Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

209K characters. Original on sec.gov · Markdown

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

| --- | --- |

FOX CORPORATION

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Page
Management’s Report on Internal Control Over Financial Reporting59
Reports of Independent Registered Public Accounting Firm60
Consolidated Statements of Operations for the fiscal years ended June 30, 2021, 2020 and 201963
Consolidated Statements of Comprehensive Income for the fiscal years ended June 30, 2021, 2020 and 201964
Consolidated Balance Sheets as of June 30, 2021 and 202065
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2021, 2020 and 201966
Consolidated Statements of Equity for the fiscal years ended June 30, 2021, 2020 and 201967
Notes to the Consolidated and Combined Financial Statements68

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Fox Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting includes those policies and procedures that:

●pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Fox Corporation;
●provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America;
●provide reasonable assurance that receipts and expenditures of Fox Corporation are being made only in accordance with authorization of management and directors of Fox Corporation; and
●provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

Fox Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements. Also, the assessment of the effectiveness of internal control over financial reporting was made as of a specific date. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including the Company’s principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of Fox Corporation’s internal control over financial reporting as of June 30, 2021, based on the framework set forth in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this evaluation, management determined that, as of June 30, 2021, Fox Corporation maintained effective internal control over financial reporting.

Ernst & Young LLP, the independent registered public accounting firm who audited and reported on the Consolidated and Combined Financial Statements of Fox Corporation included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021, has audited the Company’s internal control over financial reporting. Their report appears on the following page.

REP****ORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Fox Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Fox Corporation’s internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Fox Corporation (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Fox Corporation as of June 30, 2021 and 2020, the related consolidated and combined statements of operations, comprehensive income, cash flows and equity for each of the three years in the period ended June 30, 2021, and the related notes and our report dated August 10, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

New York, New York

August 10, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Fox Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Fox Corporation (the “Company”) as of June 30, 2021 and 2020, the related consolidated and combined statements of operations, comprehensive income, cash flows and equity for each of the three years in the period ended June 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated August 10, 2021 expressed an unqualified opinion thereon.

Adoption of ASU 2016-02

As discussed in Note 10 to the consolidated and combined financial statements, effective July 1, 2019, the Company changed its method of accounting for leases due to the adoption of ASU 2016-02, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of realizability of deferred tax assets
Description of the MatterAs disclosed in Note 2 to the consolidated financial statements, the Company records a valuation allowance based on the assessment of the realizability of the Company’s deferred tax assets. For the year ended June 30, 2021, the Company had deferred tax assets before valuation allowances of $4.1 billion as disclosed in Note 16.
Auditing management’s assessment of recoverability of deferred tax assets involved subjective estimation and complex auditor judgment in determining whether sufficient future taxable income will be generated to support the realization of the existing deferred tax assets.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s estimates of future taxable income. Among other audit procedures performed, we evaluated the significant assumptions used by the Company to develop estimated future taxable income and tested the completeness and accuracy of the underlying data. For example, we evaluated management’s estimates of future taxable income by performing a look-back analysis of management’s historical estimates compared to actual results as well as compared management’s estimates to current industry and economic trends. We also performed a sensitivity analysis of future taxable income to evaluate the recoverability of deferred tax assets resulting from changes in assumptions.
Program rights amortization – National sports programming
Description of the MatterAs disclosed in Note 2 to the consolidated financial statements, the Company has programming rights, including single and multi-year contracts for broadcast rights of sports events. The costs of multi-year sports contracts at the Company 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. Auditing the amortization of the Company’s national sports programming involved subjective estimation and complex auditor judgment because the analysis that the Company relies upon to determine the amortization of this programming is based on estimates of future revenues from the programming. Differing estimates of future revenues could materially affect the timing of sports programming amortization.
How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the amortization of the Company’s national sports programming, including controls over management’s review of the analysis and the significant assumptions used to develop the estimated future revenues. We also tested management’s controls to validate that the data used in the analysis was complete and accurate. Among other audit procedures performed, we evaluated the significant assumptions used by the Company to develop the estimated future revenues and tested the completeness and accuracy of the underlying data used in the analysis. For example, we evaluated management’s forecasts of estimated future revenues by performing a look-back analysis of management’s historical estimates compared to actual results. We also performed a sensitivity analysis of the estimated future revenues to evaluate the change in the amortization of the Company’s national sports programming resulting from changes in the assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

New York, New York

August 10, 2021

FOX CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

For the years ended June 30,
202120202019
Revenues$12,909$12,303$11,389
Operating expenses(8,037)(7,807)(7,327)
Selling, general and administrative(1,807)(1,741)(1,419)
Depreciation and amortization(300)(258)(212)
Impairment and restructuring charges(35)(451)(26)
Interest expense(395)(369)(203)
Interest income43541
Other, net579(248)(19)
Income before income tax expense2,9181,4642,224
Income tax expense(717)(402)(581)
Net income2,2011,0621,643
Less: Net income attributable to noncontrolling interests(51)(63)(48)
Net income attributable to Fox Corporation stockholders$2,150$999$1,595
EARNINGS PER SHARE DATA
Net income attributable to Fox Corporation stockholders per share
Basic$3.64$1.63$2.57
Diluted$3.61$1.62$2.57

The accompanying notes are an integral part of these Consolidated and Combined Financial Statements.

FOX CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME

(IN MILLIONS)

For the years ended June 30,
202120202019
Net income$2,201$1,062$1,643
Other comprehensive income (loss), net of tax
Benefit plan adjustments and other99(109)(89)
Other comprehensive income (loss), net of tax99(109)(89)
Comprehensive income2,3009531,554
Less: Net income attributable to noncontrolling interests(a)(51)(63)(48)
Comprehensive income attributable to Fox Corporation stockholders$2,249$890$1,506
(a)Net income attributable to noncontrolling interests includes $25 million, $33 million and $33 million for the fiscal years ended June 30, 2021, 2020 and 2019, respectively, relating to redeemable noncontrolling interests.

The accompanying notes are an integral part of these Consolidated and Combined Financial Statements.

FOX CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)

As of June 30,
20212020
ASSETS
Current assets
Cash and cash equivalents$5,886$4,645
Receivables, net2,0291,888
Inventories, net729856
Other10597
Total current assets8,7497,486
Non-current assets
Property, plant and equipment, net1,7081,498
Intangible assets, net3,1543,198
Goodwill3,4353,409
Deferred tax assets3,8224,358
Other non-current assets2,0581,801
Total assets$22,926$21,750
LIABILITIES AND EQUITY
Current liabilities
Borrowings$749$-
Accounts payable, accrued expenses and other current liabilities2,2531,906
Total current liabilities3,0021,906
Non-current liabilities
Borrowings7,2027,946
Other liabilities1,3361,482
Redeemable noncontrolling interests261305
Commitments and contingencies
Equity
Class A common stock(a)33
Class B common stock(b)33
Additional paid-in capital9,4539,831
Retained earnings1,982674
Accumulated other comprehensive loss(318)(417)
Total Fox Corporation stockholders' equity11,12310,094
Noncontrolling interests217
Total equity11,12510,111
Total liabilities and equity$22,926$21,750
(a)Class A common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 324,361,864 shares and 343,608,673 shares issued and outstanding at par as of June 30, 2021 and 2020, respectively.
(b)Class B common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 251,821,556 shares and 261,078,355 shares issued and outstanding at par as of June 30, 2021 and 2020, respectively.

The accompanying notes are an integral part of these Consolidated and Combined Financial Statements.

FOX CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

For the years ended June 30,
202120202019
OPERATING ACTIVITIES
Net income$2,201$1,062$1,643
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization300258212
Amortization of cable distribution investments222438
Impairment and restructuring charges, net of termination payments3513326
Equity-based compensation14713736
Other, net(579)24819
Deferred income taxes534283386
Change in operating assets and liabilities, net of acquisitions and dispositions
Receivables and other assets(269)224(166)
Inventories net of program rights payable190181197
Accounts payable and accrued expenses282(87)231
Other changes, net(224)(98)(98)
Net cash provided by operating activities2,6392,3652,524
INVESTING ACTIVITIES
Property, plant and equipment(484)(359)(235)
Acquisitions, net of cash acquired(51)(1,061)-
Proceeds from dispositions, net9360-
Sale of investments-349-
Purchase of investments(86)(103)(338)
Other investing activities, net-14(64)
Net cash used in investing activities(528)(1,100)(637)
FINANCING ACTIVITIES
Borrowings-1,1916,750
Net transfers to Twenty-First Century Fox, Inc.--(1,233)
Net dividend paid to Twenty-First Century Fox, Inc.--(6,500)
Repurchase of shares(1,001)(600)-
Non-operating cash flows from (to) The Walt Disney Company112(95)-
Settlement of Divestiture Tax prepayment462--
Dividends paid and distributions(330)(335)(188)
Purchase of subsidiary noncontrolling interest(67)--
Other financing activities, net(46)(15)18
Net cash (used in) provided by financing activities(870)146(1,153)
Net increase in cash and cash equivalents1,2411,411734
Cash and cash equivalents, beginning of year4,6453,2342,500
Cash and cash equivalents, end of year$5,886$4,645$3,234

The accompanying notes are an integral part of these Consolidated and Combined Financial Statements.

FOX CORPORATION

CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY

(IN MILLIONS)

Class AClass BTwenty-First CenturyAdditionalAccumulated OtherTotal Fox Corporation
Common StockCommon StockFox, Inc.Paid-inRetainedComprehensiveStockholders'NoncontrollingTotal
SharesAmountSharesAmountInvestmentCapitalEarningsIncome (Loss)EquityInterests(a)Equity
Balance, June 30, 2018-$--$-$9,513$-$-$81$9,594$-$9,594
Adoption of new accounting standards(b)----143--(143)---
Net income----1,036-559-1,595151,610
Other comprehensive loss-------(89)(89)-(89)
Dividends------(143)-(143)-(143)
Other----13535(59)-111(4)107
Net decrease in Twenty-First Century Fox, Inc. investment----(964)--(157)(c)(1,121)-(1,121)
Conversion of Twenty-First Century Fox, Inc. investment35442663(9,863)9,856-----
Balance, June 30, 2019354$4266$3$-$9,891$357$(308)$9,947$11$9,958
Net income------999-999301,029
Other comprehensive loss-------(109)(109)-(109)
Dividends------(282)-(282)-(282)
Shares repurchased(12)(1)(5)--(273)(326)-(600)-(600)
Other2----213(74)-139(24)115
Balance, June 30, 2020344$3261$3$-$9,831$674$(417)$10,094$17$10,111
Net income------2,150-2,150262,176
Other comprehensive income-------9999-99
Dividends------(272)-(272)-(272)
Shares repurchased(22)-(9)--(514)(487)-(1,001)-(1,001)
Other2----136(83)-53(41)12
Balance, June 30, 2021324$3252$3$-$9,453$1,982$(318)$11,123$2$11,125
(a)Excludes Redeemable noncontrolling interests which are reflected in temporary equity (See Note 6—Fair Value under the heading “Redeemable Noncontrolling Interests”).
(b)Reflects the adoption of ASU 2016-01 and ASU 2018-02 as defined in Note 11—Stockholders’ Equity under the heading “Accumulated other comprehensive loss.”
(c)Represents accumulated other comprehensive loss transferred from Twenty-First Century Fox, Inc. investment related to the pension and postretirement benefit assets and liabilities of the Shared Plans as defined in Note 15—Pension and Other Postretirement Benefits.

The accompanying notes are an integral part of these Consolidated and Combined Financial Statements.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Fox Corporation, a Delaware corporation (“FOX” or the “Company”), is a news, sports and entertainment company, which manages and reports its businesses in the following segments: Cable Network Programming, Television and Other, Corporate and Eliminations.

The Distribution

On March 19, 2019, the Company became a standalone publicly traded company through the pro rata distribution by Twenty-First Century Fox, Inc. (now known as TFCF Corporation) (“21CF”) of all of the issued and outstanding common stock of FOX to 21CF stockholders (other than holders that were subsidiaries of 21CF) (the “Distribution”) in accordance with the Amended and Restated Distribution Agreement and Plan of Merger, dated as of June 20, 2018, by and between 21CF and 21CF Distribution Merger Sub, Inc. Following the Distribution, 354 million and 266 million shares of the Company’s Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”), and Class B Common Stock, par value $0.01 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), respectively, began trading independently on The Nasdaq Global Select Market (“Nasdaq”). In connection with the Distribution, the Company entered into the Separation and Distribution Agreement, dated as of March 19, 2019 (the “Separation Agreement”), with 21CF, which effected the internal restructuring (the “Separation”) whereby 21CF transferred to FOX a portfolio of 21CF’s news, sports and broadcast businesses, including FOX News Media (consisting of FOX News and FOX Business), FOX Entertainment, FOX Sports, FOX Television Stations, and sports cable networks FS1, FS2, FOX Deportes and Big Ten Network, and certain other assets, and FOX assumed from 21CF the liabilities associated with such businesses and certain other liabilities. The Separation and the Distribution were effected as part of a series of transactions contemplated by the Amended and Restated Merger Agreement and Plan of Merger, dated as of June 20, 2018 (the “21CF Disney Merger Agreement”), by and among 21CF, The Walt Disney Company (“Disney”) and certain subsidiaries of Disney, pursuant to which, among other things, 21CF became a wholly-owned subsidiary of Disney.

In connection with the Separation, the Company entered into several agreements that govern certain aspects of the Company’s relationship with 21CF and Disney following the Separation. These include the Separation Agreement, a tax matters agreement, transition services agreements, as well as agreements relating to intellectual property licenses, employee matters, commercial arrangements and the FOX Studio Lot lease (See Note 10—Leases under the heading “Lessor Arrangements”). The core transition services agreements will terminate in accordance with their terms by September 2021.

The Separation Agreement contains the key provisions relating to the Separation and the Distribution. The Separation Agreement identifies the assets that were transferred, the liabilities that were assumed and the contracts that were assigned to each of the Company and 21CF as part of the Separation and describes how these transfers, assumptions and assignments occurred. It also provides for cross-indemnities between the Company and 21CF. Other matters governed by the Separation Agreement include access to financial and other information, confidentiality, access to and provision of records, continued access for the Company to 21CF insurance policies and shared contracts and certain third-party consent provisions. Pursuant to the Separation Agreement, the Company is the owner of all “FOX” brands and related trademarks, as well as all other intellectual property primarily related to the Company’s business. In addition, the Company entered into certain trademark and other intellectual property license agreements in connection with the use of certain intellectual property by 21CF.

