EX-99.4

EX-99.4 6 d695603dex994.htm EX-99.4 EX-99.4

Exhibit 99.4

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA OF REMAINCO

Overview

The unaudited pro forma condensed consolidated financial statements presented below (the “RemainCo Pro Forma Financial Statements”) are presented to illustrate the estimated effects of (i) the separation and distribution (each as defined in note 1 to the RemainCo Pro Forma Financial Statements) of Fox Corporation (“FOX”) and the related net cash dividend from FOX to Twenty-First Century Fox, Inc. (“21CF”) and (ii) the sale of 21CF’s 39% interest in Sky plc (“Sky”) to Comcast Corporation (“Comcast”) for approximately £11.6 billion ($15.1 billion) (the “Sky Sale” and, together with the transactions identified in clause (i) above, the “Transactions”), which we refer to as the Sky Sale, which is described in more detail in note 1 to the RemainCo Pro Forma Financial Statements.

The RemainCo Pro Forma Financial Statements have been prepared in accordance with SEC Regulation S-X Article 11 and are not intended to be a complete presentation of 21CF’s financial position or results of operations had the Transactions occurred as of and for the periods indicated. In addition, the RemainCo Pro Forma Financial Statements are provided for illustrative and informational purposes only, and are not necessarily indicative of 21CF’s future results of operations or financial condition had the Transactions been completed on the dates assumed.

The RemainCo Pro Forma Financial Statements are derived by applying pro forma adjustments to the historical consolidated financial statements of 21CF.

The pro forma adjustments related to the Transactions include:

•

presenting FOX as discontinued operations in accordance with Accounting Standards Codification (“ASC”) 205, as a result of the separation and distribution;

•

in connection with the separation and distribution, a dividend in the amount of $8.5 billion paid to 21CF by FOX net of the payment in the amount of $2 billion paid from TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Old Disney”) to FOX one business day after the distribution; and

•

the estimated impact of the Sky Sale.

The unaudited pro forma condensed consolidated statements of operations for the three months ended September 30, 2018 and for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016 reflect 21CF’s results as if the separation and distribution had occurred on July 1, 2015 and the Sky Sale had occurred on July 1, 2017 and does not assume any interest income on cash proceeds. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2018 gives effect to the separation and distribution as if it had occurred on December 31, 2018.

Pro forma adjustments included in the RemainCo Pro Forma Financial Statements are limited to those that are (i) directly attributable to the Transactions, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on RemainCo’s results.

The RemainCo Pro Forma Financial Statements are subject to the assumptions and adjustments described in the accompanying notes, which should be read together with the RemainCo Pro Forma Financial Statements. 21CF’s management believes that these assumptions and adjustments, based upon the information available at this time, are reasonable under the circumstances.

The unaudited pro forma condensed consolidated statements of operations do not reflect future events that may occur after the closing of the Transactions, including, but not limited to, material non-recurring charges subsequent to the closing.

The RemainCo Pro Forma Financial Statements do not reflect any divestitures or any other actions that may be required by regulatory or governmental authorities in connection with obtaining regulatory approvals and clearances for the 21CF merger (as defined in note 1 to the RemainCo Pro Forma Financial Statements). The effects of the foregoing items could, individually or in the aggregate, materially impact the RemainCo Pro Forma Financial Statements.

The RemainCo Pro Forma Financial Statements should be read in conjunction with the following information:

•

the audited consolidated balance sheets of 21CF as of June 30, 2018 and June 30, 2017, and the audited consolidated statements of operations, comprehensive income, cash flows and equity of 21CF for each of the three years in the period ended June 30, 2018, and the notes related thereto; and

•

the unaudited consolidated balance sheet of 21CF as of December 31, 2018, the unaudited consolidated statements of operations and comprehensive income for the three-month and six-month periods ended September 30, 2018 and December 31, 2018, and the unaudited consolidated statement of cash flows for the six-month period ended December 31, 2018, and the notes related thereto.

Old Disney and 21CF have different fiscal year ends. Regulation S-X, Rule 11-02(c)(3) allows the combination of financial information for pro forma reporting purposes for companies if their fiscal years end within 93 days of each other. As such, 21CF’s historical results in the RemainCo Pro Forma Financial Statements are derived from 21CF’s unaudited consolidated statement of operations for the three months ended September 30, 2018, audited consolidated statements of operations for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016 and unaudited consolidated balance sheet as of December 31, 2018.

