Twenty-First Century Fox 2005 Annual Report Download - page 86

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NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
(c) Other equity affiliates include the following fiscal 2003 transactions:
Gemstar-TV Guide, which is accounted for using the equity method, experienced a significant decline in its market capitalization. In determining if
the decline in Gemstar-TV Guide’s market value was other than temporary, the Company considered a number of factors: (i) the financial
condition, operating performance and near term prospects of the investee; (ii) the reason for the decline in fair value, be it general market
conditions, industry specific or investee specific; (iii) analysts’ ratings and estimates of 12 month share price targets for the investee; (iv) the
length of time and the extent to which the market value has been less than the carrying value of the Company’s investment; and (v) the Company’s
intent and ability to hold the investment for a period of time sufficient to allow for a recovery in fair value. As a result of this review, the Company
recorded a $305 million charge included in Equity earnings (losses) of affiliates to reduce the carrying value of its investment to reflect an other
than temporary decline in value. The charge was determined by reference to Gemstar-TV Guide’s share price of $3.75 per share and the
Company’s ownership of approximately 175 million shares.
Independent Newspapers Limited (“INL”) sold its publishing assets and this sale resulted in a gain for INL. The Company’s portion of such gain
was $161 million, which is reflected in Equity earnings (losses) of affiliates on the consolidated statements of operations.
The Company wrote down its investment in Sky Multi-Country Partners by $35 million reflected in Equity earnings (losses) of affiliates on the
consolidated statements of operations due to a permanent diminution of assets resulting from sustained losses of the platform and the decision of
the partners to limit future financial support of this business.
(d) The Company’s investment in several of its affiliates exceeded its equity in the underlying net assets at their acquisition by a total of $3.8 billion
and $3.9 billion as of June 30, 2005 and 2004, respectively.
This excess primarily relates to the Company’s investment in DIRECTV. At June 30, 2005 the remaining unamortized excess included in the
investment in DIRECTV was $3.6 billion which represents the excess of fair value over the Company’s proportionate share of DIRECTV’s
underlying net assets as adjusted to record such net assets at fair value, most notably the adjustment to the carrying value of DIRECTV’s
SPACEWAY and PanAmSat businesses and assets and its deferred subscriber acquisition costs. This excess, has been allocated to finite-lived
intangibles, which are being amortized over lives ranging from 6-20 years, and to certain indefinite-lived intangibles and goodwill, which are not
subject to amortization in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”.
In accordance with SFAS No. 142, the Company amortized $74 million and $29 million in fiscal 2005 and 2004, respectively, related to amounts
allocated to definite-lived intangible assets. Such amortization is reflected in equity earnings (losses) of affiliates.
Fiscal Year 2005 Acquisitions and Disposals
In June 2005, the Company sold its entire cost investment in The Wireless Group plc (“Wireless Group”). The Company’s 38.9 million shares of
Wireless Group were sold for total consideration of approximately $60 million. The Company recognized a gain of approximately $6 million on the
sale, which is reflected in Other, net in the accompanying consolidated statements of operations for the fiscal year ended June 30, 2005.
In fiscal 2005, INL merged with Sky Network Television and formed a new company which has been named Sky Network Television Limited
(“Sky Network Television”). As part of the transaction, the Company received net cash consideration of approximately $60 million and increased
the Company’s ownership interest in Sky Network Television by 10%, to 44%.
During fiscal 2005, as part of the Company’s acquisition of the remaining outstanding shares of FEG it did not already own (See Note 3
Acquisitions and Disposals), approximately $234 million of the FEG excess purchase price was preliminarily assigned to the Company’s
investments in National Geographic and DIRECTV, of which approximately $60 million was preliminarily allocated to amortizable intangibles with
an estimated weighted average useful life of 10 years.
In October 2004, the Company and its 34% investee, DIRECTV, announced a series of transactions with Grupo Televisa, Globopar and
Liberty Media International, Inc. that will result in the reorganization of the companies’ direct broadcast satellite (“DBS”) TV platforms in Latin
America. The transactions will result in DIRECTV Latin America and Sky Latin America consolidating their two DBS platforms into a single
platform in each of the major territories served in the region. As part of these transactions, DIRECTV will acquire News Corporation’s interests in
Sky Brasil, Innova and Sky Multi-Country Partners. The Sky Multi-Country Partners transaction has closed and the Company has recorded a pre-
tax loss during fiscal 2005 of $55 million. Upon the completion of the reorganization of the other platforms, which is subject to certain
governmental approvals, the Company will record a gain. As a result of these transactions, the Company’s transponder lease guarantee
increased by $175 million. Upon the closing of the Latin American DBS reorganization transactions, the Company will be released from the
transponder lease guarantees. (See Note 14 Commitments and Contingencies)
In December 2004, the Company sold its 20% investment in Rogers Sportsnet to Rogers Broadcasting Limited for $41 million. Rogers
Sportsnet operates regional sports networks in Canada covering local sports events plus national programming. For the six months ended
December 31, 2004, the Company recognized a gain of $39 million on this sale in Other, net in the consolidated statements of operations.
In January 2005, STAR completed the acquisition of approximately 26% in Balaji Telefilms Limited, the largest television content production
company in India, whose shares are listed for trading on The Stock Exchange, Mumbai and the National Stock Exchange of India for $34 million.
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