The Company also entered into a tax matters agreement with Disney and 21CF that governs the parties’ respective rights, responsibilities and obligations with respect to certain tax matters. Under the tax matters agreement, 21CF will generally indemnify the Company against any taxes required to be reported on a consolidated or separate tax return of 21CF and/or any of its subsidiaries, including any taxes resulting from the Separation and the Distribution, and the Company will generally indemnify 21CF against any taxes required to be reported on a separate tax return of the Company or any of its subsidiaries. The Company was responsible for certain taxes resulting from the anticipated divestitures by Disney of certain assets, primarily the FOX Sports Regional Sports Networks (“RSNs”), which were sold by Disney during calendar year 2019. The Transaction Tax (as defined below) included a prepayment of the Company’s share of the estimated tax liabilities resulting from the anticipated divestitures by Disney of these assets in the amount of approximately $700 million.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

In addition, the Company and 21CF entered into transition services agreements under which the Company and 21CF are providing specified services to each other on a transitional basis, including broadcast operations, sports production, information systems and technology, human resources services, finance and accounting, facilities and other corporate services. The core transition services agreements will terminate in accordance with their terms by September 2021.

The Company also entered into an employee matters agreement with 21CF that governs the parties’ obligations with respect to certain employee-related liabilities and certain employee benefit plans, programs, policies and other related matters for employees of the Company (See Note 12—Equity-Based Compensation and Note 15—Pension and Other Postretirement Benefits).

Basis of Presentation

The Company’s financial statements as of and for the years ended June 30, 2021 and 2020 are presented on a consolidated basis. The Company’s consolidated financial statements for the years ended June 30, 2021 and 2020 reflect the Company’s results of operations and cash flows as a standalone company, and the Company’s Consolidated Balance Sheets as of June 30, 2021 and 2020 consist of the Company’s consolidated balances.

Prior to the Distribution, which occurred on March 19, 2019, the Company’s combined financial statements were prepared on a standalone basis, derived from the consolidated financial statements and accounting records of 21CF.

The Consolidated and Combined Statements of Operations for the year ended June 30, 2019 include, for the periods prior to March 19, 2019, allocations for certain support functions that were provided on a centralized basis within 21CF prior to the Distribution and not recorded at the business unit level, such as certain expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others. 21CF did not routinely allocate these costs to any of its business units. These expenses were allocated to FOX on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures. Management believes the assumptions underlying the Consolidated and Combined Financial Statements, including the assumptions regarding allocating general corporate expenses from 21CF, are reasonable. Nevertheless, the Consolidated and Combined Financial Statements may not include all of the actual expenses that would have been incurred by FOX and may not reflect FOX’s consolidated results of operations, financial position and cash flows had it been a standalone company during the entirety of the periods presented. Actual costs that would have been incurred if FOX had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.

For purposes of the Company’s financial statements for the periods prior to the Distribution, the income tax provision in the Consolidated and Combined Statements of Operations was calculated as if FOX filed a separate tax return and was operating as a standalone business. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of FOX’s actual tax balances prior to or subsequent to the Distribution. Prior to the Distribution, the Company’s operating results were included in 21CF’s consolidated U.S. federal and state income tax returns. Pursuant to rules promulgated by the Internal Revenue Service (“IRS”) and various state taxing authorities, the Company filed its initial U.S. income tax returns for the period March 19, 2019 through June 30, 2019.

The income tax accounts reflected in the Consolidated Balance Sheet as of June 30, 2019 include income taxes payable and deferred taxes attributed to the Company at the time of and subsequent to the Separation (See Note 13—Related Party Transactions and Twenty-First Century Fox, Inc. Investment under the heading “Corporate Allocations and Twenty-First Century Fox, Inc. Investment”). The calculation of the Company’s income taxes involves considerable judgment and the use of both estimates and allocations.

Pursuant to the 21CF Disney Merger Agreement, immediately prior to the Distribution, the Company paid to 21CF a dividend in the amount of $8.5 billion (the “Dividend”). The final determination of the taxes in respect of the Separation and the Distribution for which the Company is responsible pursuant to the 21CF Disney Merger Agreement and a prepayment of the estimated taxes in respect of divestitures (collectively, the “Transaction Tax”) was $6.5 billion. Following the Distribution, on March 20, 2019 the Company received a cash payment in the amount of $2.0 billion from Disney, which had the net effect of reducing the Dividend the Company paid to 21CF. The Transaction Tax included a prepayment of the Company’s share of the estimated tax liabilities resulting from the anticipated divestitures by Disney of certain assets, principally the RSNs. This prepayment was in the amount of approximately $700 million. During the first

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

quarter of fiscal 2021, the Company and Disney reached an agreement to settle the majority of the prepaid Divestiture Tax and the Company received $462 million from Disney as reimbursement of the Company’s prepayment based upon the sales price of the RSNs. This reimbursement was recorded in Other, net in the Statement of Operations (See Note 21—Additional Financial Information under the heading “Other, net”). The balance of the prepaid Divestiture Tax is subject to adjustment in the future, but any such adjustment is not expected to have a material impact on the results of the Company.

As a result of the Separation and the Distribution, which was a taxable transaction for which the estimated tax liability of $5.8 billion was included in the Transaction Tax paid by the Company, FOX obtained a tax basis in its assets equal to their respective fair market values. This will result in estimated annual tax deductions of approximately $1.5 billion, principally over the next several years related to the amortization of the additional tax basis. This amortization is estimated to reduce the Company’s annual cash tax liability by approximately $370 million per year at the current combined federal and state applicable tax rate of approximately 25%. Such estimates are subject to revisions, which could be material, based upon the occurrence of future events including, among other things, a refund of the prepayment discussed above.

The consolidated and combined financial statements are referred to as the “Financial Statements” herein. The consolidated and combined statements of operations are referred to as the “Statements of Operations” herein. The consolidated and combined statements of comprehensive income are referred to as the “Statements of Comprehensive Income” herein. The consolidated balance sheets are referred to as the “Balance Sheets” herein. The consolidated and combined statements of cash flows are referred to as the “Statements of Cash Flows” herein. The consolidated and combined statements of equity are referred to as the “Statements of Equity” herein.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation and combination

The 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.

The Financial Statements, for periods prior to the Distribution, include certain assets and liabilities that were historically held at 21CF’s corporate level but are specifically identifiable or otherwise attributable to the Company. All significant intracompany transactions and accounts within the Company’s consolidated and combined businesses have been eliminated.

Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Financial Statements for periods prior to the Distribution. All significant intercompany balances between 21CF and the Company, for periods prior to the Distribution, have been included within the Twenty-First Century Fox, Inc. investment in these Financial Statements.

Any change in the Company’s ownership interest in a consolidated subsidiary, where a controlling financial interest is retained, is accounted for as an equity transaction. When the Company ceases to have a controlling financial 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 2020 and 2019 amounts have been reclassified to conform to the fiscal 2021 presentation.

Use of estimates

The preparation of the Company’s Financial Statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts that are reported

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

in the 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.

The coronavirus disease 2019 (“COVID-19”) pandemic has resulted in widespread and continuing negative impacts on the macroeconomic environment and disruption to the Company’s business. Weak economic conditions and increased volatility and disruption in the financial markets pose risks to the Company and its business partners, including advertisers whose expenditures tend to reflect overall economic conditions. Although the COVID-19 pandemic did not cause a significant reduction in the Company’s advertisers’ spending in fiscal 2021, future declines in the economic prospects of advertisers or the economy in general could negatively impact their advertising expenditures further. To date, the Company has not experienced meaningful subscriber declines due to the pandemic. However, there could be industry-wide changes in consumer behavior due to the pandemic, such as increasing numbers of consumers canceling or foregoing subscriptions to multi-channel video programming distributor (“MVPD”) services, that could adversely affect the Company’s affiliate fee and advertising revenues. In addition, the Company’s business depends on the volume and popularity of the content it distributes, particularly sports content. As a result of the COVID-19 pandemic, there have been cancellations or postponements of live sports events to which the Company has broadcast rights and suspensions of the production of certain entertainment content. These content disruptions have adversely affected the Company’s advertising and affiliate fee revenues and there could be additional adverse impacts on its advertising or affiliate fee revenues in the future. To the extent the COVID-19 or other pandemic further negatively impacts the timing of or the Company’s ability to air sports events, particularly Major League Baseball (“MLB”), National Football League (“NFL”) or college sports, it could result in a significantly greater adverse effect on the Company’s business, financial condition or results of operations than the Company has experienced thus far.

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 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 expected collections, current economic trends and specific identification of certain receivables that are at risk of not being paid.

Receivables, net consist of:

As of June 30,
20212020
(in millions)
Total receivables$2,106$1,981
Allowances for doubtful accounts(77)(93)
Total receivables, net$2,029$1,888

Inventories

Programming Rights

In accordance with ASC 920, “Entertainment—Broadcasters” (“ASC 920”), 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. Under ASC 920 the Company classifies entertainment programming rights with a contract duration of longer than a year in non-current inventories, net on the Balance Sheet. Advances on sports events expected to be broadcast within one year and programs with an initial license period of one year or less are recorded in the current portion of inventories, net. Television broadcast network entertainment

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

programming, which includes acquired series, co-produced series, 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 sports 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 usefulness of the program rights. The recoverability of entertainment programming is generally assessed on a contract basis and the recoverability of certain sports rights contracts for content broadcast on the FOX Network and the 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 in an amount equal to the amount by which the unamortized costs exceed fair value. The costs of multi-year sports contracts at the FOX Network and the 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.

Investments

Investments in and advances to entities or joint ventures in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method. Significant influence generally exists when the Company owns an interest between 20% and 50%.

In accordance with ASC 321 “Investments—Equity Securities” (“ASC 321”), equity securities which the Company has no significant influence (generally less than a 20% ownership interest) with readily determinable fair values are accounted for at fair value based on quoted market prices. Equity securities without readily determinable fair values are accounted for either at fair value or using the measurement alternative which is 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. All gains and losses on investments in equity securities are recognized in the Statements of Operations.

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 for buildings and leaseholds and three to 10 years for machinery and equipment. 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 depreciates 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, 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. Amounts recorded as goodwill are assigned to more than one reporting unit as of the acquisition date when more than one reporting unit is expected to benefit from the synergies of the combination. In accordance with ASC 350 “Intangibles—Goodwill and Other” (“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 average useful life of amortizable intangible assets ranges from three to 20 years.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Annual Impairment Review

Goodwill

If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount after a qualitative assessment, the Company performs a quantitative impairment test to calculate the fair value of the reporting unit and compare it with its carrying amount, including goodwill. In performing the quantitative assessment, the Company determines the fair value of a reporting unit primarily by using discounted cash flow analysis and market-based valuation approach methodologies. Determining fair value requires the exercise of significant judgments, including judgments about appropriate discount rates, long-term growth rates, company earnings multiples and relevant comparable transactions, as applicable, and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s estimated outlook and various growth rates have been assumed for years beyond the long-term business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective reporting units. In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable public company trading values. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

FCC licenses

The Company performs impairment reviews consisting of a comparison of the estimated fair value of the Company’s FCC licenses with their carrying amount on a station-by-station basis using a discounted cash flow valuation method, assuming a hypothetical start-up scenario for a broadcast station in each of the markets the Company operates in. The significant assumptions used are the discount rate and terminal growth rates and operating margins, as well as industry data on future advertising revenues in the markets where the Company owns television stations. These assumptions are based on actual third-party historical performance and estimates of future performance in each market.

Leases

The Company has lease agreements primarily for office facilities and other equipment. At contract inception, the Company determines if a contract is or contains a lease and whether it is an operating or finance lease. The Company does not separate lease components from nonlease components for real estate leases.

For operating leases that have a lease term of greater than one year, the Company initially recognizes operating lease liabilities and right-of-use (“ROU”) assets at the lease commencement date, which is the date that the lessor makes an underlying asset available for use by the Company. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the present value of the Company’s obligation to make lease payments, primarily escalating fixed payments, over the lease term. The discount rate used to determine the present value of the lease payments is generally the Company’s incremental borrowing rate because the rate implicit in the lease is generally not readily determinable. The incremental borrowing rate for the lease term is determined by adjusting the Company’s unsecured borrowing rate for a similar term to approximate a collateralized borrowing rate. The Company's lease terms for each of its leases represents the noncancelable period for which the Company has the right to use an underlying asset, together with all of the following: (i) periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; (ii) periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option; and (iii) periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor. The Company recognizes lease payments as lease expense on a straight-line basis over the lease term.

The Company’s operating ROU assets are included in Other non-current assets and the Company’s current and non-current operating lease liabilities are included in Accounts payable, accrued expenses and other current liabilities and Other liabilities, respectively, in the Company’s Balance Sheet (See Note 21—Additional Financial Information).

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

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 private company investments by considering 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 equity securities not accounted for using the equity method or at fair value for impairment based on a qualitative assessment which includes, but is not limited to (i) significant deterioration in the earnings performance, credit rating, asset quality or business prospects of the investee, (ii) significant adverse changes in the regulatory, economic or technological environment of the investee and (iii) significant adverse changes in the general market condition of either the geographical area or the industry in which the investee operates. If an equity security is impaired, an impairment loss is recognized in the Statements of Operations equal to the difference between the fair value of the investment and its carrying amount.

Long-lived assets

ASC 360, “Property, Plant, and Equipment,” ASC 842, “Leases” and ASC 350 require that the Company periodically review the carrying amounts of its long-lived assets, including property, plant and equipment, ROU assets 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 or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized and is measured as the amount by which the carrying value of such asset or asset group 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.

Revenue recognition

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company considers the terms of each arrangement to determine the appropriate accounting treatment.

The Company generates advertising revenue from sales of commercial time within the Company’s network programming to be aired by television networks and cable channels, and from sales of broadcast advertising time on the Company’s owned and operated television stations and various digital properties. Advertising revenue from customers, primarily advertising agencies, is recognized as the commercials are aired. Certain of the Company’s advertising contracts have guarantees of a certain number of targeted audience views, referred to as impressions. Revenues for any audience deficiencies are deferred until the guaranteed number of impressions is met, by providing additional advertisements. Advertising contracts, which are generally short-term, are billed monthly for the spots aired during the month, with payments due shortly after the invoice date.