REMAINCO

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

(in millions, except per share data)


	21CF Historical^3.a			FOX^3.b			Pro Forma Adjustments				Disposition of Sky				RemainCo
Revenues	$	7,177		$	(2,541	)	$	81		^3.c	$	—			$	4,717
Operating expenses		(4,424	)		1,491			(79	)	^3.c		(4	)	^3.f		(3,016	)
Selling, general and administrative		(890	)		225			—				—				(665	)
Depreciation and amortization		(158	)		43			—				—				(115	)
Impairment and restructuring charges		(16	)		—			—				—				(16	)
Equity earnings (losses) of affiliates		35			—			—				(147	)	^3.g		(112	)
Interest expense, net		(300	)		16			—				—				(284	)
Interest income		8			—			—				—				8
Other, net		52			(157	)		(9	)	^3.d		—				(114	)

Income (loss) from continuing operations before income tax (expense) benefit		1,484			(923	)		(7	)			(151	)			403
Income tax (expense) benefit		(126	)		222			2		^3.e		(190	)	^3.g		(92	)

Income (loss) from continuing operations		1,358			(701	)		(5	)			(341	)			311
Less: Net (income) loss attributable to noncontrolling interests		(66	)		11			—				—				(55	)

Income (loss) from continuing operations attributable to 21CF stockholders	$	1,292		$	(690	)	$	(5	)		$	(341	)		$	256

EARNINGS PER SHARE DATA
Weighted average shares
Basic		1,854														1,854
Diluted		1,863														1,863
Income from continuing operations attributable to 21CF stockholders per share:
Basic	$	0.70													$	0.14
Diluted	$	0.69													$	0.14

See accompanying Notes to the Unaudited RemainCo Pro Forma Financial Statements.

REMAINCO

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED JUNE 30, 2018

(in millions, except per share data)


	21CF Historical^3.a			FOX^3.b			Pro Forma Adjustments				Disposition of Sky				RemainCo
Revenues	$	30,400		$	(10,215	)	$	666		^3.c	$	—			$	20,851
Operating expenses		(19,769	)		6,567			(658	)	^3.c		5		^3.f		(13,855	)
Selling, general and administrative		(3,668	)		897			—				—				(2,771	)
Depreciation and amortization		(584	)		171			—				—				(413	)
Impairment and restructuring charges		(72	)		16			—				—				(56	)
Equity (losses) earnings of affiliates		(138	)		1			—				(426	)	^3.g		(563	)
Interest expense, net		(1,248	)		43			—				—				(1,205	)
Interest income		39			—			—				—				39
Other, net		(550	)		8			(29	)	^3.d		—				(571	)

Income (loss) from continuing operations before income tax benefit (expense)		4,410			(2,512	)		(21	)			(421	)			1,456
Income tax benefit (expense)		364			100			6		^3.e		(274	)	^3.g		196

Income (loss) from continuing operations		4,774			(2,412	)		(15	)			(695	)			1,652
Less: Net (income) loss attributable to noncontrolling interests		(298	)		41			—				—				(257	)

Income (loss) from continuing operations attributable to 21CF stockholders	$	4,476		$	(2,371	)	$	(15	)		$	(695	)		$	1,395

EARNINGS PER SHARE DATA
Weighted average shares
Basic		1,852														1,852
Diluted		1,857														1,857
Income from continuing operations attributable to 21CF stockholders per share:
Basic	$	2.42													$	0.75
Diluted	$	2.41													$	0.75

See accompanying Notes to the Unaudited RemainCo Pro Forma Financial Statements.

REMAINCO

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED JUNE 30, 2017

(in millions, except per share data)


	21CF Historical^3.a			FOX^3.b			Pro Forma Adjustments				RemainCo
Revenues	$	28,500		$	(9,977	)	$	784		^3.c	$	19,307
Operating expenses		(18,094	)		6,135			(788	)	^3.c		(12,747	)
Selling, general and administrative		(3,298	)		854			—				(2,444	)
Depreciation and amortization		(553	)		165			—				(388	)
Impairment and restructuring charges		(315	)		165			—				(150	)
Equity losses of affiliates		(41	)		(1	)		—				(42	)
Interest expense, net		(1,219	)		24			—				(1,195	)
Interest income		36			(2	)		—				34
Other, net		(327	)		128			(54	)	^3.d		(253	)

