Twenty-First Century Fox 2011 Annual Report Download - page 17

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
consideration for this acquisition included (i) approximately $480 million for the acquisition of the equity, of which approximately $60 million
has been set aside in escrow to satisfy any indemnification obligations, (ii) the repayment of Shine’s outstanding debt of approximately $135
million and (iii) net liabilities assumed. Elisabeth Murdoch, Chairman and Chief Executive Officer of Shine, and daughter of Mr. K. R. Murdoch
and sister of Messrs. Lachlan and James Murdoch, received approximately $214 million in cash at closing in consideration for her majority
ownership interest in Shine, and is entitled to her proportionate share of amounts that are released from escrow.
In June 2011, the Company transferred the equity and related assets of Myspace to a digital media company in exchange for a minority equity
interest in the acquirer. As a result of this transaction, the Company’s interest in the acquirer is now accounted for under the cost method of
accounting.
In July 2011, the Company announced that it would close its publication, News of the World, after allegations of phone hacking and
payments to police. As a result of these allegations, the Company is subject to several ongoing investigations by U.K. and U.S. regulators and
governmental authorities, including investigations into whether similar conduct may have occurred at the Company’s subsidiaries outside of the
U.K. The Company is fully cooperating with these investigations. In addition, the Company has admitted liability in a number of civil cases related
to the phone hacking allegations and has settled a number of cases. The Company has taken steps to solve the problems relating to News of the
World including the creation and establishment of an independent Management & Standards Committee (the “MSC”), which will have oversight
of, and take responsibility for, all matters in relation to the News of the World phone hacking case, police payments and all other connected issues
at News International Group Limited (“News International”), including as they may relate to other News International publications. The MSC
appointed an independent Chairman, Lord Grabiner QC, and will report directly to Joel Klein, Executive Vice President and a director of the
Company, who in turn will report to Viet Dinh, an independent director and Chairman of the Company’s Nominating and Corporate Governance
Committee. Both directors will update the Company’s Board of Directors. The MSC will ensure full cooperation with all relevant investigations
and inquiries into News of the World matters and all other related issues across News International and will conduct its own internal
investigations where appropriate. The MSC will also be responsible for reviewing existing compliance systems and for proposing and overseeing
the implementation of new compliance, ethics and governance procedures at News International. The Company has engaged outside counsel to
assist it in responding to U.K. and U.S. governmental inquiries.
In July 2011, the Company sold its majority interest in its outdoor advertising businesses in Russia and Romania for approximately $360
million. The Company expects to record a gain related to the sale of this business during the first quarter of fiscal 2012.
Results of Operations
Results of Operations – Fiscal 2011 versus Fiscal 2010
The following table sets forth the Company’s operating results for fiscal 2011 as compared to fiscal 2010.
2011 2010 Change % Change
For the years ended June 30, ($ millions)
Revenues $ 33,405 $ 32,778 $ 627 2%
Operating expenses (21,058) (21,015) (43) —
Selling, general and administrative (6,306) (6,619) 313 (5)%
Depreciation and amortization (1,191) (1,185) (6) 1%
Impairment and restructuring charges (313) (253) (60) 24%
Equity earnings of affiliates 462 448 14 3%
Interest expense, net (966) (991) 25 (3)%
Interest income 126 91 35 38%
Other, net 18 69 (51) (74)%
Income from continuing operations before income tax expense 4,177 3,323 854 26%
Income tax expense (1,029) (679) (350) 52%
Income from continuing operations 3,148 2,644 504 19%
Loss on disposition of discontinued operations, net of tax (254) — (254) **
Net income 2,894 2,644 250 9%
Less: Net income attributable to noncontrolling interests (155) (105) (50) 48%
Net income attributable to News Corporation stockholders $ 2,739 $ 2,539 $ 200 8%
** not meaningful
Overview–The Company’s revenues increased 2% for the fiscal year ended June 30, 2011 as compared to fiscal 2010. The increase was
primarily due to revenue increases at the Cable Network Programming, Television and Publishing segments. The Cable Network Programming
segment’s revenues increased primarily due to increases in net affiliate and advertising revenues. The increase at the Television segment was
primarily due to advertising revenues from the Super Bowl which was broadcast on FOX in fiscal 2011, higher pricing resulting from
improvements in the advertising markets and higher comparative political advertising due to the 2010 mid-term elections. The revenue increase at
2011 Annual Report 15