Twenty-First Century Fox 2006 Annual Report Download

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Annual Report 2006
Imagining the future…

Table of contents

  • Page 1
    Annual Report 2006 Imagining the future...

  • Page 2
    ...today Annual Report 2006

  • Page 3
    ... News Corporation Fox Televizija Australia and New Zealand FOXTEL 25% Sky Network Television Limited 44% National Rugby League 50% News Interactive Propertyfinder.com RealEstate.com 58% Asia Hathway Cable and Datacom 26% China Network Systems various BOOK PUBLISHING United States, Canada, Europe...

  • Page 4
    ... our company, including Direct Broadcast Satellite Television, Cable Network Programming, Television, Filmed Entertainment, Magazines and Inserts, and Book Publishing. Earnings per share from continuing operations rose by 26 percent to 87 cents, its highest level ever. 4 NEWS CORPORATION F I could...

  • Page 5
    ...we are taking advantage of it. Last year, we acquired MySpace.com, the Internet's most popular social networking site, as well as the gaming and entertainment site IGN.com and several other smaller, but promising, sites. We launched Fox Interactive Media to oversee these new businesses, to build up...

  • Page 6
    ... new products. We completed an agreement with Apple to make television content from FOX, FX, SPEED, FUEL TV and the Twentieth Century Fox Television library available at the iTunes Music Store. Customers can purchase and download our content onto their computers or iPods. The precise business model...

  • Page 7
    ... years continue to sell strongly, notably Sideways, Napoleon Dynamite, Alien v. Predator and I, Robot. Third, Twentieth Century Fox Television remains one of the largest and most successful producers of primetime TV in the business. We launched three new hit shows: NBC's My Name is Earl, the number...

  • Page 8
    ... cable. BSkyB, meanwhile, has topped 8 million subscribers and is aggressively branching out into new services. The company turned competitors' heads this year by announcing that it will begin offering free broadband to its customers. And DIRECTV is looking to follow suit, first with broadband video...

  • Page 9
    ... a new golden age of media. Technology is liberating us from old constraints, lowering key costs, easing access to new customers and markets and multiplying the choices we can offer. For a content company, what could be better? Rupert Murdoch, Chairman and Chief Executive Officer ANNUAL REPORT 9

  • Page 10
    ...of News Corporation's world-famous motion picture and television programming operations. Fox Filmed Entertainment is a global leader in movie production and distribution and its Twentieth Century Fox Film studio is responsible for some of the top grossing movies of all time, including history's most...

  • Page 11
    ... U.S. box office. Its worldwide gross has since exceeded $440 million. • Fox Film studios partnered with MySpace to create promotional campaigns for a number of their movies, including Fox Searchlight's The Hills Have Eyes, that offered exclusive first-looks, multimedia games, soundtrack previews...

  • Page 12
    ... major U.S. networks in the 2006-2007 season. • Twentieth Century Fox Home Entertainment's Walk The Line DVD sold more than 3 million copies in its first day of release. • TCFTV, News Corporation's main TV production studio, was the largest supplier of television series programming, delivering...

  • Page 13
    ... the fan-favorite Futurama and securing additional seasons of King of the Hill and The Simpsons. • TCFTV leads the industry in its embrace of mobile technology, creating the mobisode for mobile telephones and producing mobile phone content based on hit TCFTV broadcast series. ANNUAL REPORT 13

  • Page 14
    Television News Corporation's Television segment includes the FOX Broadcasting Company, STAR, which develops, produces and broadcasts television programming across Asia, and Fox Television Stations, the Company's 35 owned-and-operated broadcast television stations. • American Idol's two-hour ...

  • Page 15
    ...to date. The Simpsons TM and © Twentieth Century Fox Film Corporation. All Rights Reserved. • FOX continued its reign over the young demos that advertisers covet most. For the second year in a row, FOX was crowned number one among Adults 18-49. The network has been number one among Adults 18-34...

  • Page 16
    ...a.m. to 9 a.m. news block ranked number one against all affiliate competitors in key adult demographics for the first time ever. • In fiscal 2006, the Company announced the formation of MyNetworkTV, a new entertainment broadcast television network operated by FTS and Twentieth Television that will...

  • Page 17
    ... ninth straight year. • FOX Sports extended its relationship with NASCAR through 2014, gaining the rights to the Daytona 500 each year. • In May 2006, FOX Sports won five Emmy Awards. Joe Buck, FOX Sports' signature play-by-play announcer, was honored with his sixth Emmy Award. ANNUAL REPORT 17

  • Page 18
    In Asia, STAR continued its solid growth in fiscal 2006. It secured new distribution deals and showed strong ratings across the region. STAR • In India, STAR remained the number one cable television network - a position it has held since 2000. The network attracted nearly 70 million viewers per ...

