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FOX CORPORATION

(FOXA)
  Report
Delayed Nasdaq  -  04:00 2022-09-29 pm EDT
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FOX CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

08/12/2022 | 08:06am EDT

Readers should carefully review this document and the other documents filed by Fox Corporation ("FOX" or the "Company") with the Securities and Exchange Commission (the "SEC"). This section should be read

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together with the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The consolidated financial statements are referred to as the "Financial Statements" herein.

INTRODUCTION

The Distribution


On March 19, 2019, the Company became a standalone publicly traded company
through the pro rata distribution by Twenty-First Century Fox, Inc. ("21CF") of
all of the issued and outstanding common stock of FOX to 21CF stockholders
(other than holders that were subsidiaries of 21CF) (the "Distribution") in
accordance with the Amended and Restated Distribution Agreement and Plan of
Merger, dated as of June 20, 2018, by and between 21CF and 21CF Distribution
Merger Sub, Inc. Following the Distribution, the Company's Class A Common Stock,
par value $0.01 per share (the "Class A Common Stock"), and Class B Common
Stock, par value $0.01 per share (the "Class B Common Stock" and, together with
the Class A Common Stock, the "Common Stock") began trading independently on The
Nasdaq Global Select Market. In connection with the Distribution, the Company
entered into the Separation and Distribution Agreement, dated as of March 19,
2019 (the "Separation Agreement"), with 21CF, which effected the internal
restructuring (the "Separation") whereby The Walt Disney Company ("Disney")
acquired the remaining 21CF assets and 21CF became a wholly-owned subsidiary of
Disney. The Separation and the Distribution were effected as part of a series of
transactions contemplated by the Amended and Restated Merger Agreement and Plan
of Merger, dated as of June 20, 2018 (the "21CF Disney Merger Agreement"), by
and among 21CF, Disney and certain subsidiaries of Disney.

Pursuant to the 21CF Disney Merger Agreement, immediately prior to the
Distribution, the Company paid to 21CF a dividend in the amount of $8.5 billion
(the "Dividend"). The final determination of the taxes in respect of the
Separation and the Distribution for which the Company is responsible pursuant to
the 21CF Disney Merger Agreement and a prepayment of the estimated taxes in
respect of divestitures (collectively, the "Transaction Tax") was $6.5 billion.
Following the Distribution, on March 20, 2019 the Company received a cash
payment in the amount of $2.0 billion from Disney, which had the net effect of
reducing the Dividend the Company paid to 21CF. The Transaction Tax included a
prepayment of the Company's share of the estimated tax liabilities resulting
from the anticipated divestitures by Disney of certain assets, principally the
FOX Sports Regional Sports Networks ("RSNs"), which were sold by Disney during
calendar year 2019 ("Divestiture Tax"). This prepayment was in the amount of
approximately $700 million and is subject to adjustment in the future, when the
actual amounts of all such tax liabilities are reported on the federal income
tax returns of Disney or a subsidiary of Disney. Any such adjustment is not
expected to have a material impact on the results of the Company. During the
first quarter of fiscal 2021, the Company and Disney reached an agreement to
settle the majority of the prepaid Divestiture Tax and the Company received $462
million from Disney as reimbursement of the Company's prepayment based upon the
sales price of the RSNs. This reimbursement was recorded in Other, net in the
Statement of Operations (See Note 20-Additional Financial Information to the
accompanying Financial Statements under the heading "Other, net").

As a result of the Separation and the Distribution, which was a taxable
transaction for which the estimated tax liability of $5.8 billion was included
in the Transaction Tax paid by the Company, FOX obtained a tax basis in its
assets equal to their respective fair market values. This resulted in estimated
annual tax deductions of approximately $1.5 billion, principally over the next
several years related to the amortization of the additional tax basis. This
amortization is estimated to reduce the Company's annual cash tax liability by
$370 million per year at the current combined federal and state applicable tax
rate of approximately 25%. Such estimates are subject to revisions, which could
be material, based upon the occurrence of future events.

In connection with the Separation, the Company entered into several agreements
that govern certain aspects of the Company's relationship with 21CF and Disney
following the Separation, including the Separation Agreement and a tax matters
agreement. The core transition services agreements entered into in connection
with the Separation terminated in accordance with their terms in fiscal 2022.

Basis of Presentation

The Company's financial statements are presented on a consolidated basis.

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Management's discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company's financial condition, changes in financial condition and results of operations. This discussion is organized as follows:


•Overview of the Company's Business-This section provides a general description
of the Company's businesses, as well as developments that occurred either during
the fiscal year ended June 30, ("fiscal") 2022 or early fiscal 2023 that the
Company believes are important in understanding its results of operations and
financial condition or to disclose known trends.

•Results of Operations-This section provides an analysis of the Company's
results of operations for fiscal 2022, 2021 and 2020. This analysis is presented
on both a consolidated and a segment basis. In addition, a brief description is
provided of significant transactions and events that impact the comparability of
the results being analyzed.

•Liquidity and Capital Resources-This section provides an analysis of the
Company's cash flows for fiscal 2022, 2021 and 2020, as well as a discussion of
the Company's outstanding debt and commitments, both firm and contingent, that
existed as of June 30, 2022. Included in the discussion of outstanding debt is a
discussion of the amount of financial capacity available to fund the Company's
future commitments and obligations, as well as a discussion of other financing
arrangements.

•Critical Accounting Policies-This section discusses accounting policies
considered important to the Company's financial condition and results of
operations, and which require significant judgment and estimates on the part of
management in application. In addition, Note 2-Summary of Significant Accounting
Policies to the accompanying Financial Statements summarizes the Company's
significant accounting policies, including the critical accounting policy
discussion found in this section.

•Caution Concerning Forward-Looking Statements-This section provides a
description of the use of forward-looking information appearing in this Annual
Report on Form 10-K, including in Management's Discussion and Analysis of
Financial Condition and Results of Operations. Such information is based on
management's current expectations about future events which are subject to
change and to inherent risks and uncertainties. Refer to Item 1A. "Risk Factors"
in this Annual Report for a discussion of the risk factors applicable to the
Company.

OVERVIEW OF THE COMPANY'S BUSINESS

The Company is a news, sports and entertainment company, which manages and reports its businesses in the following segments:


•Cable Network Programming, which produces and licenses news and sports content
distributed through traditional cable television systems, direct broadcast
satellite operators and telecommunication companies ("traditional MVPDs"),
virtual multi-channel video programming distributors ("virtual MVPDs") and other
digital platforms, primarily in the U.S.

•Television, which produces, acquires, markets and distributes programming
through the FOX broadcast network, advertising-supported video-on-demand
("AVOD") service TUBI, 29 full power broadcast television stations, including 11
duopolies, and other digital platforms, primarily in the U.S. Eighteen of the
broadcast television stations are affiliated with the FOX Network, 10 are
affiliated with MyNetworkTV and one is an independent station.

•Other, Corporate and Eliminations, which principally consists of the FOX Studio
Lot, Credible Labs Inc. ("Credible"), corporate overhead costs and intracompany
eliminations. The FOX Studio Lot, located in Los Angeles, California, provides
television and film production services along with office space, studio
operation services and includes all operations of the facility. Credible is a
U.S. consumer finance marketplace.

The Company's Cable Network Programming and Television segments derive the
majority of their revenues from affiliate fees for the transmission of content
and advertising sales. For fiscal 2022, the Company generated revenues of $14.0
billion, of which approximately 49% was generated from affiliate fees,
approximately 42% was generated from advertising, and approximately 9% was
generated from other operating activities.
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Affiliate fees primarily include (i) monthly subscriber-based license and
retransmission consent fees paid by programming distributors that carry our
cable networks and our owned and operated television stations and (ii) fees
received from non-owned and operated television stations that are affiliated
with the FOX Network. U.S. law governing retransmission consent provides a
mechanism for the television stations owned by the Company to seek and obtain
payment from traditional MVPDs that carry the Company's broadcast signals.

