Twenty-First Century Fox 2008 Annual Report Download - page 65

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
There was no provision for income taxes related to these transactions as any tax due was offset by a release of a valuation allowance that was
applied to an existing deferred tax asset established for capital losses, which, because of the sale of TSL and Sky Radio, was utilized.
Cumulative effect of accounting change, net of tax—Effective July 1, 2005, the Company adopted Emerging Issues Task Force (“EITF”) Topic
No. D-108, “Use of the Residual Method to Value Acquired Assets Other Than Goodwill” (“EITF D-108”). EITF D-108 requires companies who have
applied the residual value method in the valuation of acquired identifiable intangibles for purchase accounting and impairment testing to use a
direct value method. As a result of the adoption, the Company recorded a charge of $1.6 billion ($1 billion net of tax, or ($0.33) per diluted share of
Class A Common Stock and ($0.28) per diluted share of Class B Common Stock), to reduce the intangible balances attributable to its television
stations’ FCC licenses. This charge has been reflected as a cumulative effect of accounting change, net of tax in the consolidated statements of
operations for the fiscal year ended June 30, 2006.
Net income—Net income increased $1,112 million for fiscal year ended June 30, 2007 as compared to fiscal 2006, primarily due to the absence
of the Cumulative effect of accounting change recognized in fiscal 2006 and increases in Operating income, Equity earnings from affiliates and
Other, net. The increase in net income was partially offset by the effect of the gains on sale of TSL and Sky Radio that were recorded during fiscal
2006, with no corresponding gains in fiscal 2007.
Segment Analysis:
The following table sets forth the Company’s revenues and operating income by segment for fiscal 2007 as compared to fiscal 2006.
2007 2006 Change % Change
For the years ended June 30, ($ millions)
Revenues:
Filmed Entertainment $ 6,734 $ 6,199 $ 535 9%
Television 5,705 5,334 371 7%
Cable Network Programming 3,902 3,358 544 16%
Direct Broadcast Satellite Television 3,076 2,542 534 21%
Magazines and Inserts 1,119 1,090 29 3%
Newspapers and Information Services 4,486 4,095 391 10%
Book Publishing 1,347 1,312 35 3%
Other 2,286 1,397 889 64%
Total revenues $28,655 $25,327 $3,328 13%
Operating income (loss):
Filmed Entertainment $ 1,225 $ 1,092 $ 133 12%
Television 962 1,032 (70) (7)%
Cable Network Programming 1,090 864 226 26%
Direct Broadcast Satellite Television 221 39 182 **
Magazines and Inserts 335 307 28 9%
Newspapers and Information Services 653 517 136 26%
Book Publishing 159 167 (8) (5)%
Other (193) (150) (43) 29%
Total operating income $ 4,452 $ 3,868 $ 584 15%
** not meaningful
Filmed Entertainment (23% and 25% of the Company’s consolidated revenues in fiscal 2007 and 2006, respectively)
For the fiscal year ended June 30, 2007, revenues at the Filmed Entertainment segment increased $535 million, or 9%, as compared to fiscal
2006. This increase was primarily due to an increase in worldwide home entertainment, pay television and free television revenues, partially offset
by a decrease in worldwide theatrical revenues. The increase in home entertainment revenues for fiscal 2007 was primarily due to the worldwide
release of previously strong theatrical titles, primarily driven by Ice Age: The Meltdown, Night at the Museum, X-Men: The Last Stand, Borat:
Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan,The Devil Wears Prada and Eragon. Fiscal 2006 worldwide home
entertainment releases included Fantastic Four, Walk the Line, Robots, Kingdom of Heaven and Hide & Seek. The increases in worldwide pay
television and free television revenues were primarily due to a stronger film lineup and more feature films available during fiscal 2007 and stronger
revenues from the returning primetime series Prison Break, Family Guy and My Name Is Earl. Fiscal 2007 worldwide theatrical revenues were driven
64 NEWSCORP 2008 Annual Report