  • Page 19
    ...one cable news network during fiscal 2006, attracting double the number of primetime viewers as its nearest competitor. • FOX News Radio celebrated the one-year anniversary of its five-minute news service. Since its launch in June 2005 the network increased coverage to 360 stations. ANNUAL REPORT...

  • Page 20
    ... on the iTunes Music Store as well. • During fiscal 2006, National Geographic Channel (Domestic) (NGC), which is 67 percent-owned by News Corporation, launched National Geographic High Definition and secured its first major distribution deal with Echostar. NGC was named the number one network for...

  • Page 21
    ... again the number one basic cable series in the advertiser-coveted demographic Adults 18-49. • FX's new controversial unscripted series Black.White. premiered as cable television's number one all-time unscripted program with 4 million viewers, including 2.8 million Adults 18-49. ANNUAL REPORT 21

  • Page 22
    ...NBA and 20 NHL teams, as well as the Big 12, ACC and Pac Ten collegiate conferences. • At the end of fiscal 2006, Fox Networks Group announced a 20-year agreement with The Big Ten Conference to create a nationally distributed Big Ten Channel. The Big Ten Channel will carry college football and men...

  • Page 23
    ... holdings in leading U.K. pay-TV company BSkyB and the largest satellite broadcaster in the U.S., The DIRECTV Group. imagine connecting the world SKY ITALIA • SKY Italia continued to expand its services, offering its 3.8 million subscribers a new personal video recording device, MySKY, more than...

  • Page 24
    ... Carbon Neutral status in May 2006, a world first for a major media company, and was recognized as a leader in encouraging environmentally sustainable practices by its employees and customers. 24 NEWS CORPORATION • At the end of fiscal 2006, Sky secured the key rights to broadcast the FA Premier...

  • Page 25
    ... several new products and services including an enhanced NFL SUNDAY TICKET package featuring new interactive services and more high definition games. • Soon after the end of fiscal 2006, DIRECTV introduced MLB games in HD on 19 regional sports networks and launched a new HD DVR. ANNUAL REPORT 25

  • Page 26
    ... in the U.K.; News Limited, which publishes more than 110 national, capital city and suburban newspapers in Australia; and the New York Post in the U.S. imagine making a difference N E W S I N T E R N AT I O N A L • In fiscal 2006, The Times recorded the highest full-rate sales in its sector...

  • Page 27
    ....co.uk, grew advertising by 33 percent and audience by 33 percent in fiscal 2006. Sun Online Bingo, launched in January 2006, had the biggest share of the U.K. online bingo market, while Sun Local, one of the U.K.'s largest classified listings sites, was launched in May 2006. ANNUAL REPORT 27

  • Page 28
    ...'s new compact format delivered an immediate and significant circulation boost. • mX, a free afternoon commuter newspaper, launched in Sydney to an average circulation of 95,000 copies each day. The growing daily attracted advertisers hoping to reach mX's young urban readership. • News Limited...

  • Page 29
    ... 2006. The magazine was well received by the entertainment industry and advertisers alike. • Celebrating its 40th anniversary, The Australian, recorded its highest-ever average weekday sales and maintained its position as Australia's leading newspaper among affluent readers. ANNUAL REPORT...

  • Page 30
    ...containing consumer offers distributed in Sunday newspapers across the U.S. and Canada. The segment also includes in-store marketing products that advertise packaged goods in more than 38,000 stores. imagine boundless choice NEWS AMERICA MARKETING • In fiscal 2006, News America Marketing's Smart...

  • Page 31
    ... In fiscal 2006, TV Guide Mobile Entertainment launched three product lines and signed carrier agreements with Sprint, Verizon and Cingular. TV Guide Mobile, a television interactive programming guide for mobile devices, offers consumers mobile access to TV Guide's local program listings and viewing...

  • Page 32
    ... consecutive year of record profits, including its most profitable quarter in company history. In all, HarperCollins had 109 books on the New York Times bestseller list, with 14 titles hitting number one. imagine big ideas • HarperCollins' fiscal 2006 performance was driven by strong sales of...

  • Page 33
    ...of No Nation by Uzodinma Iweala won the prestigious New York Public Library Young Lions Fiction Award and Los Angeles Times Book Award for First Fiction. • HarperCollins Australia was voted 2005 Publisher of the Year and placed 142 books on bestseller lists in Australia. Worldwide sales of leading...

  • Page 34
    ... networking, entertainment, sports and lifestyle websites; NDS Group, the world's leading supplier of open end-to-end digital pay-TV solutions for the secure delivery of entertainment to television set-top boxes and personal computers; and News Outdoor, the leading out-of-home advertising company...