The Company generates affiliate fee revenue from affiliate agreements with traditional and digital MVPDs (as defined in Note 17—Segment Information) for cable network programming and for the broadcast of the Company’s owned and operated television stations. In addition, the Company generates affiliate fee revenue from agreements with independently owned television stations that are affiliated with the FOX Network and receives retransmission consent fees from traditional and digital MVPDs for their signals. Affiliate fee revenue is recognized at a point in time when the network programming is made available to the customer. For contracts with affiliate fees based on the number of the affiliate’s subscribers, revenues are recognized based on the contractual rate multiplied by the estimated number of subscribers each period. For contracts with fixed affiliate fees, revenues are recognized based on the relative standalone selling price

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

of the network programming provided over the contract term, which generally reflects the invoiced amount. Affiliate contracts are generally multi-year contracts with payments due monthly.

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 606-10-32-25 through 27, “Revenue Recognition—Consideration Payable to a Customer.” The Company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period.

Advertising expenses

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses—Advertising Cost.” Advertising expenses recognized totaled $558 million, $425 million and $388 million for fiscal 2021, 2020 and 2019, respectively.

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.

Earnings per share

Basic earnings per share for the Class A Common Stock and Class B Common Stock is calculated by dividing Net income attributable to Fox Corporation stockholders by the weighted average number of outstanding shares of Class A Common Stock, including vested restricted stock units (“RSUs”), and Class B Common Stock. Diluted earnings per share for the Class A Common Stock and Class B Common Stock is calculated similarly, except that the calculation for the Class A Common Stock includes the dilutive effect of the assumed issuance of the shares issuable under the Company’s equity-based compensation plan.

On March 19, 2019, the date of the Distribution, 621 million shares of the Company’s Common Stock were distributed to 21CF stockholders (other than holders that were subsidiaries of 21CF). These 621 million shares have been utilized for the calculation of basic and diluted earnings per share for all periods presented that ended prior to the date of the Distribution as no shares of common stock or equity-based awards of the Company were outstanding prior to that date (See Note 12—Equity-Based Compensation).

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 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. The Company recognizes compensation cost for awards granted that have only service requirements and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. The Company accounts for forfeitures when they occur.

For periods prior to the Distribution, the Company’s employees participated in 21CF’s equity-based compensation plans. Equity-based compensation expense was allocated to the Company based on the awards and terms previously granted to the Company employees. In connection with the Distribution, certain 21CF equity awards were converted into new equity awards of the Company (See Note 12—Equity-Based Compensation).

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Financial instruments

The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and investments accounted for using the measurement alternative in accordance with ASC 321, approximates 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.

Redeemable noncontrolling interests

The Company accounts for redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity,” because their exercise is outside the control of the Company. The redeemable noncontrolling interests recorded are put rights held by minority shareholders in a majority-owned sports network and in Credible Labs Inc. (“Credible”). The Company accretes the changes in the redemption value of the redeemable noncontrolling interests over the period of issuance to the earliest redemption date. If a redeemable noncontrolling interest is redeemable at fair value, adjustments to the carrying amount are recorded in retained earnings. If a redeemable noncontrolling interest is redeemable at an amount in excess of fair value, the portion of the adjustment that reflects a redemption in excess of fair value is presented within net income attributable to noncontrolling interests in the Statements of Operations.

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.

Generally, the Company does not require collateral to secure receivables. As of June 30, 2021, the Company had one customer that accounted for approximately 11% of the Company’s receivables. As of June 30, 2020, the Company had no individual customers that accounted for 10% or more of the Company’s receivables.

Recently Adopted and Recently Issued Accounting Guidance and the CARES Act

Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), as amended. On July 1, 2020, the Company adopted ASU 2016-13 on a modified retrospective basis. The amendments in ASU 2016-13 require, among other things, financial assets measured at amortized cost basis to be presented at the net amount expected to be collected as compared to previous GAAP which delayed recognition until it was probable a loss had been incurred. The adoption of ASU 2016-13 did not have a material impact on the Company’s Financial Statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). On July 1, 2020, the Company adopted ASU 2018-15 on a prospective basis. The amendments in ASU 2018-15 require implementation costs incurred in a hosting arrangement that is a service contract to be capitalized using the same guidance for capitalizing implementation costs incurred to develop or obtain internal-use software. In addition, ASU 2018-15 provides guidance regarding the term over which capitalized implementation costs are to be amortized and requires specific financial statement presentation and disclosures. The adoption of ASU 2018-15 did not have a material impact on the Company’s Financial Statements.

In March 2019, the FASB issued ASU 2019-02, “Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials” (“ASU 2019-02”). On July 1, 2020, the Company adopted ASU 2019-02 on a prospective basis and reclassified entertainment programming rights, with a contract duration of longer than a year, that were previously classified as the current portion of inventories, net to non-current inventories, net on the Balance Sheet. The amendments in ASU 2019-02 align the accounting treatment for production costs of episodic television series with the accounting treatment for production costs of films. In addition,

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ASU 2019-02 modifies certain aspects of the amortization, impairment, presentation and disclosure requirements in ASC 926-20 and the impairment, presentation and disclosure requirements in ASC 920-350, including eliminating the balance sheet classification guidance. The adoption of ASU 2019-02 did not have a significant impact on the Company’s Financial Statements.

CARES Act

In March 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act includes provisions relating to refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carryback periods, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company does not expect these changes to have a material impact on its financial statements.

NOTE 3. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS

Acquisitions are accounted for under ASC 805, “Business Combinations” (“ASC 805”), which requires, among other things, that an acquirer record any noncontrolling interests in an acquiree at their acquisition date fair value.

These acquisitions support the Company’s strategy to strengthen its core brands and leverage its sports broadcasting rights and expand their reach beyond their traditional linear businesses. For these acquisitions, the initial accounting for the business combination, including the allocation of the consideration transferred, is based on provisional amounts. The amounts allocated to intangibles and goodwill, the estimates of useful lives and the related amortization expense are subject to changes pending the completion of the final valuations of certain assets and liabilities. A change in the allocation of consideration transferred and any estimates of useful lives could result in a change in the value allocated to the intangible assets that could impact future amortization expense.

For fiscal 2021, the incremental revenues and Segment EBITDA (as defined in Note 17—Segment Information), related to the acquisitions below, included in the Company’s consolidated results of operations were not material individually or in the aggregate.

Fiscal 2021

Acquisitions and Disposals

Outkick Media Acquisition

In June 2021, the Company acquired Outkick Media, LLC, a digital media company focused on the intersection of sports, news and entertainment.

Sports Marketing Business Divestiture

In March 2021, the Company sold its sports marketing businesses for cash consideration subject to post-closing adjustments and recorded a gain in Other, net in the Statement of Operations.

Overall, the fiscal 2021 Acquisitions and Disposals were not material to the Company.

Fiscal 2020

Acquisitions and Disposals

Tubi Acquisition

In April 2020, the Company acquired Tubi, Inc. (“Tubi”), a free advertising-supported video-on-demand (“AVOD”) service, for approximately $445 million in cash (the “Tubi Acquisition”), net of cash acquired. The consideration transferred of approximately $470 million has been allocated, based on a final valuation, as follows: approximately $130 million to intangible assets with useful lives ranging from three to 10 years; approximately $320 million representing goodwill; and the remainder to other net assets. The goodwill, which is not tax deductible, reflects the synergies and increased market penetration expected from combining the operations of Tubi and the Company. Additional consideration, in the form of

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

deferred consideration and unvested options, totaling approximately $45 million, may be due over a three-year period following the closing of the transaction and will be recognized as compensation expense over that period. The Company finalized its purchase price accounting for the acquisition during the fourth quarter of fiscal 2021 without any material adjustments. The Company financed the Tubi Acquisition principally with the net proceeds from the sale of its investment in Roku, Inc. (“Roku”) as discussed below.

Television Stations Acquisition and Divestiture

In March 2020, the Company acquired three television stations (FOX-affiliate KCPQ and MyNetworkTV-affiliate KZJO located in Seattle, Washington and FOX-affiliate WITI located in Milwaukee, Wisconsin) for approximately $350 million in cash from Nexstar Media Group, Inc. (“Nexstar”). As part of this transaction, the Company sold Nexstar two television stations (FOX-affiliate WJZY and MyNetworkTV-affiliate WMYT located in Charlotte, North Carolina) for approximately $45 million in cash. The consideration transferred of approximately $350 million for the stations the Company acquired has been allocated, based on a final valuation, as follows: approximately $210 million to intangible assets, of which approximately $110 million has been allocated to FCC licenses with indefinite lives and approximately $100 million to amortizable intangible assets, primarily retransmission agreements with useful lives of eight years; approximately $30 million to property, plant and equipment; and the balance to goodwill. The goodwill, which is tax deductible, reflects the increased synergies and market penetration expected from combining the operations of the three television stations with those of the Company. The Company finalized its purchase price accounting for the acquisition during the third quarter of fiscal 2021 without any material adjustments.

Credible Acquisition

In October 2019, the Company acquired 67% of the equity in Credible, a U.S. consumer finance marketplace, for approximately $260 million in cash (the “Credible Acquisition”), net of cash acquired. The remaining 33% of Credible not owned by the Company was recorded at fair value on the acquisition date based on the Company’s valuation of Credible’s business using a market approach (a Level 3 measurement as defined in Note 6—Fair Value). The consideration transferred of approximately $260 million has been allocated, based on a final valuation of 100% of Credible, as follows: approximately $75 million to intangible assets with useful lives ranging from five to 10 years; approximately $285 million representing goodwill; approximately $(110) million to redeemable noncontrolling interests and the remainder to other net assets. The goodwill, which is not tax deductible, reflects the increased market penetration and synergies expected from combining the operations of Credible and the Company. The Company finalized its purchase price accounting for the acquisition during the second quarter of fiscal 2021 without any material adjustments.

Other Transactions

Flutter

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

In May 2019, the Company and The Stars Group Inc. (“The Stars Group”), now a subsidiary of Flutter Entertainment plc (“Flutter”) and part of Flutter’s U.S. operations, announced plans to launch FOX Bet, a national media and sports wagering partnership in the U.S. The partnership was launched in the first quarter of fiscal 2020 and FOX Sports and The Stars Group entered into a long-term commercial arrangement through which FOX Sports provides Flutter with an exclusive license to use certain FOX Sports trademarks. In addition, the Company invested $236 million to acquire a 4.99% equity interest in The Stars Group, and, subject to certain conditions and applicable gaming regulatory approvals, FOX Sports has an option until August 2029 to acquire up to 50% of the equity in the U.S. business of The Stars Group. In May of 2020, the Company’s equity interest in The Stars Group was converted into Flutter equity in connection with the combination of The Stars Group and Flutter (the “Combination”). In connection with the Combination, FOX Sports received the right to acquire an approximately 18.5% equity interest in FanDuel Group, a majority-owned subsidiary of Flutter, at a price set forth in the relevant agreement (structured as a 10-year option from 2021, subject to a carrying value adjustment), which is currently the subject of ongoing arbitration proceedings. The Company made additional equity investments in Flutter in fiscal 2021 and fiscal 2020 of approximately $55 million and $100 million, respectively. As of June 30, 2021, the Company has an approximately 2.5% equity stake in Flutter. The Company accounts for the investment in Flutter at fair value (See Note 6—Fair Value).

Roku

In March 2020, the Company sold its investment in Roku for approximately $340 million. The Company recorded a loss of approximately $210 million for fiscal 2020 related to the change in the fair value of its investment in Roku prior to disposition, which was recorded in Other, net in the Statement of Operations (See Note 21—Additional Financial Information). The Company purchased its investment in Roku for approximately $40 million.

Fiscal 2019

Other Transactions

Caffeine and Caffeine Studios

In fiscal 2019, the Company invested, in the aggregate, approximately $100 million in cash for a minority equity interest in Caffeine, Inc. (“Caffeine”), a social broadcasting platform for gaming, entertainment and other creative content, and Caffeine Studio, LLC (“Caffeine Studios”), a newly formed venture that is jointly owned by the Company and Caffeine. The Company accounts for the investments in Caffeine using the measurement alternative method in accordance with ASC 321 and Caffeine Studios using the equity method.

NOTE 4. RESTRUCTURING PROGRAMS

Fiscal 2021

During fiscal 2021, the Company recorded $35 million in restructuring charges, which were primarily comprised of severance costs at the Cable Network Programming segment.

Fiscal 2020

During fiscal 2020, the Company recorded restructuring charges at the Cable Network Programming and Television segments of approximately $425 million reflecting contract termination costs related to a programming rights agreement with the United States Golf Association (the “USGA”) for the broadcast of USGA events on the Company’s networks, including the write-off of approximately $75 million of programming rights advances. The Company paid approximately $320 million to the USGA in June 2020 for the contract termination.

Changes in the restructuring program liabilities were as follows:

One time termination benefitsContract termination costsTotal
(in millions)
Balance, June 30, 2018$(37)$-$(37)
Additions(26)-(26)
Payments23-23
Balance, June 30, 2019$(40)$-$(40)
Additions(24)(427)(451)
Payments26397(a)423
Balance, June 30, 2020$(38)$(30)$(68)
Additions(39)4(35)
Payments61465
Balance, June 30, 2021$(16)$(22)$(38)
(a)Includes the write-off of approximately $75 million of programming rights advances.

Restructuring charges are recorded in Impairment and restructuring charges in the Statements of Operations. As of June 30, 2021 and 2020, restructuring liabilities of approximately $20 million and $40 million, respectively, were included in Accounts payable, accrued expenses and other current liabilities in the Balance Sheets and the balance of the accrual was included in Non-current Other liabilities in the Balance Sheets.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 5. INVENTORIES, NET

The Company’s inventories were comprised of the following:

As of June 30,
20212020
(in millions)
Sports programming rights$573$674
Entertainment programming rights355384
Total inventories, net9281,058
Less: current portion of inventories, net(729)(856)
Total non-current inventories, net$199$202

The aggregate amortization expense related to the programming rights was approximately $5.9 billion for the year ended June 30, 2021, which is included in Operating expenses in the Statements of Operations.

