PART I ITEM 1. BUSINESS Fox Corporation is a news, sports, and entertainment company operating primarily in the U.S. through its Cable Network Programming, Television, and Other, Corporate and Eliminations segments, focusing on premium, live, and 'appointment-based' content Background Fox Corporation became a standalone publicly traded company on March 19, 2019, following a spin-off from Twenty-First Century Fox, Inc. (21CF), with Disney acquiring the remaining 21CF assets - Fox Corporation spun off from Twenty-First Century Fox, Inc. (21CF) on March 19, 2019, becoming a standalone publicly traded company. Disney acquired the remaining 21CF assets7572751905 - The company's fiscal year ends on June 30, and its principal executive offices are located in New York, New York8573 Caution Concerning Forward-Looking Statements This section highlights that the Annual Report contains forward-looking statements, which are subject to inherent risks and uncertainties, with actual results potentially differing materially from projections - The report contains forward-looking statements, which are not guarantees of future performance and are subject to change and inherent risks and uncertainties910574575858859 - Key factors that could cause actual results to differ include government regulation, economic, strategic, political, and social conditions, and the impact of COVID-19 and other widespread health emergencies10575859 Business Overview FOX delivers news, sports, and entertainment content through major brands like FOX News Media, FOX Sports, FOX Entertainment, FOX Television Stations, and TUBI, emphasizing live and 'appointment-based' content - FOX produces and delivers news, sports, and entertainment content through iconic brands: FOX News Media, FOX Sports, FOX Entertainment, FOX Television Stations, and TUBI11576 - The company's strategy emphasizes live and 'appointment-based' content, strong brand leadership, and broad distribution across traditional and digital platforms to differentiate itself in the media market11576 Our Competitive Strengths FOX boasts premium brands with deep viewer resonance, holding leadership positions in news, sports, and entertainment, maintaining a significant presence in major U.S. markets, and supported by an attractive financial profile - FOX's portfolio includes highly valued brands like FOX News Media (top-rated national cable news for 20+ years), FOX Sports (leader in marquee live sports), FOX Entertainment (youngest, most diverse broadcast audience), and TUBI (fastest-growing AVOD service with 40% growth in total view time in fiscal 2022)121314577578579 - The company has a significant presence in major domestic markets, with FOX News and FOX Business available in over 70 million U.S. households and the FOX Network in nearly all U.S. households. Its 29 owned-and-operated TV stations cover 18 DMAs, including 14 of the 15 largest15580 - FOX maintains an attractive financial profile with strong revenue growth and profitability driven by affiliate fee increases, a robust balance sheet for strategic investments and capital returns, and an annual cash tax benefit of $370 million from a post-spin-off tax asset16581753911 Goals and Strategies FOX's core strategies involve maintaining leadership in live news, sports, and quality entertainment through targeted capital allocation and content investments, aiming to increase revenue and expand digital distribution - FOX is investing in digital properties at FOX News Media (FOX Nation SVOD, FOX Weather streaming service launched Oct 2021) and expanding sports rights (NFL 11-year agreement, UEFA international soccer rights, USFL launch)17582 - FOX Entertainment is increasing co-production arrangements and acquiring studios (MarVista Entertainment, TMZ) and forming partnerships (Studio Ramsay Global) to reduce reliance on third-party content17582 - The company is expanding digital distribution through TUBI (over 4 billion hours streamed in fiscal 2022, 45,000+ titles, 140+ new channels), FOX Bet Super 6 (6M+ registered accounts), and the FOX Bet sportsbook app1821583586 Segments FOX operates through three main segments: Cable Network Programming (news and sports), Television (broadcast network, owned-and-operated stations, TUBI), and Other, Corporate and Eliminations (FOX Studio Lot, Credible, corporate overhead) - Fox Corporation operates in three primary segments: Cable Network Programming (news and sports), Television (broadcast network, AVOD service TUBI, and TV stations), and Other, Corporate and Eliminations (FOX Studio Lot, Credible, corporate overhead)5756 - The company differentiates itself through leadership positions in live and 'appointment-based' content, significant presence in major markets, and broad distribution across traditional and digital platforms11576 - Key competitive strengths include premium brands (FOX News Media, FOX Sports, FOX Entertainment, FOX Television Stations, TUBI) that resonate deeply with viewers and hold leadership positions in their respective categories1213577578579 - Strategic goals include maintaining leading positions in live news, live sports, and quality entertainment, increasing revenue growth through high-quality content, and expanding digital distribution offerings and direct consumer engagement171821582583586 - Digital initiatives include investments in FOX Nation (SVOD), FOX Weather (free ad-supported streaming), expanded NFL digital rights for direct-to-consumer opportunities, and content/technology investments in TUBI, which saw nearly 40% growth in total view time in fiscal 202217579582586 - The company benefits from a strong balance sheet and a tax asset from the 2019 spin-off, providing an estimated annual cash tax benefit of $370 million due to asset basis amortization16581753911 Cable Network Programming The Cable Network Programming segment focuses on news and sports content, distributed through traditional and virtual MVPDs, with key brands like FOX News Media and FOX Sports networks - Cable Network Programming includes FOX News Media (FOX News, FOX Business), and cable sports networks (FS1, FS2, Big Ten Network, FOX Deportes), distributing news and sports content22587 Cable Network Subscribers (June 30, 2022 vs. 2021) | Network | June 30, 2022 (millions) | June 30, 2021 (millions) | | :-------------------- | :----------------------- | :----------------------- | | FOX News | 75 | 77 | | FOX Business | 72 | 73 | | FS1 | 74 | 74 | | FS2 | 55 | 54 | | The Big Ten Network | 50 | 51 | | FOX Deportes | 15 | 16 | - FOX News has been the top-rated national cable news channel for over 20 consecutive years in primetime and total day viewing26591 - FOX Sports networks (FS1, FS2, FOX Deportes, Big Ten Network) feature a wide array of live sports events including MLB, NASCAR, college sports, FIFA World Cup, and UEFA Euro matches2728293031592593594595596 - Digital distribution includes FOXNews.com, FOXBusiness.com, FOXWeather.com (launched Oct 2021), FOXSports.com, FOX Nation (SVOD), and B1G+ (Big Ten Network's streaming service)32597 - New ventures include the acquisition of Outkick Media and the launch of the United States Football League (USFL) in April 202233598 Television The Television segment includes the FOX broadcast network, 29 owned-and-operated television stations, and the AVOD service TUBI, providing primetime entertainment, major sports, and local news - Television segment encompasses the FOX broadcast network, 29 full-power broadcast TV stations (18 FOX affiliates, 10 MyNetworkTV affiliates), and the AVOD service TUBI5570603756 - FOX Television Stations own and operate 29 full-power broadcast television stations in 18 local markets, including 14 of the top 15 largest DMAs, producing approximately 1,200 hours of local news weekly39604 - The FOX Network delivers about 15 hours of weekly primetime programming to 208 affiliates, covering 99.9% of U.S. TV households, and targets the 18-49 demographic, ranking 1 in 18-34 for 27 broadcast seasons44609 - Key FOX Network programming includes NFL, MLB, college football, NASCAR, FIFA World Cup, WWE, and popular entertainment series like 'The Masked Singer' and '9-1-1'4445609610 - TUBI, a leading AVOD service, is available on over 25 digital platforms, offers over 45,000 titles, streamed over 4 billion hours in fiscal 2022, and attracts a young, diverse audience (median age 39)4849613614 - The segment includes entertainment production companies like Fox Alternative Entertainment, Bento Box Entertainment, MarVista Entertainment, TMZ, and Studio Ramsay Global, as well as Blockchain Creative Labs for Web3 content50515253615616617618 Other, Corporate and Eliminations This segment primarily comprises the FOX Studio Lot in Los Angeles, which offers television and film production services and office space, and Credible Labs Inc., a U.S. consumer finance marketplace - Other, Corporate and Eliminations primarily consists of the FOX Studio Lot (providing production services and office space) and Credible Labs Inc. (a consumer finance marketplace where FOX holds 66% equity)55705659621624756 - The FOX Studio Lot, located in Los Angeles, provides television and film production services, office space, and studio operations, with primary revenue streams from leasing to 21CF (Disney) and third-party productions58623 - FOX holds a 66% equity stake in Credible Labs Inc., a U.S. consumer finance marketplace offering personalized product and rate options for loans and insurance59624 Investments FOX has a national media and sports wagering partnership with Flutter Entertainment plc, holding an equity stake in Flutter and options to acquire interests in FanDuel Group and The Stars Group's U.S. business - FOX has a national media and sports wagering partnership with Flutter Entertainment plc, featuring the FOX Bet Super 6 free-to-play game (over 6 million registered accounts) and the FOX Bet sportsbook mobile app in four states60625 - The company owns approximately 2.5% of Flutter and holds options to acquire an 18.5% equity interest in FanDuel Group and up to 50% of The Stars Group's U.S. business60625 Government Regulation The company's operations are subject to extensive federal and state regulations, particularly in television broadcasting by the FCC, covering broadcast licenses, ownership limits, and content, with digital businesses also subject to evolving privacy and data security laws - The U.S. television broadcast industry is highly regulated by the FCC, covering broadcast licenses (8-year terms), national television ownership (39% cap, UHF discount), dual network rules, and foreign ownership limits (max 25% non-U.S. ownership without waiver)6162636465626627628629630 - Content regulations include retransmission consent elections, limits on commercial matter in children's programming (10.5-12 minutes/hour), minimum educational programming (3 hours/week), and prohibitions on indecent/profane material (6 AM-10 PM)666768631632633 - Digital businesses are subject to complex and evolving privacy and data security laws, including COPPA, CAN-SPAM, VPPA, GLBA, CCPA (amended by CPRA taking effect Jan 1, 2023), and international regulations like GDPR737475638639640 - Credible, operating consumer finance and insurance marketplaces, is subject to federal and state laws such as the Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, RESPA, UDAAP, and the SAFE Act77642 Intellectual Property FOX's intellectual property assets include copyrights in programming, trademarks, patents, and trade secrets, from which it derives value through content production, distribution, and licensing, dedicating significant resources to protection - The company's intellectual property includes copyrights in television programming, trademarks, patents, and trade secrets, generating value through content production, distribution, and licensing78643 - Significant resources are devoted to IP protection through legal sanctions, legislative initiatives, and digital rights management, but piracy and technological developments continue to pose threats to revenues7980644645 Human Capital Resources FOX employs approximately 10,600 full-time staff and focuses on developing human capital through diverse recruitment, competitive compensation and benefits, work-life balance, learning opportunities, health and safety, and fostering an inclusive workplace - As of June 30, 2022, FOX had approximately 10,600 full-time employees, with a significant portion based in the U.S. and some unionized81646 - The company is committed to diversity, requiring minority and female candidates for Director vacancies, listing job openings widely, and collaborating with professional organizations to access diverse talent8384648649 - FOX offers paid internships (over 380 students in 2021) and internal