  • Page 35
    ... and the Advertising Council and a national Internet safety campaign with Common Sense Media and the PTA. FOX MOBILE ENTERTAINMENT • In fiscal 2006, Fox Mobile Entertainment formed Mobizzo, a website for mobile phone content, including mobile wallpaper, ring-tones and mobisodes. ANNUAL REPORT 35

  • Page 36
    ...in the Bulgarian TV market with a 36.3 percent audience share - higher than its two biggest competitors combined. NDS • NDS, News Corp.'s 74 percent-owned technology solution company, delivered key new technologies for middleware, digital video recorders (DVRs), internet protocol television (IPTV...

  • Page 37
    ...loss) from continuing operations per share, basic and diluted earnings (loss) per share and cash dividend per share reflect per share amounts based on the adjusted share amounts to reflect the November 12, 2004 one-for-two share exchange in the reincorporation of News Corporation. ANNUAL REPORT 37

  • Page 38
    ... to the Consolidated Financial Statements of News Corporation for further discussion. Subsequent to the final fiscal 2007 dividend payment, shares of Class A Common Stock will cease to carry any rights to a greater dividend than shares of Class B Common Stock. Earnings (loss) per share based on the...

  • Page 39
    .... In September 2006, the nine UPN affiliated stations and the independent station will become affiliated with the MyNetworkTV network); the broadcasting of network programming in the United States, and the development, production and broadcasting of television programming in Asia. ANNUAL REPORT 39

  • Page 40
    ...an advertising business which offers display advertising primarily in locations throughout Russia and Eastern Europe; Fox Interactive Media ("FIM"), which operates the Company's Internet activities; and Global Cricket Corporation ("GCC"), which has the exclusive rights to broadcast the Cricket World...

  • Page 41
    ... quality and variety of video, audio and interactive programming, quality of picture, access to service, customer service and price are the key elements for gaining and maintaining market share. SKY Italia's competition includes companies that offer video, audio, interactive programming, telephony...

  • Page 42
    ...and during the end-of-year holiday season. Each book is a separate and distinct product, and its financial success depends upon many factors, including public acceptance. Major new title releases represent a significant portion of the Company's sales throughout the year. Consumer books are generally...

  • Page 43
    ... fiscal 2006. In January 2006, CBS Corporation, owner of the UPN network ("UPN"), and Time Warner Inc., owner of the WB network (the "WB"), announced that UPN and the WB would combine to form a new network, which is expected to launch in September 2006. The Company owns nine major-market television...

  • Page 44
    ...Class B Common Stock. Overview-The Company's revenues in fiscal 2006 increased 6% as compared to fiscal 2005. The increase was primarily due to revenue increases at the Cable Network Programming, Filmed Entertainment, DBS and Other segments. Operating expenses for the fiscal year ended June 30, 2006...

  • Page 45
    ... SPACEWAY program and PanAmSat. 2006 For the years ended June 30, 2005 ($ millions) Change % Change The Company's share of equity earnings (losses) of affiliates principally consists of: British Sky Broadcasting Group plc The DIRECTV Group, Inc. Sky Brasil Innova Other DBS equity affiliates Cable...

  • Page 46
    ... (CONTINUED) Income tax expense-The effective tax rate for the fiscal year ended June 30, 2006 was 35%. The effective tax rate for fiscal 2006 reflects the positive impact of the Company's application of the American Jobs Creation Act of 2004 ("AJCA"). The Company reflected a tax benefit of...

  • Page 47
    ... (CONTINUED) Segment Analysis: The following table sets forth the Company's revenues and operating income by segment, for fiscal 2006 as compared to fiscal 2005. 2006 For the years ended June 30, 2005 ($ millions) Change % Change Revenues: Filmed Entertainment Television Cable Network Programming...

  • Page 48
    ...and continued growth in local news programming versus fiscal 2005. Operating income at the Company's U.S. television operations for the fiscal year ended June 30, 2006 increased approximately 11% from fiscal 2005. The increase was mainly due to the absence of programming costs for the Super Bowl and...

  • Page 49
    ... revenues at the Book Publishing segment decreased by $15 million, or 1%, from fiscal 2005 as fiscal 2005 included the effect of significant sales of The Purpose Driven Life. During the fiscal year ended June 30, 2006, HarperCollins had 109 titles on The New York Times Bestseller List with 14 titles...

  • Page 50
    ..., Cable Network Programming and Direct Broadcast Satellite Television segments. Selling, general and administrative expenses increased approximately 10% from fiscal 2004 primarily due to increased subscriber acquisition costs at SKY Italia and increased employee costs in support of the Company...

