TIDMNCRA
RNS Number : 5997D
News Corporation
30 April 2013
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
April 29, 2013
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
NEWS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 001-32352 26-0075658
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NO.) IDENTIFICATION NO.)
1211 Avenue of the Americas, New York, New York 10036
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(212) 852-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST
REPORT)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
.. Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
.. Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
.. Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
.. Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 8.01 OTHER EVENTS.
News Corporation (the "Company") is providing supplemental
information required under Australian law related to the
independent media and entertainment company created by the proposed
separation of the Company's businesses (the "Supplemental
Information").
A copy of the Supplemental Information is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit
Number Description
------- -------------------------------------------------------
99.1 Supplemental Information Required Under Australian Law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
NEWS CORPORATION
(REGISTRANT)
By: /s/ Janet Nova
-------------------------
Janet Nova
Senior Vice President and
Deputy General Counsel
Dated: April 29, 2013
Exhibit Index
Exhibit
No. Description
------- -------------------------------------------------------
99.1 Supplemental Information Required Under Australian Law.
Exhibit 99.1
Supplemental Information Required Under Australian Law
1 Overview
On June 28, 2012, News Corporation (the "Company") announced
that it intends to pursue the separation of its publishing and its
media and entertainment businesses into two distinct publicly
traded companies (the "Separation"). The global publishing company
that would be created through the proposed transaction would hold
the businesses comprising the Company's newspapers, information
services and integrated marketing services, digital real estate
services, book publishing, digital education and sports programming
and pay-TV distribution in Australia ("New News Corporation"). The
global media and entertainment company would consist of the
Company's cable and television assets, filmed entertainment, and
direct satellite broadcasting businesses. The Company has announced
that it intends to change its name to Twenty-First Century Fox,
Inc. ("21st Century Fox") after the Separation, subject to
stockholder approval and other conditions to the Separation. The
Company will complete the Separation by way of a distribution of
all of the issued and outstanding shares of New News Corporation
common stock, on a pro rata basis, to the Company's stockholders of
record on the record date, subject to final approval from the
Company's Board of Directors, stockholder approval of certain
amendments to the Company's Restated Certificate of Incorporation,
the receipt of certain regulatory approvals and other conditions
being met.
Below is a description of many of the Company's businesses by
segment, as of December 31, 2012, which will be operated by 21st
Century Fox immediately following the Separation. 21st Century Fox
may determine to re-segment its business following the Separation.
However, no determination has been made as to whether 21st Century
Fox will re-segment its business. Unless otherwise noted, the
information contained in this report is dated as of December 31,
2012 and there have been no material changes to this information
except as otherwise stated.
The following summary is qualified in its entirety by the more
detailed information contained in the reports and other information
filed by the Company with the United States Securities and Exchange
Commission (the "Commission") pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") which shall be deemed to be incorporated by
reference herein including the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and Proxy Statement filed on Schedule 14A. These documents, which
are available at the Commission's web site at www.sec.gov and the
Company's web site at http://www.newscorp.com/investor, contain
important information about the Company and its consolidated
subsidiaries and their finances which you should consider in
connection with the information set forth below.
2 Cable Network Programming
The Company produces and licenses news, business news, sports,
general entertainment and movie programming for distribution
primarily through cable television systems and direct broadcast
satellite operators in the United States and internationally.
2.1 U.S. Cable Network Operations
The Company's U.S. cable network operations primarily consist of
the Fox News Channel, a 24/7 all news national cable channel; FX
Network, a general entertainment network telecasting original
series as well as acquired television series and motion pictures;
Fox Sports Net, Inc. a sports programming business which includes
ownership interests in Regional Sports Networks focusing on live
professional and major collegiate home team sports events; the
National Geographic Channels, which air non-fiction and documentary
programming; SPEED, which delivers the National Association of
Stock Car Auto Racing ("NASCAR") and other races, events and
original programming; and the Big Ten Network, a 24-hour national
programming service dedicated to the Big Ten Conference and Big Ten
athletics, academics and related programming.
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2.2 International Cable Network Operations
The Company's international cable networks consist of the Fox
International Channels ("FIC") and STAR India. FIC produces and
distributes entertainment, factual, sports, and movie channels in
various countries in Europe, Africa, Asia and Latin America using
several brands, including Fox, Fox Crime, Fox Life and National
Geographic Channel. STAR India develops, produces and broadcasts
channels that are distributed in the following countries and
regions: India; Greater China; Indonesia; the rest of South East
Asia; Pakistan; the Middle East and Africa; the United Kingdom and
Europe; and North America.
2.3 Revenues
Generally, the Company's cable networks, which target various
demographics, derive a majority of their revenues from monthly
affiliate fees received from cable television systems and direct
broadcast satellite operators based on the number of their
subscribers. Cable television and direct broadcast satellite are
currently the predominant means of distribution of the Company's
program services in the United States. Internationally,
distribution technology varies region by region.
2.4 Competition
The Company's cable networks compete for carriage on cable
television systems, direct broadcast satellite systems and other
distribution systems with other program services. A primary focus
of competition is for distribution of the Company's cable network
channels that are not already distributed by particular cable
television or direct broadcast satellite systems. For such program
services, distributors make decisions on the use of bandwidth based
on various considerations, including amounts paid by programmers
for launches, subscription fees payable by distributors and appeal
to the distributors' subscribers. When distribution is obtained,
cable networks compete for viewers and advertisers with free-to-air
broadcast television, radio, print media, motion picture theaters,
DVDs, Blu-ray high definition format discs ("Blu-rays"), Internet,
wireless and portable viewing devices and other sources of
information and entertainment. Important competitive factors
include the prices charged for programming, the quantity, quality
and variety of programming offered and the effectiveness of
marketing efforts.
3 Filmed Entertainment
The Company is engaged in the production and acquisition of
live-action and animated motion pictures for distribution and
licensing in all formats in all entertainment media worldwide, and
the production and licensing of television programming
worldwide.
3.1 Feature Film Production and Distribution
Twentieth Century Fox Film produces, acquires and distributes
motion pictures that are produced and/or distributed by the
following business units: Twentieth Century Fox and Fox 2000, each
of which produce or acquire motion pictures for mainstream
audiences; Fox Searchlight Pictures, which produces and acquires
specialized motion pictures; Twentieth Century Fox Animation, which
produces feature length animated motion pictures; and Fox
International Productions, Inc., which co-produces, co-finances and
acquires local-language motion pictures for distribution outside
the United States. Through Twentieth Century Fox Home Entertainment
LLC, the Company distributes motion pictures and other programming
produced by units of the Company, its affiliates and other
producers in the United States, Canada and international markets in
all home media formats, including the sale and rental of DVDs and
Blu-rays.
In general, motion pictures produced or acquired for
distribution by the Company are exhibited in U.S. and foreign
theaters, followed by home entertainment, including sale and rental
of DVDs and Blu-rays, video-on-demand and pay-per-view television,
on-line and mobile distribution, premium subscription television,
network television and basic cable and syndicated television
exploitation.
3.2 Television Programming, Production and Distribution
The Company produces television programs through Twentieth
Century Fox Television ("TCFTV") for the FOX Broadcasting Company
("FOX") and other broadcast television and cable networks.
Generally, a television network or cable network will license a
specified number of episodes for exhibition during the license
period. All other distribution rights, including international and
off-network syndication rights, are typically retained by TCFTV,
utilized by other units of the Company or sold to third
parties.
Twentieth Television licenses both television programming and
feature films for domestic syndication to television stations and
basic cable services in the United States. Twentieth Television
distributes a program portfolio
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that includes the Company's library of television and film
assets, and first-run programming produced by its production
companies for sales to local stations, including stations owned and
operated by the Company, as well as to basic cable networks.
Fox Television Studios is a program supplier to the major U.S.
and international broadcast and cable networks.
Shine is an international television production and distribution
group with production companies across numerous countries creating
and exploiting scripted and non-scripted content in the global
marketplace.
Television series initially produced for the networks and
first-run syndication are generally licensed to domestic and
international markets concurrently and subsequently released in
seasonal DVD and Blu-ray box sets and made available via digital
distribution platforms. More successful series are later syndicated
in domestic markets. The length of the revenue cycle for television
series will vary depending on the number of seasons a series
remains in active production and, therefore, may cause fluctuations
in operating results.
3.3 Motion Picture and Television Library
The Company's motion picture and television library consists of
varying rights to several thousand previously released motion
pictures and many well-known television programs.
3.4 Revenues
The revenues and operating results of the Filmed Entertainment
segment are significantly affected by the timing of the Company's
theatrical and home entertainment releases, the number of its
original and returning television series that are aired by
television networks and the number of its television series in
off-network syndication. Theatrical and home entertainment release
dates are determined by several factors, including timing of
vacation and holiday periods and competition in the
marketplace.
3.5 Competition
The Company competes with other film studios, such as Disney,
Paramount, Sony, Universal, Warner Bros. and other independent film
producers in the production and distribution of motion pictures,
DVDs and Blu-rays. As a producer and distributor of television
programming, the Company competes with studios, television
production groups and independent producers and syndicators, such
as Disney, Sony, NBC Universal, Warner Bros. and Paramount
Television, to sell programming both domestically and
internationally. The Company also competes to obtain creative
talent and story properties, which are essential to the success of
the Company's filmed entertainment businesses.
4 Television
The Company is engaged in the operation of broadcast television
stations and the broadcasting of network programming in the United
States. FOX is a broadcast network and Master Distribution Service,
Inc. ("MyNetworkTV") is a programming distribution service, airing
original and off-network programming.
4.1 Fox Television Stations
As of April 17, 2013, Fox Television Stations, Inc. ("Fox
Television Stations") owns and operates 29 full power stations,
including stations located in nine of the top ten largest
designated market areas ("DMAs"). Fox Television Stations owns and
operates duopolies in 10 DMAs, including the three largest DMAs,
New York, Los Angeles and Chicago. Of the 29 full power stations,
17 stations are affiliates of FOX ("FOX Affiliates"). In addition,
Fox Television Stations owns and operates 11 stations affiliated
with MyNetworkTV.
The television operations derive revenues primarily from the
sale of advertising and to a lesser extent retransmission consent
revenue. Adverse changes in general market conditions for
advertising may affect revenues.
U.S. law governing retransmission consent provides a mechanism
for the television stations owned by the Company to seek and obtain
payment from multi-channel video programming distributors who carry
the Company's broadcast signals. Retransmission consent revenue
consists of per subscriber-based compensatory fees paid to the
Company by cable and satellite distribution systems that distribute
the Company's television stations affiliated with FOX and
MyNetworkTV. The Company also receives compensation from
independently-owned television stations that are affiliated with
FOX and MyNetworkTV.
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4.2 FOX
FOX has more than 200 FOX Affiliates, including the 17 stations
owned and operated by the Company. In general, each week FOX
regularly delivers to its affiliates 15 hours of prime-time
programming and 90 minutes of late-night programming on
Saturday.
FOX obtains programming from major television studios and
independent television production companies pursuant to license
agreements. The terms of those agreements generally provide FOX
with the right to broadcast a television series for a minimum of
four seasons.
The Company has several multi-year sports rights agreements,
including contracts with the National Football League through
fiscal 2022, contracts with NASCAR for certain races and exclusive
rights for certain ancillary content through calendar year 2022, a
contract with Major League Baseball through calendar year 2021 and
other sports rights contracts. These contracts provide the Company
with the broadcast rights to certain U.S. national sporting events
during their respective terms. The costs of these sports contracts
are charged to expense based on the ratio of each period's
operating profit to estimated total operating profit for the
remaining term of the contract.
FOX provides programming to the FOX Affiliates in accordance
with affiliation agreements of varying durations, which grant to
each affiliate the right to broadcast television programming
delivered by FOX on the affiliated station. Such agreements
typically run three or more years and have staggered expiration
dates. These affiliation agreements generally require FOX
Affiliates to carry FOX programming in all time periods in which
FOX programming is offered to those affiliates, subject to certain
exceptions stated in the affiliation agreements.
4.3 MyNetworkTV
At the beginning of the 2009-2010 television season, MyNetworkTV
transitioned to a new programming distribution service, Master
Distribution Service, Inc., distributing two hours per night of
original and off- network programming from Twentieth Television and
other third party syndicators to its licensees.
