Investments

12 Months Ended

Jun. 30, 2019

NOTE 6. INVESTMENTS

The Company’s investments were comprised of the following:


	Ownership Percentage as of June 30, 2019		As of June 30,
	Ownership Percentage as of June 30, 2019		2019		2018
			(in millions)
Equity method investments (a)		various	$	148	$	173
Equity securities (b)		various		187		220

Total Investments			$	335	$	393

(a)	Equity method investments are primarily comprised of Foxtel’s investment in Nickelodeon Australia Joint Venture and Elara Technologies Pte. Ltd. (“Elara”), which operates PropTiger.com, Makaan.com and Housing.com.

(b)	Equity securities are primarily comprised of certain investments in China and the Company’s investment in HT&E Limited, which operates a portfolio of Australian radio and outdoor media assets.

The Company has equity securities with quoted prices in active markets as well as equity securities without readily determinable fair market values. Equity securities without readily determinable fair market values are valued at cost, less any impairment, plus or minus changes in fair value resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. The components comprising total gains and losses on equity securities are set forth below:


	For the fiscal year ended June 30,
	2019			2018
	(in millions)
Total (losses) gains recognized on equity securities	$	(23	)	$	35
Less: Net (losses) gains recognized on equity securities sold or impaired		—			7

Unrealized (losses) gains recognized on equity securities held at end of period	$	(23	)	$	28

Equity Losses of Affiliates

The Company’s share of the losses of its equity affiliates was as follows:


	For the fiscal years ended June 30,
	2019			2018			2017
	(in millions)
Foxtel (a)	$	—		$	(974	)	$	(265	)
Other equity affiliates, net (b)		(17	)		(32	)		(30	)

Total Equity losses of affiliates	$	(17	)	$	(1,006	)	$	(295	)

(a)	Following completion of the Transaction in April 2018, News Corp ceased accounting for Foxtel as an equity method investment and began consolidating its results in the fourth quarter of fiscal 2018. See Note 4—Acquisitions, Disposals and Other Transactions.

During the third quarter of fiscal 2018, the Company recognized a $957 million

non-cash

write-down of the carrying value of its investment in Foxtel. In the third quarter of fiscal 2018, the Company assessed the long-term prospects for Foxtel, on both a stand-alone and combined basis. As a result of lower-than-expected revenues from certain products and broadcast subscribers at Foxtel, the Company revised its outlook for Foxtel, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company concluded that the fair value of its investment in Foxtel declined below its carrying value. The assumptions utilized in the income approach valuation method were a discount rate of 10.25% and a long-term growth rate of 2.0%. The write-down was reflected in Equity losses of affiliates in the Statement of Operations for the fiscal year ended June 30, 2018.

During the second quarter of fiscal 2017, the Company recognized a $227 million non-cash write-down of the carrying value of its investment in Foxtel. As a result of Foxtel’s performance in the first half of fiscal 2017 and the competitive operating environment in the Australian pay-TV market, the Company revised its future outlook for the business in the second quarter of fiscal 2017, which resulted in a reduction in expected future cash flows. Based on the revised projections, the Company determined that the fair value of its investment in Foxtel declined below its carrying value, which included the gain recognized in connection with the acquisition of Consolidated Media Holdings Ltd. (“CMH”). The assumptions utilized in the income approach valuation method were a discount rate of 9.0% and a long-term growth rate of 2.5%. The assumptions utilized in the market approach valuation methods were EBITDA multiples from guideline public companies operating in similar industries and a control premium of 10%. The write-down is reflected in Equity (losses) earnings of affiliates in the Statement of Operations for the fiscal year ended June 30, 2017.

In November 2012, the Company acquired CMH, a media investment company that operates in Australia. CMH owned a 25% interest in Foxtel through its 50% interest in FOX SPORTS Australia. The CMH acquisition was accounted for in accordance with ASC 805 which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company’s previously held equity interest in FOX SPORTS Australia, through which the Company held its indirect 25% interest in Foxtel, was revalued to fair value as of the acquisition date, resulting in a

step-up

and

non-cash

gain of approximately $1.3 billion for the fiscal year ended June 30, 2013, of which $0.9 billion related to Foxtel.

Additionally, in accordance with ASC 350, the Company amortized $49 million and $68 million related to excess cost over the Company’s proportionate share of its investment’s underlying net assets allocated to finite-lived intangible assets during the fiscal years ended June 30, 2018 and 2017, respectively. Such amortization was reflected in Equity losses of affiliates in the Statements of Operations.

(b)

Other equity affiliates, net for the fiscal years ended June 30, 2019, 2018 and 2017 include losses primarily from the Company’s interest in Elara. Additionally, during the fiscal years ended June 30, 2018 and 2017, the Company recognized

non-cash

write-downs of $13 million and $9 million, respectively, on certain other equity method investments. The write-downs are reflected in Equity losses of affiliates in the Statements of Operations for the fiscal years ended June 30, 2018 and 2017.

Impairments of Equity Securities

Prior to the adoption of ASU 2016-01 during the first quarter of fiscal 2019, the Company regularly reviewed its investments in equity securities for impairments based on criteria that included the extent to which the investment’s carrying value exceeded its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and the investment’s financial strength and specific prospects. The Company recorded write-offs and impairments of certain available-for-sale securities in the fiscal years ended June 30, 2018 and 2017 of $33 million and $21 million, respectively which were reclassified out of Accumulated other comprehensive income and included in Other, net. These write-offs and impairments were taken either as a result of the deteriorating financial position of the investee or due to an other-than-temporary impairment resulting from sustained losses and limited prospects for recovery. As a result of the adoption of ASU 2016-01, the Company has included the impact from the remeasurement of its investments in equity securities in Other, net in the Statement of Operations for the fiscal year ended June 30, 2019.

Summarized Financial Information

Summarized financial information for Foxtel for periods through April 2, 2018, presented in accordance with U.S. GAAP, was as follows:


	For the nine months ended March 31,		For the fiscal year ended June 30,
	2018		2017
	(in millions)
Revenues	$	1,818	$	2,411
Operating income (a)		155		353
Net income		64		59

(a)

Includes Depreciation and amortization of $187 million for the period ended April 2, 2018 and $215 million for the fiscal year ended June 30, 2017. Operating income before depreciation and amortization was $342 million for the period ended April 2, 2018 and $568 million for the fiscal year ended June 30, 2017.