Twenty-First Century Fox 2011 Annual Report Download - page 82

Notes to the Consolidated Financial Statements (continued)
The Company is subject to tax in various domestic and international jurisdictions and, as a matter of ordinary course, the Company is
regularly audited by Federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all
other pending tax matters and does not currently anticipate that the ultimate resolution of other pending tax matters will have a material adverse
effect on its consolidated financial condition, future results of operations or liquidity. The U.S. Internal Revenue Service is currently examining the
Company’s returns for fiscal years 2008 and 2009. Additionally, the Company’s income tax returns for the years 2000 through 2009 are subject
to examination in various foreign jurisdictions. Consequently, it is reasonably possible that uncertain income tax positions may decrease in the
next twelve months. However, actual developments in this area could differ from those currently expected. Of the total unrecognized tax benefits
at June 30, 2011 of $256 million, approximately $127 million would affect the Company’s effective income tax rate, if and when recognized in
future fiscal years.
During the fourth quarter of fiscal 2011, the Company paid one-time dividends of $517 million back to the United States related to foreign
earnings. The repatriated cash was to be used to fund the proposed acquisition of BSkyB. As these dividends were one-time dividends, they did not
change the Company’s assertion related to the remaining amount of undistributed earnings. Therefore, the Company has not provided for U.S.
taxes on the remaining undistributed earnings of foreign subsidiaries as they are considered to be reinvested indefinitely. Calculation of the
unrecognized deferred tax liability for temporary differences related to these earnings is not practicable. Undistributed earnings of foreign
subsidiaries considered to be indefinitely reinvested amounted to approximately $8.6 billion at June 30, 2011.
NOTE 19. Segment Information
The Company regularly reviews its segment reporting and classification. In the first quarter of fiscal 2011, the Company aggregated the
previously reported Book Publishing segment, Integrated Marketing Services segment and the Newspapers and Information Services segment to
report a new Publishing segment because of changes in how the Company manages and evaluates these businesses as a result of evolving industry
trends. The Company has revised its segment information for prior fiscal years to conform to the fiscal 2011 presentation.
The Company is a diversified global media company, which manages and reports its businesses in the following six segments:
•Cable Network Programming, which principally consists of the production and licensing of programming distributed through cable
television systems and direct broadcast satellite operators primarily in the United States, Latin America, Europe and Asia.
•Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for
distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming
worldwide.
•Television, which principally consists of the broadcasting of network programming in the United States and the operation of 27 full power
broadcast television stations, including nine duopolies, in the United States (of these stations, 17 are affiliated with the FOX network and
ten are affiliated with MyNetworkTV).
•Direct Broadcast Satellite Television, which consists of the distribution of basic and premium programming services via satellite and
broadband directly to subscribers in Italy.
•Publishing, which principally consists of the Company’s newspapers and information services, book publishing and integrated marketing
services businesses. The newspapers and information services business principally consists of the publication of national newspapers in the
United Kingdom, the publication of approximately 146 newspapers in Australia, the publication of a metropolitan newspaper and a
national newspaper (with international editions) in the United States and the provision of information services. The book publishing
business consists of the publication of English language books throughout the world and the integrated marketing services business consists
of the publication of free-standing inserts and the provision of in-store marketing products and services in the United States and Canada.
•Other, which principally consists of the Company’s digital media properties, Wireless Generation, the Company’s education technology
business, and News Outdoor, an advertising business which offers display advertising in outdoor locations primarily throughout Russia and
Eastern Europe. (See Note 24 – Subsequent Events)
The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized
based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment
operating income (loss) and segment operating income (loss) before depreciation and amortization.
Segment operating income (loss) does not include: Impairment and restructuring charges, equity earnings of affiliates, interest expense, net,
interest income, other, net, income tax expense and net income attributable to noncontrolling interests. The Company believes that information
about segment operating income (loss) assists all users of the Company’s consolidated financial statements by allowing them to evaluate changes in
the operating results of the Company’s portfolio of businesses separate from non-operational factors that affect net income, thus providing insight
into both operations and the other factors that affect reported results.
Segment operating income (loss) before depreciation and amortization is defined as segment operating income (loss) plus depreciation and
amortization and the amortization of cable distribution investments and eliminates the variable effect across all business segments of depreciation
and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-
lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage
arrangement and, as such, it is excluded from segment operating income (loss) before depreciation and amortization.
Total segment operating income and segment operating income (loss) before depreciation and amortization are non-GAAP measures and
should be considered in addition to, not as a substitute for, net income (loss), cash flow and other measures of financial performance reported in
accordance with GAAP. In addition, these measures do not reflect cash available to fund requirements. These measures exclude items, such as
impairment and restructuring charges, which are significant components in assessing the Company’s financial performance. Segment operating
80 News Corporation