLEV 0.47 0.67 0.53 3.98 0.52 0.36 1.62 (0.04) 0.79 shows how well a company uses investment funds to generate earnings growth. ROEs between these range are considered desirable.
Measures the extent to which a company is using debt to increase its return on equity Spread 849.8% 78.3% 68.1%
P. Working Capital Current Assets - Current Liabilities Current Assets $ 19,333 $ 16,434 $ 14,949 11,089 9,048 7,881 $ 9,339 $ (1,539) $ 3,900 As a result of stronger liquidity, this particular increased every year. Steady growth, enough room for expansion.
The difference between current assets and current liabilities Current Liabilities $ 8,244 $ 7,386 $ 7,068
Q. Credit Risk Ratios
i. Times Interest (Earnings before tax and Interest expense) / Interest Expense, gross Earnings before tax + Interest expense $ 3,162 $ 3,470 $ 2,970 $ 2.53 $ 2.85 $ 2.51 $ 2.63 $ 38.55 $ 20.59 Interest is not that much according to their financials in comparing to income from operations. They have enough cash to pay interest expenses
The operating income available to pay interest expense Interest Expense (gross) $ 1,248 $ 1,219 $ 1,184
ii. EBITDA Coverage (Earnings before tax + Interest expense + Depreciation + Amortization) / Interest Expense Earnings before tax + Interest expense + Depreciation + Amortization $ 2,578 $ 2,917 $ 2,440 $ 1.79 $ 1.73 $ 1.51 1.68 $ 46.95 $ 24.31 Their avaliable cash continued to grow year after year. Evidently they have cash to cover their debts at any time should the lenders ask for it
Measures the amount of cash available to cover debt Interest Expense $ 1,248 $ 1,219 $ 1,184
iii. Cash from Operations to Total Debt Cash from Operations / Total Debt Cash from Operations $ 4,227 $ 3,795 $ 3,142 $ 0.08 $ 0.07 $ 0.06 $ 0.07 $ 0.14 $ 0.11 Although the cash from ops is not high in camparing to toatl debts here, but 21st century is liquid enough to pay obligations as they fall due, including legal battles
Relates cash from operations to total debt Total Debt $ 53,831 $ 50,872 $ 48,365
iv. Current Ratio Current Assets / Current Liabilities Current Assets $ 19,333 $ 16,434 $ 14,949 $ 2.35 $ 2.23 $ 2.12 $ 2.23 $ 0.92 $ 1.57 My company has shown a stronger ability to pay its short term debts as shown on avearge at 2.33. Thus an increase to their credit rating.
Relates current assets to current liabilities Current Liabilities $ 8,244 $ 7,386 $ 7,068
v. Quick Ratio (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities Cash + Marketable Securities + Accounts Receivable $ 14,742 $ 12,788 $ 10,682 $ 1.79 $ 1.73 $ 1.51 $ 1.68 $ 0.76 $ 1.22 Twenty-First Century Fox Inc.’s quick ratio improved from 2016 to 2017 and from 2017 to 2018.
Relates quick assets to current liabilities Current Liabilities $ 8,244 $ 7,386 $ 7,068
vi. Debt to Equity Total Long-Term Debt / Stockholder's Equity Total Long-Term Debt $ 18,469 $ 19,456 $ 19,298 $ 0.89 $ 1.15 $ 1.30 $ 1.11 $ 0.50 $ 0.81 A company with smaller debt to Equity ratio (more leveraged) may have higher ROE %because of the leverage. 21st century fox has shown other wise
Relates total liabilities to total stockholder's equity Stockholder's Equity $ 20,779 $ 16,919 $ 14,862
R. Accounts Receivable Turnover (ART) Revenue / Average Accounts Receivable (Gross) Revenue $ 30,400 $ 28,500 $ 27,326 $ 4.05 $ 4.13 $ 4.22 $ 4.13 $ 0.93 $ 2.53 Their ability to collect accounts receivable remain in the 4 range above industry average. Average collection period, for Twenty-first Century Fox's accouts receivable remained unchanged at 86 days, in the Dec 31 2018 .
Relates annual net sales to average accounts receivable Average Accounts Receivable (Gross) $ 7,506 $ 6,908 $ 6,477
S. Average Sales Outstanding Accounts Receivable (Gross) / Average Daily Sales Accounts Receivable (Gross) $ 7,844 $ 7,168 $ 6,647 $ 94.18 $ 91.80 $ 88.79 $ 91.59 $ 404.61 $ 248.10 The outstanding sales on average increased when controlling interest reduced, by selling some of their interests to competitors. The helped the company on sevaral fiancial parameters including this.
Reflects how well a company manages its accounts receivables Average Daily Sales $ 83.29 $ 78.08 $ 74.87
T. Accounts Payable Turnover (APT) Cost of Goods Sold / Average Accounts Payable Cost of Goods Sold $ 656 $ 868 $ 853 $ 0.39 $ 0.52 $ 0.49 $ 0.47 $ 3.49 $ 1.98 payables turnover declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Relates cost of goodds sold to average accounts payable Average Accounts Payable $ 1,675 $ 1,658 $ 1,725
U. Accounts Payable Days Outstanding Accounts Payable / Average Daily Cost of Goods Sold Accounts Payable $ 3,248 $ 3,451 $ 3,181 $ 3,614 $ 2,902 $ 2,722 $ 3,080 $ 216 $ 1,648 Twenty-First Century Fox Inc.’s cash conversion cycle improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018 not reaching 2016 level.
Reflects how long it takes a company to pay its iinvoices Average Daily Cost of Goods Sold $ 0.9 $ 1.2 $ 1.2
V. Free Cash Flow Cash provided by Operations - Capital Expenditures - Cash Dividends Cash provided by Operations $ 4,227 $ 3,795 $ 3,142 $ 3,685 $ 3,621 $ 2,864 $ 3,390 $ 8,969 $ 6,180 The fianacials shows there is solid amount of free cash flow generated for the business. Another healthy sign.
Excess cash flow from which dividends can be paid Capital Expenditures $ 540 $ 172 $ 277
Cash Dividends $ 2 $ 2 $ 1
https://www.gurufocus.com/term/ROE/NAS:FOXA/ROE-/Twenty-First-Century-Fox-Inc
NOA
2017 2016 2015 2014
Operating Assets
Receivables, net 7,120 6,625 6,258 5,912
Inventories, net 3,669 3,101 3,291 2,749
Other 922 545 976 259
Receivables, net 724 543 389 394
Inventories, net 7,518 7,452 7,041 6,411
Property, plant and equipment, net 1,956 1,781 1,692 1,722
Intangible assets, net 6,101 6,574 6,777 6,320
Goodwill 12,768 12,792 12,733 12,513
Other non-current assets 1,319 1,394 921 802
Total operating assets $ 34,977 $ 34,182 $ 33,820 $ 31,170
Operating Liabilities
Accounts payable, accrued expenses and other current liabilities 3,248 3,451 3,181 3,717
Deferred revenue 826 728 505 448
Deferred income taxes 1,892 2,782 2,888 2,290
Other liabilities 3,664 3,616 3,678 3,105
Total operating liabilities $ 9,630 $ 10,577 $ 10,252 $ 9,560
Net Operating Assets (NOA) 25,347 23,605 23,568 21,610
Average NOA 24,476
Normalizations and Adjustments
Part III - Financial Analysis - Normalizations and Adjustments
TWENTY-FIRST CENTURY FOX, INC.
(Note: This file is a table in my FinancialAnalysis Excel File)
1. REVENUE RECOGNITION
No adjustments were determined for Revenue Recognition. Note to the financial statements does highlight recently issued accounting standards for revenue recognition guidance.
2. RESEARCH AND DEVELOPMENT
a. Twenty First century Fox calls its R&D technological development cost. These expenses are included in the cost of sales.
b. The notes shows the companies return on invested capital has increased by $3 million and has expanded its gross margins by 100 basis points. Twenty First century Fox's product development has achieved significant goals for the company.
No Adjustment to design and development cost seems warranted.
3. RESTRUCTURING ITEMS
No resturcturing items noted in Twenty First century Fox 10-K
4. DEFERRED TAX ASSETS AND LIABILITITES
a. The deferred tax asset increased in 2018 is substantially more than the historical average. An adjustment was made to the Net Deferred Tax Asset to the historical percentage average.
(Millions)
2018 2017 2016 2015
Net Deferred Tax Asset in 10-K (Note 9) $ 76 $ 197 $ 278 $ 317
% Change -61.42% -29.14% -12.30%
Average % Change -34.29%
% Difference in 2018 -27.13%
Adjustment Calclulation
Net Deferred Tax Asset in 10-K $ 76
% Difference in 2018 -27.13%
2018 Adustment $ 21
2018 Adjustment Debit Credit
Deferred income taxes and other assets $ 21 Balance Sheet and Cash Flow
Income tax expense (and adjustment to Retained Earnings) $ 21 Income Statement
Adjusted Net Deferred Tax Asset 2018 2017 2016
Net Deferred Tax Asset in 10-K $ 76
2018 Adjustment $ 21 No Adjustment No Adjustment
Adjusted Net Deferred Tax Asset $ 97
b. Effective Tax Rate - Using the 2013 Rate for Model for Part IV for years 2016, 2017, and 2018
Effective Tax Rate from 2013 30.00%
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This number was hard coded from the FinancialAnalysis file.
The debits/credits would be to income tax expense and income taxes payable.
2016 2017 2018
Income tax expense (and adjustment to Retained Earnings) $ - 0 $ - 0 $ - 0
Income tax payable - - -
5. DISCONTINUED OPERATIONS
Discontinued operations were reported in 2012 and have no impact for the future.
6. EXTRAORDINARY ITEMS
No extraorinary items were noted.
7. FOREIGN CURRENCY - adjustments as reported on the Cash Flow Statement (millions)
The 2018 adjustment does not appear to be in the typical range as a % of Total Assets
For the Years Ended May 31
2018 2017 2016 2015
Operating:
Net foreign currency adjustments $ 424 $ 56 $ 66 $ - 0
Effect of exchange rate changes on cash and equivalents $ (83) $ (9) $ 36 $ 67
Total $ 341 $ 47 $ 102 $ 67
% of Total Assets 1.58% 0.25% 0.58% 0.43%
% average without 2018 0.42%
Adjusted 2018 foreign currency at previous average $ 91
Adjustment necessary
Reported 2018 (net) $ 341
Adjusted 2018 foreign currency at previous average $ 91
Net Adjustment $ 250
2018 Adjustment Debit Credit
Other (income) expense, net $ 250 Income Statement
Retained earnings change feeding from Income statement $ 250 Balance Sheet
2018 Reclass to get adjustment to AOCI
Retained earnings $ 250 Balance Sheet
Accumulated other comprehensive income $ 250 Balance Sheet
No adjustments necessary for 2013 or 2014
8. ACCOUNTS RECEIVABLE
Accounts Receivable Turnover Ratio and Average Days Sales Outstanding has improved over the past three years. The financials show no indication of these ratios declining which would warrant an adjustment.
9. INVENTORY
Inventory is valued at the lower of cost or specific identification cost basis.
10. DEPRECIATION
a. Twenty First century Fox uses the straight line method of depreciation of 2 to 40 years for buildings and equipment and 2 to 15 years for machinery. The depreciation expense is reported as part of cost of sales for assets used in manufacturing, warehousing and product distribution. Other assets depreciation is recorded in total selling and administrative expense.
b. Adjustments if necessary
The 2018 Accumulated Depreciation reported in Note 3 is $3,341M
Estimated Useful Life
Property, plant and equipment costs 1,956
Plus: Capitalized Leases (from # 15 below) 200
Total Property, plant and equipment costs 2,156
Depreciation Expense 584
Plus: Capitalized Lease Depreciation (from # 15 below) 206
Total Adjusted Depreciation Expense 790
Average useful life 2.73
11. ASSET IMPAIRMENTS
No asset impairments were noted; therefore, no adjustments were made.
12. PERCENTAGE USED UP
Percent used up
Accumulated depreciation from Note 3 2,931,000,000
Additional 3 years depreciation for Capital Leases 618
Total Adjusted Accumumlated Depreciation 2,931,000,618
Depreciable Asset Cost (from # 10 above) 2,156
Percent Used Up 135946225.32%
With the inclusion of the Capital Leases in assets, Twenty First century Fox does not appear to have material capital needs.
13. CONTINGENT LIABILITIES (Understand)
Twenty First century Fox reports no commitments and contingencies on its balance sheet.
14. BONDS
Note of the 10-K does provide the bond payment information to be used in Part IV of the project for debt payments and indicates if the payments are monthly, semi-annually, or quarterly.
15. LEASES - Adjustment for Operating Leases in Note 16 (terms of 1 to 19 years)
Twenty First century Fox has a total of $230 million in operating leases related to warehouse and retail stores. Adjustment necessary to convert the operating leases to capital leases.