Based on the balance of programming rights as of June 30, 2021, the estimated amortization expense for each of the succeeding three fiscal years is as follows:

For the years ending June 30,
202220232024
(in millions)
Estimated amortization expense$822$64$24

The Company evaluates the recoverability of the unamortized costs associated with the Company’s programming rights using total estimated advertising and other revenues attributable to the program material and considering the Company’s expectations of the usefulness of the program rights. As a result of the evaluation, the Company recognized write-downs of approximately nil, $95 million and $55 million in fiscal 2021, 2020 and 2019, respectively, related to sports, entertainment and syndicated programming rights at the Cable Network Programming and Television segments, which were recorded in Operating expenses in the Statements of Operations.

NOTE 6. FAIR VALUE

In accordance with ASC 820, “Fair Value Measurement,” fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes market participant assumptions into the following categories: (i) inputs that are quoted prices in active markets (“Level 1”); (ii) inputs other than quoted prices included within Level 1 that are observable, including quoted prices for similar assets or liabilities (“Level 2”); and (iii) inputs that require the entity to use its own assumptions about market participant assumptions (“Level 3”).

The following tables present information about financial assets and liabilities carried at fair value on a recurring basis:

Fair value measurements
As of June 30, 2021
TotalLevel 1Level 2Level 3
(in millions)
Assets
Investments in equity securities$788$788(a)$-$-
Redeemable noncontrolling interests(261)--(261)(b)
Total$527$788$-$(261)

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Fair value measurements
As of June 30, 2020
TotalLevel 1Level 2Level 3
(in millions)
Assets
Investments in equity securities$531$531(a)$-$-
Liabilities
Other(6)--(6)(b)
Redeemable noncontrolling interests(305)--(305)(b)
Total$220$531$-$(311)
(a)The investment categorized as Level 1 represents an investment in equity securities of Flutter with a readily determinable fair value (See Note 3—Acquisitions, Disposals and Other Transactions under the heading “Flutter” for further discussion).
(b)The Company utilizes the market approach valuation technique for its Level 3 fair value measures. Inputs to such measures could include observable market data obtained from independent sources such as broker quotes and recent market transactions for similar assets. It is the Company’s policy to maximize the use of observable inputs in the measurement of its Level 3 fair value measurements. To the extent observable inputs are not available, the Company utilizes unobservable inputs based upon the assumptions market participants would use in valuing the liability. Examples of utilized unobservable inputs are future cash flows and long-term growth rates.

Redeemable Noncontrolling Interests

The changes in redeemable noncontrolling interests classified as Level 3 measurements were as follows:

For the years ended June 30,
202120202019
(in millions)
Beginning of year$(305)$(189)$(275)
Acquisitions(a)-(109)-
Net income(25)(33)(33)
Redemption of noncontrolling interests(b)135--
Distributions152432
Accretion and other(c)(81)287
End of year$(261)$(305)$(189)
(a)See Note 3—Acquisitions, Disposals and Other Transactions under the heading “Credible Acquisition.”
(b)As a result of the exercise of a portion of the put rights held by the sports network minority shareholder during fiscal 2021, approximately $135 million was reclassified out of Redeemable noncontrolling interests into equity. At closing, the Company paid half of the purchase price in cash and delivered a three-year promissory note for the remaining balance, which was recorded in Non-current liabilities on the Balance Sheet.
(c)As a result of the expiration of a portion of the put rights held by the sports network minority shareholder during fiscal 2020 and 2019, approximately $120 million and $200 million, respectively, were reclassified into equity.

The fair values of the redeemable noncontrolling interests are held in a sports network and in Credible, and were determined by using discounted cash flow analysis and market-based valuation approach methodologies. Significant unobservable inputs used in the fair value measurements of the Company’s redeemable noncontrolling interests are EBITDA (as defined in Note 17—Segment Information) projections and multiples. Significant increases (decreases) in multiples would result in a significantly higher (lower) fair value measurement.

The final put right held by the sports network minority shareholder will become exercisable in the first quarter of fiscal 2022. The put right held by the Credible minority shareholder will become exercisable in fiscal 2025.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Financial Instruments

The carrying value of the Company’s financial instruments, such as cash and cash equivalents, receivables, payables and investments, accounted for using the measurement alternative method in accordance with ASC 321, approximates fair value.

As of June 30,
20212020
(in millions)
Borrowings
Fair value$9,474$9,746
Carrying value$7,951$7,946

Fair value is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market (a Level 1 measurement).

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company’s assets measured at fair value on a nonrecurring basis include investments accounted for using the equity method and the measurement alternative method in accordance with ASC 321, long-lived assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements. In addition, investments accounted for using the measurement alternative method in accordance with ASC 321 are recorded at fair value as a result of observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

NOTE 7. PROPERTY, PLANT AND EQUIPMENT, NET

As of June 30,
20212020
(in millions)
Land$204$126
Buildings and leaseholds1,3191,300
Machinery and equipment1,6521,575
3,1753,001
Less: accumulated depreciation and amortization(1,732)(1,813)
1,4431,188
Construction in progress265310
Total property, plant and equipment, net$1,708$1,498

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Depreciation and amortization related to Property, plant and equipment was $237 million, $222 million and $197 million for fiscal 2021, 2020 and 2019, respectively.

NOTE 8. GOODWILL AND INTANGIBLE ASSETS, NET

The changes in the carrying values of the Company’s intangible assets and related accumulated amortization were as follows:

Intangible assets not subject to amortization
FCC licensesOtherTotalAmortizable intangible assets, net(a)Total intangible assets, net
(in millions)
Balance, June 30, 2019$2,167$642$2,809$42$2,851
Acquisitions(b)113-113300413
Disposals(b)(30)-(30)-(30)
Amortization---(36)(36)
Balance, June 30, 2020$2,250$642$2,892$306$3,198
Acquisitions(b)---1919
Amortization---(63)(63)
Balance, June 30, 2021$2,250$642$2,892$262$3,154
(a)Net of accumulated amortization of $228 million and $165 million as of June 30, 2021 and 2020, respectively.
(b)See Note 3—Acquisitions, Disposals and Other Transactions under the heading “Acquisitions and Disposals.”

Amortization related to finite-lived intangible assets was $63 million, $36 million and $15 million for fiscal 2021, 2020 and 2019, respectively.

Based on the balance of finite-lived intangible assets as of June 30, 2021, the estimated amortization expense for each of the succeeding five fiscal years is as follows:

For the years ending June 30,
20222023202420252026
(in millions)
Estimated amortization expense(a)$56$52$35$28$27
(a)These amounts may vary as acquisitions and dispositions occur in the future.

The changes in the carrying value of goodwill, by segment, are as follows:

Cable Network ProgrammingTelevisionOther, Corporate and EliminationsTotal Goodwill
(in millions)
Balance, June 30, 2019$987$1,704$-$2,691
Acquisitions(a)45462222729
Disposals(a)-(11)-(11)
Balance, June 30, 2020$1,032$2,155$222$3,409
Acquisitions(a)32--32
Disposals(a)(5)-(1)(6)
Balance, June 30, 2021$1,059$2,155$221$3,435
(a)See Note 3—Acquisitions, Disposals and Other Transactions under the heading “Acquisitions and Disposals.”

The carrying amount of Television segment goodwill was net of accumulated impairments of $371 million as of June 30, 2021 and 2020.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 9. BORROWINGS

Public Debt - Senior Notes Issued

The Company has issued senior notes (the “Notes”) under an Indenture, dated as of January 25, 2019, by and between the Company and The Bank of New York Mellon, as Trustee (the “2019 Indenture”). The Notes are direct unsecured obligations of the Company and rank pari passu with all other senior indebtedness of the Company, including the indebtedness under the Revolving Credit Agreement described below. Redemption may occur, at the option of the holders, at 101% of the principal amount plus an accrued interest amount in certain circumstances where a change of control is deemed to have occurred. The Notes are subject to certain covenants, which, among other things, limit the Company’s ability and the ability of the Company’s subsidiaries, to create liens and engage in merger, sale or consolidation transactions. The 2019 Indenture does not contain any financial maintenance covenants.

In April 2020, the Company issued $1.2 billion of senior notes and used the net proceeds for general corporate purposes. In January 2019, the Company issued $6.8 billion of senior notes and used the net proceeds, together with available cash on its balance sheet, to fund the Dividend and to pay fees and expenses incurred in connection with the issuance of such notes and the Separation and the Distribution (as summarized below).

Outstanding as of June 30,
20212020
(in millions)
Public debt
3.666% senior notes due 2022$750$750
4.030% senior notes due 20241,2501,250
3.050% senior notes due 2025600600
4.709% senior notes due 20292,0002,000
3.500% senior notes due 2030600600
5.476% senior notes due 20391,2501,250
5.576% senior notes due 20491,5501,550
Total public debt8,0008,000
Less: unamortized discount and debt issuance costs(49)(54)
Total borrowings$7,951$7,946

Current Borrowings

Included in Borrowings within Current liabilities as of June 30, 2021 was $750 million of 3.666% senior notes due in January 2022.

Revolving Credit Agreement

On March 15, 2019, the Company entered into a credit agreement (the “Revolving Credit Agreement”) among the Company, as Borrower, the initial lenders named therein, the initial issuing banks named therein, Citibank, N.A., as Administrative Agent, Deutsche Bank Securities Inc. and Goldman Sachs Bank USA, as Co-Syndication Agents, JPMorgan Chase Bank, N.A. and Morgan Stanley Bank, N.A., as Co-Documentation Agents, and the other parties party thereto. The Revolving Credit Agreement provides for a $1.0 billion unsecured revolving credit facility with a sub-limit of $150 million available for the issuance of letters of credit and a maturity date of March 2024. Under the Revolving Credit Agreement, the Company may request an increase in the amount of the credit facility commitments up to a maximum facility amount of $1.5 billion and the Company may request that the maturity date be extended for up to two additional one-year periods. The material terms of the Revolving Credit Agreement include the requirement that the Company maintain specific leverage ratios and limitations on indebtedness. In April 2020, the Company entered into an amendment to the Revolving Credit Agreement, which, among other things, deducts cash in excess of $500 million from indebtedness for purposes of calculating the operating income leverage ratio under the agreement. The interest rates and fees under the Revolving Credit Agreement are based on the Company’s long-term senior unsecured non-credit enhanced debt ratings. Given the current credit ratings, the interest rate on borrowings under the Revolving Credit Agreement would be London Interbank Offered Rate (“LIBOR”) plus 1.1% and the facility fee is 0.15%. As of June 30, 2021, there were no borrowings outstanding under the Revolving Credit Agreement.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Bridge Credit Agreement

In December 2017, 21st Century Fox America, Inc. (“21CFA”), a wholly owned subsidiary of 21CF, entered into a commitment letter on behalf of FOX with the financial institutions party thereto for borrowings of up to $9 billion to provide FOX with financing in connection with the Dividend. FOX paid a commitment fee of 0.125%. Upon the issuance of the $6.8 billion of senior notes in January 2019, the commitment letter was reduced to $1.7 billion. In anticipation of the payment of the Dividend, the Company entered into a $1.7 billion 364-Day Bridge Term Loan Agreement (the “Bridge Credit Agreement”) on March 15, 2019 with the initial lenders named therein, Goldman Sachs Bank USA, as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and Citibank, N.A. and Deutsche Bank Securities Inc., as Co-Syndication Agents. The Company did not request any borrowings under the Bridge Credit Agreement and, as permitted under the terms of the agreement, terminated the agreement on March 20, 2019. In connection with such termination, all accrued and unpaid fees thereunder were paid in full and all commitments thereunder were terminated.

Note 10. LEASES

Lessee Arrangements

Effective July 1, 2019, the Company changed its method of accounting for leases due to the adoption of ASU 2016-02, “Leases (Topic 842)”, as amended. The following amounts were recorded in the Company’s Balance Sheet relating to its operating leases and other supplemental information:

For the years ended June 30,
20212020
(in millions)
ROU assets$469$539
Lease liabilities
Current lease liabilities$92$122
Non-current lease liabilities409452
Total lease liabilities$501$574
Other supplemental information
Weighted average remaining lease term8 years8 years
Weighted average discount rate3%3%

The following table presents information about the Company’s lease costs and supplemental cash flows information for leases:

For the years ended June 30,
20212020
(in millions)
Lease costs
Total lease costs(a)$126$126
Supplemental cash flows information
Operating cash flows from operating leases$134$166
ROU assets obtained in exchange for operating lease liabilities$49$87
(a)Total lease costs of $126 million for the years ended June 30, 2021 and 2020 are net of sublease income of approximately $30 million and $50 million, respectively. Approximately $15 million and $40 million of the sublease income for the years ended June 30, 2021 and 2020, respectively, relates to office facilities that were subleased through November 2020 to News Corporation.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The following table presents the lease payments relating to the Company’s operating leases:

As of June 30, 2021
(in millions)
Fiscal Year
2022$103
2023101
2024100
202590
202650
Thereafter145
Total lease payments589
Less: imputed interest(88)
Present value of operating lease liabilities$501

In accordance with GAAP in effect prior to the adoption of Topic 842, total operating lease expense, including corporate allocations, was approximately $100 million for fiscal 2019.

Lessor Arrangements

The Company’s lessor arrangements primarily relate to its owned production and office facilities at the FOX Studio Lot, which is located in Los Angeles, California. The Company is responsible for the management of the FOX Studio Lot, which includes managing and providing facilities, studio operations, and production services. The Company leases production and office space on the FOX Studio Lot to 21CF for an initial term of seven years, subject to two five-year renewal options exercisable by 21CF. As a result, the FOX Studio Lot will predominantly be utilized by Disney productions until 2026. The Company will receive approximately $50 million annually in lease payments over the lease term.

The Company recorded total lease income of approximately $50 and $55 million for fiscal 2021 and 2020, respectively, which is included in Revenues in the Statements of Operations. The Company recognizes lease payments for operating leases as revenue on a straight-line basis over the lease term and variable lease payments as revenue in the period incurred.