4.4 Competition
The television stations owned and operated by the Company
compete for programming, audiences and advertising revenues with
other television stations and cable networks in their respective
coverage areas and, in some cases, with respect to programming,
with other station groups, and in the case of advertising revenues,
with other local and national media. The competitive position of
the television stations owned by the Company is largely influenced
by the quality and strength of FOX and MyNetworkTV programming,
and, in particular, the prime-time viewership of the respective
network.
The U.S. television broadcast environment is highly competitive
and the primary methods of competition are the development and
acquisition of popular programming. Program success is measured by
ratings, which are an indication of market acceptance, with the top
rated programs commanding the highest advertising prices. FOX and
MyNetworkTV compete with broadcast networks, such as ABC, CBS, NBC
and The CW Television Network, independent television stations,
cable and Direct Broadcast Satellite Television program services,
as well as other media, including DVDs, Blu-rays, video games,
print and the Internet for audiences, programming and, in the case
of FOX, advertising revenues. In addition, FOX and MyNetworkTV
compete with the other broadcast networks and other programming
distribution services to secure affiliations with independently
owned television stations in markets across the United States. In
addition, future technological developments may affect competition
within the television marketplace.
5 Direct Broadcast Satellite Television
The Direct Broadcast Satellite Television ("DBS") segment's
operations consist of SKY Italia, which provides basic and premium
programming services via satellite directly to subscribers in
Italy. The programming includes exclusive rights to popular
sporting events, newly-released movies and SKY Italia's original
programming. The Company also owns significant equity interests in
British Sky Broadcasting plc ("BSkyB") and Sky Deutschland AG ("Sky
Deutschland"), which are engaged in the DBS business (for a
description of the businesses of these equity interests, please see
the discussion under the heading "Equity Interests and Other
Investments").
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5.1 Revenues
SKY Italia derives revenues principally from subscriber fees.
The Company believes that the quality and variety of programming,
audio and interactive programming including personal video
recorders, quality of picture including high definition channels,
access to service, customer service and price are the key elements
for gaining and maintaining market share.
5.2 Competition
SKY Italia's competition includes companies that offer video,
audio, interactive programming, telephony, data and other
information and entertainment services, including broadband
Internet providers, digital terrestrial transmission services,
wireless companies and companies that are developing new media
technologies.
6 Other
The Company has an interest in FOX TV in Turkey, which is a
free-to-air, general entertainment television station.
7 Equity Interests and Other Investments
7.1 BSkyB
The Company holds an approximate 39% interest in BSkyB. BSkyB's
ordinary shares are listed on the London Stock Exchange under the
symbol "BSY". BSkyB operates the leading pay television broadcast
service in the United Kingdom and Ireland, as well as broadband and
telephony services. BSkyB acquires and commissions programming to
broadcast on its own channels and supplies certain of those
channels to cable operators for retransmission by the cable
operators to their subscribers in the United Kingdom and Ireland.
BSkyB also retails channels (both its own and those of third
parties) to DTH subscribers and to certain of its own channels to a
limited number of DSL subscribers.
7.2 Sky Deutschland
In January 2013, News Corporation increased to 55% its ownership
in Sky Deutschland, the leading pay television operator in Germany
and Austria. The core business of Sky Deutschland is subscription
pay-TV and it offers a wide range of programming in Germany and
Austria and can be received via Teleclub in Switzerland. Sky
Deutschland's program offering includes current feature films, new
series, children's channels, documentaries and live sports, such as
the German Bundesliga and UEFA Champions League. Sky Deutschland
has market leading HD offering, and an additional service called
"Sky Go" which is available on the web, iPhone and iPad. As a
result of the increase in ownership, Sky Deutschland will be
included in the Company's consolidated results of operations in the
fiscal third quarter of 2013 (the quarter ending March 31, 2013) in
the Company's Direct Broadcast Satellite Television segment.
7.3 Hulu
The Company has an approximate 34% equity interest in Hulu, LLC
("Hulu") which operates an online video service that offers video
content from Fox, NBC Universal, The Walt Disney Company and other
third party content licensors. Hulu's premium programming is
available free of charge to viewers at Hulu.com and other
destination sites online, including AOL, IMDb, MSN, Myspace and
Yahoo!. Additional premium programming is available on a monthly
subscription basis at Hulu.com and through software applications on
Internet-connected devices, including smart phones, tablets, gaming
consoles and set-top boxes.
8 Government Regulation
8.1 General
Various aspects of the Company's activities are subject to
regulation in numerous jurisdictions around the world. The
introduction of new laws and regulations in countries where the
Company's products and services are
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produced or distributed (and changes in the enforcement of
existing laws and regulations in those countries) could have a
negative impact on the interests of the Company. For more
information regarding the government regulations summarized below,
including their impact on the Company's operations, see the section
entitled "Government Regulation" in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2012.
8.2 Cable Network Programming and Direct Broadcast Satellite Television
Countries in which the Company operates outside of the United
States including Asia, India, Latin America and Europe have laws
and regulations related to content and distribution which may
affect the Company's Cable Network Programming and Direct Broadcast
Satellite Television operations. These laws and regulations vary
among countries and address, among other things, access to
satellite services, licensing requirements, carriage of government
channels or local content or other content regulation, government
approvals, advertising restrictions, and competition.
In the United States, the Federal Communications Commission
("FCC") has adopted regulations pursuant to the Cable Television
Consumer Protection and Competition Act of 1992 (the "Program
Access Rules"), which place commercial restrictions on a cable
network programmer in which a cable television operator holds an
ownership interest. The cable networks operated by the Company are
not currently subject to the Program Access Rules. However, under
the FCC's rules for determining ownership of media assets, the
Murdoch Family Trust's ownership interest in both 21st Century Fox
and New News Corporation would generally result in each company's
businesses and assets being attributable to the Murdoch Family
Trust for purposes of determining compliance with the Program
Access Rules. 21st Century Fox and New News Corporation will agree
in the separation and distribution agreement to be entered into in
connection with the Separation that New News Corporation will be
prohibited from acquiring, after the Separation, an interest in a
multichannel video programming distributor, including a cable
television operator, if such acquisition would subject 21st Century
Fox to the Program Access Rules to which it is not already
subject.
8.3 Filmed Entertainment
In the United States, the Company is subject to the provisions
of so-called "trade practice laws" relating to theatrical
distribution of motion pictures as well as various consent
judgments restricting the trade practices of motion picture
companies. In countries outside of the United States, there are a
variety of existing or contemplated governmental laws and
regulations that may affect the Company's ability to distribute
and/or license its motion picture and television products to
cinema, television or in-home media, including copyright laws and
regulations that may or may not be adequate to protect its
interests, cinema screen quotas, television quotas, contract term
limitations, discriminatory taxes and other discriminatory
treatment of U.S. products.
8.4 Television
The television broadcast industry in the United States is highly
regulated by federal laws and regulations issued and administered
by various federal agencies, including the FCC. The FCC regulates
television broadcasting, and certain aspects of the operations of
cable, satellite and other electronic media that compete with
broadcasting, pursuant to the Communications Act of 1934, as
amended (the "Communications Act"). The FCC grants television
broadcast station licenses pursuant to the Communications Act.
Federal legislation or FCC rules and regulations, as applicable,
also address, among other things, broadband deployment and use,
ownership of broadcast station licensees and common ownership of a
broadcast station and a newspaper in the same market, carriage or
retransmission of television broadcast signals by multichannel
video programming distributors (as defined by the FCC),
prohibitions on the broadcast by television and radio stations of
indecent or profane material, broadcasting of commercial matter,
political advertising, children's television, equal employment
opportunity, technical operating matters, antenna tower
maintenance, video accessibility requirements and agreements
between broadcast networks and their affiliated stations. Violation
of FCC regulations can result in substantial monetary forfeitures,
periodic reporting conditions, short-term license renewals and, in
egregious cases, denial of license renewal or revocation of a
license.
As referenced above, the FCC has promulgated rules and
regulations that limit the ownership of radio and television
broadcast stations, television broadcast networks and newspapers
(the "Broadcast Ownership Rules"). Under the FCC's rules for
determining ownership of media assets, the Murdoch Family Trust's
ownership interest in both 21st Century Fox and New News
Corporation would generally result in each company's businesses and
assets
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being attributable to the Murdoch Family Trust for purposes of
determining compliance with the Broadcast Ownership Rules. 21st
Century Fox and New News Corporation will agree in the separation
and distribution agreement to be entered into in connection with
the Separation that if either party acquires, after the Separation,
newspapers, radio or television broadcast stations or television
broadcast networks in the United States and such acquisition would
impede or be reasonably likely to impede the other party's
business, then the acquiring party will be required to take certain
actions, including divesting assets, in order to permit the other
party to hold its media interests and comply with such rules.
8.5 Internet
Online services provided by the Company may be subject to
requirements of the Children's Online Privacy Protection Act of
1998, which prohibits websites from collecting personally
identifiable information online from children under age 13 without
prior parental consent, and the Controlling the Assault of
Non-Solicited Pornography and Marketing Act of 2003, which
regulates the distribution of unsolicited commercial emails, or
"spam." In addition, federal regulators' interest in issues of
privacy, cybersecurity and data security has been steadily
increasing resulting in efforts to address, among other things,
consumer privacy, the collection, use and maintenance of personal
information and data breaches. Foreign governments are also raising
similar privacy and data security concerns, in particular, the
European Union which has proposed a new privacy regulation that
would replace the current Data Protection Directive, and would
tighten regulation of the collection, use and security of online
data and would continue to restrict the trans-border flow of
data.
The Company monitors pending legislation and regulatory
initiatives to ascertain relevance, analyze impact and develop
strategic direction surrounding regulatory trends and
developments.
9 Business Strategy
The key strategic priorities for the Company's global media and
entertainment business which will comprise 21st Century Fox
are:
-- To drive long-term value for stockholders based on sustainable long-term
cash flows, and an efficient capital structure.
-- To continue to build key content franchises and leverage opportunities
for our established hit programming.
-- To build businesses which capitalize on our existing assets.
-- To maintain and enhance our competitive position by investing in unique
entertainment content and news and sports content to drive viewership
and growth.
10 Risk Factors
10.1 Risks related to 21st Century Fox's business
This section outlines a number of risks that affect the
Company's global media and entertainment business which will
comprise 21st Century Fox.
A Decline in Advertising Expenditures Could Cause the Company's
Revenues and Operating Results to Decline Significantly in any
Given Period or in Specific Markets.
The Company derives substantial revenues from the sale of
advertising on or in its television stations, broadcast and cable
networks, digital media properties and direct broadcast satellite
services. Expenditures by advertisers tend to be cyclical,
reflecting overall economic conditions, as well as budgeting and
buying patterns. A decline in the economic prospects of advertisers
or the economy in general could alter current or prospective
advertisers' spending priorities. Demand for the Company's products
is also a factor in determining advertising
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rates. For example, ratings points for the Company's television
stations and broadcast and cable networks are factors that are
weighed when determining advertising rates and the affiliate rates
received by the Company. In addition, newer technologies, including
new video formats, streaming and downloading capabilities via the
Internet, video-on-demand, personal video recorders and other
devices and technologies are increasing the number of media and
entertainment choices available to audiences. Some of these devices
and technologies allow users to view television or motion pictures
from a remote location or on a time-delayed basis and provide users
the ability to fast-forward, rewind, pause and skip programming and
advertisements. These technological developments are increasing the
number of media and entertainment choices available to audiences
and may cause changes in consumer behavior that could affect the
attractiveness of the Company's offerings to viewers, advertisers
and/or distributors. A decrease in advertising expenditures or
reduced demand for the Company's offerings can lead to a reduction
in pricing and advertising spending, which could have an adverse
effect on the Company's businesses and assets.
Global Economic Conditions May Have a Continuing Adverse Effect
on the Company's Business.
The United States and global economies have undergone a period
of economic uncertainty, which caused, among other things, a
general tightening in the credit markets, limited access to the
credit markets, lower levels of liquidity, increases in the rates
of default and bankruptcy, lower consumer and business spending and
lower consumer net worth. The resulting pressure on the labor and
retail markets and the downturn in consumer confidence weakened the
economic climate in certain markets in which the Company does
business and has had and may continue to have an adverse effect on
the Company's business, results of operations, financial condition
and liquidity. A continued decline in these economic conditions
could further impact the Company's business, reduce the Company's
advertising and other revenues and negatively impact the
performance of its motion pictures and home entertainment releases,
television operations and other consumer products. In addition,
these conditions could also impair the ability of those with whom
the Company does business to satisfy their obligations to the
Company. As a result, the Company's results of operations may be
adversely affected. Although the Company believes that its
operating cash flow and current access to capital and credit
markets, including the Company's existing credit facility, will
give it the ability to meet its financial needs for the foreseeable
future, there can be no assurance that continued or increased
volatility and disruption in the global capital and credit markets
will not impair the Company's liquidity or increase its cost of
borrowing.