training programs (e.g., FOX Ad Sales Training, FAE FASTRACK, FOX News Media Digital Rotational Program, FOX Writers Incubator Initiative) to build a diverse pipeline of talent and leaders8586650651 - Employee benefits include competitive pay, comprehensive medical/dental/vision insurance, 401(k) with company contributions, parental leave, subsidized childcare, and flexible work arrangements (hybrid/remote)878889909192652653654655656657 - FOX fosters an inclusive workplace through policies against harassment/discrimination, mandatory training, and nine Employee Resource Groups (e.g., ABLE, ACE, BLK+, HOLA, PRIDE, VETS, WiT, Women of FOX Sports, WOMEN@FOX)979899662663664 - Through its FOX Forward philanthropic platform, the company and employees generated over $8 million in community impact in fiscal 2022, supporting veterans, first responders, food banks, and schools, with over $1.5 million in matching contributions102103104667668669 ITEM 1A. RISK FACTORS This section outlines significant risks to Fox Corporation's business, including those related to macroeconomic conditions, evolving consumer behavior and technology, cybersecurity, legal and regulatory matters, and the company's ownership structure - Changes in consumer behavior and evolving technologies (e.g., shift to SVOD/AVOD, time-shifting, ad-skipping) may adversely affect the company's business, leading to declines in MVPD subscribers and advertising revenues108109110673674675 - Advertising revenues are highly sensitive to economic conditions, major sports events, election cycles, and shifts towards digital/mobile advertising, with new AVOD markets still evolving112113114115677678679680 - The company faces risks from intense competition for content, distribution, viewers, and advertisers, potentially leading to higher programming costs or loss of rights, especially for popular sports content130132695697 - Cybersecurity threats, content piracy, and evolving privacy/data protection laws (e.g., GDPR, CCPA) pose risks of service disruption, data breaches, increased costs, and reputational damage111711712713714715716718 - The Murdoch Family Trust's significant ownership (42.1% of Class B Common Stock) concentrates voting power, which could discourage takeovers and influence stockholder approval outcomes170171735736 ITEM 1B. UNRESOLVED STAFF COMMENTS This section states that there are no unresolved staff comments from the SEC - There are no unresolved staff comments176741 ITEM 2. PROPERTIES FOX owns the FOX Studio Lot in Los Angeles, California, a 50-acre facility with over 1.85 million square feet for administration, production, and post-production services, generating revenue from leasing and operating studio facilities - FOX owns the FOX Studio Lot in Los Angeles, California, a 50-acre facility with over 1.85 million square feet for administration, production, and post-production services176741 - The Studio Lot's primary revenue streams are leasing office space to 21CF (Disney) and other third parties, and operating studio facilities, predominantly for Disney productions until 2026176741 - The company also owns and leases various other real properties, primarily in the U.S., which are maintained to meet operational needs177742 ITEM 3. LEGAL PROCEEDINGS Information regarding the Company's legal proceedings is incorporated by reference from Note 14—Commitments and Contingencies to the Consolidated Financial Statements - Legal proceedings are discussed in Note 14—Commitments and Contingencies of the Consolidated Financial Statements178743 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company - Mine safety disclosures are not applicable178743 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Fox Corporation's Class A and Class B Common Stock are traded on The Nasdaq Global Select Market, with approximately 16,700 Class A and 4,600 Class B holders as of June 30, 2022, and the company repurchased approximately 27 million shares for $1 billion in fiscal 2022 - Fox Corporation's Class A Common Stock (FOXA) and Class B Common Stock (FOX) are listed on The Nasdaq Global Select Market181746 - As of June 30, 2022, there were approximately 16,700 holders of record for Class A Common Stock and 4,600 for Class B Common Stock181746 Fiscal 2022 Common Stock Repurchases | Class | Total Shares Purchased | Average Price Paid Per Share | | :--------------------- | :--------------------- | :--------------------------- | | Class A Common Stock | 18,729,320 | $37.36 | | Class B Common Stock | 8,698,961 | $34.52 | | Total Fiscal 2022 | 27,428,281 | | - The company repurchased approximately 27 million shares for $1 billion in fiscal 2022 under a $4 billion stock repurchase program, with $1.4 billion remaining authorization as of June 30, 20221827471004 ITEM 6. [RESERVED] This item is reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides a comprehensive analysis of Fox Corporation's financial condition and results of operations for fiscal years 2022, 2021, and 2020, covering business overview, segment performance, liquidity, capital resources, and critical accounting policies - The discussion covers the company's financial condition, changes in financial condition, and results of operations for fiscal years 2022, 2021, and 2020190755 - The company's revenues increased 8% in fiscal 2022 to $13.974 billion, driven by higher affiliate fees (up 7%), advertising (up 9%), and other revenues (up 15%)200201765766 - Operating expenses rose 13% in fiscal 2022 due to higher sports programming rights, production costs, increased digital investment (TUBI, FOX News Media), and USFL launch costs202767 - Net income decreased 44% in fiscal 2022 to $1.233 billion, primarily due to a change in the fair value of the Flutter investment and the absence of a $462 million reimbursement from Disney received in fiscal 2021200205765770 INTRODUCTION This section details Fox Corporation's formation as a standalone public company on March 19, 2019, following a spin-off from Twenty-First Century Fox, Inc. (21CF) and Disney's acquisition of remaining 21CF assets, highlighting the financial impacts of the transaction - Fox Corporation became a standalone public company on March 19, 2019, through a spin-off from 21CF, with Disney acquiring the remaining 21CF assets186751 - The company paid an $8.5 billion dividend to 21CF and incurred a $6.5 billion Transaction Tax, which included a $700 