Note 11. STOCKHOLDERS’ Equity

Common Stock and Preferred Stock

The Company has two classes of common stock that are authorized and outstanding: Class A Common Stock and Class B Common Stock. As a general matter, holders of Class B Common Stock are entitled to one vote per share on all matters on which stockholders have the right to vote, including director elections. Holders of Class A Common Stock are entitled to vote only in the limited circumstances set forth in the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”).

As of June 30, 2021, there were approximately 17,700 holders of record of shares of Class A Common Stock and approximately 4,700 holders of record of shares of Class B Common Stock.

In the event of a liquidation or dissolution or winding up of the Company, after distribution in full of the preferential and/or other amounts to be distributed to the holders of shares of any outstanding series of preferred stock or series common stock, holders of Class A Common Stock and Class B Common Stock, to the extent fixed by the Board of Directors (the “Board”) with respect thereto, are entitled to receive all of the remaining assets of the Company available for distribution to its stockholders, ratably in proportion to the number of shares held by Class A Common Stock holders and Class B Common Stock holders, respectively. In the event of any merger or consolidation with or into another entity, the holders of Class A Common Stock and the holders of Class B Common Stock generally are entitled to receive substantially identical per share consideration.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Under the Certificate of Incorporation, the Board is authorized to issue shares of preferred stock or common stock at any time, without stockholder approval, and to determine all the terms of those shares, including the following:

(i) the voting rights, if any, except that the issuance of preferred stock or series common stock which entitles holders thereof to more than one vote per share requires the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of directors;

(ii) the dividend rate and preferences, if any, which that preferred stock or common stock will have compared to any other class; and

(iii) the redemption and liquidation rights and preferences, if any, which that preferred stock or common stock will have compared to any other class.

Any decision by the Board to issue preferred stock or common stock must, however, be taken in accordance with the Board’s fiduciary duty to act in the best interests of the Company’s stockholders. The Company is authorized to issue 35,000,000 shares of preferred stock, par value $0.01 per share and 35,000,000 shares of series common stock, par value $0.01 per share. The Board has the authority, without any further vote or action by the stockholders, to issue preferred stock and series common stock in one or more series and to fix the number of shares, designations, relative rights (including voting rights), preferences, qualifications and limitations of such series to the full extent permitted by Delaware law.

Stock Repurchase Program

In November 2019, the Board authorized a stock repurchase program under which the Company was authorized to repurchase $2 billion of Class A Common Stock and Class B Common Stock. In June 2021, the Board authorized the repurchase of an additional $2 billion of Class A Common Stock and Class B Common Stock. The program has no time limit and may be modified, suspended or discontinued at any time. As of June 30, 2021, the Company’s remaining stock repurchase authorization was approximately $2.4 billion.

Fiscal 2021

In connection with the stock repurchase program, the Company entered into two accelerated share repurchase (“ASR”) agreements in August 2020 to repurchase $154 million of Class A Common Stock and $66 million of Class B Common Stock. In accordance with the ASR agreements, the Company paid a third-party financial institution $154 million and $66 million and received initial deliveries of approximately 4.7 million and 2.0 million shares of Class A Common Stock and Class B Common Stock, respectively, representing 80% of the shares expected to be repurchased under each ASR agreement, at a price of $26.00 and $26.01 per share, which was the Nasdaq closing share price of the Class A Common Stock and Class B Common Stock, respectively, on August 21, 2020. Upon settlement of the ASR agreements in September 2020, the Company received final deliveries of approximately 0.9 million and 0.4 million shares of Class A Common Stock and Class B Common Stock, respectively. The final number of shares purchased under the ASR agreements was determined using a price of $27.57 and $27.67 per share (the volume-weighted average market price of the Class A Common Stock and Class B Common Stock, respectively, during the terms of the ASR agreements less a discount applicable for the Class A Common Stock). The Company accounted for each ASR agreement as two separate transactions. The initial deliveries of Class A Common Stock and Class B Common Stock were accounted for as treasury stock transactions recorded on the acquisition date. The final settlements of Class A Common Stock and Class B Common Stock were accounted for as forward contracts indexed to the Class A Common Stock or Class B Common Stock, as applicable, and qualified as equity transactions.

Fiscal 2020

In connection with the stock repurchase program, the Company entered into an ASR agreement in November 2019 to repurchase $350 million of Class A Common Stock and announced its intention to promptly repurchase $150 million of Class B Common Stock. In accordance with the ASR agreement, the Company paid a third-party financial institution $350 million and received an initial delivery of approximately eight million shares of Class A Common Stock, representing 80% of the shares expected to be repurchased under the ASR agreement, at a price of $34.99 per share, which was the Nasdaq closing share price of the Class A Common Stock on November 11, 2019. Upon settlement of the ASR agreement in January 2020, the Company received a final delivery of approximately two million shares of Class A

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Common Stock. The final number of shares purchased under the ASR agreement was determined using a price of $36.05 per share (the volume-weighted average market price of the Class A Common Stock during the term of the ASR agreement less a discount). The Company accounted for the ASR agreement as two separate transactions. The initial delivery of Class A Common Stock was accounted for as a treasury stock transaction recorded on the acquisition date. The final settlement of Class A Common Stock was accounted for as a forward contract indexed to the Class A Common Stock and qualified as an equity transaction.

In addition to the shares purchased under the ASR agreements, the Company repurchased shares of Class A Common Stock and Class B Common Stock in the open market during fiscal 2021 and fiscal 2020. Repurchased shares are retired and reduce the number of shares issued and outstanding. The Company allocates the amount of the repurchase price over par value between additional paid-in capital and retained earnings.

The following table summarizes the Company’s repurchases of its Class A Common Stock and Class B Common Stock:

For the years ended June 30,
20212020
(in millions)
Total cost of repurchases$1,001$600
Total number of shares repurchased3217

Stockholders Agreement

The Company announced on November 6, 2019 that it had entered into a stockholders agreement with the Murdoch Family Trust pursuant to which the Company and the Murdoch Family Trust have agreed not to take actions that would result in the Murdoch Family Trust and Murdoch family members together owning more than 44% of the outstanding voting power of the shares of Class B Common Stock or would increase the Murdoch Family Trust’s voting power by more than 1.75% in any rolling twelve-month period. The Murdoch Family Trust would forfeit votes to the extent necessary to ensure that the Murdoch Family Trust and the Murdoch family collectively do not exceed 44% of the outstanding voting power of the Class B shares, except where a Murdoch family member votes their own shares differently from the Murdoch Family Trust on any matter.

Dividends

The following table summarizes the dividends declared and paid per share on both the Company’s Class A Common Stock and Class B Common Stock:

For the years ended June 30,
202120202019
Cash dividend per share$0.46$0.46$0.23

Comprehensive Income (Loss)

Comprehensive income is reported in the Statements of Comprehensive Income and consists of Net income and Other comprehensive income (loss), including benefit plan adjustments, which affect stockholders’ equity, and under GAAP, are excluded from Net income.

The following tables summarize the activity within Other comprehensive income (loss):

For the year ended June 30, 2021
Before taxTax benefit (provision)Net of tax
(in millions)
Benefit plan adjustments
Unrealized gains$87$(21)$66
Reclassifications realized in net income(a)45(12)33
Other comprehensive income$132$(33)$99

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

For the year ended June 30, 2020
Before taxTax benefit (provision)Net of tax
(in millions)
Benefit plan adjustments
Unrealized losses$(175)$44$(131)
Reclassifications realized in net income(a)29(7)22
Other comprehensive loss$(146)$37$(109)
For the year ended June 30, 2019
Before taxTax benefit (provision)Net of tax
(in millions)
Benefit plan adjustments and other
Unrealized losses$(133)$35$(98)
Reclassifications realized in net income(a)12(3)9
Other comprehensive loss$(121)$32$(89)
(a)Reclassifications of amounts related to benefit plan adjustments are included in Other, net in the Statements of Operations (See Note 15—Pension and Other Postretirement Benefits for additional information).

Accumulated other comprehensive loss

The following table summarizes the components of Accumulated other comprehensive loss, net of tax:

As of June 30,
202120202019
(in millions)
Benefit plan adjustments and other$(318)$(417)$(308)(a)
Accumulated other comprehensive loss, net of tax$(318)$(417)$(308)
(a)Includes a reclassification of $13 million as a result of the adoption of ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” to eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act enacted in December 2017 and $157 million related to the Shared Plans (as defined in Note 15—Pension and Other Postretirement Benefits”) allocable to the Company’s employees that was transferred to the Company in fiscal 2019 (See Statements of Equity).

In fiscal 2019, the Company adopted ASU 2016-01, “Financial Instruments––Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” and recorded a cumulative effect adjustment of $130 million to reclassify unrealized holding gains on investments in equity securities within Accumulated other comprehensive (loss) income to 21CF investment (See Statements of Equity).

NOTE 12. EQUITY-BASED COMPENSATION

Prior to the Distribution, the Company’s employees participated in 21CF’s equity plans. 21CF had plans authorized to grant equity awards of 21CF stock to the Company’s employees. The equity-based compensation expense recorded by the Company, in the periods prior to March 19, 2019, includes the expense associated with the employees historically attributable to the Company’s operations, as well as the expense associated with the allocation of equity-based compensation expense for corporate employees.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

2019 Shareholder Alignment Plan

In connection with the Distribution, the Company adopted the Fox Corporation 2019 Shareholder Alignment Plan (the “SAP”), under which equity-based compensation, including stock options (including performance-based stock options (“PSOs”)), stock appreciation rights, restricted and unrestricted stock, RSUs, performance stock units (“PSUs”) and other types of FOX equity awards may be granted. The Company’s officers, directors and employees are eligible to participate in the SAP. The maximum number of shares of Class A Common Stock that may be issued under the SAP is 65 million shares. As of June 30, 2021, the remaining number of shares of Class A Common Stock available for issuance under the SAP was approximately 48 million.

Awards granted under the SAP (other than stock options or stock appreciation rights) entitle the holder to receive Dividend Equivalents (as defined in the SAP) for each regular cash dividend on the common stock underlying the award paid by the Company during the award period. Dividend equivalents granted with respect to equity awards will be accrued during the applicable award period and such dividend equivalents will vest and be paid only if and when the underlying award vests.

The fair value of equity-based compensation under the SAP was calculated according to the type of award issued.

Restricted Stock Units

RSUs are awards that represent the potential to receive shares of Class A Common Stock at the end of the applicable vesting period, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee of the Board (the “Compensation Committee”) may establish. RSUs awarded under the SAP are fair valued based upon the fair market value of Class A Common Stock on the grant date. Any person who holds RSUs has no ownership interest in the shares of Class A Common Stock to which such RSUs relate until and unless shares of Class A Common Stock are delivered to the holder.

In fiscal 2021 and 2020, a total of approximately 2.2 million and 1.1 million RSUs were granted, respectively, which vest in equal annual installments over a three-year period subject to the participants’ continued employment with the Company.

In March 2019, in connection with the Distribution, the Compensation Committee granted approximately 2.4 million RSUs under the SAP. Approximately 50% of the RSUs vested on June 15, 2020 and 50% vested on June 15, 2021.

Performance Stock Units

PSUs are fair valued on the date of grant and expensed over the service period using a straight-line method as the awards cliff vest at the end of a three-year performance period. The Company also estimates the number of shares expected to vest which is based on management’s determination of the probable outcome of the performance conditions, which requires considerable judgment. The Company records a cumulative adjustment in periods in which the Company’s estimate of the number of shares expected to vest changes. Additionally, the Company ultimately adjusts the expense recognized to reflect the actual vested shares following the resolution of the performance conditions. The number of shares that will be issued upon vesting of PSUs can range from 0% to 200% of the target award, based on the Company’s three-year total shareholder return (“TSR”) as measured against the three-year TSR of the companies that comprise the Standard and Poor’s 500 Index and other performance measures. The fair value of the TSR condition is determined using a Monte Carlo simulation model.

In fiscal 2021 and 2020, a total of approximately 0.3 million and 1.4 million PSUs were granted, respectively, which have a three-year performance measurement period. The awards are subject to the achievement of three pre-established objective performance measures determined by the Compensation Committee. The awards issued will be settled in shares of Class A Common Stock upon vesting and are subject to the participants’ continued employment with the Company. Any person who holds PSUs has no ownership interest in the shares of Class A Common Stock to which such PSUs relate until and unless shares of Class A Common Stock are delivered to the holder. All shares of Class A Common Stock underlying awards that are cancelled or forfeited become available for future grants. Certain of these awards have a graded vesting provision and the expense recognition is accelerated.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

21CF RSUs and PSUs

The Company participated in 21CF’s 2013 Long-Term Incentive Plan (the “2013 Plan”), under which RSUs and PSUs were granted. The Company’s employees were eligible to participate in the 2013 Plan prior to the Distribution. The Compensation Committee of 21CF’s Board of Directors (“21CF’s Compensation Committee”) determined the recipients, type of award to be granted and amounts of awards to be granted under the 2013 Plan. In connection with the Distribution, certain of the 21CF RSU and PSU awards were converted into FOX RSUs using a formula designed to preserve the value of the awards immediately prior to the Distribution. All of the converted FOX RSUs were granted under the SAP and the approximately 5.5 million shares of Class A Common Stock underlying the converted FOX RSUs do not count against the maximum number of shares that may be issued under the SAP described above.