Acceptance of the Company's Film and Television Programming by
the Public is Difficult to Predict, Which Could Lead to
Fluctuations in Revenues.
Feature film and television production and distribution are
speculative businesses since the revenues derived from the
production and distribution of a feature film or television series
depend primarily upon its acceptance by the public, which is
difficult to predict. The commercial success of a feature film or
television series also depends upon the quality and acceptance of
other competing films and television series released into the
marketplace at or near the same time, the availability of a growing
number of alternative forms of entertainment and leisure time
activities, general economic conditions and their effects on
consumer spending and other tangible and intangible factors, all of
which can change and cannot be predicted with certainty. Further,
the theatrical success of a feature film and the audience ratings
for a television series are generally key factors in generating
revenues from other distribution channels, such as home
entertainment and premium pay television, with respect to feature
films, and syndication, with respect to television series.
The Company Could Suffer Losses Due to Asset Impairment Charges
for Goodwill, Intangible Assets and Programming.
In accordance with applicable generally accepted accounting
principles, the Company performs an annual impairment assessment of
its recorded goodwill and indefinite-lived intangible assets,
including FCC licenses, during the fourth quarter of each fiscal
year. The Company also continually evaluates whether current
factors or indicators, such as the prevailing conditions in the
capital markets, require the performance of an interim impairment
assessment of those assets, as well as other investments and other
long-lived assets. Any significant shortfall, now or in the future,
in advertising revenue and/or the expected popularity of the
programming for which the Company has acquired rights could lead to
a downward revision in the fair value of certain reporting units,
particularly those in the Television and Cable Network Programming
segments. A downward revision in the fair value of a reporting
unit, indefinite-lived intangible assets, investments or long-lived
assets could result in an impairment and a non-cash charge would be
required. Any such charge could be material to the Company's
reported net earnings.
8
Fluctuations in Foreign Exchange Rates Could Have an Adverse
Effect on the Company's Results of Operations.
The Company has significant operations in a number of foreign
jurisdictions and certain of the Company operations are conducted
in foreign currencies. The value of these currencies fluctuates
relative to the U.S. dollar. As a result, the Company is exposed to
exchange rate fluctuations, which could have an adverse effect on
its results of operations in a given period or in specific
markets.
The Loss of Carriage Agreements Could Cause the Company's
Revenue and Operating Results to Decline Significantly in any Given
Period or in Specific Markets.
The Company is dependent upon the maintenance of affiliation
agreements with third party owned television stations and there can
be no assurance that these affiliation agreements will be renewed
in the future on terms acceptable to the Company. The loss of a
significant number of these affiliation arrangements could reduce
the distribution of FOX and MyNetworkTV and adversely affect the
Company's ability to sell national advertising time. Similarly, the
Company's broadcast stations and cable networks maintain
affiliation and carriage arrangements that enable them to reach a
large percentage of cable and direct broadcast satellite households
across the United States. The loss of a significant number of these
arrangements or the loss of carriage on basic programming tiers
could reduce the distribution of the Company's broadcast stations
and cable networks, which may adversely affect those networks'
revenues from subscriber fees and their ability to sell national
and local advertising time.
The Inability to Renew Sports Programming Rights Could Cause the
Company's Advertising Revenue to Decline Significantly in any Given
Period or in Specific Markets.
The sports rights contracts between the Company, on the one
hand, and various professional sports leagues and teams, on the
other, have varying duration and renewal terms. As these contracts
expire, renewals on favorable terms may be sought; however, third
parties may outbid the current rights holders for the rights
contracts. In addition, professional sports leagues or teams may
create their own networks or the renewal costs could substantially
exceed the original contract cost. The loss of rights could impact
the extent of the sports coverage offered by the Company and its
affiliates, as it relates to FOX, and could adversely affect the
Company's advertising and affiliate revenues. Upon renewal, the
Company's results could be adversely affected if escalations in
sports programming rights costs are unmatched by increases in
advertising rates and, in the case of cable networks, subscriber
fees.
The Company Relies on Network and Information Systems and Other
Technology That May Be Subject to Disruption or Misuse, Which Could
Result in Improper Disclosure of Personal Data or Confidential
Information as well as Increased Costs or Loss of Revenue.
Network and information systems and other technologies,
including those related to our network management, are important to
our business activities. Network and information systems-related
events, such as computer hackings, computer viruses, worms or other
destructive or disruptive software, process breakdowns, denial of
service attacks, malicious social engineering or other malicious
activities, or any combination of the foregoing, could result in a
disruption of our services or improper disclosure of personal data
or confidential information. Improper disclosure of such
information could harm our reputation, require us to expend
resources to remedy such a security breach or subject us to
liability under laws that protect personal data, resulting in
increased costs or loss of revenue.
Technological Developments May Increase the Threat of Content
Piracy and Signal Theft and Limit the Company's Ability to Protect
Its Intellectual Property Rights.
The Company seeks to limit the threat of content piracy and
direct broadcast satellite programming signal theft; however,
policing unauthorized use of the Company's products and services
and related intellectual property is often difficult and the steps
taken by the Company may not in every case prevent the infringement
by unauthorized third parties. Developments in technology,
including digital copying, file compressing and the growing
penetration of high-bandwidth Internet connections, increase the
threat of content piracy by making it easier to duplicate and
widely distribute pirated material. In addition, developments in
software or devices that circumvent encryption technology increase
the threat of unauthorized use and distribution of direct broadcast
satellite programming signals and the proliferation of
user-generated content sites and live and stored video streaming
sites, which deliver unauthorized copies of copyrighted content,
including those emanating from other countries in various
languages, may adversely impact the Company's businesses. The
Company has taken, and will continue to take, a
9
variety of actions to combat piracy and signal theft, both
individually and, in some instances, together with industry
associations. However, protection of the Company's intellectual
property rights is dependent on the scope and duration of the
Company's rights as defined by applicable laws in the United States
and abroad and the manner in which those laws are construed. If
those laws are drafted or interpreted in ways that limit the extent
or duration of the Company's rights, or if existing laws are
changed, the Company's ability to generate revenue from
intellectual property may decrease, or the cost of obtaining and
maintaining rights may increase. There can be no assurance that the
Company's efforts to enforce its rights and protect its products,
services and intellectual property will be successful in preventing
content piracy or signal theft. Content piracy and signal theft
present a threat to the Company's revenues from products and
services, including, but not limited to, films, television shows
and cable and other programming.
The Company Must Respond to Changes in Consumer Behavior as a
Result of New Technologies in Order to Remain Competitive.
Technology, particularly digital technology used in the
entertainment industry, continues to evolve rapidly, leading to
alternative methods for the delivery and storage of digital
content. These technological advancements have driven changes in
consumer behavior and have empowered consumers to seek more control
over when, where and how they consume digital content. Content
owners are increasingly delivering their content directly to
consumers over the Internet, often without charge, and innovations
in distribution platforms have enabled consumers to view such
Internet-delivered content on televisions and portable devices.
There is a risk that the Company's responses to these changes and
strategies to remain competitive, including distribution of its
content on a "pay" basis, may not be adopted by consumers. In
addition, enhanced Internet capabilities and other new media may
reduce television viewership, the demand for DVDs and Blu-rays and
the desire to see motion pictures in theaters, which could
negatively affect the Company's revenues. The Company's failure to
protect and exploit the value of its content, while responding to
and developing new technology and business models to take advantage
of advancements in technology and the latest consumer preferences,
could have a significant adverse effect on the Company's
businesses, asset values and results of operations.
Labor Disputes May Have an Adverse Effect on the Company's
Business.
In a variety of the Company's businesses, the Company and its
partners engage the services of writers, directors, actors and
other talent, trade employees and others who are subject to
collective bargaining agreements, including employees of the
Company's film and television studio operations. If the Company or
its partners are unable to renew expiring collective bargaining
agreements, it is possible that the affected unions could take
action in the form of strikes or work stoppages. Such actions, as
well as higher costs in connection with these collective bargaining
agreements or a significant labor dispute, could have an adverse
effect on the Company's business by causing delays in production or
by reducing profit margins.
Changes in U.S. or Foreign Regulations May Have an Adverse
Effect on the Company's Business.
The Company is subject to a variety of U.S. and foreign
regulations in the jurisdictions in which its businesses operate.
In general, the television broadcasting and multichannel video
programming and distribution industries in the United States are
highly regulated by federal laws and regulations issued and
administered by various federal agencies, including the FCC. The
FCC generally regulates, among other things, the ownership of
media, broadcast and multichannel video programming and technical
operations of broadcast licensees. Our program services and online
properties are subject to a variety of laws and regulations,
including those relating to issues such as content regulation, user
privacy and data protection, and consumer protection, among others.
Further, the United States Congress, the FCC and state legislatures
currently have under consideration, and may in the future adopt,
new laws, regulations and policies regarding a wide variety of
matters, including technological changes and measures relating to
privacy and data security, which could, directly or indirectly,
affect the operations and ownership of the Company's U.S. media
properties. Similarly, changes in regulations imposed by
governments in other jurisdictions in which the Company, or
entities in which the Company has an interest, operate could
adversely affect its business and results of operations.
In addition, changes in tax laws, regulations or the
interpretations thereof in the U.S. and other jurisdictions in
which the Company has operations could affect the Company's results
of operations.
10
U.S. Citizenship Requirements May Limit Common Stock Ownership
and Voting Rights.
The Company owns broadcast station licensees in connection with
its ownership and operation of U.S. television stations. Under U.S.
law, no broadcast station licensee may be owned by a corporation if
more than 25% of its stock is owned or voted by non-U.S. persons,
their representatives, or by any other corporation organized under
the laws of a foreign country. The Company's Restated Certificate
of Incorporation authorizes the Board of Directors to prevent, cure
or mitigate the effect of stock ownership above the applicable
foreign ownership threshold by taking any action including:
refusing to permit any transfer of common stock to or ownership of
common stock by a non-U.S. stockholder; voiding a transfer of
common stock to a non-U.S. stockholder; suspending rights of stock
ownership if held by a non-U.S. stockholder; or redeeming common
stock held by a non-U.S. stockholder. On September 28, 2012, the
Audit Committee of the Company's Board of Directors determined that
approximately 32% of the Company's Class B Common Stock is owned by
non-U.S. stockholders, and the combined ownership of Class A Common
Stock and Class B Common Stock by non-U.S. stockholders is less
than 25% of the combined outstanding shares of Class A Common Stock
and Class B Common Stock. In order to maintain compliance with U.S.
law, the Company suspended 40% of the voting rights of the Class B
Common Stock held by non-U.S. stockholders, a decrease from the
previously-announced suspension in April 2012 of 50% of the voting
rights of the Class B Common Stock held by non-U.S. stockholders.
In April 2013, the Audit Committee confirmed that it would maintain
the suspension of 40% of the voting rights of the Class B Common
Stock held by non-U.S. stockholders. This
suspension will remain in place for as long as the Company deems
it necessary to maintain compliance with applicable U.S. law, and
may be adjusted by the Audit Committee as it deems appropriate. The
Company is not able to predict whether it will need to adjust the
suspension or whether additional action pursuant to its Restated
Certificate of Incorporation may be necessary. The FCC could review
the Company's compliance with applicable U.S. law in connection
with its consideration of the Company's renewal applications for
licenses to operate the broadcast stations the Company owns.
We Face Investigations Regarding Allegations of Phone Hacking,
Illegal Data Access, Inappropriate Payments to Public Officials and
Other Related Matters and Related Civil Lawsuits.
U.K. and U.S. regulators and governmental authorities are
conducting investigations relating to phone hacking, illegal data
access and inappropriate payments to public officials at our former
publication, The News of the World , and at The Sun , and related
matters (the "U.K. Newspaper Matters"). The Company is cooperating
with these investigations.
The Company has admitted liability in many civil cases related
to the phone hacking allegations and has settled many cases. The
Company also announced a private compensation scheme under which
parties could pursue claims against the Company. No additional
civil claims may be brought under the compensation scheme after
April 8, 2013.
