Twenty-First Century Fox 2006 Annual Report Download - page 82

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
In May 2006, the Company acquired aU.S. regional cable sports channel in the southeast region for approximately
$375 million. This channel has rights to the National Hockey League’s Atlanta Thrashers and shares rights to Major League
Baseball’s (“MLB”) Atlanta Braves and the National Basketball Association’s Atlanta Hawks with one of the Company’s
existing regional sports networks. The purchase price preliminarily allocated to goodwill was $295 million, with the
remaining $80 million allocated to definite-lived intangible assets.
In accordance with SFAS No. 142, excess purchase price that has been preliminarily allocated to goodwill is not being
amortized for all of the acquisitions noted above. The allocation of the excess purchase price is not final and is subject to
changes upon completion of final valuations of certain assets and liabilities. Afuture reduction in goodwill for additional
value to be assignedto identifiable finite-lived intangible assets or tangible assets could reduce future earnings as aresult of
additional amortization. For every$100 million reduction in goodwill for additional value to be assignedto identifiable
finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approximately
$10 million per year,representing amortization expense assuming an average useful life of ten years.
The fiscal 2006 acquisitions were all accounted for in accordance with SFAS No. 141, “Business Combinations” (“SFAS
No. 141”).
Fiscal 2006 Disposals
In October 2005, the Company sold its TSL Education Ltd. division (“TSL”), which included The TimesEducational Supple-
ment and other newspapers, magazines, websites and exhibitions aimed at teachers and education professionals in the
United Kingdom for cash consideration of approximately $395 million. In connection with this transaction, the Company
recorded again of approximately $381 million, net of tax of $0.
In April 2006, the Company sold Sky Radio Limited (“Sky Radio”), a commercial radio station group in the Netherlands
and Germany for cash consideration of approximately $215 million. In connection with this transaction, the Company
recorded again of approximately $134 million, net of tax of $0.
Both of these transactions are includedingain on disposition of discontinued operations in the consolidatedstatement
of operations for the year ended June 30, 2006. The net income, assets, liabilities and cash flow attributable to the TSL and
Sky Radio operations are not material to the Company in anyofthe periods presented and accordingly have not been pre-
sented separately. There is no provision for income taxesrelated to these transactions as any tax due is offset by arelease of
avaluation allowance that was applied to an existing deferred tax asset established for capital losses, which because of the
sale of TSL and Sky Radio can now be utilized. Therefore, there is no resulting tax provision.
Fiscal 2005 Transactions
Incorporation in the United States
In April 2004, the Company announced that it would pursue the Reorganization, which would change the Company’s
place of incorporation from Australia to the United States. In August 2004, the Company announced that aspecial commit-
tee of non-executive Directors and the Board of Directors of the Company had unanimously recommended the proposed
Reorganization. On October 26, 2004, the reorganization was approved by the Company’s stockholders and option holders
and on November 3, 2004, the Federal Court of Australia also approved the Reorganization.
On November 12, 2004, the Reorganization was accomplished under Australian law whereby the holders of TNCL’s
ordinary and preferred limited voting ordinary shares, including those ordinary shares and preferred limited voting ordi-
nary shares represented by American Depositary Receipts (“ADRs”), had their shares cancelled and received in exchange
shares of voting and non-voting common stock of News Corporation at aone-for-two ratio. Reorganization costs expensed
during fiscal 2005 amounted to $49 million andwere includedinOther operating charges in the Othersegment in the
consolidated statements of operations.
In connection with theReorganization, the Company acquired from the Harris Trustthe approximate 58% interest in
QPL not already owned by the Company through the acquisition of the Cruden Group of companies. The principal assets
of the Cruden Group were shares of the Company and a58%interest in QPL. QPL owns apublishing business which
includes two metropolitan andeight regional newspapers in Queensland, Australia, as well as shares of the Company. The
consideration for the acquisition of the netassets of the Cruden Group, excluding shares of the Company owned directly
through the CrudenGroup and indirectly (through QPL) by the CrudenGroup, was the issuance of approximately
61 million shares of Class BCommon Stock valued at approximately $1.0 billion andtheassumption of approximately
$400 million of debt. All of the debt assumed was retired in November 2004. The excess purchase price over the fair value
of the net assetsacquired of approximately $1.3 billion has been allocated to newspaper mastheads and goodwill, which in
accordance with SFAS No. 142 are not being amortized. As a result of the purchase of this interest in QPL, the Company’s
ownership interest in QPL increased from 42% to 100% and accordingly on November 12, 2004, the Company ceased to
equity account for QPL. The results of QPL have been included in the Company’s consolidated statements of operations
from November 12, 2004, the date of acquisition.
As a result of the Reorganization, News Corporation became the newparent company of TNCL. News Corporation has
aprimary listing on the New York Stock Exchange and secondary listings on the Australian Stock Exchange and the Lon-
don Stock Exchange.
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