The Company's revenues are impacted by rate changes, changes in the number of
subscribers to the Company's content and changes in the expenditures by
advertisers. In addition, advertising revenues are subject to seasonality and
cyclicality as a result of the impact of state, congressional and presidential
election cycles and special events that air on the Company's networks, including
the National Football League's ("NFL") Super Bowl, which is broadcast on the FOX
Network on a rotating basis with other networks, and the Fédération
Internationale de Football Association ("FIFA") World Cup, which occurs every
four years (for each of women and men), and other regular and post-season sports
events, including one NFL Divisional playoff game that is aired on a rotating
annual basis with another network.

The cable network programming and television industries continue to evolve
rapidly, with changes in technology leading to alternative methods for the
delivery and storage of digital content. These technological advancements have
driven changes in consumer behavior as consumers seek more control over when,
where and how they consume content. Consumer preferences have evolved toward
alternatives, including direct-to-consumer offerings. These changes in
technologies and consumer behavior have contributed to declines in the number of
subscribers to MVPD services, and these declines are expected to continue and
possibly accelerate in the future.

At the same time, technological changes have affected advertisers' options for
reaching their target audiences. There has been a substantial increase in the
availability of content with reduced advertising or without advertising at all.
As consumers switch to digital consumption of video content, there is still to
be developed a consistent, broadly accepted measure of multiplatform audiences
across the industry. Furthermore, the pricing and volume of advertising may be
affected by shifts in spending from more traditional media and toward digital
and mobile offerings, which can deliver targeted advertising more promptly, or
toward newer ways of purchasing advertising. In addition, the market for AVOD
advertising campaigns is relatively new and evolving.

The Company operates in a highly competitive industry and its performance is
dependent, to a large extent, on the impact of changes in consumer behavior as a
result of new technologies, the sale of advertising, the maintenance, renewal
and terms of its carriage, affiliation and content agreements and programming
rights, the popularity of its content, general economic conditions (including
financial market conditions), the Company's ability to manage its businesses
effectively, and its relative strength and leverage in the industry. For more
information, see Item 1. "Business" and Item 1A. "Risk Factors."
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RESULTS OF OPERATIONS

Results of Operations-Fiscal 2022 versus Fiscal 2021


The following table sets forth the Company's operating results for fiscal 2022,
as compared to fiscal 2021:

                                                                         For the years ended June 30,
                                                     2022                2021             $ Change               % Change
(in millions, except %)                                                    
                        Better/(Worse)
Revenues
Affiliate fee                                    $    6,878          $   6,435          $      443                        7  %
Advertising                                           5,900              5,431                 469                        9  %
Other                                                 1,196              1,043                 153                       15  %
Total revenues                                       13,974             12,909               1,065                        8  %
Operating expenses                                   (9,117)            (8,037)             (1,080)                     (13) %
Selling, general and administrative                  (1,920)            (1,807)               (113)                      (6) %
Depreciation and amortization                          (363)              (300)                (63)                     (21) %
Impairment and restructuring charges                      -                (35)                 35                      100  %
Interest expense, net                                  (371)              (391)                 20                        5  %
Other, net                                             (509)               579              (1,088)                         **
Income before income tax expense                      1,694              2,918              (1,224)                     (42) %
Income tax expense                                     (461)              (717)                256                       36  %
Net income                                            1,233              2,201                (968)                     (44) %
Less: Net income attributable to noncontrolling
interests                                               (28)               (51)                 23                       45  %
Net income attributable to Fox Corporation
stockholders                                     $    1,205          $   2,150          $     (945)                     (44) %




**   not meaningful


Overview-The Company's revenues increased 8% for fiscal 2022, as compared to
fiscal 2021, due to higher affiliate fee, advertising and other revenues. The
increase in affiliate fee revenue was primarily due to higher average rates per
subscriber, led by contractual rate increases on existing affiliate agreements
and from affiliate agreement renewals, partially offset by a lower average
number of subscribers. Also impacting the increase was the absence of prior year
affiliate fee credits as a result of the coronavirus disease 2019 ("COVID-19")
related under-delivery of college football games. The increase in advertising
revenue was primarily due to higher pricing at FOX Sports and FOX News Media,
growth at TUBI, and a higher number of live events at FOX Sports due to the
impact of COVID-19 in fiscal 2021. Partially offsetting this increase was lower
political advertising revenue due to the absence of the 2020 presidential and
congressional elections. The increase in other revenues was primarily due to
higher sports sublicensing revenues which were impacted by COVID-19 in fiscal
2021, the impact of acquisitions of entertainment production companies in fiscal
2022 (See Note 3-Acquisitions, Disposals and Other Transactions to the
accompanying Financial Statements) and higher FOX Nation subscription revenues,
partially offset by the impact of the divestiture of the Company's sports
marketing businesses in fiscal 2021.

Operating expenses increased 13% for fiscal 2022, as compared to fiscal 2021,
primarily due to higher sports programming rights amortization and production
costs related to NFL, Major League Baseball ("MLB") and college football
content, including a higher number of live events due to the impact of COVID-19
in fiscal 2021. Also impacting the increase was increased digital investment at
TUBI and FOX News Media, costs associated with the launch of the United States
Football League ("USFL") and higher entertainment programming rights
amortization due to more hours of original scripted programming as compared to
fiscal 2021 which was impacted by COVID-19. This increase was partially offset
by the absence of events that were shifted into fiscal 2021 from fiscal 2020 as
a result of COVID-19 rescheduling, including National Association of Stock Car
Auto Racing ("NASCAR") Cup Series races and additional MLB regular season games,
and the impact of the divestiture of the Company's sports marketing businesses
in fiscal 2021.
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Selling, general and administrative expenses increased 6% for fiscal 2022, as
compared to fiscal 2021, primarily due to higher technology costs related to the
Company's digital initiatives and higher marketing expenses at FOX News Media,
partially offset by the impact of the divestiture of the Company's sports
marketing businesses in fiscal 2021.

Depreciation and amortization-Depreciation and amortization expense increased
21% for fiscal 2022, as compared to fiscal 2021, primarily due to assets placed
into service during the fourth quarter of fiscal 2021 for the Company's
standalone broadcast technical facilities and the impact of acquisitions of
entertainment production companies in fiscal 2022.

Impairment and restructuring charges-See Note 4-Restructuring Programs to the accompanying Financial Statements.

Interest expense, net-Interest expense, net decreased 5% for fiscal 2022, as compared to fiscal 2021, primarily due to the repayment of $750 million of senior notes in January 2022 (See Note 9- Borrowings to the accompanying Financial Statements).

Other, net-See Note 20-Additional Financial Information to the accompanying Financial Statements under the heading "Other, net."


Income tax expense-The Company's tax provision and related effective tax rate of
27% for fiscal 2022 was higher than the statutory rate of 21% primarily due to
state taxes and a remeasurement of the Company's net deferred tax assets
associated with changes in the mix of jurisdictional earnings. The Company's tax
provision and related effective tax rate of 25% for fiscal 2021 was higher than
the statutory rate of 21% primarily due to state taxes, partially offset by a
benefit from the reduction of uncertain tax positions for state tax audits.

Net income-Net income decreased 44% for fiscal 2022, as compared to fiscal 2021,
primarily due the change in fair value of the Company's investment in Flutter
Entertainment plc and the absence of the reimbursement from Disney of $462
million related to the substantial settlement of the Company's prepayment of its
share of the Divestiture Tax, which occurred during fiscal 2021 (See Note
20-Additional Financial Information to the accompanying Financial Statements
under the heading "Other, net").
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Results of Operations-Fiscal 2021 versus Fiscal 2020

The following table sets forth the Company's operating results for fiscal 2021, as compared to fiscal 2020:

For the years ended June 30,

                                                        2021                  2020             $ Change               % Change
(in millions, except %)                                                                                  Better/(Worse)
Revenues
Affiliate fee                                    $    6,435               $   5,908          $      527                        9  %
Advertising                                           5,431                   5,333                  98                        2  %
Other                                                 1,043                   1,062                 (19)                      (2) %
Total revenues                                       12,909                  12,303                 606                        5  %
Operating expenses                                   (8,037)                 (7,807)               (230)                      (3) %
Selling, general and administrative                  (1,807)                 (1,741)                (66)                      (4) %
Depreciation and amortization                          (300)                   (258)                (42)                     (16) %
Impairment and restructuring charges                    (35)                   (451)                416                       92  %
Interest expense, net                                  (391)                   (334)                (57)                     (17) %
Other, net                                              579                    (248)                827                          **
Income before income tax expense                      2,918                   1,464               1,454                       99  %
Income tax expense                                     (717)                   (402)               (315)                     (78) %
Net income                                            2,201                   1,062               1,139                          **
Less: Net income attributable to noncontrolling
interests                                               (51)                    (63)                 12                       19  %
Net income attributable to Fox Corporation
stockholders                                     $    2,150               $     999          $    1,151                          **