Interest Rate of US Debt from 10-K
Book Value Annual Interest
Bonds Interest 2018
10/15/18 $ 101 5.15% $ 5
05/01/23 $ 499 2.25% $ 11
05/01/43 $ 499 3.63% $ 18
Notes
4/1/17 $ 39 6.20% $ 2
1/1/18 $ 19 6.79% $ 1
Yen Notes
8/20/01 $ 20 2.60% $ 1
8/20/01 $ 19 2.00% $ 0
Total $ 1,196 3.27% $ 39
Capitalize Operating Leases Discount Rate 3.27% Average Rate from Current Debt
Year Operating Lease Payments Present Value Interest Expense to Add
1 2016 $ 200 $ 194 $ 63
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Entries for Part IV
Reconciliation of Debt Balances
2 2017 $ 205 $ 192 $ 57 Ending 2016 $ 200
3 2018 $ 230 $ 209 $ 51 Less: Pmt 2015 $ 194
4 2019 $ 235 $ 207 Ending 2017 $ 394
5 2020 $ 265 $ 226 Less: Pmt 2018 $ 230
5+ Therafter $ 1,154 $ 902 Ending 2018 $ 624
$ (1,306)
Total $ 2,289 $ 1,930
Payments after year 5 $ 265
Remaining Life 4.35
Total Lease Life 9.35 Annual S/L Deprec $ 206
2018 - Journal Entry
Long-term debt $ 209 Reclass current portion of capitalized debt Balance Sheet
Current portion of long-term debt $ 209 Balance Sheet
Depr Exp - Cap Assets $ 206 Income Statement
Accum Depr - Cap Assets $ 206 Balance Sheet
Cash (and adjustment to Retained Earnings) $ 230 Balance Sheet
Operating overhead expense $ 230 Income Statement
Net (Income) Expense Check $ (24)
2017
Long-term debt $ 205 Reclass current portion of capitalized debt Balance Sheet
Current portion of long-term debt $ 205 Balance Sheet
Depr Exp - Cap Assets $ 206 Income Statement
Accum Depr - Cap Assets $ 206 Balance Sheet
Cash (and adjustment to Retained Earnings) $ 205 Balance Sheet
Operating overhead expense $ 205 Income Statement
Net (Income) Expense Check $ 1
2016
Property, plant and equipment, net $ 200 Amount to Capitalize Balance Sheet and Cash Flow
Current portion of long-term debt $ 200 Current Balance Sheet
Long-term debt $ - 0 Long-Term Balance Sheet
Depr Exp - Cap Assets $ 206 Income Statement
Accum Depr - Cap Assets $ 206 Balance Sheet
Cash (and adjustment to Retained Earnings) $ 200 Balance Sheet and Cash Flow
Operating overhead expense $ 200 Income Statement
Net (Income) Expense Check $ 6
Total Income Statement Adjustments for 2018 Add Lease Pmt from Twenty First century Fox 10-K Reports Interest Expense Subtract Depr Net Difference
2018 $ 230
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From 2015 10-K Note 16 - Actual lease expense $ - 0 $ (206) $ (24)
2017 $ 205
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From 2015 10-K Note 16 actual lease expense $ - 0 $ (206) $ 1
2016 $ 200
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From 2015 10-K Note 16 actual lease expense
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Entries for Part IV
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This number was hard coded from the FinancialAnalysis file. $ - 0 $ (206) $ 6
Note: I did not adjust the lease amounts for interest retrospectively for years as the effective discount rate assumption of 3.27% would not have had a material change.
Part IV
Total Income Statement Adjustments for 2018 Lease Payment N/A for forecast Interest Expense Subtract Depr Net Difference
2016 $ - 0 $ (63) $ (206) $ (269)
2017 $ - 0 $ (57) $ (206) $ (263)
2018 $ - 0 $ (51) $ (206) $ (257)
16. PENSIONS
Twenty First century Fox has pensions in various countries world wide as mandated by the government. The May 31, 2018 balance in Deferred income taxes and other liabilities was $36M. This amount was a $2M decrease from May 31, 2014. The amonts does not seem to be material for a normalization adjustment.
17. REPURCHASE OF CLASS B SHARES (Part IV data)
Data from 2018 - 10-K , 2014 - 10-K , and 2013 - 10-K
$ 8,000,000
Remaining Balance Yet To Be Purchased
2016 $ 798,520,953
2017 $ 356,993,807
2018 $ 798,520,953
Income Statement Adjusted
Twenty First century Fox, Inc.
Consolidated Statements of Operations
For the Years Ended May 31 Common Size
(In millions, except per share data) 2018 2017 2016 2018 2017 2016
Income from continuing operations:
Revenues Operating $ 30,400 $ 28,500 $ 27,326 100.0% 100.0% 100.0%
Operating Expenses Operating (19,769) (18,094) (17,419) -65.0% -63.5% -63.7%
Selling, general and administrative Operating (3,668) (3,298) (3,385) -12.1% -11.6% -12.4%
Depreciation and amortization Nonoperating (1,020) (964) (936) -3.4% -3.4% -3.4%
Impairment and restructuring charges (72) (315) $ (323.00) -0.2% -1.1% -1.2%
Equity losses of affiliates (138) (41) $ (34.00) -0.5% -0.1% -0.1%
Interest expense, net Nonoperating (1,248) (1,219) $ (1,184.00) -4.1% -4.3% -4.3%
Interest expense (income), net Nonoperating 39 36 38 0.1% 0.1% 0.1%
Other (income) expense, net Nonoperating 192 (327) (335) 0.6% -1.1% -1.2%
Income from continuing operations before income tax benefit (expense) 4,716 4,278 3,748 15.5% 15.0% 13.7%
Income tax expense Operating and Nonoperating 385 (1,419) (1,130) 1.3% -5.0% -4.1%
Income from continuing operations 5,101 2,859 2,618 16.8% 10.0% 9.6%
Net income from Discontinued operations - - - 0.0% 0.0% 0.0%
Net income $ 5,101 $ 2,859 $ 2,618 16.8% 10.0% 9.6%
Income before income taxes 4,410 4,689 4,154
Adjusted Income before income taxes 5,101 2,859 2,618
Less: Adjustment for Foreign Currency Transaction 250
Difference to record to retained earnings (941) 1,830 1,536
(962)
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Ties to # 15 Leases Adjustments, including adjustments of $250K Foreign Currency adjustment, Depreciation Adjustment and $46K Deferred Tax Asset plus change in Income Tax % Rate 1,830
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Ties to # 15 Leases Adjustments plus change in Income Tax % Rate 3,796
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Ties to # 15 Leases Adjustments plus change in Income Tax % Rate
Unadjusted Income tax expense 364 1,419 1,130
Adjusted Net Income 385 (1,419) (1,130)
Difference to record to Income tax payable (21) 2,838 2,260
Earnings per common share from continuing operations:
Basic (Notes 1 and 12) $ 3.80 $ 3.05 $ 2.74
Diluted (Notes 1 and 12) $ 3.70 $ 2.97 $ 2.68
Earnings per common share from discontinued operations:
Basic (Notes 1 and 12) $ - 0 $ - 0 $ 0.02
Diluted (Notes 1 and 12) $ - 0 $ - 0 $ 0.02
Dividends declared per common share $ 1.08 $ 0.93 $ 0.81
Balance Sheet Adjusted
Twenty First century Fox, Inc.
Consolidated Balance Sheets
For the Years Ended May 31, Common Size
(In millions) 2018 2017 2016 2018 2017 2016
ASSETS
Current assets:
Cash and equivalents Non-Operating $ 7,852 $ 6,368 $ 4,624 14.5% 12.5% 9.5%
Receivable, net Operating 7,120 6,625 6,258 13.2% 13.0% 12.9%
Inventories, net Operating 3,669 3,101 3,291 6.8% 6.1% 6.8%
Other Operating 922 545 976 1.7% 1.1% 2.0%
Total current assets $ 19,563 $ 16,639 $ 15,149 36% 33% 31%
Receivables, net Operating 724 543 389 1.3% 1.1% 0.8%
Inventories, net Operating 7,518 7,452 7,041 13.9% 14.6% 14.5%
Investments Non-Operating 4,112 3,902 3,863 7.6% 7.6% 8.0%
Property, plant and equipment, net Operating 1,750 1,781 1,692 3.2% 3.5% 3.5%
Intangible assets, net Operating 6,101 6,574 6,777 11.3% 12.9% 14.0%
Goodwill Operating 12,768 12,792 12,733 23.6% 25.0% 26.2%
Other non-current assets Operating 1,590 1,394 921 2.9% 2.7% 1.9%
TOTAL ASSETS $ 54,126 $ 51,077 $ 48,565 100.0% 100.0% 100.0%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings Nonoperating $ 1,263 $ 662 $ 627 2.3% 1.3% 1.3%
Accounts payable, accrued expenses and other current liabilities Operating 4,481 4,667 113 8.3% 9.1% 0.2%
Participations, residuals and royalties payable 1,748 1,657 1,672 3.2% 3.2% 3.4%
Program rights payable Operating 1,368 1,093 1,283 2.5% 2.1% 2.6%
Deferred revenue Operating 826 728 505 1.5% 1.4% 1.0%
Total current liabilities 9,686 8,807 4,200 17.9% 17.2% 8.6%
Non Current liabilities
Borrowings Nonoperating 18,261 19,251 19,098 33.7% 37.7% 39.3%
Deferred income taxes and other liabilities Operating 5,556 6,398 6,566 10.3% 12.5% 13.5%
Commitments and contingencies Operating - - - 0.0% 0.0% 0.0%
Redeemable preferred stock Operating 764 694 552 1.4% 1.4% 1.1%
Shareholders' equity:
Common stock at stated value: 0.0% 0.0% 0.0%
Class A 11 11 11 0.0% 0.0% 0.0%
Class B 8 8 8 0.0% 0.0% 0.0%
Additional paid-in capital 12,612 12,406 12,211 23.3% 24.3% 25.1%
Retained earnings 8,979 5,520 3,775 16.6% 10.8% 7.8%
Accumulated other comprehensive income(loss) (1,751) (2,018) 2,144 -3.2% -4.0% 4.4%
Total shareholders' equity 19,859 15,927 18,149 36.7% 31.2% 37.4%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 54,126 $ 51,077 $ 48,565 100.0% 100.0% 100.0%
$ - $ - $ -
Weighted average common shares outstanding (from 10-K from 2018 Note 12) 1,857 1,856 1,945
Accounts Receivable Net $ 7,120 $ 6,625 $ 6,258
Allowance for Doubtful Accounts (Note 1) $ 388
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Subtracted out the allowance for the long-term recorded in Deferred income and other assets $ 537
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Subtracted out the allowance for the long-term recorded in Deferred income and other assets $ 576
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Subtracted out the allowance for the long-term recorded in Deferred income and other assets
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No Classification Accounts Receivable Gross $ 7,508 $ 7,162 $ 6,834
Cash Flow Adjusted
Twenty First century Fox, Inc.
Consolidated Statements of Operations
For the Years Ended May 31
(In millions) 2018 2017 2016
OPERATING ACTIVITIES
Net income $ 5,101 $ 2,859 $ 2,618
Adjustments to reconcile income from continuing operations to cash provided by operating activities
Depreciation 589 934 1,038
Deferred income taxes and other taxes (882) 89 466
Equity-based compensation 204 126 196
Amortization of cable distribution investments 69 65 75
Net foreign currency adjustments 515 - -
Net gain on divestitures - - -
Change in operating assets and liabilities, net of acquisitions and dispositions
Receivables (801) (441) (332)
Inventories net of program rights payable (422) (1,030) 322
Accounts payable and accrued expenses 727 515 1,221
Other changes, net (674) 73 (765)
Cash provided by operations 4,426 3,190 4,839
Cash used by investing activities:
Property, plant and equipment (551) (377) (463)
Acquisitions, net of cash acquired (7) (75) (175)
Investments in equity affiliates (444) (128) (182)
Proceeds from dispositions, net 365 - -
Other investing activities, net (540) (172) (277)
Cash used by investing activities (1,177) (752) (1,097)
Cash used by financing activities:
Borrowings 1,469 918 1,360
Repayment of borrowings (1,872) (573) (687)
Repurchase of shares - (619) (4,904)
Dividends paid and distributions (993) (943) (821)
Purchase of subsidiary shares from noncontrolling interests - (1) (290)
Other financing activities, net (68) (73) (82)
Cash used by financing activities (1,464) (1,291) (5,424)
Effect of exchange rate changes on cash and equivalents (66) 15 64
Net increase (decrease) in cash and equivalents 1,719 1,162 (1,618)
Cash and equivalents, beginning of year $ 6,368 $ 4,624 $ 8,428
CASH AND EQUIVALENTS, END OF YEAR $ 8,087 $ 5,786 $ 6,810
$ 235 $ (582) $ 2,186
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest $ 53 $ 53 $ 20
Income taxes $ 1,262 $ 856 $ 702
Non-cash additions to property, plant and equipment $ 206 $ 167 $ 137
Dividends declared and not paid $ 240 $ 209 $ 188
Net Operating Balance Sheet Adj
Twenty First century Fox, Inc.
