Twenty-First Century Fox 2007 Annual Report Download - page 47

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cumulative effect of accounting change, net of tax–Effective July 1, 2005, the Company adopted Emerging Issues Task Force (“EITF”)
Topic No. D-108, “Use of the Residual Method to Value Acquired Assets Other Than Goodwill” (“EITF D-108”). EITF D-108 requires
companies who have applied the residual value method in the valuation of acquired identifiable intangibles for purchase accounting
and impairment testing to use a direct value method. As a result of the adoption, the Company recorded a charge of $1.6 billion
($1 billion net of tax, or ($0.33) per diluted share of Class A Common Stock and ($0.28) per diluted share of Class B Common
Stock), to reduce the intangible balances attributable to its television stations’ FCC licenses. This charge has been reflected as a
cumulative effect of accounting change, net of tax in the consolidated statement of operations for the fiscal year ended June 30,
2006.
Net income–Net income increased $1,112 million for fiscal year ended June 30, 2007 as compared to fiscal 2006, primarily due to
the absence of the Cumulative effect of accounting change recognized in fiscal 2006 and increases in Operating income, Equity
earnings from affiliates and Other, net. The increase in net income was partially offset by the effect of the gains on sale of TSL and
Sky Radio that were recorded during fiscal 2006, with no corresponding gains in fiscal 2007.
Segment Analysis:
The following table sets forth the Company’s revenues and operating income by segment, for fiscal 2007 as compared to fiscal
2006.
2007 2006 Change % Change
For the years ended June 30, ($ millions)
Revenues:
Filmed Entertainment $ 6,734 $ 6,199 $ 535 9%
Television 5,705 5,334 371 7%
Cable Network Programming 3,902 3,358 544 16%
Direct Broadcast Satellite Television 3,076 2,542 534 21%
Magazines and Inserts 1,119 1,090 29 3%
Newspapers 4,486 4,095 391 10%
Book Publishing 1,347 1,312 35 3%
Other 2,286 1,397 889 64%
Total revenues $28,655 $25,327 $3,328 13%
Operating income (loss):
Filmed Entertainment $ 1,225 $ 1,092 $ 133 12%
Television 962 1,032 (70) (7)%
Cable Network Programming 1,090 864 226 26%
Direct Broadcast Satellite Television 221 39 182 **
Magazines and Inserts 335 307 28 9%
Newspapers 653 517 136 26%
Book Publishing 159 167 (8) (5)%
Other (193) (150) (43) 29%
Total operating income $ 4,452 $ 3,868 $ 584 15%
** not meaningful
Filmed Entertainment (23% and 25% of the Company’s consolidated revenues in fiscal 2007 and 2006, respectively)
For the fiscal year ended June 30, 2007, revenues at the Filmed Entertainment segment increased $535 million, or 9%, as
compared to fiscal 2006. This increase was primarily due to an increase in worldwide home entertainment, pay television and free
television revenues, partially offset by a decrease in worldwide theatrical revenues. The increase in home entertainment revenues for
fiscal 2007 was primarily due to the worldwide release of previously strong theatrical titles, primarily driven by Ice Age: The Melt-
down, Night at the Museum, X-Men: The Last Stand, Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakh-
stan,The Devil Wears Prada and Eragon. Fiscal 2006 worldwide home entertainment releases included Fantastic Four, Walk the Line,
Robots, Kingdom of Heaven and Hide & Seek. Home entertainment revenues generated from the sale and distribution of film and tele-
vision titles in fiscal 2007 were 78% and 22%, respectively, of total home entertainment revenues. The increases in worldwide pay
television and free television revenues were primarily due to a stronger film lineup and more feature films available during fiscal
2007 and stronger revenues from the returning primetime series Prison Break, Family Guy and My Name Is Earl. Fiscal 2007 world-
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