  • Page 51
    ... years ended June 30, 2005 2004 (in millions) Loss on sale of Regional Programming Partners Loss on sale of Sky Multi-Country Partners Gain on sale of Rogers Sportsnet Gain on sale of Sky PerfecTV! Monarchy dividend (a) World Trade Center insurance settlement Change in fair value of Exchangeable...

  • Page 52
    ... vs. Predator, I, Robot, the Star Wars Trilogy, and the distribution fees earned for The Passion of the Christ. In addition, television titles such as 24, The Simpsons and Family Guy also contributed to this increase. The Company's DVD revenues rose approximately 32% for the fiscal year ended June...

  • Page 53
    ...movies at FX, higher programming and news gathering costs at Fox News and for additional MLB and NBA events at the RSNs. Direct Broadcast Satellite Television (10% and 8% of the Company's consolidated revenues in fiscal 2005 and 2004, respectively) For the fiscal year ended June 30, 2005, SKY Italia...

  • Page 54
    ... in the General Books, Childrens and United Kingdom divisions including the strong sales of the 11 titles in Lemony Snicket's A Series of Unfortunate Events. In fiscal 2005, HarperCollins had 103 titles on The New York Times Bestseller List with 15 titles reaching the number one position compared...

  • Page 55
    ...and China Netcom during fiscal 2006 and cash received in advance on the sale of Sky Brasil to DIRECTV and the sale of other non-strategic investments during fiscal 2005. The Company has evaluated, and expects to continue to evaluate, possible acquisitions and dispositions of certain businesses. Such...

  • Page 56
    ...05 per share for Class B Common Stock. This together with the interim dividend of $0.06 per share of Class A Common Stock and a dividend of $0.05 per share of Class B Common Stock constitute the total dividend relating to fiscal 2005. Based on the number of shares outstanding as of June 30, 2006 the...

  • Page 57
    ... $0.02 per share of Class B Common Stock constitute the total dividend relating to fiscal 2005. Issuances of Shares Approximate amount of issuance Number of Class A shares (in millions) Number of Class B shares Transaction Fiscal 2006 Intermix Media, Inc.(a) (b) Queensland Press(a) Fiscal 2005 Fox...

  • Page 58
    ... N.A., as administrative agent, JP Morgan Chase Bank, as syndication agent, and the lenders named therein. News Corporation, FEG Holdings, Inc., Fox Entertainment Group, Inc., News America Marketing FSI, Inc., News Publishing Australia Limited and News Australia Holdings Pty Limited are guarantors...

  • Page 59
    ..., 2006 1 year 2-3 years 4-5 years After 5 years (in millions) Contracts for Capital Expenditure Land and buildings Plant and machinery Operating leases(a) Land and buildings Plant and machinery Other commitments Borrowings Exchangeable securities News America Marketing (b) Sports programming rights...

  • Page 60
    ... (CONTINUED) (b) News America Marketing ("NAMG"), a leading provider of in-store marketing products and services primarily to consumer packaged goods manufacturers, enters into agreements with retailers to occupy space for the display of point of sale advertising. (c) The Company's current...

  • Page 61
    ... QPL owns a publishing business which includes two metropolitan and eight regional newspapers in Queensland, Australia, as well as shares in News Corporation. Following this transaction, Mr. K.R. Murdoch and the Murdoch Trusts owned approximately 29.5% of the Company's Class B Common Stock. CRITICAL...

  • Page 62
    ... and/or a write down of the asset to fair value. The costs of national sports contracts at FOX and at the Cable Network Programming segment and for international sports rights agreements are charged to expense based on the ratio of each period's operating profits to estimated total remaining...

  • Page 63
    .... Employee Costs The Company maintains defined benefit pension plans covering a majority of its employees and retirees. For financial reporting purposes, net periodic pension expense (income) is calculated based upon a number of actuarial assumptions including a discount rate for plan obligations...

  • Page 64
    ... of Operations (CONTINUED) The key assumptions used in developing the Company's fiscal 2006, 2005, 2004 and 2003 net periodic pension expense (income) for its plans consists of the following: 2006 2005 ($ in millions) 2004 2003 Discount rate used to determine net periodic benefit cost Assets...

  • Page 65
    .... SFAS No. 155 is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. SFAS No. 155 is not expected to have a material impact on the Company's consolidated financial statements. In June 2006, the FASB issued FASB Interpretation No. 48...

  • Page 66
    ... its exchangeable debentures in other liabilities. At June 30, 2006, the fair value of this conversion feature is $235 million and is sensitive to movements in the share price of one of the Company's publicly traded equity affiliates. A significant variance in the price of the underlying stock could...

  • Page 67
    ... Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Financial Statements Consolidated Statements of Operations for the fiscal years ended June 30, 2006, 2005...