Consolidated Balance Sheets
For the Years Ended May 31,
(In millions) 2018 Common Size 2017 Common Size 2016 Common Size
ASSETS
Current assets:
Receivable, net Operating 7,120 21.0% 6,625 19.4% 6,258 18.5%
Inventories, net Operating 3,669 10.8% 3,101 9.1% 3,291 9.7%
Other Operating 922 2.7% 545 1.6% 976 2.9%
Total current assets 11,711 34.5% 10,271 30.1% 10,525 31.1%
Property, plant and equipment, net Operating 1,750 5.2% 3,040 8.9% 2,834 8.4%
Intangible assets, net Operating 6,101 18.0% 6,574 19.3% 6,777 20.1%
Goodwill Operating 12,768 37.6% 12,792 37.5% 12,733 37.7%
Other non-current assets Operating 1,590 4.7% 1,394 4.1% 921 2.7%
TOTAL ASSETS $ 33,920 100.0% $ 34,071 100.0% $ 33,790 100.0%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities Operating 4,481 13.2% 4,667 13.7% 113 0.3%
Total current liabilities 4,481 13.2% 4,667 13.7% 113 0.3%
Deferred income taxes and other liabilities Operating 5,556 16.4% 6,398 18.8% 6,566 19.4%
Commitments and contingencies Operating - 0.0% - 0.0% - 0.0%
Redeemable preferred stock Operating 764 2.3% 694 2.0% 552 1.6%
Total long term liabilities 10,801 31.8% 11,759 34.5% 7,231 21.4%
Total liabilities 15,282 45.1% 16,426 48.2% 7,344 21.7%
Net operating assets $ 18,638 54.9% $ 17,645 51.8% $ 26,446 78.3%
$ - $ - $ -
Financial Ratios Adjusted
Part III - Financial Analysis of Company's Past and Present Normalized
2018 2017 2016 Average
Gross Profit Gross Profit / Revenues $ 10,631 $ 10,406 $ 9,907 35.0% 36.5% 36.3% 35.9%
Indicates the relationship between net sales revenue and the cost of goods sold. $ 30,400 $ 28,500 $ 27,326
Operating Profit Net Income from Continuing Operations / Net Sales
Blake Deatherage: Blake Deatherage:
Used Income from Continuing Operations $ 5,101 $ 2,859 $ 2,618 16.8% 10.0% 9.6% 12.1%
Measures the operating income generated by each dollar of sales $ 30,400 $ 28,500 $ 27,326
Earnings per Share Net Income - Preferred Dividends / Weighted Average Number of Shares Outstanding $ 5,101 $ 2,859 $ 2,618 0.26 0.18 0.14 0.19
Measures net income earned on each share of common stock 19,859.0 15,927.0 18,149.0
Effective Tax Rate Income Tax Expense / Pretax Income $ 385 $ (1,419) $ (1,130) 8.2% -33.2% -30.1% -18.4%
Measurement of a company's tax rate, which is calculated by comparing its income tax expense to its pretax income. $ 4,716 $ 4,278 $ 3,748
Return on Equity Net Income / Average Stockholders' Equity $ 5,101 $ 2,859 $ 2,618 28.5% 16.8% 14.4% 19.9%
Measures profitability of owners' investments $ 17,893 $ 17,038 $ 18,149
Return on Assets Net Income / Average Total Assets $ 5,101 $ 2,859 $ 2,618 9.7% 5.7% 5.4% 6.9%
Measures overall profitability of assets $ 52,602 $ 49,821 $ 48,565
Profitability and Productivity of ROA
i. Profit Margin Net Income / Revenue $ 5,101 $ 2,859 $ 2,618 16.8% 10.0% 9.6% 12.1%
Measures net income generated by each dollar of revenue $ 30,400 $ 28,500 $ 27,326
ii. Asset Turnover Revenue / Average Total Assets $ 30,400 $ 28,500 $ 27,326 0.6 0.6 0.6 0.6
Measures how efficiently assets are used to generate sales $ 52,602 $ 49,821 $ 48,565
Net Operating Profit After Taxes (NOPAT) Income before income taxes - Tax on Operating Profit $ 4,716 $ 4,278 $ 3,748 $ 4,388 $ 5,563 $ 4,740 $ 4,897
Measure of profit that excludes the costs and tax benefits of debt financing. $ 328 $ (1,285) $ (992)
Tax on Operating Profit = Tax Expense + [Pretax Net Nonoperating Expense x Statutory Tax Rate]
Assumed a Statutory Tax Rate of 37%
Net Operating Assets (NOA) Operating Assets - Operating Liabilities $ 24,065 $ 0 $ 22,168 $ 10,922 $ (10,880) $ 15,553 $ 5,198
Measures the operating assets of a business directly related to its operationing liabilities $ 13,143 $ 10,880 $ 6,615
Return on Net Operating Assets (RNOA) NOPAT / Average NOA $ 4,388 $ 5,563 $ 4,740 27.7% 46.8% 64.5% 46.3%
$ 15,854 $ 11,885 $ 7,344
i. Net Operating Profit Margin (NOPM) NOPAT / Revenues $ 4,388 $ 5,563 $ 4,740 14.4% 19.5% 17.3% 17.1%
Measures how much operating profit the company earns from each sales dollar. $ 30,400 $ 28,500 $ 27,326
ii. Net Operating Asset Turnover (NOAT) Revenues / Average NOA $ 30,400 $ 28,500 $ 27,326 $ 1.92 $ 2.40 $ 3.72 $ 2.68
Measures the productivity of the company's net operating assets. $ 15,854 $ 11,885 $ 7,344
Net Non-operating Expense (NNE) NOPAT - Consolidated Net Income $ 4,388 $ 5,563 $ 4,740 $ (713.4) $ 2,703.7 $ 2,122.0 $ 1,370.8
Measures non-operating expenses and revenues, net of tax $ 5,101 $ 2,859 $ 2,618
Working Capital Current Assets - Current Liabilities $ 19,563 $ 0 $ 16,639 $ 9,877 $ (8,807) $ 12,439 $ 4,503
The operating liquidity (or deficit) of the company to meet obligations $ 9,686 $ 8,807 $ 4,200
Credit Risk Ratios
i. Times Interest (Earnings before tax & Interest expense) / Interest Expense $ 4,755
kat davis: kat davis:
add back interest
$ 4,314
kat davis: kat davis:
Add back interest $ 3,786
kat davis: kat davis:
Add back interest 121.9 119.8 99.6 113.8
The operating income available to pay interest expense $ 39 $ 36 $ 38
ii. EBITDA coverage (Earnings before tax + Interest expense + Depreciation + Amortization) / Interest Expense 6,144 2,553 1,762 157.5 70.9 46.4 91.6
A non-GAAP calculation used to determine to demonstrate the company has more cash to cover fixed debt charges (since depreciation and amortization are non-cash items) 39 36 38
iii. Cash from Operations to Total Debt Cash from Operations / (Short-term debt + Long-term debt) $ 4,426 $ 3,190 $ 4,839 0.2 0.2 0.2 0.2
The company's ability to generate cash to make debt payments as they are due $ 19,524 $ 19,913 $ 19,725
iv. Current ratio Current assets / Current liabilties $ 19,563 $ 16,639 $ 15,149 2.0 1.9 3.6 2.5
Current assets that can be turned into cash within one year to pay for current liabilities $ 9,686 $ 8,807 $ 4,200
v. Quick ratio (Cash + Marketable securities + Accounts receivable) / Current liabilties $ 14,972 $ 12,993 $ 10,882 1.5 1.5 2.6 1.9
Current assets that can quickly be turned into cash to pay for current liabilities $ 9,686 $ 8,807 $ 4,200
vi. Debt to equity ratio (Total long-term debt including current portion + Short-term debt) / Stockholders' equity $ 19,524 $ 19,913 $ 19,725 1.0 1.3 1.1 1.1
The ratio of the companies abilitity to repay debt with the equity of the company (assumes current liabitilies are paid by current operations) $ 19,859 $ 15,927 $ 18,149
Accounts receivable turnover (ART) Revenue / Average Accounts Receivable (gross) $ 30,400 $ 28,500 $ 27,326 4.4 4.4 4.4 4.4
The number of times per year the accounts receivable turns over $ 6,873 $ 6,442 $ 6,258
Average sales outstanding Accounts Receivable (gross) / Average daily sales $ 6,873 $ 6,442 $ 6,258 82.5 82.5 83.6 82.9
The number of times per year the accounts receivable is collected $ 83.3 $ 78.1 $ 74.9
Accounts payable turnover (APT) Cost of Goods Sold / Average Accounts Payable $ (19,769) $ (18,094) $ (17,419) -4.3 -7.6 -154.2 -55.3
The number of times per year the accounts payable turns over $ 4,574 $ 2,390 $ 113
A/P days outstanding Accounts Payable / Average Daily Cost of Goods Sold $ 4,481 $ 4,667 $ 113 -82.7 -94.1 -2.4 -59.7
Average number of days its takes the company to its outstanding accounts payable $ (54.2) $ (49.6) $ (47.7)
Free cash flow (FCF) Cash Provided by Operations - Capital Expenditures - Cash Dividends $ 4,426 $ 3,190 $ 4,839 $ 3,886 $ 3,018 $ 4,562 $ 3,822
Companies ability to repay debt from the cash flows after any capital expenditures and cash dividends $ 540 $ 172 $ 277
$ - 0 $ - 0 $ - 0
Forecast Entries
Part IV: Forecast Entries
1. REVENUE RECOGNITION $ Change % Growth % Change
2015 Revenue Normlaized $ 28,987
2016 Revenue Normlaized $ 27,326 $ (1,661) -5.7%
2017 Revenue Normlaized $ 28,500 $ 1,174 4.3% 10.0%
2018 Revenue Normlaized $ 30,400 $ 1,900 6.7% 2.4%
Assumption: Given the nature of business, and uncertainity around various M&A activities, it is difficult to estimate the revenue growth. To be conservative average revenue growth of last three years has been used
1.7% Percent Used for Revenue Growth
2019 2020 2021
Revenues 30,930 31,470 32,019
2. RESEARCH AND DEVELOPMENT Operating Expenses
% of Revenue
2016 Operating Expenses normalized $ 17,419 63.7%
2017 Operating Expenses normalized $ 18,094 63.5%
2018 Operating Expenses normalized $ 19,769 65.0%
Assumed three year average 64.1%
2019 2020 2021
Operating Expenses 19,822 20,168 20,520
% of Revenue
2016 SG&A normalized $ 3,385 12.4%
2017 SG&A normalized $ 3,298 11.6%
2018 SG&A normalized $ 3,668 12.1%
Assumed three year average 12.0%
2019 2020 2021
Selling, general and administrative
3,714 3,779 3,845
% of Revenue
0.0%
2016 Other Expenses $ 335 1.2%
2017 Other Expenses $ 327 1.1%
2018 Other Expenses $ 550 1.8%
Assumed three year average 1.0%
2019 2020 2021
Other expenses
323 329 335
3. RESTRUCTURING AND OTHER NON OPERATING ITEMS
All non operating items are insignificant with respect to revenue and have been assumed based on recent trends
2019 2020 2021
Impairement and Restructuring Expenses 100 100 100
Equity losses of affiliates 100 100 100
Interest Income 40 40 40
4. DEFERRED TAX ASSETS AND LIABILITITES
No change forecasted
b. Effective Tax Rate - Using the 2013 Rate for Model for Part IV for years 2016, 2017, and 2018
The Company’s effective tax rate of (8)% for fiscal 2018 was lower than the statutory rate of 28% primarily due to a provisional $1.5 billion tax benefit which reflects the effects of the legislation in the U.S. passed in December 2017 commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Adjusted Effective tax rate has been used
Effective Tax Rate from 2015 adjusted 28.0%
5. DISCONTINUED OPERATIONS
Discontinued operations were reported in 2012 and have no impact for the future.
6. EXTRAORDINARY ITEMS
No extraorinary items were noted.
7. FOREIGN CURRENCY - adjustments as reported on the Cash Flow Statement (millions)
No adjustments forecasted
8. ACCOUNTS RECEIVABLE
Adjustments on Balance Sheet
9. INVENTORY
Adjustments on Balance Sheet
10. DEPRECIATION AND AMORTIZATION
No entry for current assets. Just adjusted for the leased assets below in # 15.
b. Adjustments if necessary
2016 2017 2018
530 553 584
Amortization of Intangibles 247 254 247
Depreciation 283 299 337
Depreciation as a % of PP&E 17% 17% 19%
2019 2020 2021
Depreciation on PP&E 317 317 317
Depreciation on Lease (Adjustment) 145 145 145
Amortization (As given in 10K) 257 259 236
Total D&A 719 721 698
11. ASSET IMPAIRMENTS
No asset impairments were noted; therefore, no adjustments were made.
12. PERCENTAGE USED UP PP&E Footnote 9
Depreciation and amortization related to Property, plant and equipment was $337 million, $299 million and $283 million for fiscal 2018, 2017 and 2016, respectively.
Total operating lease expense was approximately $230 million, $205 million and $200 million for fiscal 2018, 2017 and 2016, respectively.
13. CONTINGENT LIABILITIES (Understand)
reports no commitments and contingencies on its balance sheet.
14. BONDS
Note 8 of the 10-K does provide the bond payment information to be used in Part IV of the project for debt payments and indicates if the payments are monthly, semi-annually, or quarterly.
Current Maturties 2015 $ 107
2016 $ 106
2017 $ 44
2018 $ 24
Interest Rate of US Debt from 10-K
Book Value Annual Interest
Bonds Interest 2015
10/15/15 $ 101 5.15% $ 5
05/01/23 $ 499 2.25% $ 11
05/01/43 $ 499 3.63% $ 18
Notes
4/1/17 $ 39 6.20% $ 2
1/1/18 $ 19 6.79% $ 1
Yen Notes
8/20/01 $ 20 2.60% $ 1
8/20/01 $ 19 2.00% $ 0
Total $ 19,523 6.01% $ 1,173
2016 2017 2018
Current portion of long term debt $ 106 $ 44 $ 24
Long-term debt $ 106 $ 44 $ 24
Transfer current portion of long term debt
Interest expense (income), net $ 1,173 $ 1,173 $ 1,173
Accrued liabilities $ 1,173 $ 1,173 $ 1,173
Current portion of long term debt $ 107 $ 106 $ 44
Accrued liabilities $ 1,173 $ 1,173 $ 1,173
Cash $ 1,280 $ 1,279 $ 1,217
Record cash payment of current portion of long term debt and interest
15. LEASES - Adjustment for Operating Leases in Note 16 (terms of 1 to 19 years)
Nike has a total of $2,974,000 in operating leases related to warehouse and retail stores. Adjustment necessary to convert the operating leases to capital leases.
