Twenty-First Century Fox 2006 Annual Report Download - page 85

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
NOTE 4. UNITED KINGDOM REDUNDANCY PROGRAM
In fiscal 2005, the Company announced its intention to invest in new printing plants in the UnitedKingdom to take
advantage of technological and market changes. As the newautomated technology comes on line, the Company expects
lower production costs and improved newspaper quality, including expanded color.
In conjunction with this project, during fiscal 2006, the Company received formal approval for the construction of the
main new plant which was the last contingency, thereby committing the Company to aredundancy program (the
“Program”) for certain production employees at the Company’s U.K. newspaper operations. The Program is in response to
the reduced workforce that will be required as new printing presses and the new printing facilities eventually come on line.
As a result of this Program, the Company expects to reduce its production workforce by approximately 65%, and as of
June 30, 2006, approximately 700 employees in the UnitedKingdom had already voluntarily accepted severance agree-
ments and are expected to leave the Company primarily in fiscal 2007 and 2008.
In accordance with SFAS No. 88, “Employers’ Accounting for Settlements &Curtailments of Defined Benefit Pension
Plans and for Termination Benefits,” the Company recorded aredundancy provision of approximately $109 million, which
includes accretion expense of $8 million, during the year ended June 30, 2006 in Other operating charges and Non-current
other liabilities in the consolidated financial statements. The Company expects to record an additional provision of
approximately $23 million through fiscal 2008 to record accretion on the redundancy provision and to recognize any
retention bonuses earned. A majority of the Program’s costs are expected to be paid in cash to employees in fiscal 2008.
NOTE 5. INVENTORIES
2006 2005
As of June 30, (in millions)
Programming rights $2,147 $1,627
Books, DVDs, paper and other merchandise 466 345
Filmed entertainment costs:
Films:
Released (including acquired film libraries) 588 733
Completed, not released 88 234
In production 251 218
In developmentor preproduction 59 90
986 1,275
Television productions:
Released (including acquired libraries) 475 470
Completed, not released 27 14
In production 147 149
In developmentor preproduction 2 2
651 635
Total filmed entertainment costs, less accumulated amortization(a) 1,637 1,910
Total inventories, net 4,250 3,882
Less: current portion of inventory, net(b) (1,840) (1,516)
Total noncurrent inventories, net $2,410 $2,366
(a) Does not include $584 million and $530 million of net intangible film library costs as of June 30, 2006 and 2005,
respectively which are includedin intangible assets subject toamortization in the consolidatedbalance sheet (Refer to
Note 8 Goodwill and Other Intangible Assets for further details).
(b) Current inventory as of June 30, 2006 and June 30, 2005 is comprised of programming rights ($1,411 million and
$1,237 million, respectively), books, DVDs, paper, and other merchandise.
As of June 30, 2006, the Company estimated that approximately 70% of unamortized filmed entertainment costs from the
completed films are expected to be amortizedduring fiscal 2007 and approximately 94% of released filmed entertainment
costs will be amortizedwithin the next three fiscal years. During fiscal 2007, the Company expects to pay $725 million in
accrued participation liabilities, which are includedin participations, residuals and royalties payable on the consolidated
balance sheet. At June 30, 2006, acquired film and television libraries have remaining unamortized film costs of
$167 million, which are generally, amortized using the individual filmforecast method generally over a remaining period
of approximately three to 15 years.
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