Twenty-First Century Fox 2007 Annual Report Download - page 50

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Operating results for the fiscal year ended June 30, 2007, decreased $43 million as compared to fiscal 2006, primarily due to a
loss on the ICC Cricket World Cup which can be attributable to a shortfall in advertising and sponsorship revenue. This under-
performance was due to the early elimination of two of the more popular teams from the competition, which resulted in matches
among less well-known teams, significantly reducing the Company’s advertising and sponsorship revenues. Also contributing to the
decrease was higher employee costs and higher costs related to Internet initiatives. The decrease in operating results was partially
offset by improved Operating income at FIM, primarily due to the revenue increases noted above.
Results of Operations–Fiscal 2006 versus Fiscal 2005
The following table sets forth the Company’s operating results for fiscal 2006 as compared to fiscal 2005.
2006 2005 Change % Change
For the years ended June 30, ($ millions)
Revenues $25,327 $23,859 $ 1,468 6%
Expenses:
Operating 16,593 15,901 692 4%
Selling, general and administrative 3,982 3,697 285 8%
Depreciation and amortization 775 648 127 20%
Other operating charges 109 49 60 **
Total operating income 3,868 3,564 304 9%
Interest expense, net (545) (536) (9) 2%
Equity earnings of affiliates 888 355 533 **
Other, net 194 178 16 9%
Income from continuing operations before income tax expense and
minority interest in subsidiaries 4,405 3,561 844 24%
Income tax expense (1,526) (1,220) (306) 25%
Minority interest in subsidiaries, net of tax (67) (213) 146 (69)%
Income from continuing operations 2,812 2,128 684 32%
Gain on disposition of discontinued operations, net of tax 515 — 515 **
Income before cumulative effect of accounting change 3,327 2,128 1,199 56%
Cumulative effect of accounting change, net of tax (1,013) — (1,013) **
Net income $ 2,314 $ 2,128 $ 186 9%
Diluted earnings per share from continuing operations(1) $ 0.87 $ 0.69 $ 0.18 26%
** not meaningful
(1) Represents earnings per share based on the total weighted average shares outstanding (Class A Common Stock and Class B
Common Stock combined) for the fiscal years ended June 30, 2006 and 2005. Class A Common Stock carry rights to a greater
dividend than Class B Common Stock through fiscal 2007. As such, net income available to the Company’s stockholders is allo-
cated between the Class A Common Stock and Class B Common Stock. See Note 20 to the Consolidated Financial Statements of
News Corporation.
Overview–The Company’s revenues in fiscal 2006 increased 6% as compared to fiscal 2005. The increase was primarily due to rev-
enue increases at the Cable Network Programming, Filmed Entertainment, DBS and Other segments.
Operating expenses for the fiscal year ended June 30, 2006 increased approximately 4% from fiscal 2005, primarily due to
increased expenses at the Cable Network Programming segment and acquisitions made by the Newspaper segment and FIM during
fiscal 2005 and 2006. The increased operating expenses at the Cable Network Programming segment were due to the acquisition in
April 2005 of the Florida and Ohio RSNs and Fox Sports Net, a national sports program service, and higher programming costs at
the remaining RSNs and the FX. In addition, operating results include the consolidation of Queensland Press Pty Ltd (“QPL”), which
was acquired in November 2004, within the Newspapers segment and the impact of the Internet businesses acquired by the Com-
pany in fiscal 2006, collectively referred to as the “FIM acquisitions.” These increases were partially offset by reduced operating
expenses at the Filmed Entertainment and Television segments. The operating expense reduction at the Filmed Entertainment
segment was due to reduced amortization of production and participation costs. The decrease in operating expenses at the Tele-
vision segment was mainly due to the absence of programming costs for the NFL’s Super Bowl and NASCAR’s Daytona 500 that
were broadcast in fiscal 2005.
NEWS CORPORATION 2007 Annual Report 49