Interest Rate of US Debt from 10-K
Book Value Annual Interest
Bonds Interest 2015
10/15/15 $ 101 5.15% $ 5
05/01/23 $ 499 2.25% $ 11
05/01/43 $ 499 3.63% $ 18
Notes
4/1/17 $ 39 6.20% $ 2
1/1/18 $ 19 6.79% $ 1
Yen Notes
8/20/01 $ 20 2.60% $ 1
8/20/01 $ 19 2.00% $ 0
Total $ 19,523 6.01% $ 1,173
Capitalize Operating Leases Discount Rate 6.01% Average Rate from Current Debt
Year Operating Lease Payments Present Value Interest Expense to Add
1 2012 $ 431 $ 407
1 2013 $ 482 $ 455 $ 27
1 2014 $ 533 $ 503 $ 30
1 2015 $ 594 $ 560 $ 34
1 2019 $ 286 $ 270 $ 75
Authorized User: Blake: Entries for Part IV
Reconciliation of Debt Balances
2 2020 $ 248 $ 220 $ 59 Ending 2013 $ 2,379
3 2021 $ 248 $ 208 $ 46 Less: Pmt 2014 $ (533)
4 2022 $ 142 $ 112 Ending 2014 $ 1,846
5 2023 $ 142 $ 106 Less: Pmt 2015 $ (594)
5+ Therafter $ 514 $ 336 Ending 2015 $ 1,252
$ - 0
Total $ 1,579 $ 1,252
Payments after year 5 $ 142
Remaining Life 3.62
Total Lease Life 8.62 Annual S/L Deprec $ 145
2016
Long-term debt $ 220 Balance Sheet
Current portion of long-term debt $ 220 Balance Sheet
Transfer current portion of capitalized leases
Depr Exp - Cap Assets $ 145 Income Statement
Accum Depr - Cap Assets $ 145 Balance Sheet
Record depreciation on capitalized leases (not included in Cost of sales above)
Current portion of long-term debt $ 270 Balance Sheet
Interest expense (income), net $ 75 Income Statement
Cash $ 345
Record current year payment
2017
Long-term debt $ 208 Balance Sheet
Current portion of long-term debt $ 208 Balance Sheet
Transfer current portion of capitalized leases
Income Statement
Depr Exp - Cap Assets $ 145 Balance Sheet
Accum Depr - Cap Assets $ 145
Record depreciation on capitalized leases (not included in Cost of sales above) Balance Sheet
Current portion of long-term debt $ 220 Income Statement
Interest expense (income), net $ 59
Cash $ 279
Record current year payment
2018
Long-term debt $ 112 Balance Sheet and Cash Flow
Current portion of long-term debt $ 112 Balance Sheet
Transfer current portion of capitalized leases Balance Sheet
Depr Exp - Cap Assets $ 145 Income Statement
Accum Depr - Cap Assets $ 145 Balance Sheet
Record depreciation on capitalized leases (not included in Cost of sales above)
Current portion of long-term debt $ 208 Balance Sheet and Cash Flow
Interest expense (income), net $ 46 Income Statement
Cash $ 254
Record current year payment
Part IV
Total Income Statement Adjustments in Forecast Lease Payment N/A for forecast Interest Expense Subtract Depr Net Difference
2016 $ - 0 $ (75) $ (145) $ (220)
2017 $ - 0 $ (59) $ (145) $ (204)
2018 $ - 0 $ (46) $ (145) $ (191)
16. PENSIONS
No forecasts adjustments
17. REPURCHASE OF CLASS B SHARES (Part IV data)
No forecasts adjustments
user: Blake: Divided for the 2 for 1 stock split which occurred at the same time
Authorized User: Blake: Entries for Part IV
2019 2020 2021
Capital in excess of stated value $ - 0 $ - 0 $ - 0
Cash $ - 0 $ - 0 $ - 0
Record purchase of Class B shares
18. Payment of Dividends
Keep at same % From 10-K Cash Flow
Dividend per Share History Dividends Paid Revenue Normalized Dividend %
2016 $ 821 $ 27,326 3.00%
2017 $ 943 $ 28,500 3.31%
2018 $ 993 $ 30,400 3.27%
Total $ 2,757 $ 86,226.00 3.20%
Forecasted Revenue Dividend % Dividends Paid
2019 $ 30,930 3.20% $ 989
2020 $ 31,470 3.20% $ 1,006
2021 $ 32,019 3.20% $ 1,024
2019 2020 2021
Retained earnings $ 989 $ 1,006 $ 1,024
Cash $ 989 $ 1,006 $ 1,024
Payment of Dividends
Income Statement Forecasted
TWENTY-FIRST CENTURY FOX, INC
Consolidated Statements of Income
For the Years Ended May 31,
(In millions, except per share data) 2019 Common Size 2020 Common Size 2021 Common Size Forecast Assumptions
Income from continuing operations:
Revenues Operating $ 30,930 100.0% $ 31,470 100.0% $ 32,019 100.0% 1.7% Revenue Growth
user: Blake: Detailed assumptions on Forecast Entries Tab
Operating Expenses Operating (20,541) -66.4% 20,168 64.1% 20,520 64.1% Assumed 64.1% of Revenue from three year average plus Depreciation and Amortization, including from Capitalized Leases
user: Blake: Detailed assumptions on Forecast Entries Tab
Selling, general and administrative Operating (3,714) -12.0% 3,779 12.0% 3,845 12.0% Assumed 12.0% of Revenue from three year average
user: Blake: Detailed assumptions on Forecast Entries Tab
Other expenses Operating (323) -1.0% 329 1.0% 335 1.0% Assumed 1.0% of Revenue from three year average
user: Blake: Detailed assumptions on Forecast Entries Tab
Interest income (expense) , net Nonoperating (66) -0.2% 66 0.2% 106 0.3% Interest expense from Bonds and Capitalized Leases
user: Blake: Detailed assumptions on Forecast Entries Tab
user: Blake: Detailed assumptions on Forecast Entries Tab
user: Blake: Detailed assumptions on Forecast Entries Tab
user: Blake: Detailed assumptions on Forecast Entries Tab Other (income) expense, net Nonoperating (200) -0.6% (200) -0.6% (200) -0.6% No Change
Income from continuing operations before income tax benefit (expense) 6,086 19.7% 55,612 176.7% 56,625 176.8%
Income tax expense Operating and Nonoperating 1,704 5.5% 15,571 49.5% 15,855 49.5% Effective Tax Rate from 2018 adjusted (28.0%)
Income from continuing operations 4,382 14.2% 40,041 127.2% 40,770 127.3%
Net income from Discontinued operations - 0.0% - 0.0% 21 0.1% No Change
Net income $ 4,382 14.2% $ 40,041 127.2% $ 40,791 127.4%
Balance Sheet Forecasted
TWENTY-FIRST CENTURY FOX, INC.
Consolidated Balance Sheets
For the Years Ended May 31,
(In millions) 2018 Normalized Common Size Forecast 2019 Common Size Forecast Assumptions Forecast 2019 Common Size Forecast Assumptions Forecast 2020 Common Size Forecast Assumptions
ASSETS
Current assets:
Cash and equivalents Nonoperating $ 7,913 14.6% $ 19,264 38.6% $30,930 x 14.5%
user: Blake: will need cash for stock repurchase and dividends paid
$ 24,772 45.2% $31,470 x 14.5%
user: Blake: will need cash for stock repurchase and dividends paid
$ 28,276 49.0% $32,019 x 14.5%
user: Blake: will need cash for stock repurchase and dividends paid
Receivable, net Operating 7,120 13.1% 4,052 8.1% $30,930 x 13.1% 4,123 7.5% $31,470 x 13.1% 4,194 7.3% $32,019 x 13.1%
Inventories, net Operating 3,669 6.8% 2,103 4.2% $30,930 x 6.8% 2,140 3.9% $31,470 x 6.8% 2,177 3.8% $32,019 x 6.8%
Other 922 1.7% 922 1.8% No Change 922 1.7% No Change 922 1.6% No Change
Total current assets 19,624 36.2% 26,341 52.8% 31,957 58.3% 35,570 61.6%
Receivables, net Operating 724 1.3% (27) -0.1% Annual Depr of (2015 $606K from Cash Flow ) plus $276 from Capitalized Leases (778) -1.4% Annual Depr of (2015 $606K from Cash Flow ) plus $276 from Capitalized Leases (1,529) -2.6% Annual Depr of (2015 $606K from Cash Flow ) plus $276 from Capitalized Leases
Inventories, net Operating 7,518 13.9% 281 0.6% No Change 281 0.5% No Change 281 0.5% No Change
Investments Operating 4,112 7.6% 131 0.3% No Change 131 0.2% No Change 131 0.2% No Change
Property, plant and equipment, net Operating 1,750 3.2% 1,750 3.5% No Change 1,750 0 No Change 1,750 0 No Change
Intangible assets, net Operating 6,101 11.3% 6,101 12.2% No Change 6,101 0 No Change 6,101 0 No Change
Goodwill Operating 12,768 23.6% 12,768 25.6% No Change 12,768 0 No Change 12,768 0 No Change
Other non-current assets Operating 1,590 2.9% 2,567 5.1% $30,930 x 8.3% 2,612 4.8% $31,470 x 8.3% 2,658 4.6% $32,019 x 8.3%
TOTAL ASSETS $ 54,187 100.0% $ 49,912 100.0% $ 54,822 100.0% $ 57,729 100.0%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings Nonoperating $ 1,262 2.3% $ 220 0.4% Plus: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab $ 208 0.4% Plus: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab $ 112 0.2% Plus: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab
Accounts payable, accrued expenses and other current liabilities Operating 4,481 8.3% 2,704 5.4% $30,930 x 8.4% 2,687 4.9% $31,470 x 8.4% 2,714 4.7% $32,019 x 8.4%
Participations, residuals and royalties payable 1,748 3.2% 4,794 9.6% $30,930 x 15.5% 4,878 8.9% $31,470 x 15.5% 4,963 8.6% $32,019 x 15.5%
Program rights payable Operating 1,368 2.5% 232 0.5% $30,930 x 0.75% 236 0.4% $31,470 x 0.75% 243 0.4% $32,019 x 0.75%
Deferred revenue Operating 826 1.5% - 0.0% No change - 0.0% No Change - 0.0% No Change
Total current liabilities 9,685 17.9% 7,950 15.9% 8,009 14.6% 8,031 13.9%
Borrowings Nonoperating 18,262 33.7% 17,936 35.9% Less: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab 17,684 32.3% Less: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab 17,548 30.4% Less: $ moved to Current - See Note 14 and 15 on Forecast Entries Tab
Deferred income taxes and other liabilities Operating 5,556 10.3% 1,547 3.1% $30,930 x5.0% 1,574 2.9% $31,470 x 5.0% 1,601 2.8% $32,019 x 5.0%
Commitments and contingencies Operating - 0.0% - 0.0% No change - 0.0% No Change - 0.0% No Change
Redeemable preferred stock Operating 764 1.4% - 0.0% No change - 0.0% No Change - 0.0% No Change
Shareholders' equity: 0.0% 0.0% 0.0% 0.0%
Common stock at stated value: 0.0% 0.0% 0.0% 0.0%
Class A 11 0.0% - 0.0% - 0.0% - 0.0%
Class B 8 0.0% 8 0.0% 3 0.0% 3 0.0%
Additional paid-in capital 12,612 23.3% 12,612 25.3% $1B stock repurchase 12,612 23.0% $1B stock repurchase 12,612 21.8% $1B stock repurchase
Accumulated other comprehensive income (loss) (1,751) -3.2% (1,751) -3.5% 274 0.5% 149 0.3%
Retained earnings 9,040 16.7% 11,611 23.3% Previous Year plus Forecasted Net Income less Dividends 14,666 26.8% Previous Year plus Forecasted Net Income less Dividends 17,785 30.8% Previous Year plus Forecasted Net Income less Dividends
Total shareholders' equity 19,920 36.8% 22,480 45.0% 27,555 50.3% 30,549 52.9%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 54,187 100% 49,912 100.0% 54,822 100% 57,729 100.0%
$ - $ (0) $ (0) $ (0)
Accounts Receivable Net $ 7,120 $ 4,052 $ 4,123 $ 4,194
Allowance for Doubtful Accounts (Note 1) $ 54
Blake Deatherage: Blake Deatherage:
Subtracted out the allowance for the long-term recorded in Deferred income and other assets
0.76% $ 31
Blake Deatherage: Blake Deatherage:
Used same allowance percentage
user: Blake: will need cash for stock repurchase and dividends paid
Authorized User: Authorized User:
No Classification $ 31
Blake Deatherage: Blake Deatherage:
Used same allowance percentage
$ 32
Blake Deatherage: Blake Deatherage:
Used same allowance percentage
user: Blake: will need cash for stock repurchase and dividends paid
Blake Deatherage: Blake Deatherage:
Subtracted out the allowance for the long-term recorded in Deferred income and other assets
user: Blake: will need cash for stock repurchase and dividends paid
Accounts Receivable Gross $ 7,174 $ 4,083 $ 4,154 $ 4,226
Cash Flow Forecasted
Consolidated Statements of Cash Flows
For the Years Ended May 31
(In millions) 2018 2019 Forecast Assumptions 2020 Forecast Assumptions 2021 Forecast Assumptions
Cash provided by operations:
Net income $ 5,101 $ 3,560 From Income Statement $ 4,061 From Income Statement $ 4,143 From Income Statement
Adjustments to reconcile income from continuing operations to cash provided by operating activities
Depreciation 882 882 No Change 882 No Change 882 No Change
Deferred income taxes (67) - 389 - 473 - 473 - 523 - 523 - 577
Equity-based compensation 191 191 No Change 191 No Change 191 No Change
Amortization of cable distribution investments 43 43 No Change 43 No Change 43 No Change
Net foreign currency adjustments 674 674 No Change 674 No Change 674 No Change
Net gain on divestitures - - No Change - No Change - No Change
Change in operating assets and liabilities, net of acquisitions and dispositions
Receivables (216) 3,068 3,358 - 4,530 (71) 4,530 - 5,004 (72) 5,004 - 5,527
Inventories net of program rights payable (621) 1,566 4,337 - 4,732 (37) 4,732 - 5,228 (37) 5,228 - 5,775
Other changes, net (144) 396 1,968 - 2,028 (9) 2,028 - 2,240 (9) 2,240 - 2,475
Increase in accounts payable, accrued liabilities and income taxes payable 643 (626) Three account changes feeding from balance sheet (Plug included) (2,495) Three account changes feeding from balance sheet (Plug included) (1,462) Three account changes feeding from balance sheet (Plug included) Plug included in Cash from Operations
Cash provided by operations 6,486 9,754 3,240 4,353
Cash used by investing activities:
Acquisitions, net of cash acquired 935 - 0 2,072 - 2,028 - 2,028 - 2,240 - 2,240 - 2,475
Investments in equity affiliates (150) - No Change - No Change - No Change
Property, plant and equipment (960) - No Change - No Change - No Change
Proceeds from dispositions, net - - No Change - No Change - No Change
Other investing activities, net - (989) Plug from Balance Sheet 654 Plug from Balance Sheet (768) Plug from Balance Sheet
Cash used by investing activities (175) (989) 654 (768)
Cash used by financing activities:
Borrowings - - No Change - No Change - No Change
Repayment of borrowings (540) (1,280) See Note 14 on Forecast Entries Tab (1,279) See Note 14 on Forecast Entries Tab (1,217) See Note 14 on Forecast Entries Tab
Other financing activities, net 1,244 (918) See Note 15 on Forecast Entries Tab / Average from 2012 - 2015 Actuals 213 See Note 15 on Forecast Entries Tab / Average from 2012 - 2015 Actuals 280 See Note 15 on Forecast Entries Tab / Average from 2012 - 2015 Actuals
Purchase of subsidiary shares from noncontrolling interests (2,534) - See Note 17 on Forecast Entries Tab - See Note 17 on Forecast Entries Tab - See Note 17 on Forecast Entries Tab
Dividends paid and distributions (899) (989) Based on 2.8% of historical rate to revenue (1,006) Based on 2.8% of historical rate to revenue (1,024) Based on 2.8% of historical rate to revenue
Cash used by financing activities (2,729) (3,188) (2,073) (1,962)
Effect of exchange rate changes on cash and equivalents (83) - No Change - No Change - No Change
Net increase (decrease) in cash and equivalents 3,499 5,577 1,821 1,623
Cash and equivalents, beginning of year $ 2,753 $ 6,252 $ 11,829 $ 13,650
CASH AND EQUIVALENTS, END OF YEAR $ 6,252 $ 11,829 $ 13,650 $ 15,273
- - - -
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest $ 53 $ 53 $ 20 $ 29
Income taxes $ 1,262 $ 856 $ 702 $ 638
Non-cash additions to property, plant and equipment $ 206 $ 167 $ 137 $ 99
Dividends declared and not paid $ 240 $ 209 $ 188 $ 165
Net Operating BS Forecast
Net Operating Asset Balance Sheet
For the Years Ended May 31,
(In millions) 2015 Common Size 2016 Common Size 2017 Common Size 2018 Common Size
ASSETS
Current assets:
Accounts receivable, net Operating 3,358 17.7% $ 4,052 42.0% $ 4,123 45.5% $ 4,194 49.5%
