Twenty-First Century Fox 2014 Annual Report Download - page 54

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48
higher average rates per subscriber across most channels, the consolidations of Fox Sports Asia and Fox Pan
American Sports LLC, doing business as Fox Sports Latin America (“FSLA”), the acquisition of EMM and higher
retransmission consent revenues. The increase in subscription revenue was due to the consolidation of Sky
Deutschland in January 2013, partially offset by lower subscription revenue at Sky Italia. The higher content
revenue was due to an increase in worldwide theatrical revenues. The strengthening of the U.S. dollar against local
currencies resulted in a revenue decrease of approximately $370 million for fiscal 2013, as compared to fiscal 2012.
Operating expenses increased 12% for fiscal 2013, as compared to fiscal 2012, primarily due to increased
operating expenses at the DBS, Cable Network Programming and Filmed Entertainment segments of $850 million,
$770 million and $210 million, respectively. The increase at the DBS segment was primarily the result of the
consolidation of Sky Deutschland and higher programming costs while the increase at the Cable Network
Programming segment was primarily due to the consolidations of Fox Sports Asia and FSLA, the acquisition of
EMM, new cricket contracts in India and the launch of new channels. The increase at the Filmed Entertainment
segment was primarily due to higher theatrical marketing costs.
Selling, general and administrative expenses increased 8% for fiscal 2013, as compared to fiscal 2012,
primarily due to increased expenses at the Cable Network Programming, Filmed Entertainment and Television
segments of approximately $160 million, $70 million and $36 million, respectively. The increase at the Cable
Network Programming segment was primarily due to the consolidations of Fox Sports Asia and FSLA, the
acquisition of EMM and the launch of new channels. The increase at the Filmed Entertainment and Television
segments was primarily due to higher personnel costs and higher legal expenses for cases relating to the protection
of the Company’s intellectual property rights.
Depreciation and amortization increased 12% for fiscal 2013, as compared to fiscal 2012, primarily due to
consolidations of Sky Deutschland, Fox Sports Asia and FSLA and the acquisition of EMM.
Impairment charges – During fiscal 2013 and 2012, the Company recorded non-cash goodwill impairment
charges of $35 million and $201 million, respectively, related to the sale of a business in its Digital Media Group in
fiscal 2013.
Equity earnings of affiliates – Equity earnings of affiliates increased $19 million for fiscal 2013, as compared
to fiscal 2012, primarily due to improved results at the DBS equity affiliates of $168 million partially offset by
losses at the other equity affiliates. The improvement in the DBS equity affiliates’ results was driven by the absence
of approximately $85 million in losses as a result of the consolidation of Sky Deutschland and improved results of
approximately $75 million from BSkyB. These improvements were partially offset by lower contributions of
approximately $70 million from Hulu, as a result of the redemption of Providence Equity Partners’ equity interest in
October 2012 and the absence of approximately $55 million in equity earnings resulting from the sale of the
Company’s investment in NDS in July 2012.
For the years ended June 30,
2013 2012 Change % Change
(in millions, except %)
DBS equity affiliates ........................................................ $ 826 $ 658 $ 168 26 %
Cable channel equity affiliates ......................................... (52) (34) (18 ) (53)%
Other equity affiliates ...................................................... (119) 12 (131 ) **
Equity earnings of affiliates ............................................. $ 655 $ 636 $ 19 3 %
** not meaningful
Interest expense, net – Interest expense, net increased $31 million for fiscal 2013, as compared to fiscal 2012,
primarily due to the issuance of $1.0 billion of 3.00% Senior Notes due 2022 in September 2012 and increased
interest expense related to the consolidation of Sky Deutschland debt.