Twenty-First Century Fox 2011 Annual Report Download - page 18

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
the Publishing segment was primarily due to favorable foreign exchange fluctuations and higher advertising and circulation revenues at The Wall
Street Journal. These revenue increases were partially offset by revenue decreases at the Filmed Entertainment and Other segments. Revenues at the
Filmed Entertainment segment decreased primarily due to lower worldwide theatrical and home entertainment revenues resulting principally from
the inclusion in fiscal 2010 of the releases of Avatar and Ice Age: Dawn of the Dinosaurs with no comparable releases in fiscal 2011.The decrease
at the Other segment was primarily the result of lower advertising and search revenues at Myspace.
Operating expenses increased $43 million for the fiscal year ended June 30, 2011 as compared to fiscal 2010 primarily due to higher
programming costs at the Cable Network Programming segment as well as higher programming costs at the Television segment due to the
broadcast of the Super Bowl partially offset by lower amortization of production costs and lower participation costs at the Filmed Entertainment
segment due to the fiscal 2010 releases of Avatar and Ice Age: Dawn of the Dinosaurs with no comparable releases in fiscal 2011.
Selling, general and administrative expenses decreased 5% for the fiscal year ended June 30, 2011 as compared to fiscal 2010 due to lower
litigation settlement costs at the Publishing segment.
Depreciation and amortization for the fiscal year ended June 30, 2011 increased $6 million as compared to fiscal 2010 as additional
depreciation and amortization from the fiscal 2011 acquisitions was partially offset by certain assets becoming fully depreciated or amortized and
the absence of depreciation and amortization related to businesses disposed of in fiscal 2010 and 2011.
Impairment and restructuring charges–As discussed in Note 9 – Goodwill and Intangible Assets to the accompanying consolidated financial
statements, during the second quarter of fiscal 2011, the Company performed an interim impairment assessment of the Digital Media Group
reporting unit’s goodwill. As a result of the review performed, the Company recorded a non-cash goodwill impairment charge of $168 million
during the fiscal year ended June 30, 2011.
As discussed in Note 4 – Restructuring Programs to the accompanying consolidated financial statements, the Company recorded restructuring
charges of approximately $145 million in the fiscal year ended June 30, 2011. The restructuring charges primarily reflect a $115 million charge
related to the Company’s digital media properties and $25 million related to termination benefits recorded at the newspaper businesses. The
charges at the Company’s digital media properties were a result of an organizational restructuring to align resources more closely with business
priorities and consisted of facility related costs of $95 million, termination benefits of $18 million and other associated costs of $2 million.
During fiscal 2010, the Company determined that it was more likely than not that it would sell or dispose its News Outdoor and Fox Mobile
businesses which are considered reporting units under ASC 350 “Intangibles – Goodwill and Other” (“ASC 350”). In connection with such
potential sales, the Company reviewed these businesses for impairment and recognized a non-cash impairment charge of $200 million in the fiscal
year ended June 30, 2010. The impairment charge consisted of a write-down of $52 million in finite-lived intangible assets, a write-down of $137
million in goodwill and a write-down of fixed assets of $11 million. Fox Mobile was sold in fiscal 2011 and News Outdoor was sold in July 2011.
During fiscal 2010, the Company recorded approximately $53 million of restructuring charges in the consolidated statements of operations.
The restructuring charges reflect an $18 million charge related to the sales and distribution operations of the STAR channels, a $19 million charge
related to termination benefits recorded at the newspaper businesses, a $7 million charge related to the restructuring program at Fox Mobile and
$9 million of accretion on facility termination obligations.
Equity earnings of affiliates–Equity earnings of affiliates for the fiscal year ended June 30, 2011 increased $14 million as compared to fiscal
2010. The increase in equity earnings from the Company’s Other equity affiliates of $74 million was primarily due to a gain related to the disposal
of a business at NDS during fiscal 2011. The decrease in equity earnings from the Company’s DBS equity affiliates of $36 million was primarily
due to lower contributions from BSkyB resulting from the absence of a gain related to the partial sale of its ITV investment and the absence of a
favorable litigation settlement in fiscal 2010, partially offset by higher subscription revenues and a gain related to a business disposal in fiscal
2011. The decrease in equity earnings from the Company’s Cable channel equity affiliates of $24 million was primarily due to higher sports
programming costs.
2011 2010 Change % Change
For the years ended June 30, ($ millions)
DBS equity affiliates $305 $341 $(36) (11)%
Cable channel equity affiliates 42 66 (24) (36)%
Other equity affiliates 115 41 74 **
Total equity earnings of affiliates $462 $448 $ 14 3%
** not meaningful
Interest expense, net–Interest expense, net for the fiscal year ended June 30, 2011 decreased $25 million as compared to fiscal 2010, primarily
due to the redemption of the Company’s 0.75% Senior Exchangeable BUCS and 5% TOPrS in fiscal 2010. This decrease was partially offset by
interest expense related to the $2.5 billion in senior notes issued in February 2011.
Interest income–Interest income for the fiscal year ended June 30, 2011 increased by $35 million as compared to fiscal 2010, primarily due to
higher cash balances.
16 News Corporation