**   not meaningful


Overview-The Company's revenues increased 5% for fiscal 2021, as compared to
fiscal 2020, as higher affiliate fee and advertising revenues were partially
offset by lower other revenue. The increase in affiliate fee revenue was
primarily attributable to higher average rates due to rate increases from
affiliate agreement renewals and contractual rate increases on existing
affiliate agreements, partially offset by the impact of a lower average number
of subscribers and estimated affiliate fee credits provided as a result of
cancelled live college football games due to COVID-19. The increase in
advertising revenue was primarily due to the impact of the consolidation of
TUBI, which experienced record viewership and record advertising revenue, higher
political advertising revenue at the FOX Television Stations related to the 2020
presidential and congressional elections, higher linear and digital advertising
revenue from the 2020 presidential election coverage at FOX News Media, and the
rotating broadcast of one additional NFL Divisional playoff game, partially
offset by the comparative effect of the broadcast of the NFL's Super Bowl LIV in
February 2020 (the "Super Bowl") and lower ratings at the FOX Network due in
part to COVID-19-impacted schedules in fiscal 2021.

Operating expenses increased 3% for fiscal 2021, as compared to fiscal 2020,
primarily due to the impact of the consolidation of TUBI, partially offset by
lower sports programming rights amortization and production costs, including the
absence of the broadcast of the Super Bowl in fiscal 2021 and the cancellation
of live college football games, and lower entertainment programming rights
amortization due to fewer hours of original scripted programming as a result of
COVID-19. Partially offsetting lower sports programming rights amortization and
production costs were contractual rate increases for NFL, MLB and college
football content, the rotating broadcast of one additional NFL Divisional
playoff game and a higher volume of NASCAR races due to fewer races following
the COVID-19-impacted schedule in fiscal 2020.

Selling, general and administrative expenses increased 4% for fiscal 2021, as
compared to fiscal 2020, primarily due to higher legal and marketing expenses
and the impact of acquisitions that occurred in fiscal 2020 (the "Fiscal 2020
Acquisitions") (See Note 3-Acquisitions, Disposals and Other Transactions to the
                                       40
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accompanying Financial Statements), partially offset by lower professional fees,
lower bad debt expense and lower marketing costs associated with the absence of
the Super Bowl in the current year.

Depreciation and amortization-Depreciation and amortization expense increased
16% for fiscal 2021, as compared to fiscal 2020, primarily due to assets placed
into service as the Company transitioned from service agreements in connection
with the Separation and the Fiscal 2020 Acquisitions.

Impairment and restructuring charges-See Note 4-Restructuring Programs to the accompanying Financial Statements.


Interest expense, net-Interest expense, net increased 17% million for fiscal
2021, as compared to fiscal 2020, due to lower interest income primarily due to
lower interest rates and higher interest expense primarily due to the issuance
of $1.2 billion of senior notes in April 2020 (See Note 9-Borrowings to the
accompanying Financial Statements under the heading "Public Debt - Senior Notes
Issued" for additional information).

Other, net-See Note 20-Additional Financial Information to the accompanying Financial Statements under the heading "Other, net."


Income tax expense-The Company's tax provision and related effective tax rate of
25% for fiscal 2021 was higher than the statutory rate of 21% primarily due to
state taxes, partially offset by a benefit from the reduction of uncertain tax
positions for state tax audits. The Company's tax provision and related
effective tax rate of 27% for fiscal 2020 was higher than the statutory rate of
21% primarily due to state taxes and other permanent items. See Note 16-Income
Taxes to the accompanying Financial Statements.

Net income-Net income increased $1.1 billion for fiscal 2021 as compared to
fiscal 2020, primarily due the receipt of the $462 million reimbursement from
Disney related to the Divestiture Tax (See Note 1-Description of Business and
Basis of Presentation to the accompanying Financial Statements), higher Segment
EBITDA (as defined below) at the Cable Network Programming and Television
segments and higher net gains on investments in equity securities (See Note
20-Additional Financial Information to the accompanying Financial Statements
under the heading "Other, net"), partially offset by lower restructuring charges
due to the contract termination costs related to a programming rights agreement
with the United States Golf Association ("USGA") in fiscal 2020 (See Note
4-Restructuring Programs to the accompanying Financial Statements under the
heading "Fiscal 2020") and higher income tax expense.

Segment Analysis


The Company's operating segments have been determined in accordance with the
Company's internal management structure, which is organized based on operating
activities. The Company evaluates performance based upon several factors, of
which the primary financial measure is segment operating income before
depreciation and amortization, or Segment EBITDA. Due to the integrated nature
of these operating segments, estimates and judgments are made in allocating
certain assets, revenues and expenses.

Segment EBITDA is defined as Revenues less Operating expenses and Selling,
general and administrative expenses. Segment EBITDA does not include:
Amortization of cable distribution investments, Depreciation and amortization,
Impairment and restructuring charges, Interest expense, net, Other, net and
Income tax (expense) benefit. Management believes that Segment EBITDA is an
appropriate measure for evaluating the operating performance of the Company's
business segments because it is the primary measure used by the Company's chief
operating decision maker to evaluate the performance of and allocate resources
to the Company's businesses.
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Fiscal 2022 versus Fiscal 2021

The following tables set forth the Company's Revenues and Segment EBITDA for fiscal 2022, as compared to fiscal 2021:

                                                   For the years ended June 30,
                                          2022              2021        $ Change      % Change
(in millions, except %)                                                     Better/(Worse)
Revenues
Cable Network Programming           $     6,097          $  5,683      $    414            7  %
Television                                7,685             7,048           637            9  %
Other, Corporate and Eliminations           192               178            14            8  %
Total revenues                      $    13,974          $ 12,909      $  1,065            8  %


                                                    For the years ended June 30,
                                           2022              2021        $ Change       % Change
(in millions, except %)                                                      Better/(Worse)
Segment EBITDA
Cable Network Programming           $    2,934             $ 2,876      $      58            2  %
Television                                 347                 555           (208)         (37) %
Other, Corporate and Eliminations         (326)               (344)            18            5  %
Adjusted EBITDA(a)                  $    2,955             $ 3,087      $    (132)          (4) %



(a) For a discussion of Adjusted EBITDA and a reconciliation of Net income to Adjusted EBITDA,

see "Non-GAAP Financial Measures" below.



Cable Network Programming (44% of the Company's revenues in fiscal 2022 and
2021)

                                                                          For the years ended June 30,
                                                      2022                2021              $ Change               % Change
(in millions, except %)                                                    
                         Better/(Worse)
Revenues
Affiliate fee                                    $     4,205          $   3,995          $       210                        5  %
Advertising                                            1,462              1,337                  125                        9  %
Other                                                    430                351                   79                       23  %
Total revenues                                         6,097              5,683                  414                        7  %
Operating expenses                                    (2,595)            (2,289)                (306)                     (13) %
Selling, general and administrative                     (586)              (540)                 (46)                      (9) %
Amortization of cable distribution investments            18                 22                   (4)                     (18) %
Segment EBITDA                                   $     2,934          $   2,876          $        58                        2  %


Revenues at the Cable Network Programming segment increased for fiscal 2022, as
compared to fiscal 2021, due to higher affiliate fee, advertising and other
revenues. The increase in affiliate fee revenue was primarily due to contractual
rate increases on existing affiliate agreements and from affiliate agreement
renewals, partially offset by a lower average number of subscribers. Also
impacting the increase was the absence of fiscal 2021 affiliate fee credits as a
result of the COVID-19 related under-delivery of college football games. The
decrease in the average number of subscribers was due to a reduction in
traditional MVPD subscribers, partially offset by an increase in virtual MVPD
subscribers. The increase in advertising revenue was primarily due to higher
pricing at FOX News Media and higher pricing and an increase in the number of
live events at the national sports networks, primarily the result of additional
MLB postseason games and the return of a full college football schedule that was
shortened due to COVID-19 in fiscal 2021. This increase was partially offset by
lower political advertising revenue due to the absence of the 2020 presidential
elections. The increase in other revenues was primarily due to higher sports
sublicensing revenues, which were impacted by COVID-19
                                       42
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in fiscal 2021, and higher FOX Nation subscription revenues, partially offset by
the impact of the divestiture of the Company's sports marketing businesses in
fiscal 2021.