million prepayment for Divestiture Tax187752 - In fiscal 2021, FOX received a $462 million reimbursement from Disney related to the Divestiture Tax prepayment187752 - The taxable spin-off resulted in a tax basis step-up for FOX's assets, leading to estimated annual tax deductions of $1.5 billion and an annual cash tax benefit of $370 million188753911 OVERVIEW OF THE COMPANY'S BUSINESS Fox Corporation operates in Cable Network Programming, Television, and Other, Corporate and Eliminations segments, generating most of its revenue from affiliate fees (49% in fiscal 2022) and advertising sales (42% in fiscal 2022), with revenues influenced by subscriber numbers, ad rates, and cyclical events - Fox Corporation's business segments are Cable Network Programming, Television, and Other, Corporate and Eliminations191756 Fiscal 2022 Revenue Breakdown | Revenue Source | Percentage of Total Revenues | | :------------------- | :--------------------------- | | Affiliate fees | 49% | | Advertising | 42% | | Other operating activities | 9% | - Revenues are affected by rate changes, subscriber numbers, advertiser expenditures, and seasonality from election cycles and major sports events (e.g., Super Bowl, FIFA World Cup)194759 - The industry faces rapid evolution due to technological advancements and changing consumer behavior, leading to declines in MVPD subscribers and shifts in advertising towards digital and mobile platforms195196760761 RESULTS OF OPERATIONS FOX's total revenues increased by 8% in fiscal 2022 to $13.974 billion, driven by growth in affiliate fees and advertising, but net income decreased by 44% to $1.233 billion, primarily due to investment valuation changes and the absence of a prior year tax reimbursement Consolidated Operating Results (Fiscal 2022 vs. 2021) | Metric | FY2022 ($M) | FY2021 ($M) | Change ($M) | % Change | | :---------------------------------------------- | :---------- | :---------- | :---------- | :------- | | Total Revenues | 13,974 | 12,909 | 1,065 | 8% | | Operating expenses | (9,117) | (8,037) | (1,080) | (13)% | | Selling, general and administrative | (1,920) | (1,807) | (113) | (6)% | | Depreciation and amortization | (363) | (300) | (63) | (21)% | | Impairment and restructuring charges | — | (35) | 35 | 100% | | Interest expense, net | (371) | (391) | 20 | 5% | | Other, net | (509) | 579 | (1,088) | ** | | Income before income tax expense | 1,694 | 2,918 | (1,224) | (42)% | | Income tax expense | (461) | (717) | 256 | 36% | | Net income | 1,233 | 2,201 | (968) | (44)% | | Net income attributable to Fox Corp stockholders | 1,205 | 2,150 | (945) | (44)% | - Fiscal 2022 revenue growth was driven by higher affiliate fees (contractual rate increases, renewals), advertising (higher pricing at FOX Sports/News Media, TUBI growth, more live events), and other revenues (sports sublicensing, FOX Nation subscriptions, acquisitions)201766 - Fiscal 2022 operating expense increase was due to higher sports programming rights (NFL, MLB, college football), digital investments (TUBI, FOX News Media), USFL launch costs, and entertainment programming rights202767 Consolidated Operating Results (Fiscal 2021 vs. 2020) | Metric | FY2021 ($M) | FY2020 ($M) | Change ($M) | % Change | | :---------------------------------------------- | :---------- | :---------- | :---------- | :------- | | Total Revenues | 12,909 | 12,303 | 606 | 5% | | Operating expenses | (8,037) | (7,807) | (230) | (3)% | | Selling, general and administrative | (1,807) | (1,741) | (66) | (4)% | | Depreciation and amortization | (300) | (258) | (42) | (16)% | | Impairment and restructuring charges | (35) | (451) | 416 | 92% | | Interest expense, net | (391) | (334) | (57) | (17)% | | Other, net | 579 | (248) | 827 | ** | | Income before income tax expense | 2,918 | 1,464 | 1,454 | 99% | | Income tax expense | (717) | (402) | (315) | (78)% | | Net income | 2,201 | 1,062 | 1,139 | ** | | Net income attributable to Fox Corp stockholders | 2,150 | 999 | 1,151 | ** | - Fiscal 2021 revenue growth was driven by higher affiliate fees (rate increases, renewals) and advertising (TUBI consolidation, political advertising, NFL playoff game), partially offset by lower other revenue773 - Fiscal 2021 net income increase was primarily due to the $462 million reimbursement from Disney, higher Segment EBITDA in Cable Network Programming and Television, and higher net gains on investments778 Segment Analysis Segment EBITDA is the primary financial measure for evaluating performance and resource allocation, with Cable Network Programming Segment EBITDA increasing by 2% in fiscal 2022, while Television Segment EBITDA decreased by 37% due to significantly higher operating expenses - Segment EBITDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses, and is the primary measure for evaluating business segment performance215780 Segment Revenues and EBITDA (Fiscal 2022 vs. 2021) | Segment | FY2022 Revenues ($M) | FY2021 Revenues ($M) | % Change (Rev) | FY2022 EBITDA ($M) | FY2021 EBITDA ($M) | % Change (EBITDA) | | :-------------------------------- | :------------------- | :------------------- | :------------- | :----------------- | :----------------- | :---------------- | | Cable Network Programming | 6,097 | 5,683 | 7% | 2,934 | 2,876 | 2% | | Television | 7,685 | 7,048 | 9% | 347 | 555 | (37)% | | Other, Corporate and Eliminations | 192 | 178 | 8% | (326) | (344) | 5% | | Total | 13,974 | 12,909 | 8% | 2,955 | 3,087 | (4)% | - Cable Network Programming revenue increased 7% in fiscal 2022 due to higher affiliate fees (rate increases, renewals, absence of COVID-19 credits), advertising (higher pricing, more live events), and other revenues (sublicensing, FOX Nation subscriptions)785 - Television revenue increased 9% in fiscal 2022 due to higher advertising (pricing, full college football schedule, TUBI growth) and affiliate fees (higher rates, FOX Network affiliates), and acquisitions of entertainment production companies789 Segment Revenues and EBITDA (Fiscal 2021 vs. 2020) | Segment | FY2021 Revenues ($M) | FY2020 Revenues ($M) | % Change (Rev) | FY2021 EBITDA ($M) | FY2020 EBITDA ($M) | % Change (EBITDA) | | :-------------------------------- | :------------------- | :------------------- | :------------- | :----------------- | :----------------- | :---------------- | | Cable Network Programming | 5,683 | 5,492 | 3% | 2,876 | 2,706 | 