We are not able to predict the ultimate outcome or cost of the
civil claims or criminal matters. The Company will agree in the
separation and distribution agreement to indemnify New News
Corporation for payments made after the Separation arising out of
civil claims and investigations relating to the U.K. Newspaper
Matters, subject to New News Corporation's compliance with certain
agreements regarding the Company's control over the civil U.K.
Newspaper Matters and New News Corporation's consenting to
settlements proposed by the Company, as well as legal and
professional fees and expenses paid in connection with the criminal
matters. However, violations of law may result in criminal fines or
penalties for which the Company will not indemnify New News
Corporation. It is possible that these proceedings and any adverse
resolution thereof, including any fines or other penalties
associated with any plea, judgment or similar result, could damage
the Company's reputation, impair the Company's ability to conduct
its business and adversely affect the Company's results of
operations and financial condition.
10.2 Risks related to the Separation
This section outlines a number of risks related to the
Separation.
11
If the Distribution, Together with Certain Related Transactions,
Were Ultimately Determined to be Taxable Transactions for U.S.
Federal Income Tax Purposes, then 21st Century Fox Could Be Subject
to Significant Tax Liability.
The distribution is conditioned upon a private letter ruling
from the IRS substantially to the effect that, among other things,
the distribution of Class A Common Stock and Class B Common Stock
of New News Corporation qualifies as tax-free under Sections 368
and 355 of the Internal Revenue Code of 1986, as amended (the
"Code") except for cash received in lieu of fractional shares of
New News Corporation stock, as well as upon the Company receiving
an opinion from the law firm of Hogan Lovells US LLP confirming the
tax-free status of the distribution for U.S. federal income tax
purposes, including confirming the satisfaction of the requirements
under Section 368 and 355 of the Code not specifically addressed in
the IRS private letter ruling. The opinion of Hogan Lovells US LLP
will not be binding on the IRS or the courts, and there is no
assurance that the IRS or a court will not take a contrary
position.
The private letter ruling and the opinion will rely on certain
facts and assumptions, and certain representations from us and New
News Corporation regarding the past and future conduct of our
respective businesses and other matters. Notwithstanding the
receipt of the private letter ruling and the opinion, the IRS could
determine on audit that the distribution or the internal
transactions should be treated as taxable transactions if it
determines that any of these facts, assumptions, representations or
undertakings is not correct or has been violated, or that the
distribution or the internal transactions should be taxable for
other reasons, including as a result of a significant change in
stock or asset ownership after the distribution. If the
distribution ultimately is determined to be taxable, the
distribution could be treated as a taxable dividend or capital gain
for U.S. federal income tax purposes, and U.S. stockholders and
certain non-U.S. stockholders could incur significant U.S. federal
income tax liabilities. In addition, if the internal reorganization
and/or the distribution is ultimately determined to be taxable,
21st Century Fox would recognize gains on the internal
reorganization and/or recognize gain in an amount equal to the
excess of the fair market value of shares of the New News
Corporation common stock distributed to our stockholders on the
distribution date over our tax basis in such shares of our common
stock.
If the ATO Forms the View that All or Part of the Distribution
Should be Treated as an Unfranked Dividend Under Australian
Taxation Law, Then We and Our Australian Resident Stockholders
Could be Subject to a Significant Tax Liability.
We have requested a Class Ruling from the ATO confirming that
(1) no part of the distribution of the Class A Common Stock and
Class B Common Stock of New News Corporation will be a dividend,
and (2) the Commissioner of Taxation will not make a determination
to deem all or part of the distribution to be an unfranked
dividend.
The Class Ruling will be based upon certain facts and
assumptions regarding past and future conduct of our respective
businesses. If the ATO considers that the information provided in
the application for the Class Ruling was not correct, or omitted
relevant information, in respect of a material fact or assumption,
then the ATO may take the view that it is not bound by the view of
the law expressed in the Class Ruling. In those circumstances, or
if the ATO refuses to issue the Class Ruling, all or part of the
distribution could be taken to be an unfranked dividend, the amount
of which would be required to be included in the assessable income
of Australian resident holders of our common stock or CDIs.
21st Century Fox Could Be Liable for Income Taxes Owed by New
News Corporation.
Each member of our consolidated group, which includes New News
Corporation and each of our other subsidiaries, is jointly and
severally liable for the U.S. federal income tax liability of each
other member of the consolidated group. Consequently, 21st Century
Fox or New News Corporation could be liable in the event any such
liability is incurred, and not discharged, by any other member of
our consolidated group. Under the terms of the tax sharing and
indemnification agreement that we intend to enter into in
connection with the distribution 21st Century Fox will be required
to indemnify New News Corporation for any such liability. Disputes
or assessments could arise during future audits by the IRS in
amounts that we cannot quantify.
12
21st Century Fox Might Not Be Able to Engage in Desirable
Strategic Transactions and Equity Issuances Following the
Distribution Because of Certain Restrictions Relating to
Requirements for Tax-Free Distributions for U.S. Federal Income Tax
Purposes.
21st Century Fox's ability to engage in significant strategic
transactions and equity issuances may be limited or restricted
after the distribution in order to preserve, for U.S. federal
income tax purposes, the tax-free nature of the distribution. Even
if the distribution otherwise qualifies for tax-free treatment
under Section 355 of the Code, it may result in corporate level
taxable gain to us under Section 355(e) of the Code if 50% or more,
by vote or value, of shares of our stock or New News Corporation's
stock are acquired or issued as part of a plan or series of related
transactions that includes the distribution.
To preserve the tax-free treatment of the distribution and the
internal transactions in connection with the distribution for U.S.
federal income tax purposes, under the tax sharing and
indemnification agreement that we will enter into with New News
Corporation, 21st Century Fox will be prohibited from taking or
failing to take certain actions that may prevent the distribution
and related transactions from being tax-free for U.S. federal
income tax purposes. Further, for the two-year period following the
distribution, 21st Century Fox may be prohibited from:
-- approving or allowing any transaction that results in a change in
ownership of more than a specified percentage of our common stock,
-- a merger,
-- a redemption of equity securities exceeding 20% of its outstanding
capital stock,
-- a sale or other disposition of certain businesses or a specified percentage
of our assets, or
-- an acquisition of a business or assets with equity securities to the
extent one or more persons would acquire in excess of a specified
percentage of our common stock
These restrictions may limit 21st Century Fox's ability to
pursue strategic transactions or engage in new business or other
transactions that may maximize the value of our business.
The Separation and Distribution Agreement May Restrict 21st
Century Fox From Acquiring or Owning Certain Types of Assets in the
U.S.
Under the FCC's rules for determining ownership of the media
assets described above, the Murdoch Family Trust's ownership
interest in both New News Corporation and 21st Century Fox
following the distribution would generally result in each company's
businesses and assets being attributable to the Murdoch Family
Trust for purposes of determining compliance with the Broadcast
Ownership Rules. Consequently, 21st Century Fox's future conduct,
including the acquisition of any broadcast networks or stations, or
any newspapers, in the same local markets in which New News
Corporation owns or operates newspapers or has acquired television
stations may affect New News Corporation's ability to own and
operate its newspapers or any television stations it acquires or
otherwise comply with the Broadcast Ownership Rules. Therefore, we
and New News Corporation will agree in the separation and
distribution agreement that if 21st Century Fox acquires, after the
Separation, newspapers, radio or television broadcast stations or
television broadcast networks in the U.S. and such acquisition
would impede or be reasonably likely to impede New News
Corporation's business, then 21st Century Fox will be required to
take certain actions, including divesting assets, in order to
permit New News Corporation to hold its media interests and to
comply with such rules. This agreement will effectively limit the
activities or strategic business alternatives available to 21st
Century Fox if such activities or strategic business alternatives
implicate the Broadcast Ownership Rules and would impede or be
reasonably likely to impede New News Corporation's business.
13
The Indemnification Arrangements We Enter Into With New News
Corporation in Connection With the Distribution May Require 21st
Century Fox to Divert Cash to Satisfy Indemnification Obligations
to New News Corporation.
Pursuant to the separation and distribution agreement and
certain other related agreements, 21st Century Fox will agree to
indemnify New News Corporation for certain liabilities and New News
Corporation will agree to indemnify 21st Century Fox for certain
liabilities. As a result, 21st Century Fox could be required, under
certain circumstances, to indemnify New News Corporation against
certain liabilities to the extent such liabilities result from an
action we or our affiliates take or from any breach of our or our
affiliates' representations, covenants or obligations under the
separation and distribution agreement, tax sharing and
indemnification agreement or any other agreement we enter into in
connection with the distribution.
After the Distribution, Certain of 21st Century Fox's Directors
and Officers May Have Actual or Potential Conflicts of Interest
Because of Their Equity Ownership in New News Corporation, and
Certain of New News Corporation's Officers and Directors May Have
Actual or Potential Conflicts of Interest Because They Also Serve
as Officers and/or on the Board of Directors of 21st Century
Fox.
Following the distribution, certain of 21st Century Fox's
directors and executive officers may own shares of New News
Corporation's common stock, and the individual holdings may be
significant for some of these individuals compared to their total
assets. In addition, following the distribution, certain of 21st
Century Fox's officers and directors will also serve as officers
and/or as directors of New News Corporation, including K. Rupert
Murdoch, who will serve as New News Corporation Executive Chairman
and the Chairman and Chief Executive Officer of 21st Century Fox,
and Gerson Zweifach, who will serve as New News Corporation's
General Counsel and as Senior Executive Vice President and Group
General Counsel of 21st Century Fox. This ownership or service to
both companies may create, or may create the appearance of,
conflicts of interest when these directors and officers are faced
with decisions that could have different implications for 21st
Century Fox and New News Corporation.
For example, potential conflicts of interest could arise in
connection with the resolution of any dispute that may arise
between New News Corporation and 21st Century Fox regarding the
terms of the agreements governing the internal reorganization, the
distribution and the relationship thereafter between the companies,
including with respect to the indemnification of certain matters.
In addition to any other arrangements that 21st Century Fox and New
News Corporation may agree to implement, 21st Century Fox and New
News Corporation will agree that officers and directors who serve
at both companies will recuse themselves from decisions where
conflicts arise due to their positions at both companies.
11 Recent operational performance
Recent operational performance for the quarter ended December
31, 2012 includes:
Cable Network Programming
-- Double-digit revenue growth over the prior year quarter at the Regional
Sports Networks ("RSNs"), Fox News Channel, FX Network and National Geographic
Channels, partially offset by increased programming costs, including expanded
college football and Ultimate Fighting Championship ("UFC") coverage,
as well as higher costs at the RSNs related to the benefit recognized
in the prior year as a result of the National Basketball Association lockout.
-- Strong operating profit growth at the non-sports channels at FIC and STAR
India, partially offset by the costs associated with the inaugural broadcasts
of BCCI cricket and the adverse impact of the strengthened U.S. dollar.
-- Affiliate revenue growth at the domestic and international cable channels.
Domestic network growth reflects higher rates across most networks, led
by growth at the Fox News Channel and RSNs. International affiliate revenue
increase reflects strong local currency growth at the non-sports channels
at FIC and STAR India.
14
-- Growth of advertising revenue at the domestic cable channels driven by
growth across most networks and improvement of the international cable
channels' advertising revenue.
-- Increased expenses due to increased sports programming costs, partially
offset by reduced National Hockey League rights costs at the RSNs resulting
from this season's lockout.
-- Acquisition of a controlling 51% ownership stake in Eredivisie Media &
Marketing CV, a media company that holds the collective media and sponsorship
rights of the Dutch Premier League.
-- Acquisition of the remaining 50% interest in ESPN Star Sports (re-branded
Fox Star Sports Asia) that the Company did not already own.
-- Acquisition of Sports Time Ohio, a RSN serving the Cleveland, Ohio market.
Filmed Entertainment
-- Successful worldwide theatrical performances of Taken 2 and of Life of
Pi , which has grossed over $500 million in worldwide box office and was
nominated for eleven Academy Awards including Best Picture.
-- Fox film studios garnered thirty-one Academy Award nominations, the most
of any studio.
-- Successful worldwide home entertainment performance of Ice Age: Continental
Drift.
Television
-- More than doubling of retransmission consent revenues and increased local
advertising at the Fox Television Stations driven by political advertising
revenues, partially offset by lower national advertising revenues, primarily
reflecting lower primetime ratings at the Fox Broadcast Network.