Cable Network Programming Segment EBITDA increased for fiscal 2022, as compared
to fiscal 2021, primarily due to the revenue increases noted above, partially
offset by higher expenses. Operating expenses increased due to higher sports
programming rights amortization and production costs primarily related to the
return of a full college football and basketball season as a result of the
impact of COVID-19 in fiscal 2021, increased investment in digital growth
initiatives at FOX News Media and costs associated with the launch of USFL. This
increase was partially offset by the absence of events that were shifted into
fiscal 2021 from fiscal 2020 as a result of COVID-19 rescheduling, including
NASCAR Cup Series races and additional MLB regular season games, and the impact
of the divestiture of the Company's sports marketing businesses in fiscal 2021.
Selling, general and administrative expenses increased principally due to higher
marketing expenses at FOX News Media, partially offset by the impact of the
divestiture of the Company's sports marketing businesses in fiscal 2021.

Television (55% of the Company's revenues in fiscal 2022 and 2021)

                                                      For the years ended June 30,
                                             2022              2021        $ Change       % Change
(in millions, except %)                                                        Better/(Worse)
Revenues
Advertising                           $    4,440             $ 4,094      $     346            8  %
Affiliate fee                              2,673               2,440            233           10  %
Other                                        572                 514             58           11  %
Total revenues                             7,685               7,048            637            9  %
Operating expenses                        (6,431)             (5,662)          (769)         (14) %
Selling, general and administrative         (907)               (831)           (76)          (9) %
Segment EBITDA                        $      347             $   555      $    (208)         (37) %


Revenues at the Television segment increased for fiscal 2022, as compared to
fiscal 2021, due to higher advertising, affiliate fee and other revenues. The
increase in advertising revenue was primarily attributable to higher pricing as
well as the return of a full schedule of college football in fiscal 2022 at FOX
Sports and continued growth at TUBI, partially offset by lower political
advertising revenue at the FOX Television Stations due to the absence of the
2020 presidential and congressional elections. The increase in affiliate fee
revenue was primarily due to higher fees received from television stations that
are affiliated with the FOX Network, and higher average rates per subscriber
partially offset by a lower average number of subscribers at the Company's owned
and operated television stations. The increase in other revenues was primarily
due to the current year impact of acquisitions of entertainment production
companies.

Television Segment EBITDA decreased for fiscal 2022, as compared to fiscal 2021,
as the revenue increases noted above were more than offset by higher expenses.
Operating expenses increased primarily due to higher sports programming rights
amortization and production costs related to NFL, MLB and college football
content, including a higher number of college football games as compared to the
COVID-19 impacted fiscal 2021, increased digital investment at TUBI and higher
entertainment programming rights amortization due to more hours of original
scripted programming as compared to fiscal 2021, which was impacted by COVID-19.
Selling, general and administrative expenses increased primarily due to higher
technology costs related to the Company's digital initiatives.
                                       43
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Other, Corporate and Eliminations (1% of the Company's revenues for fiscal 2022
and 2021)

                                                                          For the years ended June 30,
                                                      2022                2021              $ Change               % Change
(in millions, except %)                                                    
                         Better/(Worse)
Revenues                                         $       192          $     178          $        14                        8  %
Operating expenses                                       (91)               (86)                  (5)                      (6) %
Selling, general and administrative                     (427)              (436)                   9                        2  %
Segment EBITDA                                   $      (326)         $    (344)         $        18                        5  %


Revenues at the Other, Corporate and Eliminations segment for fiscal 2022 and
2021 include revenues generated by Credible and the operation of the FOX Studios
lot for third parties. Operating expenses for fiscal 2022 and 2021 include
advertising and promotional expenses at Credible and the costs of operating the
FOX Studios lot. Selling, general and administrative expenses for fiscal 2022
and 2021 primarily relate to employee costs and professional fees and the costs
of operating the FOX Studios lot.

Fiscal 2021 versus Fiscal 2020

The following tables set forth the Company's Revenues and Segment EBITDA for fiscal 2021, as compared to fiscal 2020:

                                                     For the years ended June 30,
                                           2021               2020        $ Change       % Change
(in millions, except %)                                                       Better/(Worse)
Revenues
Cable Network Programming           $     5,683            $  5,492      $     191            3  %
Television                                7,048               6,661            387            6  %
Other, Corporate and Eliminations           178                 150             28           19  %
Total revenues                      $    12,909            $ 12,303      $     606            5  %


                                                     For the years ended June 30,
                                            2021               2020        $ Change       % Change
(in millions, except %)                                                        Better/(Worse)
Segment EBITDA
Cable Network Programming           $     2,876              $ 2,706      $     170            6  %
Television                                  555                  430            125           29  %
Other, Corporate and Eliminations          (344)                (357)            13            4  %
Adjusted EBITDA(a)                  $     3,087              $ 2,779      $     308           11  %



(a) For a discussion of Adjusted EBITDA and a reconciliation of Net income to Adjusted EBITDA,

      see "Non-GAAP Financial Measures" below.



                                       44
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Cable Network Programming (44% and 45% of the Company's revenues in fiscal 2021
and 2020, respectively)

                                                                          For the years ended June 30,
                                                      2021                2020              $ Change               % Change
(in millions, except %)                                                    
                         Better/(Worse)
Revenues
Affiliate fee                                    $     3,995          $   3,870          $       125                        3  %
Advertising                                            1,337              1,164                  173                       15  %
Other                                                    351                458                 (107)                     (23) %
Total revenues                                         5,683              5,492                  191                        3  %
Operating expenses                                    (2,289)            (2,316)                  27                        1  %
Selling, general and administrative                     (540)              (494)                 (46)                      (9) %
Amortization of cable distribution investments            22                 24                   (2)                      (8) %
Segment EBITDA                                   $     2,876          $   2,706          $       170                        6  %


Revenues at the Cable Network Programming segment increased for fiscal 2021 as
compared to fiscal 2020 as the increases in advertising and affiliate fee
revenues were partially offset by lower other revenue. The increase in
advertising revenue was primarily due to higher linear and digital advertising
revenue from the 2020 presidential election coverage at FOX News Media. The
increase in affiliate fee revenue was primarily due to rate increases from
affiliate agreement renewals and contractual rate increases on existing
affiliate agreements, partially offset by a lower average number of subscribers
and estimated affiliate fee credits provided as a result of the cancellation of
live college football games due to COVID-19. The decrease in the average number
of subscribers was due to a reduction in traditional MVPD subscribers, partially
offset by an increase in virtual MVPD subscribers. The decrease in other
revenues was primarily attributable to lower sports sublicensing revenues and
lower revenues generated from Premier Boxing Champions ("PBC") pay-per-view
events due in part to COVID-19.

Cable Network Programming Segment EBITDA increased for fiscal 2021 as compared
to fiscal 2020 primarily due to the revenue increases noted above, partially
offset by higher expenses. Selling, general and administrative expenses
increased primarily due to higher legal and marketing expenses, including
promotional expenses associated with FOX Nation. Operating expenses decreased
primarily due to lower sports programming rights amortization and production
costs driven by cancelled live games in the first half of fiscal 2021, partially
offset by the shift of NASCAR races and MLB regular season games into fiscal
2021 as a result of COVID-19 and contractual rate increases for MLB and college
football content.