  • Page 68
    ... the Audit Committee of News Corporation's Board of Directors. Based on this assessment, management determined that, as of June 30, 2006, News Corporation maintained effective internal control over financial reporting. Ernst & Young LLP, the independent registered public accounting firm who audited...

  • Page 69
    ..., cash flows, and stockholders' equity and other comprehensive income (loss) for each of the three years in the period ended June 30, 2006 of News Corporation, and our report dated August 22, 2006 expressed an unqualified opinion thereon. New York, New York August 22, 2006 ANNUAL REPORT 69

  • Page 70
    ... stock based compensation and the valuation of certain acquired identifiable intangible assets. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of News Corporation's internal control over financial reporting...

  • Page 71
    News Corporation Consolidated Statements Of Operations 2006 For the years ended June 30, 2005 2004 (in millions, except per share amounts) Revenues Expenses: Operating Selling, general and administrative Depreciation and amortization Other operating charges Operating income Other income (expense): ...

  • Page 72
    News Corporation Consolidated Balance Sheets 2006 As of June 30, 2005 (in millions, except share and per share amounts) ...shares at par at June 30, 2006 and 2005, respectively Class B common stock, $0.01 par value per share, 3,000,000,000 shares authorized, 986,530,368 shares and 1,029,576,988 shares...

  • Page 73
    ... Issuance of shares Repurchase of shares Dividends paid Net cash (used in) provided by financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Exchange movement of opening cash balance Cash and cash equivalents, end of year $ 2,314 (515...

  • Page 74
    News Corporation Consolidated Statements of Stockholders' Equity and Other Comprehensive Income (loss) 2006 Shares For the years ended June 30, Amount Shares (in millions) 2005 Amount Shares 2004 Amount Class A common stock: Balance, beginning of year Acquisitions Shares issued Treasury shares ...

  • Page 75
    ...; News Outdoor, an advertising business which offers display advertising primarily in locations throughout Russia and Eastern Europe; Fox Interactive Media, which operates the Company's Internet activities; and Global Cricket Corporation, which has the exclusive rights to broadcast the Cricket World...

  • Page 76
    ... amortization is provided to currently recognize that loss. The costs of national sports contracts at the Fox Broadcasting Company ("FOX") and Cable Network Programming segment and for international sports rights agreements are charged to expense based on the ratio of each period's operating profits...

  • Page 77
    ... than a 20% ownership interest) are accounted for under the cost method of accounting, unless they have readily determinable fair values. The Company reports investments with readily determinable fair values at fair value based on quoted market prices. Investment securities with readily determinable...

  • Page 78
    ... book publishing and from newspaper circulation are recognized upon passing of control to the buyer. Sales returns Consistent with industry practice, certain of the Company's products, such as home entertainment product, books and newspapers, are sold with the right of return. The Company records...

  • Page 79
    ... earnings per share for Class A and Class B Common Stock is calculated similarly, except that the calculation includes the dilutive effect of the assumed issuance of shares under the Company's equity based compensation plans and the dilutive effect of convertible securities. ANNUAL REPORT 79

  • Page 80
    .... The Company uses financial instruments designated as cash flow hedges to hedge its limited exposures to foreign currency exchange risks associated with the costs for producing films abroad. All cash flow hedges are recorded at fair value on the consolidated balance sheet. As of June 30, 2006 and...

  • Page 81
    ... future results of operations and financial condition. NOTE 3. ACQUISITIONS AND DISPOSALS Fiscal 2006 Acquisitions In September 2005, the Company acquired the 25% stake in News Out of Home ("NOOH") that it did not own from Capital International Global Emerging Markets Private Equity Fund, L.P. for...

  • Page 82
    ...2004, the date of acquisition. As a result of the Reorganization, News Corporation became the new parent company of TNCL. News Corporation has a primary listing on the New York Stock Exchange and secondary listings on the Australian Stock Exchange and the London Stock Exchange. 82 NEWS CORPORATION

  • Page 83
    ... which are included in the Filmed Entertainment, Television, Cable Network Programming and Other segments. In connection with the Offer and subsequent merger, a wholly-owned subsidiary of the Company tendered the shares of Fox Class A common stock and Fox Class B common stock that it owned prior to...

  • Page 84
    ..., the Company exchanged its 40% interest in RPP for Rainbow's 60% interests in Fox Sports Net Ohio and Fox Sports Net Florida (formerly included in the RPP business) and Rainbow's 50% interests in National Sports Partners and National Advertising Partners increasing the Company's ownership in these...