The following table summarizes the activity related to RSUs and target PSUs granted to the Company’s employees to be settled in stock (RSUs and PSUs in thousands):

Fiscal 2021Fiscal 2020Fiscal 2019
Number of sharesWeighted average grant- date fair valueNumber of sharesWeighted average grant- date fair valueNumber of sharesWeighted average grant- date fair value(a)
RSUs and PSUs
Unvested units at beginning of the year8,043$29.987,660$32.2710,896$29.77
Granted2,49528.072,49932.441,565(b)46.11
Vested(4,654)26.71(1,862)43.07(5,070)(d)30.07
Cancelled(189)32.01(254)27.14(3,166)29.72
Net units granted in conversion, as a result of the Separation----1,011(b), (c)N/A
Granted after conversion----2,42440.11
Unvested units at the end of the year(e)5,695$31.758,043$29.987,660$32.27
(a)The weighted average grant date fair value prior to the Distribution represents the fair value of awards granted with respect to 21CF class A common stock prior to the conversion of the awards to FOX equity awards. The weighted average grant date fair value of the unvested units after the conversion in fiscal 2019 represents the fair value of awards using the applicable conversion ratio.
(b)In fiscal 2019, 21CF’s Compensation Committee granted approximately 1.6 million 21CF RSUs to certain employees of the Company that converted into FOX RSUs that will generally vest in August 2021.
(c)In fiscal 2018, 21CF’s Compensation Committee granted approximately 3.1 million 21CF PSUs to certain employees of the Company that converted into FOX RSUs that vested in August 2020. In addition, 21CF’s Compensation Committee made a special grant of approximately 2.6 million 21CF restricted stock units (“Retention RSUs”) to certain of the Company’s senior executives, including 21CF named executive officers. Approximately 50% of the Retention RSUs were paid out in shares of 21CF class A common stock and the remaining 50% were converted into FOX RSUs and Disney RSUs on the same pro rata basis accorded to shareholders of 21CF common stock in the mergers contemplated by the 21CF Disney Merger Agreement and vested in fiscal 2020.
(d)The 21CF PSUs scheduled to vest in 2019 were accelerated and paid out and 50% of the Retention RSUs were paid out in shares of 21CF class A common stock in connection with the Distribution.
(e)The intrinsic value of unvested RSUs and target PSUs as of June 30, 2021 was approximately $210 million.

Stock Options

Stock options are awards that entitle the holder to purchase a specified number of shares of Class A Common Stock at a specified price for a specified period of time and become exercisable over time, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee of the Board may establish. Stock Options granted under the SAP were fair valued using a Black-Scholes option valuation model that uses the following assumptions: (i) expected volatility was generally based on historical volatility of the Company, 21CF and the Company’s peer group over the expected term of the stock options; (ii) expected term of stock

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

options granted was generally determined by analyzing historical data of the Company’s peer group and represented the period of time that stock options granted were expected to be outstanding; (iii) risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award; and (iv) expected dividend yield.

During fiscal 2020, approximately 3.8 million stock options were granted, which generally have a term of seven years and vest in equal annual installments over a three-year period subject to the participants’ continued employment with the Company. During fiscal 2019, the Compensation Committee granted approximately 3.1 million stock options, in connection with the Distribution. Approximately 50% of the stock options vested on June 15, 2020 and 50% vested on June 15, 2021. The options will expire approximately seven years from the grant date.

Performance-Based Stock Options

PSOs are awards that entitle the holder to purchase a specified number of shares of Class A Common Stock at a specified price for a specified period of time, contingent on the performance of the Class A Common Stock over a three-year period, subject to the terms and conditions of the SAP, the applicable award documents and such other terms and conditions as the Compensation Committee of the Board may establish. The PSOs granted under the SAP will vest in full only if the Company’s Class A Common Stock exceeds the exercise price of the PSO by a certain threshold over a certain period of time during the performance period (the “market condition”). The PSOs were fair valued using a Monte Carlo simulation model that uses the following assumptions: (i) expected volatility; (ii) expected term; (iii) risk-free interest rate; and (iv) expected dividend yield. Compensation cost related to the PSO will be recognized even if the market condition is not met.

During fiscal 2021, the Company granted approximately 5.0 million PSOs. As the market condition has been met, the PSOs will vest in full at the end of a three-year performance period and have a term of seven years thereafter.

The following table summarizes information about the Company’s stock options and PSOs granted under the SAP during fiscal 2021, 2020 and 2019 (options in thousands).

Fiscal 2021Fiscal 2020Fiscal 2019
Number of optionsWeighted average exercise priceNumber of optionsWeighted average exercise priceNumber of optionsWeighted average exercise price
Outstanding at the beginning of the year6,809$35.113,113$40.25-$-
Granted5,00327.523,83830.873,11840.25
Exercised(a)(386)27.21----
Cancelled(276)30.44(142)33.37(5)40.26
Outstanding at the end of the year(b)11,150$32.096,809$35.113,113$40.25
Exercisable at the end of the year(c)3,981$38.121,626$39.30-$-
Weighted average grant-date fair value of options granted$7.37$6.87$8.67
Weighted average remaining contractual term of options outstanding at the end of the year6.82 years5.98 years6.72 years
Weighted average remaining contractual term of options exercisable at the end of the year4.81 years5.50 yearsN/A
(a)During fiscal 2021, the Company received approximately $12 million in cash payments from the exercise of stock options.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(b)The intrinsic value of options outstanding as of June 30, 2021, 2020 and 2019 was $65.6 million, $2.8 million and nil, respectively.
(c)The intrinsic value of options exercisable as of June 30, 2021, 2020 and 2019 was $5.5 million, $0.7 million and nil, respectively.

The fair value of each PSO and stock option grant is estimated on the date of grant with the following weighted average assumptions used for grants during fiscal 2021, 2020 and 2019:

For the years ended June 30,
202120202019
Expected volatility35.00%26.66%26.50%
Risk-free interest rate0.66%1.43%2.41%
Expected dividend yield1.67%1.46%1.12%
Expected term5.29 years3.83 years3.84 years

The following table summarizes the Company’s equity-based compensation:

For the years ended June 30,
202120202019
(in millions)
Equity-based compensation(a)$147$156$103
Intrinsic value of all settled equity-based awards$139$47$247
Tax benefit on settled equity-based awards$23$6$47
(a)Prior to the Distribution in March 2019, equity-based compensation included allocated expense for both executive directors and corporate executives of 21CF, allocated using a proportional allocation driver, which management has deemed to be reasonable.

As of June 30, 2021, the Company’s total estimated compensation cost, not yet recognized, related to non-vested equity awards held by the Company’s employees was approximately $70 million and is expected to be recognized over a weighted average period between one and two years.

NOTE 13. RELATED PARTY TRANSACTIONS AND TWENTY-FIRST CENTURY FOX, INC. INVESTMENT

Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, which prior to the Distribution included subsidiaries and equity affiliates of 21CF, to buy and/or sell programming and purchase and/or sell advertising.

For the years ended June 30, 2021 and 2020, the related party revenue and expense were not material (See Note 10—Leases for information related to office facilities that were subleased to News Corporation for a portion of fiscal 2021 and Note 14 — Commitments and Contingencies for information related to U.K. Newspaper Matters Indemnity obligation to News Corporation). For the year ended June 30, 2019, the Company recorded related party revenue and expense of $302 million and $57 million, respectively.

As of June 30, 2021 and 2020, the amounts due to related parties were $59 million and $67 million, respectively, which were included in Accounts payable, accrued expenses and other current liabilities in the Balance Sheets.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Corporate Allocations and Twenty-First Century Fox, Inc. Investment

Prior to the Distribution, 21CF provided services to and funded certain expenses for the Company such as: global real estate and occupancy costs and employee benefits (“Direct Corporate Expenses”). In addition, the Company’s Financial Statements include, for the periods prior to March 19, 2019, general corporate expenses of 21CF which were not historically allocated to the Company for certain support functions that were provided on a centralized basis within 21CF prior to the Distribution and not recorded at the business unit level, such as certain expenses related to finance, legal, insurance, information technology, compliance and human resources management activities, among others (“General Corporate Expenses”). For purposes of the Financial Statements for fiscal 2019, the General Corporate Expenses were allocated to the Company. The General Corporate Expenses were included in the Statements of Operations in Selling, general and administrative expenses and Other, net, as appropriate. These expenses were allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of combined revenues, headcount or other relevant measures of the Company. Management believes the assumptions underlying the Financial Statements, including the assumptions regarding allocating General Corporate Expenses from 21CF are reasonable. Nevertheless, the Financial Statements may not include all of the actual expenses that would have been incurred by FOX and may not reflect the Company’s consolidated results of operations and cash flows had it been a standalone company prior to the Distribution. Actual costs that would have been incurred if the Company had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. For the purposes of the Statements of Operations, the Company recorded approximately $270 million of General Corporate Expenses within Selling, general and administrative expenses for fiscal 2019 and the remaining balance of the Corporate allocations presented in the table below within Other, net for fiscal 2019.

Intercompany transactions with 21CF or its affiliates and the Company are reflected in the historical Financial Statements for the periods prior to the Distribution. All significant intercompany balances between 21CF and the Company, for the periods prior to the Distribution, have been reflected in the Statements of Cash Flows as a financing activity and in the Statements of Equity as a Twenty-First Century Fox, Inc. investment.

The following table summarizes the components of the net decrease in the Twenty-First Century Fox, Inc. investment for fiscal 2019:

For the year ended June 30, 2019
(in millions)
Cash pooling, general financing activities and other(a)$(1,502)
Corporate allocations291
Net dividend paid to Twenty-First Century Fox, Inc.(6,500)
Taxes payable(b)821
Deferred taxes on step-up(c)5,836
Other deferred taxes(c)90
Net decrease in Twenty-First Century Fox, Inc. investment$(964)
(a)The nature of activities included in the line item ‘Cash pooling, general financing activities and other’ includes financing activities, capital transfers, cash sweeps, other treasury services and Direct Corporate Expenses.
(b)For purposes of the Company’s financial statements for the periods prior to the Distribution, the income tax benefit in the Statements of Operations has been calculated as if FOX filed a separate tax return and was operating as a standalone business. This amount represents the difference between the separate tax return methodology and the actual tax liabilities attributed to the Company, in accordance with applicable tax law, as of the date of the Distribution.
(c)As a result of the Separation and the Distribution, FOX obtained an additional tax basis in its assets equal to their respective fair market values. These amounts represent the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1—Description of Business and Basis of Presentation under the heading “Basis of Presentation”) and other deferred tax adjustments recorded as of the date of the Distribution.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 14. COMMITMENTS AND CONTINGENCIES

The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments as of June 30, 2021:

As of June 30, 2021
Payments due by period
Total1 year2 - 3 years4 - 5 yearsAfter 5 years
(in millions)
Operating leases$589$103$201$140$145
Borrowings8,0007501,2506005,400
Sports programming rights36,9054,3718,2197,44716,868
Entertainment programming rights1,12278731916-
Other commitments and contractual obligations58728024958-
Total commitments, borrowings and contractual obligations$47,203$6,291$10,238$8,261$22,413

Operating leases

For additional information on operating leases, see Note 2—Summary of Significant Accounting Policies under the heading “Leases” and Note 10—Leases.

Sports programming rights

Under the Company’s contracts with the NFL, the remaining future minimum payments for program rights to broadcast certain football games are payable over the remaining term of the contract through the 2033 NFL season. The NFL has a one-time right to terminate the agreement after the 2029 NFL season.

The Company’s contract with MLB gives the Company rights to broadcast certain regular season and post-season games, as well as exclusive rights to broadcast MLB’s World Series and All-Star Game through the 2028 MLB season.

The Company’s contracts with the National Association of Stock Car Auto Racing (“NASCAR”) give the Company rights to broadcast certain races and ancillary content through calendar year 2024.

Under the Company’s contracts with certain collegiate conferences, remaining future minimum payments for program rights to broadcast certain sports events are payable over the remaining terms of the contracts.

Other commitments and contractual obligations

Primarily includes obligations relating to talent costs and television rating services agreements.

Pension and other postretirement benefits

In accordance with ASC 715, “Compensation—Retirement Benefits” (“ASC 715”), the total accrued net benefit liability for pension and other postretirement benefit plans recognized as of June 30, 2021 was $598 million (See Note 15—Pension and Other Postretirement Benefits). This amount is affected by, among other items, statutory funding levels, changes in plan demographics and assumptions and investment returns on plan assets. Because of the current overall funded status of the Company’s material plans, the accrued liability does not represent expected near-term liquidity needs and, accordingly, this amount is not included in the contractual obligations table.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Contingencies

Profits Participants Litigation

In November 2015, profits participants in the Bones television series filed lawsuits against 21CF, Fox Entertainment Group, Twentieth Century Fox Film Corporation, Twentieth Century Fox Television (“TCFTV”), and Fox Broadcasting Corporation, alleging improprieties relating to profits participation payments for the show. During the fiscal year ended June 30, 2020, Disney as successor to 21CF, Fox Entertainment Group, Twentieth Century Fox Film Corporation, and TCFTV, settled with the plaintiffs and with other non-party profits participants, and the Company contributed approximately $58 million to those settlements.

FOX News

The Company’s FOX News business and certain of its current and former employees have been subject to allegations of sexual harassment and discrimination on the basis of sex and race. The Company has resolved many of these claims and is contesting other claims in litigation. The Company has also received regulatory and investigative inquiries relating to these matters. To date, none of the amounts paid in settlements or reserved for pending or future claims is material, individually or in the aggregate, to the Company. The amount of additional liability, if any, that may result from these or related matters cannot be estimated at this time. However, the Company does not currently anticipate that the ultimate resolution of any such pending matters will have a material adverse effect on its business, financial condition, results of operations or cash flows.

U.K. Newspaper Matters Indemnity

In connection with the separation of 21CF and News Corporation in June 2013 (the “21CF News Corporation Separation”), 21CF agreed to indemnify News Corporation, on an after-tax basis, for payments made after the 21CF News Corporation Separation arising out of civil claims and investigations relating to phone hacking, illegal data access and inappropriate payments to public officials that occurred at subsidiaries of News Corporation before the 21CF News Corporation Separation, as well as legal and professional fees and expenses paid in connection with the related criminal matters, other than fees, expenses and costs relating to employees who are not (i) directors, officers or certain designated employees or (ii) with respect to civil matters, co-defendants with News Corporation (the “U.K. Newspaper Matters Indemnity”). In accordance with the Separation Agreement, the Company assumed certain costs and liabilities related to the U.K. Newspaper Matters Indemnity. The liability recorded in the Balance Sheets related to the indemnity was approximately $55 million and $65 million as of June 30, 2021 and 2020, respectively.