Direct Broadcast Satellite Television
-- Sky Italia generated a quarterly segment operating loss driven by higher
programming expenses, including nearly $30 million of rights costs primarily
associated with expanded UEFA Champions and Europa League coverage.
-- Net reduction at Sky Italia of approximately 28,000 subscribers during
the quarter, bringing total subscribers to 4.83 million.
Equity Interests and Other Investments
-- Acquisition of 49% equity interest in the Yankees Entertainment and Sports
Network, a New York City-based RSN.
12 21st Century Fox pro forma historical financial information
12.1 Overview
The Company will complete the Separation by way of a
distribution (the "Distribution") of all of the issued and
outstanding shares of New News Corporation common stock, on a pro
rata basis, to the Company's stockholders of record on the record
date, subject to final approval from the Company's Board of
Directors, stockholder approval of certain amendments to the
Company's Restated Certificate of Incorporation, the receipt of
certain regulatory approvals and other conditions being met. The
date of the Distribution is referred to as the "Distribution Date",
and 21st Century Fox and New News Corporation will, subsequent to
the Distribution, be two independent, publicly-traded companies
trading on NASDAQ. The Distribution will be made pursuant to the
separation and distribution agreement to be entered into in
connection with the Separation.
After the Distribution Date, the Company will not own any equity
interest in New News Corporation and, following such date, will not
consolidate the financial results of New News Corporation for the
purpose of its own
15
financial reporting. The Company will file a Form 8-K with the
Commission within four business days after the completion of the
Separation, in which pro forma information reflecting the
Separation as of and for the nine months ended March 31, 2013 and
for the fiscal years ended June 30, 2012, 2011 and 2010 will be
presented.
The unaudited pro forma consolidated financial statements of the
Company have been derived from our historical consolidated
financial statements and are being presented to give effect to the
separation of New News Corporation into an independent,
publicly-traded company. The unaudited pro forma consolidated
balance sheet gives effect to these events as if they occurred as
of December 31, 2012. The unaudited pro forma consolidated
statements of operations reflect our results as if the separation
of New News Corporation from the Company occurred on July 1, 2009.
The following unaudited pro forma consolidated financial statements
should be read in conjunction with our historical financial
statements and accompanying notes which are available at the
Commission's web site at www.sec.gov and the Company's web site at
www.newscorp.com/investor .
The unaudited pro forma consolidated financial statements are
not intended to be a complete presentation of the Company's
financial position or results of operations had the Separation and
related transactions contemplated by the separation and
distribution agreement and related agreements occurred as of and
for the periods indicated. In addition, the unaudited pro forma
consolidated financial statements are provided for illustrative and
information purposes only, and are not necessarily indicative of
the Company's future results of operations or financial condition
had the Separation been completed on the dates assumed. The pro
forma adjustments are based on available information and
assumptions that the Company's management believes are reasonable,
that reflect the impacts of events directly attributable to the
Separation and related transaction agreements that are factually
supportable, and for purposes of the statements of operations, are
expected to have a continuing impact on the Company.
12.2 Basis of preparation
The unaudited pro forma financial statements have been prepared
in accordance with Regulation S-X, Article 11. The Company's
historical financial statements are included in and form the basis
for the unaudited pro forma financial statements. The historical
financial statements for the years ended June 30, 2012 and 2011
were prepared in accordance with generally accepted accounting
principles of the United States ("U.S. GAAP") and have been audited
in accordance with the standards of the Public Company Accounting
Oversight Board (United States). The historical financial
statements for the six months ended and as of December 31, 2012 are
derived from the unaudited U.S. GAAP historical financial
statements of the Company, which were reviewed in accordance with
Statement of Auditing Standards No. 100 ("SAS 100"). In
management's opinion, the unaudited historical financial statements
have been prepared on the same basis as the audited historical
financial statements and include all adjustments, consisting only
of ordinary recurring adjustments, necessary for a fair
presentation of the information for the periods presented.
The unaudited pro forma consolidated statements of operations
for the six months ended December 31, 2012 and for the fiscal years
ended June 30, 2012, and 2011, respectively, reflect our results as
if the events had occurred on July 1, 2009. The unaudited pro forma
consolidated balance sheet gives effect to these events as if they
occurred as of December 31, 2012. The unaudited pro forma
consolidated financial statements give effect to the following:
-- the contribution by the Company to New News Corporation, pursuant to the
Separation, of all the assets and liabilities that comprise the businesses
of New News Corporation;
-- the expected transfers to and from New News Corporation, in connection
with the Separation, of certain assets, including investments, and liabilities
that were reflected in our historical consolidated financial statements;
-- costs incurred in connection with the Separation; and
16
-- the impact of, and transactions contemplated by, the separation and distribution
agreement and the tax sharing and indemnification agreement between the
Company and New News Corporation and the provisions contained therein.
The unaudited pro forma consolidated financial statements are
subject to the assumptions and adjustments described in the
accompanying notes. Our management believes that these assumptions
and adjustments are reasonable under the circumstances and given
the information available at this time. However, these adjustments
are subject to change as we and New News Corporation finalize the
terms of the separation and distribution agreement and the other
agreements related to the Separation.
The unaudited pro forma consolidated statements of operations do
not reflect material non-recurring charges following the
Distribution related to the Separation as the Company does not
anticipate incurring any such charges following the Distribution,
with the exception of the expenses associated with the U.K.
Newspaper Matters. Amounts related to the U.K. Newspaper Matters
cannot be estimated at this point and thus no pro forma adjustment
is required. (See Note (d) to the unaudited pro forma consolidated
financial information.)
17
12.3 21st Century Fox unaudited pro forma consolidated statement of operations
News Corporation
Unaudited Pro Forma Consolidated Statement of Operations
For the six months ended December 31, 2012
(in millions, except per share data)
Separation
of
News New News Pro Forma Pro Forma
Corporation Corporation Adjustments for
Historical (a) for Separation Separation
------------- ------------- ---------------- ------------
Revenues $ 17,561 $ (4,451) $ - $ 13,110
Operating expenses (10,717) 2,685 - (8,032)
Selling, general and administrative (3,276) 1,332 (82 ) (b), (d) (2,026)
Depreciation and amortization (610) 254 - (356)
Impairment and restructuring
charges (217) 177 - (40)
Equity earnings of affiliates 364 (64) 1 (c) 301
Interest, net (465) (29) - (494)
Other, net 2,775 (1,207) - 1,568
Income (loss) before income
tax benefit (expense) 5,415 (1,303) (81) 4,031
Income tax (expense) benefit (661) (45) (3 ) (i) (709)
Net income (loss) from continuing
operations 4,754 (1,348) (84) 3,322
Less: Net income
attributable
to noncontrolling interests (140) 21 - (119)
Net income (loss) attributable
to the Company, from continuing
operations $ 4,614 $ (1,327) $ (84) $ 3,203
Earnings Per Share
Basic 1.96 1.36
Diluted 1.96 1.36
Weighted-Average Shares Outstanding
Basic 2,353 2,353
Diluted 2,358 2,358
See accompanying Notes to the Unaudited Pro Forma Consolidated
Financial Statements
18
News Corporation
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended June 30, 2012
(in millions, except per share data)
Separation
of
News New News Pro Forma Pro Forma
Corporation Corporation Adjustments for
Historical (a) for Separation Separation
------------- ------------- ---------------- ------------
Revenues $ 33,706 $ (8,654) $ - $ 25,052
Operating expenses (20,785) 5,122 - (15,663)
Selling, general and administrative (6,363) 2,644 (199 ) (d) (3,918)
Depreciation and amortization (1,179) 468 - (711)
Impairment and restructuring
charges (3,005) 2,763 - (242)
Equity earnings of affiliates 730 (94) 4 (c) 640
Interest, net (899) (56) - (955)
Other, net 7 59 18 (e) 84
Income (loss) before income tax
benefit (expense) 2,212 2,252 (177) 4,287
Income tax (expense) benefit (805) (289) (6 ) (i) (1,100)
Net income (loss) from continuing
operations 1,407 1,963 (183) 3,187
Less: Net income attributable
to noncontrolling interests (228) 35 - (193)
Net income (loss) attributable
to the Company, from continuing
operations $ 1,179 $ 1,998 $ (183) $ 2,994
Earnings Per Share
Basic 0.47 1.20
Diluted 0.47 1.20
Weighted-Average Shares Outstanding
Basic 2,499 2,499
Diluted 2,504 2,504
See accompanying Notes to the Unaudited Pro Forma Consolidated
Financial Statements
19
News Corporation
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended June 30, 2011
(in millions, except per share data)
Separation
of
News New News Pro Forma Pro Forma
Corporation Corporation Adjustments for
Historical (a) for Separation Separation
------------- ------------- ---------------- ------------
Revenues $ 33,405 $ (9,173) $ - $ 24,232
Operating expenses (21,058) 5,312 - (15,746)
Selling, general and administrative (6,306) 2,547 (13 ) (d) (3,772)
Depreciation and amortization (1,191) 414 - (777)
Impairment and restructuring
charges (313) 25 - (288)
Equity earnings of affiliates 462 (110) 4 (c) 356
Interest, net (840) (47) - (887)
Other, net 18 (47) - (29)
Income (loss) before income tax
benefit (expense) 4,177 (1,079) (9) 3,089
Income tax (expense) benefit (1,029) 356 (1 ) (i) (674)
Net income (loss) from continuing
operations 3,148 (723) (10) 2,415
Less: Net income attributable
to noncontrolling interests (155) 26 - (129)
Net income (loss) attributable
to the Company, from continuing
operations $ 2,993 $ (697) $ (10) $ 2,286
Earnings Per Share
Basic 1.14 0.87
Diluted 1.14 0.87
Weighted-Average Shares Outstanding
Basic 2,625 2,625
Diluted 2,633 2,633
See accompanying Notes to the Unaudited Pro Forma Consolidated
Financial Statements
20
12.4 21st Century Fox unaudited pro forma consolidated balance sheet
News Corporation
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2012
(in millions)
Separation
of
News New News Pro Forma Pro Forma
Corporation Corporation Adjustments for
Historical (a) for Separation Separation
------------- ------------- ---------------- ------------
Assets:
Current assets:
Cash and cash equivalents $ 7,806 $ (742) $ (1,819 ) (f) $ 5,245
Accounts receivables, net 7,760 (1,656) 19 (h) 6,123
Inventories, net 3,282 (292) - 2,990
Other 896 (475) - 421
Total current assets 19,744 (3,165) (1,800) 14,779
Receivables 449 (2) - 447
Investments 7,441 (3,176) (135 ) (c) 4,130
Inventories, net 5,024 (31) - 4,993
Property, plant and equipment,
net 5,857 (3,315) - 2,542
Intangible assets 7,149 (2,697) - 4,452
Goodwill 15,875 (3,710) - 12,165
Other non-current assets 1,206 (516) - 690
Total assets $ 62,745 $ (16,612) $ (1,935) $ 44,198
Liabilities and Equity:
Current liabilities:
Borrowings $ 273 $ - $ - $ 273
Accounts payable, accrued expenses
and other current liabilities 5,260 (1,440) 102 (d), (h) 3,922
Participations, residuals and
royalties payable 1,899 (169) - 1,730
Program rights payable 1,665 - - 1,665
Deferred revenue 1,163 (408) - 755
Total current liabilities 10,260 (2,017) 102 8,345
Borrowings 16,184 - - 16,184
Other liabilities 4,200 (893) (60 ) (g) 3,247
Deferred income taxes 2,447 (1,110) - 1,337
Redeemable noncontrolling interests 649 - - 649
Commitments and contingencies - - - -
Total liabilities 33,740 (4,020) 42 29,762
Total equity 29,005 (12,592) (1,977 ) (j) 14,436
Total liabilities and equity $ 62,745 $ (16,612) $ (1,935) $ 44,198
See accompanying Notes to the Unaudited Pro Forma Consolidated
Financial Statements
21
12.5 Notes to the Unaudited Pro Forma Consolidated Financial Statements
a) Reflects the operations, assets, liabilities and equity of New News Corporation,
formerly the newspapers, information services and integrated marketing
services, digital real estate services, book publishing, digital education
and sports programming and pay-TV distribution in Australia businesses
of the Company, and all of the common stock of New News Corporation will
be distributed on the Distribution Date on a pro rata basis to the Company's
stockholders of record as of the record date.
Included in this column is the investment in Sky Network
Television Ltd which was sold in March 2013 and consequently does
not affect continuing operations.