Television (55% and 54% of the Company's revenues in fiscal 2021 and 2020,
respectively)

                                                       For the years ended June 30,
                                              2021               2020        $ Change       % Change
(in millions, except %)                                                          Better/(Worse)
Revenues
Advertising                           $     4,094              $ 4,169      $     (75)          (2) %
Affiliate fee                               2,440                2,038            402           20  %
Other                                         514                  454             60           13  %
Total revenues                              7,048                6,661            387            6  %
Operating expenses                         (5,662)              (5,437)          (225)          (4) %
Selling, general and administrative          (831)                (794)           (37)          (5) %
Segment EBITDA                        $       555              $   430      $     125           29  %


Revenues at the Television segment increased for fiscal 2021, as compared to
fiscal 2020, due to higher affiliate fee and other revenues partially offset by
lower advertising revenue. The increase in affiliate fee revenue was primarily
due to higher fees received from television stations that are affiliated with
the FOX Network and higher average rates partially offset by a lower average
number of subscribers at the Company's owned and
                                       45
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operated television stations. The increase in other revenues was primarily due
to higher revenues at the Company's entertainment production companies. The
decrease in advertising revenue was primarily due to the comparative effect of
the broadcast of the Super Bowl in fiscal 2020 and lower ratings at the FOX
Network due in part to COVID-19-impacted schedules partially offset by the
impact of the consolidation of TUBI, higher political advertising revenue at the
FOX Television Stations related to the 2020 presidential and congressional
elections and the rotating broadcast of one additional NFL Divisional playoff
game.

Television Segment EBITDA increased for fiscal 2021, as compared to fiscal 2020,
due to the revenue increases noted above partially offset by higher expenses.
Operating expenses increased primarily due to the impact of the consolidation of
TUBI partially offset by lower sports programming rights amortization and
production costs, including the absence of the broadcast of the Super Bowl in
fiscal 2021, and lower entertainment programming rights amortization due to
fewer hours of original scripted programming as a result of COVID-19. Partially
offsetting the decrease in sports programming rights amortization and production
costs were contractual rate increases for NFL, MLB and college football content
and the rotating broadcast of one additional NFL Divisional playoff game.
Selling, general and administrative expenses increased primarily due to the
Fiscal 2020 Acquisitions (See Note 3- Acquisitions, Disposals and Other
Transactions to the accompanying Financial Statements) partially offset by lower
bad debt expense and lower marketing costs associated with the absence of the
Super Bowl in fiscal 2021.

Other, Corporate and Eliminations (1% of the Company's revenues for fiscal 2021
and 2020)

                                                                          For the years ended June 30,
                                                      2021                2020              $ Change               % Change
(in millions, except %)                                                    
                         Better/(Worse)
Revenues                                         $       178          $     150          $        28                       19  %
Operating expenses                                       (86)               (54)                 (32)                     (59) %
Selling, general and administrative                     (436)              (453)                  17                        4  %
Segment EBITDA                                   $      (344)         $    (357)         $        13                        4  %


Revenues at the Other, Corporate and Eliminations segment increased for fiscal
2021, as compared to fiscal 2020, primarily due to the impact of the
consolidation of Credible in the second quarter of fiscal 2020 and growth at
Credible. Operating expenses increased primarily due to the impact of the
consolidation of Credible and growth at Credible. Selling, general and
administrative expenses decreased primarily due to lower professional fees.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as Revenues less Operating expenses and Selling, general and administrative expenses. Adjusted EBITDA does not include: Amortization of cable distribution investments, Depreciation and amortization, Impairment and restructuring charges, Interest expense, net, Other, net and Income tax expense.


Management believes that information about Adjusted EBITDA assists all users of
the Company's Financial Statements by allowing them to evaluate changes in the
operating results of the Company's portfolio of businesses separate from
non-operational factors that affect Net income, thus providing insight into both
operations and the other factors that affect reported results. Adjusted EBITDA
provides management, investors and equity analysts a measure to analyze the
operating performance of the Company's business and its enterprise value against
historical data and competitors' data, although historical results, including
Adjusted EBITDA, may not be indicative of future results (as operating
performance is highly contingent on many factors, including customer tastes and
preferences and the impact of COVID-19 and other widespread health emergencies
or pandemics and measures to contain their spread).

Adjusted EBITDA is considered a non-GAAP financial measure and should be
considered in addition to, not as a substitute for, net income, cash flow and
other measures of financial performance reported in accordance with U.S.
generally accepted accounting principles ("GAAP"). In addition, this measure
does not reflect cash available to fund requirements and excludes items, such as
depreciation and amortization and
                                       46
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impairment charges, which are significant components in assessing the Company's
financial performance. Adjusted EBITDA may not be comparable to similarly titled
measures reported by other companies.

Fiscal 2022 versus Fiscal 2021

The following table reconciles Net income to Adjusted EBITDA for fiscal 2022, as compared to fiscal 2021:

For the years ended June 30,

                                                                             2022                  2021
                                                                                   (in millions)
Net income                                                             $        1,233          $    2,201
Add
Amortization of cable distribution investments                                     18                  22
Depreciation and amortization                                                     363                 300
Impairment and restructuring charges                                                -                  35
Interest expense, net                                                             371                 391
Other, net                                                                        509                (579)
Income tax expense                                                                461                 717
Adjusted EBITDA                                                        $        2,955          $    3,087

The following table sets forth the computation of Adjusted EBITDA for fiscal 2022, as compared to fiscal 2021:


                                                                             For the years ended June 30,
                                                                               2022                  2021
                                                                                    (in millions)
Revenues                                                                $        13,974          $   12,909
Operating expenses                                                               (9,117)             (8,037)
Selling, general and administrative                                              (1,920)             (1,807)
Amortization of cable distribution investments                                       18                  22
Adjusted EBITDA                                                         $         2,955          $    3,087

Fiscal 2021 versus Fiscal 2020

The following table reconciles Net income to Adjusted EBITDA for fiscal 2021, as compared to fiscal 2020:

For the years ended June 30,

                                                                             2021                  2020
                                                                                   (in millions)
Net income                                                             $        2,201          $    1,062
Add
Amortization of cable distribution investments                                     22                  24
Depreciation and amortization                                                     300                 258
Impairment and restructuring charges                                               35                 451
Interest expense, net                                                             391                 334
Other, net                                                                       (579)                248
Income tax expense                                                                717                 402
Adjusted EBITDA                                                        $        3,087          $    2,779


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The following table sets forth the computation of Adjusted EBITDA for fiscal 2021, as compared to fiscal 2020:


                                                                             For the years ended June 30,
                                                                               2021                  2020
                                                                                    (in millions)
Revenues                                                                $        12,909          $   12,303
Operating expenses                                                               (8,037)             (7,807)
Selling, general and administrative                                              (1,807)             (1,741)
Amortization of cable distribution investments                                       22                  24
Adjusted EBITDA                                                         $         3,087          $    2,779

LIQUIDITY AND CAPITAL RESOURCES

Current Financial Condition


The Company has approximately $5.2 billion of cash and cash equivalents as of
June 30, 2022 and an unused five-year $1.0 billion unsecured revolving credit
facility (See Note 9-Borrowings to the accompanying Financial Statements). The
Company also has access to the worldwide capital markets, subject to market
conditions. As of June 30, 2022, the Company was in compliance with all of the
covenants under its revolving credit facility, and it does not anticipate any
noncompliance with such covenants.

The principal uses of cash that affect the Company's liquidity position include
the following: the acquisition of rights and related payments for entertainment
and sports programming; operational expenditures including production costs;
marketing and promotional expenses; expenses related to broadcasting the
Company's programming; employee and facility costs; capital expenditures;
acquisitions; interest and dividend payments; debt repayments; and stock
repurchases.

In addition to the acquisitions and dispositions disclosed within Note
3-Acquisitions, Disposals, and Other Transactions to the accompanying Financial
Statements, the Company has evaluated, and expects to continue to evaluate,
possible acquisitions and dispositions of certain businesses and assets. Such
transactions may be material and may involve cash, the Company's securities or
the assumption of additional indebtedness.

Sources and Uses of Cash-Fiscal 2022 vs. Fiscal 2021

Net cash provided by operating activities for fiscal 2022 and 2021 was as follows (in millions):


For the years ended June 30,                      2022         2021

Net cash provided by operating activities $ 1,884 $ 2,639

The decrease in net cash provided by operating activities during fiscal 2022, as compared to fiscal 2021, was primarily due to higher sports payments and entertainment production spending as well as lower Adjusted EBITDA.