Inventories Operating 4,337 22.9% 2,103 21.8% 2,140 23.6% 2,177 25.7%
Other Operating 389 2.1% 21 0.2% 21 0.2% 21 0.2%
Prepaid expenses and other current assets Operating 1,968 10.4% 526 5.4% 535 5.9% 544 6.4%
Total current assets 10,052 53.1% 6,702 69.4% 6,819 75.2% 6,937 81.8%
Property, plant and equipment, net Operating 6,312 33.3% (27) -0.3% (778) -8.6% (1,529) -18.0%
Identifiable intangible assets, net Operating 281 1.5% 281 2.9% 281 3.1% 281 3.3%
Goodwill Operating 131 0.7% 131 1.4% 131 1.4% 131 1.5%
Deferred income taxes and other assets Operating 2,155 11.4% 2,567 26.6% 2,612 28.8% 2,658 31.3%
TOTAL ASSETS $ 18,931 100.0% $ 9,654 100.0% $ 9,065 100.0% $ 8,478 100.0%
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable Operating 2,131 11.3% $ 2,598 26.9% $ 2,643 29.2% $ 2,690 31.7%
Accrued liabilities Operating 3,951 20.9% 4,794 49.7% 4,878 53.8% 4,963 58.5%
Income taxes payable Operating 71 0.4% 232 2.4% 236 2.6% 243 2.9%
Total current liabilities 6,153 32.5% 7,624 79.0% 7,757 85.6% 7,895 93.1%
Deferred income taxes and other liabilities Operating 1,480 7.8% 1,547 16.0% 1,574 17.4% 1,601 18.9%
Commitments and contingencies Operating - 0.0% $ - 0 0.0% $ - 0 0.0% $ - 0 0.0%
Redeemable preferred stock Operating - 0.0% - 0.0% - 0.0% - 0.0%
Total long term liabilities 7,633 40.3% $ - 0 0.0% $ - 0 0.0% $ - 0 0.0%
Total liabilities 9,113 48.1% 1,547 16.0% 1,574 17.4% 1,601 18.9%
Net operating assets $ 9,818 51.9% $ 8,108 84.0% $ 7,491 82.6% $ 6,877 81.1%
Financial Ratios Forecasted
Part IV - Financial Analysis of Company's Past and Present Normalized
2019 2020 2021 2019 2020 2021 Forecasted 3 year Average Industry Class Lecture / Textbook Adjusted 3 year Average Change
Competitor - Under Armour - Last 3 year average
A. Gross Profit Gross Profit / Revenues $ 10,389 $ 11,157 $ 11,354 33.6% 35.5% 35.5% 34.8% 50.2% 44.8% -9.9%
Indicates the relationship between net sales revenue and the cost of goods sold. $ 30,930 $ 31,470 $ 32,019
B. Operating Profit Net Income from Continuing Operations / Net Sales
Blake Deatherage: Blake Deatherage:
Used Income from Continuing Operations $ 3,560 $ 4,061 $ 4,122 11.5% 12.9% 12.9% 12.4% 12.9% 10.6% 1.8%
Measures the operating income generated by each dollar of sales $ 30,930 $ 31,470 $ 32,019
C. Earnings per Share Net Income - Preferred Dividends / Weighted Average Number of Shares Outstanding $ 3,560 $ 4,061 $ 4,143 4.13 4.71 4.81 4.55 0.56 3.38 1.17
Measures net income earned on each share of common stock 861.7 861.7 861.7
D. Effective Tax Rate Income Tax Expense / Pretax Income $ 1,384 $ 1,579 $ 1,603 28.0% 28.0% 28.0% 28.00% 40.00% 22.84% 5.16%
Measurement of a company's tax rate, which is calculated by comparing its income tax expense to its pretax income. $ 4,944 $ 5,641 $ 5,726
E. Return on Equity Net Income / Average Stockholders' Equity $ 3,560 $ 4,061 $ 4,143 16.8% 16.2% 14.3% 15.8% 2.2% 26.6% -10.83%
Measures profitability of owners' investments $ 21,200 $ 25,017 $ 29,052
F. Return on Assets Net Income / Average Total Assets $ 3,560 $ 4,061 $ 4,143 10.4% 30.0% 31.7% 24.0% 1.0% 13.8% 10.27%
Measures overall profitability of assets $ 34,163 $ 13,548 $ 13,078
G. Profitability and Productivity of ROA
i. Profit Margin Net Income / Revenue $ 3,560 $ 4,061 $ 4,143 11.5% 12.9% 12.9% 12.5% 12.1%
Blake Deatherage: Blake Deatherage:
Used Net Margin Data 10.7% 1.80%
Measures net income generated by each dollar of revenue $ 30,930 $ 31,470 $ 32,019
ii. Asset Turnover Revenue / Average Total Assets $ 30,930 $ 31,470 $ 32,019 0.9 2.3 2.4 1.9 0.1 1.29 0.60
Measures how efficiently assets are used to generate sales $ 34,163 $ 13,548 $ 13,078
H. Net Operating Profit After Taxes (NOPAT) Income before income taxes - Tax on Operating Profit $ 4,944 $ 5,641 $ 5,726 $ 3,187 $ 3,688 $ 3,734 $ 3,536 $ 164 $ 2,995 $ 542
Measure of profit that excludes the costs and tax benefits of debt financing. $ 1,757 $ 1,952 $ 1,991
Tax on Operating Profit = Tax Expense + [Pretax Net Nonoperating Expense x Statutory Tax Rate]
Assumed a Statutory Tax Rate of 37%
I. Net Operating Assets (NOA) Operating Assets - Operating Liabilities $ 9,654 $ 9,065 $ 8,478 $ 483 $ (266) $ (1,019) $ (267) $ 660 $ 10,761 $ (11,028)
Measures the operating assets of a business directly related to its operationing liabilities $ 9,171 $ 9,331 $ 9,496
J. Return on Net Operating Assets (RNOA) NOPAT / Average NOA $ 3,187 $ 3,688 $ 3,734 22.3% 39.4% 42.6% 34.8% 27.2% 29.2% 5.53%
$ 14,293 $ 9,359 $ 8,771
i. Net Operating Profit Margin (NOPM) NOPAT / Revenues $ 3,187 $ 3,688 $ 3,734 10.3% 11.7% 11.7% 11.2% 8.0% 10.7% 0.51%
Measures how much operating profit the company earns from each sales dollar. $ 30,930 $ 31,470 $ 32,019
ii. Net Operating Asset Turnover (NOAT) Revenues / Average NOA $ 30,930 $ 31,470 $ 32,019 $ 2.16 $ 3.36 $ 3.65 $ 3.06 $ 1.30 $ 2.73 $ 0.33
Measures the productivity of the company's net operating assets. $ 14,293 $ 9,359 $ 8,771
K. Net Non-operating Expense (NNE) NOPAT - Consolidated Net Income $ 3,187 $ 3,688 $ 3,734 $ (373.1) $ (373.1) $ (408.9) $ (385.1) $ 2.7 $ 20.4 $ (405.4)
Measures non-operating expenses and revenues, net of tax $ 3,560 $ 4,061 $ 4,143
L. Net Non-operating Obligations (NNO) Non-operating Liabilities - Non-operating Assets $ 18,262 17,936 $ 17,684 $ 13,777 $ 14,044 $ 12,962 $ 13,594 $ 413 $ (746) $ 14,340
Measures the excess of interest-bearing debt over investments in non-operating assets. $ 4,485 3,892 $ 4,722
M. Financial Leverage (FLEV) Average NNO / Average Total Stockholders' Equity $ 13,341 $ 13,911 $ 13,503 0.26 0.27 0.24 0.25 1.20 (0.06) 0.32
The ratio of the nonoperating obligations to the average stockholders' equity $ 52,050 $ 52,367 $ 56,276
N. Spread Return on net operating assets percent - net nonoperating expense percent 22.3% 39.4% 42.6% 25.1% 42.1% 45.6% 37.6% 28.0% 33.5% 4.0%
The difference between the return on net operating assets and net nonoperating expense percent -2.8% -2.7% -3.0%
O. Non-operating Return FLEV x Spread 0.26 0.27 0.24 6.4% 11.2% 10.9% 9.5% -10.1% -1.9% 11.5%
The product of the financial leverage and the Spread 25.1% 42.1% 45.6%
P. Working Capital Current Assets - Current Liabilities $ 11,187 $ 10,711 $ 11,659 $ 3,237 $ 2,701 $ 3,628 $ 3,189 $ 827 $ 9,355 $ (6,166)
The operating liquidity (or deficit) of the company to meet obligations $ 7,950 $ 8,009 $ 8,031
Q. Credit Risk Ratios
i. Times Interest (Earnings before tax & Interest expense) / Interest Expense $ 6,152
Authorized User: Authorized User:
Add back interest
Blake Deatherage: Blake Deatherage:
Used Income from Continuing Operations $ 6,849 $ 6,974 5.1 5.7 5.6 5.4 60.1 -294.4 299.9
The operating income available to pay interest expense $ 1,208 $ 1,208 $ 1,248
ii. EBITDA coverage (Earnings before tax + Interest expense + Depreciation + Amortization) / Interest Expense 5,869 6,566 6,651 4.9 5.4 5.3 5.2 N/A
user: Blake: I could only find a debt service coverage ratio (.1) but this would include principle payments -362.1 367.3
A non-GAAP calculation used to determine to demonstrate the company has more cash to cover fixed debt charges (since depreciation and amortization are non-cash items) 1,208 1,208 1,248
iii. Cash from Operations to Total Debt Cash from Operations / (Short-term debt + Long-term debt) $ 9,754 $ 3,240 $ 4,353 0.5 0.2 0.2 0.3 2.1 0.7 -0.3
The company's ability to generate cash to make debt payments as they are due $ 18,262 $ 17,936 $ 17,684
iv. Current ratio Current assets / Current liabilties $ 11,187 $ 10,711 $ 11,659 1.4 1.3 1.5 1.4 3.3 2.7 -1.3
Current assets that can be turned into cash within one year to pay for current liabilities $ 7,950 $ 8,009 $ 8,031
v. Quick ratio (Cash + Marketable securities + Accounts receivable) / Current liabilties $ 7,548 $ 7,680 $ 7,813 0.9 1.0 1.0 1.0 0.6 1.7 -0.8
Current assets that can quickly be turned into cash to pay for current liabilities $ 7,950 $ 8,009 $ 8,031
vi. Debt to equity ratio (Total long-term debt including current portion + Short-term debt) / Stockholders' equity $ 18,262 $ 17,936 $ 17,684 0.8 0.7 0.6 0.7 0.6 0.5 0.2
The ratio of the companies abilitity to repay debt with the equity of the company (assumes current liabitilies are paid by current operations) $ 22,480 $ 27,555 $ 30,549
R. Accounts receivable turnover (ART) Revenue / Average Accounts Receivable (gross) $ 30,930 $ 31,470 $ 32,019 5.5 7.6 7.6 6.9 0.6 8.4 -1.5
The number of times per year the accounts receivable turns over $ 5,628 $ 4,118 $ 4,190
S. Average sales outstanding Accounts Receivable (gross) / Average daily sales $ 5,628 $ 4,118 $ 4,190 66.4 47.8 47.8 54.0 34.2 43.5 10.5
The number of times per year the accounts receivable is collected $ 84.7 $ 86.2 $ 87.7
T. Accounts payable turnover (APT) Cost of Goods Sold / Average Accounts Payable $ 20,541 20,313 20,665 7.0 7.8 7.7 7.5 8.0 8.5 -1.0
The number of times per year the accounts payable turns over $ 2,923 $ 2,621 $ 2,667
U. A/P days outstanding Accounts Payable / Average Daily Cost of Goods Sold $ 2,598 $ 2,643 $ 2,690 46.2 47.5 47.5 47.1 51.4 45.2 1.9
Average number of days its takes the company to its outstanding accounts payable $ 56.3 $ 55.7 $ 56.6
V. Free cash flow (FCF) Cash Provided by Operations - Capital Expenditures - Cash Dividends $ 9,754 $ 3,240 $ 4,353 $ 8,765 $ 2,234 $ 3,329 $ 4,776 $ 80 $ 2,076
user: Blake: Did not include 2013 - it skewed the comparison
user: Blake: I could only find a debt service coverage ratio (.1) but this would include principle payments $ 2,700
Companies ability to repay debt from the cash flows after any capital expenditures and cash dividends $ - 0 $ - 0 $ - 0
$ 989 $ 1,006 $ 1,024
Co Past & Present Performance
Part V. Financial Analysis of Company's Past and Present Performance
1. a. Cost of debt capital using the After-Tax Cost of Debt model
Interest expense forecast 2019 $ 1,704
Average total debt from 2018 and 2019 $ 9,420
Pre-tax borrowing rate 18.1%
Effective forecasted tax rate for 2019 28.0%
b. Cost of equity capital using the CAPM model
Re = Rf + [Beta x (Rm - Rf)] Source:
Beta = Beta Risk 0.34 https://www.infrontanalytics.com/fe-en/00064AA/Twenty-First-Century-Fox-Inc-/Beta
Rm = expected return on market portfolio ususally of any index 13.65% https://ycharts.com/indicators/sandp_500_total_return_annual
Rf = Risk-Free Rate (10 year US Treasury Bill) 2.50% https://www.cnbc.com/quotes/?symbol=US10Y
Re = .0191 + [.064 x (.1680-.188)] 6.29%
c. Weighted cost of capital
Rw = (Rd x IV Debt/IV Firm) + (Re x (IV Equity / IV Firm)
Source:
Rd = Cost of Debt 18.09% Interest Rate of US Debt from 10-K
Re = Cost of Equity from CAPM model above 6.29% CAPM from above
Effective forecasted tax rate for 2019 28.00% From 2019 Forecast
IV Debt = Intrinsic value of company debt $ 19,524 From 2019 Forecast Total ST/LT Debt
IV Equity = Intrinsic value of company equity $ 19,920 From 2019 Forecast Total Equity
IV Firm = IV Debt + IV Equity $ 39,444
After tax cost of debt capital Cost of equity capital
= Pre-tax cost of debt x (1 - marginal tax rate) =Risk Free rate + Beta x Market Risk Premium 2.50%
Pre Tax cost of debt capital 18.09% Risk Free Rate 0.34
Marginal inc tax rate 28.00% Beta 11.15%
After tax cost of debt capital 13.03% Market Risk Premium 6.29% (Expected Rate of Return less Risk Free Rate)
Cost of equity capital
$ 19,920
Market Value of Debt $ 19,524 Market value of equity $ 39,444
Debt plus equity 50.5%
Proportion debt to total cap 49.5% Proportion to equity to total cap
Weighted Average Cost of Capital 9.6%
d. Dividend Discount Framework
DDM Constant Perpetiuty
2018 2019 2020 2021 Onward
Growth Rate 2.00% 2.00% 2.00% 2.00%
Dividend per Share $ 0.53 $ 0.55 $ 0.56 $ 0.57 $ 0.58
Perpetuity $ 7.59
Present Value $0.50 $0.51 $0.52 $6.93
Intrinsic Value $8.45
https://www.cnbc.com/quotes/?symbol=US10Yhttps://ycharts.com/indicators/sandp_500_total_return_annualhttps://www.infrontanalytics.com/fe-en/00064AA/Twenty-First-Century-Fox-Inc-/Beta
Valuation Models
Discounted Cash Flow Model
Reported Year Horizon Perod Terminal Period
Authorized User: Authorized User:
May have different growth rate
2018 2019 2020 2021
Rate 2.0%
Sales (Unrounded) 30,400.00 30,930.00 31,470.00 32,019.00 32,659.38
Sales (Rounded) 30,930 31,470 32,019 32,659 Change In NOPAT Average
NOPAT 4,388 3,187 3,688 3,734 3,952 1,201 (502) (46) 218
NOA 10,922 483
Authorized User: Blake: From Forecasted Ratios (266)
Authorized User: Blake: From Forecasted Ratios (1,019)
Authorized User: Blake: From Forecasted Ratios (4,999)
Authorized User: Blake: less average increase in NOA
Change In NOA Average
(10,439) (750) (752) (3,980)
Increase in NOA (10,439) (750) (752) (3,980)
FCFF (NOPAT - Increase in NOA) 13,625 4,438 4,487 7,932
Discount Factor (WACC @9.6%) 91.22% 83.21% 75.91% 790.34%
PV value of Horizon FCFF 12,429 3,693 3,406 62,693
Total Present Firm Value 82,220
Less (Plus): NNO (8,998) Total Shareholder Equity 19,920 from 2019 Forecasted Balance Sheet
Less: NCI - 0
Firm Equity Value $ 91,218
Shares Outstanding 1,857.0 from 2018 Adjusted Balance Sheet
Stock value per share $ 49.12 DCF Model does not equal ROPI Model
Residual Operating Income Model
Reported Year Horizon Perod Terminal Period
Authorized User: Authorized User:
May have different growth rate
Authorized User: Authorized User:
May have different growth rate
Authorized User: Blake: From Forecasted Ratios
Authorized User: Blake: From Forecasted Ratios
Authorized User: Blake: From Forecasted Ratios
Authorized User: Blake: less average increase in NOA
2018 2019 2020 2021
Rate 5.0% 5.0% 5.0% 2.0%
Sales (Unrounded) 30,400.00 31,920.00 33,516.00 35,191.80 35,895.64
Sales (Rounded) - 0 31,920 33,516 35,192 35,896
NOPAT 4,388 3,187 3,688 3,734 3,952
NOA 10,922 483 (266) (1,019) (4,999)
ROPI (NOPAT - (NOA beg x R x) 2,640 3,664 3,748 4,003
Discount Factor @ WACC 0% 91% 83% 76%
PV value of Horizon ROPI 2,408 3,049 2,845
Cumulative PV of Horizon FCFF 8,302
PV value of Terminal FCFF 101,285
NOA 10,922
Total Firm Value 120,509
Less (Plus): NNO (8,998) Total Shareholder Equity 19,920 from 2019 Forecasted Balance Sheet
Less: NCI - 0
Firm Equity Value $ 129,507
Shares Outstanding 1,857.0 from 2018 Adjusted Balance Sheet
Stock value per share $ 69.74 DCF Model does not equal ROPI Model
Company and Equity IV
Company Assumed Value = Equity plus Debt less Cash
Equity Assumed Value = Share x Mkt Price
3. A) Company and Equity Intrinic Value
a. NOPAT Multiple
2019 Forecast 2018 10-K
21st Century Fox Walter Disney Co.