Defamation and Disparagement Claims

From time to time, the Company and its news businesses, including FOX News Media and the FOX Television Stations, and their employees are subject to lawsuits alleging defamation or disparagement. These include lawsuits filed by Smartmatic USA Corp. and certain of its affiliates (collectively, “Smartmatic”) in February 2021 and Dominion Voting Systems, Inc. and certain of its affiliates (collectively, “Dominion”) in March 2021. The Company believes these lawsuits, including the Smartmatic and Dominion matters, are without merit and intends to defend against them vigorously. To date, none of the amounts the Company has paid in settlements of defamation or disparagement claims or reserved for pending or future claims is material, individually or in the aggregate, to the Company. The amount of additional liability, if any, that may result from these or related matters cannot be estimated at this time. However, the Company does not currently anticipate that the ultimate resolution of any such pending matters will have a material adverse effect on its business, financial condition, results of operations or cash flows.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Other

The Company establishes an accrued liability for legal claims and indemnification claims when the Company determines that a loss is both probable and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the amounts accrued for such matters. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition. For the contingencies disclosed above for which there is at least a reasonable possibility that a loss may be incurred, other than the accrual provided, the Company was unable to estimate the amount of loss or range of loss.

The Company’s operations are subject to tax in various domestic jurisdictions and as a matter of course, the Company is regularly audited by federal and state tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity. Each member of the 21CF consolidated group, which includes 21CF, the Company (prior to the Distribution) and 21CF’s other subsidiaries, is jointly and severally liable for the U.S. federal income and, in certain jurisdictions, state tax liabilities of each other member of the consolidated group. Consequently, the Company could be liable in the event any such liability is incurred, and not discharged, by any other member of the 21CF consolidated group. The tax matters agreement requires 21CF and/or Disney to indemnify the Company for any such liability. Disputes or assessments could arise during future audits by the IRS in amounts that the Company cannot quantify.

NOTE 15. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company participates in and/or sponsors various pension, savings and postretirement benefit plans. Pension plans and postretirement benefit plans are closed to new participants with the exception of a small group covered by collective bargaining agreements. The Company has a legally enforceable obligation to contribute to some plans and is not required to contribute to others. The plans include both defined benefit pension plans and employee non-contributory and employee contributory accumulation plans covering all eligible employees. The Company makes contributions in accordance with applicable laws or contract terms.

Pension and postretirement plans that are sponsored by the Company (“Direct Plans”) are accounted for as defined benefit pension plans. Accordingly, the funded and unfunded position of each Direct Plan is recorded in the Balance Sheets. Actuarial gains and losses that have not yet been recognized through income are recorded in Accumulated other comprehensive loss net of taxes, and they are systematically amortized as a component of net periodic benefit cost in accordance with ASC 715. The Company’s benefit obligation for Direct Plans is calculated using assumptions which the Company reviews on a regular basis. The funded status of the Direct Plans can change from year to year, but the assets of the funded plans have been sufficient to pay all benefits that came due in each of fiscal 2021, 2020 and 2019.

Prior to the Distribution, certain of the Company’s employees participated in defined benefit pension and postretirement plans sponsored by 21CF (“Shared Plans”), which include participants of other 21CF subsidiaries. Shared Plans were accounted for as multiemployer benefit plans. Therefore, no asset or liability was recorded to recognize the funded status. The related pension expenses allocated to the Company were based primarily on benefits earned by active employees and accounted for in a manner similar to a defined contribution plan. In contemplation of the Separation, the pension and postretirement benefit assets and liabilities of the Shared Plans allocable to the Company’s employees were transferred to the Company in fiscal 2019. Assets of $630 million, projected benefit obligations of $765 million and $188 million of accumulated other comprehensive loss ($143 million, net of tax) were recorded for pension benefits transferred from 21CF. Projected benefit obligations of $98 million and $18 million of accumulated other comprehensive loss ($14 million, net of tax) were recorded for postretirement benefits transferred from 21CF.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The Company uses a June 30 measurement date for all Direct Plans. The following table sets forth the change in the projected benefit obligation, change in the fair value of plan assets and funded status for the Company’s Direct Plans:

Pension benefitsPostretirement benefits
As of June 30,
2021202020212020
(in millions)
Projected benefit obligation, beginning of the year$1,409$1,255$104$103
Service cost383522
Interest cost303923
Benefits paid(23)(21)(4)(3)
Settlements(a)(51)(45)--
Actuarial losses (gains)(b)65145(6)(1)
Other-1--
Projected benefit obligation, end of the year1,4681,40998104
Change in the fair value of plan assets for the Company's benefit plans:
Fair value of plan assets, beginning of the year788800--
Actual return on plan assets19524--
Employer contributions633043
Benefits paid(23)(21)(4)(3)
Settlements(a)(51)(45)--
Fair value of plan assets, end of the year972788--
Funded status(c)$(496)$(621)$(98)$(104)
Grantor Trust assets(c)$304$247$-$-
(a)Represents the full settlement of former employees deferred pension benefit obligations through lump sum payments.
(b)Actuarial losses (gains) for June 30, 2021 were mainly due to a change in the discount rate assumption utilized in measuring plan obligations and changes to other economic assumptions and demographic experience. Actuarial losses for June 30, 2020 were mainly due to a change in the discount rate assumption utilized in measuring plan obligations.
(c)The Company has established an irrevocable grantor trust (the “Grantor Trust”), administered by an independent trustee, with the intention of making cash contributions to the Trust to fund certain future pension benefit obligations of the Company. The assets in the Grantor Trust are unsecured funds of the Company and can be used to satisfy the Company’s obligations in the event of bankruptcy or insolvency.

Amounts recognized in the Balance Sheets consist of:

Pension benefitsPostretirement benefits
As of June 30,
2021202020212020
(in millions)
Pension assets$4$-$-$-
Accrued pension liabilities(500)(621)(98)(104)
Net amount recognized$(496)$(621)$(98)$(104)

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Amounts recognized in Accumulated other comprehensive loss, before tax, consist of:

Pension benefitsPostretirement benefits
As of June 30,
2021202020212020
(in millions)
Actuarial losses$409$533$13$20
Prior service cost23--
Net amounts recognized$411$536$13$20

Accumulated pension benefit obligations as of June 30, 2021 and 2020 were $1,319 million and $1,273 million, respectively. For the funded plans, as of June 30, 2021, the projected benefit obligation exceeds the fair value of the plan assets except for one plan that has assets of $100 million, a projected benefit obligation of $96 million and an accumulated benefit obligation of $96 million. Information about funded and unfunded pension plans is presented below:

Funded plansUnfunded plans
As of June 30,
2021202020212020
(in millions)
Projected benefit obligation$1,150$1,096$318$313
Accumulated benefit obligation1,010971309302
Fair value of plan assets972788-(a)-(a)
(a)The fair value of the assets in the Grantor Trust as of June 30, 2021 and 2020 was $304 million and $247 million, respectively.

Information about funded and unfunded pension plans in which the accumulated benefit obligation exceeds fair value of the plan assets is presented below.

Funded plansUnfunded plans
As of June 30,
2021202020212020
(in millions)
Projected benefit obligation$990$1,096$318$313
Accumulated benefit obligation854971309302
Fair value of plan assets811788-(a)-(a)
(a)The fair value of the assets in the Grantor Trust as of June 30, 2021 and 2020 was $304 million and $247 million, respectively.

The components of periodic benefit costs were as follows:

Pension benefitsPostretirement benefits
For the years ended June 30,
202120202019202120202019
(in millions)
Service cost$38$35$19$2$2$1
Interest cost303930232
Expected return on plan assets(50)(55)(30)---
Amortization of deferred losses442811111
Other217--(1)
Net periodic benefit costs-Direct plans644837563
Net periodic benefit costs- Shared Plans--14--4
Total periodic benefit costs$64$48$51$5$6$7

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The components of net periodic benefit costs other than the service cost component are included in Other, net in the Statements of Operations.

Pension benefitsPostretirement benefits
For the years ended June 30,
202120202019202120202019
Additional information
Weighted-average assumptions used to determine benefit obligations
Discount rate2.7%2.8%3.6%2.7%2.8%3.6%
Weighted-average assumptions used to determine net periodic benefit costs
Discount rate for service cost2.9%3.7%4.6%3.0%3.8%4.4%
Discount rate for interest cost2.2%3.2%4.1%2.2%3.2%3.9%
Expected return on plan assets6.5%7.0%7.0%N/AN/AN/A

N/A – not applicable.

The Company utilizes a full yield curve approach in the estimation of the service and interest components of net periodic benefit costs for pension and postretirement benefits by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The Company utilizes the latest mortality table released by the Society of Actuaries.

The following assumed health care cost trend rates as of June 30 were also used in accounting for postretirement benefits:

Postretirement benefits
Fiscal 2021Fiscal 2020
Health care cost trend rate6.0%7.3%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)4.0%4.5%
Year that the rate reaches the ultimate trend rate20472039

The following table sets forth the estimated benefit payments and estimated settlements for the next five fiscal years and in aggregate for the five fiscal years thereafter. These payments are estimated based on the same assumptions used to measure the Company’s benefit obligation at the end of the fiscal year and include benefits attributable to estimated future employee service:

Expected benefit payments
Pension benefitsPostretirement benefits
(in millions)
Fiscal year
2022$66$4
2023635
2024635
2025655
2026655
2027-203137025

The above table presents expected benefit payments for the postretirement benefits net of a nominal amount of U.S. Medicare subsidy receipts per year.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Plan Assets and Grantor Trust

The following tables present Plan assets for the Company’s Direct Plans and Grantor Trust assets to fund certain future unfunded pension benefit obligations of the Company. The assets are classified by level within the fair value hierarchy, as described in Note 6—Fair Value, as of June 30, 2021 and 2020:

As of June 30, 2021
Fair value measurements at reporting date usingAssets measured
TotalLevel 1Level 2at NAV(a)
(in millions)
PENSION PLAN ASSETS
Pooled funds(b)
Money market funds$22$22$-$-
Domestic equity funds6767--
Domestic fixed income funds(c)355355--
International equity funds193193--
International fixed income funds(c)2828--
Balanced funds9393--
U.S. common stocks(d)136136--
Partnership interests10--10
Exchange traded equity funds(d)6767--
Other(f)1-1-
Total fair value of plan assets$972$961$1$10
GRANTOR TRUST ASSETS
Balanced funds(b)$267$267$-$-
Partnership interests17--17
Other(f)2020--
Total fair value of Grantor Trust assets$304$287$-$17

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

As of June 30, 2020
Fair value measurements at reporting date usingAssets measured
TotalLevel 1Level 2at NAV(a)
(in millions)
PENSION PLAN ASSETS
Pooled funds(b)
Money market funds$33$-$33$-
Domestic equity funds7373--
Domestic fixed income funds(c)33--
International equity funds119119--
International fixed income funds(c)291-28
Balanced funds181114-67
U.S. common stocks(d)144144--
Government and Agency obligations(e)
Domestic government obligations19-19-
Domestic agency obligations24-24-
Corporate obligations(e)50-50-
Partnership interests13--13
Exchange traded funds(d)7070--
Other(f)30(10)40-
Total fair value of plan assets$788$514$166$108
GRANTOR TRUST ASSETS
Balanced funds(b)$214$214$-$-
Partnership interests13--13
Other(f)2020--
Total fair value of Grantor Trust assets$247$234$-$13
(a)Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are excluded from the fair value hierarchy disclosure. These investments have monthly liquidity.
(b)Pooled funds that have a readily determinable fair value are valued at the regularly published NAV.
(c)Domestic fixed income funds and international fixed income funds consist primarily of investment grade securities.
(d)Exchange traded funds and common stock investments that are publicly traded are valued at the closing price reported on active markets in which the securities are traded.
(e)The fair value of corporate, government and agency obligations are valued based on a compilation of primary observable market information or a broker quote in a non-active market.
(f)Includes cash and cash equivalents, plan receivables and payables and certain other fixed income investments.

The investment objective for the funded pension plans is to grow assets to decrease the deficit and protect improvements in funded status. The asset allocation strategy will change over time by shifting assets from return seeking assets to liability hedging assets upon the achievement of certain funding milestones. The target asset allocation on June 30, 2021 is 57% return seeking assets and 43% liability hedging assets. The actual asset allocation on June 30, 2021 is 62% return seeking assets and 38% liability hedging assets. Return seeking assets are diversified across multiple asset classes and liability hedging assets are managed to correlate highly with the pension liabilities to reduce interest rate risk. Assets are generally managed by external investment managers. The expected long-term rate of return on asset assumption is determined using the current target asset allocation and applying expected future returns for the various asset classes and correlations amongst the asset classes.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The funded plans weighted-average asset allocation, by asset category, are as follows:

Pension benefits
As of June 30,
20212020
Asset Category
Equity investments48%51%
Fixed income investments4221
Other, including cash1028
Total100%100%

Required pension plan contributions for the next fiscal year are not expected to be material; however, actual contributions may be affected by pension asset and liability valuation changes during the year. The Company will continue to make voluntary contributions as necessary to improve funded status.

Defined Contribution Plans

The Company has defined contribution plans for the benefit of substantially all employees meeting certain eligibility requirements. Employer contributions to such plans were $49 million, $44 million and $39 million for fiscal 2021, 2020 and 2019, respectively.

NOTE 16. INCOME TAXES

For purposes of the Company’s Financial Statements for the periods prior to the Distribution, the income tax provision in the Statements of Operations was calculated as if FOX filed a separate tax return and was operating as a standalone business. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of FOX’s actual tax balances prior to or subsequent to the Distribution.

Income before income tax (expense) benefit was attributable to the U.S. jurisdiction. Significant components of the Company’s provision for income taxes were as follows:

For the years ended June 30,
202120202019
(in millions)
U.S.
Federal$181$110$127
State, local and other2968
Total current183119195
Deferred534283386
Provision for income taxes$717$402$581

The reconciliation of income tax computed at the statutory rate to income tax (expense) benefit was:

For the years ended June 30,
202120202019
U.S. federal income tax rate21%21%21%
State and local taxes444
Nondeductible compensation12-
Valuation allowance movements-1-
Adjustments for tax matters, net(1)(1)-
Other--1
Effective tax rate25%27%26%

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The following is a summary of the components of the deferred tax accounts:

As of June 30,
20212020
(in millions)
Deferred tax assets
Basis difference(a)$3,676$4,176
Operating lease liabilities121140
Pension benefit obligations6493
Equity-based compensation3331
Accrued liabilities3731
Net operating loss carryforwards1828
Other117120
Total deferred tax assets4,0664,619
Deferred tax liabilities
Operating lease ROU assets(114)(133)
Sports rights contracts(108)(110)
Total deferred tax liabilities(222)(243)
Net deferred tax asset before valuation allowance3,8444,376
Less: valuation allowance(24)(20)
Total net deferred tax assets(b)$3,820$4,356
(a)As a result of the Separation and the Distribution, which was a taxable transaction for which the estimated tax liability of $5.8 billion was included in the Transaction Tax paid by the Company, FOX obtained a tax basis in its assets equal to their respective fair market values. This amount includes the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1—Description of Business and Basis of Presentation under the heading “Basis of Presentation”).
(b)Includes a $2 million deferred tax liability recorded in Other liabilities on the Consolidated Balance Sheet as of June 30, 2021 and 2020.