6% | | Television | 7,048 | 6,661 | 6% | 555 | 430 | 29% | | Other, Corporate and Eliminations | 178 | 150 | 19% | (344) | (357) | 4% | | Total | 12,909 | 12,303 | 5% | 3,087 | 2,779 | 11% | - Cable Network Programming EBITDA increased 6% in fiscal 2021 due to higher advertising (2020 election coverage) and affiliate fees, partially offset by higher legal/marketing expenses797798 - Television EBITDA increased 29% in fiscal 2021 due to higher affiliate fees and other revenues, partially offset by lower advertising (absence of Super Bowl, COVID-19 impact) and higher operating expenses (TUBI consolidation)799800801 Non-GAAP Financial Measures This section defines Adjusted EBITDA as a non-GAAP financial measure used by management and investors to evaluate operating performance, excluding non-operational factors, and provides reconciliations to Net Income - Adjusted EBITDA is a non-GAAP financial measure defined as Revenues less Operating expenses and Selling, general and administrative expenses, excluding amortization of cable distribution investments, depreciation and amortization, impairment and restructuring charges, interest expense, net, other, net, and income tax expense8041087 - Management uses Adjusted EBITDA to evaluate operating performance and allocate resources, providing insight into business operations separate from non-operational factors affecting Net income8051086 Net Income to Adjusted EBITDA Reconciliation (Fiscal 2022 vs. 2021) | Metric | FY2022 ($M) | FY2021 ($M) | | :----------------------------------------- | :---------- | :---------- | | Net income | 1,233 | 2,201 | | Add: Amortization of cable distribution investments | 18 | 22 | | Add: Depreciation and amortization | 363 | 300 | | Add: Impairment and restructuring charges | — | 35 | | Add: Interest expense, net | 371 | 391 | | Add: Other, net | 509 | (579) | | Add: Income tax expense | 461 | 717 | | Adjusted EBITDA | 2,955 | 3,087 | Net Income to Adjusted EBITDA Reconciliation (Fiscal 2021 vs. 2020) | Metric | FY2021 ($M) | FY2020 ($M) | | :----------------------------------------- | :---------- | :---------- | | Net income | 2,201 | 1,062 | | Add: Amortization of cable distribution investments | 22 | 24 | | Add: Depreciation and amortization | 300 | 258 | | Add: Impairment and restructuring charges | 35 | 451 | | Add: Interest expense, net | 391 | 334 | | Add: Other, net | (579) | 248 | | Add: Income tax expense | 717 | 402 | | Adjusted EBITDA | 3,087 | 2,779 | LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2022, Fox Corporation had $5.2 billion in cash and cash equivalents and an unused $1.0 billion revolving credit facility, providing strong financial flexibility, with cash primarily used for programming rights, operational expenditures, capital investments, acquisitions, debt repayment, and shareholder returns - As of June 30, 2022, the company had $5.2 billion in cash and cash equivalents and an unused $1.0 billion unsecured revolving credit facility, indicating strong liquidity251816 - Principal uses of cash include acquiring programming rights, operational expenditures, capital investments, acquisitions, interest and dividend payments, debt repayments, and stock repurchases252817 Net Cash Flows (Fiscal 2022 vs. 2021) | Activity | FY2022 ($M) | FY2021 ($M) | | :----------------------- | :---------- | :---------- | | Operating Activities | 1,884 | 2,639 | | Investing Activities | (513) | (528) | | Financing Activities | (2,057) | (870) | - Net cash from operating activities decreased in fiscal 2022 primarily due to higher sports payments, entertainment production spending, and lower Adjusted EBITDA253818 - Net cash used in financing activities increased in fiscal 2022 due to the repayment of $750 million in senior notes and the absence of a $462 million reimbursement from Disney received in fiscal 2021254819 - The company repurchased approximately 27 million shares for $1 billion in fiscal 2022 and increased its semi-annual dividend to $0.25 per share, expecting $275 million in total cash dividends for fiscal 20232567478211112 Outstanding Public Debt (June 30, 2022 vs. 2021) | Senior Notes Due | FY2022 ($M) | FY2021 ($M) | | :--------------- | :---------- | :---------- | | 2022 | — | 750 | | 2024 | 1,250 | 1,250 | | 2025 | 600 | 600 | | 2029 | 2,000 | 2,000 | | 2030 | 600 | 600 | | 2039 | 1,250 | 1,250 | | 2049 | 1,550 | 1,550 | | Total Public Debt | 7,250 | 8,000 | - The company's senior debt ratings are Baa2 (Moody's) and BBB (Standard & Poor's), both with a Stable outlook827 CRITICAL ACCOUNTING POLICIES This section details Fox Corporation's critical accounting policies that require significant management judgment and estimates, including revenue recognition, inventory valuation, goodwill and other intangible asset impairment testing, income taxes, and employee costs - Critical accounting policies involve significant judgment and estimates in areas such as revenue recognition, inventories, goodwill and other intangible assets, income taxes, and employee costs831 - Revenue from advertising is recognized as commercials air, with guarantees for targeted audience views. Affiliate fee revenue is recognized when programming is available, based on contractual rates and estimated subscribers834835936937 - Licensed programming costs are amortized as programs are broadcast, while owned programming is amortized using the individual-film-forecast-computation method. Inventories are evaluated for impairment if fair value is less than unamortized costs837838840920921922966 - Goodwill and indefinite-lived intangible assets (like FCC licenses) are tested annually for impairment using discounted cash flow and market-based valuation approaches, requiring significant judgment on discount rates, growth rates, and market data843844845927928929930 - Income taxes involve significant judgment in determining tax expense and evaluating tax positions, including establishing valuation allowances for deferred tax assets based on future taxable income estimates847941 - Pension and other postretirement benefit costs require significant management judgments on discount rates, expected return on plan assets, and actuarial assumptions, which are reviewed annually based on market conditions8488498508539961061 CAUTION CONCERNING FORWARD-LOOKING STATEMENTS This section reiterates that the document contains forward-looking statements, which are inherently