Company Assumed Value $ 61,360
Net operating profit after tax $ 3,187 $ 16,155
Company Shares Outstanding 845.7 1,507.0
NOPAT market multiple $ 3.80 $ 3.80
Company Intrinsic Value $ 12,103
Equity Intrinsic Value (Company IV less NNO) $ 10,073
Equity Intrinsic Value per Share $ 11.91
b. Net Income Multiple
2019 Forecast 2018 10-K
21st Century Fox Walter Disney Co.
Share Price $ 37.68 $ 115.00 Source: Yahoo Finance for Share Price
Equity assumed value $ 20,889
Net Income $ 4,382 $ 12,886
Authorized User: Blake: Was in Thousands - Coverted to Milllions
Company Shares Outstanding 845.7 181.6
Net Income market multiple $ 1.62 $ 1.62
Equity Intrinsic Value $ 7,104
Equity Intrinsic Value per Share $ 8.40
c. Net Operating Assets Multiple
2019 Forecast 2018 10-K
21st Century Fox Walter Disney Co.
Share Price $ 37.68 $ 115.00 Source: Yahoo Finance for Share Price
Company assumed value $ 61,360
Net Operating Assets $ 483 $ 126,070
Authorized User: Blake: Was in Thousands - Coverted to Milllions
Company Shares Outstanding 845.7 181.6
NOA Multiple $ 0.49 $ 0.49
Company Intrinsic Value $ 235
Equity Intrinsic Value (Company IV less NNO) $ 10,073
Authorized User: Blake: Nike has a negative NNO for 2015
Equity Intrinsic Value per Share $ 11.91
d. Book Value Multiple
2019 Forecast 2018 10-K
21st Century Fox Walter Disney Co.
Share Price $ 37.68 $ 115.00 Source: Yahoo Finance for Share Price
Equity assumed value $ 20,889
Book Value of Equity $ 19,920 $ 52,188
Authorized User: Blake: Was in Thousands - Coverted to Milllions
Authorized User: Blake: Was in Thousands - Coverted to Milllions
Authorized User: Blake: Was in Thousands - Coverted to Milllions
Authorized User: Blake: Nike has a negative NNO for 2015
Company Shares Outstanding 845.7 181.6
BV market multiple $ 0.40 $ 0.40
Equity intrinsic value $ 7,973
Equity Intrinsic Value per Share $ 9.43
3. B) Price per Earnings Ratio
Stock Price / Earnings per Share
Share Price $ 37.68 Source: Yahoo Finance for Share Price
Earnings per Share $ 4.13
Price per Earnings Ratio $ 9.12
Description of Business
Description of Business 12 Months Ended
Jun. 30, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Description of Business NOTE 1. DESCRIPTION OF BUSINESS 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, which principally consists of the production and licensing of programming distributed primarily through cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors (collectively, multi-channel video programming distributors) (“MVPDs”) primarily in the United States (“U.S.”) and internationally; Television, which principally consists of the acquisition, marketing and distribution of broadcast network programming in the U.S. and the operation of 28 full power broadcast television stations, including 11 duopolies, in the U.S. (of these stations, 17 are affiliated with the FOX Broadcasting Company (“FOX”), nine are affiliated with Master Distribution Service, Inc. (“MyNetworkTV”), one is affiliated with both The CW Television Network and MyNetworkTV and one is an independent station); Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide; and Other, Corporate and Eliminations, which principally consists of corporate overhead costs and intercompany eliminations.
Summary of Significant Accounti
Summary of Significant Accounting Policies 12 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]
Summary of Significant Accounting Policies NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The Consolidated Financial Statements include the accounts of all majority-owned and controlled subsidiaries. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810-10, “Consolidation” (“ASC 810-10”) and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. All significant intercompany accounts and transactions have been eliminated in consolidation, including the intercompany portion of transactions with equity method investees. Any change in the Company’s ownership interest in a consolidated subsidiary, where a controlling financial interest is retained, is accounted for as a capital transaction. When the Company ceases to have a controlling interest in a consolidated subsidiary, the Company will recognize a gain or loss in net income upon deconsolidation. The Company’s fiscal year ends on June 30 (“fiscal”) of each year. Reclassifications and adjustments Certain fiscal 2017 and 2016 amounts have been reclassified to conform to the fiscal 2018 presentation. Unless indicated otherwise, the information in the notes to the Consolidated Financial Statements relates to the Company’s continuing operations. The Company has reclassified certain fiscal 2017 and 2016 amounts for development and certain other costs from Selling, general and administrative to Operating expenses within the Consolidated Statements of Operations to conform to the fiscal 2018 presentation. These reclassifications did not affect previously reported Revenue, Income from continuing operations before income tax benefit (expense) or Net income in the Consolidated Statements of Operations. Use of estimates The preparation of the Company’s Consolidated Financial Statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported in the Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. Receivables Receivables are presented net of an allowance for returns and doubtful accounts, which is an estimate of amounts that may not be collectible. 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 paid. 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 percentage of each dollar of product sales that provide the customer with the right of return. The Company has receivables with original maturities greater than one year in duration principally related to the Company’s sale of program rights in the television syndication markets within the Filmed Entertainment segment. Allowances for credit losses are established against these non-current receivables as necessary. As of June 30, 2018 and 2017, these allowances were not material. Receivables, net consist of:
As of June 30,
2018
2017
(in millions)
Total receivables
$
8,232
$
7,705
Allowances for returns and doubtful accounts
(388
)
(537
)
Total receivables, net
7,844
7,168
Less: current receivables, net
(7,120
)
(6,625
)
Non-current receivables, net
$
724
$
543
Inventories Filmed Entertainment Costs In accordance with ASC 926, “Entertainment—Films” (“ASC 926”), Filmed Entertainment costs include capitalized production costs, overhead and capitalized interest costs, net of any amounts received from outside investors. These costs, as well as participations and talent residuals, are recognized as operating expenses for each individual motion picture or television series based on the ratio that the current year’s gross revenues for such film or series bear to management’s estimate of its total remaining ultimate gross revenues. Management bases its estimates of ultimate revenue for each motion picture on the historical performance of similar motion pictures, incorporating factors such as the past box office record of the lead actors and actresses, the genre of the motion picture, pre-release market research and the expected number of theaters in which the motion picture will be released. Management updates such estimates based on information available on the actual results of each motion picture through its life cycle. Television production costs incurred in excess of the amount of revenue contracted for each episode in the initial market are expensed as incurred on an episode-by-episode basis. Estimates for initial syndication revenue are not included in the estimated lifetime revenues of network series until such sales are probable. Television production costs incurred subsequent to the establishment of secondary markets are capitalized and amortized. Marketing costs are charged as operating expenses as incurred. Development costs for projects not produced are written-off at the earlier of the time the decision is made not to develop the story or after three years. Filmed Entertainment costs are stated at the lower of unamortized cost or estimated fair value on an individual motion picture or television series basis. Revenue forecasts for both motion pictures and television series are continually reviewed by management and revised when warranted by changing conditions. When estimates of total revenues and other events or changes in circumstances indicate that a motion picture or television series has a fair value that is less than its unamortized cost, a loss is recognized currently for the amount by which the unamortized cost exceeds the film or television series’ fair value. The Company receives tax credits on qualifying motion picture and television productions which are offset against Filmed Entertainment costs. The Company records these outstanding tax credits in Other non-current assets in the Consolidated Balance Sheets. Programming Rights In accordance with ASC 920, “Entertainment—Broadcasters,” costs incurred in acquiring program rights or producing programs for the Cable Network Programming and Television segments, including advances, are capitalized and amortized over the license period or projected useful life of the programming. Program rights and the related liabilities are recorded at the gross amount of the liabilities when the license period has begun, the cost of the program is determinable and the program is accepted and available for airing. Television broadcast network entertainment programming and cable network entertainment programming, which includes acquired series, series produced in-house, movies and other programs, are amortized primarily on an accelerated basis. The Company has single and multi-year contracts for broadcast rights of programs and sporting events. The Company evaluates the recoverability of the unamortized costs associated therewith, using total estimated advertising and other revenues attributable to the program material and considering the Company’s expectations of the programming usefulness of the program rights. The recoverability of certain sports rights contracts for content broadcast on FOX and the national sports channels is assessed on an aggregate basis. Where an evaluation indicates that these multi-year contracts will result in an asset that is not recoverable, amortization of rights is accelerated. The costs of multi-year national sports contracts at FOX and the national sports channels are primarily amortized based on the ratio of each current period’s attributable revenue for each contract to the estimated total remaining attributable revenue for each contract. Estimates can change and, accordingly, are reviewed periodically and amortization is adjusted as necessary. Such changes in the future could be material. The costs of local and regional sports contracts for a specified number of events are amortized on an event-by-event basis while costs for local and regional sports contracts for a specified season are amortized over the season on a straight-line basis. Investments 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. Significant influence is generally presumed to exist when the Company owns an interest between 20% and 50% and exercises significant influence. Under the equity method of accounting, the Company includes its investments and amounts due to and from its equity method investees in its Consolidated Balance Sheets. The Company’s Consolidated Statements of Operations include the Company’s share of the investees’ earnings (losses), the Company’s Consolidated Statements of Comprehensive Income include the Company’s share of other comprehensive income (loss) of equity method investees and the Company’s Consolidated Statements of Cash Flows include all cash received from or paid to the investees. The difference between the Company’s investment and its share of the fair value of the underlying net assets of the investee is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. The Company follows ASC 350, “Intangibles—Goodwill and Other” (“ASC 350”), which requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. Investments in which the Company has no significant influence (generally less than a 20% ownership interest) 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 Company reports available-for-sale investments at fair value based on quoted market prices. Unrealized gains and losses on available-for-sale investments are included in Accumulated other comprehensive loss, net of applicable taxes and other adjustments until the investment is sold or considered impaired. Property, plant and equipment Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over an estimated useful life of three to 40 years. Leasehold improvements are amortized using the straight-line method over the shorter of their useful lives or the life of the lease. Costs associated with the repair and maintenance of property are expensed as incurred. Changes in circumstances, such as technological advances, or changes to the Company’s business model or capital strategy, could result in the actual useful lives differing from the Company’s estimates. In those cases where the Company determines that the estimated useful life of property, plant and equipment should be shortened, the Company would depreciate the asset over its revised remaining useful life, thereby increasing depreciation expense. Goodwill and Intangible assets The Company’s intangible assets include goodwill, Federal Communications Commission (“FCC”) licenses, MVPD affiliate agreements and relationships, film and television libraries, and trademarks and other copyrighted products. Intangible assets acquired in business combinations are recorded at their estimated fair value at the date of acquisition. Goodwill is recorded as the difference between the consideration transferred to acquire entities and the estimated fair values assigned to their tangible and identifiable intangible net assets. In accordance with ASC 350, the Company’s goodwill and indefinite-lived intangible assets, which primarily consist of FCC licenses, are tested annually for impairment, or earlier, if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. The impairment assessment of indefinite-lived intangibles compares the fair value of the assets to their carrying value. Intangible assets with finite lives are generally amortized over their estimated useful lives. The Company’s goodwill impairment reviews are determined using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not impaired and the second step of the impairment review is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment review is required to be performed to estimate the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is compared with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. When a business within a reporting unit is disposed of, goodwill is allocated to the disposed business using the relative fair value method. Asset impairments Investments Equity method investments are reviewed for impairment by comparing their fair value to their respective carrying amounts. The Company determines the fair value of its public company investments by reference to their publicly traded stock prices. With respect to private company investments, the Company makes its estimate of fair value by considering other available information, including recent investee equity transactions, discounted cash flow analyses, estimates based on comparable public company operating multiples and, in certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline in market value has occurred, including the length of time and extent to which the market value has been below cost, the financial condition and near-term prospects of the issuer of the security, the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value and other factors influencing the fair market value, such as general market conditions. The Company regularly reviews available-for-sale investment securities and investments accounted for at cost for other-than-temporary impairment based on criteria that include the extent to which the investment’s carrying value exceeds its related market value or estimated fair value, the duration of the decline, the Company’s ability to hold until recovery and the financial strength and specific prospects of the issuer of the security. Long-lived assets ASC 360, “Property, Plant, and Equipment,” and ASC 350 require that the Company periodically review the carrying amounts of its long-lived assets, including property, plant and equipment and finite-lived intangible assets, to determine whether current events or circumstances indicate that such carrying amounts may not be recoverable. If the carrying amount of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment adjustment is recognized if the carrying value of such asset exceeds its fair value. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows using an appropriate discount rate. Considerable management judgment is necessary to estimate the fair value of assets; accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less their costs to sell. Guarantees The Company follows ASC 460, “Guarantees” (“ASC 460”). ASC 460 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing certain guarantees. Subsequently, the initial liability recognized for the guarantee is generally reduced as the Company is released from the risk under the guarantee. The Company periodically reviews the facts and circumstances pertaining to its guarantees in determining the level of related risk. Revenue recognition Revenue is recognized when persuasive evidence of an arrangement exists, the fees are fixed or determinable, the product or service has been delivered and collectability is reasonably assured. The Company considers the terms of each arrangement to determine the appropriate accounting treatment. Cable Network Programming and Television Advertising revenue is recognized as the commercials are aired, net of agency commissions. Subscriber fees received from MVPDs for Cable Network Programming and Television are recognized as affiliate fee revenue in the period services are provided. The Company classifies the amortization of cable distribution investments (capitalized fees paid to MVPDs to facilitate carriage of a cable network) against affiliate fee revenue in accordance with ASC 605-50, “Revenue Recognition—Customer Payments and Incentives.” The Company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period. Filmed Entertainment Content revenues from the distribution of motion pictures and television series are recognized in accordance with ASC 926. Revenues from the theatrical distribution of motion pictures are recognized as they are exhibited, and revenues from home entertainment sales, net of a reserve for estimated returns, are recognized on the date that DVD and Blu-ray units are made widely available for sale by retailers or when made available for viewing via digital distribution platforms and all Company-imposed restrictions on the sale or availability have expired. Revenues from television distribution are recognized when the motion picture or television series is made available to the licensee for broadcast. License agreements for the broadcast of motion pictures and television series in the broadcast network, syndicated television and cable television markets are routinely entered into in advance of their available date for broadcast. Cash received and amounts billed in connection with such contractual rights for which revenue is not yet recognizable is classified as deferred revenue. Because deferred revenue generally relates to contracts for the licensing of motion pictures and television series which have already been produced, the recognition of revenue for such completed product is principally only dependent upon the commencement of the availability period for broadcast under the terms of the related licensing agreement. The Company earns and recognizes revenues as a distributor on behalf of third parties. In such cases, determining whether revenue should be reported on a gross or net basis is based on management’s assessment of whether the Company acts as the principal or agent in the transaction. To the extent the Company acts as the principal in a transaction, revenues are reported on a gross basis. Determining whether the Company acts as principal or agent in a transaction involves judgment and is based on an evaluation of whether the Company has the substantial risks and rewards of ownership under the terms of an arrangement. Film production financing The Company enters into arrangements with third parties to co-produce certain of its theatrical and television productions. These arrangements, which are referred to as co-financing arrangements, take various forms. The parties to these arrangements, primarily for theatrical productions, include studio and non-studio entities both domestic and international. In several of these agreements, other parties control certain distribution rights. The Company records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party investors own an interest in the film and, therefore, receive a participation based on the third-party investors’ contractual interest in the profits or losses incurred on the film. Consistent with the requirements of ASC 926, the estimate of the third-party investor’s interest in profits or losses on the film is based on total estimated ultimate revenues. Advertising expenses The Company expenses advertising costs as incurred, including advertising expenses for theatrical and television productions in accordance with ASC 720-35, “Other Expenses—Advertising Cost.” Advertising expenses recognized totaled $2.3 billion, $2.2 billion and $2.4 billion for fiscal 2018, 2017 and 2016, respectively. Translation of foreign currencies Foreign subsidiaries and affiliates are translated into U.S. dollars using the current rate method, whereby trading results are converted at the average rate of exchange for the period and assets and liabilities are converted at the closing rates on the period end date. The resulting translation adjustments are accumulated as a component of Accumulated other comprehensive loss. Gains and losses from foreign currency transactions are included in income for the period. Income taxes The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established where management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Deferred taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries to the extent amounts are reinvested indefinitely. Earnings per share Basic earnings per share for the Class A common stock, par value $0.01 per share (“Class A Common Stock”), and Class B common stock, par value $0.01 per share (“Class B Common Stock”) is calculated by dividing Net income attributable to Twenty-First Century Fox stockholders by the weighted average number of outstanding shares of Class A Common Stock and Class B Common Stock. Diluted earnings per share for Class A Common Stock and Class B Common Stock is calculated similarly, except that the calculation for Class A Common Stock includes the dilutive effect of the assumed issuance of shares issuable under the Company’s equity-based compensation plans. Equity-based compensation The Company accounts for share-based payments in accordance with ASC 718, “Compensation—Stock Compensation” (“ASC 718”). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in the Consolidated Financial Statements. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-based payment transactions with employees (See Note 13 – Equity-Based Compensation). Financial instruments and derivatives The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and cost method investments, approximate fair value. The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market. The Company uses derivative financial instruments to hedge its exposures to foreign currency exchange rate and interest rate risks. All derivative financial instruments used as hedges are recorded at fair value in the Consolidated Balance Sheets (See Note 8 – Fair Value). The effective changes in fair values of derivatives designated as cash flow hedges are recorded in Accumulated other comprehensive loss and included in unrealized (losses) gains on cash flow hedges. The effective changes in the fair values of derivatives designated as cash flow hedges are reclassified from Accumulated other comprehensive loss to Net income when the underlying hedged item is recognized in earnings. Cash flows from the settlement of derivative contracts designated as cash flow hedges offset cash flows from the underlying hedged items and are included in operating activities in the Consolidated Statements of Cash Flows. The effective changes in fair values of derivatives designated as net investment hedges are recorded in Accumulated other comprehensive loss and included in foreign currency translation adjustments. The effective changes in the fair values of derivatives designated as net investment hedges are reclassified from Accumulated other comprehensive loss to Net income when the related foreign subsidiaries or equity method investments are sold. The related cash flows are reported in Proceeds from dispositions, net within Net cash (used in) provided by investing activities from continuing operations in the Consolidated Statements of Cash Flows. Concentrations of credit risk 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 June 30, 2018 or 2017 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 June 30, 2018, the Company did not anticipate nonperformance by any of the counterparties. Recently Adopted and Recently Issued Accounting Guidance and U.S. Tax Reform Adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The amendments in ASU 2016-09 simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. On July 1, 2017, the Company adopted ASU 2016-09. In accordance with ASU 2016-09, the Company will prospectively recognize all excess tax benefits and tax deficiencies in Income tax benefit (expense) in the Statements of Operations. In the statement of cash flows, all excess tax benefits are presented retrospectively in Net cash provided by operating activities from continuing operations. In addition, the Company retrospectively adopted the guidance that requires cash paid by the Company when directly withholding shares for tax withholding purposes to be classified as a financing activity in the statement of cash flows. The adoption of ASU 2016-09 resulted in an increase in Net cash provided by operating activities from continuing operations and a corresponding increase in Net cash used in financing activities from continuing operations in the Statement of Cash Flows for fiscal 2017 and 2016. The other aspects of ASU 2016-09 did not have a material effect on the Company’s consolidated financial statements. On July 1, 2017, the Company early adopted ASU 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”). ASU 2017-07 requires an employer to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. ASU 2017-07 did not have a material effect on the Company’s consolidated financial statements. Issued In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 requires additional disclosure around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 will be effective for the Company for annual and interim reporting periods beginning July 1, 2018. The Company expects to apply ASU 2014-09 on a modified retrospective basis with the cumulative effect, if any, of initially applying the new guidance recognized at the date of initial application as an adjustment to opening retained earnings. The Company has completed its review of contracts for each of the Company’s significant revenue streams and does not expect a material impact on its consolidated financial statements as a result of its adoption of ASU 2014-09. The Company expects that the new standard will impact the timing of revenue recognition for renewals or extensions of existing licensing agreements for intellectual property, which upon adoption will be recognized as revenue when the customer can begin to use and benefit from the license rather than when the agreement is extended or renewed, under historical GAAP. The new standard will require the Company’s Filmed Entertainment segment to recognize revenues from certain television license deals earlier as opposed to recognizing those license fees over the term of the licenses. Conversely, revenues from certain of the Filmed Entertainment segment’s trademark licensing deals will be recognized over the license terms as opposed to recognition at inception as under historical GAAP. In addition, the Company implemented appropriate changes to the Company’s processes, systems and controls to support the recognition and disclosure requirements under the new standard. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments––Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for the Company for annual and interim reporting periods beginning July 1, 2018. In accordance with ASU 2016-01, the Company will prospectively record changes in fair value of available-for-sale investments in net income rather than in Accumulated other comprehensive loss. On July 1, 2018, the Company will record a cumulative-effect adjustment to Retained Earnings for the balance of unrealized holding gains on securities in Accumulated other comprehensive loss as of June 30, 2018 (See Note 12 – Stockholders’ Equity under the heading “Accumulated Other Comprehensive Loss”). Cost method investments that do not have readily determinable fair values will be recognized prospectively at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adjustments related to the observable price changes will be recognized in net income. In February 2016, the FASB issued ASU 2016-02,
Acquisitions, Disposals and Oth
Acquisitions, Disposals and Other Transactions 12 Months Ended
Jun. 30, 2018
Acquisitions Disposals And Other Transactions [Abstract]
Acquisitions, Disposals and Other Transactions NOTE 3. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS During fiscal 2018, 2017 and 2016, the Company announced and/or completed acquisitions as more fully described below. All of the Company’s completed acquisitions were accounted for under ASC 805, “Business Combinations” (“ASC 805”), which requires, among other things, that an acquirer (i) remeasure any previously held equity interest in an acquiree at its acquisition date fair value and recognize any resulting gains or losses in earnings and (ii) record any noncontrolling interests in an acquiree at their acquisition date fair values. The below acquisitions by the Company all support its 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 fiscal 2017 and 2016, the incremental revenues and Segment OIBDA (as defined in Note 18 – Segment Information), related to the acquisitions below, included in the Company’s consolidated results of operations were not material individually or in the aggregate for each respective year. Fiscal 2018 Disney Transaction/Distribution of New Fox On June 20, 2018, the Company entered into an Amended and Restated Merger Agreement and Plan of Merger (the “Amended and Restated Merger Agreement”) with The Walt Disney Company (“Disney”) and TWDC Holdco 613 Corp., a newly formed holding company and wholly-owned subsidiary of Disney (“New Disney”), which amends and restates in its entirety the Agreement and Plan of Merger that the Company entered into with Disney in December 2017, pursuant to which, among other things, at the closing, the Company will merge with and into a subsidiary of New Disney (the “21CF Merger”), Disney will merge with and into a subsidiary of New Disney (the “Disney Merger,” and together with the 21CF Merger, the “Mergers”), and each of Disney and the Company will become wholly-owned subsidiaries of New Disney. Prior to the consummation of the Mergers, the Company will transfer a portfolio of the Company’s news, sports and broadcast businesses, including the Fox News Channel, Fox Business Network, FOX Broadcasting Company, Fox Television Stations Group, FS1, FS2, Fox Deportes and Big Ten Network and certain other assets and liabilities into a newly formed subsidiary (“New Fox”) (the “New Fox Separation”) and distribute all of the issued and outstanding common stock of New Fox to the holders of the outstanding shares of the Company’s Class A Common Stock and Class B Common Stock (other than holders that are subsidiaries of the Company (shares held by such holders, the “Hook Stock”)) on a pro rata basis (the “New Fox Distribution”). Prior to the New Fox Distribution, New Fox will pay the Company a dividend in the amount of $8.5 billion. New Fox will incur indebtedness sufficient to fund the dividend, which indebtedness will be reduced after the Mergers by the amount of a cash payment paid by Disney to New Fox. As the New Fox Separation and New Fox Distribution will be taxable to the Company at the corporate level, the dividend is intended to fund the taxes resulting from the New Fox Separation and New Fox Distribution and certain other transactions contemplated by the Amended and Restated Merger Agreement (the “Transaction Tax”). The Company will retain all assets and liabilities not transferred to New Fox, including the Twentieth Century Fox Film and Television studios and certain cable and international television businesses, including FX Networks, National Geographic Partners, LLC (“National Geographic Partners”). Regional Sports Networks (“RSNs”), Fox Networks Group International and STAR India (“STAR”), as well as the Company’s interests in Hulu LLC (“Hulu”), Sky plc (“Sky”), Tata Sky Limited and Endemol Shine Group. Upon consummation of the Transaction, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Mergers (other than (i) shares held in treasury by the Company that are not held on behalf of third parties, (ii) shares that are Hook Stock and (iii) shares held by the Company’s stockholders who have not voted in favor of the 21CF Merger and perfected and not withdrawn a demand for appraisal rights pursuant to Delaware law) will be exchanged for consideration (the “Merger Consideration”) in the form of either cash (the “Cash Consideration”) or a fraction of a share of New Disney common stock (the “Stock Consideration”). The value of the Merger Consideration may fluctuate with the market price of Disney common stock and will, subject to the collar described below, be determined based on the volume-weighted average trading price of a share of Disney common