Net cash used in investing activities for fiscal 2022 and 2021 was as follows (in millions):


For the years ended June 30,                   2022        2021

Net cash used in investing activities $ (513) $ (528)



The decrease in net cash used in investing activities during fiscal 2022, as
compared to fiscal 2021, was primarily due to lower capital expenditures in
connection with establishing the Company's standalone broadcast technical
facilities placed into service in fiscal 2021, partially offset by higher fiscal
2022 acquisitions (See Note 3-Acquisitions, Disposals, and Other Transactions to
the accompanying Financial Statements).
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Net cash used in financing activities for fiscal 2022 and 2021 was as follows (in millions):


For the years ended June 30,                    2022         2021

Net cash used in financing activities $ (2,057) $ (870)



The increase in net cash used in financing activities during fiscal 2022, as
compared to fiscal 2021, was primarily due to the $750 million repayment of
senior notes that matured in January 2022 (See Note 9-Borrowings to the
accompanying Financial Statements) and the absence of cash received from Disney
in fiscal 2021, including the $462 million reimbursement related to the
Divestiture Tax.

Stock Repurchase Program

See Note 11-Stockholders' Equity to the accompanying Financial Statements under the heading "Stock Repurchase Program."

Dividends


Dividends paid in fiscal 2022 totaled $0.48 per share of Class A Common Stock
and Class B Common Stock. Subsequent to June 30, 2022, the Company increased its
semi-annual dividend and declared a semi-annual dividend of $0.25 per share on
both the Class A Common Stock and the Class B Common Stock. The dividend
declared is payable on September 28, 2022 with a record date for determining
dividend entitlements of August 31, 2022.

Based on the number of shares outstanding as of June 30, 2022, and the new
annual dividend rate stated above, the total aggregate cash dividends expected
to be paid to stockholders in fiscal 2023 is approximately $275 million, which
is consistent with fiscal 2022.

Sources and Uses of Cash-Fiscal 2021 vs. Fiscal 2020

Net cash provided by operating activities for fiscal 2021 and 2020 was as follows (in millions):


For the years ended June 30,                      2021         2020

Net cash provided by operating activities $ 2,639 $ 2,365



The increase in net cash provided by operating activities during fiscal 2021, as
compared to fiscal 2020, was comprised of higher Segment EBITDA and higher
programming amortization over cash payments at the Television segment partially
offset by higher advertising and affiliate billings along with higher tax
payments.

Net cash used in investing activities for fiscal 2021 and 2020 was as follows (in millions):


For the years ended June 30,                   2021         2020

Net cash used in investing activities $ (528) $ (1,100)

Net cash used in investing activities during fiscal 2021 was primarily comprised of payments related to investments made in connection with establishing the Company's standalone broadcast technical facilities as compared to the acquisitions of TUBI, three television stations and Credible during fiscal 2020.

Net cash (used in) provided by financing activities for fiscal 2021 and 2020 was as follows (in millions):


For the years ended June 30,                               2021       2020

Net cash (used in) provided by financing activities $ (870) $ 146



Net cash used in financing activities during fiscal 2021 was primarily comprised
of repurchases of shares of the Company's Common Stock and dividends paid to
stockholders of $1.3 billion partially offset by the $462 million reimbursement
from Disney related to the Divestiture Tax. The net cash provided by financing
activities during fiscal 2020 was primarily due to the April 2020 issuance of
$1.2 billion of senior notes, partially offset by repurchases of shares of the
Company's Common Stock and dividends paid of $935 million to stockholders during
fiscal 2020.
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Debt Instruments

The following table summarizes cash from borrowings and cash (used in) repayment of borrowings for fiscal 2022, 2021 and 2020:

                                                         For the years ended June 30,
                                                         2022                2021       2020
                                                                (in millions)
Borrowings
Notes due 2025 and 2030(a)                     $         -                  $  -      $ 1,191
Notes due 2022, 2024, 2029, 2039 and 2049(b)          (750)                    -            -
Total borrowings                               $      (750)                 $  -      $ 1,191



(a) See Note 9-Borrowings to the accompanying Financial Statements under the heading

"Public Debt - Senior Notes Issued." (b) In January 2022, $750 million of 3.666% senior notes matured and were repaid in full

(See Note 9-Borrowings to the accompanying Financial Statements).

Ratings of the Senior Notes


The following table summarizes the Company's credit ratings as of June 30, 2022:

Rating Agency           Senior Debt        Outlook
Moody's                     Baa2           Stable
Standard & Poor's           BBB            Stable


Revolving Credit Agreement

The Company has an unused five-year $1.0 billion unsecured revolving credit facility with a maturity date of March 2024 (See Note 9-Borrowings to the accompanying Financial Statements).

Commitments and Contingencies


The Company has commitments under certain firm contractual arrangements ("firm
commitments") to make future payments. These firm commitments secure the future
rights to various assets and services to be used in the normal course of
operations. For additional details on commitments and contingencies see Note
14-Commitments and Contingencies to the accompanying Financial Statements under
the headings "Operating leases," "Licensed Programming," "Other commitments and
contractual obligations" and "Contingencies."

Pension and other postretirement benefits and uncertain tax benefits


The table in Note 14-Commitments and Contingencies to the accompanying Financial
Statements excludes the Company's pension and other postretirement benefits
("OPEB") obligations and the gross unrecognized tax benefits for uncertain tax
positions as the Company is unable to reasonably predict the ultimate amount and
timing. The Company made contributions of $59 million and $63 million to its
pension plans in fiscal 2022 and 2021, respectively. The majority of these
contributions were voluntarily made to improve the funded status of the plans.
Future plan contributions are dependent upon actual plan asset returns, interest
rates and statutory requirements. Assuming that actual plan asset returns are
consistent with the Company's expected plan returns in fiscal 2023 and beyond
and that interest rates remain constant, the Company would not be required to
make any material contributions to its pension plans for the immediate future.
Required pension plan contributions for the next fiscal year are not expected to
be material but the Company may make voluntary contributions in future periods.
Payments due to participants under the Company's pension plans are primarily
paid out of underlying trusts. Payments due under the Company's OPEB plans are
not required to be funded in advance, but are paid as medical costs are incurred
by covered retiree populations, and are principally dependent upon the future
cost of retiree medical benefits under the Company's OPEB plans. The Company
does not expect its net OPEB payments to be material in fiscal 2023 (See Note
15-Pension and Other Postretirement Benefits to the accompanying Financial
Statements for further discussion of the Company's pension and OPEB plans).
                                       50
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CRITICAL ACCOUNTING POLICIES


An accounting policy is considered to be critical if it is important to the
Company's financial condition and results of operations and if it requires
significant judgment and estimates on the part of management in its application.
The development and selection of these critical accounting policies have been
determined by management of the Company and the related disclosures have been
reviewed with the Audit Committee of the Company's Board of Directors. For the
Company's summary of significant accounting policies, see Note 2-Summary of
Significant Accounting Policies to the accompanying Financial Statements.

Use of Estimates

See Note 2-Summary of Significant Accounting Policies to the accompanying Financial Statements under the heading "Use of Estimates."

Revenue Recognition


Revenue is recognized when control of the promised goods or services is
transferred to the Company's customers in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods
or services. The Company considers the terms of each arrangement to determine
the appropriate accounting treatment.

The Company generates advertising revenue from sales of commercial time within
the Company's network programming to be aired by television networks and cable
channels, and from sales of advertising on the Company's owned and operated
television stations and various digital properties. Advertising revenue from
customers, primarily advertising agencies, is recognized as the commercials are
aired. Certain of the Company's advertising contracts have guarantees of a
certain number of targeted audience views, referred to as impressions. Revenues
for any audience deficiencies are deferred until the guaranteed number of
impressions is met, by providing additional advertisements. Advertising
contracts, which are generally short-term, are billed monthly for the spots
aired during the month, with payments due shortly after the invoice date.

The Company generates affiliate fee revenue from agreements with traditional and
virtual MVPDs for cable network programming and for the broadcast of the
Company's owned and operated television stations. In addition, the Company
generates affiliate fee revenue from agreements with independently owned
television stations that are affiliated with the FOX Network and receives
retransmission consent fees from traditional and virtual MVPDs for their
signals. Affiliate fee revenue is recognized at a point in time when the network
programming is made available to the customer. For contracts with affiliate fees
based on the number of the affiliate's subscribers, revenues are recognized
based on the contractual rate multiplied by the estimated number of subscribers
each period. For contracts with fixed affiliate fees, revenues are recognized
based on the relative standalone selling price of the network programming
provided over the contract term, which generally reflects the invoiced amount.
Affiliate contracts are generally multi-year contracts with payments due
monthly.