uncertain and subject to various risks, with actual results potentially differing significantly due to factors such as evolving technologies, advertising market fluctuations, subscriber declines, competition, cybersecurity threats, and regulatory changes - The report contains forward-looking statements, which are subject to inherent risks and uncertainties, and actual results may differ materially from projections858859862 - Key risk factors include evolving technologies and consumer behavior, declines in advertising expenditures, MVPD subscriber losses, inability to renew programming rights, cybersecurity threats, and changes in laws and regulations859861 - The company does not undertake to update or revise any forward-looking statements unless required by law862 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Fox Corporation is exposed to market risks from changes in interest rates and stock prices, holding $7.25 billion in fixed-rate debt as of June 30, 2022, and common stock investments subject to market price volatility - The company is exposed to market risks from changes in interest rates and stock prices, but does not hold or issue financial instruments for trading purposes298863 Interest Rate Risk Exposure (June 30, 2022 vs. 2021) | Metric | FY2022 ($M) | FY2021 ($M) | | :------------------------------------------------------------------ | :---------- | :---------- | | Borrowings: liability (Fair Value) | 7,084 | 9,474 | | Potential change in fair values from a 10% adverse change in interest rates | (270) | (173) | - As of June 30, 2022, the company had $7.25 billion of outstanding fixed-rate debt and no variable-rate debt299300864865 Stock Price Risk Exposure (June 30, 2022 vs. 2021) | Metric | FY2022 ($M) | FY2021 ($M) | | :------------------------------------------------------------------ | :---------- | :---------- | | Total fair value of common stock investments | 435 | 788 | | Potential change in fair values from a 10% adverse change in market prices | (43) | (79) | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents Fox Corporation's audited consolidated financial statements for fiscal years 2022, 2021, and 2020, including statements of operations, comprehensive income, balance sheets, cash flows, and equity, along with management's report on internal control and independent auditor's reports - This item includes the Consolidated Statements of Operations, Comprehensive Income, Balance Sheets, Cash Flows, and Equity for fiscal years ended June 30, 2022, 2021, and 2020307872 - Management's Report on Internal Control Over Financial Reporting confirms effective internal controls as of June 30, 2022, based on the COSO framework310875 - Ernst & Young LLP, the independent registered public accounting firm, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting313319878884 - Critical audit matters identified include the assessment of realizability of deferred tax assets and program rights amortization for national sports programming, both involving subjective estimation and complex auditor judgment325888890 CONSOLIDATED STATEMENTS OF OPERATIONS The Consolidated Statements of Operations show Fox Corporation's financial performance for fiscal years 2022, 2021, and 2020, with total revenues increasing to $13.974 billion in fiscal 2022, and net income attributable to stockholders at $1.205 billion Consolidated Statements of Operations (in millions, except per share amounts) | Metric | FY2022 ($M) | FY2021 ($M) | FY2020 ($M) | | :---------------------------------------------- | :---------- | :---------- | :---------- | | Revenues | 13,974 | 12,909 | 12,303 | | Operating expenses | (9,117) | (8,037) | (7,807) | | Selling, general and administrative | (1,920) | (1,807) | (1,741) | | Depreciation and amortization | (363) | (300) | (258) | | Impairment and restructuring charges | — | (35) | (451) | | Interest expense, net | (371) | (391) | (334) | | Other, net | (509) | 579 | (248) | | Income before income tax expense | 1,694 | 2,918 | 1,464 | | Income tax expense | (461) | (717) | (402) | | Net income | 1,233 | 2,201 | 1,062 | | Less: Net income attributable to noncontrolling interests | (28) | (51) | (63) | | Net income attributable to Fox Corporation stockholders | 1,205 | 2,150 | 999 | | Basic EPS | 2.13 | 3.64 | 1.63 | | Diluted EPS | 2.11 | 3.61 | 1.62 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME The Consolidated Statements of Comprehensive Income present net income and other comprehensive income (loss) for fiscal years 2022, 2021, and 2020, with comprehensive income attributable to Fox Corporation stockholders at $1.297 billion in 2022 Consolidated Statements of Comprehensive Income (in millions) | Metric | FY2022 ($M) | FY2021 ($M) | FY2020 ($M) | | :---------------------------------------------- | :---------- | :---------- | :---------- | | Net income | 1,233 | 2,201 | 1,062 | | Other comprehensive income (loss), net of tax: | | | | | Benefit plan adjustments and other | 92 | 99 | (109) | | Other comprehensive income (loss), net of tax | 92 | 99 | (109) | | Comprehensive income | 1,325 | 2,300 | 953 | | Less: Net income attributable to noncontrolling interests | (28) | (51) | (63) | | Comprehensive income attributable to Fox Corporation stockholders | 1,297 | 2,249 | 890 | CONSOLIDATED BALANCE SHEETS The Consolidated Balance Sheets provide a snapshot of Fox Corporation's financial position as of June 30, 2022, and 2021, with total assets at $22.185 billion in 2022 and total equity at $11.375 billion Consolidated Balance Sheets (in millions) | Asset/Liability/Equity Category | June 30, 2022 ($M) | June 30, 2021 ($M) | | :---------------------------------------------- | :----------------- | :----------------- | | ASSETS | | | | Current assets | 8,281 | 8,749 | | Cash and cash equivalents | 5,200 | 5,886 | | Receivables, net | 2,128 | 2,029 | | Inventories, net | 791 | 729 | | Other current assets | 162 | 105 | | Non-current assets | | | | Property, plant and equipment, net | 1,682 | 1,708 | | Intangible assets, net | 3,157 | 3,154 | | Goodwill | 3,554 | 3,435 | | Deferred tax assets | 3,440 | 3,822 | | Other non-current assets | 2,071 | 2,058 | | Total assets | 22,185 | 22,926 | | LIABILITIES AND EQUITY | | | | Current liabilities | 2,296 | 3,002 | | Borrowings (current) | — | 749 | | Accounts payable, accrued expenses and other current liabilities | 2,296 | 2,253 | | Non-current liabilities | 8,514 | 8,538 | | Borrowings (non-current) | 7,206 | 7,202 | | Other liabilities | 1,120 | 1,336 | | Redeemable noncontrolling interests | 188 | 261 | | Total liabilities | 10,810 | 11,540 | | EQUITY | | | | Total Fox Corporation stockholders' equity | 11,339 | 11,123 | | Noncontrolling interests | 36 | 2 | | Total equity | 11,375 | 11,125 | | Total liabilities and equity | 22,185 | 22,926 | CONSOLIDATED STATEMENTS OF CASH FLOWS The Consolidated Statements of Cash Flows detail the cash generated and used by Fox Corporation's operating, investing, and financing activities for fiscal years 2022, 2021, and 2020, with net cash provided by operating activities decreasing to $1.884 billion in 2022 Consolidated Statements of Cash Flows (in millions) | Activity | FY2022 ($M) | FY2021 ($M) | FY2020 ($M) | | :------------------------------------------------ | :---------- | :---------- | :---------- | | OPERATING ACTIVITIES | | | | | Net cash provided by operating activities | 1,884 | 2,639 | 2,365 | | INVESTING ACTIVITIES | | | | | Net cash used in investing activities | (513) | (528) | (1,100) | | FINANCING ACTIVITIES | | | | | Net cash (used in) provided by financing activities | (2,057) | (870) | 146 | | Net (decrease) increase in cash and cash equivalents | (686) | 1,241 | 1,411 | | Cash and cash equivalents, end of year | 5,200 | 5,886 | 4,645 | CONSOLIDATED STATEMENTS OF EQUITY The Consolidated Statements of Equity track changes in Fox Corporation's equity for fiscal years 2022, 2021, and 2020, with total Fox Corporation stockholders' equity increasing to $11.339 billion in 2022 Consolidated Statements of Equity (in millions) | Metric | June 30, 2022 ($M) | June 30, 2021 ($M) | June 30, 2020 ($M) | | :---------------------------------------------- | :----------------- | :----------------- | :----------------- | | Balance, beginning of year | 11,123 | 10,094 | 9,947 | | Net income | 1,205 | 2,150 | 999 | | Other comprehensive income (loss) | 92 | 99 | (109) | | Dividends | (273) | (272) | (282) | | Shares repurchased | (1,000) | (1,001) | (600) | | Other | 192 | 53 | 139 | | Balance, end of year | 11,339 | 11,123 | 10,094 | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These notes provide detailed explanations of Fox Corporation's accounting policies, financial statement components, and significant transactions, covering business description, basis of presentation, summary of significant accounting policies, acquisitions, debt, equity, and other financial information NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION This note describes Fox Corporation as a news, sports, and entertainment company, detailing its spin-off from 21CF in March 2019 and Disney's subsequent acquisition of remaining 21CF assets, outlining the financial impacts of the transaction - Fox Corporation became a standalone public company on March 19, 2019, following a spin-off from 21CF, with Disney acquiring the remaining 21CF assets905 - The company paid an $8.5 billion dividend to 21CF and incurred a $6.5 billion Transaction Tax, which included a $700 million prepayment for Divestiture Tax910 - In fiscal 2021, FOX received a $462 million reimbursement from Disney related to the Divestiture Tax prepayment910 - The taxable spin-off resulted in a tax basis step-up for FOX's assets, leading to estimated annual tax deductions of $1.5 billion and an annual cash tax benefit of $370 million911 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines Fox Corporation's key accounting policies, including principles of consolidation, use of estimates, cash and receivables valuation, programming inventories, investments, property, plant and equipment depreciation, goodwill/intangible asset impairment reviews, leases, revenue recognition, advertising expenses, income taxes, earnings per share, equity-based compensation, financial instruments, redeemable noncontrolling interests, and concentrations of credit risk - The company consolidates all majority-owned and controlled subsidiaries and evaluates variable interest entities for consolidation913 - Financial statements require management estimates and assumptions, which may differ from actual results915916 - Licensed programming is amortized as broadcast, while owned programming uses an individual-film-forecast-computation method. Inventories are evaluated for recoverability against fair value920921922 - Goodwill and indefinite-lived intangible assets (FCC licenses) are tested annually for impairment using discounted cash flow and market-based valuation methods, requiring significant management judgment927928929930 - Revenue from advertising is recognized when commercials air, and affiliate fee revenue is recognized when network programming is made available, based on contractual rates and estimated subscribers936937 - The company accounts for redeemable noncontrolling interests based on ASC 480-10-S99-3A, accreting changes in redemption value over the issuance period to the earliest redemption date945946 NOTE 3. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS This note details Fox Corporation's acquisition and disposal activities, including the acquisition of entertainment production companies in fiscal 2022, and significant acquisitions in fiscal 2020 such as Credible, television stations, and Tubi, Inc. (TUBI) - In fiscal 2022, the company acquired three entertainment production companies for approximately $240 million in cash950 - In October 2019 (fiscal 2020), FOX acquired 67% of Credible, a consumer finance marketplace, for approximately $260 million in cash, allocating $75 million to intangible assets and $285 million to goodwill951 - In March 2020 (fiscal 2020), FOX acquired three television stations from Nexstar for $350 million and sold two stations for $45 million, allocating $210 million to intangible assets (FCC licenses, retransmission agreements) and $30 million to property, plant and equipment953 - In April 2020 (fiscal 2020), FOX acquired Tubi, Inc. (TUBI) for approximately $445 million in cash, allocating $130 million to intangible assets and $320 million to goodwill954 - The company has a media and sports wagering partnership with Flutter Entertainment plc, holding an approximately 2.5% equity stake as of June 30, 2022, and options to acquire interests in FanDuel Group and The Stars Group's U.S. business955 - In March 