stock on the New York Stock Exchange over the fifteen day consecutive trading day period ending on (and including) the trading day that is three trading days prior to the date of the effective time of the Disney Merger (such price, the “Average Disney Price”). Subject to the election, proration and adjustment procedures set forth in the Amended and Restated Merger Agreement, each share of the Company’s common stock will be exchanged for an amount (such amount, the “Per Share Value”), payable in cash or New Disney common stock, equal to the sum of (i) $19.00 plus (ii) fifty percent (50.0%) of the value (determined based on the Average Disney Price) of a number of shares of Disney common stock equal to the exchange ratio described below. The number of shares of New Disney common stock to be delivered in exchange for each share of the Company’s common stock to the Company’s stockholders electing to receive Stock Consideration will be equal to the Per Share Value divided by the Average Disney Stock Price. If the Average Disney Price is greater than $114.32, then the exchange ratio will be 0.3324. If the Average Disney Price is less than $93.53, then the exchange ratio will be 0.4063. If the Average Disney Price is greater than or equal to $93.53 but less than or equal to $114.32, then the exchange ratio will be an amount equal to $38.00 divided by the Average Disney Price. The Merger Consideration is subject to the proration provisions set forth in the Amended and Restated Merger Agreement, which ensure that the aggregate Cash Consideration (before giving effect to the adjustment for transaction taxes) is equal to $35.7 billion. As a result, the form of consideration a stockholder elects to receive may be adjusted such that it may receive, in part, a different form of consideration than the form it elected. Any stockholder of the Company not making an election will receive the Cash Consideration, the Stock Consideration or a combination of both, as determined by the proration provisions of the Amended and Restated Merger Agreement. To provide New Fox with financing in connection with the New Fox Distribution, 21st Century Fox America, Inc. (“21CFA”), a wholly-owned subsidiary of the Company, entered into a commitment letter on behalf of New Fox with the financial institutions party thereto (the “Bridge Commitment Letter”) which provides for borrowings of up to $9 billion. Given the Company’s current debt ratings, 21CFA pays a commitment fee of 0.1%. While the Company has entered into the Bridge Commitment Letter, New Fox intends to finance the dividend by obtaining permanent financing in the capital markets on a standalone basis. Under the terms of the Amended and Restated Merger Agreement, Disney will pay the Company $2.5 billion if the Mergers are not consummated under certain circumstances relating to the failure to obtain approvals, or there is a final, non-appealable order preventing the transaction, in each case, relating to antitrust laws, communications laws or foreign regulatory laws. On June 27, 2018, the Antitrust Division of the U.S. Department of Justice announced that it cleared the Transaction. The Company, Disney and the U.S. Department of Justice have entered into a consent decree that allows the Transaction to proceed, while requiring New Disney and the Company to sell the RSNs within 90 days following the closing of the Transaction, which consent decree is subject to court approval. The consummation of the Transaction remains subject to various conditions, including among others, (i) the consummation of the New Fox Separation, (ii) the receipt of certain tax opinions with respect to the treatment of the Transaction under U.S. and Australian tax laws, and (iii) the receipt of certain regulatory approvals and governmental consents. The Transaction is expected to be completed in the first half of calendar year 2019. The Amended and Restated Merger Agreement generally requires the Company to operate its business in the ordinary course pending consummation of the 21CF Merger and restricts the Company, without Disney’s consent, from taking certain specified actions until the Transactions are consummated or the Amended and Restated Merger Agreement is terminated, including making certain acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and expenditures, paying dividends in excess of certain thresholds, and repurchasing or issuing securities outside of existing equity award programs. In February 2018, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) established a cash bonus retention plan for certain employees of approximately $110 million of which 50% is payable at the time of the Mergers and 50% on the 10-month anniversary of the Mergers, subject to each participant's continued employment through the applicable payment date. The cash bonus retention payment plans are subject to accelerated payment upon the occurrence of certain termination events. In the event the Amended and Restated Merger Agreement is terminated, the payments under the cash-based retention program will be made on the later of December 13, 2019 and the date of such termination. In addition, the Compensation Committee modified certain equity awards and granted additional equity awards to certain executives (See Note 13 – Equity-based Compensation). The modification and grant of equity awards and the cash bonus retention plan resulted in additional compensation expenses of approximately $130 million for fiscal 2018, of which approximately $65 million was included in Selling, general and administrative expenses and the remaining amount was included in Other, net in the Consolidated Statements of Operations. Television Stations Acquisition In May 2018, the Company entered into a definitive agreement (the “Purchase Agreement”) with Sinclair Broadcast Group, Inc. (“Sinclair”) and Tribune Media Company (“Tribune”) to acquire seven television stations from Tribune for approximately $910 million subject to certain purchase price adjustments. On August 9, 2018, Tribune exercised its right to terminate its merger agreement with Sinclair and correspondingly, the Company’s Purchase Agreement was also terminated. Other In fiscal 2018, the Company acquired an additional 10% interest in a RSN, increasing the Company’s ownership interest to 70%, for approximately $100 million. In July 2018, the Company paid in cash the first of four equal annual installments. This transaction was accounted for as the purchase of subsidiary shares from noncontrolling interests (See Note 8 – Fair Value under the heading “Redeemable Noncontrolling Fiscal 2017 Sky Acquisition In December 2016, the Company announced it reached agreement with Sky, in which the Company currently has an approximate 39% interest, on the terms of a recommended pre-conditional cash offer by the Company for the fully diluted share capital of Sky which the Company does not already own (the “Sky Acquisition”), at a price of £10.75 per Sky share subject to certain payments of dividends. On July 11, 2018, the Company announced an increased offer price for the Sky Acquisition, of £14.00 per Sky share (approximately $19.9 billion in the aggregate), payable in cash, subject to reduction if certain dividends or other distributions are paid by Sky (the “Increased Offer”). In connection with the Increased Offer, the Company and Sky agreed to amend the surviving provisions of the co-operation agreement entered into on December 15, 2016 between the Company and Sky (the “Co-operation Agreement”), including those provisions regarding the Company switching from a scheme of arrangement to a takeover offer (as that term is defined in the UK Companies Act In connection with the Increased Offer, on July 11, 2018, the Company entered into a letter agreement with Disney, pursuant to which Disney consented to the increased indebtedness that would be incurred by the Company as a result of the Increased Offer. Also, in the event that Disney does not complete the Mergers due to the failure to obtain regulatory approvals or in certain other limited circumstances, Disney has agreed to reimburse the Company for an amount equal to the difference between the cash consideration of £14.00 and £13.00 for each share of Sky purchased by the Company pursuant to the revised terms of the Increased Offer, plus any interest and fees on such amount. The Sky Acquisition has received unconditional clearance by all competent competition authorities including the European Commission and has been cleared on public interest and plurality grounds. On July 12, 2018, the Sky Acquisition received approval by the UK Secretary of State for Digital, Culture, Media and Sport (the “Secretary of State”), subject to accepted undertakings described below. However, the Sky Acquisition is conditional on, among other things, the Company securing valid acceptances of the Increased Offer in respect of Sky shares which represent 75% or more of the Sky shares that the Company does not own. The Company reserves the right to reduce this acceptance condition to a simple majority of all Sky shares (including those held by the Company). In connection with the approval given by the Secretary of State, the Company has undertaken to the Secretary of State to separate the Sky News business into a separate company (“Sky News Newco”), and to transfer the shares in Sky News Newco to Disney or to an alternative suitable third party if Disney does not complete its acquisition of Sky News Newco within a specified period, (the “Sky News Divestment”). The Sky News Divestment is conditional upon the Sky Acquisition completing. The Company shall pay to Sky News NewCo an annual lump sum every year for 15 years from the date of the Sky News Divestment (the “NewCo Funding”), subject to a reduction to reflect the actual amount of revenue received or generated by Sky News NewCo in the relevant financial year. Disney has undertaken to maintain the operating investment in Sky News NewCo at an agreed level (plus inflation) for 15 years from the date of the Sky News Divestment, conditional upon Sky News NewCo receiving the NewCo Funding. Disney has also undertaken to ensure that the total funds available for Sky News Newco, including the funding the Company has undertaken to provide, is no less than £100 million per year for the next 15 years. Disney has undertaken to continue to operate Sky News for a period of 15 years after the Sky News Divestment and may only sell Sky News Newco with the approval of the Secretary of State. Disney and the Company have undertaken that the Sky News Newco board of directors shall consist of directors that are independent of the Company, News Corp, any member of the Murdoch family or companies controlled by the Murdoch family. The Secretary of State announced that the undertakings provided by the Company and Disney had been accepted on July 12, 2018. If the Company does not acquire 100% of Sky pursuant to the Sky Acquisition or another party has not acquired more than 50% of the ordinary shares of Sky, in each case prior to the completion of the Transaction, Disney will be required to make a mandatory offer for all the outstanding ordinary shares of Sky not already owned by the Company within 28 days of the Transaction closing. On July 13, 2018, the Panel on Takeovers and Mergers of the United Kingdom (the "U.K. Takeover Panel"), ruled that any such offer would be required to be made in cash and at a price of £14.00 for each ordinary share in Sky (the "July 13 Ruling"), which ruling was upheld on August 3, 2018 by the U.K. Takeover Panel’s Hearings Committee on appeal. Certain interested parties have appealed the ruling of the Hearings Committee to the Takeover Appeal Board. To provide financing in connection with the Sky Acquisition, the Company and 21CFA entered into a bridge credit agreement with the lenders party thereto (the “Bridge Credit Agreement”) which was subsequently amended as a result of the Increased Offer. The Bridge Credit Agreement provides for borrowings of up to £15.3 billion (approximately $20.2 billion). Fees under the Bridge Credit Agreement are based on the Company’s long-term senior unsecured non-credit enhanced debt ratings. Given the Company’s current debt ratings, 21CFA pays a commitment fee on undrawn funds of 0.1% and the initial interest rate on advances will be London Interbank Offered Rate (“LIBOR”) plus 1.125% with subsequent increases every 90 days up to LIBOR plus 1.875%. 21CFA has also agreed to pay a duration fee on each of the 90th, 180th and 270th day after the funding of the loans in an amount equal to 0.50%, 0.75%, and 1.00%, respectively, of the aggregate principal amount of the advances and undrawn commitments outstanding at the time. The terms of the Bridge Credit Agreement also include the requirement that 21CFA maintain a certain leverage ratio and limitations with respect to secured indebtedness. The Company purchased a foreign currency exchange option in February 2017, which expired in June 2018, to limit its foreign currency exchange rate risk in connection with the Sky Acquisition. In June 2018, the Company purchased a new foreign currency exchange option for the same objective (See Note 8 – Fair Value under the heading “ Foreign Currency Contracts” Note 22 – Additional Financial Information under the heading “Other, net” The Company believes the Sky Acquisition will result in enhanced capabilities of the combined company, underpinned by a more geographically diverse and stable revenue base, and an improved balance between subscription, affiliate fee, advertising and content revenues. On April 25, 2018, Comcast Corporation (“Comcast”) announced a pre-conditional cash offer for the fully diluted share capital of Sky at a price of £12.50 per Sky share (the “Original Comcast Offer”) which was subject to regulatory preconditions (which have now been satisfied) as well as additional closing conditions. Following the announcement of the Original Comcast Offer, on April 25, 2018, the independent committee of the Sky Board of Directors (the “Sky Independent Committee”) withdrew its previously announced recommendation that unaffiliated Sky shareholders vote in favor of the Sky Acquisition and the Company received from Sky a written notice of termination of the Co-operation Agreement. Certain provisions relating to the Company’s conduct of the Sky Acquisition survived the termination of the Co-operation Agreement. As stated above, the Co-operation Agreement has since been further amended on July 11, 2018. On July 11, 2018, Comcast announced a revised cash offer for the fully diluted share capital of Sky at a price of £14.75 per Sky share that was recommended by the Sky Independent Committee. Any increase in the debt financing for the Sky Acquisition or sale by the Company of its interest in Sky would require Disney’s consent. Completion of the Sky Acquisition is not a condition to either party’s obligation to consummate the Transaction. Completion of the Sky Acquisition will not affect the amount or form of consideration that stockholders of the Company receive in the Transaction. Other In March 2017, the FCC concluded a voluntary auction to reclaim television broadcast station spectrum. The Company had three stations’ bids of approximately $350 million to relinquish spectrum accepted by the FCC as part of the auction. As a result, the spectrum previously utilized by its television stations in Washington, DC, Charlotte, NC and Chicago, IL designated market areas, in which the Company operates duopolies, has been relinquished to the FCC. The proceeds were received in July 2017 and the Company recorded a pre-tax gain of $102 million for the portion of spectrum relinquished to the FCC prior to June 30, 2018, which was included in Other, net in the Consolidated Statements of Operations for fiscal 2018. The Company will record a nominal pre-tax gain in fiscal 2019 for the remaining spectrum relinquished to the FCC. These television stations will continue broadcasting using the spectrum of the existing FOX owned and operated station in that market. Fiscal 2016 Acquisitions National Geographic Partners In fiscal 2016, the Company, through 21CFA and the National Geographic Society (“NGS”), formed the entity that became National Geographic Partners, to which, in November 2015, the Company contributed $625 million in cash and the Company and NGS contributed their existing interests in NGC Network US, LLC, NGC Network International, LLC and NGC Network Latin America, LLC (collectively, “NGC Networks”). Prior to the transaction, the Company held a controlling interest in NGC Networks, a consolidated subsidiary. NGS also contributed its publishing, travel and certain other businesses (collectively, the “NGS Media Business”) to National Geographic Partners. As part of the transaction, National Geographic Partners also acquired the long-term license for the use of certain trademarks owned by NGS related to the NGC Networks and the NGS Media Business. The Company currently holds a 73% controlling interest in National Geographic Partners. The consideration transferred to NGS has been allocated as follows: approximately $510 million to indefinite-lived intangible assets related to the trademark license agreement, $105 million...