Excluded from these amounts are certain general corporate
overhead expenses not specifically related to New News Corporation.
Such general corporate expenses do not meet the requirements to be
presented in discontinued operations under U.S. GAAP, and thus will
be presented as part of the Company's continuing operations.
The provision for income taxes was determined using the U.S.
GAAP intraperiod allocation rules.
b) Reflects the removal of $28 million of costs directly related to the Separation
that were incurred during the historical periods, but are non-recurring
in nature. These costs were primarily for accounting, legal, consulting
and advisory fees.
c) Adjustment reflects the removal of certain investments in Asia of approximately
$135 million that we expect to contribute to New News Corporation prior
to the Distribution in connection with the internal reorganization. These
investments are principally cost-based.
d) Reflects an adjustment related to the indemnification of certain liabilities
related to the U.K. Newspaper Matters pursuant to the separation and distribution
agreement. The separation and distribution agreement provides that the
Company will indemnify New News Corporation for payments made after the
Distribution Date arising out of civil claims and investigations relating
to the U.K. Newspaper Matters, subject to New News Corporation's compliance
with certain agreements regarding our control over the civil U.K. Newspaper
Matters and consenting to settlements proposed by us, as well as legal
and professional fees and expenses paid in connection with the criminal
matters. Adjustment reflects the recognition of expenses related to the
indemnification of U.K. Newspaper Matters in the amount of $110 million
for the period ended December 31, 2012, $199 million for the year ended
June 30, 2012 and $13 million for the year ended June 30, 2011 previously
recognized by New News Corporation's businesses and an accrual of $70
million recorded by New News Corporation for the estimate of the indemnification
liability based on the claims that have been filed and costs incurred
as of December 31, 2012.
e) Adjustment primarily reflects the $18 million reversal of the write-off
recorded during the year ended June 30, 2012 related to an investment
in Australia as this investment is expected to be contributed to New News
Corporation prior to the Distribution in connection with the internal
reorganization.
f) Reflects the net cash contribution immediately prior to the Distribution
by the Company to New News Corporation, based upon the anticipated post-Distribution
capital structure for New News Corporation and pursuant to the terms of
the separation and distribution agreement, of approximately $1.8 billion.
New News Corporation's cash balance is expected to be approximately $2.6
billion upon the Distribution.
g) Represents the assets and liabilities formerly associated with the Company-sponsored
shared pension plans and other employee benefit arrangements for the known
New News Corporation employees. Certain of New News Corporation's U.S.
employees participate in defined benefit pension plans sponsored by the
Company. Upon completion of the Separation, New News Corporation will
assume obligations associated with its active employees and provide the
benefits directly to its employees, and accordingly the Company will transfer
to New News Corporation plan liabilities in the amount of $117 million
and assets in the amount of $57 million associated with these active employees.
22
h) Adjustment reflects the elimination of intercompany activity generally
transacted at cost between the Company and New News Corporation that will
be reflected as third party transactions subsequent to the Distribution.
i) In determining the tax rate to apply to our pro forma adjustments, we
used the applicable statutory rate based on the jurisdiction in which
the adjustment relates. If the adjustment relates to an item that would
not be subject to tax in that particular jurisdiction, we did not provide
any tax effect.
The adjustments related to the indemnification of certain
liabilities related to the U.K. Newspaper Matters pursuant to the
separation and distribution agreement of $110 million for the six
months ended December 31, 2012, $199 million for the year ended
June 30, 2012, and $13 million for the year ended June 30, 2011,
respectively, result in a capital loss for tax purposes. However,
the recognition of the related tax benefit is deferred because it
is not more likely than not that such benefit will be realized. In
addition, the adjustment related to the removal of $28 million of
Separation costs from the six months ended December 31, 2012
includes two components. The first component of $20 million of
these costs was not deductible and therefore has no tax effect. The
second component of $8 million is deductible and was tax-effected
using the U.S. combined income tax rate of 38%. Also, the
adjustment to remove certain investments in Asia that are expected
to be contributed to New News Corporation prior to the Distribution
in connection with the internal reorganization was tax- effected
using the applicable statutory income tax rates of the
jurisdictions in which these investments are held.
The internal reorganization will result in the recognition of
significant built-in losses and gains by the Company (through its
U.S. federal consolidated group). It is expected that the losses
will exceed the gains recognized. However, the recognition of the
tax benefit of such losses is deferred because it is not more
likely than not that such benefit will be realized, as realization
of such capital losses is dependent on the generation of capital
gain income in order to utilize such losses.
j) Stockholders' equity was adjusted as a result of adjustments (c), (d),
(f), (g), and (h).
23
13 Management and Board of Directors
13.1 Executive Officers
The executive officers of the Company are set forth below.
K. Rupert Murdoch
Chairman and Chief Executive Officer
-- K. Rupert Murdoch AC has been Chief Executive Officer of the Company since
1979 and its Chairman since 1991.
-- Mr. K.R. Murdoch served as a Director of BSkyB from 1990 to 2007, as a
Director of Gemstar-TV Guide International Inc. ("Gemstar-TV Guide") from
2001 to 2008 and as a Director of The DIRECTV Group, Inc. ("DIRECTV")
from 2003 to 2008.
-- Mr. K.R. Murdoch will serve as Executive Chairman of New News Corporation.
Chase Carey
Deputy Chairman, President and Chief Operating Officer
-- Chase Carey has been the President and Chief Operating Officer of the
Company and Deputy Chairman of the Board since July 2009.
-- Mr. Carey previously served the Company in numerous roles beginning in
1988, including as Co-Chief Operating Officer from 1996 to 2002, as a
consultant from 2002 to 2003 and as a Director from 1996 to 2007.
-- Mr. Carey has served as the Chairman of the Supervisory Board of Sky Deutschland
AG, a German pay-television operator and affiliate of the Company, since
July 2010. Since 2013, Mr. Carey has served as a Director of BSkyB, where
he previously served as a Director from 2003 to 2008.
-- Mr. Carey served as a President and Chief Executive Officer and a Director
of DIRECTV from 2003 to 2009. Mr. Carey also served as a Director of Yell
Finance B.V. from 2004 to 2007.
James R. Murdoch
Director and Deputy Chief Operating Officer and Chairman and
CEO, International
-- James R. Murdoch has been a Director of the Company since 2007 and its
Deputy Chief Operating Officer and Chairman and CEO, International since
2011, after serving as the Company's Chairman and Chief Executive, Europe
and Asia beginning in 2007.
-- Mr. J.R. Murdoch was the Chief Executive Officer of BSkyB from 2003 to
2007. Mr. J.R. Murdoch has served as a Director of BSkyB since 2003 and
served as its Non-Executive Chairman from 2007 to April 2012.
-- Mr. J.R. Murdoch was the Chairman and Chief Executive Officer of STAR
Group Limited, a subsidiary of the Company, from 2000 to 2003. Mr. J.R.
Murdoch previously served as an Executive Vice President of the Company,
and served as a member of the Board from 2000 to 2003.
-- Mr. J.R. Murdoch served as a Director of GlaxoSmithKline plc from 2009
to May 2012 and as a Director of Sotheby's from 2010 to May 2012.
David F. DeVoe
Director and Senior Executive Vice President and Chief Financial
Officer
-- David F. DeVoe has been a Director of the Company and its Chief Financial
Officer since 1990. Mr. DeVoe has served as Senior Executive Vice President
of the Company since 1996.
24
-- Mr. DeVoe has been a Director of BSkyB since 1994.
-- He served as a Director of Gemstar-TV Guide from 2001 to 2008 and as a
Director of DIRECTV from 2003 to 2008.
Gerson Zweifach
Senior Executive Vice President and Group General Counsel
-- Gerson Zweifach has been a Senior Executive Vice President and Group General
Counsel of the Company since February 2012. He also serves as Chief Compliance
Officer of the Company.
-- Mr. Zweifach served as an attorney at Williams & Connolly LLP where he
was a partner from 1988 to February 2012 and currently serves as Of Counsel.
-- Mr. Zweifach has been a member of the Bar of the District of Columbia
since 1981 and the Bar of the State of New York since 1980.
-- Mr. Zweifach will serve as General Counsel of New News Corporation.
13.2 Board of Directors Committees
The Board has three standing committees: the Audit Committee,
the Compensation Committee and the Nominating and Corporate
Governance Committee. These committees are comprised entirely of
independent Directors, as currently required under the existing
rules of the Exchange Act and NASDAQ. Each committee is governed by
a written charter approved by the Board. These charters are
available on the Company's website at
www.newscorp.com/corp_gov/bc.html and are available in print to any
stockholder requesting a paper copy of these documents from the
Corporate Secretary. The Company does not anticipate any changes
following the Separation to the Board's committees or their
respective charters and responsibilities.
13.3 Directors
The Company expects that certain directors of the Company will
resign as of the Separation and become directors of New News
Corporation, and the Company will seek to identify appropriate
candidates to replace such directors on the board of directors of
21st Century Fox. The biographies of the directors of the Company
not listed above are set forth below.
José María Aznar
-- José María Aznar has been a Director of the Company since 2006
and is a member of the Nominating and Corporate Governance Committee.
-- Mr. Aznar has been the President of the Foundation for Social Studies
and Analysis since 1989.
-- Mr. Aznar was a Distinguished Scholar at the Edmund A. Walsh School of
Georgetown University from 2004 to 2011. Since 2011, he has been a Distinguished
Fellow at the Johns Hopkins University Paul H. Nitze School of Advanced
International Studies, where he is also Chairman of the Atlantic Basin
Initiative.
-- Mr. Aznar has served as a member of the International Advisory Board of
Barrick Gold Corporation since 2011.
-- Mr. Aznar is the Honorific President of the Partido Popular of Spain and
served as its Executive President from 1990 to 2004. Mr. Aznar was a member
of The State Council of Spain from 2005 to 2006. Mr. Aznar served as the
President of Spain from 1996 to 2004.
Natalie Bancroft
-- Natalie Bancroft has been a Director of the Company since 2007 and is
a member of the Nominating and Corporate Governance Committee.
-- Ms. Bancroft is a professionally trained opera singer, has studied journalism
and is a graduate of L'Institut de Ribaupierre in Lausanne, Switzerland.
25
Peter L. Barnes
-- Peter L. Barnes has been a Director of the Company since 2004 and serves
as a member of the Audit and the Compensation Committees.
-- Mr. Barnes has been a Director of Metcash Limited since 1999, serving
as its Chairman since 2010.
-- Mr. Barnes was a Director of Ansell Limited from 2001 to 2012 and was
its Chairman from 2005 to 2012.
-- Mr. Barnes served in various senior management positions in the United
States, the United Kingdom and Asia at Philip Morris International Inc.
from 1971 to 1998, including as President of Philip Morris Asia Inc.
James W. Breyer
-- James W. Breyer has been a Director of the Company since 2011 and serves
as Chairman of the Compensation Committee.
-- Mr. Breyer has been a Partner of Accel Partners, a venture capital firm,
since 1987 and is the Founder and Chief Executive Officer of Breyer Capital,
a global diversified investment firm. Mr. Breyer is also a co-founder
and has been co-lead on the strategic investment committee since inception
of the IDG-Accel China Funds.
-- Mr. Breyer was elected as a fellow in February 2013 to the join the Harvard
Corporation, the University's senior governing body.
-- Mr. Breyer has been a Director of Wal-Mart Stores, Inc. since 2001 and
currently serves as its Presiding Director. Since 2009, Mr. Breyer has
served as a Director of Dell Inc. where he is the Chairman of its Finance
Committee. Since 2005, Mr. Breyer has served as a Director of Facebook
where he is the Chairman of the Compensation Committee. Since 2000, Mr.
Breyer has served as a Director of ModelN. Mr. Breyer serves as a Director
of several privately-held companies including Legendary Pictures and Etsy.
He previously served as a Director of Marvel Entertainment, Inc. from
2006 to 2009, a Director of RealNetworks, Inc. from 1995 to 2008 and a
Director of Brightcove from 2005 to 2013.
Elaine L. Chao
-- Elaine L. Chao has been a Director of the Company since 2012 and serves
as a member of the Nominating and Corporate Governance Committee.
-- Ms. Chao has been a Distinguished Fellow at The Heritage Foundation, a
research and educational organization based in Washington D.C., since
2009.
-- She previously served as the U.S. Secretary of Labor from 2001 to 2009.