2020, FOX sold its investment in Roku for approximately $340 million, recording a loss of $210 million related to the change in fair value prior to disposition956 NOTE 4. RESTRUCTURING PROGRAMS This note details Fox Corporation's restructuring activities, including $35 million in charges in fiscal 2021 and approximately $425 million in fiscal 2020, primarily due to contract termination costs for a programming rights agreement with the United States Golf Association (USGA) - In fiscal 2021, the company recorded $35 million in restructuring charges, primarily for severance costs in the Cable Network Programming segment959 - In fiscal 2020, restructuring charges totaled approximately $425 million, mainly from contract termination costs for a programming rights agreement with the USGA, including a $75 million write-off of programming rights advances and a $320 million payment to the USGA960 Restructuring Program Liabilities (in millions) | Metric | June 30, 2022 | June 30, 2021 | June 30, 2020 | | :----------------------------------- | :------------ | :------------ | :------------ | | Balance, beginning of year | (38) | (68) | (40) | | Additions | (35) | (35) | (451) | | Payments | 11 | 65 | 423 | | Balance, end of year | (27) | (38) | (68) | NOTE 5. INVENTORIES, NET This note details Fox Corporation's inventories, consisting of licensed and owned programming, totaling $1.312 billion as of June 30, 2022, with $50 million in impairment charges recognized in fiscal 2022 Inventories, Net (in millions) | Category | June 30, 2022 | June 30, 2021 | | :---------------------------------------------- | :------------ | :------------ | | Licensed programming, including prepaid sports rights | 975 | 811 | | Owned programming | 337 | 117 | | Total inventories, net | 1,312 | 928 | | Less: current portion of inventories, net | (791) | (729) | | Total non-current inventories, net | 521 | 199 | Owned Programming Breakdown (in millions) | Category | June 30, 2022 | June 30, 2021 | | :-------------- | :------------ | :------------ | | Released | 205 | 48 | | In-process or other | 132 | 69 | | Total | 337 | 117 | - Amortization expense related to inventories was $5.379 billion in fiscal 2022, up from $4.721 billion in fiscal 2021966 - The company recognized $50 million in impairment charges for licensed and owned programming in fiscal 2022966 Estimated Amortization Expense for Inventories (in millions) | Fiscal Year | Estimated Amortization Expense | | :---------- | :----------------------------- | | 2023 | $934 | | 2024 | $164 | | 2025 | $38 | NOTE 6. FAIR VALUE This note details Fox Corporation's fair value measurements for financial assets and redeemable noncontrolling interests, categorized into a three-tiered hierarchy, with investments in equity securities (Flutter) at $435 million (Level 1) and redeemable noncontrolling interests at $(188) million (Level 3) as of June 30, 2022 Financial Assets and Redeemable Noncontrolling Interests at Fair Value (June 30, 2022) | Category | Total ($M) | Level 1 ($M) | Level 2 ($M) | Level 3 ($M) | | :-------------------------------- | :--------- | :----------- | :----------- | :----------- | | Investments in equity securities | 435 | 435 | — | — | | Redeemable noncontrolling interests | (188) | — | — | (188) | | Total | 247 | 435 | — | (188) | Financial Assets and Redeemable Noncontrolling Interests at Fair Value (June 30, 2021) | Category | Total ($M) | Level 1 ($M) | Level 2 ($M) | Level 3 ($M) | | :-------------------------------- | :--------- | :----------- | :----------- | :----------- | | Investments in equity securities | 788 | 788 | — | — | | Redeemable noncontrolling interests | (261) | — | — | (261) | | Total | 527 | 788 | — | (261) | - Level 1 investments represent equity securities of Flutter with readily determinable fair values970 - Level 3 fair value measures for redeemable noncontrolling interests use market and income approach valuation techniques, with unobservable inputs like EBITDA projections and multiples970972 - The put right for Credible's minority shareholder becomes exercisable in fiscal 2025, and for an entertainment production company's minority shareholder in fiscal 2027973 NOTE 7. PROPERTY, PLANT AND EQUIPMENT, NET This note provides a breakdown of Fox Corporation's property, plant, and equipment, net, totaling $1.682 billion as of June 30, 2022, with depreciation and amortization expense of $297 million in fiscal 2022 Property, Plant and Equipment, Net (in millions) | Category | June 30, 2022 | June 30, 2021 | | :-------------------------------------- | :------------ | :------------ | | Land | 199 | 204 | | Buildings and leaseholds | 1,284 | 1,319 | | Machinery and equipment | 1,743 | 1,652 | | Total (gross) | 3,226 | 3,175 | | Less: accumulated depreciation and amortization | (1,729) | (1,732) | | Net depreciable assets | 1,497 | 1,443 | | Construction in progress | 185 | 265 | | Total property, plant and equipment, net | 1,682 | 1,708 | - Depreciation and amortization related to Property, plant and equipment was $297 million in fiscal 2022, $237 million in 2021, and $222 million in 2020979 NOTE 8. GOODWILL AND INTANGIBLE ASSETS, NET This note details Fox Corporation's goodwill and intangible assets, with total intangible assets, net, at $3.157 billion and goodwill at $3.554 billion as of June 30, 2022, and no impairment identified in the annual review Intangible Assets, Net (in millions) | Category | June 30, 2022 | June 30, 2021 | | :-------------------------------------- | :------------ | :------------ | | FCC licenses (not subject to amortization) | 2,250 | 2,250 | | Other intangible assets (not subject to amortization) | 642 | 642 | | Amortizable intangible assets, net | 265 | 262 | | Total intangible assets, net | 3,157 | 3,154 | - Amortization related to finite-lived intangible assets was $66 million in fiscal 2022, $63 million in 2021, and $36 million in 2020980 Estimated Amortization Expense for Finite-Lived Intangible Assets (in millions) | Fiscal Year | Estimated Amortization Expense | | :---------- | :----------------------------- | | 2023 | $65 | | 2024 | $47 | | 2025 | $34 | | 2026 | $33 | | 2027 | $30 | Goodwill by Segment (in millions) | Segment | June 30, 2022 | June 30, 2021 | June 30, 2020 | | :-------------------------------- | :------------ | :------------ | :------------ | | Cable Network Pro
Fox(FOXA) - 2022 Q4 - Annual Report