Twenty-First Century Fox 2011 Annual Report Download - page 23

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Depreciation and amortization increased 4% for the fiscal year ended June 30, 2010 as compared to fiscal 2009. The increase was primarily
due to higher depreciation at the DBS segment resulting from increased depreciation of set-top boxes and unfavorable foreign exchange
fluctuations, which was partially offset by the absence of depreciation and amortization related to NDS.
Impairment and restructuring charges–As discussed in Note 9 to the Consolidated Financial Statements of News Corporation, the Company
determined that it was more likely than not that its News Outdoor and Fox Mobile businesses which are considered reporting units under ASC
350, would be sold or disposed. 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.
As discussed in Note 4 to the Consolidated Financial Statements of News Corporation, the Company recorded approximately $53 million of
restructuring charges in the consolidated statements of operations in the fiscal year ended June 30, 2010. 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.
During fiscal 2009, the Company performed an interim impairment review in advance of its annual impairment assessment because the
Company believed events had occurred and circumstances had changed that would more likely than not reduce the fair value of the Company’s
goodwill and indefinite-lived intangible assets below their carrying amounts. These events included: (a) the decline of the price of the Company’s
Class A Common Stock and Class B Common Stock below the carrying value of the Company’s stockholders’ equity; (b) the reduced growth in
advertising revenues; (c) the decline in the operating profit margins in some of the Company’s advertising-based businesses; and (d) the decline in
the valuations of other television stations, newspapers and advertising-based companies as determined by the current trading values of those
companies. In addition, the Company performed an annual impairment assessment of goodwill and indefinite-lived intangible assets.
As a result of the impairment reviews performed, the Company recorded non-cash impairment charges of approximately $8.9 billion ($7.2
billion, net of tax) during the fiscal year ended June 30, 2009. The charges consisted of a write-down of the Company’s indefinite-lived intangible
assets (primarily FCC licenses in the Television segment) of $4.6 billion, a write-down of $4.1 billion of goodwill and a write-down of the
Publishing segment’s fixed assets of $185 million.
During the fiscal year ended June 30, 2009, the Company recorded restructuring charges of approximately $312 million. These restructuring
charges reflect a number of the Company’s businesses that implemented a series of operational restructuring actions to address the Company’s cost
structure, including the restructuring of the Company’s digital media properties to align resources more closely with business priorities. This
restructuring program included significant job reductions, both domestically and internationally, to enable the businesses to operate on a more cost
effective basis. In conjunction with this restructuring program, the Company also eliminated excess facility requirements. In fiscal 2009, several
other businesses of the Company implemented similar plans, including the U.K. and Australian newspapers, HarperCollins, MyNetworkTV and
Fox Television Stations.
Equity earnings (losses) of affiliates–Equity earnings of affiliates increased $757 million for the fiscal year ended June 30, 2010 as compared
to fiscal 2009, primarily due to higher contributions from BSkyB as a result of a favorable litigation settlement, as well as a gain recognized by
BSkyB on the sale of a portion of its investment in ITV and the absence of write-downs related to ITV recorded by BSkyB during fiscal 2009. Also
contributing to the increase was the absence of a $422 million write-down of the Company’s investment in Sky Deutschland recorded in fiscal
2009.
2010 2009 Change % Change
For the years ended June 30, ($ millions)
DBS equity affiliates $341 $(374) $715 **
Cable channel equity affiliates 66 59 7 12%
Other equity affiliates 41 6 35 **
Total equity (losses) earnings of affiliates $448 $(309) $757 **
** not meaningful
Interest expense, net–Interest expense, net for the fiscal year ended June 30, 2010 increased $64 million as compared to the fiscal year ended
June 30, 2009, primarily due to the issuance of borrowings in February 2009 and August 2009. This increase was partially offset by the retirement
of $200 million and $150 million of the Company’s borrowings in October 2008 and March 2010, respectively.
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