Income (loss) from continuing operations before income tax (expense) benefit		4,689			(2,509	)		(58	)			2,122
Income tax (expense) benefit		(1,419	)		877			20		^3.e		(522	)

Income (loss) from continuing operations		3,270			(1,632	)		(38	)			1,600
Less: Net (income) loss attributable to noncontrolling interests		(274	)		37			—				(237	)

Income (loss) from continuing operations attributable to 21CF stockholders	$	2,996		$	(1,595	)	$	(38	)		$	1,363

EARNINGS PER SHARE DATA
Weighted average shares
Basic		1,854										1,854
Diluted		1,856										1,856
Income from continuing operations attributable to 21CF stockholders per share:
Basic	$	1.62									$	0.74
Diluted	$	1.61									$	0.73

See accompanying Notes to the Unaudited RemainCo Pro Forma Financial Statements.

REMAINCO

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED JUNE 30, 2016

(in millions, except per share data)


	21CF Historical^3.a			FOX^3.b			Pro Forma Adjustments				RemainCo
Revenues	$	27,326		$	(8,948	)	$	733		^3.c	$	19,111
Operating expenses		(17,419	)		5,577			(733	)	^3.c		(12,575	)
Selling, general and administrative		(3,385	)		936			—				(2,449	)
Depreciation and amortization		(530	)		167			—				(363	)
Impairment and restructuring charges		(323	)		55			—				(268	)
Equity losses of affiliates		(34	)		(1	)		—				(35	)
Interest expense, net		(1,184	)		18			—				(1,166	)
Interest income		38			(5	)		—				33
Other, net		(335	)		105			(14	)	^3.d		(244	)

Income (loss) from continuing operations before income tax (expense) benefit		4,154			(2,096	)		(14	)			2,044
Income tax (expense) benefit		(1,130	)		777			6		^3.e		(347	)

Income (loss) from continuing operations		3,024			(1,319	)		(8	)			1,697
Less: Net (income) loss attributable to noncontrolling interests		(261	)		35			—				(226	)

Income (loss) from continuing operations attributable to 21CF stockholders	$	2,763		$	(1,284	)	$	(8	)		$	1,471

EARNINGS PER SHARE DATA
Weighted average shares
Basic		1,943										1,943
Diluted		1,945										1,945
Income from continuing operations attributable to 21CF stockholders per share:
Basic and Diluted	$	1.42									$	0.76

See accompanying Notes to the Unaudited RemainCo Pro Forma Financial Statements.

REMAINCO

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2018

(in millions)


	21CF Historical^3.a		FOX^3.b			Pro Forma Adjustments			RemainCo
ASSETS
Current assets
Cash and cash equivalents	$	21,281	$	(1,444	)	$	6,500	^3.h	$	26,337
Receivables, net		8,083		(2,438	)		117	^3.c		5,762
Inventories, net		3,934		(1,422	)		217	^3.c		2,729
Other		719		(66	)		—			653

Total current assets		34,017		(5,370	)		6,834			35,481

Non-current assets
Receivables, net		859		(5	)		—			854
Investments		833		(289	)		—			544
Inventories, net		8,133		(155	)		7	^3.c		7,985
Property, plant and equipment, net		1,971		(1,150	)		—			821
Intangible assets, net		5,970		(2,859	)		—			3,111
Goodwill		12,758		(5,174	)		—			7,584
Other non-current assets		1,345		(384	)		—			961

Total assets	$	65,886	$	(15,386	)	$	6,841		$	57,341

LIABILITIES AND EQUITY
Current liabilities
Borrowings	$	887	$	—		$	—		$	887
Accounts payable, accrued expenses and other current liabilities		7,048		(1,114	)		6,834	^3.c, ^3.h		12,768

Total current liabilities		7,935		(1,114	)		6,834			13,655

Non-current liabilities
Borrowings		18,321		—			—			18,321
Other liabilities		3,848		(637	)		—			3,211
Deferred income taxes		1,971		(1,080	)		—			891
Redeemable noncontrolling interests		576		(106	)		—			470
Commitments and contingencies
Total equity		33,235		(12,449	)		7	^3.c, ^3.h		20,793

Total liabilities and equity	$	65,886	$	(15,386	)	$	6,841		$	57,341

See accompanying Notes to the Unaudited RemainCo Pro Forma Financial Statements.