  • Page 85
    News Corporation Notes to the Consolidated Financial Statements NOTE 4. UNITED KINGDOM REDUNDANCY PROGRAM (CONTINUED) In fiscal 2005, the Company announced its intention to invest in new printing plants in the United Kingdom to take advantage of technological and market changes. As the new ...

  • Page 86
    ...Network Systems Sky Network Television Ltd. National Geographic Channel (US)(2) National Geographic International(2) Other equity method investments Cost method investments DBS operator principally in the U.S. U.S. print and electronic guidance company U.K. DBS operator Taiwan cable TV operator New...

  • Page 87
    ... 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. Impairment Review During the year ended June 30, 2006, Gemstar-TV Guide's common...

  • Page 88
    ...of Gemstar-TV Guide's common stock, the Company will continue to monitor this investment for possible future impairment. Summarized financial information Summarized financial information for significant equity affiliates, determined in accordance with Regulation S-X of the Securities Exchange Act of...

  • Page 89
    ... as of June 30, 2005 Balance as of June 30, 2006 Acquisitions Adjustments(a) (in millions) Filmed Entertainment Television Cable Network Programming Direct Broadcast Satellite Television Magazines & Inserts Newspapers Book Publishing Other Total goodwill $ 976 3,407 4,416 523 257 980 - 385...

  • Page 90
    News Corporation Notes to the Consolidated Financial Statements (CONTINUED) Amortization related to finite-lived intangible assets was $99 million, $40 million and $26 million for the fiscal years ended June 30, 2006, 2005 and 2004, respectively. Based... Exchangeable securities Total public debt...

  • Page 91
    ...seven-year period ending February 2012 and is subject to certain financial covenants. The loans are secured by certain bank accounts and share pledges of the Company's Russian operating subsidiaries. The cash flows from these facilities have been and are to be used to expand the Company's businesses...

  • Page 92
    ...new $1.75 billion Five Year Credit Agreement (the "Credit Agreement") with Citibank N.A., as administrative agent, JP Morgan Chase Bank, as syndication agent, and the lenders named therein. News Corporation, FEG Holdings, Inc., FEG, News America Marketing FSI, Inc., News Publishing Australia Limited...

  • Page 93
    ... on a share of Class B Common Stock. Class A Common Stock retain this right through fiscal year 2007. Subsequent to the final fiscal 2007 dividend payment, shares of Class A Common Stock will cease to carry any rights to a greater dividend than shares of Class B Common Stock. ANNUAL REPORT 93

  • Page 94
    ... through open market transactions. The timing of such transactions and class of shares purchased will depend on a variety of factors, including market conditions. The program is expected to be completed within two years. The Company expects that the number of shares of Class A Common Stock and Class...

  • Page 95
    ... was calculated as an average of a ten year history of the Company's yearly dividend divided by the fiscal year's closing stock price. RSU awards are grants that entitle the holder to shares of Class A Common Stock as the award vests, subject to the 2005 Plan and such other terms and conditions as...

  • Page 96
    ... history of the Company's yearly dividend divided by the fiscal year's closing stock price. Other The Company operates an employee share ownership scheme in the United Kingdom. This plan enables employees to enter into fixed-term savings contracts with independent financial institutions linked to...

  • Page 97
    ... with exercise prices greater than A$19.74 per share, which was the closing price of the Class A Common Stock (as traded on the Australian Stock Exchange in the form of CHESS Depositary Interests) on May 2, 2005. Prior to the Reorganization, stock options were granted to employees ANNUAL REPORT 97

  • Page 98
    ...than if the Company had continued to account for stock-based compensation under APB No. 25 "Accounting for Stock Issued to Employees" ("APB 25"). Basic and diluted earnings per share for the year ended June 30, 2006 are each $0.01 lower for both Class A Common Stock and Class B Common Stock, than if...

  • Page 99
    ... to the Company prior to fiscal 2006. During fiscal 2004, Mr. K. R. Murdoch purchased real estate from the Company for its fair market value of $13 million in cash. The Company recorded a gain on the sale of $0.8 million. In fiscal 2000, the Company advanced $1 million to Mr. Chase Carey, a Director...

  • Page 100
    ... through fiscal 2095. (b) News America Marketing ("NAMG"), a leading provider of in-store marketing products and services primarily to consumer packaged goods manufacturers, enters into agreements with retailers to rent space for the display of point of service advertising. (c) The Company's current...

  • Page 101
    ... football games are payable over the remaining term of the contract through fiscal 2012. The Company's contracts with the National Association of Stock Car Auto Racing ("NASCAR") give the Company rights to broadcast certain races and ancillary content through calendar year 2014. The Company acquired...

  • Page 102
    News Corporation Notes to the Consolidated Financial Statements (CONTINUED) At the Company's 2006 annual meeting of stockholders, the Company's stockholders will be asked to approve an extension of the existing rights plan to October 2008, with the Company having the right to extend the rights ...

