Segment Information

9 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

Segment Information

NOTE 11. 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 cable television systems, direct broadcast satellite operators, telecommunication companies and online video distributors (collectively, multi-channel video programming distributors), primarily in the U.S.

• Television, which principally consists of the acquisition, marketing and distribution of broadcast network programming nationally under the FOX brand and the operation of 28 full power broadcast television stations, including 11 duopolies, in the U.S. (of these stations, 17 are affiliated with the FOX Network, nine are affiliated with MyNetworkTV, one is affiliated with both The CW Television Network and MyNetworkTV and one is an independent station).

• Other, Corporate and Eliminations, which principally consists of corporate overhead costs, intracompany eliminations and the FOX Studios lot. The FOX Studios 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.

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.

Beginning with the announcement of the Company’s financial results for the quarter ended March 31, 2019, the Company has renamed as “Segment EBITDA” the measure that it previously referred to as “Segment OIBDA”. The definition of this measure has not changed: 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) benefit. 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.

Management believes that information about Total Segment EBITDA assists all users of the Company’s Unaudited Consolidated and Combined Financial Statements by allowing them to evaluate changes in the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing insight into both operations and the other factors that affect reported results. Total Segment EBITDA provides management, investors and equity analysts a measure to analyze the operating performance of the Company’s business and its enterprise value against historical data and competitors’ data, although historical results, including Segment EBITDA and Total Segment EBITDA, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).

Total Segment EBITDA may be considered a non-GAAP financial measure and should be considered in addition to, not as a substitute for, net income, cash flow and other measures of financial performance reported in accordance with GAAP. In addition, this measure does not reflect cash available to fund requirements and excludes items, such as depreciation and amortization and impairment charges, which are significant components in assessing the Company’s financial performance. Total Segment EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table reconciles Income before income tax (expense) benefit to Total Segment EBITDA for the three and nine months ended March 31, 2019 and 2018:

	For the three months ended March 31,						For the nine months ended March 31,
	2019			2018			2019			2018
	(in millions)
Income before income tax (expense) benefit	$	706		$	654		$	1,568		$	1,577
Add
Amortization of cable distribution investments		10			11			29			43
Depreciation and amortization		58			43			152			126
Impairment and restructuring charges		14			14			14			11
Interest expense		81			7			112			20
Interest income		(19	)		-			(19	)		-
Other, net		(84	)		(23	)		116			75
Total Segment EBITDA	$	766		$	706		$	1,972		$	1,852

The following tables set forth the Company’s Revenues and Segment EBITDA for the three and nine months ended March 31, 2019 and 2018:

	For the three months ended March 31,						For the nine months ended March 31,
	2019			2018			2019			2018
	(in millions)
Revenues
Cable Network Programming	$	1,383		$	1,325		$	4,082		$	3,778
Television		1,370			1,138			4,796			3,982
Other, Corporate and Eliminations		(1	)		-			(2	)		(1	)
Total revenues	$	2,752		$	2,463		$	8,876		$	7,759
Segment EBITDA
Cable Network Programming	$	741		$	692		$	1,893		$	1,730
Television		99			81			256			268
Other, Corporate and Eliminations		(74	)		(67	)		(177	)		(146	)
Total Segment EBITDA	$	766		$	706		$	1,972		$	1,852

Revenues by Segment by Component
	For the three months ended March 31,					For the nine months ended March 31,
	2019			2018		2019			2018
	(in millions)
Cable Network Programming
Affiliate fee	$	968		$	931	$	2,845		$	2,609
Advertising		276			266		893			825
Other		139			128		344			344
Total Cable Network Programming revenues		1,383			1,325		4,082			3,778
Television
Advertising		812			735		3,245			2,796
Affiliate fee		452			350		1,257			1,001
Other		106			53		294			185
Total Television revenues		1,370			1,138		4,796			3,982
Other, Corporate and Eliminations		(1	)		-		(2	)		(1	)
Total revenues	$	2,752		$	2,463	$	8,876		$	7,759

Future Performance Obligations

As of March 31, 2019, approximately $2.1 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 sports rights sublicensing contracts and affiliate 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, (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 three months ended March 31,				For the nine months ended March 31,
	2019		2018		2019		2018
	(in millions)
Depreciation and amortization
Cable Network Programming	$	12	$	10	$	35	$	28
Television		28		27		80		82
Other, Corporate and Eliminations		18		6		37		16
Total depreciation and amortization	$	58	$	43	$	152	$	126

	As of March 31, 2019		As of June 30, 2018
	(in millions)
Assets
Cable Network Programming	$	2,620	$	2,430
Television		6,506		6,805
Other, Corporate and Eliminations		8,038		3,611
Investments		493		275
Total assets	$	17,657	$	13,121