Notes to the Unaudited RemainCo Pro Forma Financial Statements

1.	Description of the Transactions

Disney Transaction / Separation and Distribution of FOX

Pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated as of June 20, 2018, between, among others, Old Disney and 21CF (the “combination merger agreement”), following the distribution on March 19, 2019, a subsidiary of Old Disney merged with and into 21CF (the “21CF merger”), and 21CF continued as the surviving corporation in the 21CF merger and a wholly owned subsidiary of The Walt Disney Company (formerly known as TWDC Holdco 613 Corp.) (“New Disney”). Prior to the completion of the 21CF merger, 21CF and FOX entered into a separation agreement (the “separation agreement”), pursuant to which 21CF, among other things, engaged in an internal restructuring (the “separation”), whereby it transferred to FOX a portfolio of 21CF’s news, sports and broadcast businesses, including the Fox News Channel, Fox Business Network, Fox Broadcasting Company, Fox Sports, Fox Television Stations Group, and sports cable networks FS1, FS2, Fox Deportes and Big Ten Network, and certain other assets and liabilities associated with such businesses. 21CF retained all assets and liabilities not transferred to FOX, including the Twentieth Century Fox film and television studios and certain cable and international television businesses. Following the separation and prior to the completion of the 21CF merger, 21CF distributed all of the issued and outstanding common stock of FOX to 21CF stockholders (other than holders that are subsidiaries of 21CF) on a pro rata basis (the “distribution”). Prior to the distribution, FOX paid to 21CF a dividend in the amount of $8.5 billion (the “dividend”). FOX incurred indebtedness sufficient to fund the dividend, which indebtedness was reduced after the 21CF merger by the amount of the cash payment from Old Disney. As the separation and distribution are taxable to 21CF at the corporate level, the dividend was intended to fund the taxes resulting from the separation and distribution and certain other transactions contemplated by the combination merger agreement (the “transaction tax”).

Upon completion of the 21CF merger on March 20, 2019, each issued and outstanding share of 21CF common stock (other than (i) shares held in treasury by 21CF that are not held on behalf of third parties, (ii) shares held by subsidiaries of 21CF and (iii) shares held by 21CF stockholders who had not voted in favor of the 21CF merger and perfected and not withdrawn a demand for appraisal rights pursuant to the Delaware General Corporation Law) was exchanged for, at the election of the holder thereof and subject to automatic proration and adjustment (as described below), consideration (the “21CF merger consideration”) payable in either cash (the “21CF cash consideration”) or New Disney common stock (the “21CF stock consideration”). Holders of 21CF common stock who made no election received the 21CF cash consideration, the 21CF stock consideration or a combination of the two in exchange for their shares. The consideration paid to holders of shares of 21CF common stock in the 21CF merger was subject, pursuant to the terms of the combination merger agreement, to automatic proration and adjustment, as applicable, to ensure that the total amount of cash paid by New Disney in the 21CF merger was equal to $35.7 billion. Additionally, the final estimate as of the closing date of the Transaction Tax (as defined in the combination merger agreement) was $6.5 billion, which amount was determined in accordance with the procedures set forth in the combination merger agreement. As a result, Old Disney was required to make a cash payment to FOX in the amount of $2.0 billion.

Sky Disposal

On October 3, 2018, 21CF entered into an agreement to sell its Sky shares to Comcast at a price of £17.28 for each Sky share. As a result, in October 2018, 21CF received cash consideration of approximately £11.6 billion ($15.1 billion) for its 39% interest in Sky.

2.	Basis of Presentation

The separation and distribution qualify as discontinued operations for 21CF, and FOX is therefore presented in the FOX column in accordance with the discontinued operations guidance in ASC 205, “Financial Statement Presentation.” In accordance with applicable SEC guidance, the unaudited pro forma condensed consolidated statements of operations for the three months ended September 30, 2018 and for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016 reflect the separation and distribution as discontinued operations. Upon completion of the separation and distribution, holders of 21CF class A common stock and class B common stock received, on a pro rata basis, all of the issued and outstanding common stock of FOX. The unaudited pro forma condensed consolidated statements of operations for the three months ended September 30, 2018 and for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016 reflect 21CF’s results as if the Sky Sale had occurred on July 1, 2017 and does not assume any interest income on cash proceeds. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2018 gives effect to the separation and distribution as if it had occurred on December 31, 2018.