The Company classifies the amortization of cable distribution investments (capitalized fees paid to traditional MVPDs to facilitate carriage of a cable network) against affiliate fee revenue. The Company amortizes the cable distribution investments on a straight-line basis over the contract period.

Inventories


The Company incurs costs to license programming rights and to produce owned
programming. Licensed programming includes costs incurred by the Company for
access to content owned by third parties. The Company has single and multi-year
contracts for sports and non-sports programming. Licensed programming is
recorded at the earlier of payment or when the license period has begun, the
cost of the program is known or reasonably determinable and the program is
accepted and available for airing. Licensed programming is predominately
amortized as the associated programs are broadcast. The costs of multi-year
sports contracts are primarily amortized based on the ratio of each contract's
current period attributable revenue to the estimated total remaining
attributable revenue. Estimates can change and, accordingly, are reviewed
periodically and amortization is adjusted as necessary. Such changes in the
future could be material.

Owned programming includes content internally developed and produced as well as
co-produced content. Capitalized costs for owned programming are predominately
amortized using the individual-film-forecast-computation method, which is based
on the ratio of current period revenue to estimated total future remaining
revenue, and related costs to be incurred throughout the life of the respective
program. When production
                                       51
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partners distribute owned programming on the Company's behalf, the net participation in profits is recorded as content license revenue.


Inventories are evaluated for recoverability when an event or circumstance
occurs that indicates that fair value may be less than unamortized costs. The
Company will determine if there is an impairment by evaluating the fair value of
the inventories, which are primarily supported by internal forecasts as compared
to unamortized costs. Where an evaluation indicates unamortized costs, including
advances on multi-year sports rights contracts, are not recoverable,
amortization of rights is accelerated in an amount equal to the amount by which
the unamortized costs exceed fair value. Owned programming is monetized and
tested for impairment on an individual basis. Licensed programming is
predominately monetized as a group and tested for impairment on a channel,
network, or daypart basis. The recoverability of certain sports rights is
assessed on an aggregate basis. The Company recognized impairments of
approximately $50 million, nil, and $95 million in fiscal 2022, 2021 and 2020,
respectively, related to licensed and owned programming at the Cable Network
Programming and Television segments, which were recorded in Operating expenses
in the Consolidated Statements of Operations.

Goodwill and Other Intangible Assets

The Company's intangible assets include goodwill, Federal Communications Commission ("FCC") licenses, traditional MVPD affiliate agreements and relationships, software, trademarks and other copyrighted products.


The Company accounts for its business combinations under the acquisition method
of accounting. The total cost of acquisitions is allocated to the underlying net
assets acquired, based on their respective estimated fair values at the date of
acquisition. Goodwill is recorded as the difference between the consideration
transferred to acquire entities and the estimated fair values assigned to their
tangible and identifiable intangible net assets and is assigned to one or more
reporting units for purposes of testing for impairment. Determining the fair
value of assets acquired and liabilities assumed requires management's judgment
and often involves the use of significant estimates and assumptions, including
assumptions with respect to future cash inflows and outflows, discount rates,
asset lives and market multiples, among other items. Identifying reporting units
and assigning goodwill to them requires judgment involving the aggregation of
business units with similar economic characteristics and the identification of
existing business units that benefit from the acquired goodwill. The judgments
made in determining the estimated fair value assigned to each class of
intangible assets acquired, their reporting unit, as well as their useful lives
can significantly impact net income. The Company allocates goodwill to disposed
businesses using the relative fair value method.

Carrying values of goodwill and intangible assets with indefinite lives are
reviewed at least annually for possible impairment. The Company's impairment
review is based on a discounted cash flow analysis and market-based valuation
approach that requires significant management judgment. The Company uses its
judgment in assessing whether assets may have become impaired between annual
valuations. Indicators such as unexpected adverse economic factors,
unanticipated technological changes or competitive activities, loss of key
personnel and acts by governments and courts, may signal that an asset has
become impaired and require the Company to perform an interim impairment test.

The Company uses direct valuation methods to value identifiable intangibles for
acquisition accounting and impairment testing. The direct valuation method used
for FCC licenses requires, among other inputs, the use of published industry
data that are based on subjective judgments about future advertising revenues in
the markets where the Company owns television stations. This method also
involves the use of management's judgment in estimating an appropriate discount
rate reflecting the risk of a market participant in the U.S. broadcast industry.
The resulting fair values for FCC licenses are sensitive to these long-term
assumptions and any variations to such assumptions could result in an impairment
to existing carrying values in future periods and such impairment could be
material.

During fiscal 2022, the Company determined that the goodwill and
indefinite-lived intangible assets included in the accompanying Consolidated
Balance Sheet as of June 30, 2022, were not impaired based on the Company's
annual assessment. While the Company believes its judgments represent reasonably
possible outcomes based on available facts and circumstances, adverse changes to
the assumptions, including those related to macroeconomic factors, comparable
public company trading values and prevailing conditions in the capital markets,
could lead to future declines in the fair value of a reporting unit in the
Other, Corporate and Eliminations segment and a potential non-cash goodwill
impairment charge. The estimated fair value of this
                                       52
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reporting unit was determined using a combination of the income approach, which
incorporates the use of a discounted cash flow analysis, and the market
approach, which incorporates the use of revenue multiples based on market data.
Fair value exceeded the carrying value of this reporting unit by less than 20%
as of June 30, 2022. Further adverse changes in market conditions may result in
a partial or full impairment of the approximately $250 million of goodwill in
this reporting unit as of June 30, 2022. The Company determined that there are
no other reporting units at risk of impairment as of June 30, 2022, and will
continue to monitor its goodwill and indefinite-lived intangible assets for any
possible future non-cash impairment charges.

See Note 2-Summary of Significant Accounting Policies to the accompanying Financial Statements under the heading "Annual Impairment Review" for further discussion.


Income Taxes

The Company is subject to income tax primarily in various domestic
jurisdictions. The Company computes its annual tax rate based on the statutory
tax rates and tax planning opportunities available to it in the various
jurisdictions in which it earns income. Tax laws are complex and subject to
different interpretations by the taxpayer and respective governmental taxing
authorities. Significant judgment is required in determining the Company's tax
expense and in evaluating its tax positions, including evaluating uncertainties
under ASC 740, "Income Taxes."

The Company records valuation allowances to reduce deferred tax assets to the
amount that is more likely than not to be realized. In making this assessment,
management analyzes future taxable income, reversing temporary differences and
ongoing tax planning strategies. Should a change in circumstances lead to a
change in judgment about the realizability of deferred tax assets in future
years, the Company would adjust related valuation allowances in the period that
the change in circumstances occurs, along with a corresponding increase or
charge to income.

Employee Costs


The Company participates in and/or sponsors various pension, savings and
postretirement benefit plans. Pension plans and postretirement benefit plans are
closed to new participants with the exception of a small group covered by
collective bargaining agreements. The measurement and recognition of costs of
the Company's pension and OPEB plans require the use of significant management
judgments, including discount rates, expected return on plan assets and other
actuarial assumptions.

For financial reporting purposes, net periodic pension expense is calculated
based upon a number of actuarial assumptions, including a discount rate, an
expected rate of return on plan assets and mortality. The Company considers
current market conditions, including changes in investment returns and interest
rates, in making these assumptions. The expected long-term rate of return is
determined using the current target asset allocation of 35% equity securities,
55% fixed income securities and 10% in other investments, and applying expected
future returns for the various asset classes and correlations amongst the asset
classes. A portion of the fixed income investments is allocated to cash to pay
near-term benefits.