  • Page 103
    ... United States District Court for the Central District of California, filed a First Amended Class and Derivative Complaint (the "Amended Complaint"). The original derivative action was filed in May 2003 and arose out of Intermix' restatement of quarterly financial results for its fiscal year ended...

  • Page 104
    ... themselves. News America Marketing On January 18, 2006, Valassis Communications, Inc. ("Valassis") filed a complaint against News America Incorporated, News America Marketing FSI, Inc. and News America Marketing Services, In-Store, Inc. (collectively "News America") in the United States District...

  • Page 105
    ...Company's benefit plans: Postretirement benefits Pension benefits As of June 30, 2006 2005 2006 2005 (in millions) Projected benefit obligation, beginning of the year Service cost Interest cost Benefits paid Actuarial (gain) loss(a) Settlements Foreign exchange rate changes Amendments, transfers...

  • Page 106
    News Corporation Notes to the Consolidated Financial Statements (CONTINUED) The following table sets forth the change in the fair value of plan assets for the Company's benefit plans: Pension benefits As of June 30, 2006 (in millions) 2005 Fair value of plan assets, beginning of the year Actual ...

  • Page 107
    News Corporation Notes to the Consolidated Financial Statements The components of net periodic costs were as follows: (CONTINUED) Pension benefits Postretirement benefits For the years ended June 30, 2006 2005 2004 2006 2005 2004 (in millions) Components of net periodic cost: Service cost ...

  • Page 108
    ...for the years ended June 30, 2006, 2005 and 2004, respectively. The Company does not expect mandatory pension funding requirements to be significant in fiscal 2007. However, the Company does expect to continue making discretionary contributions to the plans during fiscal 2007. 108 NEWS CORPORATION

  • Page 109
    ... For the years ended June 30, 2006 2005 (in millions) 2004 Loss on sale of RPP Gain on sale of Innova Gain on sale of China Netcom Loss on sale of Sky Multi-Country Partners Gain on sale of Rogers Sportsnet Gain on sale of Sky PerfecTV! Monarchy dividend(a) World Trade Center insurance settlement...

  • Page 110
    ... be used to compensate non-executive U.S. employees for services performed within the United States. The reconciliation of income tax attributable to continuing operations computed at the statutory rate to income tax expense is: For the years ended June 30, 2006 2005 2004 US federal income tax rate...

  • Page 111
    ... providers; News Outdoor, an advertising business which offers display advertising in locations primarily throughout Russia and Eastern Europe; FIM, which operates the Company's Internet activities; and Global Cricket Corporation, which has the exclusive rights to broadcast the Cricket World Cup and...

  • Page 112
    ... 2006 For the years ended June 30, 2005 (in millions) 2004 Revenues: Filmed Entertainment Television Cable Network Programming Direct Broadcast Satellite Television Magazines and Inserts Newspapers Book Publishing Other Total revenues Operating income: Filmed Entertainment Television Cable Network...

  • Page 113
    ... (loss) For the year ended June 30, 2006 Depreciation and amortization Amortization of cable distribution investments (in millions) Filmed Entertainment Television Cable Network Programming Direct Broadcast Satellite Television Magazines and Inserts Newspapers Book Publishing Other Total $1,092...

  • Page 114
    News Corporation Notes to the Consolidated Financial Statements For the years ended June 30, (CONTINUED) 2006 2005 (in millions) 2004 Depreciation and amortization Filmed Entertainment Television Cable Network Programming Direct Broadcast Satellite Television Magazines and Inserts Newspapers Book ...

  • Page 115
    News Corporation Notes to the Consolidated Financial Statements Geographic Segments (CONTINUED) 2006 For the years ended June 30, 2005 (in millions) 2004 Revenues: United States and Canada(1) Europe(2) Australasia and Other(3) Total revenues $14,102 7,552 3,673 $25,327 $12,884 7,511 3,464 $23...

  • Page 116
    ... Class B Common Stock participate in dividends with the Class A Common Stock. The following tables set forth the computation of basic and diluted earnings per share under SFAS No. 128, "Earnings per Share": 2006 For the years ended June 30, 2005 (in millions) 2004 Income from continuing operations...

  • Page 117
    News Corporation Notes to the Consolidated Financial Statements 2006 Class A For the years ended June 30, Class B Total (CONTINUED) 2005 Class A Class B Total Class A 2004 Class B Total (in millions, except per share data) Allocation of income-basic: Income from continuing operations Gain on ...