Ms. Chao also served as the President and Chief Executive Officer of United
Way of America from 1992 to 1996.
-- Her prior government service includes serving as Director of the Peace
Corps and as Deputy Secretary at the U.S. Department of Transportation.
-- Prior to her government service, she was Vice President of Syndications
at Bank of America and a banker with Citicorp, N.A.
-- Ms. Chao has served as a Director of Dole Food Company, Inc. since 2009
and as a Director of Wells Fargo & Company and Protective Life Corporation
since 2011.
Viet Dinh
-- Viet Dinh has been a Director of the Company since 2004 and serves as
Chairman of the Nominating and Corporate Governance Committee and as a
member of the Audit Committee. He also oversees and reports to the Board
on the work of the Management and Standards Committee that was created
by the Company to have oversight of, and take responsibility for, all
matters related to The News of the World phone hacking case .
-- Mr. Dinh has been a Professor of Law at Georgetown University Law Center
since 1996.
-- Mr. Dinh is a Member of Bancroft PLLC, a law firm he founded in 2003.
26
-- Mr. Dinh has acted as General Counsel and Corporate Secretary of Strayer
Education, Inc. ("Strayer") since 2010 through Strayer's engagement of
Bancroft PLLC.
-- Mr. Dinh has served as a Director of Revlon, Inc. since June 2012. He
served as a Director of M&F Worldwide Corp., which ceased to be a public
reporting company in 2011, from 2007 to 2011, and as a Director of The
Orchard Enterprises, Inc., which ceased to be a public reporting company
in 2010, from 2007 to 2010.
Sir Roderick I. Eddington
-- Sir Roderick I. Eddington has been a Director of the Company since 1999
and the Lead Director since 2006, and serves as the Chairman of the Audit
Committee and as a member of the Compensation Committee.
-- Sir Roderick Eddington has served as Non-Executive Chairman, Australia
and New Zealand of J.P. Morgan since 2006.
-- He served as a Director and the Chief Executive of British Airways Plc
from 2000 to 2005 and as the Managing Director of Cathay Pacific Airways
from 1992 to 1996.
-- Sir Roderick Eddington has been a Director of John Swire & Sons Pty Ltd
since 1997, a Director of CLP Holdings Limited since 2006, and a Director
of Lion Pty Ltd since 2011 and its Chairman since April 2012.
-- Sir Roderick Eddington served as a Director of Allco Finance Group Limited
from 2006 to 2009 and as a Director of Rio Tinto plc from 2005 to 2011.
Joel I. Klein
-- Joel I. Klein has been a Director and Executive Vice President, Office
of the Chairman of the Company and Chief Executive Officer of Amplify,
the education division of the Company, since 2011.
-- He was the New York City schools chancellor from 2002 through 2010.
-- He was the U.S. Chairman and Chief Executive Officer of Bertelsmann, Inc.
and Chief U.S. Liaison Officer to Bertelsmann AG from 2001 to 2002.
-- Mr. Klein also served with the Clinton administration in a number of roles,
including Deputy White House Counsel from 1993 to 1995.
-- Mr. Klein has served as a Director of Boston Properties, Inc. since January
2013.
Lachlan K. Murdoch
-- Lachlan K. Murdoch has been a Director of the Company since 1996.
-- Mr. L.K. Murdoch has served as a Director of Ten Network Holdings Limited
since 2010 and as its Non-Executive Chairman since February 2012, after
serving as its Acting Chief Executive Officer from 2011 to January 2012.
-- Mr. L.K. Murdoch has served as the Executive Chairman of Illyria Pty Ltd,
a private investment company, since 2005. He has served as Executive Chairman
of DMG Radio Australia since 2009.
-- Mr. L.K. Murdoch served as an advisor to the Company from 2005 to 2007,
and served as its Deputy Chief Operating Officer from 2000 to 2005.
Álvaro Uribe
-- Álvaro Uribe has been a Director of the Company since 2012 and serves
as a member of the Compensation Committee.
-- Mr. Uribe served as the President of Colombia from 2002 to 2010 after
holding a number of political offices including Senator of Colombia from
1986 to 1994 and Governor of Antioquia from 1995 to 1997.
-- Mr. Uribe has served as a member of the International Advisory Council
of J.P. Morgan since 2011.
-- From 2010 to 2011, Mr. Uribe was a Distinguished Scholar at the Edmund
A. Walsh School of Georgetown University and was a Vice Chairman of a
United Nations investigation panel.
27
Arthur M. Siskindand Stanley S. Shuman each serves as a Director
Emeritus.
14 Compensation
The compensation of the Company's executive officers and
directors for the fiscal year ended June 30, 2012 is set forth in
the Company's proxy statement filed with the Commission on
September 4, 2012. In addition, on April 26, 2013, the Company
filed with the Commission a Current Report on Form 8-K disclosing,
among other things, Mr. K.R. Murdoch's fiscal 2014 target total
direct compensation for his role as Chairman and Chief Executive
Officer of 21st Century Fox. No decisions have been made with
regard to future compensation of the Company's other executive
officers and directors following the Separation.
15 Legal Proceedings
Shareholder Litigation
Delaware
On March 16, 2011, a complaint seeking to compel the inspection
of the Company's books and records pursuant to 8 Del. C. -- 220,
captioned Central Laborers Pension Fund v. News Corporation, was
filed in the Delaware Court of Chancery. The plaintiff requested
the Company's books and records to investigate alleged possible
breaches of fiduciary duty by the directors of the Company in
connection with the Company's purchase of Shine (the "Shine
Transaction"). The Company moved to dismiss the action. On November
30, 2011, the court issued an order granting the Company's motion
and dismissing the complaint. The plaintiff filed a notice of
appeal on December 13, 2011. The Delaware Supreme Court heard
argument on the fully-briefed appeal on April 18, 2012 and issued a
decision on May 29, 2012 in which it affirmed the Court of
Chancery's dismissal of the complaint.
Also on March 16, 2011, two purported shareholders of the
Company, one of which was Central Laborers Pension Fund, filed a
derivative action in the Delaware Court of Chancery, captioned The
Amalgamated Bank v. Murdoch, et al. (the "Amalgamated Bank
Litigation"). The plaintiffs alleged that both the directors of the
Company and Rupert Murdoch as a "controlling shareholder" breached
their fiduciary duties in connection with the Shine Transaction.
The suit named as defendants all directors of the Company, and
named the Company as a nominal defendant. Similar claims against
the same group of defendants were filed in the Delaware Court of
Chancery by a purported shareholder of the Company, New Orleans
Employees' Retirement System, on March 25, 2011 (the "New Orleans
Employees' Retirement Litigation"). Both the Amalgamated Bank
Litigation and the New Orleans Employees' Retirement Litigation
were consolidated on April 6, 2011 (the "Consolidated Action"),
with The Amalgamated Bank's complaint serving as the operative
complaint. The Consolidated Action was captioned In re News Corp.
Shareholder Derivative Litigation. On April 9, 2011, the court
entered a scheduling order governing the filing of an amended
complaint and briefing on potential motions to dismiss.
Thereafter, the plaintiffs in the Consolidated Action filed a
Verified Consolidated Shareholder Derivative and Class Action
Complaint (the "Consolidated Complaint") on May 13, 2011, seeking
declaratory relief and damages. The Consolidated Complaint largely
restated the claims in The Amalgamated Bank's initial complaint and
also raised a direct claim on behalf of a purported class of
Company shareholders relating to the possible addition of Elisabeth
Murdoch to the Company's Board. The defendants filed opening briefs
in support of motions to dismiss the Consolidated Complaint on June
10, 2011, as contemplated by the court's scheduling order. On July
8, 2011, the plaintiffs filed a Verified Amended Consolidated
Shareholder Derivative and Class Action Complaint (the "Amended
Complaint"). In addition to the claims that were previously raised
in the Consolidated Complaint, the Amended Complaint brought claims
relating to the alleged acts of voicemail interception at The News
of the World (the "NoW Matter"). Specifically, the plaintiffs
claimed in the Amended Complaint that the directors of the Company
failed in their duty of oversight regarding the NoW Matter.
On July 15, 2011, another purported stockholder of the Company
filed a derivative action captioned Massachusetts Laborers' Pension
& Annuity Funds v. Murdoch, et al., in the Delaware Court of
Chancery (the "Mass. Laborers Litigation"). The complaint names as
defendants the directors of the Company and the Company as a
nominal defendant. The plaintiffs' claims are substantially similar
to those raised by the Amended Complaint in the Consolidated
Action. Specifically, the plaintiff alleged that the directors of
the Company have breached their fiduciary duties by, among other
things, approving the Shine Transaction and for failing to exercise
proper oversight
28
in connection with the NoW Matter. The plaintiff also brought a
breach of fiduciary duty claim against Rupert Murdoch as
"controlling shareholder," and a waste claim against the directors
of the Company. The action seeks as relief damages, injunctive
relief, fees and costs. On July 25, 2011, the plaintiffs in the
Consolidated Action requested that the court consolidate the Mass.
Laborers Litigation into the Consolidated Action. On August 24,
2011, the Mass. Laborers Litigation was consolidated with the
Consolidated Action.
On September 29, 2011, the plaintiffs filed a Verified Second
Amended Consolidated Shareholder Derivative and Class Action
Complaint ("Second Amended Complaint"). In the Second Amended
Complaint, the plaintiffs removed their claims involving the
possible addition of Elisabeth Murdoch to the Company's Board,
added some factual allegations to support their remaining claims
and added a claim seeking to enjoin a buyback of Common B shares to
the extent it would result in a change of control. The Second
Amended Complaint seeks declaratory relief, an injunction
preventing the buyback of Class B shares, damages, pre- and
post-judgment interest, fees and costs.
The defendants filed a motion to dismiss the Second Amended
Complaint. The hearing on the defendants' fully-briefed motion to
dismiss was postponed to allow further briefing by plaintiffs after
the Cohen Litigation, which is defined and described below, was
consolidated with the Consolidated Action.
On March 2, 2012, another purported stockholder of the Company
filed a derivative action captioned Belle M. Cohen v. Murdoch, et
al., in the Delaware Court of Chancery (the "Cohen Litigation").
The complaint names as defendants the directors of the Company and
the Company as a nominal defendant. The complaint's claims and
allegations pertain to the NoW Matter and are substantially similar
to the NoW Matter allegations raised in the Second Amended
Complaint in the Consolidated Action. The complaint asserts causes
of action against the defendants for alleged breach of fiduciary
duty, gross mismanagement, contribution and indemnification, abuse
of control, and waste of corporate assets. The action seeks as
relief damages, fees and costs. On March 20, 2012, the Cohen
Litigation was consolidated with the Consolidated Action.
On June 18, 2012, the plaintiffs in the Consolidated Action
filed a Verified Third Amended Consolidated Shareholder Derivative
Complaint (the "Third Amended Complaint"). The Third Amended
Complaint alleges claims against director defendants for breach of
fiduciary duty arising from the Shine Transaction; against Rupert
Murdoch for breach of fiduciary duty as the purported controlling
shareholder of the Company in connection with the Shine
Transaction; against director defendants for breach of fiduciary
duty arising from their purported failure to investigate illegal
conduct in the NoW Matter and allegedly permitting the Company to
engage in a cover up; against certain defendants for breach of
fiduciary duty in their capacity as officers arising from a
purported failure to investigate illegal conduct in the NoW Matter
and allegedly permitting the Company to engage in a cover up; and
against James Murdoch for breach of fiduciary duty for allegedly
engaging in a cover up related to the NoW Matter. The class action
claim asserted in the Second Amended Complaint pertaining to the
buyback of Common B shares and the relief related to that claim
were removed. The Third Amended Complaint seeks a declaration that
the defendants violated their fiduciary duties, damages, pre- and
post-judgment interest, fees and costs.
On July 18, 2012, the defendants renewed their postponed motion
to dismiss in the Consolidated Action, and in support thereof, they
filed supplemental briefing directed towards the allegations of the
Third Amended Complaint. Plaintiffs' response was filed on August
8, 2012. A hearing on the fully briefed motion was held in Chancery
Court on September 19, 2012. The Court reserved decision.
On April 17, 2013, the parties reached an agreement in principle
to settle the Consolidated Action. Pursuant to the terms of that
settlement, which is subject to the approval of the Delaware Court
of Chancery after notice to the stockholders and a hearing, the
parties agreed that the director defendants in the Consolidated
Action would cause to be paid on their behalf the amount of $139
million to the Company, minus any attorneys' fees and expenses
awarded by the Court to the plaintiffs' counsel. Such amount is to
be paid from an escrow account created for the benefit of the
director defendants pursuant to an agreement reached between the
defendants and their directors' and officers' liability insurers
for the payment of insurance proceeds, subject to a claims release.
