Twenty-First Century Fox 2007 Annual Report Download - page 55

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Notable bestsellers during fiscal 2006 included: Marley and Me by John Grogan, Freakonomics by Steven D. Levitt and Stephen J.
Dubner, The Purpose Driven Life by Rick Warren, YOU: The Owner’s Manual by Michael F. Roizen and Mehmet C. Oz, M.D. and The
Chronicles of Narnia by C. S. Lewis.
Operating income for the Book Publishing segment for the fiscal year ended June 30, 2006 increased by $3 million, or 2%, from
fiscal 2005. The increase in Operating income was primarily due to a higher level of more profitable backlist sales in the General
Books group, when compared to fiscal 2005.
Other (6% and 5% of the Company’s consolidated revenues in fiscal 2006 and 2005, respectively)
For the fiscal year ended June 30, 2006, revenues at the Other segment increased $274 million, or 24%, as compared to fiscal
2005. The increase was primarily driven by incremental revenues from the FIM acquisitions. The Operating loss at the Other seg-
ment decreased $27 million, or 15%, for the fiscal year ended June 30, 2006 as compared to fiscal 2005, primarily as a result of fis-
cal 2005 results including costs in connection with the Reorganization partially offset by the inclusion of the fiscal 2006 FIM
operating losses, principally resulting from employee retention expenses and amortization of purchased intangible assets.
Liquidity and Capital Resources
Current Financial Condition
The Company’s principal source of liquidity is internally generated funds; however, the Company has access to the worldwide capi-
tal markets, a $2.25 billion revolving credit facility and various film co-production alternatives to supplement its cash flows. The
availability under the revolving credit facility as of June 30, 2007 was reduced by letters of credit issued which totaled approximately
$121 million. Also, as of June 30, 2007, the Company had consolidated cash and cash equivalents of approximately $7.7 billion. The
Company believes that cash flows from operations will be adequate for the Company to conduct its operations. The Company’s
internally generated funds are highly dependent upon the state of the advertising market and public acceptance of film and tele-
vision products. Any significant decline in the advertising market or the performance of the Company’s films could adversely impact
its cash flows from operations which could require the Company to seek other sources of funds including proceeds from the sale of
certain assets or other alternative sources.
The principal uses of cash that affect the Company’s liquidity position include the following: investments in the production and
distribution of new feature films and television programs; the acquisition of and payments under programming rights for entertain-
ment and sports programming; paper purchases; operational expenditures including employee costs; capital expenditures; interest
expense; income tax payments; investments in associated entities; dividends; acquisitions and stock repurchases.
Sources and Uses of Cash–Fiscal 2007 vs. Fiscal 2006
Net cash provided by operating activities for the fiscal years ended June 30, 2007 and 2006 is as follows (in millions):
Years Ended June 30, 2007 2006
Net cash provided by operating activities $4,110 $3,257
The increase in net cash provided by operating activities reflects higher operating results and cash collections resulting primarily
from an increased sale of home entertainment product at the Filmed Entertainment segment during the fiscal year ended June 30,
2007. These increases were offset by higher tax payments and higher sports rights. The higher sports rights payments reflect the
renewal of several sports teams’ local rights agreements, the addition of the BCS sports rights and higher international sports rights.
Net cash used in investing activities for the fiscal years ended June 30, 2007 and 2006 is as follows (in millions):
Years Ended June 30, 2007 2006
Net cash used in investing activities $(2,076) $(2,060)
Cash used in investing activities during fiscal 2007 was slightly higher than fiscal 2006 due to higher capital expenditures and
increased investments. Partially offsetting this increase was a reduction in the total net cash used for acquisitions and dispositions.
The increase in capital expenditures was primarily due to the Company’s continued investment in new printing plants in the
United Kingdom and an increase in expenditures related to Internet initiatives. The decrease in cash used for acquisitions was
primarily due to the acquisitions of Intermix Media, Inc. (“Intermix”) and IGN Entertainment, Inc. (“IGN”) during fiscal 2006.
The Company has evaluated, and expects to continue to evaluate, possible acquisitions and dispositions of certain businesses.
Such transactions may be material and may involve cash, the Company’s securities or the assumption of additional indebtedness.
Net cash used in financing activities for the fiscal years ended June 30, 2007 and 2006 is as follows (in millions):
Years Ended June 30, 2007 2006
Net cash used in financing activities $(273) $(1,932)
The decrease in net cash used in financing activities was primarily due to a reduction in share repurchases of approximately $733
million. During fiscal 2007, the Company repurchased 57.5 million shares for approximately $1.3 billion, as compared to
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