  • Page 118
    ... preferred shares were listed on the Australian Stock Exchange, the London Stock Exchange and the New Zealand Stock Exchange and TNCL American Depositary Receipts, each representing four TNCL ordinary shares or TNCL preferred shares, were listed on the New York Stock Exchange. 118 NEWS CORPORATION

  • Page 119
    News Corporation Notes to the Consolidated Financial Statements NOTE 22. VALUATION AND QUALIFYING ACCOUNTS Balance at beginning of year (CONTINUED) Additions Acquisitions and disposals (in millions) Utilization Foreign exchange Balance at end of year Fiscal 2006 Allowances for returns and ...

  • Page 120
    ...agent, and the lenders named therein. News Corporation, News Australia Holdings Pty Limited, FEG Holdings, Inc., FEG, News America Marketing FSI, L.L.C., and News Publishing Australia Limited are guarantors (the "Guarantors") under the Credit Agreement. The Guarantors are wholly owned by the Company...

  • Page 121
    ...information for the Company on a consolidated basis. Supplemental Condensed Consolidating Statement of Operations News Corporation News America News Reclassifications and Incorporated Corporation Guarantor Non-Guarantor and Eliminations Subsidiaries For the year ended June 30, 2006 (US$ in millions...

  • Page 122
    ...Financial Statements (CONTINUED) Supplemental Condensed Consolidating Statement of Operations News Corporation and News America News Reclassifications Incorporated Corporation Guarantor Non-Guarantor and Eliminations Subsidiaries For the year ended... tax (expense) benefit Minority interest in ...

  • Page 123
    News Corporation Notes to the Consolidated Financial Statements (CONTINUED) Supplemental Condensed Consolidating Statement of Operations News America Incorporated For the year ended June 30, 2004 News Corporation Guarantor Non-Guarantor Reclassifications and Eliminations News Corporation and...

  • Page 124
    ...Financial Statements Supplemental Condensed Consolidating Balance Sheet (CONTINUED) News America Incorporated At June 30, 2006 News Corporation Guarantor Non-Guarantor Reclassifications and Eliminations News Corporation... Investments in associated companies and Other investments Intragroup...

  • Page 125
    ...Financial Statements Supplemental Condensed Consolidating Balance Sheet (CONTINUED) News Reclassifications Corporation News America News and and Incorporated Corporation... Investments Investments in associated companies and Other investments Intragroup ... guarantor information ANNUAL REPORT 125

  • Page 126
    News Corporation Notes to the Consolidated Financial Statements (CONTINUED) Supplemental Condensed Consolidating Statement of Cash Flows News Reclassifications Corporation and and News America News Incorporated Corporation Guarantor Non-Guarantor Eliminations Subsidiaries For the Year ended June ...

  • Page 127
    ... Notes to the Consolidated Financial Statements (CONTINUED) Supplemental Condensed Consolidating Statement of Cash Flows News Corporation and Subsidiaries News America Incorporated For the Year ended June 30, 2005 News Corporation Guarantor Non-Guarantor Reclassifications and Eliminations...

  • Page 128
    ... Notes to the Consolidated Financial Statements (CONTINUED) Supplemental Condensed Consolidating Statement of Cash Flows News Corporation and Subsidiaries News America Incorporated For the Year ended June 30, 2004 News Corporation Guarantor Non-Guarantor Reclassifications and Eliminations...

  • Page 129
    ...subsidiary of News Corporation, principally engaged in the development, production and worldwide distribution of feature films and television programs, television broadcasting, and cable network programming. News Publishing Australia Limited FEG Holdings, Inc. News America Marketing FSI, L.L.C. Fox...

  • Page 130
    ... under the heading "Security Ownership of News Corporation." As of August 15, 2006, there were approximately 1,700 holders of record of Class B Common Stock and 56,300 holders of record of Class A Common Stock. Each share of Class B Common Stock entitles the holder to one vote per share on all...

  • Page 131
    Top twenty stockholders as at August 15, 2006. The following information regarding the top twenty stockholders of record is based on information provided by News Corporation's transfer agent as of August 15, 2006. Class B Common Stock Cede & Co Nominee Account (c/o Computershare Investor Services) ...

  • Page 132
    ... and Chief Operating Officer News Corporation KENNETH E. COWLEY Chairman RM Williams Holdings Limited DAVID F. DEVOE Chief Financial Officer News Corporation VIET DINH Professor of Law Georgetown University Law Center SIR RODERICK I. EDDINGTON Chairman, Australia and New Zealand JPMorgan Chase Bank...

  • Page 133
    ...'s public disclosure. News Corporation's Chief Executive Officer has submitted to the New York Stock Exchange ("NYSE") a certificate certifying that he is not aware of any violations by News Corporation of the NYSE corporate governance listing standards. 1211 Avenue of the Americas New York, NY...

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