In addition to the payment to the Company, the settlement
contemplates that the Company will build on corporate governance
and compliance enhancements which the Company has implemented in
the past year. These would remain in effect at least through
December 31, 2016, and would be applicable to both 21st Century Fox
and New News Corporation. The Memorandum of Understanding related
to the settlement has been filed with the Court. In addition to
requiring the approval of the Delaware Court of Chancery, the
settlement will not become effective unless the Shields Litigation,
the Iron Workers Litigation and the Stricklin Litigation (each as
described below under the
heading "Shareholder Litigation - Southern District of New
York") are also dismissed.
29
On May 30, 2012, a purported stockholder of the Company filed a
class action lawsuit in the Delaware Court of Chancery on behalf of
all non-U.S. stockholders of the Company's Class B shares,
captioned Första Ap-Fonden v. News Corporation, et al. The
plaintiff alleges that, by temporarily suspending 50% of the voting
rights of the Class B shares held by non-U.S. stockholders to
remain in compliance with U.S. governing broadcast licenses (the
"Suspension"), the Company and the Board violated the Company's
charter and the General Corporation Law of the State of Delaware
("DGCL") and the directors breached their fiduciary duties, both in
approving the Suspension and in failing to monitor the Company's
ownership by non-U.S. stockholders. The complaint named as
defendants the Company and all directors of the Company at the time
of the Suspension. The complaint sought a declaration that the
defendants violated the Company's charter and the DGCL, a
declaration that the directors breached their fiduciary duties, a
declaration that the Suspension is invalid and unenforceable, an
injunction of the Suspension, damages, fees, and costs. On June 11,
2012, the defendants filed an opening brief in support of a motion
to dismiss the complaint in its entirety. On August 2, 2012, the
plaintiff filed a Verified Amended and Supplemented Class Action
Complaint (the "Amended and Supplemented Complaint"). The Amended
and Supplemented Complaint seeks a declaration that the defendants
violated the Company's charter and the DGCL, a declaration that the
directors breached their fiduciary duties, a declaration that the
Suspension is invalid and unenforceable, an injunction of the
Suspension, a declaration that non-U.S. stockholders of the
Company's Class B shares are entitled to vote all of their shares
on the Proposed Separation Transaction, damages, fees, and costs.
On August 28, 2012, the parties entered into a Memorandum of
Understanding providing for an agreement in principle to settle the
lawsuit. The Memorandum of Understanding, which was filed with the
Court on September 5, 2012, provides in pertinent part: (i) within
5 business days after receiving Court approval, the Company will
file a petition with the FCC requesting permission to comply with
law governing broadcast licenses for any meeting of stockholders by
(a) determining the number of shares held by foreign stockholders
that are present at the meeting and that would be entitled to vote
but for the Suspension, and (b) counting as votes cast all voted
shares held by foreign stockholders, up to a total of 25% of the
shares voted; (ii) the Company's Audit Committee will determine on
at least an annual basis the total number of voting shares held by
non-U.S. citizens and will have the power to modify or eliminate
any then-existing suspension; the Company will disclose this
information in its annual proxy materials and (iii) the Company
will not consent to amend, modify or terminate the Murdoch Family
Interests agreement without prior approval of the Audit Committee,
which in the case of any vote related to the Proposed Separation
Transaction, must be unanimous. The settlement is subject to Court
approval after notice to the stockholders and a hearing. The
Stipulation of Settlement was filed with the Court on November 30,
2012. On December 10, 2012, the Court entered a Scheduling Order,
which, among other things, set the settlement hearing for April 26,
2013, and approved the form of Notice of Pendency of Class Action,
Proposed Settlement of Class Action, Settlement Hearing, and Right
to Appear, which has been distributed to holders of the Company's
Class B Common Stock in accordance with the Scheduling Order. At a
hearing held on April 26, 2013, the Court approved the settlement
and dismissed the action with prejudice.
Southern District of New York
On July 18, 2011, a purported shareholder of the Company filed a
derivative action captioned Shields v. Murdoch, et al. ("Shields
Litigation"), in the United States District Court for the Southern
District of New York. The plaintiff alleged violations of Section
14(a) of the Securities Exchange Act, as well as state law claims
for breach of fiduciary duty, gross mismanagement, waste, abuse of
control and contribution/indemnification arising from, and in
connection with, the NoW Matter. The complaint names the directors
of the Company as defendants and names the Company as a nominal
defendant, and seeks damages and costs. On August 4, 2011, the
plaintiff filed an amended complaint. The plaintiff seeks
compensatory damages, an order declaring the October 15, 2010
shareholder vote on the election of the Company's directors void;
an order setting an emergency shareholder vote date for election of
new directors; an order requiring the Company to take certain
specified corporate governance actions; and an order (i) putting
forward a shareholder vote resolution for amendments to the
Company's Article of Incorporation and (ii) taking such other
action as may be necessary to place before shareholders for a vote
on corporate governance policies that: (a) appoint a non-executive
Chair of the Board who is not related to the Murdoch family or
extended family; (b) appoint an independent Chair of the Board's
Audit Committee; (c) appoint at least three independent directors
to the Governance and Nominating Committees; (d) strengthen the
Board's supervision of financial reporting processes and implement
procedures for greater shareholder input into the policies and
guidelines of the Board; and (e) appropriately test and strengthen
the internal and audit control functions.
30
On July 19, 2011, a purported class action lawsuit captioned
Wilder v. News Corp., et al. ("Wilder Litigation"), was filed on
behalf of all purchasers of the Company's common stock between
March 3, 2011 and July 11, 2011, in the United States District
Court for the Southern District of New York. The plaintiff brought
claims under Section 10(b) and Section 20(a) of the Securities
Exchange Act, alleging that false and misleading statements were
issued regarding the NoW Matter. The suit names as defendants the
Company, Rupert Murdoch, James Murdoch and Rebekah Brooks, and
seeks compensatory damages, rescission for damages sustained, and
costs.
On July 22, 2011, a purported shareholder of the Company filed a
derivative action captioned Stricklin v. Murdoch, et al.
("Stricklin Litigation"), in the United States District Court for
the Southern District of New York. The plaintiff brought claims for
breach of fiduciary duty, gross mismanagement, and waste of
corporate assets in connection with, among other things, (i) the
NoW Matter; (ii) News America's purported payments to settle
allegations of anti-competitive behavior; and (iii) the Shine
Transaction. The action names as defendants the Company, Les
Hinton, Rebekah Brooks, Paul Carlucci and the directors of the
Company. On August 3, 2011, the plaintiff served a motion for
expedited discovery and to appoint a conservator over the Company,
which defendants objected to. The motion has not been formally
calendared and there is no briefing schedule yet. On August 16,
2011, the plaintiffs filed an amended complaint. The plaintiff
seeks various forms of relief including compensatory damages,
injunctive relief, disgorgement, the award of voting rights to
Class A shareholders, the appointment of a conservator over the
Company to oversee the Company's responses to investigations and
litigation related to the NoW Matter, fees and costs.
On August 10, 2011, a purported shareholder of the Company filed
a derivative action captioned Iron Workers Mid-South Pension Fund
v. Murdoch, et al. ("Iron Workers Litigation"), in the United
States District Court for the Southern District of New York. The
plaintiff brought claims for breach of fiduciary duty, waste of
corporate assets, unjust enrichment and alleged violations of
Section 14(a) of the Securities Exchange Act in connection with the
NoW Matter. The action names as defendants the Company, Les Hinton,
Rebekah Brooks and the directors of the Company. The plaintiff
seeks various forms of relief including compensatory damages,
voiding the election of the director defendants, an order requiring
the Company to take certain specified corporate governance actions,
injunctive relief, restitution, fees and costs.
The Wilder Litigation, the Stricklin Litigation and the Iron
Workers Litigation are all now before the judge in the Shields
Litigation. On November 21, 2011, the court issued an order setting
a briefing schedule for the defendants' motion to stay the
Stricklin Litigation, the Iron Workers Litigation and the Shields
Litigation pending the outcome of the consolidated action pending
in the Delaware Court of Chancery. On September 18, 2012, the Court
denied the motion as to two of the cases and dismissed the third
with leave to replead, which plaintiff has done. Specifically, on
October 4, 2012, Stricklin filed a Second Amended Complaint that
added a claim under Section 14(a) of the Securities Exchange Act
challenging the disclosures in the Company's definitive proxy
statements issued during the years of 2005 through 2012. The
plaintiff seeks, among other things, to void the election of the
director defendants at the Company's 2012 annual meeting. The
plaintiffs in Shields, Stricklin and Iron Workers have requested a
pre-motion conference to address the potential consolidation of
these derivative actions and a briefing schedule regarding the
potential leadership structure for the plaintiffs. The pre-motion
conference has not yet been scheduled. In the Wilder Litigation, on
June 5, 2012, the court issued an order appointing the Avon Pension
Fund ("Avon") as lead plaintiff and Robbins Geller Rudman &
Dowd as lead counsel. Thereafter, on July 3, 2012, the court issued
an order providing that an amended consolidated complaint shall be
filed by July 31, 2012. Avon filed an amended consolidated
complaint on July 31, 2012, which among other things, added as
defendants NI Group Limited
and Les Hinton, and expanded the class period to include
February 15, 2011 to July 18, 2011. Defendants filed their motion
to dismiss on September 25, 2012, plaintiffs' opposition was filed
November 6, 2012 and defendants' reply was filed November 30, 2012.
The motion is pending.
The Company's management believes these shareholder claims are
entirely without merit, and intends to vigorously defend these
actions. The settlement of the Consolidated Action (described above
under the heading "Shareholder Litigation - Delaware") will not
become effective unless the Shields Litigation, the Iron Workers
Litigation and the Stricklin Litigation are also dismissed.
The News of the World Investigations and Litigation
U.K. and U.S. regulators and governmental authorities continue
to conduct investigations initiated in 2011 with respect to the
U.K. Newspaper Matters. The Company is cooperating with these
investigations.
31
The Company has admitted liability in many civil cases related
to the phone hacking allegations and has settled many cases. The
Company also announced a private compensation scheme under which
parties could pursue claims against the Company. No additional
civil claims may be brought under the compensation scheme after
April 8, 2013.
The Company is not able to predict the ultimate outcome or cost
of the civil claims or criminal matters. The Company incurred legal
and professional fees related to the U.K. Newspaper Matters and
costs for civil settlements totaling approximately $110 million and
$90 million during the six months ended December 31, 2012 and 2011,
respectively. As of December 31, 2012, the Company has provided for
its best estimate of the liability for the claims that have been
filed and costs incurred and has accrued approximately $70 million.
It is not possible to estimate the liability for any additional
claims that may be filed given the information that is currently
available to the Company. If more claims are filed and additional
information becomes available, the Company will update the
liability provision for such matters.
The Company will agree in the separation and distribution
agreement to indemnify New News Corporation for payments made after
the Separation arising out of civil claims and investigations
relating to the U.K. Newspaper Matters, subject to New News
Corporation's compliance with certain agreements regarding the
Company's control over the civil U.K. Newspaper Matters and New
News Corporation's consenting to settlements proposed by the
Company, as well as legal and professional fees and expenses paid
in connection with the criminal matters. The legal and professional
fees and expenses and payments for settlements that the Company has
incurred to date were in connection with the civil claims and
investigations and criminal matters, and the Company generally will
indemnify New News Corporation for such costs that are paid after
the Separation. However, violations of law may result in criminal
fines or penalties for which the Company will not indemnify New
News Corporation. It is possible that these proceedings and any
adverse resolution thereof, including any fines or other penalties
associated with any plea, judgment or similar result, could damage
the Company's reputation, impair the Company's ability to conduct
its business and adversely affect the Company's results of
operations and financial condition.
Other
The Company's operations are subject to tax in various domestic
and international jurisdictions and as a matter of course, the
Company is regularly audited by federal, state and foreign 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.
The Company establishes an accrued liability for legal 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. Legal fees associated with litigation and similar
proceedings that are not expected to provide a benefit in future
periods are expensed as incurred. 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.
32
This information is provided by RNS
The company news service from the London Stock Exchange
END
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