The discount rate reflects the market rate for high-quality fixed income
investments on the Company's annual measurement date of June 30 and is subject
to change each fiscal year. The discount rate assumptions used to account for
pension and other postretirement benefit plans reflect the rates at which the
benefit obligations could be effectively settled. The rate was determined by
matching the Company's expected benefit payments for the plans to a hypothetical
yield curve developed using a portfolio of several hundred high-quality
non-callable corporate bonds.
                                       53
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The key assumptions used in developing the Company's fiscal 2022, 2021 and 2020 net periodic pension expense for its plans consist of the following:


                                      2022           2021        2020
                                         (in millions, except %)
Discount rate for service cost          2.8   %      2.9  %      3.7  %
Discount rate for interest cost         2.1   %      2.2  %      3.2  %
Assets
Expected rate of return                 5.1   %      6.5  %      7.0  %
Actual return                     $    (152)       $ 195       $  24
Expected return                          50           50          55
Actuarial (loss) gain             $    (202)       $ 145       $ (31)
One year actual return                (15.8)  %     26.1  %      3.4  %


Discount rates are volatile from year to year because they are determined based
upon the prevailing rates as of the measurement date. The Company will utilize
discount rates of 4.8% and 4.5% in calculating the fiscal 2023 service cost and
interest cost, respectively, for its plans. The Company will use an expected
long-term rate of return of 5.0% for fiscal 2023 based principally on the future
return expectation of the plans' asset mix. The accumulated pre-tax net losses
on the Company's pension and postretirement benefit plans as of June 30, 2022
were $292 million which decreased from $424 million as of June 30, 2021. This
decrease of $132 million was primarily due to the change in the discount rate
assumption utilized in measuring plan obligations, updates to other valuation
assumptions and the recognition of deferred losses related to amortization
partially offset by asset losses. The overall accumulated pre-tax net losses as
of June 30, 2022 were primarily the result of changes in discount rates. Higher
discount rates decrease the present value of benefit obligations and reduce the
Company's accumulated net loss, which decreases the amortization component of
subsequent-year pension expense. Lower discount rates increase the present value
of benefit obligations and increase the Company's accumulated net loss, which
increases the amortization component of subsequent-year pension expense. These
deferred losses are being systematically recognized in future net periodic
pension expense in accordance with ASC 715, "Compensation-Retirement Benefits."
Unrecognized losses in excess of 10% of the greater of the market-related value
of plan assets or the plans' projected benefit obligation ("PBO") are recognized
over the average future service of the plan participants or average future life
of the plan participants.

The Company made contributions of $59 million, $63 million and $30 million to
its pension plans in fiscal 2022, 2021 and 2020, respectively. The majority of
these contributions were voluntarily made to improve the funding status of the
plans which were impacted by the economic conditions noted above. Future plan
contributions are dependent upon actual plan asset returns, statutory
requirements and interest rate movements. Assuming that actual plan returns are
consistent with the Company's expected plan returns in fiscal 2023 and beyond
and that interest rates remain constant, the Company would not be required to
make any material statutory contributions to its pension plans for the immediate
future. The Company will continue to make voluntary contributions as necessary
to improve funded status.

Changes in net periodic pension expense may occur in the future due to changes
in the Company's expected rate of return on plan assets and discount rate
resulting from economic events. The following table highlights the sensitivity
of the Company's pension obligations and expense to changes in these
assumptions, assuming all other assumptions remain constant:

                                                                  Impact on 

Annual

                Changes in Assumption                             Pension Expense                      Impact on PBO
0.25 percentage point decrease in discount rate             Increase $3 million                Increase $32 million
0.25 percentage point increase in discount rate             Decrease $3 million                Decrease $30 million

0.25 percentage point decrease in expected rate of return on assets

                                            Increase $2 million                              -
0.25 percentage point increase in expected rate of
return on assets                                            Decrease $2 million                              -


                                       54
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Fiscal 2023 net periodic pension expense for the Company's pension plans is expected to increase to approximately $65 million primarily due to asset losses during fiscal 2022 and an increase in interest costs due to higher discount rates.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS


This document contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical or current fact are "forward-looking statements" for
purposes of federal and state securities laws, including any statements
regarding (i) future earnings, revenues or other measures of the Company's
financial performance; (ii) the Company's plans, strategies and objectives for
future operations; (iii) proposed new programming or other offerings; (iv)
future economic conditions or performance; and (v) assumptions underlying any of
the foregoing. Forward-looking statements may include, among others, the words
"may," "will," "should," "likely," "anticipates," "expects," "intends," "plans,"
"projects," "believes," "estimates," "outlook" or any other similar words.

Although the Company's management believes that the expectations reflected in
any of the Company's forward-looking statements are reasonable, actual results
could differ materially from those projected or assumed in any forward-looking
statements. The Company's future financial condition and results of operations,
as well as any forward-looking statements, are subject to change and to inherent
risks and uncertainties, such as those disclosed or incorporated by reference in
our filings with the SEC. Important factors that could cause the Company's
actual results, performance and achievements to differ materially from those
estimates or projections contained in the Company's forward-looking statements
include, but are not limited to, government regulation, economic, strategic,
political and social conditions and the following factors:

•evolving technologies and distribution platforms and changes in consumer behavior as consumers seek more control over when, where and how they consume content, and related impacts on advertisers and MVPDs;

•declines in advertising expenditures due to various factors such as the economic prospects of advertisers or the economy, major sports events and election cycles, evolving technologies and distribution platforms and related changes in consumer behavior and shifts in advertisers' expenditures, the evolving market for AVOD advertising campaigns, and audience measurement methodologies' ability to accurately reflect actual viewership levels;

•further declines in the number of subscribers to MVPD services;

•the failure to enter into or renew on favorable terms, or at all, affiliation or carriage agreements or arrangements through which the Company makes its content available for viewing through online video platforms;


•the impact of COVID-19 and other widespread health emergencies or pandemics and
measures to contain their spread and related weak macroeconomic conditions and
increased market volatility;

•the impact of COVID-19 and other widespread health emergencies or pandemics
specifically on the Company, including content disruptions that negatively
affect the timing, volume or popularity of the Company's programming,
particularly sports programming, and potential non-cash impairment charges
resulting from significant declines in the Company's estimated revenues or the
expected popularity of the Company's programming;

•the highly competitive nature of the industry in which the Company's businesses operate;


•the popularity of the Company's content, including special sports events; and
the continued popularity of the sports franchises, leagues and teams for which
the Company has acquired programming rights;

•the Company's ability to renew programming rights, particularly sports programming rights, on sufficiently favorable terms, or at all;

•damage to the Company's brands or reputation;

•the inability to realize the anticipated benefits of the Company's strategic investments and acquisitions;

                                       55
--------------------------------------------------------------------------------

•the loss of key personnel;

•labor disputes, including labor disputes involving professional sports leagues whose games or events the Company has the right to broadcast;

•lower than expected valuations associated with the Company's reporting units, indefinite-lived intangible assets, investments or long-lived assets;


•a degradation, failure or misuse of the Company's network and information
systems and other technology relied on by the Company that causes a disruption
of services or improper disclosure of personal data or other confidential
information;

•content piracy and signal theft and the Company's ability to protect its intellectual property rights;

•the failure to comply with laws, regulations, rules, industry standards or contractual obligations relating to privacy and personal data protection;


•changes in tax, federal communications or other laws, regulations, practices or
the interpretations thereof (including changes in legislation currently being
considered);

•the impact of any investigations or fines from governmental authorities, including FCC rules and policies and FCC decisions regarding revocation, renewal or grant of station licenses, waivers and other matters;

•the failure or destruction of satellites or transmitter facilities the Company depends on to distribute its programming;

•unfavorable litigation or investigation results that require the Company to pay significant amounts or lead to onerous operating procedures;

•changes in GAAP or other applicable accounting standards and policies;

•the Company's ability to secure additional capital on acceptable terms;

•the impact of any payments the Company is required to make or liabilities it is required to assume under the Separation Agreement and the indemnification arrangements entered into in connection with the Transaction; and

•the other risks and uncertainties detailed in Item 1A. "Risk Factors" in this Annual Report.


Forward-looking statements in this Annual Report speak only as of the date
hereof, and forward-looking statements in documents that are incorporated by
reference hereto speak only as of the date of those documents. The Company does
not undertake any obligation to update or release any revisions to any
forward-looking statement made herein or to report any events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events or to
conform such statements to actual results or changes in our expectations, except
as required by law.

© Edgar Online, source Glimpses

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