As of June 30, 2021, the Company had $18 million of tax attributes from net operating loss carryforwards available to offset future taxable income. A substantial portion of these losses can be carried forward indefinitely. The Company also had $10 million of tax attributes from capital loss carry forwards available to offset future capital gains. A substantial portion of these capital losses can be carried forward for four years.

The net increase in the valuation allowance to $24 million as of June 30, 2021 was primarily due to the additional valuation allowance required on net operating loss carryforwards not expected to be utilized.

The following table sets forth the change in the uncertain tax positions, excluding interest and penalties:

For the years ended June 30,
202120202019
(in millions)
Balance, beginning of year$73$94$91
Additions for prior year tax positions-17
Additions for current year tax positions229
Reduction for prior year tax positions(45)(a)(24)(a)(13)
Balance, end of year$30$73$94
(a)The reduction for prior year tax positions in fiscal 2021 includes $31 million from the settlement of audits and $14 million from the expiration of statutes of limitations. The reduction for prior year tax positions in fiscal 2020 includes $21 million from the expiration of statutes of limitations.

The Company recognizes interest and penalty charges related to uncertain tax positions as income tax (expense) benefit. The Company recorded liabilities for accrued interest of $11 million and $22 million as of June 30, 2021 and 2020, respectively, and the amounts of interest income/expense recorded in each of the three fiscal years 2021, 2020 and 2019 were not material.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The Company is subject to tax in various domestic jurisdictions and, as a matter of ordinary course, the Company is regularly audited by federal and state tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not anticipate that the resolution of these pending tax matters will have a material adverse effect on its combined financial condition, future results of operations or liquidity. The net decrease to the balance of uncertain tax positions in fiscal 2021 is primarily attributable to state matters. The Company does not expect significant changes to these positions over the next 12 months. As of June 30, 2021 and 2020, $24 million and $58 million, respectively, would affect the Company’s effective income tax rate if the Company’s position with respect to the uncertainties is sustained.

NOTE 17. SEGMENT INFORMATION

The Company is a news, sports and entertainment company, which manages and reports its businesses in the following segments:

•Cable Network Programming, which principally consists of the production and licensing of news and sports content distributed primarily through traditional cable television systems, direct broadcast satellite operators and telecommunication companies (“traditional MVPDs”) and online multi-channel video programming distributors (“digital MVPDs”), primarily in the U.S.
•Television, which principally consists of the production, acquisition, marketing and distribution of broadcast network programming and free advertising-supported video-on-demand (“AVOD”) services under the FOX and Tubi brands, respectfully, and the operation of 29 full power broadcast television stations, including 11 duopolies, in the U.S. Of these stations, 18 are affiliated with the FOX Network, 10 are affiliated with MyNetworkTV and one is an independent station.
•Other, Corporate and Eliminations, which principally consists of the FOX Studio Lot, Credible, corporate overhead costs and intracompany eliminations. The FOX Studio Lot, located in Los Angeles, California, provides television and film production services along with office space, studio operation services and includes all operations of the facility. Credible is a U.S. consumer finance marketplace.

The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measure is segment operating income before depreciation and amortization, or Segment EBITDA. Due to the integrated nature of these operating segments, estimates and judgments are made in allocating certain assets, revenues and expenses.

Segment EBITDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses. Segment EBITDA does not include: Amortization of cable distribution investments, Depreciation and amortization, Impairment and restructuring charges, Interest expense, Interest income, Other, net and Income tax expense. Management believes that Segment EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources to the Company’s businesses.

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

The following tables set forth the Company’s Revenues and Segment EBITDA for fiscal 2021, 2020 and 2019:

For the years ended June 30,
202120202019
(in millions)
Revenues
Cable Network Programming$5,683$5,492$5,381
Television7,0486,6615,979
Other, Corporate and Eliminations17815029
Total revenues$12,909$12,303$11,389
Segment EBITDA
Cable Network Programming$2,876$2,706$2,495
Television555430470
Other, Corporate and Eliminations(344)(357)(284)
Amortization of cable distribution investments(22)(24)(38)
Depreciation and amortization(300)(258)(212)
Impairment and restructuring charges(35)(451)(26)
Interest expense(395)(369)(203)
Interest income43541
Other, net579(248)(19)
Income before income tax expense2,9181,4642,224
Income tax expense(717)(402)(581)
Net income2,2011,0621,643
Less: Net income attributable to noncontrolling interests(51)(63)(48)
Net income attributable to Fox Corporation stockholders$2,150$999$1,595

Revenues by Segment by Component

For the years ended June 30,
202120202019
(in millions)
Cable Network Programming
Affiliate fee$3,995$3,870$3,804
Advertising1,3371,1641,184
Other351458393
Total Cable Network Programming revenues5,6835,4925,381
Television
Advertising4,0944,1693,872
Affiliate fee2,4402,0381,708
Other514454399
Total Television revenues7,0486,6615,979
Other, Corporate and Eliminations17815029
Total revenues$12,909$12,303$11,389

For fiscal 2021 and 2020, the Company had no individual customers that accounted for 10% or more of Revenues. For fiscal 2019, the Company had one customer that represented approximately 11% of Revenues.

Future Performance Obligations

As of June 30, 2021, approximately $5 billion of revenues are expected to be recognized primarily over the next one to three years. The Company’s most significant remaining performance obligations relate to affiliate contracts, sports advertising contracts and content licensing contracts with fixed fees. The amount disclosed does not include (i) revenues related to performance obligations that are part of a contract whose original expected duration is one year or less,

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(ii) revenues that are in the form of sales- or usage-based royalties and (iii) revenues related to performance obligations for which the Company elects to recognize revenue in the amount it has a right to invoice.

For the years ended June 30,
202120202019
(in millions)
Depreciation and amortization
Cable Network Programming$55$59$48
Television1047396
Other, Corporate and Eliminations14112668
Total depreciation and amortization$300$258$212
For the years ended June 30,
202120202019
(in millions)
Capital expenditures
Cable Network Programming$53$43$83
Television1007271
Other, Corporate and Eliminations33124481
Total capital expenditures$484$359$235
As of June 30,
20212020
(in millions)
Assets
Cable Network Programming$2,577$2,591
Television7,3057,054
Other, Corporate and Eliminations12,14511,487
Investments899618
Total assets$22,926$21,750
As of June 30,
20212020
(in millions)
Goodwill and intangible assets, net
Cable Network Programming$1,324$1,287
Television4,5824,630
Other, Corporate and Eliminations683690
Total goodwill and intangible assets, net$6,589$6,607

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 18. EARNINGS PER SHARE

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

For the years ended June 30,
202120202019
(in millions, except per share amounts)
Net income attributable to Fox Corporation stockholders$2,150$999$1,595
Weighted average shares - basic(a)591613621
Shares issuable under equity-based compensation plans(b)43-
Weighted average shares - diluted(a)595616621
Net income attributable to Fox Corporation stockholders per share - basic$3.64$1.63$2.57
Net income attributable to Fox Corporation stockholders per share - diluted$3.61$1.62$2.57
(a)For all periods presented prior to the date of the Distribution, 621 million shares have been utilized for the calculation of basic and diluted earnings per share as no shares of common stock or equity-based awards of the Company were outstanding prior to that date (See Note 2—Summary of Significant Accounting Policies under the heading “Earnings per share” for additional information).
(b)Weighted average common shares include the incremental shares that would be issued upon the assumed vesting of RSUs, PSUs and stock options (including PSOs) if the effect is dilutive (See Note 12—Equity-Based Compensation).

NOTE 19. QUARTERLY DATA (UNAUDITED)

For the three months ended
September 30,December 31,March 31,June 30,
(in millions, except per share amounts)
FISCAL 2021
Revenues$2,717$4,087$3,215$2,890
Net income attributable to Fox Corporation stockholders(a)1,106224567253
Net income attributable to Fox Corporation stockholders per share - basic1.830.380.960.44
Net income attributable to Fox Corporation stockholders per share - diluted1.830.370.960.43
FISCAL 2020
Revenues$2,667$3,778$3,440$2,418
Net income attributable to Fox Corporation stockholders(a)49930078122
Net income attributable to Fox Corporation stockholders per share - basic0.800.490.130.20
Net income attributable to Fox Corporation stockholders per share - diluted0.800.480.130.20
(a)See Note 5—Inventories, net and Note 21—Additional Financial Information under the heading “Other, net” for details of infrequent items recorded during the fiscal year. In addition, the Company recorded impairment and restructuring charges of $442 million, or $0.73 per basic and diluted share, during the fourth quarter of fiscal 2020 (See Note 4—Restructuring Programs for additional information).

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 20. VALUATION AND QUALIFYING ACCOUNTS

Balance as of beginning of yearAdditionsUtilizationOtherBalance as of end of year
(in millions)
FISCAL 2021
Allowances for doubtful accounts$(93)$(4)$11$9$(77)
Deferred tax valuation allowance(20)(9)5-(24)
FISCAL 2020
Allowances for doubtful accounts$(35)$(63)$5$-$(93)
Deferred tax valuation allowance(6)(19)5-(20)
FISCAL 2019
Allowances for doubtful accounts$(28)$(15)$8$-$(35)
Deferred tax valuation allowance(45)(10)-49(a)(6)
(a)Represents the allocation of the deferred tax valuation allowance between 21CF and the Company in accordance with the Distribution (See Note 1—Description of Business and Basis of Presentation under the heading “Basis of Presentation”).

NOTE 21. ADDITIONAL FINANCIAL INFORMATION

Other, net

The following table sets forth the components of Other, net included in the Statements of Operations:

For the years ended June 30,
202120202019
(in millions)
Transaction costs(a)$421$(125)$(199)
Net gains on investments in equity securities(b)25814268
U.K. Newspaper Matters Indemnity(c)(64)(90)(58)
Other(36)(47)(30)
Total other, net$579$(248)$(19)
(a)The transaction costs for fiscal 2021 are primarily related to the partial settlement from Disney of $462 million related to the reimbursement of the Company’s prepayment of its share of the Divestiture Tax (See Note 1—Description of Business and Basis of Presentation). The transaction costs for fiscal 2020 and 2019 are primarily related to the Separation and the Distribution which includes retention related costs and for fiscal 2020 include costs associated with the profits participants litigation (See Note 14—Commitments and Contingencies under the heading “Profits Participants Litigation”).
(b)Net gains on investments in equity securities for fiscal 2021 included the gains related to the changes in fair value of the Company’s investment in Flutter (See Note 6—Fair Value). Net gains on investments in equity securities for fiscal 2020 included the loss related to the change in fair value of the Company’s investment in Roku, which was sold in March 2020 (See Note 3—Acquisitions, Disposals and Other Transactions under the heading “Roku”).
(c)See Note 14—Commitments and Contingencies under the heading “U.K. Newspaper Matters Indemnity.”

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Other Non-Current Assets

The following table sets forth the components of Other non-current assets included in the Balance Sheets:

As of June 30,
20212020
(in millions)
Investments(a)$899$618
Operating lease ROU assets469539
Grantor Trust304247
Inventories, net199202
Other187195
Total other non-current assets$2,058$1,801
(a)Includes investments accounted for at fair value on a recurring basis of $788 million and $531 million as of June 30, 2021 and 2020, respectively (See Note 6—Fair Value).

Accounts Payable, Accrued Expenses and Other Current Liabilities

The following table sets forth the components of Accounts payable, accrued expenses and other current liabilities included in the Balance Sheets:

As of June 30,
20212020
(in millions)
Accrued expenses$1,077$907
Program rights payable659485
Deferred revenue196152
Operating lease liabilities92122
Other current liabilities229240
Total accounts payable, accrued expenses and other current liabilities$2,253$1,906

Other Liabilities

The following table sets forth the components of Other liabilities included in the Balance Sheets:

As of June 30,
20212020
(in millions)
Accrued non-current pension/postretirement liabilities$586$709
Non-current operating lease liabilities409452
Other non-current liabilities341321
Total other liabilities$1,336$1,482

FOX CORPORATION

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Supplemental Information

For the years ended June 30,
202120202019
(in millions)
Supplemental cash flows information
Cash paid for interest$(390)$(355)$(39)
Cash paid for income taxes$(225)$(88)$(4)
Supplemental information on acquisitions
Fair value of assets acquired, excluding cash$49$1,254$-
Cash acquired-41-
Liabilities assumed and other2(84)-
Noncontrolling interests-(109)-
Cash paid(51)(1,102)-
Fair value of equity instruments consideration$-$-$-

NOTE 22. SUBSEQUENT EVENTS

Subsequent to June 30, 2021, the Company increased its semi-annual dividend and declared a semi-annual dividend of $0.24 per share on both the Class A Common Stock and the Class B Common Stock. The dividend declared is payable on September 29, 2021 with a record date for determining dividend entitlements of September 1, 2021.

Subsequent to June 30, 2021, the Company repurchased a total of approximately 1.4 million shares of Common Stock for $50 million in the open market.

I****TEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

I****TEM 9A.CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management’s report and the report of the independent registered public accounting firm thereon are set forth on pages 59 and 60, respectively, and are incorporated herein by reference.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s fourth quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Due to the COVID-19 pandemic, most of the Company’s employees continue to work remotely, and the Company has strived to minimize the impact of this on the design and effectiveness of the Company’s internal control over financial reporting. The Company is continually monitoring and assessing its internal control over financial reporting and has not experienced any material impact to its internal control over financial reporting due to the COVID-19 pandemic.

Effective July 1, 2021, the Company implemented new general ledger and procure-to-pay systems. This company-wide implementation involved migrating multiple legacy systems, some of which were subject to a 21CF transition services agreement, to a common platform. In connection with this implementation, the Company has implemented updates and changes to its processes and related control activities.

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9B. OTHER INFORMATION.