Twenty-First Century Fox 2011 Annual Report Download - page 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
U.S. dollar against local currencies, primarily the Australian Dollar, resulted in revenue and operating income increases of approximately 6% and
13%, respectively, for the fiscal year ended June 30, 2010.
For the fiscal year ended June 30, 2010, revenues at the Company’s book publishing business increased $128 million, or 11%, as compared to
fiscal 2009, primarily due to higher sales at the General Books and Children’s divisions and favorable foreign exchange fluctuations. Also
contributing to the increase during the fiscal year ended June 30, 2010 were revenues from licensing fees received from a settlement. The increase
at the General Books division was primarily due to the success of Going Rogue by Sarah Palin and higher electronic book sales. Strong sales of
Where the Wild Things Are by Maurice Sendak, The Vampire Diaries by L.J. Smith and LA Candy by Lauren Conrad led to the increase at the
Children’s division. During the fiscal year ended June 30, 2010, HarperCollins had 164 titles on The New York Times Bestseller List with 19 titles
reaching the number one position.
For the fiscal year ended June 30, 2010, revenues at the Company’s integrated marketing service businesses increased $24 million, or 2%, as
compared to fiscal 2009. The increase in revenues was primarily due to increases in volume and rates of in-store marketing products sold, partially
offset by lower revenues for free-standing insert products.
For the fiscal year ended June 30, 2010, operating income at the Publishing segment decreased $369 million, or 44%, as compared to fiscal
2009. The decrease in operating income was primarily due to the $500 million charge relating to the settlement of the Valassis litigation and
higher royalty and manufacturing costs resulting from higher book sales. The operating income decrease was partially offset by the revenue
increases noted above, as well as the impact of cost containment initiatives and lower newspaper production costs.
Other (5% and 8% of the Company’s consolidated revenues in fiscal 2010 and 2009, respectively)
Revenues at the Other segment decreased $847 million, or 36%, for the fiscal year ended June 30, 2010, as compared to fiscal 2009, primarily
due to decreased revenues from NDS and the Company’s digital media properties. The decrease at NDS of $413 million was due to the absence of
revenues for the fiscal year ended June 30, 2010, reflecting the sale of a portion of the Company’s ownership stake in NDS in February 2009. As a
result of the sale, the Company’s portion of NDS’s operating results subsequent to February 2009 is included within Equity earnings (losses) of
affiliates. The revenue decrease at the Company’s digital media properties of $276 million was principally due to lower search and advertising
revenues.
Operating results for the fiscal year ended June 30, 2010 decreased $212 million, or 58%, as compared to fiscal 2009. The decrease was
primarily due to lower operating results from NDS and the Company’s digital media properties. The decrease at NDS was due to the absence of
$121 million of operating income during the fiscal year ended June 30, 2010, resulting from the sale of a portion of the Company’s ownership
stake in NDS as noted above. The decrease at the Company’s digital media properties of $135 million for the fiscal year ended June 30, 2010 was
primarily due to the revenue declines noted above, partially offset by cost containment initiatives.
Liquidity and Capital Resources
Current Financial Condition
The Company’s principal source of liquidity is internally generated funds. The Company also has a $2.25 billion revolving credit facility,
which expires in May 2012, and has access to various film co-production alternatives to supplement its cash flows. In addition, the Company has
access to the worldwide capital markets, subject to market conditions. As of June 30, 2011, the availability under the revolving credit facility was
reduced by stand-by letters of credit issued which totaled approximately $77 million. As of June 30, 2011, the Company was in compliance with
all of the covenants under the revolving credit facility, and it does not anticipate any violation of such covenants. The Company’s internally
generated funds are highly dependent upon the state of the advertising markets and public acceptance of its film and television products.
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 entertainment and sports programming;
paper purchases; operational expenditures including employee costs; capital expenditures; interest expenses; income tax payments; investments in
associated entities; dividends; acquisitions; debt repayments; and stock repurchases.
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.
Sources and Uses of Cash – Fiscal 2011 vs. Fiscal 2010
Net cash provided by operating activities for the fiscal years ended June 30, 2011 and 2010 is as follows (in millions):
For the years ended June 30, 2011 2010
Net cash provided by operating activities $4,471 $3,854
The increase in net cash provided by operating activities during the fiscal year ended June 30, 2011 as compared to fiscal 2010 was primarily
due to higher affiliate receipts at the Cable Network Programming segment, higher collections at the DBS segment, higher advertising receipts at
the Television segment, lower litigation settlement payments at the Publishing segment and lower pension contributions. These increases were
partially offset by lower worldwide theatrical receipts, due to the absence of Avatar, and higher production spending at the Filmed Entertainment
segment, lower receipts at the digital media properties due to lower advertising and search revenues and higher tax payments.
2011 Annual Report 25