Twenty-First Century Fox 2007 Annual Report Download - page 51

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Selling, general and administrative expenses increased approximately 8% for the fiscal year ended June 30, 2006 from fiscal
2005, primarily due to the consolidation of the Florida and Ohio RSNs, Fox Sports Net and QPL. In addition, the impact of acquis-
itions at FIM also contributed to the increase in selling, general and administrative expenses during the fiscal year ended June 30,
2006. Depreciation and amortization expense increased approximately 20% during the fiscal year ended June 30, 2006, when
compared to fiscal 2005, primarily due to the amortization of intangible assets acquired on the purchase of the minority interest in
the FEG in March 2005, as well as incremental expenses resulting from the FIM acquisitions. Accelerated depreciation recognized on
printing plant assets in the United Kingdom also contributed to the increase.
During the fiscal year ended June 30, 2006, Operating income increased 9% from fiscal 2005, primarily due to the revenue
increases noted above. The Operating income increase was offset by a $109 million redundancy provision recorded as an other
operating charge during fiscal 2006. The redundancy provision, recorded at the Newspapers segment, was related to certain U.K.
employees as a result of the Company committing to a reduction in workforce, associated with the development of new printing
plants in the United Kingdom.
Interest expense, net–Interest expense, net increased $9 million for the fiscal year ended June 30, 2006 as compared to fiscal 2005.
This increase is primarily due to interest on the Company’s issuance of $1.0 billion in 6.2% Senior Notes due 2034 and $750 million
in 5.3% Senior Notes due 2014 in December 2004 and $1.15 billion in 6.4% Senior Notes due 2035 in December 2005. The
increase in interest expense was partially offset by higher interest income.
Equity earnings of affiliates–Net earnings from affiliates for the fiscal year ended June 30, 2006 increased $533 million as compared
to fiscal 2005. The improvement for fiscal 2006 was due to an increased contribution from DIRECTV on subscriber growth and
increased pricing. DIRECTV’s results also reflect lower expenses associated with a new set-top receiver lease program, as well as the
absence of charges recognized in fiscal 2005 related to the SPACEWAY program and PanAmSat.
2006 2005 Change % Change
For the years ended June 30, ($ millions)
The Company’s share of equity earnings of affiliates principally consists of:
British Sky Broadcasting Group plc $369 $ 374 $ (5) (1)%
The DIRECTV Group, Inc. 246 (186) 432 **
Other DBS equity affiliates 108 81 27 33%
Cable channel equity affiliates 68 46 22 48%
Other equity affiliates 97 40 57 **
Total equity earnings of affiliates $888 $ 355 $533 **
** not meaningful
Other, net–
2006 2005
For the years ended June 30, (in millions)
Loss on sale of Regional Programming Partners(a) $ — $ (85)
Gain on sale of Innova(b) 206 —
Gain on sale of China Netcom Group Corporation(b) 52 —
Loss on sale of Sky Multi-Country Partners(b) — (55)
Gain on sale of Rogers Sportsnet(b) —39
Change in fair value of exchangeable securities(c) (76) 246
Other 12 33
Total Other, net $194 $178
(a) See Note 3 to the Consolidated Financial Statements of News Corporation.
(b) See Note 6 to the Consolidated Financial Statements of News Corporation.
(c) The Company has certain outstanding exchangeable debt securities which contain embedded derivatives. Pursuant to SFAS
No. 133, these embedded derivatives are not designated as hedges and, as such, changes in their fair value are recognized in
Other, net. A significant variance in the price of the underlying stock could have a material impact on the operating results of
the Company. See Note 10 to the Consolidated Financial Statements of News Corporation.
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