3.	Pro Forma Adjustments

3.a

Reflects 21CF’s historical financial position as of December 31, 2018 and operating results for the three months ended September 30, 2018 and for the fiscal years ended June 30, 2018, June 30, 2017 and June 30, 2016, respectively.

3.b

Represents adjustments to record the separation and distribution of FOX, as presented on an ASC 205 basis. The financial information presented in accordance with ASC 205 excludes attributions, allocations and other carve-out adjustments. Because the financial information presented under ASC 205 excludes attributions, allocations and other carve-out adjustments, 21CF management believes that the financial information presented under ASC 205 may not be representative of future results that FOX will report as an independent public company.

FOX’s cash and cash equivalents of $1.4 billion includes $600 million, which was contributed by 21CF in accordance with the combination merger agreement, plus all net cash generated beginning January 1, 2018 by FOX’s businesses and assets. In accordance with the separation agreement, at the time of the separation and distribution, FOX was entitled to such cash amounts reduced by (i) applicable operational taxes, (ii) 30% of all cash dividends declared by 21CF from December 13, 2017 through the distribution, (iii) 30% of all unallocated shared overhead and corporate costs from December 13, 2017 through the distribution, (iv) an allocated amount of shared overhead corporate costs consistent with 21CF’s historical approach to such allocation, and (v) certain other expenses related to the separation and the distribution. An estimate of the obligations described in clauses (i) – (v) are reflected in the $1.4 billion in cash and cash equivalents as of December 31, 2018. This cash allocation continued through the consummation of the separation and distribution pursuant to the separation agreement.

3.c

Represents adjustments to record the effect of historical ongoing transactions between FOX and 21CF which were historically eliminated in consolidation as intercompany transactions.

3.d

In connection with the separation of 21CF from News Corporation in June 2013, 21CF agreed to indemnify News Corporation, on an after-tax basis, for payments made after the 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, 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 combination merger agreement, certain costs and liabilities related to the U.K. Newspaper Matters Indemnity were allocated to FOX. The liability related to the U.K. Newspaper Matters Indemnity of approximately $45 million as of December 31, 2018 is included in the accounts payable, accrued expenses and other current liabilities line in the FOX column presented on an ASC 205 basis. In 21CF’s historical financial statements, the associated expense / income was included in (loss) income from discontinued operations, net of tax financial statement line and is included in the other, net financial statement line in the FOX column as FOX would not present this as discontinued operations on a go forward basis. The pro forma adjustment eliminates the effect of the above reclassification on the RemainCo Pro Forma Financial Statements.

3.e

In determining the tax rate to apply to 21CF’s pro forma adjustments, 21CF used a combined federal and state applicable tax rate of 23% for the three months ended September 30, 2018 and 30% for the fiscal year ended June 30, 2018, which reflects the decrease in the federal statutory rate from the federal income tax legislation enacted in December 2017, and 37% for all other periods.

3.f

Represents the adjustment to reverse the elimination of intra-entity profits and losses on transactions between 21CF and Sky.

3.g

Represents the impact to equity results of affiliates as a result of the Sky Sale. Historically 21CF accounted for its investment in Sky under the equity method of accounting. As a result of the Sky Sale, the historical equity earnings were eliminated. 21CF has also removed from income tax (expense) benefit the net deferred tax amounts, including an adjustment for the new federal statutory rate, due to the difference between the equity earnings recorded from Sky and the dividends received from Sky during the period.

3.h

Represents an adjustment to record a net dividend of $6.5 billion paid to 21CF by FOX and a corresponding current taxes payable of $6.5 billion for the transaction tax arising from the separation and distribution.

In accordance with the combination merger agreement, the dividend paid by FOX to 21CF with the intent of funding 21CF’s transaction tax was $8.5 billion. The 21CF merger consideration was set based on an estimate of $8.5 billion for the transaction tax. The final estimate as of the closing date of the Transaction Tax was $6.5 billion, which amount was determined in accordance with the procedures set forth in the combination merger agreement. As a result, Old Disney was required to make a cash payment to FOX in the amount of $2.0 billion.

The per share value of the 21CF merger consideration was calculated, in accordance with the combination merger agreement, to be $51.572626.